Tuesday, April 30, 2013

Big Week Ahead for the Euro-Dollar




EURUSD: Big Week Ahead by Elliottwave International Currency Specialty Forecasting

Two news stories from Europe hit the headlines Monday morning (Apr. 29).

One: Italy finally ended its political chaos and swore in the new government.

Two: Eurozone economic confidence fell more than expected.

EURUSD -- the euro-dollar exchange rate and most traded forex market -- rose on Monday. But let's pretend for a moment that we didn't know that.

Try this instead: Look at the two news items above and guess, without knowing what EURUSD actually did, which story would have "moved" it on Monday? Would you expect the euro to fall because of the economic confidence surprise, or rise because of Italy's return to political stability?

There is no way to answer that with any degree of certainty, is there?

By now you probably get the point: More often than not, the day's news is a mixed bag. And only in retrospect can you a) look at what the market has already done, and b) pick out the news item that best fits the market action. In other words, if EURUSD fell on Monday instead, you can bet the same analysts would blame it on the poor confidence number and ignore "the good news" from Italy.

Where does that leave us? Well, this week's biggest news story is arguably still ahead: The European Central Bank meeting on Thursday, when they will decide on whether to cut interest rates. Will the euro rally or fall on the news (whatever it ends up being)?

Ah . . . but you already know that's a trick question.

Our Currency Specialty Service uses Elliott wave analysis to anticipate trends in EURUSD and 10 other forex pairs -- 24 hours a day.

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Monday, April 29, 2013

Investing in Packaging



Click Here for a Free Trial of "Profit Rockets" Stock Pick Service



Zacks Investment Research reports RockTenn ( RKT ) delivered its third consecutive positive earnings surprise on April 23, and earnings estimates have been soaring ever since.

This has sent the stock to a Zacks Rank #1 (Strong Buy).

Based on current consensus estimates, analysts project 43% EPS growth this year and 39% growth next year. Despite this stellar growth, shares trade at just 12.5x forward earnings.

RockTenn manufactures corrugated and consumer packaging. It was founded in 1936 and has a market cap of $7.0 billion.

Big Second Quarter Beat

RockTenn reported better-than-expected second quarter results for the second quarter of its fiscal 2013 on April 23. Adjusted earnings per share jumped 16% to $1.12, beating the Zacks Consensus Estimate by 10 cents. It was the company's third consecutive positive earnings surprise.

Net sales increased 2% to $2.325 billion, driven by a 7% increase in the Corrugated Packaging segment.

Turning 2% sales growth into 16% EPS growth means one thing: expanding profit margins. The gross margin expanded 80 basis points to 16.6% in the quarter, while total segment income increased 60 basis points to 7.5%. Meanwhile, interest expense declined 16%, which drove the net profit margin higher.

Estimates Soaring

Earnings estimates have soared since RockTenn's big second quarter beat, which has sent the stock to a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for 2013 is now $6.40, up from $5.88 just 60 days ago, and representing 43% EPS growth over 2012. The 2014 consensus has risen from $7.75 to $8.93 over the same period, which corresponds with 39% EPS growth.

While people think the paper industry is dying, the 'Paper & Related Products' industry ranks in the top 20% of industries according to the Zacks Industry Rank.

Former Dunder Mifflin manager Michael Scott would be proud.

Reasonable Valuation

The valuation picture look very reasonable for RockTenn. Shares trade at 12.5x 12-month forward earnings, which is in-line with its 10-year median.

RockTenn also trades at just 6.5x cash flow, well below the industry median of 10.0x.

The Bottom Line

With rising earnings estimates, strong growth projections and reasonable valuation, RockTenn offers investors a lot to like.

Click Here for a Free Trial of Zacks Investment Research

Friday, April 26, 2013

Active Vs. Passive Investment Management



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Active and passive investing represent opposite approaches to money management. Active management involves the selection of individual financial securities and the trading of these shares in response to the markets. Passive mutual funds and exchange-traded funds do not trade securities as often as active ones. Instead, passive fund managers design their products to resemble a broader market index. In the 10-year period leading up to 2012, investors withdrew $543 billion from actively managed funds while investing $660 billion into passively managed funds, according to the ETF Trends website.

Active fund managers invest with a goal to deliver profits that are higher than some industry barometer to which the fund is designed to beat. An example of one such index is the S&P 500, which represents trading in some of the largest U.S. stocks. Active fund managers rely heavily on research to determine when to buy or sell securities in a fund. Passive managers are doing their jobs if an investment portfolio performs as well as the index it tracks. Less trading activity occurs in passive funds compared with active portfolios.

Fees

Active managers charge investors about 1.3 percent of assets each year, according to an article on the Knowledge@Wharton website. These expenses exceed those charged by passive fund managers -- fees that can be less than 0.2 percent each year -- given active fund managers' mandate to perform better than average. Passive managers often use price as a feature on which to compete, given that their investment products are often similar. Companies that oversee exchange-traded funds have been known to compete fiercely on price, according to a 2012 article in "The Wall Street Journal."

Risk

Active managers focus on the current and potential financial performance of individual companies when building a portfolio. In doing so, they expose investors to the risk of human error. However, passive managers do not believe in taking chances that may not pay off. They avoid this risk by investing in entire investment categories or sectors, according to a 2011 article on the CBS MoneyWatch website. The active management style endorses the belief that the stock market has inefficiencies that human beings can identify and profit from, while passive managers disagree. However, passive funds are also less nimble than active ones and are not usually in the business of rearranging securities in a portfolio when performance is suffering.

Investment Size

The success of active and passive management is affected by the nature of the securities in a fund. In a study by Dow Jones S&P Indices cited on the MarketWatch website, less than 33 percent of active managers of U.S. stock funds were able to outperform the S&P 1500 index between 2007 and June 2012. The expertise of active managers may become especially valuable when identifying opportunities in smaller stocks, where performance is more difficult to predict than with better-known large companies.

By Zacks Investment Research

Tuesday, April 23, 2013

Busted Breakout Forex Trades



By Van Tharp Institute Trading Education Home Study Programs and Workshops



Trading Forex is not so different than trading stocks or futures. There are some nuances, to be sure, but for anyone who has already been trading, picking up on these small differences would be easy. I thought I would share the background for one of the systems I teach to show people that they can understand a Forex system with little explanation and a few charts.

First, understand that currencies tend to be trendy—especially on a shorter-term basis. I have observed this across many currency pairs over a number of years. There would seem to be an obvious edge in a trend-following system that can identify low-volatility consolidation patterns that are likely to break-out into a momentum-driven continuation of the trend. To take advantage of this behavior, I created a low-risk, rules-based system for times when I find that a particular currency pair is trending, respects important lines in charts, and frequently breaks out of low-volatility range consolidations.

Forex System With an Edge — Busted Breakout

According to Tharp Think, a trading system consists of several parts: beliefs behind the system, setup & entry rules, filters, risk definition (1R), exits, and a position sizing strategy™. The following trade example gives only a short description of these parts.

One of the fundamental beliefs behind this system is that price consolidations within a trend are times of “refreshers” (or pauses) required for the trend to regain strength before it can continue. Multi-bar consolidations bring price volatility down and allow for low-risk trading opportunities.

The system benefits from an initial state of low volatility that allows a relatively tight stop at entry. Because the system is based on the psychology of the market participants, it works in all timeframes, from very small to large (from 1 min to daily charts).

Now, let’s have a look at a recent long Busted Breakout trade in the EURUSD on the 5th of April, 2013.

Higher Timeframe Analysis

Overall, we see in the 60-minute chart an uptrend in the EURUSD pair determined by higher highs and higher lows. The recent strong momentum move confirms this trend and indicates that trend acceleration might take place from here on out. The moving averages are in a nice trend mode (i.e. 8>21>50>200MA). The current price is in/around the 8 & 21MA, representing a good base for the next momentum move to occur. Target levels are indicated in the chart (grey rectangles—top right) with the conservative target being the round number of 1.3000, and the more aggressive target at 1.3050 (more aggressive target). This overall chart picture might seem to present an obvious low-risk trade opportunity.



Setup & Entry

A number of rules must apply for a valid entry on both the higher timeframe chart (60 minutes) and entry chart (15 minutes). Two important consolidation setup conditions are visible on the entry chart below. First, there's a clear horizontal line through a number of bars (1.2927 in this case). Second, our break-out trader friends made a trial push lower just prior to 9:00. The breakout lower, however, failed.

At this point, I started stalking the busted pattern, waiting for a definite break above the horizontal line within a certain time limit. The red candle second to last on the chart below was a nice rejection candle (testing the 21MA from above) that, although not necessary, added value to the setup. This indicated that the EUR-bulls were taking over the command of the price. The entry trigger would be the break of the high of this candle with a tight stop set at the last low (see navy blue line below the same candle). Taking into account the conservative target of 1.3000 the reward-to-risk ratio of this trade was more than 3.5 (well above my required 2:1) and I was ready for the entry.



One note of caution: an important news announcement (NFP) was about to happen at 14:40 (8:30am US EST) that would likely have an impact on the EURUSD. Generally, I try to avoid trading around major news announcements, except when I am in a trade and my current stop would get me out at break even or better. Here at the entry, we were still 2 ½ hours away from this news release which left enough time (10 more bars) to make the trade at least break-even; otherwise I would exit the position before the announcement.

Trade Management

After the entry at the 12:15 bar price break up, the Busted pattern continued to develop as expected. Price tested support at the 21MA a second time before it started off with a nice momentum move (last 4 green bull candles in the chart below). This re-break of the horizontal line from below would have been an entry if the 1st one was not taken. The stop was at a good and protected place, and we saw higher highs & higher lows forming.

Look at the momentum move and think about why it happened— the market is actually running the stops of those short traders that were hoping for a successful break-down. They have to cover their shorts at prior highs which then drive prices higher towards our target. At this point, my position sizing rules required that I take off part of the position and move my stop to breakeven on the position. Now, I could relax and be grateful for a potential unexpected upside reward.



By the time the news release happened at 14:40, my stops protected me from a loss and the announcement actually had a bullish impact, helping the trade reach the 1st conservative target quickly (see thick grey line on the chart below). I took off another part of my position at the +3R point and left a trailing stop on the remainder—see small pink lines.

Once the position gained +4R, I tightened my trailing stop by a certain percentage to preserve more of my profits. The first pullback below the 8MA led to a stop-out of the full position at 1.3011. Overall, the conservative target had been well achieved and the trade got stopped out just short of the second target. The trade generated a net positive result of +3.1R (+0.2R, + 0.8R, and + 2.1R) with limited risk exposure throughout the trade.



Post Trade – A New Setup Forming

After that trade, the EURUSD price moved back to the MAs on the 60min chart and things got interesting again. A nice, green rejection candle squeezed within the 8/21MA is about to trigger the next potential trade using another system whose trades last a little longer because it uses hourly bars only. I teach this system in the Forex workshop.



As you might have noted with the trade example and the setup example above, these “Forex” trading systems may look familiar. One of my beliefs is that: “a chart is a chart,” and as such, the same system logic can apply for all timeframes, Forex pairs, and instruments beyond Forex.

Click Here to Review More Forex Currency Trading Resources

Monday, April 22, 2013

Investing in Wisdom



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Zacks Investment Research reports Wisdom Tree Investments ( WETF ) has seen some strong net inflows over the past few quarters and has dramatically increased its assets under management of late. As a Zacks Rank #2 (Buy), it is the Bull of the Day.

Inflows For the ETF Industry

One look at the annual net inflows for the ETF Industry and you will see that the growth story is back on. There was $177 billion in net inflows in 2008, but the recession cased that number to slide to $116 billion in 2009. A slight gain was recorded in 2010 with net inflows reaching $118B in 2010 and they stay at that level in 2011. Last year, the industry posted and industry record with $185 billion of net inflows.

2012 Inflows are worth a closer look. The industry saw $53B in 1Q12, followed by $25B in 2Q and then $52B and $55B in quarters three and four respectively. So as the market improved, the industry saw a willingness on the part of investors to move shift their assets from cash. Interestingly, the industry saw a net inflow for fixed income products of $356B with $52B of that coming in the form of ETFS. They noted that equities saw a net outflow of $20B as equity mutual funds saw $153B in redemptions but there was $133B in net inflows for equity ETFs.

Company Description

Wisdom Tree Investments operates as an exchange-traded funds (ETFs) sponsor and asset manager. It offers ETFs in equities, currency, fixed income, and alternatives asset classes. The company also licenses its indexes to third parties for proprietary products, as well as offers a platform to promote the use of Wisdom Tree ETFs in 401(k) plans. It develops index using its fundamentally weighted index methodology. The company was founded in 1985 and is based in New York, New York.

WETF Beats Estimates In Two of Last Three Quarters

Dating back to the June 2012 quarter, has beaten the Zacks Consensus Estimate in two of the last three quarters. The June 2012 quarter saw the company post $0.02, $0.01 ahead of the estimate for a 100% positive earnings surprise. The following quarter saw another one cent beat which translated into a 50% positive earnings surprise.

The most recent quarterly report took place on February first of this year. The company posted revenues of $24M and EPS of $0.04, both were in line with the Zacks Consensus Estimates.

Growing Inflows and AUM

The quarterly net inflows for WETF mimic the results of the broader industry, with a strong 1Q12 followed by a weaker 2Q12. The most likely reason for the slide was the lower equity markets in 2Q12. The following two quarters saw a nice rebound to end the year. For the year 2012, net inflows increased from $3.899B to $4.732B or more than 21%.

Assets under management have been growing at a dramatic pace. In 2009 they stood at $6B and moved to $9.9B in 2010. Another increase pushed the number to $12.2B for 2011 and the company ended the year 2012 with $18.3B in assets under management. That represents an increase of 50% from the prior year.

WETF Sees Estimates Moving Higher

Aggressive growth investors have to like the every growing earnings story at WETF. The company has seen the Zacks Consensus Estimate for 2013 tick higher every month since October when it was $0.24. The estimate has grown to its current level of $0.35 since that time. Similarly, estimates for 2014 have also moved higher. Over the same time period, the Zacks Consensus Estimate has moved from $0.31 to $0.51. That gives and implied growth rate of 45%, and a number like that can turn a lot of heads.

Valuation

The valuation picture for WETF shows what you would expect to see for a fast growing company with great potential for future earnings. That is code for a high valuation, with the company sporting a 29x multiple of forward earnings compared to a 13x industry average. The key to me is the margin story. The company is posting a pre tax margin of 13% while the industry average is 12.1%, and that advantage flows down to the bottom line. The industry average for net margin over the last twelve months was 5.5% while WETF was able to post 13% net margin. When you can earn more than 2x the industry average, people will pay up if there is growth included.

Friday, April 19, 2013

Three Stocks Set to Top Earnings Estimates



By Zacks Investment Research


The earnings pace as quickened this week and the results have not be stellar. By Monday afternoon, only 34 of the 498 stocks in the S&P 500 had reported. Of those 34 companies we saw total earnings up +16% from the same period last year, with 64.7% of them beating earnings expectations. Total revenues for these companies are up +5.5% and 41.2% of them reported positive top-line surprises.

As the week progressed, we saw revenue and earnings weakness start to materialize a bit more with Nokia ( NOK ), Intel ( INTC ), Bank of New York (BK), eBay ( EBAY ) and others missing the mark. UnitedHealth saw their first-quarter earnings fall 14% as higher medical bills continued to outpace increased revenue, they were trading down today as well.

Order weakness was also seen in tech giant Apple ( AAPL ) , who saw its shares cut by 9% this week alone.

My three stock picks from last week, Goldman, Yahoo and Blackstone, all beat Zacks EPS estimates, but are struggling on market weakness and less than perfect earnings reports. The reality is that markets are now extremely finicky when it comes to dissecting results; companies must be firing on all cylinders.

As we continue our search for stocks that have a high likelihood of beating estimates, the Zacks Earnings ESP can be an invaluable tool in your search.

Bullish ESP Stocks

Hasbro ( HAS )is a Zacks Rank #3 stock with a positive earnings ESP of 33% for the current quarter. The company is expected to make 3 cents a share, but our ESP readings are looking for a profit of 4 cents.

This stock may be worth a look after Mattel announced first-quarter net income more than quadrupled helped by strong sales of dolls like Monster High, Disney Princess and American Girl. The toy market must not be doing that poorly.

Devry ( DV )is a Zacks Rank #3 stock with a positive earnings ESP of 6.02% for the current quarter; the Zacks Consensus is for a per share profit of $0.83, with the most accurate at $0.88.

This education company is getting a fair amount of love from analysts ahead of its report next week and the company has been buying back a relatively large amount of shares. There is no doubt that the space has struggled, but as some of its peers are showing, a recovery might not be too far away.

The majority of analyst action has been bullish and we have seen estimates on the rise for the current quarter, next quarter as well as FY 2013 and FY 2014 since Devry’s last report. ESPs are also positive for those time frames.

Devry reports earnings on April 23rd

USG Corp ( USG ) is a Zacks Rank #2 stock with a positive earnings ESP of 54.55% for the current quarter. The Zacks consensus estimate is for Q1 EPS of $0.11 with the most accurate estimate coming in at $0.17.

The improvement in the housing market has helped push USG, a large building materials supplier, higher over the last 12 months. The stock has defied gravity somewhat as it has missed Zacks Consensus estimates 4 of the last 4 reports.

The company has been losing money, but is expected to get back to profitability this quarter and make 65 cents a share this year. Hopefully the robust housing data has helped propel them closer to that goal.

Lower input costs should also help out their cause as commodity prices have come down.

USG reports earnings on April 24th

ESP Earnings Results

Now that you know which groups of stocks to focus on to increase your chances of a positive surprise, let’s look at the size of the ESP that has historically generated the best results.

First, just having a positive ESP produces market beating results. Over the last 10 years, using a 1 week holding period (stocks were held for no more than one week after they reported), the average annual return was 23.5%. This is in stark contrast to stocks with a negative ESP which produced a -9.20% return.

Now apply the Zacks Rank of 1, 2 or 3 to that list and the returns jump to 28.3%.

If you require your stocks to have an ESP of greater than 1%, we found it increased performance to 29.6%. An ESP of greater than 2% bumps performance up to 31.6%. While an ESP of greater than 3%, produces an average annual return of 37.2%.

Note: there’s no need to hold out for stocks with significantly higher ESP’s than 3%. While some stocks with higher ESP’s will do fantastic, there’s no aggregate increase in performance by ratcheting it up beyond d the 3% threshold. And as the above stats illustrate, simply having a positive ESP (i.e., the Most Accurate Estimate is above the Consensus) still produces stellar results with a high probability of success.

Start Using Zacks ESP in Your Own Trading Today

The next time your stock is about to report or a stock on your watch list is getting closer to their earnings date, be sure to look at its Zacks ESP and see what your stock’s probabilities are of producing a positive surprise.

If you prefer to let someone else do all the work and have the best candidates sent to your inbox, learn more about Whisper Trader now.

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Thursday, April 18, 2013

Premier Trader University Trend Jumper Free Webinar April 18



Click Here to Review and Register for the Premier Trader University Trend Jumper Free Webinar April 18


We've been *hinting* and teasing it for awhile now . . . finally, it's ready for prime-time!

PTU Trend Jumper.

Yes!! Get excited - on April 18, we're going to give you...

Instructions on How to Capture Profitable High-Frequency, Low-Risk Trades in Forex, Futures and Options Markets... Even With a Small Account!

An Awesome 'See-It-To-Believe-It' Live Demo of the Software, Rules, and Markets & Time Frames

Directions on *How to Get* Trend Jumper Before It Goes Off the Market Again.

If you're aching for flexible, no-stress trading with PLENTY of action - you have got to attend this webinar.

Because on Thursday, we're pulling back the curtain and showing you just how simply it's done.

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Tuesday, April 16, 2013

Ways to Profit from Shorting Gold and Silver



Click Here to Watch The Gold Meltdown What Happened Video


4 Ways to Short Gold with ETFs by Zack Investment Research

Gold has been performing appallingly this year as investors are shifting to more risky asset classes like equities. This is especially true in the backdrop of the strengthening dollar and continued bullishness in the stock market, two conditions that are tempering safe haven appeal across the board.

In fact, gold bullion has plunged double digits in the year-to-date time frame and is easily under performing the broad markets when compared to the 10% gain for Dow, 8% gain for the S&P 500, 6% for Nasdaq, 5% for FTSE and 25% for the Nikkei. Currently, gold is trading below $1,400 per ounce with some forecasting a bigger drop in the days ahead as well.

This is especially true given some of the fundamental factors surrounding global markets.The U.S. economy is improving, we are seeing weak consumption demand from economies like India and China, and an increasing appetite for equities over commodities.

Investors are also concerned about the longevity of the Fed's quantitative easing measures given the growing signals about a slowdown in the pace of $85 billion asset purchases in the second half of the year or the early end of the program. If this program slows down and the markets are able to hold steady, it could add to the appeal of equities and dull demand for gold (see more ETFs in the Zacks ETF Center).

Further, the ultra-popular SPDR Gold Trust ETF ( GLD ) , with an asset base of around $58.3 billion and an average daily volume of around 10 million shares, has seen more than $8.6 billion in outflows so far this year. While this might not seem like a huge number, investors should note that this is nearly two times greater than the second biggest outflow (SPY) in the same time frame (read: A Technical Perspective on Gold ETFs).

Given these outflows and the optimism over economic growth in the medium run, the appeal of the gold ETFs seems to be dulling. This could be especially true if European woes make investors flee to the dollar, curtailing the demand for gold even further.

As a result, investors who are bearish on gold right now, may want to consider anear term short on the precious metal. Fortunately with the advent of ETFs, this is quite easy as there are many options for accomplishing this task. Below, we highlight a few of our favorites and some of the key differences between each:

ProShares Ultra Short Gold ETF (GLL)

This fund seeks to deliver twice (2X or 200%) the inverse return of the daily performance of gold bullion in U.S. dollars; the gold price is fixed for delivery in London. Launched in Dec 2008, GLL makes a profit when the gold market declines and is suitable for hedging purposes against the fall of gold prices.

The product is expensive when compared to other geared options in the space though, charging 95 bps in fees a year. However, it is rich in AUM and average daily volumes with $109.2 million and roughly 200,000 shares, respectively. The ETF has gained over 26% so far in the year.

DB Gold Short ETN ( DGZ )

Launched in Feb 2008, ETN tracks the performance of the DBIQ Optimum Yield Gold Index Excess Return plus the interest income from U.S. Treasury bills, net of fees and expenses.

The product has an inverse (opposite) relation to the movement of gold prices and thus creates a short position in the underlying index. It has managed assets of $33.4 million so far in the year and trades in average daily volume of more than 100,000 shares. This suggest a relatively wide bid/ask spread increasing the total cost for the product beyond the annual fees of 75 bps.

DGZ has added about 12.7% year-to-date (read: 3 ETF Strategies For Long Term Success).

DB Gold Double Short ETN ( DZZ )

This ETN seeks to deliver twice (2X or 200%) the inverse return of the daily performance of the DBIQ Optimum Yield Gold Index Excess Return, before fees and expenses.

DZZ initiates a short position in the gold futures market and has a relatively tight bid/ask spread with an average volume of roughly 424,000 shares per day. The note charges 75 bps in fees per year from investors.

The product has amassed over $80 million in AUM since its inception in Feb 2008. The ETN generated impressive returns of over 26% in the year-to-date time frame, and its solid volume makes it a good choice for many traders.

VelocityShares 3x Inverse Gold ETN ( DGLD )

This product provides three times (300%) short exposure to the daily performance of the S&P GSCI Gold Index Excess Return plus returns from U.S. T-bills net of fees and expenses (read: Have We Seen the Bottom in Gold ETFs?).

The ETN was launched in Oct 2011 and since then has been able to amass an asset base of only $5.5 million. The product is the high cost choice in the gold bullion space, charging 135 bps in fees per year from investors. Additionally, it has a wide bid/ask spread given its small average daily volume of 20,000 shares that increases the total cost of the product.

Not surprisingly, the note returned an excellent 41% so far in the year buoyed by negative sentiments for gold across the globe.

Bottom Line

Investors should note that since these products are extremely volatile, these are suitable only for traders and those with a high risk tolerance. Additionally, the daily rebalancing—when combined with leverage—may make these products deviate significantly from expected long term performance figures.

Still, for ETF investors who are bearish on gold in the near term, any of the above products could make for interesting choices. Clearly, many are abandoning the precious metal, so a near term short could be intriguing for those with a high risk tolerance, and a belief that the trend is your friend in this corner of the investing world.

Click the Link Below to Review More Gold Trading Resources

Monday, April 15, 2013

Value Stocks for Non Billionaires



By Zacks Investment Research


It's well known that stocks as an asset class have delivered strong returns over the long run. But if you dig a little deeper into the numbers, you notice that some corners of the stock market have performed better than others.

In particular, small cap stocks have outperformed large cap stocks over time.

According to research from investment management firm Royce & Associates, from 1926-2011, small cap stocks delivered average annual returns of 11.3% compared to 9.5% for the larger S&P 500.

Not impressed? Consider the growth of $10,000 over that period. With the S&P, you would've wound up with $23.4 million. Not too shabby. But with small caps, you would have amassed a remarkable $100.4 million!

And if you zoom in a little further, you'll see that small cap value stocks outperform small cap growth stocks. According to Royce & Associates, from 1979-2011 the Russell 2000 Value index returned an average of 13.0% per year, which is a whopping 400 basis points more than the Russell 2000 Growth index average of 9.0%.

Hidden Gems

The outperformance of value stocks shouldn't be a surprise to most. Investors are often too optimistic about the growth prospects of glamour stocks and end up paying too much for a future that doesn't materialize. Similarly, they tend to be too pessimistic about the future for value stocks, allowing astute investors to "buy low" and wait for business to turn around.

But why do small caps tend to outperform their larger peers?

There are a couple of theories for their strong performance:

Less Efficiency: Small caps stocks are more likely to be mispriced by the market because they tend to have less analyst coverage and are often overlooked by large institutional investors.

Higher Risk Premium: Smaller companies are riskier than larger companies and usually exhibit more volatility in their prices, so investors require a larger required return to compensate for this risk.

In either case, if you're willing to live with a little more risk, then you might be able to generate stronger stock market returns with small cap value stocks.

4 Small Cap Value Stocks

Using the Research Wizard screening program, I searched for stocks with a market cap between $150 million and $1 billion and low valuation multiples. I also added criteria that a stock needs to have a Zacks Rank of 1 (Strong Buy). Why? Because this indicates rising earnings estimates, and stocks with strong earnings momentum are much more likely to outperform the market than stocks with declining earnings estimates.

Below are 4 small cap value stocks with strong earnings momentum from the screen:

1. PharMerica Corp ( PMC )

PharMerica provides pharmacy products and services to residents and patients in skilled nursing facilities, nursing centers, assisted living facilities, hospitals, and other long-term alternative care settings. It has a market cap of $424 million. Shares of Pharmerica trade at a very attractive 9.8x 12-month forward earnings and 7.9x cash flow. This is in spite of the fact that the company has delivered 10 straight positive earnings surprises. It is a Zacks Rank #1 (Strong Buy) stock.

2. First Defiance Financial Corp. ( FDEF ) is a unitary thrift holding company focused on traditional banking and property and casualty, life and group health insurance products through its three subsidiaries: First Federal Bank of the Midwest, First Insurance Group of the Midwest and First Defiance Risk Management Inc. With a market capitalization of just $228 million, it's not a stock on many investors' radars. But with a forward P/E ratio of just 10.8 and a price to book ratio of only 0.8, perhaps it should be. First Defiance has also seen a big jump in earnings estimates since it delivered a big positive earnings surprise on January 28.

3. American Railcar Industries ( ARII )

American Railcar manufactures hopper and tank railcars and has a market cap of $911 million. The company reported record profit margins and earnings for 2012, and it also reported an average positive earnings surprise of 42% over the last 4 quarters. It is a Zacks Rank #1 (Strong Buy) stock. Despite this, shares trade at a relatively modest 11.0x 12-month forward earnings and 10.3x cash flow.

4. Big Five Sporting Goods Corporation ( BGFV )

Big Five Sporting Goods is a sporting goods retailer with 414 stores in 12 states in the western U.S. It has a market cap of $331 million. The company has delivered three consecutive positive earnings surprises and has seen a sharp increase in earnings estimates for both 2013 and 2014 over the last several months. It is a Zacks Rank #1 (Strong Buy) stock. Shares trade at a very reasonable 13.8x forward earnings and 9.8x cash flow.

The Bottom Line

If you're looking to stack the odds of market-beating returns in your favor, then you need to explore small cap value stocks with strong earnings momentum. These four all fit that criteria.

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Tuesday, April 09, 2013

Jumping on the Trend with Maximum Profit



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Perfection is a beautiful thing. Many Trend Jumper Futures Tradeplans are perfect so far last week, hitting all new profit levels each day.

There is nothing like starting a new quarter, new month and new week perfect. Every trade a winner. Especially after we keep seeing this occur on a fairly frequent basis and we keep breaking record profit levels on every market we follow since the first release of Trend Jumper. We see this across the board, futures and forex. Here are a few examples:

The Dow eMini (YM) Futures won again last week, continuing an amazing winning streak. The YM has now won 30 out of the last 31 sessions! Today it was one and done for + 24 points, for $120. It is perfect all three sessions this week with no losing trades. In fact, it has won the past 7 trades in a row and hasn’t had a losing trade since Monday the 25th of March.

Crude Oil Futures was two for two again last week, giving it a perfect 3 session winning streak, going 6 for 6 this week. Today, up + .37, for $370.

Heating Oil Futures was perfect last week too. Today it was one and done for + 84 ticks, + $352. No losses this week and also on a multi trade and multi session winning streak.

Unleaded Gas Futures, also perfect, up + 127 ticks. Actually, this one did have a losing trade to begin the week but ended the Monday session up + 217 ticks anyway. We’re up over +500 ticks this week already, and that’s the bottom line.

The Trend Jumper has put together an impressive track record and continues to consistently do so. Not just futures, of course. Forex, too. Many forex trades are off and running right now posting large gains.

AUDUSD just hit Target’s one and two. Currently it is in a risk free trade as it tries to get to its 3rd target. + 150 pips so far

USDJPY just hit all three targets in one session and is now trailing the remainder. + 370 pips (combo total of all three targets)

NZDCAD just hit its first target; + 50 pips

Many other trades are at varying stages of progression. Some have been trailing for a long time. I’m in a current EURUSD position for example that is up hundreds of pips and has been going for over a month. Same sith EURAUD.

Get all the details in the Trend Jumper Owner’s Club. Make sure you are on the list so you don’t miss the next big release, the date to be announced soon. April is always the beginning of a very exciting time for us because the markets really start to move. There’s nothing like experience and we have seen this year after year for a long time. The Russell eMini has already shown signs of heating up as it typically does right ab0ut now. Trend Jumper grabbed a nice winner today and was one and done. We are looking forward to a banner year and you should be too! You COULD be and WOULD be if you were a Trend Jumper Owner and Member.

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Monday, April 08, 2013

Investing in Next Generation Healthcare



By Jim Cramer TheStreet Action Alerts Plus


Opko Health (NYSE:OPK) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

OPK's very impressive revenue growth greatly exceeded the industry average of 6.9%. Since the same quarter one year prior, revenues leaped by 180.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

Compared to its closing price of one year ago, OPK's share price has jumped by 59.61%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, OPK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

Net operating cash flow has increased to -$5.73 million or 13.05% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -33.36%.

49.60% is the gross profit margin for OPKO HEALTH INC which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -3.37% is in-line with the industry average.

OPK's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.97 is somewhat weak and could be cause for future problems.

Opko Health, Inc., a pharmaceutical and diagnostics company, engages in the discovery, development, and commercialization of novel and proprietary technologies. It operates in two segments, Pharmaceuticals and Diagnostics. Opko Health has a market cap of $2.47 billion and is part of the health care sector and health services industry.

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Friday, April 05, 2013

Pharma & Biotech Stocks Forecast Outlook



Pharma & Biotech Stocks Forecast Outlook by Zacks Investment Research


The pharmaceutical industry has been showing signs of recovery from one of the biggest patent cliffs in recent times. The last few quarters saw major blockbusters like Merck’s ( MRK ) Singulair, Pfizer’s ( PFE ) Lipitor, Forest Laboratories’ (FRX) Lexapro, Sanofi/Bristol-Myers’ ( SNY ) /BMY) Plavix and Eli Lilly’s ( LLY ) Zyprexa losing patent protection. These products alone represented branded sales worth more than $15 billion.

However, the effect of the genericization of these products was felt mostly in 2012. While the industry won’t be completely free from genericization, the major patent expiries are over and done with. New products should start contributing significantly to results and increased pipeline visibility and appropriate utilization of cash should increase confidence in the sector.

Some products that are slated to lose patent protection in 2013 include:



Collaborations and Acquisitions

The pharma sector witnessed major merger and acquisitions (M&A) activity over the last couple of years. Going forward, we expect small bolt-on acquisitions to continue.

We also expect a significant pickup in in-licensing activities and collaborations for the development of pipeline candidates. Instead of developing a product from scratch, which involves a lot of funds and time, pharma companies are shopping for mid-to-late stage pipeline candidates that look promising.

Small biotech companies are open to in-licensing activities and collaborations. Most of these companies find it challenging to raise cash, thereby making it difficult for them to survive and continue with the development of promising pipeline candidates. Therefore, it makes sense for them to seek deals with pharma companies that are sitting on huge piles of cash.

We would recommend investors to put their money in biotech stocks that have attractive pipeline candidates or technology that can be used for the development of novel therapeutics. Therapeutic areas which could see a lot of in-licensing activity include oncology, central nervous system disorders, diabetes and immunology/inflammation. The hepatitis C virus (HCV) market is also attracting a lot of attention.

Another trend that we are seeing in recent months is the divestment of non-core business segments. Pfizer sold its Capsugel unit and its Nutrition business in Aug 2011 and Nov 2012, respectively. Earlier this year, the company’s Animal Health business started trading separately.

Meanwhile, GlaxoSmithKline ( GSK ) divested certain non-core brands from its Consumer Healthcare segment. In Aug 2011, AstraZeneca (AZN) sold its Astra Tech business to DENTSPLY ( XRAY ) . The monetization of non-core assets will allow the pharma/biotech companies to focus on their areas of expertise.

Abbott Labs (ABT) split into two separate publicly traded companies -- while one company deals in diversified medical products, the other, AbbVie is focusing on research-based pharmaceuticals. Johnson & Johnson ( JNJ ) also announced its plans to explore strategic alternatives for its ortho-clinical diagnostics business, including a possible divestiture.

Emerging Markets and Biosimilars

Another trend seen in the pharmaceutical sector is a focus on emerging markets. Companies like Mylan ( MYL ) , Pfizer, Merck, Eli Lilly, Glaxo and Sanofi are all looking to expand their presence in India, China, Brazil and other emerging markets. Until recently, most of the commercialization efforts were focused on the US -- the largest pharmaceutical market -- along with Europe and Japan.

Emerging markets are slowly and steadily gaining more importance and several companies are now shifting their focus to these areas. According to the IMS Institute, spending on medicines in "pharmerging" markets will almost double to $345 billion - $375 billion in five years from $194 billion in 2011.

However, while higher demand for medicines, government initiatives for healthcare, new patient population, and increasing use of generics should help drive demand, we point out that emerging markets are also not immune from genericization.

Meanwhile, according to the IMS Institute, annual growth in the branded medicines market will remain flat or increase up to 3% to $615 billion - $645 billion through 2016 from $596 billion in 2011.

As far as developed nations are concerned, the IMS Institute expects US spending to go up by $35 billion - $45 billion (1-4%) in the next five years (from 2011). The introduction of medicines targeting unmet needs and higher patient access resulting from Obamacare are expected to drive growth.

However, growth in Europe will continue to be pressurized by austerity and cost-containment measures.

We are also seeing several companies entering into deals for the development of biosimilars, generic versions of biologics. Companies like Merck, Amgen, Biogen (BIIB), Actavis (ACT) and Teva ( TEVA ) are all targeting the highly lucrative biosimilars market.

A Look at Fourth Quarter Results

Despite facing challenges like EU austerity measures, genericization and lower-than-expected contributions from new products, companies like Eli Lilly, Bristol-Myers Squibbs, Merck, and Pfizer delivered stronger-than-expected results. However, companies like Amgen, Glaxo, and Forest Labs missed the Zacks Consensus Estimate.

While guidance provided by Johnson & Johnson and Merck lagged expectations, Amgen and Eli Lilly provided an encouraging outlook.

A look at the Earnings ESP (Expected Surprise Prediction - Zacks' proprietary methodology for determining which stocks have the best chance to surprise with their next earnings announcement) in the table below shows that companies like Pfizer, Biogen, Teva, Actavis, Celgene ( CELG ) and Bristol-Myers Squibb could beat the Zacks Consensus Estimate in the first quarter of 2013. Meanwhile, Johnson & Johnson, Gilead, Amgen, Allergan and Mylan are likely to deliver below expectations.





Most of these products should be major contributors to the top-line in 2013. Stivarga, Kalydeco, Xtandi and Kyprolis, especially, represent strong commercial potential.

Meanwhile, key regulatory decisions expected this year include a response regarding the approvability of Forest Labs’ levomilnacipran (depression) and cariprazine (schizophrenia and bipolar mania), Merck’s Atozet (primary or mixed hyperlipidemia) and Biogen’s rFIXFc (hemophilia B) among others. Biogen’s oral multiple sclerosis drug, Tecfidera, and Johnson & Johnson’s type II diabetes drug, Invokana, gained FDA approval last week.

Opportunities

We continue to have a Neutral outlook on large-cap pharma stocks. While the companies will continue to face challenges like EU austerity measures and genericization, the pharma industry should be out of the worst of the genericization phase from 2013.

Several companies which had faced generic headwinds in the last couple of years should see their results recover from 2013. Cost-cutting, downsizing, streamlining of the pipeline, growth in emerging markets and product approvals should support growth.

Zacks Rank #2 (Buy) stocks in the pharma sector include Eli Lilly ( LLY ) and Novo Nordisk (NVO), among others. Despite the presence of generic competition for key products, share buybacks and cost control should help Eli Lilly achieve its 2013 guidance.

In the biotech space, we are positive on Biogen (BIIB). We are optimistic on Tecfidera, the company’s oral multiple sclerosis drug which gained approval last week. Key products, Avonex and Tysabri, should continue contributing significantly to sales. The company is also progressing with its hemophilia pipeline.

We are also positive on Amgen (AMGN). Amgen’s 2013 guidance was above expectations. The company also provided an update on its long-term strategy. Amgen should be able to deliver on its long-term strategy based on expansion in key markets, launch of new manufacturing technologies, and pipeline development. Enbrel should continue performing well. Amgen’s late-stage pipeline is also moving along.

Both Biogen and Amgen are Zacks Rank #2 stocks. Gilead, another Zacks Rank #2 stock, continues to do well in the HIV segment.

Osiris Therapeutics (OSIR), a stem cell company, currently carries a Zacks Rank #1 (Strong Buy). Prochymal’s approval in Canada and New Zealand were major milestones for the company. Meanwhile, the Biosurgery segment is also gaining traction. A partnership deal for Prochymal would be a major boost for the stock.

Among generic companies, Mylan carries a Zacks Rank #2. We are encouraged by Mylan’s geographic reach and product depth and robust generic product pipeline.

Weaknesses

We recommend avoiding names that offer little growth or opportunity for a take-out. These include companies which are developing drugs that are likely to face regulatory hurdles. The FDA has been exercising more caution in granting approval to new products and several candidates are facing delays in receiving final approval.

Although Forest Labs (FRX) carries a Zacks Rank #3 (Hold), we remain concerned about the headwinds being faced by the company in the form of generic competition and slow ramp up of new products.

Companies that currently carry a Zacks Rank #4 (Sell) include Affymax, Inc. (AFFY), Protalix BioTherapeutics (PLX), Elan Corp (ELN) and Jazz Pharmaceuticals (JAZZ) among others. Affymax is currently evaluating strategic options like a sale, merger, restructuring, wind-down of operations and filing for bankruptcy. The company took this decision after it recalled all lots of Omontys (peginesatide) voluntarily along with its partner Takeda Pharmaceutical Co. (TKPYY) in Feb 2013.

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Thursday, April 04, 2013

Who Cares about the Nonfarm Payroll Report?



What Is The Non-Farm Payroll Report And Why Traders Care? By Profits Run


With the biggest economic report in the financial universe coming out tomorrow, investors and traders want to pay close attention to the report and its effect on the year over year unemployment rate.

For you new traders out there, this is Nonfarm Payroll week. This monthly employment report can give the market an idea of the relative strength of the US Labor Market. The NFP report, as it is commonly referred too, is generally released on the first Friday of each month. I thought we would cover the ins and outs of the payroll report.

What is nonfarm payroll employment? Nonfarm payroll employment is an influential statistic released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market. It is a report that covers the employment numbers for goods-producing, construction and manufacturing companies for the previous month. Typically, the Bureau of Labor Statistics releases the report at 8:30 a.m. Eastern Time on the first Friday of each month and covers the numbers for the previous month. The U.S. Nonfarm payroll number is an important factor which can affect the U.S. dollar, the Foreign exchange market, the bond market, and the stock market.

The data released also includes the change in nonfarm payrolls (NFP), as compared to the previous month. The NFP number is meant to represent the number of jobs added or lost in the economy over the last month, not including jobs relating to the farming industry.

In general, increases in employment means both that businesses are hiring which means they are growing and that those newly employed people have money to spend on goods and services, further fueling growth. The opposite of this is true for decreases in employment.

While the overall number of jobs added or lost in the economy is obviously an important indicator of what the current economic situation is, the report also includes several other pieces of data that can move financial markets:

1. The unemployment rate. The unemployment rate in the economy is reported as a percentage of the overall workforce. This is an important part of the report as the amount of people out of work is a good indication of the overall health of the economy, and this is a critical number that is used by the Fed when determining any action that might be needed in the economy.

2. Which sectors the increase or decrease in jobs came from. This can give traders a heads up on which sectors of the economy may be primed for growth as companies in those sectors such as housing add jobs.

3. Average hourly earnings. This is an important component to know, because if the same number of people are employed but are earning more or less money for that work, this has basically the same effect as if people had been added or subtracted from the labor force.

4. Revisions of previous month’s data. An important component of the report which can move markets as traders re-price growth expectations based on the revision to the previous number.

In summary, employment in the economy is one of the most watched economic indicators, because employment drives every aspect of the economy. If the NFP comes out better or worse than expected, the markets can really react, (many times overreacting and settling down close to where they started.) Traders challenge: Look for the release of the NFP report this coming Friday morning May 5th at 8:30 am eastern and see how it affects the market!

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Wednesday, April 03, 2013

Alternative Investing and Borrowing Link Up



Prosper from Investment Borrowing as an Investor and a Borrower


Personal loans meet online investing at America's leading online destination for borrowing money and investing in personal loans. It's called peer to peer lending.

Prosper is America's first peer-to-peer lending marketplace, with more than 1.6 million members and over $400,000,000 in funded loans.

Prosper connects people who want to invest money with people who want to borrow money.

Easy way to invest in consumer lending.

Monthly payments from creditworthy borrowers.

Diversification for your investment portfolio.

Peer-to-Peer Lending Means Everyone Prospers

Prosper is the market leader in peer-to-peer lending popular alternative to traditional loans and investing options. We cut out the middleman to connect people who need money with those who have money to invest . . . so everyone prospers!

Here's How it Works:

Borrowers choose a loan amount, purpose and post a loan listing.

Investors review loan listings and invest in listings that meet their criteria.

Once the process is complete, borrowers make fixed monthly payments and investors receive a portion of those payments directly to their Prosper account.

Peer-to-Peer Lending for Your Investment Strategy

Why add Prosper to your investment portfolio?

High Yields Short Durations

Along with great returns and 1-, 3- and 5- year terms, Prosper Notes provide many portfolio benefits, ranging from current income to lower interest rate risk. This unique investment opportunity provides meaningful returns without locking up your money for long periods of time.

Proven Consistent Profitability of Consumer Credit

Lending to consumers is a decades-old industry that’s produced profits year after year for a handful of credit card companies and banks. Prosper.com provides investors unprecedented access to this market, with consistent returns.

Monthly Cash Flow

Borrowers make monthly payments of principal plus interest that show up in your Prosper.com account. Create a passive income stream, or easily reinvest your cash earnings with our online investing tools like Quick Invest. Investment diversification

Diversify your portfolio by adding a new asset class—consumer loans—which is less vulnerable to market volatility than other investments.

Tax Advantages with the Prosper IRA1

Along with high-yields and consistent returns, enjoy tax advantages when you open your new or rollover Prosper IRA. See how fast your retirement savings can grow when you invest your Individual Retirement Account with Prosper.

Social Lending: Invest in People

Help hardworking families escape the credit card trap, fund an entrepreneur’s dream, or finance a dream wedding -- while earning a healthy return. Through Prosper.com, borrowers get fixed-rate personal loans that are smarter alternatives to high-interest rate credit card debt that could take years to pay off.

With easy monthly payments of principal and interest to investors like you, borrowers get what they want without getting deeper into debt. Take a look at our loan listings. These are real people with real stories, wants and needs.

Company Overview

Prosper is America's first peer-to-peer lending marketplace, with more than 1.6 million members and over $400,000,000 in funded loans.

Prosper allows people to invest in each other in a way that is financially and socially rewarding. On Prosper, borrowers list loan requests between $2,000 and $25,000 and individual lenders invest as little as $25 in each loan listing they select. In addition to credit scores, ratings, and histories, investors can consider borrowers’ personal loan descriptions, endorsements from friends, and community affiliations. Prosper handles the servicing of the loan on behalf of the matched borrowers and investors.

Prosper Funding LLC is a wholly-owned subsidiary of Prosper Marketplace, Inc.

Prosper Marketplace, Inc. is run by CEO Stephan Vermut, founder and former managing partner of Merlin Securities, a prime brokerage service based on cutting-edge technology. Prosper Marketplace, Inc.’s investors include Sequoia Capital, Accel Partners, and Benchmark Capital.

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Tuesday, April 02, 2013

Finding the Profit Price Trend



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Profits Run shows you how to define the trend of the chart. Regardless of the time frame we are looking at we need to be able to tell the direction that the price is moving. The trend can be defined in terms of the long, intermediate and short time frames. If we are trading the short time frames we still want to know the longer term trends. The longer the trend, the stronger price movement can be expected. If we are trading counter to this longer time frame we need to be aware that we are doing so.

The first thing we need to do is have some criteria we look for in order to define it the trend is up, down or sideways. As an example I will present the following as a suggestion of how to define each of these trends. We will use the chart of Gold on the daily time frame for our example:

Gold Chart



In order to define the trend as moving up we are using the 40 period SMA. When this SMA is pointing higher like we see here, the trend is up. In order to confirm the trend we want to make sure that the price is also above this average. Knowing that the price and moving average are sitting in this position we can have confidence that the trend has been established as up. Once the trend is established as up we will be looking for opportunities to buy.

Gold Chart Downtrend:



In order to define the trend as moving down we are using the 40 period SMA. When this SMA is pointing lower like we see here, the trend is down. In order to confirm the trend we want to make sure that the price is also below this average. Knowing that the price and moving average are sitting in this position we can have confidence that the trend has been established as down. Once the trend is established as down we will be looking for opportunities to sell.

Gold Chart Non-trend:



Should the alignment be different than what was described for the uptrend or downtrend we will consider it a non-trend. In this example above we can see that the 40 SMA is moving lower but the price is above the SMA. This is out of alignment for calling it a down or uptrend so we will look at it as a non-trend situation. In this situation we would not take a trade until the proper alignment happen for the up or down trend.

When we are looking to take trades we want to make sure we know what the trend is for the time frame we are trading as well as the longer time frame. This puts us in the best possible position to allow our trade to move in the direction we want it to.

Take some time to review how you determine what the trend is. Make sure you outline your rules and write them down so you can follow them when looking at your charts.

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Monday, April 01, 2013

Investing in this Big High-Tech Turnaround Stock



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Zacks Investment Research reports that the post-crash environment has been very tough for makers of computers and peripherals. Competition has been extremely intense, and many consumers have shifted from traditional PCs to tablets and smart phones as their main sources of computing activities.

With this backdrop, many firms have faltered, but a few have managed to persevere despite the immense challenges. One such company that is starting to find its way again in the space is undoubtedly Hewlett Packard ( HPQ ).

The company is usually regarded as a member of the ‘old guard’ of the PC world, and was best known for its home use products. However, the company has begun to reinvent itself and find new opportunities, namely in the printing and enterprise groups.

These segments, while not quickly growing, have helped to stabilize the company’s floundering personal systems division and give hope for the firm in both the short and long term periods.

Estimate Picture

Analysts are starting to take note of the trend too, as the vast majority of analysts have recently revised their estimates upward for both the current quarter, current year, and next year periods. The magnitude of the revision has also been pretty good, suggesting that analysts are expecting pretty good things out of the company going forward.

This widespread optimism over HPQ has helped to propel the company to a Zacks Rank of 1 or ‘Strong Buy’, along with a great Industry Rank. These factors suggest that the stock could be poised to continue to move higher in the near term, especially if analysts continue to stay bullish on the firm ahead of the next earnings report in May.



Other Factors

If the estimates picture isn’t enough, consider that HPQ has incredible momentum to start 2013. In the first quarter of the year, the stock added more than 65%, suggesting to many that a bottom has finally been hit and that better days will continue to be ahead for this stock.

The stock is also trading at low valuations, even with the huge surge as of late. Price/Sales, and Price/Cash Flow metrics are both below half of the industry average, while the company currently has a 2.2% yield as well.

While that 2.2% yield might not sound that impressive, it is far better than many other big tech names in the space, and it is on par with the S&P 500 as well. So, even if trouble does hit this stock in the near future, this solid dividend should help to alleviate some concerns of more risk adverse investors.

Bottom Line

Yes, HPQ has had some significant trouble in the past and its stock has lost a big chunk of its value since the 2008 crash. However, the firm is starting to turn things around, moving aggressively into other sectors and stabilizing its bottom line.

This has been a winning strategy for the firm so far in 2013, and if the analyst estimate trend is any guide, it could continue into the second quarter as well. That is why now could still be a great time to get in on this top Ranked stock in order to ride the turnaround story in this tech giant a bit higher.