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 concidered 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...



Feedback or Requests?

Stock Picks

Invest on Reversing PRGO and QCOM

Published

on

The S&P 500 Index (SPX) seems unstoppable as it continues to record one fresh high after another. The market even gapped up on January 12, opening at 2,770.18 after closing at 2,767.56 on January 11. Market participants are extremely bullish as they continue to buy even though SPX is in extreme overbought territory. At this point, however, it would be wise to take a contrarian point of view and be cautious about your positions. Your capital and all gains are at tremendous risk when the market is euphoric.

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

You can still ride the mania by investing in stocks that are far from their tops. Let’s look at names that are reversing their trends.

PRGO – Perrigo Company

Perrigo Company (PRGO) is an international manufacturer of over-the-counter healthcare supplies, including infant formulae, supplements, and pediatric nutritionals. The company has close to 10,000 employees with sales of over $5 billion in 2016.

PRGO has been in a downtrend since it generated a lower high of 198.42 in August 2015. Things went from bad to worse for investors when the market broke crucial support of 120 in April 2016. During that week, the stock lost 21.02% of its value, as it dropped from 120.10 to 94.86. PRGO continued to tumble until it established support at 67 in March 2017. It consolidated for several months at that level until a volume spike in August 2017 brought the stock back to life.

// -- 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 -- //

Technical analysis reveal that PRGO is on the verge of completely reversing its trend. It has created a bullish reversal pattern that relies on the breach of resistance at 98.

With the stock still a few dollars away from 98, you have a couple of options. You can buy at the current price level to reduce costs. Otherwise, wait for the stock to take out 98 with at least 10 million in volume in the daily chart. Those who bought at the 67 support level are likely to sell a significant part of their positions at 98 to lock their gains. PRGO needs a new set of investors who would absorb the selling pressure.

Once 98 is taken out, the target is 130.

Weekly PRGO Chart

Monthly PRGO Chart

As of January 12, the stock of Perrigo Company closed at 91.80.

Summary of Strategy

Buy: 91.80 or breakout at 98 with 10 million volume in the daily chart

Target: 130

Stop: A close below 87 negates this trade call

 

QCOM – Qualcomm Incorporated

Qualcomm Incorporated (QCOM) is an American multinational company that specializes in the design, development, manufacture, and marketing of wireless telecommunications products and services. The company has over 33,000 employees and has generated $23.55 billion in revenues in 2016.

QCOM went extremely bearish when it posted a lower high of 78.53 in October 2014. The stock nosedived as it struggled to find stability. It even gapped down in the weekly chart on several occasions before establishing support at 45 in January 2016. QCOM has been rallying since. It’s also very close to breaching resistance at 69.

Technical analysis reveals that QCOM has created a large bullish reversal pattern. To confirm the reversal, the stock must take out resistance at 69 with volume of 80 million in the daily chart. Those who bought at the 55 support level are likely to dump their shares at 69, knowing that this is a strong resistance. QCOM needs buyers who would be happy to purchase those shares at 69.

The strategy is to wait for volume confirmation before placing buy orders. Bears have defended 69 several times which means they wouldn’t give up that level without a fight. If you want to invest, make sure you get in when the bulls are the clear winner.  

Take out 69 and we have a target of 93.

Weekly QCOM Chart


Monthly QCOM Chart


As of January 12, the Qualcomm Company stock closed at 65.38.

Summary of Strategy

Buy: Breakout at 69 with 80 million in volume

Target: 93

Stop: After breakout at 69, a close below 64 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.

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 concidered 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...



Feedback or Requests?

Continue Reading

Stock Picks

Ride PBCT and OKE on Bullish Reversal Patterns

Published

on

The S&P 500 Index (SPX) continues to be aggressively bullish as the market records seven fresh highs in a matter of eight trading days. Momentum is sky high, and the market continues to climb even though it is in extreme overbought territory. While this may sound bullish, such an ascent is not sustainable. The market will eventually have a correction and buying at the top is not a great strategy. If you don’t want to be left behind however, be smart and buy stocks that offer limited risks but reasonable rewards.

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

Let’s look at names that are near their breakout point.

PBCT – People’s United Financial Incorporated

People’s United Financial Incorporated (PBCT) is the bank holding company for People’s United Bank. The company was founded in 1842 and has 4,729 employees. PBCT operates in the commercial and retail banking segments, serving individual, municipal, and corporate clients.  

The stock has been in a downtrend since it generated a lower high of 21.76 in September 2008. It plunged to one lower low after another until it found support at 11 in August 2011. After going through a long accumulation period, it came back to life in November 2016 when the stock went from 16.48 to 18.43 in a week. More than one year later, it appears that PBCT is ready for its next big move.

// -- 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 -- //

Technical analysis show that the stock has created an immense bullish reversal pattern that started way back in 2008. Resistance at 20 was created when the market failed to close above that level almost a decade ago. Fast-forward to 2018, the stock gets another chance to reclaim that level. The stock needed close to ten years to get to the verge of taking out resistance at 20.

These multi-year consolidation periods sometimes yield tremendous gains in the short term. The key for PBCT is to break resistance of 20. To do so, the market needs 10 million in volume on the daily chart. Those who bought at immediate support of 17.50 are likely to sell some of their positions. The stock needs a fresh set of investors who can absorb the selling pressure.

The strategy is to buy breakout at 20 with the required volume. Take out that resistance level, and we have a target of 29.

Weekly PBCT Chart

Monthly PBCT Chart

As of January 12, the stock of People’s United Financial Incorporated closed at 19.48.

Summary of Strategy

Buy: Breakout at 20 with 10 million in volume in the daily chart.

Target: 29

Stop: After breakout at 20, a close below $18.75 negates this trade call.

OKE – ONEOK Incorporated

ONEOK Incorporated (OKE) is a diversified energy company that owns and operates one of the country’s modern natural gas liquid systems. It is also involved in collecting, processing, storing, and transporting natural gas. The company was founded in 1906 to provide safe and reliable energy and services to its customers.

OKE went into a downtrend in October 2014 when the stock registered a lower high of 61.56. It tumbled to one lower low after another until it established support at 20 in December 2015. The stock consolidated at that level until April 2016 when it made a big push up. OKE went from 30.57 to 36.03 in one week. Since then, the stock has been gradually rising, and it is currently threatening to take out resistance at 60.

Technical analysis show that OKE has created a large bullish reversal pattern that started in 2014 when the stock posted a lower high at 61.56. Breach of resistance at 60 will attract momentum traders, and could push the stock up to 100.

The strategy is to wait for breakout at 60 with volume of 10 million in the daily chart. Those who bought at immediate support at 55 are likely to dump some of their shares at 60 to lock in gains. OKE needs a new batch of investors who would most likely sell above 60.

Otherwise, wait for the market to take a slight dip so you can buy as close to 55 as possible. The market is currently in overbought territory, which increases the likelihood of a pullback.

Weekly ONEOK Chart

Monthly ONEOK Chart

As of January 12, the ONEOK Incorporated stock closed at 58.67.

Summary of Strategy

Buy: breakout at 60 with 10 million volume or as close to 55 as possible.

Target: 100

Stop: A close below 52 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.

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 concidered a failure either way.
1 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 5 (1 votes, average: 5.00 out of 5)
You need to be a registered member to rate this.
Loading...



Feedback or Requests?

Continue Reading

Stock Picks

Trade Recommendation: Bottom Pick MOS and NWL

Published

on

The S&P 500 Index (SPX) hit another fresh high of 2748.51 points yesterday. This is the fifth fresh high of the index in the last five trading days. Yesterday’s volume is still above the 20-day average, which means that market participants are willing to buy at this level, expecting that the index will climb higher. All of this is happening while the index is in extreme overbought territory in the daily, weekly, and monthly charts. As an experienced trader, I would take this opportunity to sell the greed. The best time to sell is when you don’t have to.

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

While selling the greed, use your capital and earnings to buy the fear. Let’s look at stocks that have fallen, but have managed to bounce back.

MOS – The Mosaic Company

The Mosaic Company (MOS) is a Fortune 500 firm and one of the world’s largest producers of two key crop nutrients: potash and phosphate. In mining those minerals, the company is able to produce high-quality fertilizer and animal feed. Half of which is sold to customers in North America while the other half is sold to customers around the globe.

MOS has been in a downtrend for over six years after generating a lower high of 74.31 on the weekly chart in July 2011. Things went from bad to worse when the stock broke critical support of 50 in July 2013. MOS then created one lower low after another until it tumbled down to 19 which is a support level that hasn’t been taken out since 2006.

// -- 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 -- //

Technical analysis show that MOS continues to respect the 12-year old support level. The stock has bounced from 19 with significant volume on the weekly charts in September 2017. This indicates that market participants are investing because they believe the stock is cheap. However, RSI shows that the stock is also respecting immediate resistance of 67. MOS may take a slight dip, which is a good opportunity for you to buy. The strategy is to buy as close to support of 23 as possible.

Take note: the stock is still in a downtrend, but there’s an opportunity to generate profits by buying the bounce. Consider selling positions at 34 to lock in gains. If the market breaches that resistance level, the next target is 50.

Weekly MOS Chart

Monthly MOS Chart

As of January 8, The Mosaic Company closed at 26.29.

Summary of Strategy

Buy: as close to support at 23 as possible

Target: 34 and 50

Stop: A close below 19 negates this trade call.

 

NWL – Newell Brands Incorporated

Newell Brands Incorporated (NWL) is a global leader in marketing commercial and consumer merchandise such as food storage, home organization products, reusable containers, and office supply products. The company’s portfolio includes popular brands such as Coleman, PaperMate, Elmer’s, Rubbermaid, and Parker Pens.   

NWL has been in a downtrend since it created a bearish double top at 55 in June 2017. The stock lost almost half of its value when it plunged to just below 28, which is a very important support level. Since 1996, the stock surged whenever it went above this level. On the other hand, NWL tends to nosedive if that support level is breached.

So far, the stock appears to respect this support level. Massive increase in volume levels from end of October to end of November indicate capitulation. The significant drop in volume last week may suggest exhaustion. This is a good opportunity to bottom pick.

The strategy is to buy at current price level. Initial resistance is 35. Take out this level, and we have a target of 44.

Weekly NWL Chart

Monthly NWL Chart

As of January 8, the Newell Brands Incorporated stock closed at 32.08.

Summary of Strategy

Buy: 32.08

Target: 44

Stop: A close below 28 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.

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 concidered 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...



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