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Stock Picks: LUK and MRO

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The S&P 500 (SPX) went as high as 2,742.10 yesterday, May 14, 2018, before succumbing to profit taking. This pullback is healthy given the index’s rally from a low of 2,594.62 on May 3. The bullish outlook remains as long as the SPX remains above 2,680.

As the index remains resilient, let’s look at stocks flashing signs of strength.

LUK – Leucadia National Corporation

Leucadia National Corporation (LUK) is an American conglomerate and investment holding company. Incorporated in 1968, it is a company focused on return on investment and long-term value. Their financial services business portfolio includes Berkadia Commercial Mortgage LLC, Foursight Capital and Chrome Capital, FXCM Group LLC, HomeFed Corporation, Jefferies Group LLC, and Leucadia Asset Management.

Technical analysis show that LUK is primed to take out resistance of 27. This comes after it created a bullish higher low setup when it dropped to as low as 21.61 on April 6, 2018. The setup was affirmed by a strong bounce to 24.75 on April 9 with volume that’s 173.47% higher than its daily average. Breach of the resistance would trigger the cup and handle reversal structure on the weekly chart.

Also, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of LUK is 19.66. The stock looks fairly valued based on the PE ratio, but it has a five-year maximum of 171.43. This suggests that investors are willing to pay a premium for LUK shares.

The strategy is to buy the breakout at 27 as long as the stock prints seven million shares on the daily chart. Those who bought the higher low are likely to take profits at the resistance. The stock needs buyers to absorb the selling pressure.

Once bulls take out the resistance, the stock may attract trend followers and momentum traders who may help lift LUK to our target of 39. The process may take more than six months.

Weekly LUK Chart

Monthly LUK Chart


As of this writing, the Luecadia National Corporation stock is trading at 24.57.

Summary of Strategy

Buy: Buy breakout at 27 as long as the stock generates seven million shares on the daily chart.

Target: 39

Stop: Close below 25.2 after the breakout.

MRO – Marathon Oil Company

Marathon Oil Corporation (MRO) is an American petroleum and natural gas exploration and production company founded in 1887. They primarily operate in North America: Eagle Ford in Texas, Permian in New Mexico, STACK and SCOOP in Oklahoma, and the Bakken in North Dakota. The company’s international segment produces and markets crude oil and condensate, NGLs and natural gas outside of North America, and Equatorial Guinea (E.G.). The Oil Sands Mining segment mines, extracts, and transports bitumen from Alberta, Canada.

Technical analysis show that MRO has taken out resistance of 19. This triggered the inverse head and shoulders pattern on the weekly chart. The breakout was affirmed by a rally to 21.68 on May 9, 2018. However, the stock is touching overbought territory on the daily chart. The possible dip should be your opportunity to buy near the breakout point.

Furthermore, fundamental analysis reveal that MRO’s trailing twelve months (TTM) PE ratio stands at 14.68. The stock still looks attractive considering that its five-year maximum is 26.02.

The strategy is to buy on dips as close to 19 as possible. As long as the stock stays above 19, it has the momentum to climb to our target of 31.50.

The process may take six months.

Weekly MRO Chart

Monthly MRO Chart


As of this writing, the Marathon Oil stock is trading at 21.42.

Summary of Strategy

Buy: Buy on dips as close to 19 as possible.

Target: 31

Stop: 18

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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3.8 stars on average, based on 308 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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Stock Picks

Stock Pick: Starbucks Corporation (SBUX)

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Starbucks Corporation (SBUX) is one of the most popular coffee and tea companies in the world. The company founded in Seattle markets, roasts, and sells specialty coffees and teas to retail consumers. In addition to the Starbucks coffee chain, the company also owns and operates popular brands such as Seattle’s Best Coffee, Teavana, and Tazo. As of June 2018, Starbucks Corporation has a workforce of 277,000 employees and sales of $23.5 billion in fiscal 2018.

Technical Analysis of Starbucks Corporation (SBUX)

For over three years, the stock range traded between $47.40 and $61.40. While many stocks printed new all-time highs during this period, SBUX was stuck in sideways trading. This changed in November 2018 when the stock took out resistance of $61.40 with an above-average move. The price action ignited a rally to a new all-time high of $68.96.

While the stock has been pulling back since, something tells us that SBUX will likely generate a fresh ATH in the next few months.

Technical analysis shows that SBUX successfully flipped resistance of $61.40 into support. This happened early this month as the stock completed the retest of $61.40. The price action is bullish. It tells us that the market is ready to trend higher.

On top of that, we can see a golden cross between the 50 MA and the 100 MA on the weekly chart. The crossover sets up the ideal MA alignment where the 50 MA is on top of the 100 MA and the 100 MA is above the 200 MA. This setup indicates that the market’s uptrend remains healthy.

Fundamental Analysis of Starbucks Corporation (SBUX)

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

The most recent quarterly earnings report of the company beat expert estimates. Q4 earnings data reveal that SBUX posted an adjusted earnings per share of 62 cents versus expert estimate of 60 cents. It also surpassed expert projection of $6.27 billion in revenues as the company generated $6.3 billion. Lastly, the company printed global same-store sales of 3% as opposed to analysts prediction of 2.35%.

On top of the impressive Q4 earnings, the stock’s trailing twelve months price-to-earnings ratio (PE ratio TTM) stands at 26.27. It is still undervalued considering its five-year maximum is 39.60. This tells us that market participants are ready to pay a premium for SBUX shares. Along with the technical setup, it appears that SBUX has some upside potential.

The strategy is to buy on dips as close to $61.40 as possible. As long as bulls hold this level, SBUX will likely generate the momentum to rally to a new all-time high of $70.

The timeline for the target is less than six months.

Weekly SBUX Chart

Monthly SBUX Chart

As of this writing, the Starbucks Corporation stock (SBUX) is trading at $63.57.

Summary of Strategy

Buy: On dips as close to $61.40 as possible.

Target:  $70

Stop: Close below $59.

 

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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3.8 stars on average, based on 308 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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Stock Pick: Apple Inc. (AAPL)

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Apple Incorporated (AAPL) is a company that needs no introduction, as it is one of the biggest and most valuable companies in the world. AAPL designs, builds, and markets media devices, computer software, as well as third-party digital content and apps. Some of the company’s popular products include the iPhone, iPad, and MacBook. As of June 6, 2018, Apple Inc. employs a workforce of 123,000 employees with sales of $247.5 billion in fiscal 2018.    

Technical Analysis of Apple Inc (AAPL)

The last several months for AAPL have been nothing short of a disaster. The stock has been in a freefall after posting its all-time high of $233.47 in October 2018. Last week, the stock was down by as much as 10% on the weekly chart as it dropped to as low as $142.

It seems like almost everyone is bearish on the stock. This is exactly why we think that a bounce is in order and the technicals support our view.

Technical analysis shows that AAPL is ripe for a dead-cat bounce. It appears to be respecting the 200 moving average on the weekly chart. Last week’s candle has a long wick below its body indicating the rejection of lower prices. On top of that, AAPL is oversold on the weekly RSI. These signals tell us that the market is ripe for a relief rally.

Also, the 50 moving average on the monthly is acting as support. Throughout AAPL’s parabolic run, the market has always bounced hard after hitting this indicator. The stock’s recent price movement tells us to expect the same reaction.   

Fundamental Analysis of Apple Inc (AAPL)

In addition to our technical analysis, fundamental analysis also backs our short-term bullish view. In other words, the stock remains bearish in the long-term but we can expect a relief rally for now.

Just a couple of days ago, Apple’s CEO Tim Cook issued a warning to investors to expect less than stellar numbers for the company’s fiscal 2019 first quarter. Instead of the projected revenue estimates of $93 billion, the company will likely post revenues of $84 billion. That’s a difference of 9.68%, which is huge if you’re one of the world’s top companies. On top of that, sales of the iPhone have been flatlining for years. This supports our view that the stock is bearish in the long-term.  

However, it is interesting to note that the trailing twelve months price-to-earnings ratio (PE ratio TTM) is 12.48. The stock is undervalued considering that its five-year average is 15.25 while its five-year maximum is 20.70. These numbers tell us that the stock is likely oversold and trading below its actual intrinsic value. This is why we believe that a bounce should be on the horizon.

The strategy is to buy on dips as close to $142 as possible. As long as bulls hold this level, AAPL will likely generate the momentum to bounce to our target of $168.

The timeline for the target is less than three months.

Weekly AAPL Chart

Monthly AAPL Chart


As of this writing, the Apple Inc stock (AAPL) is trading at $148.26.

Summary of Strategy

Buy: On dips as close to $142 as possible.

Target:  $168

Stop: Close below $137.

 

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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3.8 stars on average, based on 308 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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Stock Pick: Advanced Micro Devices (AMD)

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Advanced Micro Devices (AMD) is a semiconductor company that operates in 23 countries. It is the second largest manufacturer of personal computer microprocessors. In addition, the company makes other PC components such as flash memories, graphics processing units, and motherboard chipsets for business and consumer markets. As of June 2018, AMD has a labor force of 8,900 employees with sales of $6 billion in fiscal 2018.

Technical Analysis of Advanced Micro Devices (AMD)

Advanced Micro Devices has been retracing ever since it posted an all-time high of $34.14 in September 2018. At that level, the stock was starting to lose bullish steam. The weekly RSI showed that it was extremely overbought. In addition, the stock failed to take out resistance of $33 after trying for three consecutive weeks. Lastly, volume considerably declined after the stock posted its ATH.

These signals indicated bullish exhaustion. With waning volume and momentum, the stock nosedived.

Technical analysis shows that the stock’s price is likely headed to its parabolic support of $14.55. This area used to be a firm resistance. AMD struggled to take out this level from February 2017 up until May 2018. When the stock finally breached the resistance, it started a parabolic run that saw the stock climb to its ATH.

With AMD currently showing bearish signals, it can rely on the parabolic support of $14.55 to generate a possible relief rally.

Fundamental Analysis of Advanced Micro Devices (AMD)

On top of our technical analysis, fundamental analysis also backs our short-term bullish view.

While the company has given notice to its investors to expect weaker Q4 revenues, its fundamentals remain strong. AMD beat expert estimates as the company posted earnings per share of 13 cents versus analyst estimates of 12 cents per share. More importantly, the company reported a gross margin of 40% for the third quarter, which is significantly higher than last year’s gross margin of 36%. This tells us that the company is retaining more in profits on each dollar of sale.

Also, its trailing twelve months price-to-earnings ratio (PE ratio TTM) is 52.18. The stock may look overvalued but not if you consider its five-year maximum of 458. This tells us that investors are happy to pay top dollar for these shares. Thus, we can say that the stock has more upside potential.

The strategy is to buy on dips as close to $14.55 as possible. As long as bulls hold this level, AMD will likely generate the momentum to bounce to our target of $19. Breach that level and there’s a possibility of moving as high as $21.82.

The timeline for the target is less than six months.

Weekly AMD Chart

Monthly AMD Chart

As of this writing, the Advanced Micro Devices stock (AMD) is trading at $17.19.

Summary of Strategy

Buy: On dips as close to $14.55 support as possible.

Target:  $19 and then $21.82.

Stop: Close below $14.

 

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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3.8 stars on average, based on 308 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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