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Invest on Reversing PRGO and QCOM

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The S&P 500 Index (SPX) seems unstoppable as it continues to record one fresh high after another. The market even gapped up on January 12, opening at 2,770.18 after closing at 2,767.56 on January 11. Market participants are extremely bullish as they continue to buy even though SPX is in extreme overbought territory. At this point, however, it would be wise to take a contrarian point of view and be cautious about your positions. Your capital and all gains are at tremendous risk when the market is euphoric.

You can still ride the mania by investing in stocks that are far from their tops. Let’s look at names that are reversing their trends.

PRGO – Perrigo Company

Perrigo Company (PRGO) is an international manufacturer of over-the-counter healthcare supplies, including infant formulae, supplements, and pediatric nutritionals. The company has close to 10,000 employees with sales of over $5 billion in 2016.

PRGO has been in a downtrend since it generated a lower high of 198.42 in August 2015. Things went from bad to worse for investors when the market broke crucial support of 120 in April 2016. During that week, the stock lost 21.02% of its value, as it dropped from 120.10 to 94.86. PRGO continued to tumble until it established support at 67 in March 2017. It consolidated for several months at that level until a volume spike in August 2017 brought the stock back to life.

Technical analysis reveal that PRGO is on the verge of completely reversing its trend. It has created a bullish reversal pattern that relies on the breach of resistance at 98.

With the stock still a few dollars away from 98, you have a couple of options. You can buy at the current price level to reduce costs. Otherwise, wait for the stock to take out 98 with at least 10 million in volume in the daily chart. Those who bought at the 67 support level are likely to sell a significant part of their positions at 98 to lock their gains. PRGO needs a new set of investors who would absorb the selling pressure.

Once 98 is taken out, the target is 130.

Weekly PRGO Chart

Monthly PRGO Chart

As of January 12, the stock of Perrigo Company closed at 91.80.

Summary of Strategy

Buy: 91.80 or breakout at 98 with 10 million volume in the daily chart

Target: 130

Stop: A close below 87 negates this trade call

 

QCOM – Qualcomm Incorporated

Qualcomm Incorporated (QCOM) is an American multinational company that specializes in the design, development, manufacture, and marketing of wireless telecommunications products and services. The company has over 33,000 employees and has generated $23.55 billion in revenues in 2016.

QCOM went extremely bearish when it posted a lower high of 78.53 in October 2014. The stock nosedived as it struggled to find stability. It even gapped down in the weekly chart on several occasions before establishing support at 45 in January 2016. QCOM has been rallying since. It’s also very close to breaching resistance at 69.

Technical analysis reveals that QCOM has created a large bullish reversal pattern. To confirm the reversal, the stock must take out resistance at 69 with volume of 80 million in the daily chart. Those who bought at the 55 support level are likely to dump their shares at 69, knowing that this is a strong resistance. QCOM needs buyers who would be happy to purchase those shares at 69.

The strategy is to wait for volume confirmation before placing buy orders. Bears have defended 69 several times which means they wouldn’t give up that level without a fight. If you want to invest, make sure you get in when the bulls are the clear winner.  

Take out 69 and we have a target of 93.

Weekly QCOM Chart


Monthly QCOM Chart


As of January 12, the Qualcomm Company stock closed at 65.38.

Summary of Strategy

Buy: Breakout at 69 with 80 million in volume

Target: 93

Stop: After breakout at 69, a close below 64 invalidates this trade call.

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.7 stars on average, based on 269 rated postsKiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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  1. MissRobot

    January 16, 2018 at 10:27 pm

    Hi, thank you for the recommendations. Just one question for reach this targets How long you think it takes approximately? Thanks for your comments.

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Stock Picks

Stock Pick: Symantec Corporation

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Symantec Corporation (SYMC) is a Fortune 500 company that sells cybersecurity applications and services. Their mission is to help consumers and organizations protect and manage their most valuable data. The firm carries reputable cybersecurity software brands including Symantec, LifeLock, and Norton. As of June 2018, Symantec has 13,000 employees with sales of $4.8 billion.

Technical Analysis of Symantec Corporation (SYMC)

Symantec has been correcting since it posted an all time high of $34.20 in September 2017. At that level, SYMC was showing signs of weakness. It created a large bearish divergence on the weekly chart. On top of that, the stock failed to go above $34 resistance after several attempts. These were indications that bulls were exhausted.

One year later, bulls appear to have replenished their numbers. They are now working hard to keep the stock from officially reversing its trend.

Technical analysis shows that SYMC is respecting its uptrend support when it bounced off lows of $17.49 in October 2018. The bounce was supported by heavy volume, which enabled to pair to climb as high as $23.57 early this month. The stock has been pulling back since but we’re confident that the bounce will continue.

That’s because Symantec has numerous support levels at this area on top of the uptrend support, including the 50% Fibonacci level of $18.71. In addition, the weekly RSI has broken out of two resistances. This tells us that bulls are gaining heavy momentum.

Fundamental Analysis of Symantec Corporation (SYMC)

In addition to technical analysis, fundamental analysis also support our bullish view.

In May 2018, Symantec made headlines as the stock crashed by 34.7% after the company announced an internal investigation. The investigation focused on the company’s questionable accounting practices. The cybersecurity firm sought the services of independent counsel and kept the SEC in the loop. Symantec also warned investors that the investigation might lead to financial restatements.

Four months later, Symantec announced that the investigation has concluded. The company said that it will not restate its previous financial statement with the exception of one transaction that’s worth $13 million.

With this development, the stock appears to have been unjustly sold. It might take SYMC some time to regain investor confidence but it seems to be fundamentally sound. Its trailing twelve months price-to-earnings ratio is 11.70. This tells us that the stock is undervalued considering that its five-year maximum is 23.33.

The strategy is to buy on dips as close to $20 as possible. As long as the stock is above this level, it has the momentum to rally to our target of $26.

The timeline for the target is more than six months.

Weekly SYMC Chart

Monthly SYMC Chart

As of this writing, the Symantec Corporaton stock (SYMC) is trading at $21.83.

Summary of Strategy

Buy: On dips as close to $20 support as possible.

Target: $26

Stop: Close below $18.75.

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.7 stars on average, based on 269 rated postsKiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Black Friday: How to Capitalize on It

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

The most interesting event this month in the US is the famous Black Friday, the day of large discounts, which is on Nov 23. On this day, Americans make 45% of all their annual purchases. The US economy is doing well compared to other countries, with the Fed hiking the rates in order to cool the markets down. The unemployment rate is at its record lows, which means people have money, and there’s going to be much hype about the Black Friday as usual. With this scenario, a few companies may show great potential during Q4. First, there’s e-commerce that is a very strong competition against offline stores. Amazon (NASDAQ: AMZN) is the leader here, with the market cap of $1T. In Q3, Amazon made a record high when it comes to quarterly earnings. However, the chart shows it is Q4 that is going to be the most profitable for the company.

Unluckily, after the Q3 report, the price was unable to reach new highs. Investors’ expectations were higher than the data that came out, which led to the share price going down. However, Amazon did make profit, and there’s a good trend in it. Furthermore, Amazon management expects to book the record profit in Q4 2018. In October, we analyzed Amazon and said the company stock is going to trade at around $1,400. It is now trading at its low at $1,476, however, and is above the 200-day SMA. When the price goes below $1,700, the volumes get much higher, according to the chart. Thus, this may be the support the price may start recovering from.

If the earnings expectations are met, Amazon may well rise above the round number of $2,000. Another large company that may get nice profits is eBay (NASDAQ: EBAY), which is mostly centered around e-commerce, too. The profits are good here, while the stock price leaves much to be desired.

Still, eBay incomes are rising quarter to quarter. According to the expectations, Q4 is going to be the most profitable in the recent few years.

Over 2018, eBay stock went down by nearly 30%. Perhaps, the reason for that is the increasing debt, with the debt to equity ratio now being 1.11, while, for Amazon, it is just 0.63. Technically, the stock went down till November last year, too, while after the Q4 report it traded at its highs. This time, the stock looks somewhat weaker than before, and may only reach $36 or so.

Walmart, an offline store chain, may also be included into this list, as this company is sure to get good profits thanks to Black Friday sales. Nevertheless, while eBay and Amazon shares corrected before Q4, Walmart is rising and is trying to break out its record highs made a year ago. Walmart earnings, like internet giants’ ones, are sure to be sensitive to the sales before Xmas.

The company reports its earnings on Thursday, and they are expected higher than the same quarter last year. The income is visibly growing up, and the record highs for Q4 earnings expectations are quite logical. Walmart has been recently going up thanks to large hedge funds positions, with around 52 funds now including this stock into their portfolios.

Technically, as said before, the stock is quite strong. The price is currently above the 200-day SMA, showing good growth and ready to hit new record highs. As for the entry, it’s hard to determine the risk. The nearest support levels are $100 and $90, and once the price reaches either, it could be a good entry point for the next few months.

 

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 17 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Analysis

Time to Focus on General Motors

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

As earnings season continues, analysts have been bewildered by General Motors’ (NYSE: GM) report.  Over the last year, GM shares became 35% cheaper, while income was mixed, both rising and falling, and net profit turned positive only in late 2018.

The GM stock price has been under pressure, most likely because of rising debt. General Motors went bankrupt in 2009, liquidating all previous debts, but new ones started appearing soon. The debt-equity ratio reached 1.93 ever since, making it a serious question whether or not to invest in such a company that had previously been bankrupt.

Since the second IPO in 2010, GM shares have been unable to overcome the 30% rise barrier, while the DJIA rose by over 100% over the same period. This made interest in GM quite low.

With ever-growing debt and shareholder pressure, the company had to cut expenses, and this was done through cutting jobs and closing factories in various countries. For instance, the GM Korea factory is likely to get closed, with over 2,000 jobs cut. Another factory, located in Saint Petersburg, Russia may be closed, too. Meanwhile, in North America, around 36% of jobs were cut.

Overall, the former multinational giant is leaving the markets in Europe, Indonesia, Thailand, India and Australia. The company may end up present only in the US and China.

Naturally, running a company with multiple branches in multiple countries is much harder than the one working in a single country. A good example is Tesla, which in 2008 was saved by a single contract with SpaceX (both owned by Elon Musk) worth $1.8B, while General Motors was unable to do with even $30B.

After the 2008 crisis, US automotive companies faced serious issues. Ford Motor, for example, has not shown any good results ever since, and is still trading at its 2010 lows.

Nevertheless, in mid 2018, Warren Buffet’s fund disclosed information on its Q2 portfolio that included Apple (Buffet said he would like to control 100% of Apple shares), Goldman Sachs, Teva, Delta Airlines and General Motors. If GM is on this list, other investors might also want focus on it.

Meanwhile, in Q2, GM shares rose sharply by 10%, which was the result of an agreement between General Motors and an investment fund run by SoftBank Group, the Japanese telecommunication giant. The fund invested $2.25B into the autonomous taxi development led by a part of GM team.

Thus, Q2 was overall positive for GM, and while the stock price did not increase significantly, the net profit did. As a result, the Q3 report was great, beating all expectations.

The net profit in Q3 reached $2.53B, or $1.75 EPS, against the $2.98B loss, or -$2.03, reported last year. The yearly EPS is expected at somewhere between $5.80 and $6.20, though GM management assumes it could be even higher.

Around 86% of net profit comes from the North American market, while only 14% covers the rest of the world. This is quite in line with the company’s policy regarding closing its regional branches.

Meanwhile, car production was lowered by 14.70% compared to last year, but GM succeeded thanks to the price increase and truck sales, where the yield is higher.

Technically, the price is still below the 200-day SMA, which may push values to the descending trend line which was broken out thanks to the positive report. If the price then bounces, it may rise above $40. GM management’s prediction on beating the yearly profit expectations may be priced quite soon, while then the yearly report comes, the price may head down. The Buy Rumors, Sell Facts rule may well work here.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 17 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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