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These Breaking Out Stocks Offer Handsome Returns

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The S&P 500 Index (SPX) has finally closed above the 2,600 resistance. This is good news for investors as breach of that level supports our bullish bias. However, the breakout occurred with very light volume. The index must stay above the 2,600 mark in the next few days to validate the move. Return of market participants from the holidays might just give the index a healthy boost.    

As we remain bullish on the index, let’s look at breaking out stocks with attractive profit potentials.

CF – CF Industries Holdings Inc

CF made its five-year high of 70.32 July 2015, but unfortunately, the name has lost all bullish momentum when it failed to hold critical support at 52 several weeks later. It went into a deep downtrend until it managed to establish support at 20 almost one year later. However, investors have a lot of reasons to rejoice as CF appears ready to breakout and reverse its trend.

Technical analysis reveals a large reversal pattern that might give the stock the momentum it needs to reclaim 52. However, CF must first take out immediate resistance at 36 with volume of at least 10 million in the daily chart. Interestingly, the stock has filled the gaps it made on September and October which is another encouraging sign for the bulls. Range is also tightening, indicating that the stock will make its move soon.

The strategy is to wait for the stock breakout at 36 with the required volume. The stock has immediate support at 34 first, 32 next, and then 29.

Weekly CF Chart

Monthly CF Chart

Summary of Strategy

Buy: breakout at 36 with 10 million volume

Support: 34, 32, and 29

Resistance: 40, 44,48, and 52

Target: 52

Useless: A close below 29 negates this view

CVX – Chevron Corp

CVX reached a 5-year high of 135.10 in July 2014, but just like CF Holdings, the stock came crashing after failing to hold a critical support level. In the case of CVX, that level is 120. The stock lost almost half of its value, when it established support at 70 a year later. The stock has rallied since and it is now looking to reclaim 120.

CVX briefly went above 120 last month, but it was sent back. To breach 120, bulls must get a volume of 15 million on the daily chart. Otherwise, bears maintain control of that resistance. So, the strategy is to wait for volume confirmation before placing buy orders at 120. However, you also have the alternative to wait for the stock to dip, and buy it for cheap, between prices of 114 and 112.

Once the stock breaches 120 with heavy volume, we are likely to hit 125 first, 129 next, and 134 last. Take out 134, and we have a clear path to the target of 170.

Weekly CVX Chart

Monthly CVX Chart

Summary of Strategy

Buy: breakout at 120 with 15 million volume

Support: 118, 116, 114, and 112

Resistance: 125, 129, 134

Target: 170

Useless: A close below 112 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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3.8 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: 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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