Wednesday, June 26, 2013

Profitable Forex Breakout Strategy

A Simple Profitable Forex Breakout Trading

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Directional Breakouts

Stop trading false breakouts and trade where price is most likely to go.

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2 Trading Sessions

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Know When Not to Trade

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Low Cost

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What Makes This System Great

There’s more to forex breakouts than just a breakout!

Breakout Box

You’ve probably seen these a million times. Time based breakout ranges. Nothing new, but it’s just a small part of the system.


Projected highs and lows give you your targets and also show you when a pair is overextended and likely to reverse.

Breakout Direction

Utilizing both leading and lagging trend detection, false breakouts are kept to a minimum by keeping you on the right side of the trade.

Support and Resistance

Areas of heavy buying and selling are automatically drawn on the chart. No more buying into institutional selling or selling into buying!

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Tuesday, June 25, 2013

Turn Market Volatility into Your Profit

An experienced trading pro can show you how the jump in volatility offers the informed trader some interesting opportunities.

The trial-and-error method of learning how to trade is typically so expensive that many traders have to give up. Losses can add up all too quickly.

Of course, even seasoned traders who have a stellar track record must take losses at times. That said, the fact that these professionals are successful shows that they have learned how to manage risk and how to manage their trading account.

Traders with less experience would do well to learn from a professional.

Sure, that has a cost, too. But it’s often far less expensive than trying to figure out the trading game on your own.

Check out trading professional Dick Diamond’s course. For several years, Elliott Wave International has been associated with Diamond, and Robert Prechter endorses Diamond’s technically intensive approach.

A little about Diamond: His trading story starts in the 1960s when he experienced beginner’s luck. Then a losing streak wiped out 70% of his portfolio, but he loved to trade, so he stuck with it. He was one of those rare exceptions who made a lasting comeback.

Get this: Diamond has been trading for 47 years!

If there were such a thing as an honorary doctorate for traders, Dick Diamond would deserve to get one. His trading knowledge is extensive enough to fill 174 pages in one of his recent trading manuals.

Diamond emphasizes what he calls “80/20” trades. These are high-confidence trades that he teaches students to recognize.

The 80/20 trade is based on indicators that create a specific trading setup. A trader must act on this setup immediately. Then you set stops.

In shorter time frames, like trading from a five-minute chart, the 80/20 setup may come along a few times a day. If you're trading a longer time frame, like off of a 120-minute or 240-minute chart, the 80/20 trade will come along less frequently, but when it does, the opportunity will be bigger. The 80/20 setup can be especially rewarding for position traders. Indicators sometimes reveal what I call 90/10 trades.

Trading Pro Dick Diamond

Diamond can show you how to enter and exit those trades in a bull or a bear market.

You can learn to see trading opportunities in various financial markets.

Attend Dick Diamond’s 4-day Market Mentor Trading Course from Aug. 11 to Aug. 14, 2013, in Orlando, Fla. Watch Diamond trade in a live market so that you can duplicate his actions in your own trading room.

Follow this link to find out what Dick Diamond’s students say about the 4-Day Market Mentor Trading Course.

Click Here to Review and Register for More Investing Trading Seminars Webinars Workshops and Events

Monday, June 24, 2013

Investing in a Company for Women

Zacks Investment Research reports that growing demand for its products and improved cost management, Avon seems to be in a position to deliver decent earnings growth.

Further, with a solid outlook for the industry, this Zacks Rank #1 (Strong Buy) beauty products company looks quite attractive as of now.

About the Company

Avon (AVP) is a leading global beauty company, with nearly $11 billion in annual revenue. The company is the world's largest direct seller with more than 6 million active independent sales representatives.

Avon products are available in over 100 countries, and the products include color cosmetics, skincare, fragrance, fashion and home products, under brand names like Avon Color, ANEW, Skin-So-Soft and Advance Techniques.

Excellent Results and Improving Fundamentals

Avon posted first-quarter adjusted earnings of $0.26 per share on April 30, easily crushing the Zacks Consensus Estimate of $0.14 per share, and increasing more than twice from the $0.10 per share in the prior-year quarter.

Adjusted gross margin was 62.5%, 160 basis points higher than the prior-year quarter, primarily due to lower freight costs and lower material costs.

After underperforming for many years, the company finally took a number of steps last year including upgrading senior talent, implementing stabilization plans for key markets, prioritizing product categories, reducing cost base and improving capital position.

These strategies finally seem to be paying off as this was the second consecutive earnings beat for the company after reporting six quarters of lower-than-expected results.

Positive Earnings Estimates Revisions

As a result of improving outlook for the company, analysts have been revising their estimates for the June 2013 quarter and the fiscal year 2013. Zacks consensus estimates for the second quarter and the fiscal year 2013 now stand at $0.25 and $1.15 per share.

Solid Industry Outlook

Per Avon, the global beauty Market is $400 billion currently and is projected to grow at 7% rate through 2017, mainly driven by surging demand in developing countries. Further, consumer shopping behavior continues to change but word-of-mouth remains the most trusted source of information, benefitting direct sellers like Avon.

With a Zacks Industry Rank of 17 out of 265, Cosmetics industry is expected to outperform significantly in the near-to mid-term, as well.

The Bottom Line

AVP is a Zacks Rank#1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of “Outperform”. Additionally, a Zacks Industry rank of 17 out of 265 indicates very strong likelihood of continued strength in the short to medium term, compared with other industries.

Successful Investing Trading

Friday, June 21, 2013

Forex Chart of the Week: EURUSD

The Elliott wave story of the 240-pip sell-off in EUR/USD since Wednesday is remarkably similar to that of the S&P 500.

Just like U.S. stocks, euro/dollar (the world's biggest forex market) had an easy-breezy start this week -- namely, it went higher.

The rally was fully in the cards based on an Elliott wave pattern called a contracting triangle. On Monday, the editor of our forex-focused Currency Specialty Service, Jim Martens, wrote:


[Posted On:] June 17, 2013 09:18 AM

The triangle suggests the euro will thrust to a new high above 1.3391 but warns the new high will represent the end of a larger rally sequence.

Notice that warning about the rally being brief. Triangles most often appear in the fourth-wave position of the five-wave Elliott pattern. The so-called post-triangle thrust -- in this case, higher -- is usually an ending move.

That was on Monday. On Tuesday, EUR/USD indeed went higher. Currency Specialty Service wrote:


[Posted On:] June 18, 2013 05:59 PM

Remain on guard for a potential peak in EUR/USD following a five-wave advance of multiple degrees, the most recent of which was an ending diagonal. These patterns tend to retrace themselves quickly...

See, just like in the S&P 500, the tail end of the EUR/USD rally was taking the shape of a diagonal -- an ending pattern that virtually guarantees a sharp trend reversal.

That takes us to Wednesday, the now infamous day of the Fed's announcement. Wrote Jim in a morning intraday update:


[Posted On:] June 19, 2013 11:33 AM

No change here. A new high would best complete an ending diagonal, setting the stage for a downturn.

Another high didn't come -- but the long-awaited downturn came in spades:

On the morning of June 19, Jim Martens tweeted:

"All eyes are on the Fed and the announcement due today. If USD gets stronger, investors will certainly say the Fed was the cause. What we will point out is, the market was already poised to turn."

Indeed it was.

We track 11 FX pairs in our Currency Specialty Service, 24 hours a day, in real time.

Click Here to Review More Forex Resources

Monday, June 17, 2013

Invest in This Smart Clever Wise Intelligent Company

Akamai - [ah kah mai'] Hawaiian Word - Smart, clever, wise, intelligent. You may take it as a compliment if someone tells you that you are akamai.

The summer of 2013 is expected to be anything but dull. Tensions among investors and market volatility are high as we weigh the effects of QE tapering amidst a world with struggling economies.

Stocks that have global discretionary exposure or unjustifiably high valuations have gotten hit the hardest over the last month or so.

If economies do weaken and consumers slow their spending habits once again, there are a few areas that could still see strong growth. In fact, today’s bull of the day might actually benefit from consumers staying home, surfing the web or engaging in more online content.

Think about them as a quasi-defensive growth company; sure they have competition, but they are one of the best at what they do and it seems that investors may be gearing up for the company to make another leg higher as short interest dropped dramatically as of late.

The most recent short interest data has been released by the Nasdaq for the 05/31/2013 settlement date, showed a 6,608,451 share decrease in total short interest from 10,971,242 or 37.59% since 05/15/2013. This shift happened even as the stock price skyrocketed.

Who are they?

Akamai (AKAM) is more than just a “cloud” company; the company provides the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere. The proliferation of mobile devices from the likes of Apple, Samsung, HTC, Google and more all will add to the need for Akamai’s services.

If you've ever shopped online, downloaded music, watched a web video or connected to work remotely, you've probably used Akamai's cloud platform. The company’s promise is to ensure the best online experience on any device, anywhere.

Akamai delivers roughly 20% of ALL web traffic globally.

Akamai helps enterprises accelerate innovation in the hyper-connected world by removing the complexities of technology and handling all the “leg work” in getting content from the company to the consumer and beyond.

Their “Intelligent Platform” reaches globally and delivers locally, providing customers with unmatched reliability, security and visibility into their online business. This platform comprises more than 95,000 servers located across nearly 1,000 networks in 70 countries worldwide and delivers hundreds of billions of internet interactions daily.

The company also tracks and defends against “attack traffic” on the internet, helping us all get the safest bandwidth possible. Global internet traffic is not only growing in raw content and users, but the speed at which we access that content is also rising rapidly.

Recent Results

Most Zack’s Rank #1 stocks have recently experience very positive analyst momentum and Akamai is no exception.

After the company delivered a 24% beat last quarter (42cents versus the Zacks Consensus for 34 cents), there have been a slew of positive analyst revisions. The Zacks Consensus for the current and next quarters as well as FY2013 and FY 2014 are all higher than they were just 2 months ago, with none moving their estimates lower.

Akamai is expected to report Q2 results on July 24th and given their Zacks Rank coupled with an earnings ESP of 8.11% in the current quarter, there is a very good chance they will beat the current Zacks Consensus for 37 cents. ESPs are also positive for the future, which is a good sign for guidance.

AKAM has beat the Zacks Consensus earnings estimates 4 periods in a row, exceeding expectations by an average of 13.7%.

The Charts

Since gapping almost 17% above the 200 day moving average on their last earnings report, the stock added another 15%, making a new 52 week high of 48.47 over the last month.

Recently, shares have come down to their post gap price around the $42.50 level, which is just above the 50 day moving average of $42.34.

Shares are in an odd area here; I’d like to see them trading above the $43.07 area, which coincides with a key Fibonacci level. If the stock breaks down here along with the broad market, look for strong support around $39.50 and even more at the 200 day moving average of $37.81.

The reality is that the intermediate bullish trend is intact, and a buy around these levels wouldn’t be catastrophic, but Akamai’s forward P/E of 26.5 may put it on the temporary chopping block if the broad market corrects.

Look for an initial upside target of $47.25, with another 5% breakout if shares eclipse the 52 week high.

Akamai is my favorite pick in the cloud space at the moment; Rackspace (RAX), a Zacks Rank #5 Strong Sell, doesn’t look nearly as attractive and trades at double the multiple and while Hewlett Packard (HPQ) (Zacks Rank #3 Hold) is trying to move into the space, they may have a long road ahead and are much less agile and “plugged in” than Akamai.

By Zacks Investment Research

Friday, June 14, 2013

5 Careful Ways to Win with Options

5 Careful Ways to Win with Options

Did you know that in spite of all the volatility in the markets as of late (or maybe partly because of it), the growth in options trading has continued to rise?

In fact, for the last seven years in a row, the volume of options contracts traded has steadily increased with last year setting an all-time high.

More and more people are now including options in their investments as a smart way to get ahead of the market.

And it's easy to see why.


Most people know that options afford the investor many advantages, not the least of which is a guaranteed limited risk when buying calls and puts.

And you can also get a great deal of leverage while using only a fraction of the money you would normally have to put up to get into the actual stocks themselves.

But those are just some of the advantages of options.


The real advantage with options is the opportunity to make money if a stock goes up, down and, depending on your strategy, even sideways.

In fact, with some strategies you can even be wrong on the underlying stock's direction and still profit. Simply identifying a range is all you need to win.

This flexibility gives the options investor the opportunity to profit in virtually any market condition – even when you're unsure what the market will do.

Easier Than You Think

Even though the popularity of options has soared, they are still not as well known or understood as stocks.

But it's all a lot easier than you might think.

1.) Are You Bullish?

If you believe the price of a stock will go up, you can buy a call option on it and make money as it goes higher.

The option buyer gets a guaranteed limited risk, which is limited to the purchase price (or premium) plus any applicable commissions and fees.

Essentially, at expiration, your profit is the difference between where the stock price is and your option's strike price.


Let's say a stock was trading at $50.

You buy a $45 call option with a premium of $6.50, i.e., $650.

At expiration, the stock has shot up to $65.

Your $45 call would now be $20 in-the-money, making it worth $2,000.

So the option is worth $2,000.

You paid $650.

That's a gain of $1,350.

All on just a $650 investment.

Worst case scenario: if the stock at expiration closed below your option's strike price of $45, you could lose the entire $650. But even if the price went down to $0, you could never lose any more than that. Whereas with a stock, you'd be on the hook for it all.

2.) Are You Bearish?

If you believe the price of a stock will go down, you can buy a put option on it and make money as the price goes lower.

Once again, the option buyer gets a guaranteed limited risk, which is limited to the purchase price (or premium) plus any applicable commissions and fees.

At expiration, your profit is the difference between where the stock price is and your option's strike price.


Let's say a stock was trading at $60.

You buy a $65 put option with a premium of $7.00, i.e., $700.

At expiration, the stock has dropped to $40.

Your $65 put would now be $25 in-the-money, making it worth $2,500.

So the option is worth $2,500.

You paid $700.

That's a gain of $1,800.

All on just a $700 investment.

Worst case scenario: if the stock at expiration closed above your strike price of $65, you could lose what you paid for the option. But even if the stock went against you even more, you could never lose any more than that.

3.) Expecting a Big Move, But Not Sure Which Way?

A straddle is a way to make money when you're not sure which way the market will go, but you believe something big will happen in either direction.

With a straddle, you're buying both a call and a put at the same time, with the same strike price, and the same expiration date.

For example, let's say it's earnings season and you expect a big move to occur, either up or down, based on whether the company reports a positive surprise or a negative surprise. Or maybe the charts are suggesting a big breakout could be getting ready to take place in one direction or another.

With this strategy you can make money in either direction without having to worry about whether you guessed correctly or not.


Let's say a stock was trading at $100 a few days before their earnings announcement.

You buy the front month $100 strike call for $150. And you buy the front month $100 strike put also for $150.

That's a cost of $300 (not including transactions costs) to put on the trade.

Now let's say the stock shoots up $15 as a result of a positive earnings surprise.

The call option is now worth $1,500.

The put option is worth $0.

You paid $300.

That's a profit of $1,200.

All on just a $300 investment.

The best part with this strategy is if the stock had posted a negative surprise and it dropped -$15 instead, you would have been just as profitable. The only difference is that the put would have been the profitable side and the call would have been the loser. (But so what, because you didn't care which way it went, you just expected something big to happen in one direction or the other.)

Worst case scenario: at expiration, if nothing big ever happens, you would have lost the entire $300.

4.) Expecting a Stock to Fall (or at Least Not Go Much Higher)?

Writing calls can be profitable in mildly bullish markets, sideways markets and bearish markets.

Buying a call option gives you the right but not the obligation to purchase 100 shares of a stock at a certain price within a certain period of time. The price you pay for the option, let's say $500 for example, is called the premium.

If you write an option, you're collecting that premium. Someone else is buying the right to own 100 shares of a stock at a certain price within a certain period of time. And that premium is paid to you.

If that stock goes down and the option expires worthless, the buyer of the option loses -$500, but the writer of the option makes $500.


Let's say a stock was at $70.

For whatever reason, you determined the stock would go down or at least not go much higher.

Let's also say that you wrote an $80 call for a premium of $5.00, i.e., $500. That means your account would be credited $500.

If at expiration, the stock is at or below the strike price of $80, you'd keep the entire premium of $500.

Even though the stock didn't go down like you thought, but instead went even higher -- $10 higher in this example -- as long as it stayed below your strike price of $80 by expiration, you'd still profit by the full $500 you collected.

Thought the stock was going down.

Instead it went up.

Still made money: $500.

Pretty exciting.

In fact, at expiration, the stock could literally be above the strike price of $80, plus an amount commensurate with what the writer collected for the premium, and still not lose any money. (In this case, the stock could literally be at $85 at expiration and you still wouldn't have lost anything.)

Worst case scenario: if the stock went up past the strike price plus the amount collected in premium, then you'd start losing on the trade. And for every $1 above that level, you'd lose $100.

But if the stock looks like it's breaking out above your price level, you can simply buy that option back to limit your loss, or depending on where you are in the trade, lock in a partial gain.

5.) Think a Stock Will Go Up, But You'd Like To Buy It at a Lower Price, Yet Still Make Money Even If You Never Get In?

Writing put options is a great way to make money if the market goes up, sideways and even down (to a limited extent).

This is also a way to potentially get into a stock that you'd like to own at a much cheaper price, and get paid while you wait, even if you never get the stock.

As you know, if you buy a put option, you're buying the right to sell a stock at a certain price within a certain period of time. The buyer pays a premium for this right. He has a limited risk – which is limited to the price he paid for the option.

However, the writer is taking the other side. He has to buy the stock if it's put to him at a certain price within a certain period of time. And for this 'risk', the writer collects a premium.


Let's say a stock was at $50.

And you decided to write a $40 put option, collecting a premium of $4.00, i.e., $400. (Not to mention, looking forward to potentially getting a chance to own that stock a full $10 cheaper than where it's trading at.)

If at expiration, the stock is trading anywhere above your strike price of $40 or higher, you'd keep the entire premium of $400. You may not have gotten that stock, but you still got paid for your wait.

Thought the stock would go up, but didn't want to buy it at that price.

Wanted it to go down to buy at a lower price.

Never does.

You still made $400.

If at expiration, the stock price is at $40, the buyer of the option could exercise it and you'd now be obligated to buy that stock for $40 a share, which means you've now got that stock at the price you wanted – plus your $400 premium.

Didn't want the stock at $50.

Wished it would go down so you could get it at $40.

Finally does and you get your stock.

Plus $400.

But even if the stock fell to $36 (i.e., down to your strike price plus an amount commensurate with the premium collected -- this would be your breakeven point), you still wouldn't lose anything.

Worst case scenario: the stock would have to fall below $36 to even begin to lose on the trade. And for every $1 below that level, you'd lose $100 due to the stock you now own.

Of course, if you changed your mind, or if you thought the stock could fall below your strike price and even your breakeven point, you could buy the option back at any time, thus cutting your loss or locking in your gain and ending the trade right there, without having to even bother with the stock.

Options give the investor numerous ways to make money in the market. Up, down or sideways, decide to make success your only option.

You can learn more about different types of option strategies by downloading our free options booklet: 3 Smart Ways to Make Money with Options (Two of Which You Probably Never Heard About).

By Zacks Investment Research

Monday, June 10, 2013

Investing for an Extra Paycheck Every Friday

This week we do not have a free stock pick. After the recent market pullback, many investors and traders are trying to determine whether the recent bull run is over and if this is the beginning of more downside to come.

Instead of choosing a buy or sell stock pick this week, we are focusing on a new options trading system that provides low-risk high-reward returns. Click the link above to get the free trading plan blueprint.

How Does an Extra "Paycheck" Every Friday Sound?

This little-known, 2-step trading technique exploits a "flaw" around how most people trade options so that you have the potential to:

Earn up to 2% every 7 days, or the equivalent of 104% every year.

Due to the very nature of how it works, "instant income" is deposited into your trading account every time you place this trade each Friday.

Your total time investment with this technique is less than 20 minutes PER WEEK, and you collect your "instant income" every Friday.

Click here for the free income blueprint.

Click Here to Review More Options Trading Resources

Friday, June 07, 2013

Gold Silver and Mining Stocks Forecast Outlook

It has been a very long couple of years for the precious metal bugs. The price of gold, silver and their related mining stocks have bucked the broad market up trend and instead have been sinking to the bottom in terms of performance.

Earlier this week I posted a detailed report on the broad stock market and how it looks as though it‘s uptrend will be coming to an end sooner than later. The good news is that precious metals have the exact flip side of that outlook. They appear to be bottoming as they churn at support zones.

While metals and miners remain in a down trend it is important to recognize and prepare for a reversal in the coming weeks or months. Let’s take a look at the charts for a visual of where price is currently trading along with my analysis overlaid.

Weekly Price of Gold Futures:

Gold has been under heavy selling pressure this year and it still may not be over. The technical patterns on the chart show continued weakness down to the $1300USD per once which would cleanse the market of remaining long positions before price rockets towards $1600+ per ounce.

There is a second major support zone drawn on the chart which is a worst case scenario. But this would likely on happen if US equities start another major leg higher and rally through the summer.

Weekly Price of Silver Futures:

Silver is a little different than gold in terms of where it stands from a technical analysis point of view. The recent 10% dip in price which shows on the chart as a long lower candle stick wick took place on very light volume. This to me shows the majority of weak positions have been shaken out of silver. Gold has not done this yet and it typically happens before a bottom is put in.

While I figure gold will make one more minor new low, silver I feel will drift sideways to lower during until gold works the bugs out of the chart.

Silver Mining Stock ETF – Weekly Chart:

Silver miners are oversold and trading at both horizontal support and its down support trendline. Volume remains light meaning traders and investors are not that interested in them down where and it should just be a matter of time (weeks/months) before they build a basing pattern and start to rally.

Gold Mining Stock ETF – Weekly Chart:

Gold mining stocks continue to be sold by investors with volume rising and price falls. Fear remains in control but that may not last much longer.

Gold Junior Mining Stock ETF – Weekly Chart:

Gold junior miners are in the same boat with the big boys. Overall gold and gold miners are still being sold while silver and silver stocks are firming up.

Precious Metals Trading Conclusion:

In the coming weeks we should see the broad stock market top out and for gold miners along with precious metals bottom. There are some decent gains to be had in this sector for the second half of the year but it will remain very dicey at best.

If selling in the broad market becomes intense and triggers a full blown bear market money will be pulled out of most investments as cash is king. Gold is likely to hold up the best in terms of percentage points but mining stocks will get sucked down along with all other stocks for a period of time. This scenario is not likely to be of any issue for a few months yet but it’s something to remember.

By Gold and Oil Forecasts

Click Here to Review More Precious Metals Forecast Outlooks and Trading Resources

Wednesday, June 05, 2013

Investing and Trading on Media Indicators

As soon as USA Today ran with the “Bull run gets solid footing” headline, I knew it was only a matter of time before the market sold off.


History, my dear Watson… History.

Shortly after this cover story ran on May 29, 2013, the market dropped about 300 points.

When Barron’s released its “Time to Buy” cover in October 2011, I knew it was time to go short both financials and the overall market.

And it’s a good thing I did. The market would fall 250 points the following week, led in part by financials.

You see, magazine covers have a history of leading investors astray.

The findings of three University of Richmond professors published in their recent study “Are Cover Stories Effective Contrarian Indicators” prove as much.

Their research examined Business Week, Fortune, and Forbes, and found a correlation between the cover of the publication and the performance of a stock.

In addition, the study examined how covers can predict when the overall market would change. (See the examples below.)

Business Week’s August 13, 1979 “The Death of Equities” cover claimed investors – burned by years of bad returns in the 1970s – turned their back on stocks for good. That was just before the market launched into an 18-year rally.

Times’ “Home Sweet Home” cover story in June 2005 called the very top of the housing market. Newsweek’s April 2010 cover declared “America’s Back!” right before the Dow plunged from 11,200 to about 9,500.

Here’s the September 1998 Time cover asking, “Is the Boom Over?” before the Internet bubble even started to inflate.

Dozens of covers have been directly linked to changing the course of market direction:

In the March/April 2007 Financial Analysts Journal, Arnold, Earl and North take the issue head-on. They collect 20 years of headlines from Business Week, Fortune and Forbes and classify them as positive, negative or neutral.

Their statistical tests indicate that positive cover stories typically signal the end of superior performance and that negative headlines typically signal the end of poor performance. However, the evidence does not strongly suggest significant reversal or momentum when factors such as company size are also considered.

It may sound like a ridiculous indicator, but it holds true.

By Ian Cooper of the Speed Retirement System

Tuesday, June 04, 2013

The Hindenburg Omen and the Stock Market

By Ian L. Cooper Speed Retirement System

Just when you thought it was safe to get back into the market…

Run and hide, run and hide.

Otherwise known as the Hindenburg Omen, once this is seen, the probability of a crash occurrence is considered high.

Named after the crash of the German Zeppelin Hindenburg in 1937, here’s how it works:

1) The number of new daily 52-week highs and lows on the NYSE is more than 2.2% of all securities traded that day. However, new 52-week highs cannot be more than twice the number of new 52-week lows. This condition is mandatory.

2) The 10-week moving average of the NYSE Index is rising.

3) The McClellan Oscillator, an overbought/oversold indicator, is negative.

4) And, finally, if you step on a crack on the third Thursday of a month with a full moon while looking in a northerly direction, you’ll break your mother’s back… (I’m kidding, of course.)

The Omen has now appeared before all major crashes, or panic events for the last 25 or so years. No panic sell off has occurred without its presence.

The latest Omen-sighting may or may not lead to a sell-off, given Fed intervention. So let’s just wait and see before getting nuts, shall we?

Friday’s 200-point decline wasn’t comforting. But let’s just wait and see.

According to Barron’s, the Hindenburg Omen appeared in June 2008 when the Dow was trading at 11800 – three months before the big September crash.

In 2010, according to The Wall Street Journal:

The confluence of data used by the Omen was officially tripped this week. There were 92 companies that hit new 52-week highs on Thursday, or 2.9% of all companies traded on the New York Stock Exchange. There were also 81 new lows, or 2.6% of the total. Each number must exceed 2.5% for the Omen to occur, according to Mr. Miekka. Other criteria include a rising 10-week moving average for NYSE and a negative McClellan Oscillator, a technical indicator that measures market fluctuations.

As you can see, the Dow — for example — did turn down after the August 2010 sighting. The only reason we bounced was because of Bernanke’s QE2 announcement.

We got a second sighting of the dreaded Omen on December 14, 2010.

By April 2011, the market crashed. Omen-related or not, the crash was still significant. The only reason we bounced so well was because of Operation Twist — a policy involving selling $400 billion worth of short-term Treasuries in exchange for longer-term bonds.

By July 2012, we got another sighting right before a brief dip. Again, we were saved by Fed intervention.

Would it be so bad if we sold off in the next few weeks? Nope. We need a healthy pullback. This rally is wildly over-extended on Fed actions.

Monday, June 03, 2013

Investing in Consumer Goods Containers and Packaging

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Before analyzing a company for investment, it’s important to have a perspective on how well the business has performed. Because at the end of the day, if you are an investor, you are buying the business. The FAST Graphs™ presented with this article will focus first on the business behind the stock. The orange line on the graph plots earnings per share since 1999. A quick glance vividly reveals the historical operating record of the company.

Ball Corp (BLL) is a supplier of high quality packaging for beverage, food and household products customers, and of aerospace and other technologies and services, primarily for the U.S. government.

This article will reveal the business prospects of Ball Corp through the lens of FAST Graphs – fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.

A quick glance at the graph itself and the orange earnings justified valuation line will tell the readers volumes about how well the company has historically been managed and performed as an operating business. Simply put, the reader should ask whether this example is worthy of a greater investment of their time and effort based on the data as presented and organized. The FAST Graphs’ unique advantage is the graphical articulation of the price value proposition.

Earnings Determine Market Price: The following earnings and price correlated F.A.S.T. Graphs™ clearly illustrates the importance of earnings. The Earnings Growth Rate Line or True Worth™ Line (orange line with white triangles) is correlated with the historical stock price line. On graph after graph the lines will move in tandem. If the stock price strays away from the earnings line (over or under), inevitably it will come back to earnings.

Earnings & Price Correlated Fundamentals-at-a-Glance

A quick glance at the historical earnings and price correlated FAST Graphs™ on Ball Corp shows a picture of undervaluation based upon the historical earnings growth rate of 17.3% and a current P/E of 14.1. Analysts are forecasting the earnings growth to continue at about 10%, and when you look at the forecasting graph below, the stock appears undervalued (it’s inside of the value corridor of the five orange lines, based on future growth).

Ball Corp: Historical Earnings, Price, Dividends and Normal P/E Since 1999

Performance Table Ball Corp

The associated performance results with the earnings and price correlated graph, validates the principles regarding the two components of total return: capital appreciation and dividend income. Dividends are included in the total return calculation and are assumed paid, but not reinvested.

When presented separately like this, the additional rate of return a dividend paying stock produces for shareholders becomes undeniably evident. In addition to the 15.3% Annualized ROR (without dividend) (green circle), long-term shareholders of Ball Corp, assuming an initial investment of $10,000, would have received an additional $4,581.34 in total dividends paid (blue highlighting) that increased their Annualized ROR (without dividend) from 15.3% to a Total Annualized ROR plus Dividends Paid of 15.7% versus 3.2% in the S&P 500.

The following graph plots the historical P/E ratio (the dark blue line) in conjunction with 10-year Treasury note interest. Notice that the current price earnings ratio on this quality company is as normal as it has been since 1999.

A further indication of valuation can be seen by examining a company’s current P/S ratio relative to its historical P/S ratio. The current P/S ratio for Ball Corp is .76 which is historically normal.

Looking to the Future

Extensive research has provided a preponderance of conclusive evidence that future long-term returns are a function of two critical determinants:

1. The rate of change (growth rate) of the company’s earnings

2. The price or valuation you pay to buy those earnings

Forecasting future earnings growth, bought at sound valuations, is the key to safe, sound and profitable performance.

The Estimated Earnings and Return Calculator Tool is a simple yet powerful resource that empowers the user to calculate and run various investing scenarios that generate precise rate of return potentialities. Thinking the investment through to its logical conclusion is an important component towards making sound and prudent commonsense investing decisions.

The consensus of 14 leading analysts reporting to Capital IQ forecast Ball Corp’s long-term earnings growth at 10%. Ball Corp has high long-term debt at 73% of capital. Ball Corp is currently trading at a P/E of 14.4, which is inside the value corridor (defined by the five orange lines) of a maximum P/E of 18. If the earnings materialize as forecast, based upon forecasted earnings growth of 10%, Ball Corp’s share price would $79.01 at the end of 2018 (brown circle on EYE Chart), which would represent a 11.8% annual rate of total return which includes dividends paid (yellow highlighting).

Earnings Yield Estimates

Discounted Future Cash Flows: All companies derive their value from the future cash flows (earnings) they are capable of generating for their stakeholders over time. Therefore, because Earnings Determine Market Price in the long run, we expect the future earnings of a company to justify the price we pay.

Since all investments potentially compete with all other investments, it is useful to compare investing in any prospective company to that of a comparable investment in low risk Treasury bonds. Comparing an investment in Ball Corp to an equal investment in 10-year Treasury bonds illustrates that Ball Corp’s expected earnings would be 5.6 (purple circle) times that of the 10-year T-bond interest (see EYE chart below). This is the essence of the importance of proper valuation as a critical investing component.

By GuruFocus