The share market is an obscure place. Many investors too, subscribe to the feeling. Further, the stock market reports further complicate the issue. For the newcomer to the stock market, the stock reports are quite complex to understand.

The symbols, acronyms and numbers used in the daily stock report are a cause of puzzlement to the newcomers in a stock market. For keeping track of the stock market prices, today in the stock market, it is imperative to understand how to read these reports. Some overview can be gained by reading the quick moving tickers on financial TV broadcasts. They provide various stock analysis results. We at Company Invest rely heavily on technical analysis (the study of stock charts), however, you should always research companies fundamentals, as well as looking at stock reports.

One simple method to help understand and read the stock reports could be to make a note of all the acronyms appearing in the report and keeping track of their meaning as a list. This list could be updated and expanded with time. Using this list while reading a stock report online could then be likened to reading a newspaper with a dictionary by the side.

One of the factors of interest to the investor would be the closing value in the stock market today. This is generally placed right next to the stock symbol. This value can be used as an important tool to compare the prices between different stocks, within the investor’s portfolio.

Immediately following the closing value, the stock report gives the major percentage change figure. Some reports mention the price change, in the stocks market today, between the starting and closing prices, others give a percentage change figure. An up or a down arrow, next, serves to indicate the price movement involving the stock, for the investor. The investor can then compare the change with the different indexes for the industrial sector and thus gain an overall view of the position of the stock in the market.

For long term investors, the next figure is important. This shows the performance and competence of the stock in the last 52 weeks. Detailed information on the moving average in this range may be obtained from websites and business-TV shows. A thorough analysis of these trends, helps the long term investor take a stand in his trading of stocks.

For an understanding of the stock report, the best place to go to is the online trading platforms. They provide the latest trends and charts which help the investor to take quick decisions in the live market. They also provide trend information about a bunch of stocks in the portfolio. Financial television tickers are another source of information, which responds very fast to market changes. But for a newcomer, the high-speed movement of the tickers may not be a very comfortable experience.

The stock markets may remain stagnant, may move up or move down. It is very important for the investor to keep track of the movement of stocks through stock reports and online trading portals, so as to get the latest news and take maximum advantage whether he is a day trader or a long term trader. Proper stock analysis and timely action, backed by a positive attitude is very important for success in the stock market.  At Company Invest, we feel looking at a stock report is another piece of the investing puzzle that can only lead to success.

As Company Invest, we continue writing about the stock market.

When a new corporation decides to sell its shares of stocks in its IPO, it raises investment capital from the market. The corporation invests this capital in buying equipment and hiring employees. The corporation begins its operations, and at the end of the year makes a profit, thus improving its share prices. There are a number of ways the board of directors of the corporation may decide on the disbursement of the profits earned.

After careful market analysis, the board of directors may decide to save the profits in a bank account to be used in case of emergency. It may decide to distribute the profits to the shareholders, and consequently, declare a dividend per share. It may decide to reinvest the profits back into the business to buy additional equipment or hire more employees, thus expanding the company. It may also decide on any combination of the above three options to influence the price of shares.

If the corporation decides to distribute most of the profits to its shareholders, it is called an Income stock. The price trend of an income stock stays mostly flat. Unless the profits increase and the dividends thereby, the market stock prices of the corporation remain constant. People annually get their dividends, and the business does not grow. This would be the case for the stock of a business which disburses all its profits to the shareholders every year.

If the corporation, instead of paying dividends, decided to save its profits and later invested the profits in expanding the business, it is called a growth company. The shareholders may not be receiving yearly dividends, but are owners of a company that is growing. The stock value of the company rises, in the anticipation that the increased investment will bring additional profits. The shareholders, therefore, get additional value for their shares, if they decide to sell them. The buyer will be interested to pay more for the shares of the stock, on account of the increased book value of the company as well as the potential for the improvement in its profits.

When a company’s shares are thus publicly traded, all financial details of the company is made public. The Securities and Exchange Commission is responsible for collecting this financial information and making it public. The value of the stock divided by the earnings of each share is an indicator of the worth of the stock of the company. This is called the price to earnings ratio. Investors use ratios of this type to determine the value of stock of a corporation.

Another method to assess the health of stock prices as a whole is to follow the movement of the averages such as the Dow Jones Index or the Russell 2000 or the S&P 500. These broad market averages are designed to inform you of the general health of the companies trading on the stock market. The market is termed a Bull market, if the moving average prices of a group of stocks have a rising trend. A falling trend, for the moving average prices of the group of stocks, makes it a Bear market.

It’s been a crazy week on Wall Street.  The move has been mostly down with the exception of yesterday’s tremendous rally because of the GM IPO and a better than expected economic report (Philadelphia Manufacturing).  But all week the retail sector has been strong, and today’s Company Invest pick, Lowe’s (LOW) in particular looks poised for a big rally.

COMPANY INVEST TECHNICAL ANALYSIS

Looking at the chart “A” is the 3-day Relative Strength Index.  As you can see the momentum is positive and it is about to break through 50.  RSI readings above 50 are considered quite bullish.

“B” is the price chart.  Notice, instead of the usual candlesticks, I chose to display a line chart.  This is good for seeing certain patterns.  There is a powerful bullish pattern called the “W” pattern.  Essentially it is a double bottom pattern where the stock sells off, rallies, then pulls back again before really taking off, thus forming a “W” shape.  Two keys to this pattern:  #1 the second “V” of the “W” should not dip as low as the first.  What this says is that after a rally, there was just some normal profit taking (not a heavy selloff).  #2  The most powerful occurrence of the “W” pattern is when you see it occur right under a major moving average.  That’s because many short sellers place their stops right above moving averages.  So the theory is, if the stock price breaks through the moving average, those shorts will be forced to cover and buy back shares they sold, thus making the stock move even higher.  If it sounds confusing, don’t worry.  Just look for the W under either the 50 day or 200 day moving average with the right side higher than the left and you’ve got a winner.   And look at Thursday’s chart of LOW.  BINGO!

“C” is the MACD histogram.  Yesterday we got a bullish pPp reversal on the chart.  This is a 3-bar reversal where you have a selling bar, a deeper selling bar, then a shallower selling bar.  Confirmation of this pattern will occur when LOW closes above $21.64 (yesterday’s close).

“D” is the slow stochastic momentum indicator.  Notice the nice higher low the stochastic put in (green up-sloping line).  Also, we got a bullish touch of the signal line (black) with the stochastic line (red).  Look for a solid cross of the signal line to the upside for confirmation.

Company Invest Bottom Line: Looking at the black parallel lines in the price chart it looks like LOW could easily gain 10% in the near future and move to the $23.25 area for a great trade.  Start with 50 or 100 shares and put a stop in at $1 below the purchase price.

Company Invest Recent Picks:  Still holding ERY and QID despite a rough day yesterday.

Despite Ben Bernanke and the Federal Reserve’s $600 billion effort to prop the stock market and economy, it looks as if a correction is in order now.  Now would be a good time to pause, take profits and sell a portion of your long positions, or, if you are aggressive, why not make money when the market goes down?   You can do that by shorting stocks, buying put options, or, our preferred method, buying inverse ETFs.

We know that the market goes down much faster than it goes up because fear is a powerful thing, especially when coupled with money.  Right now the early signals indicate a 5 to 10 percent correction looming in the S&P 500.  And when the S&P 500 goes down, 3/4 of all stocks go down with it so take heed.  If you want to stay in your long positions, that’s fine.  Use a 5 to 8% trailing stop (whatever you are comfortable with).  A trailing stop is a wonderful tool offered by most online brokers.  It is a variable selling point and is great when you’ve already made money and want to lock in your profits.  If you put a 5% trail in, your selling point is always 5% lower than the current bid for the stock or ETF you are in.  That way, if the price keeps going up, so does your stop, however, once it corrects 5%, your shares are automatically sold, and your profits are locked in.

Today’s pick is QID.  QID is a reverse ETF which moves in the opposite direction of the QQQ’s (technology ETF).  That is when the technology sector is going down, QID is going up.

Looking at the chart there are several encouraging signals:

“A” is the slow stochastic momentum indicator.  It has been oscillating in oversold territory since early September!  We think this time the stochastic line has a great shot of going all the way up to 80 (overbought).  If that happens, QID will rally bigtime!  There is a powerful divergence between the stochastic and the price channel.  Look at the severely downsloped price trendline (red), compared to the stochastic lows (green line).  The stochastic line is flat to slightly sloping upward, indicating a change in trend.

“B“is the price chart for QID.  We had a powerful white candle on Friday (typically a selling day) and QID had a positive week overall.  More importantly, are the 3 and 10 day Exponential Moving Averages (EMAs).  The green and red arrows in the chart indicate buy/sell signals generated when the 3 day EMA (blue line) crosses up or down through the 10 day EMA (red line).  As you can see this technique gives wonderful stock trading signals.  The last signal (SELL) occured at the beginning of September.  Since then QID has gotten a 36% haircut! As of Friday’s close the 3 day EMA is EXACTLY the same as the 10 day and is just about to cross to the upside.  Monday could be an EXCELLENT entry point.

“C” is the MACD histogram.  Look at the massive bullish divergence between the histogram and the price channel.  This is a powerful buy signal.

“D” is the ADX indicator.  You get a buy signal when the green line crosses up through the red line (heading that direction but hasn’t happend yet).  However, the ADX line (black line) gives early signals.  The ADX line measures trend, and the trend has been up since early September, however that line is now rolling over and sloping down.

Bottom Line: Look for an entry point Monday and buy 50-100 shares of QID with a stop $1 below your entry point.

UPDATE: We had two wonderful stocks here in X (US Steel) and DGP (Double Gold ETF).  Hopefully you took profits and sold all of your shares now.

ERY:  We recommended it last week, but our stop of $29.20 was triggered.  However, ERY rallied hard on Friday and we really like it again as a trade.  Look to re-enter on Monday.

At Company Invest,  we strive to provide analysis to give readers the most accurate forecast for the best stocks to buy based on recent chart signals.  We use technical analysis as our primary trading strategy.  For those who don’t know, technical analysis is the study of stock price charts.  We get signals from a variety of indicators including chart patterns, support and resistance levels, Japanese candlestick signals, moving averages, volume, and a variety of momentum indicators.

Before we get to the charts, on a macro level there are some interesting news events to consider.  With last week’s Federal Reserve decision to enact Quantitative Easing (QE2), many assumed, and rightly so, that the dollar would get trashed while commodities, especially precious metals would soar.  And that pretty much came true last week with gold hitting a new all-time high above $1,400 an ounce.  However, it seems to me this week (in a 180 degree reversal to that theory) that the Fed would like to strengthen the dollar.  There seems to be a sector rotation going on here that started yesterday and continued today.  The sector rotation appears to be a move out of gold, commodities, and treasuries and into stocks.

That brings us to today’s Company Invest pick, ERY.  ERY is a bearish Exchange Traded Fund (ETF) for the energy sector.  With what seems to be a coordinated effort to strengthen the dollar and with the dollar’s chart (UUP) looking quite bullish, the energy sector is setting up for a big correction.  And, by buying ERY, you can capitalize by making money when energy stocks go down.

COMPANY INVEST TECHNICAL ANALYSIS

Looking at today’s chart, “A” is the Relative Strength Index (RSI) set to the 7-day period.  At a reading of 10.44, the RSI is more oversold than it has been for at least 6 months (this entire chart).  This tells us a bounce is coming.

“B” is the ERY price chart.  Last Thurs, Nov 4 ERY gapped down pre-market and then continued to sell off throughout the day.  A “gap” occurs when prices move up or down outside of the trading session (in futures trading).  Technical analysis tells us that most of these gaps are eventually filled, meaning there is a very high probability that ERY goes back to the $34-$34.50 area in the near term.  That would mean over an 11% possible gain on a quick swing trade.  Also, yesterday’s candle was a hollow red candle, which indicates a reversal could be imminent.  The hollow red candle meant that ERY gapped down premarket yesterday, moved lower, then rallied the rest of the day to close higher than it opened, yet still lower (barely) than the previous day’s close.

“C” is the MACD histogram.  A shallower blue bar at the end of today’s session would indicate a reversal and a possible bullish divergence between the histogram and the price chart.  These bullish divergences happen when prices make a lower low, but the histogram makes a higher low (see sloping up green line on histogram and sloping down red line on price chart).

Finally, “D” the slow stochastic momentum indicator got a bullish cross (signal line “black” crossed up through the stochastic line “red”).

Company Invest Bottom Line:  This trade has a good risk reward.  You can buy it here and put a stop at $29.20, for a move to $34-$35.

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Even though we’re still somewhat bearish on gold  right now at Company Invest, the chart signals are telling us the trade right now is to the upside.  We prefer to use DGP, which is a double gold ETF.

COMPANY INVEST TECHNICAL ANALYSIS

Looking at today’s chart, “A” is the Wilder’s ADX indicator.  Welles Wilder developed the Average Directional Index (ADX) to evaluate the strength of a current trend, be it up or down.  Low readings (below 20) indicate a weak trend and high readings (above 40) indicate a strong trend The ADX line (black line) measures this trend.  It has settled back to 24.39, after staying at an overhead level for a couple weeks. The other two lines on the indicator are the +DX (green) and –DX (red).  Buy and sell signals are generated in a trending market when a +DX/-DX crossover occurs . On 10/28 we had a bullish DI cross.  Confirmation of this buy signal occurs when the stock closes above the high point of the day of the crossover.  On 10/29 we got that confirmation with a close of $39.30. Buy signal firmly intact.

“B” is the daily pricing chart of DGP.  I prefer candlestick charts, because they have useful predictive qualities.  In this case, a red spinning top on Oct 27 (candle body has shadows extending both above and below it) indicated a temporary bottom.  Spinning tops occur on volatile trading days when the stock trades well above and below its opening and closing price throughout the day.  It marks investor indecision.  When this occurs following a multi-day trend, it suggests a pause or change in direction.

Secondly, I plotted this chart with 3 and 10 day Exponential Moving Averages (EMAs).  3 and 10 day EMA crossovers give wonderful buy signals.  Look at all the great signals on the chart when one line crossed the other. Today the blue line (3 day) crossed up through the red line (10 day).

Finally, as “C” shows, we had a confirmation of a bullish “PPP” pattern on the MACD histogram today. You can see this pattern on the chart. A higher low bar was put in yesterday, while today, 10/29 the stock closed higher than it did yesterday, confirming the signal. “PPPs” also give good, solid signals.

Company Invest Bottom Line:  Buy DGP Monday for a possible run into the $44-46 range.  Put a stop right below $37 (nearest support).  That way, you cap your potential loss

Today’s Company Invest pick is student loan giant, Sallie Mae Corporation (SLM). Most stocks are WAY overbought right now in this market that keeps going up despite horrid fundamentals and one bad economic report after another. So we need to choose stocks that have had a sizeable pullback for the best possible trade target.

SLM is part of the financial sector, which, up until today has been battered recently.  At a share price under $11.50 it’s also affordable for the averageinvestor.

COMPANY INVEST TECHNICAL ANALYSIS

1st thing on the chart “A” the slow stochastic is quite bullish and has moved to oversold, out andback, now it’s trending back up again at over 29. Odds are, this time it goes back to 80 again, and the stock will move up with it.

“B” is a 3/10 exponential moving average crossover I like to use sometimes. Notice how good the signals are when the blue line (3) crosses up or down through the red line (10). And tomorrow will likely bring another bullish cross.

“C” the MACD D histogram (blue bars) are definitely showing a reversal and the signal line (black is about to cross above the MACD D line (red).

Company Invest Bottom line: Grab it tomorrow with a stop at 10.89 (right below Tuesday’s low).  It could go to $13 on this quick little run (see green parallel trend lines).

Today at Company Invest, we focus on the retail sector and today’s pick looks like a great trade.  It’s Home Depot, member of the DOw 30, and the largest home improvement retailer in the country.

While the S&P and DOW have continued to go up, retail has taken a beating over the past 5-6 trading sessions, meaning it’s a good buy because we always try and buy stocks on sale. But looking at the daily chart, HD is in a great spot for a swing trade for a possible 10% pop to the upside.

COMPANY INVEST TECHNICAL ANALYSIS

“A” is the 3-day RSI.  The three day timeperiod is ideal for swing trades.  Look at the pattern of green circles to see that when the stock is this oversold, it nearly always rallies for 3 or more days.

“B” is important for two reasons.  #1, today’s candlestick was a “hammer.”  Look at the long tail, indicating strong support.  #2, notice where the stock closed today.  Right exactly at the 200 day moving average (major support). The trade is ideal, because if we open up lower in the morning, you could buy it below $30.50 and put a stop right at $29.75 (the 50 day moving average (blue line)).  Your risk will be less than .75 cents, but you could easily pick up $3-$4 on the upside at a target  of $33.

The MACD histogram “C” (blue bars) failed to put in a lower bar today.  Look for a higher bar tomorrow for confirmation of a reversal.

Finally, “D,” the stochastic oscillator, which measures momentum, is bottomed out, while at the same time the stock is sitting right on support.

Company Invest Bottom Line: Grab it here, stop at $29.75 for a run to $33.

Sometimes simple is better.  The following strategy, developed by Dr. Charles Schaap in his book, “Investing for Success,” is a very simple, yet effective way to profit in this market.

 The essence of the system is catching a trend and riding it.  In this case, Dr. Schaap uses only two indicators to define a trend.  They are “A” the Relative Strength Index (RSI), and “B” the 50 day moving average.  When the 20-day RSI moves above 50 and the stock trades above the 50 day moving average, that is a buy signal. When the reverse happens, it is a sell (or short) signal.

 The RSI, “A” is an indicator that measures a stock’s recent performance against it’s past performance.  In this case, Schaap uses an RSI value of “20″ (default is normally 14).

 The 50 day moving average “B” is widely used in technical analysis and it a standard indicator of market health.  Simply put, if a stock is trading above its 50 day moving average it is thought to be healthy and bullish.  Below, it is struggling and bearish.  With this strategy you can use either the Simple Moving Average (SMA) or Exponential Moving Average (EMA).  These settings can be found on most charting platforms.

 The following is a daily chart of the S&P 500 Large Cap Index ($SPX).  It spans a 1 year timeframe.  The green arrows represent buy signals.  The red arrows represent sell (or short) signals.

Now imagine if all you did was buy the SPY at the green arrows, and buy the SDS (short SPY ETF) at the red arrows.  You would have made one heck of a return at the end of the year and would have beaten all the mutual fund returns.

Bottom Line:  If you would have put all your money in the $SPX and left it there all year, you would have a paltry 4.7% year to date return.  However, using the 50/50 strategy, you would have made 22.56% year to date.

Ag equipment giant John Deere is today’s Company Invest focus.  Like Apple, Deere is another one of those excellent companies that always seem to find a way to be profitable, even in tough times.  Deere has a diversified product line and, when it needed to, cut costs to help streamline and strengthen the company.  It’s hard to believe that just only a year and a half ago, at the height of the financial collapse, this stock could be had at the generational low price of $25 a share.  I remember telling colleagues that DE @ $25 was the deal of the century.  Ironically, that same evening, Jim Cramer of CNBC said, “Don’t think about touching this stock until it goes down to at least $20.”  Well, those folks are still waiting for that $20 price and they may never get it.

COMPANY INVEST TECHNICAL ANALYSIS

DE is being featured today because the charts favor a short term rally and a great trading opportunity. Look at the 3 day RSI (“A” above), and look at what happened to the stock price the last 5-6 times it was this oversold.

“B” is the 50 day price moving average (@ $67.30).  This is a major area of support and this support will more than likely hold again.

“C” is the slow stochastic momentum indicator.  It has pulled all the way back to oversold territory (<20) yet the last time the stochastic hit 20, the stock was trading at around $62.  This is a higher low, which is a healthy occurrence during a stock’s uptrend.

Company Invest Bottom Line: Grab this stock at this level for a nice little swing trade using a stop somewhere below that 50 day moving average ($66 or so).  Start small with 50-100 shares so your loss is minimal if your stop is taken out, however, add on as many shares as you like if when is starts moving in your favor for a possible run to the $76 level or better.