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Stock Picks: WMB and WELL

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The S&P 500 (SPX) is beginning to slow down as it went as high as 2,790.21 yesterday, June 11, 2018 only to close at 2,782. We continue to expect a slight dip this week to give the 4-day, 8-day, and 21-day moving averages a chance to catch up with the daily candle’s body. Nevertheless, SPX remains bullish so we’ll continue looking for stocks that flash signs of strength.  

WMB – The Williams Companies Incorporated

The Williams Companies, Inc. (WMB) is a Fortune 500 energy infrastructure company involved in natural gas processing, with interstate gas pipeline and gathering & processing operations in the United States, including the Gulf of Mexico, the Rockies, the Pacific Northwest and the Eastern Seaboard. Founded in 1908, the company operates through segments that include Williams Partners and Williams NGL & Petchem Services. Among its subsidiaries are William Pipeline Partners LP, Northwest Pipeline Corporation, Transco Energy Company, Apoc Oil and Gas International, and Bargarth Incorporated.

Technical analysis show that WMB is creating a large cup and handle reversal structure on the weekly chart. This view comes after the pair generated a higher low of 24 in April 2018. The higher low was affirmed by a rally to 28.23 in May. WMB may have taken a slight dip but it now appears ready to resume its ascent. Furthermore, the attachment of the 4-day and 8-day moving averages to the weekly candle supports this sentiment.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of WMB is 11.38.  Therefore, the stock appears to be undervalued considering that it has a five-year maximum of 114.31 and an average of 44.51. Also, its earnings improved from the prior-year figure of 14 cents to 19 cents per share. Based on these figures, the stock has some room to grow.

The strategy is to buy as close to 26 as possible. As long as the stock is above this level, bulls have the momentum they need to take out resistance of 32 and climb to our target of 50.

The process may take six months.

Weekly WMB Chart

Monthly WMB Chart

As of this writing, The Williams Companies Incorporated stock (WMB) is trading at 26.75.

Summary of Strategy

Buy: As close to 26 as possible.

Target: 50

Stop: Close below 24.

WELL – Welltower Incorporated

Welltower Incorporated (WELL) is a Fortune 1000 Real Estate Investment Trust (REIT) that invests in seniors housing, assisted living and memory care communities, post-acute care facilities, and medical office buildings. Founded in 1970, it now owns interests in properties in the United States, Canada, and the United Kingdom. The company operates in three segments: triple-net, seniors housing operating, and outpatient medical. They include independent and assisted living facilities, care homes and Alzheimer’s/dementia care facilities, and outpatient medical buildings.

Technical analysis show that WELL is poised for a strong bounce play. This view comes after the stock respected the 23.6% Fibonacci level. On top of that, the 4-day, 8-day, and 21-day moving averages are reversing their direction on the weekly chart. This indicates a potential move up.

Lastly, bulls showed up when WELL dropped to support of 50. We can see how the volume on the weekly chart surged when the stock hovered above this level.

Furthermore, fundamental analysis reveal that WELL’s trailing twelve months (TTM) PE ratio stands at 37.13. The stock appears overvalued but it has a five-year average of 65.77 and a maximum of 271.83. Also, its recent earnings report looked promising. Considering these figures, WELL has some upside potential.

The strategy is to buy as close to 57 as possible. If bulls preserve the support, they may spark a bounce to our target of 67.

The process may take three months.

Weekly WELL Chart

Monthly WELL Chart

As of this writing, The Welltower Incorporated stock (WELL) is trading at 58.18.

Summary of Strategy

Buy: Buy as close to 57 as possible.

Target: 67

Stop: Close below 55.

 

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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3.6 stars on average, based on 225 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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Stock Pick: Nordstrom Incorporated

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Nordstrom Incorporated (JWN) is a fashion retailer that sells clothes, shoes, and accessories to men, women in children. The firm that started as a small shoe shop in Seattle back in 1901 has grown into a large publicly traded company with 373 stores in 40 states and in Canada. In 2017, Nordstrom achieved records sales of over $15 billion. The company continues to grow even in the midst of a retail apocalypse in the US.

Technical Analysis of Nordstrom Incorporated (JWN)

JWN started to show signs of weakness in July 2015 when it generated a lower high of 80.23. This was a clear signal that the bull run that started in August 2010 was over. The downtrend was confirmed in September 2015 when the stock breached support of 68 and broke out of a rounding top pattern.

As as result, JWN plunged to as low as 35.01 in June 2016. Since then, the stock has been showing signs of bullishness. It took JWN over two years of consolidation before it finally reversed its trend.

Technical analysis show JWN broke out of a large inverse head and shoulders pattern on the weekly chart. This happened when the stock breached resistance of 58 earlier this month. The breakout was validated by the highest weekly volume recorded by JWN this year.  

However, the weekly RSI is showing overbought signals. The stock must pull back to keep the ascent sustainable. This can be your opportunity to buy the dip.

Fundamental Analysis of Nordstrom Incorporated (JWN)

On top of the technical analysis, fundamentals offer some support to our bullish outlook. JWN’s trailing twelve months (TTM) price to earnings ratio (PE ratio) is 20.25. The stock appears fairly valued. However, it has a five-year maximum of 33.24. This tells us that investors are willing to pay a premium for JWN shares.

In addition, Zacks reports that Nordstrom’s second quarter results beat expert estimates. Analysts forecasted that the company would generate revenues of $3.79 billion and a profit of 83 cents per share. However, Nordstrom posted revenues of $4.07 billion and an earnings per share of 95 cents.

The strategy is to buy on dips as close to 58 as possible. If bulls can successfully back test the breakout, then we might see JWN ascend to 80.

The timeline for the target is six months.

Weekly JWN Chart

Monthly JWN Chart

As of this writing, the Nordstrom Incorporated stock (JWN) is trading at 61.56.

Summary of Strategy

Buy: As close to 58 as possible.

Target: 80

Stop: Close below 55.

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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3.6 stars on average, based on 225 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

The Air Transportation Market is Growing. Where to Invest?

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

Today, practically every person who has internet access knows what Amazon and Alibaba are. These are the world’s largest internet-companies who, for the sale of their products, also use famous platforms like AliExpress and eBay.

Their total revenue constantly has been increasing year after year.

And as long as these companies are oriented toward international markets, 95% of the goods they sell are delivered by air.

Here we could pay attention to the aircraft manufacturers, as the air transportation growth rate will lead to increased demand for new aircraft. Boeing has conducted research according to which the demand for pilots, aircraft technicians and flight attendants in the world is growing, and the biggest activity is expected in the Asia-Pacific Region and in North America.

This week, the news feeds have been peppered with headlines on the current shortage of pilots in airline companies, and this demand will be hard to satisfy in the nearest 10 years.

Last week, Ryanair pilots went on strike demanding a salary raise and improved improved working conditions.

Consequently, investors have started showing interest in airline companies. Also, rumor has it that Warren Buffett is going to invest in one such company (or in several), but it has not yet been indicated which one exactly. According to some reports, it may be Southwest Airlines Co. (NYSE: LUV).

Southwest Airlines Co. is an American low-cost airline founded in 1971. It is the biggest low-cost carrier in the United States and in the world by the number of transported passengers. As of December 2017, there were 706 Boeing 737 aircraft in the company. By its financial performance, the company looks attractive for long-term investments. For example, profitability has reached 16.90%. The Short Float ratio is very low – only 1.82% and the debt to equity ratio is 0.48.

Based only on the rumors, Southwest Airlines stocks have left the consolidation range between the levels of $50.00 and $53.50, having broken out the 200-day moving average and indicating a possible formation of an ascending trend on D1. The closest resistance levels are at $62 and $67.

On W1, a stable uptrend is visible and the broken out levels are becoming a support for underlying price.

It is unclear precisely which company Warren Buffett will direct his attention to, so we can analyze the financial standing of other airline companies, which can become potentially interesting investments.

Delta Air Lines (NYSE: DAL) is one of the largest airlines in the world. Its destinations network includes countries in Asia, Europe, North, South America and the Caribbean region. As of January 2018, Delta Air Lines had 853 aircraft.

The financial performance of this company over the last 4 years shows a drop in income.

Profitability is 7.7%, the debt to equity ratio is 0.67 and the Short Float ratio is 2.65%.

According to technical analysis, the price is trading near the 200-day moving average, constantly breaking it out in both ways. Since December 2017 the resistance has formed on the chart, as the stock still won’t break out. In this situation, the breakout of $57.00 can be a signal for the further growth of the price of the stocks, but, at the same time, it has to be confirmed by good Q3 results.

On W1, there is still an uptrend, but we can already see a more serious resistance area from 2015 in the range between $53 and 56. The price is now in this range. The stock already tried to break out of this resistance in January 2018, but is has never managed to secure its position above this resistance. Here there is a high chance of the price falling to the support at $40. Currently, the potential drop of the price of the stock prevails over the growth.

The next airline company which we can direct our attention to is American Airlines, Inc. It is also one of the largest airline carriers in the world with headquarters in Fort Worth (Texas). The aircraft fleet of the company amounts to 958 aircraft in total.

Unfortunately, recently the financial performance of this airline has not been perfect either.

The debt to equity ratio (25.16) clearly demonstrates how risky this asset may be. That means that the company has 25 times more debts than the means to clear these debts. In this situation, the slightest decline of aviation operations may seriously hurt the company.

It should be noted that American Airlines has the “youngest” aircraft fleet now, as the company has invested its money exactly in the aircraft, which has caused such debts. Therefore, the company decided to risk, bu investors have not appreciated it, and thus the price of the stocks in 2018 was constantly falling.

Currently, the stock is in a downtrend. The price is gradually dropping within the descending channel, breaking out the support levels. However, near the level of $36 there has appeared a surge in rise, which indicates a possible forming of a strong support.

This can be due to rumors about Buffett’s interest towards the airline companies: his fund has now about $100 billion of available cash and a part of it will get to the market. Overall, the stocks of American Airlines seem to be a very risky investment.

There is another large airline company, which may be interesting from the point of view of investments: United Continental Holdings.

United Continental Holdings (NYSE: UAL) is the fourth largest airline company in the United States. It appeared out of the merger of United Airlines and Continental Airlines in 2010. As of June 2018, the aircraft fleet of United Continental Holdings amounts to 716 aircraft. Also, as in the two previously described airline companies, the most successful financial year was 2015. According to those results, profits reached $7.34 billion.

The Short Float ratio is 5.20%; the debt of the airline is 1.62 times bigger than its internal funds.

On D1, the technical analysis indicates an uptrend, as the price is now above the 200-day moving average and has secured its position above $80. In this situation, the further growth of the price cannot be excluded.

On W1, the stock also shows a stable uptrend trend and is currently trading near its historical maximums.

Thus, the technical analysis indicates a good growth potential for this stock, but the possibility of the correction of the price to $75 cannot be excluded either.

Having summarized the data on the revenue, we can see the big picture in the airline transportation market for 4 airlines.

American Airlines has lost the most income, while Southwest Airlines has been constantly increasing its profit.

The rest of the data indicates that the riskiest assets is American Airlines – its debt is the biggest out of all the 4 companies, its profitability is low and its Short Float is high.

To sum up, for the nearest years Southwest Airlines looks the most attractive investment-wise.

Amid all these data, Southwest Airlines noticeably stands out – all the rest have not been able to restore the previous revenue level after 2015. The fact of the matter is that Southwest Airlines has concentrated on low-cost transportation and this decision turned out to be the right one. If Buffett’s fund does buy Southwest stocks, this may become a very good investment for the coming years. Nevertheless, even without it, the expected growth of the passenger throughput will only be increasing the profit of this company and, consequently, the price of its stocks.

You should not consider this article as a guideline to follow in any way – this is only information for analysis.

 

Disclaimer

Any forecasts contained herein are based on the authors’ particular opinion. This analysis may not be treated as trading advice. RoboMarkets bears no responsibility for trading results based on 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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4.4 stars on average, based on 6 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 Pick: Twitter Incorporated

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Twitter Incorporated operates a popular social media platform that enables users to post and engage with messages known as tweets. In addition, the social media channel offers promoted products and services which include promoted trends, promoted accounts, and promoted tweets. These features allow advertisers to endorse their products and services. The company has 3,372 employees with 2017 revenues amounting to $2.44 billion.

Technical Analysis of Twitter Incorporated (TWTR)

TWTR moved as high as 74.73 in December 2013. Unfortunately for buyers at that level, the stock went into a freefall after it hit that price level. The downtrend began in March 2014 when TWTR breached support of 50. Bulls mounted multiple attacks to take out the resistance, but each attempt was denied. With bears in full control of the market, the stock dropped to as low as 13.91 in February 2016.

At that price level, TWTR formed a solid base. The base building continued until October 2017 when the stock surged in price and volume. The price action was a signal that the stock was ready for a bull run.

Technical analysis show TWTR broke out of a rounding bottom reversal pattern on the daily and weekly charts. The breakout looks valid as it was pushed by heavy volume. On top of that, the stock climbed as high as 47.79 in June 2018.

Recently, TWTR has been correcting. Nevertheless, this may be an opportunity to buy the dip.

Fundamental Analysis of Twitter Incorporated (TWTR)

On top of the technical analysis, fundamentals offer some support to our bullish outlook. TWTR’s trailing twelve months (TTM) price to earnings ratio (PE ratio) is 62.63. The stock appears overvalued. However, it has a three-year maximum of 333.4. This tells us that investors are willing to pay a premium for TWTR shares.

In addition, Variety reports that Twitter’s quarterly results beat expert estimates. Analysts predicted that the company would generate revenues of $605 million and a profit of 12 cents per share. However, Twitter posted revenues of $665 million and an earnings per share of 16 cents.

The strategy is to buy on dips as close to 30 as possible. If bulls can stay above this level, then we might see TWTR climb to 39.80. This point is crucial because by then, the stock would have created an inverse head and shoulders pattern. We’ll revisit TWTR once the target is hit for the possibility of a breakout.

The timeline for the initial target is less than three months.

Daily TWTR Chart

Weekly TWTR Chart

As of this writing, the Twitter Incorporated stock (TWTR) is trading at 32.98.

Summary of Strategy

Buy: As close to 30 as possible.

Target: 39.80

Stop: Close below 28.40.

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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3.6 stars on average, based on 225 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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