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George Krum, aka OddsTrader, has been involved in trading and technical analysis since 1996. His passion for developing innovative trading tools and indicators has culminated in the development of several financial apps available from Apple and Amazon.
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  • Fundamental V. Technical Targets

    In October 2013 we wrote here about a little experiment comparing the end-of-year price targets of two baskets of stocks recommended by GS and JPM, with the equivalent price targets obtained from our flagship OddsTrader app. At the end of that article we promised to follow up with an analysis of the results.

    Since Goldman Sachs has released a new list of 40 stocks with most upside potential, we decided to review the outcome of our 2013 study and begin another one.

    To say that we are pleased with the results would be an understatement. In summary, only 4 out of 41 price targets supplied by GS and JPM (less than 10%) were more accurate than the OddsTrader targets. In fact, our targets for the JPM portfolio differed from the actual year-end prices by an average of .25 cents (compared to $3.25 for JPM's targets), and by $3 for the GS portfolio (compared to $11 for GS's targets).

    Which brings us to the current GS list of undervalued stocks. Below we repeat our experiment from last year by comparing GS's targets derived from their fundamental analysis of these stocks, to our technical analysis targets based on Hurst channels. Our only guiding principle in selecting the channels is that they obey Hurst's main rule that a properly drawn channel should contain all but a few extreme data points. We should also note that the targets we provide are for the first half of 2014, and that we changed the inaccurate prices reported by BI for PVH, BTU and APA.

    Here is the list:

    As usual, we'll follow up with the results in the second half of 2014.

    If you are concerned that the US stock market may be ready for a pull-back which will drag all stocks down irrespective of their strong fundamentals, keep in mind that OddsTrader also contains tools for position sizing and risk and portfolio management. The app provides both upside and downside targets (a rarity for Wall Street research), along with stop/loss and entry/exit levels, risk/reward ratios, volatility measures, bullish and bearish swing targets, cycles, and more.

    (click to enlarge)

    In summary, our app provided a lot more realistic price targets than those of JPM and GS. It also allowed us to estimate with ease the quality of their recommendations and determine, well in advance, which one is more speculative, and which one is more likely to meet its targets.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 06 5:01 AM | Link | 4 Comments
  • W.D. Gann And The Markets In 2014

    Gann observed that a year ending in 4 is a bear year, but it ends a bear cycle and lays foundation for a bull market.

    We tend to agree with the second part of his observation, due to the fact that years ending in 5 are uniformly bullish.

    But before we proceed with our analysis, let's consider years ending in 3 first, which demonstrate an interesting characteristic. They tend to be either sharply bullish or bearish. The record since 1886 (2013 included) is 7:6 for the bulls. Since 2013 is finishing with a 20%+ gain, the only way 2014 can end a bear cycle is if it develops during the year or if it marks the end of a much larger cycle which comes to an end in 2014.

    Looking back at 127 years of Dow history (courtesy of Gann 9) however, the record shows that during that period there was only one bearish year (1974), four bullish years, and the other eight have traded mostly sideways. It should be noted, however, that one of these "sideways" years was 1914, a year in which the market was closed from July until December 12th to prevent a financial crisis triggered by the start of WW I.

    If we focus on the 1914 stock market closure, and the 1973-1974 stock market crash only, we immediately notice that they have one thing in common. They were both triggered by currency events (a collapse in the dollar triggered by the start of WWI, which prompted the issue of emergency currency in 1914, and the collapse of the Bretton Woods system).

    The two buzz words: currency crisis and war are, unfortunately, all too familiar to all of us today. With several ongoing wars and many regional conflicts simmering under the surface, there's no shortage of events which could trigger a world-wide conflict. And given the current state of crisis in confidence in all matters of fiat currency, and the desperate attempts from central banks from around the world to devalue their own currencies, it is obvious that the currency issue has been brewing for quite some time and is ready to boil over.

    Therefore, keeping the 100 and the 40-year cycles in mind, just following the average for years ending in 4 may not prove to be enough. These two powerful cycles are a reminder to keep a particularly close eye on geopolitical events, currencies, and on the Dollar index chart. It is currently barely holding above its '92 low and could very well grab the headlines once again. With the FED celebrating its 100 year long war on the dollar, they may just succeed in burying it into the ground in 2014:

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 23 1:32 AM | Link | Comment!
  • Fundamental V. Technical Analysis

    Recently, as reported by Business Insider, both Goldman Sachs and JP Morgan came up with year-end predictions for the SP500 and a list of stocks attractive from a fundamental (valuation) point of view. They provided end-of-year targets for them as well.

    We thought it may be interesting to compare the findings of their fundamental approach to price targets obtained from pure technical analysis tools, and see how they compare to each other. For purposes of this comparison we'll use Hurst channels. The benefit of Hurst channels is twofold: first, they do a great job of defining the trend and projecting the future trading range with high accuracy and confidence; and second, by using the OddsTrader app, you can access the benefits of this powerful tool with just a tap of your finger. There's no need for building complicated valuation models loaded with subjective growth and other assumptions.

    But let's proceed with the comparison.

    Both Tom Lee (JPM) and David Kostin (GS) have a year-end target for the SPX in the 1750 - 1775 range. This seems to be in line with the lower OT channel target of 1780:

    (click to enlarge)

    Next, we take a look at the individual stocks in their recommended lists, and compare their targets with Oddstrader's channel targets.

    Here's what we get:

    (click to enlarge)

    Without going into the merits of the individual recommendations, there are two observations that come to mind:

    First, with the exception of the stocks, JPM is most bullish on (bottom of their list), their targets are usually within $1 or $2 from Hurst channel targets; while stocks on GS's recommended list have targets usually diverging more than twice as much from channel targets, both to the upside and the downside.

    Second, most of JPM's stocks are already in an uptrend (more likely to meet their upside targets), while most of GS's stocks are currently in a downtrend.

    In summary, while both GS's and JPM's strategists have a similar projection for the SP500, GS seems to be recommending to their clients a portfolio of stocks with a lot more aggressive and speculative targets.

    In any case, it will be interesting to revisit the results at the end of 2013.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 06 11:15 AM | Link | Comment!
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