The head-and-shoulders (H&S) top is one of the best-known patterns in technical analysis. This pattern was first written about in 1930 by a financial editor at Forbes magazine who described how the H&S forms and how it can be traded. Many readers are familiar with the H&S pattern. On a price chart, there will be three peaks in price at the end of the uptrend, with the center peak (the head) being higher than the other two. The peaks on the sides (the shoulders) should be about equal in height. Connecting the bottom of the peaks gives us… Read More

The head-and-shoulders (H&S) top is one of the best-known patterns in technical analysis. This pattern was first written about in 1930 by a financial editor at Forbes magazine who described how the H&S forms and how it can be traded. Many readers are familiar with the H&S pattern. On a price chart, there will be three peaks in price at the end of the uptrend, with the center peak (the head) being higher than the other two. The peaks on the sides (the shoulders) should be about equal in height. Connecting the bottom of the peaks gives us the neckline, and breaking the neckline is the sell signal. Real H&S patterns rarely resemble the precise line diagrams seen in books, and the chart below shows one that occurred in real market conditions. The shoulders are nearly, but not quite, the same height. The problem with charts is that their interpretation is subjective. Many traders find an H&S in almost every chart they look at because some traders tend to see whatever they want to see. Because traders see what they want to see, results vary. Some may find success looking at charts while others will suffer… Read More

In today’s energy market, investors often try to distinguish between oil plays and natural gas plays, but the distinction is often moot — most of today’s wells produce a healthy amount of both. The key to finding winning investments is to focus on the relative productivity of a firm’s well. #-ad_banner-#Let’s focus first on natural gas (we’ll shift the discussion to oil in a moment). The natural gas market appears to have settled into long-term equilibrium. You’ll surely see short-term spikes in prices when the weather gets especially cold (as increasingly appears to be the case… Read More

In today’s energy market, investors often try to distinguish between oil plays and natural gas plays, but the distinction is often moot — most of today’s wells produce a healthy amount of both. The key to finding winning investments is to focus on the relative productivity of a firm’s well. #-ad_banner-#Let’s focus first on natural gas (we’ll shift the discussion to oil in a moment). The natural gas market appears to have settled into long-term equilibrium. You’ll surely see short-term spikes in prices when the weather gets especially cold (as increasingly appears to be the case this winter). But unless we have strongly overestimated that amount of untapped oil and gas remaining in our shale regions, then supply increases will be the likely result of any upward move in natural gas prices.  As a result, gas prices may move into the $4 to $4.25 per thousand cubic feet (Mcf) area, but much more upside than that is unlikely. In fact, the natural gas futures market doesn’t anticipate a move up above the $4.50 mark until January 2019. To be sure, gas prices in the $3.50 to $4.50 range explain why share prices of many… Read More

This month, the International Energy Agency released the 2013 version of its annual World Energy Outlook. Not surprisingly, the horizontal oil boom that has given birth to an oil production renaissance in the United States played center stage in the report.   However, some of what the IEA had to say about the U.S. horizontal boom may have caught some people by surprise.#-ad_banner-# The IEA sees the horizontal boom making the U.S. the world’s largest oil producer by 2015. No surprise there — the media is all over that story. But the IEA… Read More

This month, the International Energy Agency released the 2013 version of its annual World Energy Outlook. Not surprisingly, the horizontal oil boom that has given birth to an oil production renaissance in the United States played center stage in the report.   However, some of what the IEA had to say about the U.S. horizontal boom may have caught some people by surprise.#-ad_banner-# The IEA sees the horizontal boom making the U.S. the world’s largest oil producer by 2015. No surprise there — the media is all over that story. But the IEA also said that the horizontal oil boom will peak by the year 2020. (But it’s only just begun!) After 2020, the IEA sees American production hitting a brief plateau before heading back into permanent decline. That doesn’t sound like an oil boom — in the grand scheme of things, it’s barely a blip on the long-term radar. I don’t entirely agree with this view from the IEA, which I think massively underestimates the entrepreneurial spirit of the energy industry.  After all, the renaissance in U.S. oil production wasn’t led by supermajors like Exxon (NYSE: XOM) and Chevron (NYSE: CVX) —… Read More

Whether you’re measuring by the latest economic data or just by the pickup in traffic at your local mall, it’s apparent the consumer is back in a big way — and that’s opening up a new way for investors to profit.#-ad_banner-#​ After the lingering economic downturn that followed the financial crisis, consumers are finally feeling confident enough to ramp up spending.  This improvement started in earnest during the final quarter of 2012, which marked the end of household deleveraging, according to the chief U.S. economist for Italian banking giant UniCredit.  During this quarter of change, the net worth of U.S. Read More

Whether you’re measuring by the latest economic data or just by the pickup in traffic at your local mall, it’s apparent the consumer is back in a big way — and that’s opening up a new way for investors to profit.#-ad_banner-#​ After the lingering economic downturn that followed the financial crisis, consumers are finally feeling confident enough to ramp up spending.  This improvement started in earnest during the final quarter of 2012, which marked the end of household deleveraging, according to the chief U.S. economist for Italian banking giant UniCredit.  During this quarter of change, the net worth of U.S. households rose 1.8%, marking the highest level since the first quarter of 2007.  In fact, the net worth of U.S. households rocketed 29% between the first quarter of 2009 and the fourth quarter of 2012, fueled by the soaring stock market and growth in housing. The stock market has continued its bullish ways throughout 2013, further boosting the consumer’s rebirth. According to the U.S. Bureau of Economic Analysis, personal consumption expenditures grew 0.2%, or nearly $25 billion, in September.   Long considered the most popular shopping day of the year, the day after Thanksgiving is known as Black Friday because… Read More

For 41 weeks in a row, the options trades I’ve recommended to my Income Trader readers have been profitable. And on average, my readers are collecting 7.5% in “Instant Income” every 48 days. So far, we’re 32 for 32 when it comes to closed trades. How am I doing it? It’s actually pretty simple… but it requires some investors to leave their comfort zone. Options are one of the most misunderstood corners of the financial world. Many investors steer clear of options because they have a reputation for being risky, but that’s not always the case…… Read More

For 41 weeks in a row, the options trades I’ve recommended to my Income Trader readers have been profitable. And on average, my readers are collecting 7.5% in “Instant Income” every 48 days. So far, we’re 32 for 32 when it comes to closed trades. How am I doing it? It’s actually pretty simple… but it requires some investors to leave their comfort zone. Options are one of the most misunderstood corners of the financial world. Many investors steer clear of options because they have a reputation for being risky, but that’s not always the case… My strategy involves selling options on undervalued stocks. And as I’ve mentioned here, here and here, selling “put” options is one of the most effective income strategies in the world. #-ad_banner-# But today, I want to tell you about a different strategy — selling covered calls. A covered call strategy involves selling call options on stocks that you own. This allows you to generate income from selling options while benefitting from the potential upside by owning the stock. The downside risk is partly reduced by the income generated from selling options, which offsets potential losses in the stock. If you’re… Read More

IPOs — initial public offerings of stock — are the financial world’s Super Bowl. The enthusiasm, anticipation, and chance to make millions out of seemingly nothing are what drive investor’s excitement.#-ad_banner-#​ In this year’s third quarter, the three top-performing IPOs were Sprouts Farmers Market (Nasdaq: SFM), Benefitfocus (Nasdaq: BNFT) and Rocket Fuel (Nasdaq: FUEL), up 123%, 102% and 93%, respectively, in their first day of trading. Even if you hadn’t heard of these three offerings, big-name IPOs such as Twitter (Nasdaq: TWTR) and Facebook (Nasdaq: FB) have been on nearly everyone’s radar due to massive media coverage. Not… Read More

IPOs — initial public offerings of stock — are the financial world’s Super Bowl. The enthusiasm, anticipation, and chance to make millions out of seemingly nothing are what drive investor’s excitement.#-ad_banner-#​ In this year’s third quarter, the three top-performing IPOs were Sprouts Farmers Market (Nasdaq: SFM), Benefitfocus (Nasdaq: BNFT) and Rocket Fuel (Nasdaq: FUEL), up 123%, 102% and 93%, respectively, in their first day of trading. Even if you hadn’t heard of these three offerings, big-name IPOs such as Twitter (Nasdaq: TWTR) and Facebook (Nasdaq: FB) have been on nearly everyone’s radar due to massive media coverage. Not only do many IPOs make the company’s founders and initial investors wealthy, initial offerings usually provide much-needed cash to expand operations (and increase shareholder value). The problem for most investors is that it’s difficult if not impossible to obtain IPO shares before they’re listed. These shares go to insiders and others with special relationships with the investment house issuing the shares. There are some “backdoor” ways in which regular investors can profit from the first day of an IPO: for example, in the case of Twitter’s IPO, investing in a high-tech incubator like Japan’s Digital Garage or a fund like… Read More

Investors in a certain global leader in medical equipment have been seen mildly erratic behavior (to put it nicely) from the stock over the better part of a decade. Shares rose from $40 in 2004 to highs of $75 in 2007 before sinking to $30 in 2009 and rebounding to $50 in 2011. Since then, the stock has steadily risen to its current level near $75. But while the stock was spinning its wheels over that nine-year period, the company was growing at a good clip. Annual revenue climbed a cumulative 29% between 2009 and 2012,… Read More

Investors in a certain global leader in medical equipment have been seen mildly erratic behavior (to put it nicely) from the stock over the better part of a decade. Shares rose from $40 in 2004 to highs of $75 in 2007 before sinking to $30 in 2009 and rebounding to $50 in 2011. Since then, the stock has steadily risen to its current level near $75. But while the stock was spinning its wheels over that nine-year period, the company was growing at a good clip. Annual revenue climbed a cumulative 29% between 2009 and 2012, to $8.7 billion. Net earnings jumped 17% in that time, to $1.3 billion. Last month, Stryker (NYSE: SYK) delivered rather uneven third-quarter numbers: Revenue rose 4.8% from a year ago, to $2.2 billion, but earnings fell more than 70%.#-ad_banner-# The revenue boost came from a revival in Stryker’s largest division, specifically in orthopedic implants used in hip and knee joint replacements. This division grew 9% in the third quarter, one of its strongest performances in some time. Most of the dip in earnings can be attributed to litigation related to a recall of Stryker’s ABG II and Rejuvenate hip implants… Read More

Dunkin’ Brands (Nasdaq: DNKN) has far outpaced the performance of the S&P 500 Index year to date, gaining nearly 48% compared with the broader index’s 26% gain.#-ad_banner-# Even more exciting is that if the shares can crack round-number resistance at $50, they are likely to challenge $60 in fairly short order. Since there is a well-defined stop-loss level at the major uptrend line, which intersects the chart just under $46, the reward-to-risk ratio is roughly 2.5 to 1, which is highly attractive. Dunkin’ Donuts, which has been around since 1950, is an American favorite. Through aggressive expansion, it is capturing… Read More

Dunkin’ Brands (Nasdaq: DNKN) has far outpaced the performance of the S&P 500 Index year to date, gaining nearly 48% compared with the broader index’s 26% gain.#-ad_banner-# Even more exciting is that if the shares can crack round-number resistance at $50, they are likely to challenge $60 in fairly short order. Since there is a well-defined stop-loss level at the major uptrend line, which intersects the chart just under $46, the reward-to-risk ratio is roughly 2.5 to 1, which is highly attractive. Dunkin’ Donuts, which has been around since 1950, is an American favorite. Through aggressive expansion, it is capturing an even larger domestic and international following. (My colleague David Goodboy is also a longtime fan of the company, as he wrote recently.) In its third quarter, the company, which also owns the Baskin-Robbins brand, added 222 new stores worldwide, 81 of which were U.S.-based Dunkin’ Donuts locations. There are now 7,500 Dunkin’ Donuts restaurants in the U.S. CEO Nigel Travis announced his goals of opening at least 15,000 Dunkin’ Donuts restaurants in the U.S., including 3,000 east of the Mississippi and 5,000 in Western states. That’s double the size of the current chain. At present, Dunkin’ Donuts is heavily… Read More

As we head into the final weeks of 2013, European central bankers are on pins and needles. They’re hoping the fourth-quarter economic data reveal signs that the Continent is truly on the mend.#-ad_banner-# An early November report from the European Commission sees signs of that upturn coming. The report’s main takeaway: “The signs of hope that we saw last spring have started to turn into tangible positive outcomes. After six consecutive quarters of stagnation or contraction, the EU economy has posted positive growth in the second quarter of 2013. The recovery is expected to continue, and… Read More

As we head into the final weeks of 2013, European central bankers are on pins and needles. They’re hoping the fourth-quarter economic data reveal signs that the Continent is truly on the mend.#-ad_banner-# An early November report from the European Commission sees signs of that upturn coming. The report’s main takeaway: “The signs of hope that we saw last spring have started to turn into tangible positive outcomes. After six consecutive quarters of stagnation or contraction, the EU economy has posted positive growth in the second quarter of 2013. The recovery is expected to continue, and to gather some speed next year.” Indeed, while the European economic region likely contracted a bit in 2013, these economists predict GDP will likely grow 1.5% in 2014, and perhaps 2% in 2015. And where will that strength come from? “Domestic demand is expected to take over as the main engine of growth,” they predict. If they’re right, then it’s useful to make sure you have European exposure in your portfolio. Heading into Labor Day, my colleague David Goodboy profiled the Vanguard FTSE Europe ETF (NYSE: VGK). A quick look at a five-year chart of this ETF against the S&P… Read More