COMPANY INVEST GENERAL MARKET OVERVIEW

Hello! This market has just been crazy lately… Just when the signals tell us that there should be a decent 8 to 10 percent correction, the Federal Reserve rides in on its white horse and saves the day with strategic POMO treasury purchases.  These purchases flood the market with cash, which is then put into stocks. This is one reason for the dramatic turnaround on Wednesday after a dramatic selloff on Tuesday. These actions nullified sell signals that occured on Tuesday.  Add the US announcing it will aid the European Debt crisis and a dose of better than expected economic reports and it’s easy to see why we got a powerful 250 point one-day rally in the Dow.

Based on Federal Reserve Stimulus activities and better than expected (but still lukewarm to lousy) economic data, our best assumption is that the market will continue to rally through December and on into the new year. I  wouldn’t be surprised to see 1,250 to 1,280 in the S&P 500 by December 31. What does this mean to you as a trader? Be careful with short positions unless your position is small. The only short that may be a good one in the near term is gold via DZZ. There could very well be a rotation of money out of gold and into stocks from here until the end of the year. Otherwise, I’d consider staying with some of the recent long positions we’ve suggested  (which are doing great — see below):

LOWE’S (LOW). What We Said: On November 19 we suggested buying the stock at the $21.64 area for a possible run to $23.25, for a 10% gain!. What Happened: BINGO! Exactly what the charts told us. As of Today, LOW closed at $23.85, which is a 10.25% gain in just 2 weeks!. What to do now: Put in a 5% trailing stop and let it ride!

Solar Power Sector Solar ETF (TAN). What We Said: On November 23 we suggested buying above $7. What Happened: After a brief selloff on Tuesday, TAN has reversed and is again above $7 and rising. What to do now: Hold and add to your position daily if the stock closes higher than it opened.

Excel Maritime (EXM): What We Said: On Nov 30 we suggested buying at the $5.50 level with a stop at $4.97. What Happened: EXM rallied nearly 2% in today’s trading. What to do now: Hold and add to your position daily if the stock closes higher than it opened.

COMPANY INVEST TIPS

• Always use stops to minimize losses and/or protect profits
• Scale in and out of positions (start with few shares and add on when the trade moves in your favor. Then, take profits after you’ve made some money.
• Add to your positions at the end of the trading day when your stock(s) are going to close higher than they opened.

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.

WHAT IS THE VIX?

 We strive to introduce new trading strategies at companyinvest.com.  Today we talk about a contrarian indicator, the VIX index.

 The VIX is the symbol for the Chicago Board Options Exchange’s volatility index. It measures implied volatility (not historical or statistical volatility) of a wide range of S&P 500 options. It is often called the “investor fear gauge” because it reflects investor’s best prediction of near-term market volatility, or risk. In general, VIX starts to rise during times of financial stress and lessens as investors become complacent. It is the market’s best prediction of near-term market volatility.  The good news is we can use the VIX to forecast the future direction of the market.

 HOW CAN YOU VIEW THE VIX?

 You can access the VIX index using your stock software or any major online trading platform software such as www.stockcharts.com or Yahoo Finance.  Enter the symbol “$VIX”. 

 USING THE VIX TO TRADE

 There is an old clichéd saying about the VIX index that goes:

 ”When the VIX is high, you buy… When it’s low, you GO!”

Looking at today’s chart of the VIX, “A” is the 3-day relative strength index (RSI).  Look at the past 3 times the levels were this oversold (green circles).  They all led to rallies in the VIX, while at the same time corrections in the S&P 500.  Here’s how they played out:

• June 21-Jun 30 VIX rally =     10.67% Correction in S&P 500
• July 12-July 18 VIX rally =     3.93% Correction in S&P 500
• October 19-20 VIX rally =       2.6% Correction in S& P 500
• November 5 to ? =                  3 to 10% S&P Correction on the HORIZON!

 ”B” is the price chart.  Right now the VIX is approaching a several month low, so if the saying rings true, you should sell some of your long positions or consider going short for the impending correction.  Also, today’s candlestick is a doji, indicating a probable change in trend.

 ”C” is the MACD histogram, a wonderful forecaster of trend change.  It looks like a bullish divergence is forming, meaning the VIX price made a LOWER low, while at the same time the MACD is forming a HIGHER low.

 Bottom Line: Position yourself for a 3 to 10% market correction.

 RECENT COMPANY INVEST PICKS

 We found some hot stocks recently!

 US Steel (X).  We said to buy shares at the $40 level on October 28, and since then the stock has rallied over 21%!  Many investors don’t get that kind of return in a whole year.  What to do:  Take 3/4 to all of your position off and put the profits in your pocket.

 Double Bull Gold (DGP).  We said to buy shares at the $39 level.  The trade is currently up 6.5% and still rising.  What to do:  HOLD or put a 5% trailing stop in.

Today marked the release of the September, 2010 Non-farm payrolls report.  The report was awful; worse than expected.  Minus 95,000 jobs in September (the number was expected to be flat).  Selloff imminent right? Wrong.  As I write this, the Dow has eclipsed the 11,000 mark, all indices are solid green, and gold and other commodities are up as well.

Why? There is strong speculation that this widespread economic weakness will lead the Fed to enact “Quantitative Easing, Part II”, or QE2.  This means they will continue a zero interest rate policy and again crank up the money printing press, using those fresh greenbacks to pay off our debt through the purchase of treasuries.  This keeps interest rates low, especially mortgage rates, while trashing the value of the dollar.  Long term this policy will create many problems including widespread inflation.  However, that is a way’s off.  Until then, let’s party like it’s 1999.

Here’s a brief snippet of the past few Company Invest picks:

October 4 (John Deere: DE). What We Said: Get this stock at the $68 level for a quick run to $76.    What Happened: DE did indeed break out and rallied above $76 today for a great trade.  What to do now?:  Take profits and sell 1/2 your position.

Sept 30 (Apple: AAPL). What We Said: The stock is overheated and will more than likely pull back to 272 before resuming it’s upward trend.  What Happened: Pulled back from 285, to 278 (not quite the 272 we were expecting), and skyrocketed.  As I write this it’s trading at $294.  What to do Now? Take 1/4 to 1/2 off your position off and take profits.

Sept 29 (3M: MMM). What We Said:  Stock is in a trading range between $85 and $88.  Sell under $85 and buy above $88.  What Happened:  It broke through the top of the range and is now in a new range between $88.25 and $89.92.  What to do Now? HOLD your position and place a stop below $88.25.

Sept 28 (Alcoa: AA). What We Said:  At $12.22 take profits and let it pull back.  What Happened: Pulled back to $11.85 before taking off after a positive earnings report on 10/7. It is now trading over $13.  What to do Now? Nothing.  Don’t buy this stock until it pulls back.  Don’t chase a train out of the station.

These were some good calls.  Technical analysis is a wonderful thing and we hope you like this information and continue to visit the site.  As always, your comments are welcomed.  Stay tuned for a full week of picks next week as we fire up 3^rd quarter earnings season on Wall Street.

The best investment over the past 10 years has been gold.  The good news is you don’t have to buy gold bullion to play.  There is an ETF (GLD) that tracks the price of gold.  How good of an investment has it been?  If you would have had all your money in the S&P 500 or equivalent over the past 10 years, you wouldn’t have made ANY money. In fact, you would have had a small loss.  However, an investment in gold yielded 400% during the same time period!

Gold moves opposite the dollar (ETF: UUP) as an inflation hedge.  UUP looks like it’s about to find some support after a nosedive since late August. And, although GLD will remain a wonderful long-term investment, it looks ready for a multi-week pullback.  Today’s chart is the weekly chart of GLD (so each candlestick represents one week).

COMPANY INVEST TECHNICAL ANALYSIS

“A” is the impressive uptrend the price has been in throughout 2010.  However, look at the MACD during the same time. The price keeps making new highs, while the MACD cannot. Looks like a powerful triple divergence setting up on the MACD.

“B” is the 50 day moving average. As you can see, GLD is trading WAY above both the 50 and 200, making it a very, very bullish investment.  The 13 day EMA (green line) is a good pullback target.  I would expect GLD to settle down to 120-121 (and possibly 114) over the next 2-4 weeks before another thrust up.

Looking at “C,” you can see that the buying volume has decreased for the past 3 weeks while the price kept going up.  This means the buyers are drying up for now and a pullback is imminent.

“D” is the downslope of the MACD and flat line of the histogram diverging with the price.

“E” is the 14-week RSI, which is a momentum indicator.  The “overbought” level of 70 has been breached. The last 3 times this happened, a selloff followed.

Company Invest Bottom Line: While GLD is a great investment, take some profits and look to load up again at the 120 level (or even 114). Another play is DZZ, a “short” gold ETF.  i.e., when the GLD goes down, DZZ goes up.

Alcoa Aluminum Daily Chart

Alcoa Aluminum has enjoyed a nice run from $9.92 per share on 8/31 to $12.22 at today’s closing. Lucky investors who got in at that time would have enjoyed a nice 23% gain in just over a month’s time!

Today’s Analysis:

Look at the green letter “A” in the chart above. If you notice, the stock price has went almost straight up from Sept 7 until today. Seems great right? However, Notice the red “A” at the bottom of the chart. That is a Stochastic indicator which measures momentum.  Notice how it is sloping down at the same time the price is going up.  That is a negative divergence and is a “sell” signal.

The letter “B” is today’s Japanese candlestick symbol, which is a “Hanging Man.” This candlestick appears during an uptrend and is a reversal signal.  Another “sell.”

Letter “C” are the volume bars, which are simply the number of shares traded in a day. Each bar represents a day. Notice how the buying volume has been diminishing while the stock price continues to rise. Another negative divergence. “Sell” again.

Letter “D” is the MACD histogram. MACD is a powerful technical indicator. The histogram bars are a nice predictor of market direction. They have flattened out. Watch tomorrow’s bar. If tomorrow’s bar, is shorter than today’s that is yet another “Sell” signal.

Finally the red line above the stock price (see red arrow) is the 200 day price moving average.  That line marks heavy resistance.  Should this rally continue, it will more than likely stall there.   The blue line near the bottom is the 50 day moving average. It can be considered “support.” So any selloff will likely be contained there.  In the middle is a trading range.

Bottom Line: After a 23% gain in a month, take profits and get out! Or if you’re feeling adventurous, short AA or buy puts.

This site will feature daily analysis of a company’s stock chart to assist you in making sound investment decisions and enable you to trade successfully. We will feature a different company from the Dow Jones Industrial Average each day, providing a visual chart along with text analysis and also a brief analysis of the broader market (S&P 500). Why are we concerned with the broader market? Because 3/4 of all stocks move with the S&P 500, so it is important to understand the direction of the S&P. Why the S&P? The S&P 500 is the most representative sample we have of the entire market and is made up of 500 companies. The Dow Jones Industrial Average, on the other hand, is made up of only 30 stocks, so it’s not the best index for forecasting. However, since there are only 30 stocks in the DOW, it is ideal to use those companies to analyze in this blog. However, this is an open forum. Please post your requests for analysis (by stock symbol) and we will do our best to analyze your stock.

The analysis on this blog uses the technical analysis methodology. Technical analysis is a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume.

Technical analysts seek to identify price patterns and trends in financial markets and attempt to exploit those patterns. While technicians use various methods and tools, the study of price charts is primary.

Technical analysts also extensively use indicators, which are typically mathematical transformations of price or volume. These indicators are used to help determine whether an asset is trending, and if it is, its price direction.

Technicians seek to forecast price movements such that large gains from successful trades exceed more numerous but smaller losing trades, producing positive returns in the long run through proper risk control and money management.

Daily nugget: The average professional stock trader loses on 3 out of every 5 trades. However, using the buy/sell signals we will discuss coupled with a disciplined trading strategy will allow you to make great profits even when you only win on 2 out of 5 trades. That is the power of trading. Stay tuned!

The last economic crisis of the global stock market cost the investors a lot of money. Majority of investors lost money, retirement funds melted away and unemployment rate went sky high due to lay off in the manufacturing plants.

Because of the fluctuations in the stock market, investors seek for alternative ways to protect their investments. This driving force increased the global real estate market rapidly. If you haven’t consider investing to real estates globally, here are tips to increase your profits from real estate investments.

1) Think of Real Estate Globally. Do a research on what country can have a potential for economical growth. While developed countries such as USA, UK, Europe and Australia real estate markets are slowing down, developing countries like Bulgaria, Croatia and Turkey have a booming real estate market right now. You may need to do more research on possesing property and tax regulations in the given country before buying a property to compare the potential cost of ownership.

2) Assess your plan to make sure that it is profitable.  Think about the potential future political and economical changes before buying a real estate. With a proper plan, you can predict the market fluctuations and protect your investment.

3) Plan for the worst. When you make a plan, it is important to think about the worst as well. With this way, you can plan anything that can be possible.

4)  Consult an expert before the final investment. A real estate agent can save you thousands of dollars when you buy the property. With this way, you may save a lot of money and learn the market quickly.

5) Buy what you can afford. Most people like to buy what they want. An investment that fits to budget always prevents a possible future bankruptcy if something goes wrong. Ideally, a conservative budget is preferred when buying a property. With this way, you can have extra money for the unpredicted expenses for the property.

Finally, make a budget by adding all possible costs to own the property such as legal fee,s, real estate agency fees, taxes, etc. You also need to think about the potential renovation costs if you need to. Overall, real estate is a great way for investments and you can achieve your goals by using our recommendations to prevent surprises.