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Chart of Day: Buy What Others Hate

Mar 17, 2017

Sometimes, buying what others hate is the best way to make money.

For weeks, analysts have been busy downgrading NVDA. Traders were so bearish, they sent the stock to $98.85 where we recommended buying the May 100 call and the May 105 call on March 9, 2017. Since then, the stock has moved back to $104 a share as bulls wake back up to the long-term semiconductor stock story.

On March 9, the May 100 call traded at just $6.50. It’s now up to $9 days later. The May 105 calls traded at just $4.40. It’s now up to $6.30. All we had to do was buy what others were foolishly selling and ignoring for no real reason.

What’s interesting is that NVDA is just beginning to rebound here, likely to retest a previous high near $120, short-term. We come across opportunities just like this one all the time.

 

 

Chart of Day: Bristol Myers (BMY) Ready to Slip

Mar 14, 2017

The last time we played Bristol Myers (BMY), we bought it on oversold conditions and watched it soar to refill its bearish gap. We did quite well. Now, though, the stock has become aggressively overbought and ready to pivot in the other direction. In fact, if you look at the usual momentum metrics in the chart above, you can clearly see that RSI, MACD and Williams’ %R are all over-extended to the upside. What we’d like to see is a potential drop to $54, near-term, which would allow us to take our gains and move on as we did in February.

Consider buying to open the BMY April 2017 57.50 put up to $2.65 and or the BMY April 2017 55 put up to $1.40.

 

Chart of Day: NVIDIA at Bottom

Mar 09, 2017

After a vicious pullback under its 50-day, shares of NVDA look to have caught strong support just under $99. At the same time, we have excessively oversold reads on RSI, MACD and Money Flow as well. What I’d like to see here is an eventual recovery back to $120, perhaps even more given the strength of the stock. Two ways to consider trading NVDA upside is with the May 100 call up to $7 and, or the May 105 call up to $5.25.

Chart of Day: SNAP IPO Snafu

Mar 06, 2017

It’s hard to feel bad for people these days.

When SNAP hit the market at $24 a share, it was already overvalued.   In fact, if you look at the article right under this one, we note:

But be careful here. To justify that valuation, the stock needs to grow its bottom line significantly soon.  And that’s not likely to happen. Unfortunately, growth hasn’t been a strong point for the company.

In fact, the company managed to lose $514 million last year on revenue of $404 million. It lost another $169 million in the fourth quarter on $166 million in sales, too. And growth in users seems to be slowing thanks in part to explosive competition. In fact, according to the S-1, its annual user growth is now below 23% - bad news. 

User growth dropped from 15% daily active users in the first two quarters of 2016 to 7% by the last two quarters of the year. The other risk here is that Snap could become another Twitter-like disappointment on the market. Remember, Twitter may have had a hot IPO at $26 and ran to $44 on the first day, but it was a flop, sinking as sales slowed.

Those were known knowns. Nothing was unknown.

Yet, investors piled in anyway. Worse, of the seven analysts that cover this stock, not one of them has a buy rating. Instead, analysts at Needham, Atlantic Equities, Nomura Instinet, and Pivotal Research say sell.

Some of the top reasons for that is slowing growth in daily active users, slowing monetization growth, heavy bouts of competition, and far too rich valuation.

As we’ve noted since late last year, two of the better ways to make money from the SNAP IPO was to buy ETFs that typically run up on IPO momentum, including the First Trust IPOX (FPX), which ran from a December 2016 low of $52.63 to $57.40, and the Global X Social Media Index ETF (SOCL), which ran from a low of $21.54 to $24.25.

Sorry. But it’s hard to feel bad for people these days when they buy overpriced IPOs.

Chart of Day: Stay away from SNAP

Mar 02, 2017

Snap (SNAP) may its debut today.

While it’s already up to $25 a share on 100 million shares in the first 30 minutes, it’s already oversubscribed by 12 times. That gives it a market cap of about $33 billion.

It’s one of the hottest IPOs to hit market in quite some time.

But be careful here. To justify that valuation, the stock needs to grow its bottom line significantly soon.  And that’s not likely to happen.

Unfortunately, growth hasn’t been a strong point for the company.

In fact, the company managed to lose $514 million last year on revenue of $404 million. It lost another $169 million in the fourth quarter on $166 million in sales, too. And growth in users seems to be slowing thanks in part to explosive competition. In fact, according to the S-1, its annual user growth is now below 23% - bad news. 

User growth dropped from 15% daily active users in the first two quarters of 2016 to 7% by the last two quarters of the year. The other risk here is that Snap could become another Twitter-like disappointment on the market. Remember, Twitter may have had a hot IPO at $26 and ran to $44 on the first day, but it was a flop, sinking as sales slowed.

In the case of Snap, money isn’t such a strong point at all. For it to be a hot stock to own, it must increase its growth rate significantly. We’re not sure it can. 

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