Reading a Cloud Chart

In a recent post, we introduced Cloud Charts, formally known as Ichimoku Clouds. We received several questions about how to interpret the charts. While we generally like to provide answers to questions in the comments section of the blog, some answers require more space than that. When more space is needed, we sometimes devote a post to the question as we are doing now. Rather than cover Clouds in detail here, we will provide a quick review. The chart is visually distinctive. The most prominent feature on the chart is the shaded areas. These are the Clouds. There are actually five co...
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Why Bad News for Bonds Might Be Good News For the Stock Market

Since the election, interest rates have been rising around the world. This is bad news for bond holders who have suffered losses of more than $1 trillion according to some estimates. When writing about interest rates, authors often note that bond prices move inversely to rates.  When rates rise, prices fall. That’s about as far as the discussion goes. Instead of stopping there, we would like to put some specific numbers to the idea. Since the election, the interest rate on the ten-year Treasury note has moved up by almost 0.5%. The ten-year yield is the most commonly cited long-term interes...
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What You Should Know About the Price-to-Sales Ratio

Several weeks ago, we blogged about fundamental ratios and showed a head-to-head comparison of several of the best performing indicators. We received comments from some readers asking how the price-to-sales (P/S) ratio fared in that type of testing. In hindsight, we should have anticipated this question. The P/S ratio is popular, and for good reason. A number of studies have shown the ratio, which is also known as the PSR, works well. There are times when we can forget that investment analysis is a fairly new field of study. Many indicators have been developed within our own lifetimes. The ...
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Clouds Can Help Traders Spot Trends

Technical analysis is an established discipline dating back to at least the 1800s. Some techniques are even older with candlestick patterns being used to trade rice markets in eighteenth century Japan according to legend. However, candlesticks were lost for centuries to Western traders and only became popular after they were reintroduced to the world in the 1980s. They were brought to the attention of traders in Western markets by Steve Nison in his book, Japanese Candlestick Charting Techniques, and Nison noted that based on his research, he believed the chart style was developed after 1850. ...
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Four Trump Trades to Benefit From the New President’s First Hundred Days

The election is finally over and we know who the next president will be. We also know that the first hundred days of a president’s term are among the most important. Political scientists agree that the first hundred days of a new president’s term are likely when their power and influence are at its greatest. This is when they have the chance to work with Congress to get things done, before rivalries develop. The deadline of 100 days helps to create a sense of urgency and urgency led to the origination of the term. Franklin D. Roosevelt was the first to emphasize his first hundred days when ...
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Four Biotechs to Buy Now

Elections can be hard on stocks. In the heat of the campaign, politicians often make promises and seek to assure voters they share many of the same problems that make life difficult for voters. At times, when trying to reassure voters, politicians seem to demonize industries. Financial stocks were a popular demon after the financial crisis. This year, drug makers became demons and targets of a few politicians in their speeches and tweets. To be fair, the CEOs of drug companies made easy targets this year. In February, Martin Shkreli, a 30-something hedge-fund manager turned pharmaceutica...
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Is the P/E Ratio the Best Way to Find Value?

Many investors look at the price-to-earnings (P/E) ratio when deciding whether or not to buy a stock. They often believe that a low P/E ratio identifies value while a high P/E ratio indicates a stock should be avoided. Applying a test to identify value makes sense since buying undervalued stocks increase the probability an investment will be successful. But many investors fail to consider whether or not the P/E ratio is the best test for value. They might be relying on the P/E ratio just because it is popular and widely available. Researchers have actually looked at the question of which me...
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Ben Graham’s Rules for Cheap Stocks: Four Cheap Stocks Warren Buffett’s Teacher Might Buy

  Ben Graham is considered to be the founder of the value investing philosophy. He began investing in the 1920s, just in time to suffer large losses in the 1929 stock market crash. Graham decided to learn from the crash and began studying how to buy safe stocks. Within a few years, he coauthored the first book on the subject of value investing with a former student, David Dodd. That 1934 book, Security Analysis, is still found on the bookshelf of many investment professionals. Although Graham’s work is important on its own right, it was the work of another student, Warren Buffett, that would m...
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