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Chart of Day: Aluminum Still Running, as Hoped

Jan 16, 2017

On December 20, we noted that since 2016 began, the Dow Jones U.S. Aluminum Index -- which tracks the future prices of aluminum – had jumped about 70% and that the run was far from over.

After years of oversupply issues and supply-demand imbalances, those issues has just about stabilized, in our opinion.  And because of that, we also noted, we could see an even bigger increase in aluminum prices, as Donald Trump’s infrastructure plans help ramp up demand for the metal. 

One of the stocks recommended in that Chart of Day was Century Aluminum (CENX) – which at the time priced at just $8.65. It’s now up to $11.52 and running. If you’re happy with the gain, consider exiting half here and allow the other half to run.

At the same time, the Dow Jones Aluminum Index ran from a low of $95.20 to $105.45. And the run is far from over especially as hedge funds take interest.

In December 2016, hedge funds boosted their total net long positions in more than a dozen commodities by close to 9.7%. That’s a sizable jump from the year prior when many funds were net short.

They’re now bullish on oil, soybeans, copper, aluminum and cotton, for instance.

“After five straight years of losses, raw materials rebounded as supply gluts receded for metals and energy. There’s a growing chorus of voices that says the rally isn’t over,” noted Bloomberg. “Citigroup Inc., the bank that was ahead of the game back in 2012 when analysts declared the end of the super cycle of rising demand and price, now predicts that most commodities will perform strongly in 2017 as global economic growth picks up.”

“Goldman Sachs Group Inc. in November recommended an overweight position for the asset class for the first time in more than four years.”

Chart of Day: How to Trade the Retail Madness Now

Jan 14, 2017

Nordstrom got the steel tip of a boot this holiday season.

It’s just been an absolute disaster after a JP Morgan downgrade that sent the stock diving. Management didn’t help, describing its traffic trends in full stores as being the worst since 1972. In fact, as we noted the other week:

“Analysts believe the company is out of “silver bullets” to boost sales growth any longer. Plus, it’s brick and mortar traffic levels haven’t been this bad since 1972, as the retail model shits online.  We see no reason to get excited about the stock. Again, if it breaks support at $50.48, it’ll fall even more. A good way to trade JWN is by buying to open the April 2017 47.50 put.”

We would exit half of that put on January 5, as the underlying stock fell to $44.62.

As of this writing, the put is now up to $5.65, where we recommend selling to close.

There’s a simple reason for the exit. The stock has become aggressively oversold, catching and holding $44.20 with oversold RSI, MACD and Williams %Range. We could see at least a quick bounce here should support hold.

But it’s not the only retailer likely to bounce. Kohl’s (KSS) could, too.

Historically, when KSS RSI, MACD and Williams’ %Range get this low, we typically see a rebound shortly after. The stock looks to have also caught good support at current prices of $40.79. As long as that holds, the stock could refill that bearish gap near $50.50, near-term. Consider buying to open the KSS February 40 call up to $2.65.

 

 

 

Chart of Day: Cyber Security Pays Off Big

Jan 11, 2017

It shouldn't be this easy to make money.

On January 4, 2017, we noted that Palo Alto Networks (PANW) and Proofpoint (PFPT) were a steal at current market prices of $127.50 and $74.59.

As of today, PANW trades at $137.50. PFPT trades at $80.42.

Not a bad return for a week.  If you’re happy with current gains, sell half of each. But be sure to hold the remainder long-term. The cyber hacking issue isn’t disappearing.

Chart of Day: Take Advantage of $162 billion AR Industry

Jan 10, 2017

At just $6.04 a share, Himax Technologies (NASDAQ:HIMX) is an undervalued (PEG ratio of 0.63) semiconductor company that provides display imaging processing technologies to its global consumer base. But what’s most exciting is its involvement with augmented reality (AR) technologies. Average earnings reports and downgrades aside, the company could be a key provider of technology to AR device makers. The company already made 21.5% of its total revenue from its non-driver business, which includes AR, in the third quarter. It expects even more growth this year.

What’s most exciting is that AR could be worth $162 billion in the next five years. Facebook, Alphabet, Google, Sony, and other big companies are pursuing AR with hardware and software, investing billions of dollars into headsets that help users experience virtual worlds. Microsoft, for example, is already supporting AR growth with its $3,000 HoloLens Development Edition headset, which is expected to become a consumer product in years. A Windows-10 powered $300 headset is due out in 2017, too. It’s an exciting time to buy related stocks, like HMIX.

Technically, HIMX is oversold at double bottom support with reversing MACD, Money Flow (MFI) and Relative Strength (RSI).  It's a buy at market prices.

 

Chart of Day: Ignore the NVDA Short Arguments

Jan 10, 2017

By far, NVDA was the best performer on the markets.

Then, in recent weeks, it came under attack from a short seller, who argued that increased competition could send the stock back to $90. To me, though, that’s laughable with the stock likely to move aggressively higher from support at $100.

We’re not concerned about downside.

In fact, we have a price target of $120 on the stock after it found support.

Better yet, the company just partnered with German automaker, Audi to bring autonomous cars to the market by 2020. And, on January 6, 2017, B. Riley, Needham, and UBS reiterated their buy ratings on the stock.

And, with further industry consolidation likely, coupled with the growth of the Internet of Things (IoT), upside appears to be unlimited for related stocks.

There are two ways to trade NVDA here. One, you can buy the underlying stock up to $110. Two, you can sell to open the NVDA February 105 put for a credit of $7.30. Or three, buy to open the NVDA February 110 call at market.

 

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