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Stock Picks: Invest in AEP and FTI

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The SPX is showing signs that it is running out of steam as it dropped 13.7 points yesterday, January 29, when it opened at 2,867.23 and closed at 2,853.53. While the dip in points doesn’t appear significant, the plunge in RSI is concerning. It went from 86.6866 down to 76.8894 in one day. The 10-point pull back might indicate that the index is ripe for profit taking, especially since it is still in extreme overbought territory.  

As we continue to recommend to stay on the defensive, let’s look at stocks that far from their high and near their support.

AEP – American Electric Power Incorporated

American Electric Power Incorporated (AEP) is a power utility holding company that serves 11 states: Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia. This investor-owned company, originally formed in 1906 as the American Gas and Electric Company (AG&E), provides electric services on an integrated basis with other segments that include Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing.

AEP generated its five-year high of 78.07 in December 2017. At that point, however, the stock was near overbought territory, and bears took the opportunity to dump their positions. What followed next was a six-week correction that saw the market tumble down to 67.11 on January 16, 2018. In about a month, the stock shed close to 15% of its value. Those who sold during this corrective period lost the chance to recoup their investments once the stock resumes its ascent.

Technical analysis show that the stock is establishing support at 67. The dramatic increase in volume when AEP dropped to this level shows that bulls are ready to defend 67. While the stock recently bounced to 69.8 on January 25, it appears that 67 is bound for a retest. If bulls successfully defend this level again, then it might signal the end of the correction.   

The strategy is to buy as close to 67 as soon as the stock successfully retests this support. If this level is defended, we might see the stock climb up to 78 in three months.

Daily AEP Chart

Weekly AEP Chart

As of January 29, the American Electric Power Incorporated stock closed at 67.90.

Summary of Strategy

Buy: As close to 67 as possible

Target: 76

Stop: A close below 65 negates this trade call

 

FTI – TechnipFMC

TechnipFMC (FTI) is a company that specializes in projects, technologies, systems, and services for oil and gas production and transformation. They are the current global experts in innovation and design for subsea (umbilicals, flexibles) onshore/offshore (fixed and floating facilities), and surface (drilling, flow-treatment services) solutions. Among their subsidiaries are FMC Technologies, Technip, Flexi France SAS, and DUCO INC.

FTI went in a downtrend when it generated a lower high at 57.87 in November 2014. What ensued was a series of lower lows and lower highs as the stock broke one support level after another. It finally found a bottom at 22.30 in February 2016, and it established support at 25 one month later. The stock briefly pierced resistance of 35 in November 2016. However, those who bought at the 25 support level used the rally to take profits.

While FTI retreated to 25 again in October 2017, technical analysis show that it is forming a large double bottom pattern that could jumpstart a bull run. But first, it must take out resistance at 35 with conviction. This means to volume needs to be over 20 million shares in the daily chart to have a good chance of claiming 35. Those who bought the retest at 25 are likely to take profits at 35. The breakout needs a fresh batch of buyers to absorb the selling pressure.  

The strategy is to buy the breakout at 35 with the prescribed volume. Once breakout is confirmed, we might see the stock reach our target of 45 three months later.

Weekly FTI Chart

Monthly FTI Chart

As of January 29, the TechnipFMC stock closed at 33.08.

Summary of Strategy

Buy: breakout at 35 with 20 million volume

Target: 45

Stop: A close below 22 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 252 rated postsKiril is a financial professional with 4+ 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

Boeing Still a Good Investment, but Not Now

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

In one of our previous articles, we spoke about the rising demand of pilots and air transportation, which made us focus on relevant companies. Another important aspect here is aircraft, without which no air transportation is possible. So today, we’ll analyze one of the largest aircraft manufacturers out there, Boeing.

Boeing Company (NYSE: BA) is a leading aircraft, military and space equipment manufacturer. Headquartered in Chicago, IL, the company mostly operates in Seattle, WA. Boeing is among the top three military equipment companies in the US by the yearly order volume. Around 50% of the company’s budget accounts for military orders.

Over the last four years, Boeing’s yearly revenue is always somewhere near $90B, while the net profit is steadily growing.

Since 2014, the company’s equity was going down, with the debt growing at the same time, and thus the debt-equity ratio is currently not the best one.

Despite the debt, however, the investors get the dividends regularly, and those have been growing speedily since 2014: from $1.94 per share that year to $6.50 in 2018. Meanwhile, the growing demand led to Boeing supplying 763 aircraft in 2017. This was a record high, and the earnings went up from $4.985B to $8.197. The price per share also rose by over 100%, breaking out $300. In 2018, the company is going to supply 912 aircraft, or 20% more.

Boeing Contracts

Recently, Boeing got a contract for $62.7M which included maintenance and modification of F/A-18 и EA-18G. The contract is expected to be fulfilled by Sep 2019.

Another contract won by Boeing is worth $805M and includes developing, manufacturing, testing, and supplying for pilotless aircraft to the US Air Force by 2024.

The US Air Force also has yet another contract with Boeing, which is worth $9.20B and includes both aircraft and flight simulators. At the first stage, the company will get $813M to supply 351 Advanced Pilot Training aircraft and 46 simulators. The overall deadline is 2034.

This is just to name a few, and still one could clearly understand Boeing has orders for at least the next 10 years.

Boeing is also a significant player in the international military business; with the emerging countries increasing their budgets in the light of global geopolitical uncertainty, the company is sure to get more orders.

Apart from military aircraft, Boeing is planning to launch an air taxi prototype next year, which would carry passengers for short distances, while the company is also determined to create an air transport management system within 5 years.

All this makes the outlook perfect, with both dividends and share prices growing steadily. Technically, however, there is some extreme volatility, which shows investors are uncertain; some are closing their positions to lock in over 100% profit, others are, conversely, buying. This led to the price forming a wide range between $315 and $370. At this rate, it may well reach $400 and then bounce back to $300.

Technical Analysis

In 2016, Boeing shares started rising from $100, with the volumes growing, and reached the high at $350, i.e. those who bought at $100, started selling at $350. This means one should better wait for higher volumes and lower prices, as well as some good news, before buying, rather than going long straight away.

Alphabet Inc (NASDAQ: GOOG) experienced a similar situation, when the price was between $1,000 and $1,200, and then, when good earning reports came out, it reached $1,270. Then, Google shares went down again, and are now trading at $1,150, while being fundamentally very strong. So, it may start rising again soon, but at lower levels.

You remember an old saying ‘Buy rumors, sell facts’, of course. This is true with Boeing as well. The news on the company plans must be already priced into the shares, so before adding Boeing to your portfolio, you’d better wait for some lower prices.

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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4.6 stars on average, based on 15 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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Stock Picks

Stock Pick: General Motors

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General Motors Company (GM) is an American multinational corporation that designs, builds, and sells automobiles such as cars, trucks, crossovers as well as automobile parts. Its most popular vehicle brands include the Buick, Cadillac, GMC, and Chevrolet.  Currently, GM has a workforce of 180,000 employees across 35 countries. In 2017, the company posted revenues of $145.59 billion.

Technical Analysis of General Motors (GM)

GM has been in a slump since June 2018 when it respected resistance of $45. In as little as four months, the stock lost over 23% of its value. At first glance, it might appear that GM has some more downside potential. A close look, however, reveals that GM is due for a bounce. That’s when our play can come in.

Technical analysis shows that GM is approaching the uptrend support of $33. This support has never been breached since July 2012. Bulls have managed to defend it multiple times and that tells us that they’ll also do the same this time.

On top of that, we can see on the weekly RSI that GM is nearly oversold. This gives us confidence that we can expect some selling relief soon. The oversold conditions plus the increased demand at the support can be the catalysts of a strong rally.

Fundamental Analysis of General Motors (GM)

In addition, we have fundamental analysis to support our bullish view. GM’s trailing twelve month price to earnings ratio is 5.51. The stock is undervalued considering that the PE ratio TTM of the automotive – domestic industry stands at 12.39. The comparison tells us that GM has good upside potential.

Also, our research shows that GM is a fundamentally strong company. In its second-quarter report, GM’s US sales volume was up 4.6% year-over-year. Additionally, sales volume in China was up 4.4%. Lastly, a look at the firm’s income statement shows that GM’s earnings before interest, taxes, depreciation, and amortization (EBITDA) growth rate in the last five years was 17.40% per year. This tells us that the company is generating a lot of revenue at a high growth rate.

The firm’s net income may be suffering due to some external challenges but the figures show that GM continues to deliver solid results. Eventually, these results will be reflected in the stock’s price.

The strategy is to buy as close to $33 support as possible. If bulls can successfully defend the support, then GM might be able to rally to our target of $40. Sell immediately once the target is hit. Keep in mind, we are just playing for the bounce.

The timeline for the target is less than six months.

Weekly GM Chart

Monthly GM Chart

As of this writing, the General Motors Company stock (GM) is trading at $32.65.

Summary of Strategy

Buy: As close to $33 support as possible.

Target: $40

Stop: Close below $32.

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 252 rated postsKiril is a financial professional with 4+ 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

Investors Getting High on Cannabis

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

A year ago, you would hardly find even the most financially illiterate person in the world that had not heard of Bitcoin or cryptocurrency. Regardless of whether they know what it was — at least they know you can earn money with it!

Opportunities to earn easy money sometimes do appear, but they do extremely rarely, and in this light the crypto boom is often compared to the tulipmania that happened in the 17th century. At that time, speculators with no experience joined the tulip futures trading, which eventually led to a sharp increase in flower bulb prices, while a year later the overheated market collapsed, bringing huge losses to all.

The chance to earn huge profits for people who do not have a close connection with the markets does not appear so often. But for those who work with stocks, such opportunities arise almost every quarter.

The price of bitcoin at the peak of its popularity, when almost everyone knew about it, went up by 2,000%. In the stock market, some companies can yield a return of 1,000% within a week or a month, and there is no need to wait a whole year around.

The last sharp increase in share prices after an IPO, which broke all records this year, was shown by Tilray. Since the IPO on July 19 this year, the stock yielded a return of 1,300% over 2 months, and for those who follow the IPO, there was plenty of time to buy this stock, as the price was at about $20 for about a month.

Tilray is a Canada-based company specializing in cultivation and sale of medical marijuana to consumers and pharmaceutical distributors.

When a stock experiences such a rise, however, it usually falls afterwards, and Tilray was no exception as it lost 50% of its maximum value, although it continues to trade at 600% higher against the initial IPO price.

2018 was a landmark for marijuana manufacturers, as in January California legalized the use of marijuana for recreational purposes. Currently, medical marijuana products can be consumed in 29 US states. It is expected that, by 2022, the marijuana market in the US and Canada will have grown by more than three times.

Tilray is a clear indicator of investors’ interest in such companies. However, it’s not just traders who are interested in marijuana producers. Constellation Brands, one of the largest beer producers in the US, announced its intention to invest $4B into Canopy Growth, another Canadian company. This will allow it to increase its share in Canopy Growth from 8.70% to 38.00%. In the next 3 years, the US company will get the right to buy another 139.7M shares for $3.5B, thereby increasing its stake to the controlling one.

Meanwhile, Microsoft has partnered with the Kind Financial, a US based startup company which develops software for government agencies that control the production and sale of marijuana.

On September 17, rumor had it that Coca-Cola was negotiating with Aurora Cannabis to create a beverage containing cannabis. Most likely, this drink will be used to reduce inflammation, seizures, and as an anesthetic.

All this confirms the interest of large companies and investors in marijuana manufacturers. At this rate, finding a marijuana company and investing your money in it could seem a good idea, but there is a risk of high volatility, just like in case of Tilray, which can put your deposit under serious threat. An easier way would be investing in an ETF with the same companies stocks.

The most interesting ETF in the marijuana industry is ETFMG Alternative Harvest (NYSE: MJ).

According to some sources, since August 22, this fund recorded a cash inflow of $112M, which is about 20% of the total value of its entire portfolio. With the money supply growing, the trading volumes increased up to 10M shares, which is 3 times higher than the volume in July.

The interest towards this ETF was especially frantic when California passed the law early this year: at that time, ETF MJ price rose from $29 to $39. Then, in March, the price tried to go up further, but the volumes stayed low, so the price had to get back and even sank a bit. It was only in August when $27 got broken out, and then the price went well up to reach $45, this time also with increased trading volumes. Currently, the support levels are at $34 and $39. Given the increased volatility, the price is quite likely to go down to $34.

ETF investment has always been considered less risky, and in case we are now on the brink of a marijuana boom, this ETF is certainly going to be the best investment vehicle.

 

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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3 votes, average: 4.00 out of 53 votes, average: 4.00 out of 53 votes, average: 4.00 out of 53 votes, average: 4.00 out of 53 votes, average: 4.00 out of 5 (3 votes, average: 4.00 out of 5)
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4.6 stars on average, based on 15 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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