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LifeLock Inc. (LOCK): Trade the Dead Cat Bounce

Jul 22, 2015

There’s just no rhyme or reason to the market these days…

China, Puerto Rico, Greece, Russia, Iran, oil, gold… you name it. And it’s making a mess of the market.

The Dow fell 200 yesterday. We’re down another 90 today… after challenging historic resistance that’s given way to downside many times in the past. Unfortunately, foolish bulls just don’t pay attention all the time at nosebleed levels.

While I’d like to say we’ve bottomed out, we haven’t. We could easily test June lows of 17,500 before we even begin to see signs of an end. Even then, we’re still overvalued.

The worst is far from over.

But there are still news-related opportunities we can’t ignore.

Yesterday, for example, LifeLock Inc. (LOCK) was destroyed on Federal Trade Commission news that LOCK did not fulfill obligations related to a 2010 settlement. But the claims raised by the FTC are related to the past, not to current business practice. The impact on growth should be small, in our opinion.

All we want to do here is trade a bounce off oversold, over-extended conditions and walk away. We’re not looking to invest here.

We’re just looking to trade this, take our money, and run…

Consider buying just the LOCK stock up to $10.

 

iShares NASDAQ Biotechnology Index (IBB): Buy on Dips

Jul 21, 2015

Even after countless headlines of biotech bubble doom, Janet Yellen’s July 2014 warning of stretched sector valuations, and terrified overreactions to news, we still argued for further upside in the sector, as 10,000 baby boomers retire by the day, and as new healthcare coverage and treatments emerge. 

We’ve been making the same argument over and over again since first recommending the IBB at just $80 a share. It came within cents of hitting our $400 target today.

That’s a gain of 400% in just seven years.

We’ve heard the same bubble fears many times over the years. But what investors seem to forget is the baby boomer catalyst, a 20-year trend that just won’t fade.

While I strongly believe the IBB will hit $450 before 2015 ends, we have to wait for a pullback in the name first. Not because of changing underlying fundamentals. But because there’s a technical over-extension in my momentum indicators that gets us in and out before short-lived moves lower.

Let’s wait to buy more of the IBB until we see a good pullback to at least the 50-day moving average.

 

eBay (EBAY): Why it’s Time to Go Short

Jul 20, 2015

Shares of eBay are being bid higher after an impressive earnings report, and on news that it spun off its payment-processing unit, PayPal (PYPL). But with the stock moving well into overbought territory per MACD, RSI and Money Flow indicators, a near-term pullback is likely before a move higher.

At least… that’s what we’re betting on here.

I’d like to see a pullback to at least $26 before we think about taking a long position in EBAY. For now, consider shorting EBAY. No options are available.

We can also look at just how technically over-extended EBAY is with a look at the upper Bollinger Band (2,20) with an overbought read of near zero on Williams % Range. Again, look for a respectable pullback before going long the name.

 

Cummins (CMI): Is the Dividend Enough?

Jul 17, 2015

What do you do when your stock valuation has fallen off radar… and on one seems to really care any more?

You raise your dividend 25% to 97.5 cents from 78 cents.

That’s payable on September 1, 2015 to shareholders of record on August 21, 2015, by the way.

But will it be enough in such a weak economy? There’s hope, as the stock catches support just under $130 a share with reversing RSI, MACD and MFI indications.

Nothing is ever a guarantee in this market though. We all know that from painful experience. But I’m willing to bet on near-term bounce in the name. Consider buying just the underlying stock here up to $130 with a -10% stop.

 

Greek Debt Crisis: How to Trade it Now

Jul 15, 2015

And here we go again…

After testing 200-day support, the S&P 500 rallied to 2108 this week on potential deal with Greece and its European creditors.

But what many don’t understand – again – is that the deal could easily fall apart. Even if the Greek parliament approves the new plan, it could still be rejected because no one is really happy with the deal in the first place.

We have to consider the new plan was reached under extreme duress. The people of Greece aren’t too happy about this deal whatsoever. So it’ll be interesting to see what happens…

We also have to consider that even if the deal makes its way through parliament, it’s a tough pill to swallow. We can only hope Greece will actually be able to do what’ll be required here. A 50 billion euro “privatization fund” doesn’t seem likely because it would take up to 100 years to reach a 50 billion euro goal.

For a moment, though, let’s assume a deal is possible.

The IMF can still destroy it already arguing that targets set by Greece cannot be met. And in order for the IMF to participate in the bailout deal, the IMF must believe Greek debt is sustainable.

It’s not.

Other than Greece, we also have to contend with Puerto Rico’s potential default.

We have to remember that it is days away from an imminent historic default on $72 billion. Attempts to cut expenditures and restructure debt have failed.

While the U.S. Treasury Department has been providing guidance to the island, there’s no word on bailout plans.  That news, coupled with Greece could have terrifying realities for financial markets and unprepared U.S. investors.

The problem is that Puerto Rico debt problems aren’t just confined to the island.  Some of the biggest U.S. mutual funds have significant wagers on Puerto Rico’s municipal bonds, too. Funds run by Oppenheimer and Franklin Resources have big exposure to this debt.  They hold about $4.5 billion and $2.3 billion of the debt, respectively.

Standard & Poor’s just lowered its rating on the region to “imminent default,” as well.

But as with everything, it’s a wait-and-see, as usual.

We have the same market concerns we had when the S&P failed at its last double top. The bulls are forcing the market higher on nothing more than hope… again.

But when the garbage hits the fan, it’ll be a disaster.

One of the easiest ways to profit from a potential pullback on global realities is with the Pro Shares Ultra Short S&P 500 (SDS) ETF. This will allow us to profit from pullbacks on the S&P 500 when – and if – things hit the fan.

 

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