Monday, October 20, 2014

Stock index and futures performance 2014 YTD

Quick update on the performance of key US stock indices and futures year-to-date, via Finviz.

Coffee (+80%) and Feeder Cattle (+44%) lead the pack YTD, while soybeans (-27%) and cotton (-26%) fare worst. Crude oil is down sharpy from its summer highs, -16% YTD. Natural gas is down 13% YTD. 

Here's the data for stock indices year-to-date: Nasdaq 100 (+8%), S&P 500 (+3%), and the small cap Russell 2000 (-6%) YTD. 



If you want to dig deeper and check out the performance of individual US stocks, try the Finviz screener and adjust the fields in "performance". You can search stocks for YTD performance and sort the results by volume, percentage gains, stock price or market cap. 

Monday, October 13, 2014

Why shorting low-float momo stocks is a big "no-no"

There are some things you just shouldn't do, unless you want to lose a lot of money.

Shorting stocks in an uptrend is one of those things. More specifically, shorting low float momentum stocks in a red-hot industry theme is something you should avoid. Unless, of course, you like paying up for the privilege of imposing your views on the market.

Even on a day like today, when the major indices (SPY, QQQ, IWM) are dropping, people are panicking, and the VIX ("fear index") is nearing 2-year highs, we see low-float stocks shooting to the moon.

Here are 3 such stocks (APT, IBIO, and LAKE) rocketing higher on the fear-driven Ebola theme

Ebola stocks momentum momo APT IBIO LAKE



Note that these Ebola-related stocks were all up 35% or more on a day when the rest of the market was tanking. Still want to step in front of this train? 

As I mentioned on Twitter last week, Ebola stocks are the hot momentum theme of the moment. This is a fear-and-greed play that will result in yet another boom-and-bust cycle. These shares will rocket higher, then peak, and (very likely) plunge lower.


 
We've already seen it happen this year with cannabis stocks, fuel cells, and wearable cameras (in the wake of the Ferguson fiasco and GoPro's IPO). Now the speculative frenzy is focused on companies that might help to protect us from a deadly viral outbreak. 

No matter the industry theme, these low-float stocks can rocket higher once traders and investment funds set their sights on a theme and start buying in earnest.

Here are 2 recent videos (from real chart-focused traders) that explain the pitfalls of shorting small-cap momentum stocks with low share floats. 

1. Steve Spencer at SMB Capital outlines The Risk of Shorting a "Low Float" Stock - DGLY

2. Nathan Michaud at InvestorsLive explains Float Rotation and the similarities between the DGLY and LAKE run-ups. 

If you must short these stocks, wait until each individual name has formed a true topping pattern or entered a new downtrend. Better yet, since most people aren't truly skilled at shorting stocks, wait for the "nonsense" to subside as you sit on the sidelines in cash. You'll probably save cash (by protecting your trading account) in the end. 

Disclosure: No current positions in any of the stocks mentioned in this post. I am long one drug stock (not mentioned here) that may be an Ebola-related stock.

Sunday, October 05, 2014

Winners imagine their dreams first - Joe Montana

Image via totalprosports.com

Hall of Fame NFL quarterback and 4-time Super Bowl champ, Joe Montana, offers his view of the winner's mindset: 

"Winners, I am convinced, imagine their dreams first. They want it with all their heart and expect it to come true. There is, I believe, no other way to live.".

This positive mindset and the visualization of one's future achievements is, in Montana's view, key to self-actualization. 

What is your view? Do you find that a "winning mindset" applies to trading, entrepreneurship, or any endeavor of life where one hopes to excel and reach great heights?

Thursday, July 24, 2014

Confidence and mastery come from hard work and experience

Today's motivational trading quote comes from Dr. Brett Steenbarger (Hat tip: Kirk Report). 

Confidence mastery work experience failure motivation Brett Steenbarger
Image (borrowed + repurposed) via Bruceelkin.com.


True confidence comes from within. It cannot be bought, it must be earned. As Dr. Brett points out, confidence and mastery are the byproducts of effort, failure, and learning along the way. 

Self-knowledge may be another aspect of confidence. Is it tied together?

Have you achieved mastery in your field or in an area of life you are passionate about? What did you have to go through along the way? Are you still working towards your goals or expanding your "limits"? 

Monday, June 16, 2014

Tesla gets its groove back: Electric car market broadens

Tesla (TSLA) closed up 9 percent today on strong volume, with over 12 million shares transacted (almost twice its recent daily average volume). 

The move above $220 and the 50 day moving average signals a bullish emergence from TSLA's recent base pattern. Are we seeing the start of a new uptrend in Tesla's stock price?

Here's an updated TSLA chart with today's closing price at $224.61. The stock closed near the high of its daily range, another indication of strength.



Elon Musk recently announced that Tesla would "open source" its patent portfolio, which should help fuel innovation in the EV market and encourage further build out of the needed electric charging infrastructure. Traders seem to have digested the patents strategy and decided in its favor. 

More on Tesla's patent strategy and Musk's vision for electric cars from Wired:


" ...Asked what Tesla shareholders thought of the company’s move, Musk downplayed the importance of owning patents, saying it was more important for a company to be constantly creating new technologies than to doggedly pursue lawsuits against other companies doing similar things.
“You see a lot of these battles going on with giant companies firing massive patent lawsuits against one another, the obvious example being Apple and Samsung,” he said. “You wonder who’s really benefiting there. And it seems like neither one. It doesn’t seem like it’s actually serving shareholders.”

Musk points out that electric cars still account for less than one percent of all auto sales. At this point, it’s far more important for Tesla to help drive adoption of electric cars, regardless of what company makes them. Most consumers must be convinced that the idea makes sense. They need to know that the infrastructure, including charging stations, is in place.

The hope is that, by opening up its patents, Tesla will help make this happen, since many companies will be able to focus on making better cars instead of making sure that all their patents are in the clear. It could also help with the development of charging stations that work with many different brands of electric car, since companies will be able to use the same technologies for charging without having to pay patent licensing fees.

Musk also thinks the move will help attract more top notch engineers to Tesla–and help retain the ones it already has. “Putting in long hours for a corporation is hard,” he says. “But putting in long hours for a cause is easy. I think it’s quite motivating for people."

You can read some of our prior posts on Tesla and Elon Musk in the links below.

Related posts:

1. Tesla vs. GM stock performance (it's not even close).

2. Tesla hits new all-time high: do androids dream of electric cars?

Disclosure: I have no position in TSLA stock. I may choose to initiate a long or short position at any time in the future. Posts are educational material. No buy or sell recommendations or personalized investment advice are offered to readers.
Posts are strictly educational material. No buy or sell recommendations on securities or personalized investment advice are offered to readers of this blog.   - See more at: http://financetrends.blogspot.com/#sthash.5iFdyXLO.dpuf
Posts are strictly educational material. No buy or sell recommendations on securities or personalized investment advice are offered to readers of this blog.   - See more at: http://financetrends.blogspot.com/#sthash.5iFdyXLO.dpuf
Posts are strictly educational material. No buy or sell recommendations on securities or personalized investment advice are offered to readers of this blog.   - See more at: http://financetrends.blogspot.com/#sthash.5iFdyXLO.dpuf

Tuesday, June 03, 2014

Jazz Pharmaceuticals: Market leader chart review

When reviewing charts and stocks in my watchlists, I sometimes look at long-term charts of leading stocks. 

I like to step back to the weekly charts and try to understand how the bigger price moves unfold. To try and answer the question, "what signals the emergence of a potential super-performance stock?". 

Which brings me to today's prime example of a market leader and super-performance stock in this ongoing bull market. Below is the chart of JAZZ, aka Jazz Pharmaceuticals, from 2008 to 2014. 



Note the performance figures from the chart: JAZZ is now up 4,100% from its mid-2009 surge to the $3.50 level. If you had bought JAZZ at $0.80 as the market was bottoming in March 2009 and held to the present, you'd be sitting on a gain of 18,000%. 

The biotech ETF, IBB has had a sixfold advance over the same time frame. So in this particular instance, you were well compensated for assuming single stock risk in a rather volatile sector. 



Enough of the backward-looking hypotheticals. Let's quickly examine some of JAZZ's key chart points and market leading traits.  

1. The S+P 500 and IBB both bottomed in March '09. JAZZ actually went on to make a lower low in April - May '09, then inched higher before surging in June '09 on massive volume. 

2. JAZZ surged higher ahead of presentations and phase 3 data on its new drug (new product catalyst). The stock continued to rise as revenues and earnings estimates grew and as the company consistently beat earnings estimates. 

3. After consolidating the initial price surge, JAZZ continued higher in the summer of 2009. Despite some 40% - 50% pullbacks and shakeouts the following year, JAZZ went on to make new highs in late 2010. As you'll see in the chart above, the entire uptrend was supported by the long-term 80 weekly moving average. 

Some traders may prefer to trade smaller parts of these larger trends, weaving in and out to capture respectable profits along the way. Some may prefer to identify, buy, and hold key leading stocks (such as JAZZ) for longer durations. Either approach is fine, as long as you can define and follow your method

Disclosure: I have no current positions in any of the securities mentioned here.

Related posts:

1. Leading stocks: Tesla (TSLA) vs. GM chart review.

2. Mark Minervini: define and refine your approach.

Sunday, May 04, 2014

Nicolas Darvas on stops: "no loss-free Nirvana"

I was just rereading Nicolas Darvas' How I Made $2,000,000 in the Stock Market and came across this interesting summary of his trading method and risk management approach in the author's intro. I'd like to share it with you.

Quoth Darvas: 

"I built a fortune with serenity by avoiding premature selling yet making an exodus from most of my stocks with the use of a single tool: the trailing stop-loss. 

I have discovered no loss-free Nirvana. But I have been able to limit my losses to less than 10 percent wherever possible. My stop loss method had two effects. It got me out of the wrong stock and into the right one."

Full passage in the image below:

Nicolas Darvas stops trading losses stocks


Sounds a bit like William O'Neil's philosophy on taking losses, doesn't it? Well, as O'Neil points out, his trading style and risk management philosophy was influenced by (among others) Nicolas Darvas and famed speculator and author, Gerald Loeb. Loeb advised speculators to cut all losses at 10% and he aimed to exit his own losing positions before they reached that mark. 

You will have losses at some point in your trading career. That is certain. This holds true for those saving and investing their own money in stocks and mutual funds/ETFs. Losses are an inevitable part of speculation. How you handle those losses (do you cut them quickly or let them run?) will make all the difference in your results.

We'll have more on controlling trading losses in a future post. In the meantime, check out Darvas' and O'Neil's books on trading. They will give you some serious food for thought on stock selection and risk management. If you take the time to read and apply their lessons, you may see some improvement in your trading (or "investing") results.