Friday, September 11, 2015

Stocks to Watch: DTEA, FB, JUNO

DavidsTea Inc (NASDAQ:DTEA) displayed some impressive relative strength with a 8% gain. It looks like the stock is starting to turn back up and indicators are giving the first bullish signs. Could squeeze over 14.50 with $16.53 (50EMA) as the next upside objective. Move DTEA to your watch list.

Facebook Inc (NASDAQ:FB) Resistance Breakout. Go long on the break of Thursday’s high at 92.06. I expect to see a strong upside move if the stock can break through this resistance level. Watch the stock closely on Friday.

Juno Therapeutics Inc (NASDAQ:JUNO) Broke out on solid volume placing this stock on the map for technical analysis breakout buyers and move to $45 in short-term is very likely.

Buy Gold and Sell Stocks

Buy low, sell high!  As of early September 2015, the better choices are buying gold and selling the S&P500 Index and relevant stocks.
Examine the graph of the ratio of Gold to S&P500 Index for the past 25 years.  The ratio is low now and likely will correct higher.  I think gold will move higher and the S&P will move lower.

Examine the graph of the S&P500 – 20 years on a log scale.  The Index has broken the red support line dating back to 2009.  This is a “danger zone.”  In addition, internals are weak, moving averages have turned lower and crossed each other, and some global stock markets have already crashed.  I think it is likely the S&P500 moves much lower in the next six months.

Examine the graph of Gold – 20 years on a log scale.  The three trend lines, as I have drawn them, show that gold is at the low end of the range and over a third lower than the center line which indicates the average of the long term exponential trend upward.  I think gold will climb much higher in the next several years, and that the gold low in July will hold.

Could the S&P500 burst higher and gold be crushed again?  Certainly!  “Print” a few trillion dollars of digital “money” and buy S&P futures while selling short gold contracts and the S&P500 will levitate while paper gold prices drop.  But is that likely?
My estimation is that various forces will nudge the S&P500 higher and occasionally levitate it, but deflationary forces will overwhelm both markets and central banks, and global stock markets will continue their downward path.  Eventually people and investors will realize that “money” is now debt owed by a government, central bank or corporation that may not be solvent.  When confidence in the viability of debt based fiat currencies and confidence in the ability to repay debt diminishes, people will flock to gold investments.
My estimation:  S&P500 down for months, maybe several years…and gold up for years!  If not, then these (no longer relevant) ideas may still be true:
  • Buy stocks for the long term. They always go up.
  • Buy real estate – house prices always go up.
  • Gold is useless and a relic of the past.
  • Don’t fight the Fed.
  • Trust Wall Street brokers as they have your best interests at heart.
  • Politicians will take care of the middle class.
  • Hope and change.

Stock Market Sentiment

We previously noted extremely over bearish market sentiment conditions in Rydex bull/bear fund allocations and in Small Speculators’ net short positions. These sentiment indicators have been reset to traditional correction-ending, even bear market-ending levels.  That’s the reality.
The latter especially, has been a reliable contrary indicator.  Basically, the Small Specs have never been right at important market turns.  For instance, they were heavily net short in the late 1990’s but by the time the market topped in 2000, they had covered and become net long.  They have reliably been a contrary indicator all along the current bull market as well, going net short at each correction bottom, post 2009.
Add to this the Newsletter writer community, which has a vested interest in trend following and always looking right with the market.  The latest Investors Intelligence data by way of Pension Partners and the Daily Shot email service shows that NL writers have quickly gotten right with the bear, and the fear.

Another indicator is the NAAIM Investment Managers data.  These managers sell down toward 70% to 100% cash at every market bottom.  They are now at around 75% cash.

Of course, market sentiment is market sentiment, economic fundamentals are economic fundamentals, monetary policy is monetary policy and global pressures are what they are.
In other words, sentiment is a condition, not the be-all, end-all director in any short-term period.  Just as the market floated for years with over bullish Investors Intelligence data for instance, the over bearish data now in play is a condition to future bullish events, but not necessarily a fine timing tool.

United Continental Holdings Inc (NYSE: UAL)

United Continental Holdings, Inc., together with its subsidiaries, provides air transportation services in North America, the Asia-Pacific, Europe, the Middle East, Africa, and Latin America. It transports people and cargo through its mainline operations, which use jet aircraft with at least 118 seats, and its regional operations. As of December 31, 2014, the company operated a fleet of 1,257 aircraft. It also sells fuel; and provides maintenance, ground handling, and catering services for third parties. The company was formerly known as UAL Corporation and changed its name to United Continental Holdings, Inc. in October 2010. United Continental Holdings, Inc. was founded in 1934 and is headquartered in Chicago, Illinois.
Take a look at the 1-year chart of United (NYSE: UAL) below with added notations:
1-year chart of United (NYSE: UAL)
After selling off from January into June, UAL started trading sideways over the following few months. While in the sideways move, the stock has formed a key pair of price levels that are worth watching. UAL has a resistance at $60 (red) and a $50 support (green). At some point one of those levels will have to break.

The Tale of the Tape: UAL is trading inside a trading range. The possible long positions on the stock would be either on a pullback to $50 or on a breakout above $60. The ideal short opportunity would be on a break below $50.