Connect with us

Stock Picks

Will These Stocks Rally Again This Year?

Published

on

The US markets are on a roll as we head into the last quarter of the year. The S&P 500 continues to record new lifetime highs on a regular basis. While a section of the trading community has been skeptical of the rally, it has not deterred the bulls from buying on every dip. The correction still eludes the bears.

// -- Discuss and ask questions in our community on Workplace.

Key points

  1. The markets are at new lifetime highs.
  2. The fourth quarter is the strongest quarter for the stock market.
  3. Historically, five stocks of the Dow Jones industrial average have traded positive about 80% of the times in the fourth quarter.
  4. We analyze the charts of the five stocks to determine whether they offer a good risk to reward trading opportunity this year.

However, the current bull rally, which is already the second longest in history calls for caution but traders should continue to participate because no one can predict the exact top in the markets. It is only in hindsight that one comes to know about the top.

Therefore, in this article, we shall analyze the historical performance of the stock markets and a few stocks in the fourth quarter of the year, which have rewarded the investors handsomely.

Though it is not necessary that history will repeat itself, chances are that it may rhyme. These studies help the trader improve his odds for success.

// -- Become a yearly Platinum Member and save 69 USD and get access to our secret group on Workplace. Click here to change your current membership -- //

The Dow Jones industrial average has risen for eight straight quarters, the longest winning streak since 1997. The S&P 500 has also rallied similarly, while the Nasdaq composite has risen for five straight quarters.

Though the September quarter is cyclically one of the weakest, this year, the Dow rallied 4.9%, the S&P 500 4%, and the Nasdaq composite 5.8% respectively. The stock market has entered its strongest quarter with a favorable tailwind.

The fourth quarter is the strongest for the markets

The fourth quarter is the best quarter for the stock markets by a huge margin. In the last 25 years, it has been positive 80% of the times. This is no small achievement. Also, the returns have been impressive.

Therefore, it is appropriate to expect the markets to close the year with strength. That is what most of the analysts also forecast.

Analysts expect 2017 to end on a strong note

In a recent poll by CNBC, majority of the analysts were confident that the S&P 500 will rise from the current levels and end the year with strength.

Along with the rise, they were extremely bullish on the pace of rise. About 79% believed that the rally will be more than 5%, which gives a year-end target of 2635 on the S&P 500. Considering the rally of the past few days, it certainly looks achievable.

But it is not only the US markets that are creating new records. The global stocks have also equaled the record for consecutive monthly gains – 11 straight months, last achieved in 2003, during the rebound from the dotcom bust.

Therefore, historical evidence suggests that we should see a strong fourth quarter, which will be good for stocks.

However, in the current bull run, the rally has not been broad-based. Only a handful of stocks have led the rally. Therefore, in order to profit, one has to pick the right stocks. Just buying any stock in the markets will not guarantee returns.

A study by CNBC  has identified five stocks in the Dow Jones industrial average, which have rallied in the fourth quarter majority of the times.

While these are positive numbers over a long period of time, still, before investing, it is always prudent to analyze whether the performance can be repeated this year.

Let’s look at the chart patterns to find out whether the stocks offer a good risk to reward trade opportunity or not.

UNH

The stock is currently trading within an ascending channel. It has traded in the upper half of the channel for most of the times, however, in September, it fell to the lower end of the channel. Since then, the stock has again rallied back to the highs. We can expect the stock to continue trending higher until it breaks down of the channel. Therefore, we have a clear stop loss at around $190.

Also, considering the stock’s performance of the past few months, we can expect a rally to the upper end of the channel, which should be around $207. However, for that, the stock will have to first rally above the highs of $200.76. If we buy at the current levels, our immediate profit objective is around $10, whereas, the possibility of a loss is $8, which leaves us with a risk to reward ratio of 1:1. Traders can take 50% position at the current levels and add the remaining 50% once the stock breaks out of $201. The initial stop loss should be kept at $190, which should be trailed higher once the stock moves up.

HD

The stock has broken out of an inverse head and shoulders pattern, which has a pattern target of $176. However, most breakouts retest their neckline, which in this case would be the $162.5 levels. Therefore, traders can buy 50% of the position at the current levels and 50% on a retrace to $162.5.

The stop loss should be kept at $159 levels, just below the neckline because the pattern weakens when the stock starts to trade below $162. This gives us a risk to reward ratio of roughly 1:2.

CSCO

Weekly chart

The stock has formed a large base after falling from the peak made during the dotcom bubble. A breakout of the overhead resistance zone of $33 to $35 can be very bullish for the stock, as it has no major resistances ahead. Therefore, we can assume that the stock will gain momentum once it sustains above $35.

Daily chart

On the daily chart, we find that the stock has a stiff resistance at $34.5, where the stock is likely to stall its current rally. However, if the stock breaks out of the resistance, it will be very positive for it. Therefore, traders should wait for a close above $34.5 and enter at $35. The stop loss for the trade can be kept at about $32.5 levels. The rally can easily extend to $39 and higher, which gives it a risk to reward ratio of about 1:2.

DIS

DIS is range bound between $90 and $120. Currently, it is trending down, as price is quoting below the downtrend line and the 50-day simple moving average (SMA). Any rally from the present levels is likely to face a slew of resistances between $101 to $106, from the 50-day SMA and the downtrend line. Therefore, we don’t find a buy setup here that can be traded.

TRV

The stock has been in a well-established uptrend, trading inside the ascending channel since 2010. However, at the current levels, the stock is right in the middle of the channel. Its support is at $110, whereas, it has resistance at $130 and thereafter at $140. The stock has not reached the upper end of the channel since November 2015. Therefore, the chances of a rally to the upper end of the channel in the fourth quarter look dim. At the present levels, we don’t find a good trade setup, which offers an attractive risk to reward ratio.

Conclusion

After analyzing the charts of the five stocks, we find buy setups only on three stocks. We don’t find any reliable buy setups on the other two.

Though the fourth quarter is the strongest, October gives jitters to the history students of the stock markets because two major crashes started in this month. First was the crash on 29 October 1929, commonly known as ‘Black Tuesday’ and the second was the crash on 19 October 1987, also known as ‘Black Monday’.

Though we don’t expect a similar crash this year, there is no running away from the fact that the markets are trading above their average price to earnings ratio. Additionally, the geopolitical tensions and the news on the tax reforms will keep the markets on the edge. Therefore, traders should be cautious and reduce their position size. Participate in the markets but with a lower allocation and keep a generous amount of cash in the portfolio.

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?

Stock Picks

Stock Picks: Fluor Corporation and F5 Networks Incorporated

Published

on

The S&P 500 (SPX) showed indecision yesterday, April 23, as it moved as high as 2,682.86 but closed the day at 2,670.29. If the index once again revisits 2,600, the support may no longer hold. Stay defensive and only invest in stocks that have strong bullish sentiments like the names that we have below.

// -- Discuss and ask questions in our community on Workplace.

FLR – Fluor Corporation

Fluor Corporation (FLR) is a multinational Fortune 500 publicly-traded engineering, procurement, fabrication, construction (EPFC) and maintenance company founded in 1912. It provides engineering, procurement, construction, fabrication and modularization, commissioning and maintenance, and project management services in the following segments: Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Government, and Maintenance, Modification & Asset Integrity (MMAI). The company’s subsidiaries include American Equipment Company, Inc., Otay River Constructions, and ADP Marshall, Inc., among others.

Technical analysis show that FLR has taken out resistance of 60 on April 23, 2018. The price action triggered the large inverse head and shoulders pattern on the weekly chart. The breakout was validated by heavy volume as volume rose by over 107% yesterday. In addition, the RSI is not yet in overbought territory. Expect the stock to follow through in today’s trading to further validate the trend reversal.  

Furthermore, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of FLR is 45.21. While the PE ratio tells us that the stock is already expensive, its five-year maximum of 58.92 shows that it has some more room for growth.

// -- Become a yearly Platinum Member and save 69 USD and get access to our secret group on Workplace. Click here to change your current membership -- //

The strategy is to buy as close to 60 as possible. If bulls continue to hold this level, they may create a base and move to our target of 80. The process may take more than a year.

Weekly FLR Chart

Monthly FLR Chart

As of this writing, the Fluor Corporation stock is trading at 61.48.

Summary of Strategy

Buy: As close to 60 as possible.

Target: 80

Stop: 54

FFIV – F5 Networks Incorporated

F5 Networks Incorporated is an American company that develops, markets, and sells application delivery networking (ADN) for the security, performance, availability of servers, data storage devices, and other network and cloud resources. It offers products based on its Traffic Management Operating System (TMOS) and Access Policy Manager (APM). The company operates primarily in the United States but also in Europe, the Middle East, Africa (EMEA), Japan, and the Asia Pacific region (APAC). F5 Networks was incorporated in 1996.

Technical analysis show that FFIV has taken out 149 resistance on April 13, 2018 and triggered the large cup and handle pattern on the daily chart. The price action was validated by extremely heavy volume and a follow through that saw the stock go as high as 161.58 on April 17. At this point, however, FFIV was already flashing overbought signals. It needs to correct and create a new base to keep its ascent sustainable. That’s where you can come in.

In addition, fundamental analysis show that FFIV’s trailing twelve months (TTM) PE ratio stands at 24.34. It may look like the stock is already fairly valued but it’s five-year maximum of 33.68 indicates that investors believe in the company’s potential for growth.

The strategy is to wait for the dip and buy as close to 149 as possible. As long as FFIV is above 149, it has enough bullish momentum to reach 183.

The process may take more than a year.

Daily FFIV Chart

Weekly FFIV Chart

As of this writing, the F5 Networks Incorporated stock is trading 157.72.

Summary of Strategy

Buy: As close to 149 as possible.

Target: 183

Stop: close below 140.

 

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...

3.6 stars on average, based on 149 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.




Feedback or Requests?

Continue Reading

Stock Picks

Stock Picks: General Motors and Everest RE Group

Published

on

The S&P 500 (SPX) appears to have filled the gap between 2,695.68 and 2,709.79 on the daily chart as the index went as high as 2,717.49 on April 18. However, it seems that SPX has generated another lower high. Unless the index can move above 2,720 soon, it is in danger of creating a bearish descending triangle pattern.

// -- Discuss and ask questions in our community on Workplace.

With the SPX showing signs of weakness, let’s look at stocks that are near firm support levels.

GM – General Motors Company

General Motors Company (GM) is an American multinational corporation that designs, builds, and sells cars, trucks, crossovers, and automobile parts. Founded in 1908, it now has 180,000 employees across 35 countries worldwide. The company’s operational segments include GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and General Motors Financial Company, Inc. (GM Financial). In General Motors’ portfolio are the brands Buick, Cadillac, Chevrolet, GMC, Holden, and Wuling.

Technical analysis show that GM has taken out resistance of 37 on September 8, 2017 and triggered the inverse head and shoulders reversal pattern on the weekly chart. The stock went as high as 46.76 on October 24, 2017 and hit the target of the pattern before it retreated and dipped to 34.50 on March 27, 2018.

// -- Become a yearly Platinum Member and save 69 USD and get access to our secret group on Workplace. Click here to change your current membership -- //

The stock, however, has recently reclaimed 37. As long as that level holds, the large cup and handle pattern on the weekly chart is still in play.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of GM is 21.35. While the PE ratio looks as if the stock is already fairly valued, its five-year maximum shows that it has still room to grow. GM’s maximum TTM PE ratio in the last five years was 32.18. Based on this number, we can say that GM has some more upside potential.

The strategy is to buy as close to 37 as possible. If bulls continue to hold this level, they may create a base and crawl to our target of 54. The process may take more than a year.

Weekly GM Chart

Monthly GM Chart

As of this writing, the General Motors Company stock is trading at 37.61.

Summary of Strategy

Buy: As close to 37 as possible.

Target: 54

Stop: 34.50

RE – Everest RE Group Limited

Everest Re Group (RE) is a company engaged in insurance and reinsurance underwriting. Founded in 1973, its products now range from property and casualty reinsurance to marine, aviation, surety, errors and omissions liability (E&O), directors’ and officers’ liability (D&O), medical malpractice, accident and health (A&H), and workers’ compensation insurance.

Technical analysis show that RE bottomed out in December 2017 when it dropped to 208.81. The stock has been rallying since and has even managed to go as high as 264.88 on March 21, 2018. Bears repelled the advance, but the stock appears to be carving a bullish higher low setup above 240. If this level holds, RE may use it to take out 265 resistance.

Moreover, fundamental analysis show that RE’s trailing twelve months (TTM) PE ratio stands at 22.13. This looks like a reasonable PE ratio but it’s five-year maximum of 38.36 indicates that investors are willing to pay a premium. In other words, RE has some more potential for growth.

The strategy is to buy at current market level. If the stock holds the higher low of 241.80, bulls will likely use it to create a base and breach 265 resistance. Once breakout is complete, the stock may march to our target of 320.

The process may take more than a year.

Daily RE Chart

Weekly RE Chart

As of this writing, the Everest RE Group Limited stock is trading 246.99.

Summary of Strategy

Buy: At current market price of 246.99.

Target: 320

Stop: 241.80

 

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...

3.6 stars on average, based on 149 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.




Feedback or Requests?

Continue Reading

Stock Picks

Stock Picks: Essex Property Trust Incorporated and Edison International

Published

on

The S&P 500 (SPX) resumed its climb yesterday, April 16, 2018, as it closed at 2,677.84. The price action encourages those who bought around 2,600 to keep holding their positions. This helps ease selling pressure, which may help bulls continue their ascent to the top end of the range at 2,800.

// -- Discuss and ask questions in our community on Workplace.

As the index shows signs of life, let’s look at stocks that are about to breakout.  

ESS – Essex Property Trust Incorporated

Essex Property Trust (ESS) is a publicly-traded real estate investment trust (REIT) company that acquires, develops, redevelops, and manages apartment communities. Founded in 1971, what started from 16 multifamily communities has now grown to 59,645 homes in 250 communities. The company operational segments include Southern California, Northern California, and Seattle Metro.

Technical analysis show that ESS is primed to take out resistance of 244 and trigger the large inverse head and shoulders pattern on the daily chart. To breach the resistance, the stock must print volume of at least 1 million shares on the daily chart. Bottom pickers are likely to dump positions at the resistance. ESS needs breakout buyers to come out and overwhelm sellers.

// -- Become a yearly Platinum Member and save 69 USD and get access to our secret group on Workplace. Click here to change your current membership -- //

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of ESS is 37.33. While the PE ratio looks high, it is still way below the stock’s five-year average of 54.99. Based on these figures, we can say that ESS has some more room to grow.

The strategy is to buy the breakout at 244 after the stock generates volume of 1 million shares. If bulls take out 244, they will gather enough momentum to sustain a climb to our target of 268. The process may take six months.

Daily ESS Chart

Weekly ESS Chart

As of this writing, the Essex Property Trust Incorporated stock is trading at 245.30.

Summary of Strategy

Buy: Breakout at 244 as long as the stock prints over 1 million in volume on the daily chart.

Target: 268

Stop: Close below 240 after the breakout.

EIX – Edison International

Edison International (EIX) is a public utility holding company. Founded in 1886, it is the parent company of Southern California Edison Company (SCE) and Edison Energy Group Incorporated (Edison Energy Group). SCE supplies and delivers electricity to Southern California, while Edison Energy Group is a holding company for subsidiaries focused on finding business opportunities across energy services.

Technical analysis show that EIX is poised to take out resistance of 65 and trigger an inverse head and shoulders reversal pattern on the daily chart. This comes after the stock generated a higher low of 61.47 on March 26, 2018.

To complete the breakout, bulls must generate volume of at least six million shares on the daily chart. Those who bought the bottom and those who bought the higher low are likely to take profits at the resistance. The market needs buyers to absorb the selling pressure.

Moreover, fundamental analysis show that EIX’s trailing twelve months (TTM) PE ratio stands at 38. This looks like a high PE ratio but it is still low in relation to its five-year PE ratio range which is 10.57 – 225.55. With such a wide range, EIX has a lot of upside potential.

The strategy is to buy the breakout at 65 as long as the volume requirement is met. If bulls complete the breakout, they will gather enough momentum to push EIX to our target of 72. The process may take more than a month.

Daily EIX Chart

Weekly EIX Chart

As of this writing, the Edison International stock is trading 64.64.

Summary of Strategy

Buy: Breakout at 65 as long as the stock prints over 6 million in volume on the daily chart.

Target: 72

Stop: Close below 63 after the breakout.

 

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...

3.6 stars on average, based on 149 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.




Feedback or Requests?

Continue Reading

Recent Comments

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