The Charts Offer a Surprising Message on Tesla

Tesla (Nasdaq: TSLA) is the company that some investors and analysts have an emotional relationship with. Some love the company and others hate the electric car maker. Both reactions seem to be due, in large part, to reactions to the company’s CEO Elon Musk. Musk has been the CEO and chairman of the Board of Directors but agreed to step down in a recent settlement with the Securities and Exchange Commission (SEC). The SEC began investigating Musk after one of his tweets attracted the interest of investors, and regulators. The terms of the settlement would be in the best interests of ...
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Nothing Lasts Forever

There’s a great old saying on Wall Street: The trend is your friend. But what happens when the trend ends? After all, nothing lasts forever. That’s when things can become troublesome for investors. At least, for those who don’t know the signs. That’s because a stock’s pattern can give you a clue that a long-running trend is about to end. And whether that means a stock that’s been going up is about to go down, or a declining stock is about to rally. This is called a reversal pattern. And being able to catch one successfully is one way to grow and preserve ...
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The Odds of a Rate Hike and How to Play It

Over the past few years, arguably the Federal reserve has been increasingly important in the stock market. The Fed has always been important. But its current role seems to prop the stock market up. It doesn’t do so by buying stocks but instead, the Fed uses policy tools. The Fed Is Not a Stock Market Investor To begin with, it is important to emphasize that the Fed does not own stocks directly. According to the Federal Reserve Bank of San Francisco: Federal Reserve System does not hold corporate stocks, but it does hold government securities. The Federal Reserve's securities portfolio is composed of ...
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Wall Street’s Wisest Saying

There’s a great old saying on Wall Street: The trend is your friend. That’s especially true if you want to trade in the options market, where you have a limited amount of time for a trade to play out. Yet many investors, focused on a company’s fundamentals, don’t think about trends at all. It’s a critical skill for any investor—but it’s crucial for shorter and more leveraged trades like those in the options market. That’s why it’s important to consider all the factors that can cause a company’s share price to rise or fall. For longer periods, the fundamentals definitely matter. But ...
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Using Momentum Indicators to Forecast the Stock Market

Momentum indicators tell us a great deal about the stock market. These indicators can be a useful forecasting tool. But that might not be the way all investors look at these indicators. Momentum indicators are designed to measure the strength of the trend. They are usually thought of as short term trading tools. This makes sense because momentum measures the strength of a move and if a stock moves too fast, or shows too much strength, a reversal should be expected. That standard interpretation of momentum indicators is based on the fact that stock prices tend to exhibit mean reverting behavior in ...
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Scouting Out Your Next Big Trading Win

Trading can be tough for many reasons. But just as a general fighting a war may send on scouts, you too can scout out the options market for the best possible trades. Understanding how a company’s options usually move can prepare you to find moments where they’re making unusual moves. And by looking at options with unusual activity, you can get an idea of where larger investors in the options market are placing their bets. These larger traders—the so-called “Smart Money” on Wall Street— may not make huge profits, but they have a great track record of being right far more than ...
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This Old School Chart Says New School Stocks Are In Trouble

Point and figure (P&F) charts are among the oldest trading tools. They were in use by the late 1800s and they are still widely used by traders. They are valued by traders because they can easily be used to identify the trend and to develop price targets and trading strategies. We have written about the construction and fundamentals of the P&F chart and we will refer readers to the previous article for a review of the basics. That article can be found here. In this article, we will focus on what the charts tell us about the current state of ...
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Using The Options Market to Find the Next Big Trade

One of the hardest things in investing is finding a winning trade. That’s especially true when looking for short-term trades that are ideal for investing with options. Fortunately, there’s a way to use the options market itself to find such winning trades. How? By focusing on unusual options activity. When big money moves in the relatively small options market, it’s incredibly visible. It shows traders exactly which stocks are likely to make big moves – up or down. But that’s not all. Thanks to the options market, investors can also see where unusual moves are happening specifically with prices and dates—to really ...
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