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Michael Michaud
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Michael Michaud is the founder of Invest2Success.com (http://www.invest2success.com/) and the Invest2Success Blog (http://invest2success.blogspot.com/). He has been investing and trading in the financial markets since 1989. He founded Invest2Success.com to empower individual institutional... More
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  • Oil Bear Market About To End?

    Crude Oil Rig Count

    The Oil Bear Market is About to End by The Gold and Oil Guy

    Crude oil and energy stocks are tricky to navigate in a situation like this where the equities market is nearing a bull market top.

    It is critical to remember that when the US stock market turns down and starts a bear market virtually all stocks and commodities will fall in value including oil and energy stocks. Investors need to understand that even though the price of crude oil is nearing a bottom it could and will likely stay low for a considerable amount of time "IF" the stock market turns down.

    Over the last 100 years we have seen nearly 30 bear markets. The average length of a bear market is 18 months and has an average decline of 30%.

    I do feel currency problems and a war breakout will be bullish for both oil and gold. So if we get a bear market in equities, and a war oil and oil should rally while stocks in general fall.

    But if we do not have those sever crisis' then if gold and oil break below their critical support level which is the red line on the charts and a bear market in stocks start you do not want to be long stocks or commodities.

    Price Chart of Oil

    The chart below shows the line in the sand for the price of crude oil. If this level is broken with a monthly bar close below $43 per/barrel I think $30-$33 will be the next stop and the low for the oil market. It seems everyone is bullish on precious metals and have been buying like crazy.

    The points I made about gold which I talked about in PART II should be reread because if the support levels are broken oil will fall 40%, and gold another 35% from their current prices.

    Crude Oil Price Chart

    Below are some ETFs that takes advantage of rising oil prices. While there are other funds that cover oil stocks I feel they may not perform well during the equities bear market. Investing in physical oil is the best play at this stage of the game but when the equities bear market looks to be nearing an end, energy stocks will be the best place to invest.

    ETF Expenses

    The following table includes expense data and other descriptive information for all Crude Oil ETF's listed on US exchanges that are currently tracked by ETF Database. In addition to expense ratio and issuer informaiton, this table displays platforms that offer commission-free trading for certain ETF's

    Crude Oil ETFs

    Conclusion

    In short, I feel crude oil will has or will find a bottom within the next couple months. Long term the value is great, but we must be aware that if equities start a bear market it will be best close all equity positions and wait for the bear market to subside. When the time is right investing in crude oil and energy stocks which pay high dividends will generate life changing gains and an income stream. Patience is the key.

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    Mar 25 9:42 AM | Link | Comment!
  • Listen To The News But Trade The Action

    Monetary Policy

    Trade the FOMC by NetPicks

    Trading over big numbers or highly anticipated market events can be a point of contention. On the one hand there's a great deal of movement and the opportunity to take some nice profits. On the other hand the increased volatility can be very erratic and cause traders to take some big losses. The FOMC is just such an event.

    For this reason some traders choose to trade the FOMC and some choose to mitigate the potentially elevated risk by avoiding the event entirely. Whichever path you choose to follow, it's crucial to carefully consider your approach.

    What many traders tend to do over a big release if they do trade it, is they see movement and then try to immediately jump in on it. But there are several reasons why this is a dangerous game to play.

    Speed of market

    Speed Traffic at Dramatic Sundown Time - light trails on motorwaMost traders simply do not have a setup capable of staying in touch with what's currently happening when volatility spikes. Compare the average day trader to what the trading elite have in their arsenal. The average day trader is trading at home over a standard ISP and with a non-dedicated computer, possibly thousands of miles away from the exchange. This all adds to latency. You can't assume that if you're sitting in an arcade you're immune to these issues either - it really depends on the level of sophistication of the arcade's setup.

    Compare this to the systems that top firms or trading algorithms employ and you can start to see just how disadvantaged many traders are going to be.

    Interpretation of incoming information

    But then there's the issue of interpretation too and the bias that is often given to our own positions. If you trade the FOMC you'll hear the various parts of it being reported by squawks over a short period. Any of these items in isolation, have the potential to make the markets move and so multiple items released sequentially, can send the market up and then hurtling back down in no time at all. Figuring out what the market's conclusion of the FOMC as a whole is frequently a less than straightforward matter. Taking a view and then clinging on to a trade that fits this idea can have disastrous consequences even if a trader isn't wrong on the overall direction.

    "The market can stay irrational longer than you can stay solvent." - John Maynard Keynes

    But whilst trading the FOMC in an unstructured and reactive manner is potentially dangerous, it does often bring a great deal of movement and as a trader, movement is what you have to live for. So how can you better approach this kind of scenario?

    Wait for a tell

    In exactly the same way as you might be looking for context to help you identify the chance of high probability setups occurring ahead of time, you can use context to figure out what the market might be doing over the FOMC. There are numerous ways to do this, but for simplicity, I tend to combine price action and Fibonacci retracements of a move.

    Over the FOMC just gone (3/18/15), we can see that the NQ failed to pull back past the 38.2% retracement of its initial thrust (drawn in from the official statement release time). I use the 38.2% as a cue to assess the chance that the move might be faltering, along with how the market reacts to testing key reference prices.

    Trade the FOMC

    A combination of the NQ making higher lows and higher highs together with the lack of a substantial retracement of the initial thrust had me thinking that the move higher was set to continue. Knowing that this FOMC statement was likely to be a market mover that would bring in longer term participants, my expectations of how far it could go were adjusted accordingly. 4394.50 became a key short-term price as on the second pullback, sellers held it as the upper bound of a tight short-term range and then after making another higher high, it held on the third pullback.

    Any additional buying opportunities generated by Trend Jumper with the NQ making new highs would get my attention.

    Trade the FOMC

    When it finally gave an opportunity on breaking to make new session highs, the trade gave a nice runner of 13.50 points. True, there were other decent trades that occurred before this particular opportunity, but in terms of taking a context driven trade following the FOMC statement, this was the one to take.

    Listen to the news but trade the action

    I'd give one more reminder when trading over big news items - listen to the news but trade the action. If you hear something that you believe is particularly bullish, then you must gauge the impact before deciding how to trade it. Just because it seems like it should be bullish doesn't mean that the market hasn't already priced in a more bullish release than what actually transpired.

    But if the price action and context fits with what you've heard, then there could be good reason to get involved in a continuation move. Trade the FOMC Overall I believe it's dangerous for most people to trade the FOMC and other big news events. Market movement can be lightening quick and seemingly erratic, whilst at the same time trader emotions run high and can sabotage trading decisions. But if you're intention is to sit back and let the event start to play out before you get involved, I believe that the opportunities to profit from day trading futures can be substantial.

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    Mar 24 5:33 PM | Link | Comment!
  • This Weeks Free Stock Pick

    Qorvo

    This Weeks Free Stock Pick - Investing in Semiconductor Earnings Growth

    Qorvo (NASDAQ:QRVO) is the combination of RF Micro Devices and TriQuint Semi, and as a significant player in the microchip sector, this stock has seen a substantial gain of late. Part of this is due to the strength of Apple, but electronic devices in general are proliferating and this means the whole pie for this space is growing and QRVO is going after a big slice.

    Strong Industry and Zacks Rank

    Being the Bull of the Day is all about why a stock has reached the highly desired position of a Zacks Rank #1 (Strong Buy). This tends to happen when analysts from firms like Morgan Stanely, Merrill Lynch, William Blair and others move their earnings estimates higher. Those moves have an impact the valuations of stocks, so finding the best estimate revisions is what the Zacks Rank does for you, and the Bull of the Day help highlight one of those stocks.

    Qorvo (QRVO) not only has the strong Zack Rank, but the Industry that QRVO is currently ranked 4/265 making it the top 2%. In writing a Bull of the Day (and "Rank Buys" before that) over the last few years, I have rarely written on a stock that is a Zacks Rank #1 (Strong Buy) and one of the top four industries.

    Description

    Qorvo provides technologies and radio frequency solutions for mobile, infrastructure, and aerospace/defense. The company's product line includes amplifiers, control products, discrete transistors and ICs, filters and duplexers, frequency converters, integrated modules, optical components, oscillators, passives, and switches. Qorvo, Inc. was founded in 1991 and is headquartered in Greensboro, North Carolina.

    Earnings History

    There has only been one earnings report as a combined company, so you are not going to be able to get a good read on this company from this perspective. The Company reported earnings of $1.42 on January 28 of this year when the Zacks Consensus Estimate was calling for $1.06. This was a substantial beat that translated into a 34% positive earnings surprise.

    The conference call did not really satiate investors. The company only discussed one half of the entities performance as the two company's became one at the close of trading on 12/31/14. The next conference call will be one that investors can begin to get a more of a full picture on the company.

    Earnings Estimates

    Another issues with the merger is that the prior earning revisions for RFMD and TQNT are out the window. We only have a few months of numbers for QRVO, but in that short amount of time we have already seen the Zacks Consensus Estimate $3.30 to $3.32 for 2015.

    The 2016 Zacks Consensus Estimate has held steady at $4.60, where is started the year. The implied earnings growth rate is currently 38.5%.

    Valuation

    The Zacks Research System, where I get the majority of my data from, only has data on two of the most commonly followed metrics. The forward PE for QRVO is showing 24.1x and that is just a little above the 20.3x industry average. The other metric is the price to book multiple of 13x and that is well above the 3.7x industry average. I would advise investors to not rely on that number at this time, and wait for the reported results from the combined company before making a judgement call based on something like the price to book multiple.

    Next Earnings

    The company is expected to report again at the end of April. Wall Street is looking for revenue of $621M and EPS of $0.86.

    Chart

    Normally I show the price and consensus chart here, but since there isn't much information on that chart I am just showing the 3 month chart.

    Qorvo Semiconductor Stock Chart

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    investing trading success. Or avail of Home Study Courses and or
    Trading Softwares available to improve your investment returns.

    Mar 24 8:42 AM | Link | Comment!
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