While most cigarette stocks had a successful 2014 on the charts, the sector behemoth by market capitalization — Philip Morris International (NYSE: PM), weighing in at $120 billion — headed mostly south. Through its April 1 low, it shed 18% from its June 2014 peak above $91.  The good news is that PM reached long-term support from its 2013 low and, arguably, the bottom of a giant trading range originating in early 2012. The question for traders is whether this support will hold, and there are many reasons why I think it will.  For… Read More

While most cigarette stocks had a successful 2014 on the charts, the sector behemoth by market capitalization — Philip Morris International (NYSE: PM), weighing in at $120 billion — headed mostly south. Through its April 1 low, it shed 18% from its June 2014 peak above $91.  The good news is that PM reached long-term support from its 2013 low and, arguably, the bottom of a giant trading range originating in early 2012. The question for traders is whether this support will hold, and there are many reasons why I think it will.  For starters, there is a positive condition in short-term momentum indicators such as the Relative Strength Index (RSI). While price set a lower low in April than it did in March, RSI set a higher low. This divergence between the two suggests that the price decline is weakening.  Along that same argument, price action also set what I call a divergence within Bollinger Bands. The bands are based on volatility rather than a set percentage and offer an interesting way to look for pending trend changes.  #-ad_banner-#​When prices moved below the lower band in a downtrend, it told us… Read More

I didn’t expect to win the award. I was really looking for feedback from other financial professionals regarding my trading ideas. But a group of market experts critically reviewed my work and determined that the strategy I present my readers each week is an example of one of the best ideas in technical analysis. My research paper is the foundation of my current streak of 86-for-86 winning closed trades. Recently, I had the honor of attending the 2015 Market Technicians Association’s Gala Awards Dinner in New York City. There I was presented with the Charles H. Dow Award, which is… Read More

I didn’t expect to win the award. I was really looking for feedback from other financial professionals regarding my trading ideas. But a group of market experts critically reviewed my work and determined that the strategy I present my readers each week is an example of one of the best ideas in technical analysis. My research paper is the foundation of my current streak of 86-for-86 winning closed trades. Recently, I had the honor of attending the 2015 Market Technicians Association’s Gala Awards Dinner in New York City. There I was presented with the Charles H. Dow Award, which is an award that highlights outstanding research in technical analysis. And today I wanted to give you a glimpse of my award winning research. #-ad_banner-#I spend a great deal of time studying and building on the works of successful investors. One of the most influential on my investing career has been Larry Williams, a well-known trader and author of 2003 book, “The Right Stock at the Right Time.” But it was actually an article he wrote in 2007 that has been one of the keys to my success. Many traders follow the Volatility S&P 500 Index (VIX) — a measure of… Read More

In hindsight, the six-year bull market was an easy rally to predict. Valuations were very low in early 2009, and Federal Reserve policy has been remarkably accommodating. Yet the forward view may not be so rosy. Sales growth is getting harder to achieve for companies in the S&P 500. Analysts are expecting sales per share at S&P 500 companies in 2015 to decline by 1.4%, while earnings are expected to eke out 2.5% growth to $120.17 per share, according to FactSet Research. #-ad_banner-#Sales growth has not been stellar in recent years, but companies have been able to increase earnings through… Read More

In hindsight, the six-year bull market was an easy rally to predict. Valuations were very low in early 2009, and Federal Reserve policy has been remarkably accommodating. Yet the forward view may not be so rosy. Sales growth is getting harder to achieve for companies in the S&P 500. Analysts are expecting sales per share at S&P 500 companies in 2015 to decline by 1.4%, while earnings are expected to eke out 2.5% growth to $120.17 per share, according to FactSet Research. #-ad_banner-#Sales growth has not been stellar in recent years, but companies have been able to increase earnings through expense management and lower interest expense. Net margins on results over the last four quarters are at 10% for the companies in the S&P 500, well above the 8.6% average over the last ten years. It is going to be progressively more difficult to squeeze out higher earnings on cost management alone and higher interest rates could be another headwind on profit margins. This tough corporate environment is coming as the Federal Reserve inches closer to a less accommodative monetary policy. Global growth has yet to fulfill the promise of increased easing by developed nation’s central banks and U.S. firms… Read More

You would be shocked to know how many accepted “facts” in the financial world are simply not true.  For example, you may have been told that asset allocation — the amount of your portfolio you dedicate to stocks, bonds, etc. — is more important to your future returns than stock selection. This widely cited idea comes from a grossly misinterpreted study that suggests “more than 91.5% of a portfolio’s return is attributable to its mix of asset classes. In this study, individual stock selection and market timing accounted for less than 7% of a diversified portfolio’s return.” The statistic is… Read More

You would be shocked to know how many accepted “facts” in the financial world are simply not true.  For example, you may have been told that asset allocation — the amount of your portfolio you dedicate to stocks, bonds, etc. — is more important to your future returns than stock selection. This widely cited idea comes from a grossly misinterpreted study that suggests “more than 91.5% of a portfolio’s return is attributable to its mix of asset classes. In this study, individual stock selection and market timing accounted for less than 7% of a diversified portfolio’s return.” The statistic is attributed to a 1986 paper published in the Financial Analysts Journal called “Determinants of Portfolio Performance,” written by Gary P. Brinson, CFA, Randolph Hood, and Gilbert L. Beebower. It is commonly referred to as the BHB study. Read that way, the study is basically telling us stock picking is a waste of time since we can only squeeze a small amount of performance out of the stock selection process. If you read the paper closely, however, the authors actually said something different. BHB studied the variation of a portfolio’s quarterly returns. #-ad_banner-# I don’t know where the misinterpretation started, but… Read More

Despite the negative sentiment still surrounding crude oil and energy stocks, the evidence points to a much brighter future. Every day my screens turn up more and more energy stocks forming bottoms and actually breaking out to the upside. #-ad_banner-#It started with explorers and producers and spread to drillers. Now I see other oil services stocks making some bullish noise, including deep-water engineering services provider Oceaneering International (NYSE: OII). Any company involved with offshore drilling for oil and gas suffered last year as crude prices plummeted. Rigs were shut down, global stores… Read More

Despite the negative sentiment still surrounding crude oil and energy stocks, the evidence points to a much brighter future. Every day my screens turn up more and more energy stocks forming bottoms and actually breaking out to the upside. #-ad_banner-#It started with explorers and producers and spread to drillers. Now I see other oil services stocks making some bullish noise, including deep-water engineering services provider Oceaneering International (NYSE: OII). Any company involved with offshore drilling for oil and gas suffered last year as crude prices plummeted. Rigs were shut down, global stores seemed to be overflowing and business slowed to a crawl. But as we see time and time again, the charts firm up and start to rise long before the fundamentals seems to change. The market, being the sum of the actions of all investors, commercial operators and speculators, looks out into the future to anticipate what might happen roughly nine months down the road. Right now, it suspects that oil demand will pick up by year end and all that reduced capacity will create bottlenecks.  Getting back to my mandate, the charts of many oil services stocks are starting to… Read More

While insider action can provide valuable hints about where a stock is headed, many investors consider this activity most helpful with buying decisions. After all, as legendary fund manager Peter Lynch once noted, insiders might sell their firm’s stock for any number of reasons. But they only buy it for one reason: they think it’s going to go up. And who better to make such a call than the people most closely associated with a company? Trouble is, keeping abreast of insider buying trends in such a large universe of stocks is much too time-consuming for most individual investors. But… Read More

While insider action can provide valuable hints about where a stock is headed, many investors consider this activity most helpful with buying decisions. After all, as legendary fund manager Peter Lynch once noted, insiders might sell their firm’s stock for any number of reasons. But they only buy it for one reason: they think it’s going to go up. And who better to make such a call than the people most closely associated with a company? Trouble is, keeping abreast of insider buying trends in such a large universe of stocks is much too time-consuming for most individual investors. But no matter. There’s a simpler way to own stocks with heavy insider buying, and recent performance suggests it’s capable of generating market-beating returns. The method: investing in exchange-traded funds designed specifically to offer broad exposure to stocks with robust insider buying. Currently, there are two choices, the Guggenheim Insider Sentiment ETF (NYSE: NFO) and the Direxion All Cap Insider Sentiment ETF (NYSE: KNOW). Both are index funds (with reasonable expense ratios of less than 70 basis points). NFO tracks the Sabrient Insider Sentiment Index, an equal-weight benchmark of the 100 stocks with the highest composite rankings incorporating four factors: the… Read More

The decimation of oil prices has been a dominant theme for the past eight months. However, while weaker earnings out of the energy complex are weighing on overall market earnings, the collapse in oil prices has yet to really hit earnings outside the sector.  But that could be about to change. While companies like airlines and shipping providers may benefit from lower fuel prices, companies that provide ancillary services to the energy sector may soon surprise the market with lower sales.  One particularly expensive-looking company already warned investors, but no one seemed to notice. Cintas (NASDAQ:… Read More

The decimation of oil prices has been a dominant theme for the past eight months. However, while weaker earnings out of the energy complex are weighing on overall market earnings, the collapse in oil prices has yet to really hit earnings outside the sector.  But that could be about to change. While companies like airlines and shipping providers may benefit from lower fuel prices, companies that provide ancillary services to the energy sector may soon surprise the market with lower sales.  One particularly expensive-looking company already warned investors, but no one seemed to notice. Cintas (NASDAQ: CTAS) is the largest U.S.-based uniform rental provider with more than 7,700 delivery routes and 1 million business clients. Beyond a commanding domestic presence, the company has operations in Asia, Latin America and Europe. #-ad_banner-#​Revenue from the core rental business accounts for 75% of sales and 80% of profitability. While Cintas has been able to carve out a name for itself in the mature market of rental uniforms, it has struggled in its other segments — direct uniform sales and first aid, safety and fire protection services.  The attempt to diversify sales into these… Read More

By any measure, $104 billion is a lot of money. That’s the dollar value of share buyback announcements made in February — the largest monthly figure since these flows were first tracked 20 years ago. It was also nearly double the amount from a year earlier, according to money flow tracker TrimTabs Investment Research. (Companies make share buyback announcements throughout this year, but February is typically the high watermark as companies release full-year financial results.) Companies in the S&P 500 spent $564.7 billion on share repurchases over the past 12 months, which was a year-over-year increase of… Read More

By any measure, $104 billion is a lot of money. That’s the dollar value of share buyback announcements made in February — the largest monthly figure since these flows were first tracked 20 years ago. It was also nearly double the amount from a year earlier, according to money flow tracker TrimTabs Investment Research. (Companies make share buyback announcements throughout this year, but February is typically the high watermark as companies release full-year financial results.) Companies in the S&P 500 spent $564.7 billion on share repurchases over the past 12 months, which was a year-over-year increase of 18%, according to FactSet Research. In fact, 72% of all companies in the index bought back shares in the fourth quarter of 2014. Make no mistake, the powerful waves of buybacks are a clear positive for stocks — in the near-term. For proof, look no further than the five-year chart for the PowerShares Buyback Achievers ETF (NYSE: PKW). Simply put, the more than $2 trillion in cash that has been returned by S&P 500 companies since 2009 has been a key factor behind the bull market’s extended run. Said another way, a steady reduction in shares outstanding has… Read More