The play right now is in the metals space – gold, silver, industrial metals, mining, etc. The steel sector as a whole isn’t doing real well right now, but what the heck steel it’s a metal and GSI is showing massive buy demand on a recent breakout. Take a look at the chart below. At the beginning of March General Steel (GSI) staged a massive 60% breakout move with extremely heavy volume and now needs to retrace much of that move, providing a 2nd chance opportunity. It has already retraced half of the entire move, but I believe there is more to go possibly down to the 1.15 – 1.20 level which would provide an excellent opportunity to scale in with a small 1st position. Perhaps that move takes place quickly out of the gates Monday morning.
This is a stock that soared from just over a buck to above $19 in about 9 months back in 2007. Could a move like that happen again? It’s not impossible, but of course the chances are extremely slim. That doesn’t mean you could get a quick double or triple out of this one in a very short timeframe!
Disclaimer: I have no position in GSI at this time, but may look for an entry within the range I described above.
Tags:
general steel,
gsi
Well it’s been a long time once again since I’ve posted here so realistically consistent posting probably isn’t going to happen. All my time these days is spent with Bumblejax which has been a terrific journey and remains my passion, but I miss the stock analysis and trading which I have only dabbled in the past few years. However, the decision to step away from the market was the best decision ever for both my mental and physical health. Being on the West Coast I can’t say I miss the 5:30AM alarm clock to get ready for the market day or the constant pressure and long hours to make sure I was providing the best information to my members at Self Investors in a timely fashion. In a nutshell, doing that for 6 years burned me out.
I will always be fascinated by the market and the opportunities it presents. I love researching new companies breaking out of bases for the first time following an IPO (which by the way, is often the most significant and potentially rewarding trade setup there is). The heart and soul of my strategy remains within an analysis of the stock chart which provides a picture of supply and demand. With that said, a lot can be learned by reviewing past stock picks to see how things panned out. At the end of the article I’ll provide a new momentum stock play to keep an eye on in the hottest sector right now.
First up is Applied Materials (AMAT) which I wrote about in Sept of last year as it was breaking out of a double bottom base (albeit, not a perfect one) at just above $17. Here was the chart at the time:
Now let’s take a look at the current chart to see how it fared. You can see in the chart below it’s been a methodical, steady move up of a bit less than 10%. Not bad, but not impressive. Exactly what you’d expect from a big market cap stock in a rising market. The real gains are seen in small to mid caps which you’ll see below.
The last round of breakout stocks I highlighted were in the biotech space which at the time was on fire. That’s the key, find stocks breaking out in sectors that are catching fire across the board and your chances of success skyrocket. Let’s take a look at NSTG. When I highlighted it in September of last year it had just broken out of a picture perfect pennant formation .. an absolute beautiful setup for another run higher.
Take a look at the run from that breakout. Granted, this took a bit of time to get going, but once it did it really got going! So here’s a key moment in this trade which took place at the end of October. See how the stock continued drifting down consolidating the big gain in September? Had you got in during the breakout when I highlighted it at around 11.50, you’d be down a fair amount at that point and a bit nervous about holding right? You and quite a few others. Look how the stock shook out nervous traders, but finished the day near the top of the range which was the moment the stock more than doubled in price. Reversal moves like that where the stock sells off sharply in the 1st half of the trading day only to recover and close near the top of the trading range is always bullish. It’s a capitulation move.
This is a great example that highlights some important lessons. Lesson #1 – Do Not Enter the Entire Position Right Away. Particularly with highly risky biotech stocks, you want to scale in slowly. For these kinds of stocks I would typically start small with 2.5 % of the total portfolio. This will limit the need to have a finger on the sell trigger at all times and give the stock a chance to breathe and do its thing which hopefully more often than not is up. In this case that last dip at the end of October didn’t take out the huge breakout point in early September. That breakout remained technically intact. As it turned out this stock just needed more time to digest that huge gain which brings me to Lesson #2 – The Greater The Breakout Move, The Longer The Consolidation. In this case, where I highlighted that pennant, the stock had only spent a few days consolidating that massive gain making the odds greater that it needed more time. It doesn’t mean you can’t get in there, it just means you need to be sure to scale in slowly and give it time if it needs it. The next breakout point in this stock was actually right out of a cup with handle type setup on Dec 6th above $13. You could have added your 2nd position (I like to add another 2.5% of total portfolio value).
Ok let’s take a look at the next biotech breakout stock ENTA which I highlighted around the same time in Sept ’13. This was a stock I needed to see consolidate a big breakout move that had taken place. The 1st entry point in this stock was out of that flat base around $20. You could have scaled into it with a 1st position at that point. If you missed the initial breakout, no worries there are almost always 2nd chances which brings me to Lesson #3 – Breakouts Always Retrace. What I mean by that is that in almost all cases a stock that breaks out will retrace at least half of the breakout move and often times the entire breakout move to the original breakout point.
A current chart helps to explain this concept better. See how this stock retraced the ENTIRE move and offered a 2nd chance? This brings me to LESSON #4 – NEVER Chase A Breakout. If you don’t get in on the breakout within 5% or less of the breakout point, let it go to minimize risk. You want to catch them as close to the breakout point as possible. If it gets away from you no problem! Almost all stocks will provide a 2nd chance as this one did. Two opportunities to capture a double on your investment in just a couple weeks. Not too shabby.
DISCLAIMER: Now would be a good time to remind you that the results of these two biotech plays are not typical! I know you know that but for someone new to trading, it’s worth repeating. These two happened to work out extremely well. Not all do which is why it’s important to scale in with a small position and exit if the initial breakout point is broken. You can be right less than half the time and still do extremely well if you hit on a few of these and minimize losses. Trading is all about minimizing risk and maximizing potential reward. The lessons above will do that and tip the odds in your favor.
Tesla Motors (TSLA) is another stock highlighted here in 2013, but I won’t get into the details of the chart of Tesla Motors (TSLA) in this post. I think my original post covered it fairly well and you can look for similarities to the charts above. Take a look at the 1st and 2nd chance it offered around $40/share in April 2013 before going onto more than a 600% gain in less than a year. A new company, disrupting a long established industry breaking to new all time highs is always an extremely bullish sign and a chance at significant profit. In this case extraordinary profit. Even at $250 TSLA’s chart still look very healthy, but needs quite a bit of consolidation time. No it’s not a good place to get into TSLA for the first time.
The Action Right Now Is In Metals
I’d like to wrap up this post with LESSON #5 – 70% of Stocks Move In Direction Of General Market, so it gets a bit riskier up here as the overall market remains at overextended levels with some recent selling pressure. For that reason it’s even more important to choose a sector that is heating up. One such sector are the metal plays with significant breakouts off the bottom in gold and silver playing out over the past few weeks. The leading metal plays have already had healthy runs, but there are still opportunities. When I first highlighted those biotech plays, the biotech stocks had already been heating up for a few weeks and they remained on fire for several months. This run in metals could last awhile.
So a bit of a disclaimer on these metal play breakout plays. They are quite speculative lower priced stocks with greater risk, but greater reward as well. Same rule applies. Scale in with an initial smaller position.
Go here to see the first momentum metal play! This stock soared from just over a buck to over $19/share in about a 9 months span in 2007. Will it make a similar move?
Here are some business and stock market headline news stories to chew on this evening…
Across 20 major US cities, the average home value increase was 12.4% which is the most in 7 years! However, it looks as though the rate of increase has peaked for now. “More cities are experiencing slow gains each month than the previous month, suggesting that the rate of increase may have peaked,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement. Prices rose fastest in Las Vegas, which saw annual gains of 27.5%. Prices in San Francisco jumped 24.8%, Los Angeles 20.8% and San Diego 20.4%. Sure seems like a mini bubble in housing right now particularly with mortgage rates a full percentage point higher in the past few months.
Rumor has it that Twitter is leaning towards listing on the NYSE. The company announced (er, rather Tweeted) a couple weeks ago that it had filed for an IPO confidentially which means the company can keep its financials under wraps until 3 weeks before the IPO prices. We’ll continue to follow the news surrounding what should be a much hyped (overhyped?) IPO. Perhaps this is the IPO that marks the top of the internet stocks frenzy over the past year.
Hey, we could all use some inspiration once in awhile! Print these out and pin up in the office.
Some analysts are questioning just how well the iPhone 5C is selling because Apple includes phones shipped to retailers as sold. One analyst said, “the 5C appears to continue to be (uncharacteristically) widely available, suggesting that Apple may have been overzealous in estimating its appeal.” If you’re trading AAPL, get a free daily analysis of the chart here.
In 5 days iTunes Radio added 11 million users which will put in the realm of iHeartRadio. Next up is Spotify with 20 million users and the behemoth in the niche Pandora (P) which has 65 million users. Analysts disagree on the impact it will have on Pandora. There are cases for and against so if you’re trading Pandora you’ll need to keep a close eye on the chart. The iTunes Radio news has been out for months and the stock has done VERY well since then. It has pulled back a bit on news of the success of iTunes Radio, but given the huge run in the stock, this is a very normal pullback right now. You can get a free daily analysis of the strength of the Pandora stock chart here.
Applied Materials (AMAT) is surging higher today to a new 5 year high after it was announced it would merge with another global giant, Tokyo Electron Limited, in an all stock transaction valuing the new company at nearly 30 billion. The merger brings together complementary technologies in the semiconductor and display markets and is expected to close in about a year. After the close, Applied Materials shareholders will own approximately 68% of the new company and Tokyo Electron shareholders approximately 32%. The combined company will have a new name, but dual HQ’s and a dual listing on the Tokyo Exchange as well as the Nasdaq.
Tetsuro Higashi, Chairman, President and CEO of Tokyo Electron, said, “Today, we are launching a new company and taking a bold step forward for our industry. Built on a foundation of people, technology and commitment, we are creating a truly global company that we believe will expand the value we deliver to our customers and be able to achieve new levels of financial performance.”
Gary Dickerson, President and CEO of Applied Materials, said, “We are creating a global innovator in precision materials engineering and patterning that provides our new company with significant opportunities to solve our customers’ high-value problems better, faster and at lower cost. We believe the combination will accelerate our momentum for profitable growth, increase the value we deliver to shareholders and create great opportunities for our employees.”
As mentioned above, AMAT is looking quite bullish and breaking out to a multi year high today. It probably needs to spend a few weeks digesting gains at some point soon, but AMAT appears to be a solid long term play.
You can get a free daily technical analysis “analysis” of AMAT for free here! Don’t miss it.
Earlier today I mentioned that the small biotech/pharma plays have really been moving and while I typically stay away from these highly risky and volatile plays, they can provide for outstanding shorter term trades with smaller positions. This morning I highlighted the trade in ENTA which staged a big breakout and just needs a retrace of that move to provide an entry.
Another trade I’ve got my eye on is NSTG which is flashing a chart that looks like it might be ready to explode higher. The company is in the instrumentation and analysis business which is obviously less risk than a company relying solely on pharmaceuticals, but still considerably risky (albeit with a potentially huge reward).
The stock exploded higher on September 10th after news of FDA clearance for its breast cancer testing. This from Seeking Alpha:
- NanoString Technologies (NSTG +41%) soars after receiving FDA 510(k) clearancefor its Prosigna diagnostic test.
- The test uses the gene expression profile of cells found in breast cancer tissue to assess a patient’s risk of distant recurrence of disease.
- Prosigna is the company’s first FDA-approved in vitro diagnostic assay, and CEO Brad Gray notes the approval “marks a milestone for NanoString and is an important step forward in the treatment of breast cancer.”
While I typically focus on the technical action in the chart for shorter term trades, it’s a good idea to get an overview of the company you’re about to put cash in to. Here’s a good place to start.
The chart of NSTG is exceedingly bullish, with a nice pennant formation squeezed to smaller price swings and ultimately resulting a breakout today from this bullish formation. If you got in today, you’re sitting great. It would still provide entry in the morning if it doesn’t gap up big at the open.
Be sure to get your free daily technical analysis of NSTG here.
It’s been quite awhile since I’ve posted here, but hope to be more consistent with profitable stock trade ideas! With today’s post I highlight the first of 3 biotech stocks that IPO’d this year and are flashing big, high volume breakouts. Please know that biotech stocks carry considerably more risk than just about any other industry. They live and die by results of drug trials and any negative result can send the stock diving. Do your due diligence on these and in my opinion, never place large bets on these. With that being said here is the first small biotech play showing tremendous momentum with a couple more to come over the next 24 hrs.
Enanta Pharma (ENTA) is a small pharma company with a focus on infectious diseases and specifically, helping to find better a treatment of hepatitis C. Here’s a recent write up from Motley Fool:
“Expiration of lock-up periods after a company goes public sometimes has insiders selling shares in mass — driving the stock down. Although the lock-up period expired for Enanta Pharmaceuticals (NASDAQ: ENTA ) this week, there certainly was no sell-off. Actually, the opposite occurred, with the stock soaring 31%.
Enanta went public back in March. Rule 144 of the Securities Act of 1933 places restrictions on insider selling until at least six months after the new security is issued. This lock-up period fell by the wayside on Tuesday. Shares of Enanta promptly went on a nice run that continued through the week.
The biotech is in partnership with AbbVie (NYSE: ABBV ) to develop protease inhibitors to fight hepatitis-C. Experimental drug ABT-450 is in a phase 3 study and was granted Breakthrough Therapy designation by the U.S. Food and Drug Administration in May. The all-oral antiviral combo from AbbVie and Enanta is considered to be one of the top prospects for treating hepatitis-C, which affects around 3.2 million Americans.”
Technically, the stock is extremely bullish as indicated by the high volume breakout from a base in the chart below. This is what I would call more of a saucer base (a very shallow cup with handle base) which can actually be considerably more bullish than a standard cup with handle base. The stock broke out of the handle formation at around $20/share about one week ago with heavy volume. This presented the first opportunity to enter the trade, but about 75% of breakout stocks provide a 2nd chance opportunity on a retracement of the breakout move. In order to minimize risk, you want to enter the trade as close to the breakout point around $20 as possible, but I see an ideal entry all the way up to $21 – $22 should it return to that level (I think it will).
===> Be sure to get your Free ENTA Daily Technical Analysis Here
It’s been a volatile few months for solar stocks which saw a big surge off the bottom late last year only to retest those lows recently. Today, solar stocks get a spark in positive guidance from First Solar (FSLR) which posted much better than expected guidance, but it remains to be seen if they catch fire again. It’s too soon to begin calling another bottom in solar stocks, but today’s buy interest/short squeeze definitely means you should put solar stocks back on the radar for a potential trade in the coming days and weeks.
=== > Click Here For Your FREE First Solar Analysis
Here are highlights from the guidance:
2013:
Sales 3.8 – 4 B
EPS of 4 – 4.50
Module Shipments 1.6GW – 1.8GW
Analysts see FY13 sales of $3.15 billion and EPS of $3.46.
2014:
Sales 3.5 – 4 B
EPS 2.5 – 4
Shipments 1.8 – 2.2 GW
2015:
Sales 4.2 – 4.8 B
EPS 4 – 6
Shipments 2.3 – 2.7 GW
Shares of First Solar (FSLR) were up nearly 50% earlier today. It has come off the highs just a bit, but is still trading at a new 52 WK high with very heavy volume. Suntech Power (STP) is also up big at 33% and most of the other solar stocks are up anywhere from 10 – 20% today. The Guggenheim Solar ETF (TAN) is up 15% and breaking out of a downtrend. In my opinion, if these solar stocks retrace the majority of this today’s move, that would setup a real nice, lower risk entry point.
=== > Click Here For Your FREE First Solar Analysis
Tags:
first solar,
fslr
A few days ago shares of Tesla Motors (TSLA) staged a significant breakout move above previous resistance, sending the stock to all time highs. Technically, this is an extremely […] Continue Reading…
Tags:
elon musk,
Tesla,
tsla
Facebook (FB) stock has had quite a run since its Q3 earnings report back in late October. After that report I mentioned that a floor was likely in the […] Continue Reading…
Tags:
facebook,
fb
Tesla Motors (TSLA) reported earnings last night that provided a bit of fuel for skeptics, but hope remains and the company has indicated profitability is just around the corner. […] Continue Reading…
Tags:
earnings,
Tesla,
tsla
