Connect with us

Analysis

Stock Picks: These two stocks are likely turnaround candidates

Published

on

The S&P 500 will remain range bound until it breaks out of 2500 or breaks down below 2400 levels. Therefore, we have to be more stock specific in our approach because a few stocks will continue to rally while the index consolidates. As the index lacks momentum, this week, we have chosen a few stocks that are possible turnaround candidates.

Key points

  1. The S&P 500 is range bound, however, individual stocks are likely to outperform
  2. We have adopted a bottom-up investing approach in this article
  3. We believe GPRO and AEO are turnaround candidates

Though risky, such stocks can offer huge returns if our analysis proves to be correct. However, if the company fails to perform according to our expectations, stocks can fall lower. Therefore, you should always strictly adhere to the recommended stop loss. Also, once the stock moves in your favor, please keep trailing the stops higher.

As long as the S&P 500 remains above 2400, we shall continue to look for buying opportunities. We shall become negative on the markets only if the index breaks below 2400 levels. We have identified two stocks that are showing signs of a turnaround, both fundamentally and technically.

Let’s analyze the stocks.

GoPro – (NASDAQ: GPRO), Buy at the current levels, SL 8, Target 15 and 18

GoPro is an action camera manufacturer founded in 2002. The stock has been languishing near its lows due to its weak performance in the past few quarters.

However, the recent results and guidance shows that the company is on a turnaround path. It has recorded higher revenues and better margins in the second quarter of this year and has forecast that it will meet the higher end of its guidance for the third quarter. This shows that demand for their products is increasing.

It has a few top end products lined up for launch, which are likely to boost both the bottom line and the top line of the company. This has rekindled hopes that the company will be able to turn profitable if the new launches are successful. This hope is pushing the stock prices higher.

Additionally, the upgrades by Goldman Sachs from Sell to Neutral, and by Morgan Stanley from underweight to equal weight has also boosted prices. However, a lot hinges on the new product launches. If these fail to generate interest among consumers, the turnaround story will fall flat on its face. Nevertheless, if the products are a success and the company turns profitable, the stock is likely to be re-rated and the investors can reap huge rewards.

Weekly chart

The long-term chart of GPRO looks scary. It has lost about 90% from its highs of $98.47 in October 2014. The stock had fallen to $7.15 levels in March of this year. Since then, the stock is on the mend and is showing signs of bottoming out.

A breakout above $11.1 will start a new uptrend in the stock, which should can take the stock to $15 levels.

Daily chart

The daily chart shows a base formation, with the stock taking support at $7.5 levels. It has formed an inverse head and shoulders bottom, which will complete on a breakout above $11.1. On August 4, the stock had gapped up sharply, however, it could not breakout of the overhead resistance. Selling close to the $11.1 levels pushed the stock back down to about $8.5 levels. However, the stock has again gapped up on September 7 and is again attempting to breakout above the neckline.

We recommend entering 50% of the allocation size at the current levels, keeping a stop loss of $8. The remaining 50% allocation can be purchased when the stock breaks out of $11.1. The minimum pattern target is $15, though the stock can surprise on the upside and even reach $18 levels. Therefore, the risk to reward ratio is favorable.

American Eagle Outfitters, Inc. – (NYSE: AEO), Buy at the current levels, SL 9, Target 19

The retail sector in the US is going through a disruptive phase, due to changes in consumer behavior and the growth in online shopping. This has led to a sharp fall in the margins and growth of the brick and mortar retailers. As a result, the whole sector has been punished, plunging stocks to multi-year lows.

However, we believe that a few stocks in the retail sector are showing signs of a turnaround. These companies are adapting to the changing consumer needs and are likely to emerge stronger. One such company is AEO, owner of the American Eagle Outfitters® and Aerie® brands.

The company has maintained positive comparable sales growth for ten straight quarters. This shows that the company’s products are able to withstand the cut-throat competition.

However, the increase in sales has not resulted in higher net profit, because the margins have taken a hit, due to promotional offers.

Nonetheless, AEO has increased its online sales, which now accounts for about 23% of the company’s business. This shows that the company is flexible and can quickly adapt to changing consumer requirements.

Also, the low debt to equity ratio provides opportunities to the management to buyout other struggling retail companies. Presently, AEO has a very limited international exposure, which it plans to expand. This will help diversify its business. With these positives in mind, we want to build a position in the stock before it gets re-rated.

Weekly chart

AEO has remained range bound between $10 to $20 for almost seven years. During this period, the stock has fallen to the $10 levels thrice. All these three occasions proved to be a good buying opportunity because every time the stock rallied back to at least $18 levels. This time too, as the company improves its performance, we expect the same trend to play out. We have a clear stop loss at $9, a level that has not been touched since 2009 and our target objective is $19. This gives us a good risk to reward ratio.

Daily chart

On the daily chart, we find that the stock has broken out of the downtrend line and has moved above both the 20-day exponential moving average (EMA) and the 50-day simple moving average (SMA). This shows that the stock is finding buyers at the $10 levels. Therefore, we can buy the stock in a phased manner, purchasing about 50% of the total allocation at the current levels and buying the rest on dips to $10.5 levels. The stop loss for the trade should be a close below $9 level. On the upside, the stock is likely to rally to $14.5, once it breaks out of $13. Thereafter, it has a small resistance at $16 after which it is likely to rally to $19 levels.

 

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.7 stars on average, based on 9 rated postsRakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.




Feedback or Requests?

4 Comments

4 Comments

  1. jgmartin89

    September 13, 2017 at 9:32 pm

    Awesome! Thanks for these. Would be spectacular if you could post more stock picks.

    • Rakesh Upadhyay

      September 14, 2017 at 7:54 am

      Hello jgmartin89,

      Thank you for the appreciation. I would certainly try to search for more such stocks.

  2. felix

    September 14, 2017 at 12:37 pm

    Thanks Rakesh, great job!

  3. Rakesh Upadhyay

    September 14, 2017 at 6:19 pm

    Hello felix,

    Thank you for the appreciation.

You must be logged in to post a comment Login

Leave a Reply

Analysis

Pre-Market Analysis And Chartbook: Brexit Chaos Sparks Turmoil Across Markets

Published

on

Thursday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,685 -0.63%
DAX 30 11,360 -0.47%
WTI Crude Oil 56.40 0.71%
GOLD 1,215 0.31%
Bitcoin 5,389 -3.72%
EUR/USD 1.1302 -0.04%

The Brexit process continues to be the main driver in financial markets across asset classes, and the situation in the UK could be best described as chaotic at the moment. While yesterday the British Cabinet’s approval of the draft Brexit plan sparked a brief risk rally, with the Euro the Pound and equities rising hand-in-hand, today, the plan is in serious jeopardy. Several ministers, including the Brexit-Secretary resigned, and the outcome of vote in the Parliament seems doubtful, at best.

GBP/USD, 4-Hour Chart Analysis

The Pound lost significant ground against all of its peers, with the currency’s losses also being exaggerated by the much worse than expected British Retail Sales data. The GBP/USD pair hit its lowest level this month, touching the 1.2750, while the Euro is relatively strong today, the Dollar’s broad rally still seems intact, and a no-deal Brexit could push the Cable back towards its historic low near 1.20 from late 2016.

Dow 30 Futures, 4-Hour Chart Analysis

While equities are little changed so far today, the charts still look wounded globally and even the relatively strong US benchmarks are likely headed for, at least, a test of their lows from October. Economic numbers were mixed today in the US, with the Retail Sales report beating the consensus estimates across the board, but with the Philly Fed Index showing an unexpected slowdown in the manufacturing sector.

The Dow, which has been the strongest benchmark recently is hovering near the 25,000 level, after underperforming the broader market yesterday, and with the other indices being in even worse technical shape, the coming days could see another surge in volatility, despite the pullback in Treasury yields across the curve.

Heavy Trading Continues in Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Oil finally found support following two months of steep losses and Tuesday’s liquidation event, with the WTI contract rising above the $57 per barrel level yesterday, before a late-day pullback. Today the crucial commodity is performing relatively well in the nervous environment, and although bulls are still not out of the woods, we still expect a bounce above $60 in the coming week.

We will still have the weekly US crude inventory data coming out during the morning session on Wall Street, and volatile trading will likely continue in the throughout the day, with the $54.50 short-term support level and the $57.50 resistance level being in the center of attention.

Gold Futures, 4-Hour Chart Analysis

Gold is also having an interesting session so far, as it is testing the short-term resistance zone near $1215 due to the Brexit uncertainty and the pullback in yields. The precious metal is still well below the consolidation pattern that developed in October, and it would need to rise above $1220 to trigger a short-term trend change, but should risk assets continue their downtrend, gold could quickly rally as high as $1250.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

Copper Futures, 4-Hour Chart Analysis

Featured image from 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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.7 stars on average, based on 394 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




Feedback or Requests?

Continue Reading

Analysis

Long-Term Cryptocurrency Analysis: Bear Market Continues With Major Technical Breakdown

Published

on

After months of choppy consolidation, yesterday, we saw the largest move in the cryptocurrency segment since April, which took the majors below key technical levels. Bitcoin’s drop is the most important event, since the most valuable coin violated a structurally important base support for the first time since its historic bull run to $20,000 started.

As we warned repeatedly, the market didn’t show signs of healing during the sideways drift, since no leadership developed, and the coins failed to show follow-through following the, sometimes explosive rally attempts, so our trend model remained overwhelmingly bearish throughout the consolidation.

The top altcoins completed their structural breakdowns well ahead of BTC, and the stability of Bitcoin was the most encouraging sign for crypto-bulls, so now, the broad selloff confirmed the next lower in the bear market.

BTC/USD, Daily Chart Analysis

After violating the primary support at $6275, Bitcoin’s selloff accelerated below the weaker $6000 level and the key zone near $5850 wasn’t enough to support the coin. The structural breakdown will likely lead to a test of the $5000-$5100 zone, while an unlikely recovery would be a very positive development. Primary resistance is now ahead near $5850, while further major support zones are found near $4500 and $3600, and traders and investors still shouldn’t enter new positions here.

ETH/USD, Daily Chart Analysis

Ethereum fell to a marginal new bear market low, outperforming Bitcoin from a short-term technical perspective, but that’s not enough to warrant optimism with regards to the long-term setup. ETH is still in a clear long-term downtrend despite the lengthy consolidation phase, and a test of the $160 level is likely in the coming period.

The coin is still on sell signals on both time-frames in our trend model, and traders and investors should stay away from new positions, with further support found near $130 and with resistance levels ahead near $200 and $235.

(more…)

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.7 stars on average, based on 394 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




Feedback or Requests?

Continue Reading

Altcoins

XRP Price Analysis: XRP/USD Performing Better than Peers; Another New Partner Announced

Published

on

 

  • Ripple’s XRP weighted to the downside, but not performing as bad as some of its peers.
  • CIMB Group are the latest financial organisation to be utilizing Ripple’s technology.

XRP/USD has been firmly on the back foot during trading over the last two sessions now. Selling pressure had hit the whole market on 13th November. This went on to further intensify in the following session, 14th November. A total blood bath was observed across the board, with huge areas of support being breached. The wave hit the entire market. Ripple’s XRP has managed to hold a firmer ground, in comparison to some of the losses encountered with its peers.

Ripple Reveals New Partner – CIMB

CIMB Group, one of the largest south Asian banking organizations, are the latest to be utilize Ripple’s technology. CIMB will leverage Ripple’s technology for its SpeedSend remittance product, this coming from a joint press release. The SpeedSend product is available in a spectrum of Southeast Asian markets. Countries include: Thailand, Philippines and Vietnam. Ripple continue at a rapid pace adding large financial institutions to its network.

Ripple via their announcement stated the following: “Ripple’s blockchain-based solution has been deployed to enhance CIMB’s proprietary remittance product called SpeedSend. This service allows customers to send and receive money with direct account crediting and instant cash collection. The enhancement improves their access to cross-border remittances across the globe — both inbound into ASEAN and outbound to other countries. It is already enabling remittances to corridors such as Australia, USA, UK and Hong Kong.”

Technical Review – XRP/USD

XRP/USD daily chart

XRP/USD is running at three consecutive sessions in the red, nursing chunky double-digit losses over this period. The price dropped over 20%, a move that was very much in line with the rest of the cryptocurrency market. Price action had been moving within a triangular pattern formation, since 21st September. Thie XRP price observed much narrowing over this period. During the heavy selling pressure on 14th November, the bears had pierced the lower support of the mentioned pattern.

Despite the large lower wick seen on 14th November candlestick, the price managed to close within boundaries of the triangular formation. In terms of current price action on the latest for today, XRP/USD is seen below this area of support. Should the market bears manage to push for a breach and daily close underneath the supporting trend line, this could cause large devastation. Eyes could be on a return to the $0.3000-$0.2500 region. Lastly, worth noting, looking to the upside, the resistance would likely be seen around $0.4800, and this level is critical. This is where the lower trend line is seen tracking.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.5 stars on average, based on 50 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




Feedback or Requests?

Continue Reading

Recent Posts

A part of CCN

Hacked.com is Neutral and Unbiased

Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

Trending