One big story keeps coming up in the stock market. It’s tax reform. Analysts are still sorting through the implications of the new rules but there is a general agreement that changes to the tax code are bullish for most companies. This week, we searched for individual companies that analysts believe could be winners under tax reform. We searched our database for companies that are followed by at least four different Wall Street analysts and are priced below $20 a share. Then, we looked for companies where at least one analyst raised their earnings per share (EPS) estimate by at least 5% ...

Over the past year, we have shared trades based on a seasonal strategy. At the beginning of every month, we provided real time buy recommendations and we also tracked the results of the previous month’s recommendations. Now, after a year, we are able to show you the results for the past twelve months. This system was based on one of the simplest seasonal trades possible. Few traders follow seasonal strategies although these strategies are often profitable. They are also relatively low risk because they limit market exposure to short periods of time. To apply this strategy, every month...

Right now, the stock market has been in an up trend for years and hasn’t suffered a pull back of 5% or more in more than a year. This seems like we could be near a significant top. And, that means now might not be the ideal time to buy new stocks. Of course, those same words could have been written at any time in the past few months. Not buying may seem like a cautious approach to take to the market, especially when it is going up. But, not buying carries perhaps the biggest risk to small investors. The arguments against buying have been in place for more than a year. In fact, most of th...

Some investors seem to spend most of their time deciding what to buy. They should probably be spending an equal amount of time thinking about when they will sell. This might be uncomfortable because some investors associate selling with being wrong. The idea of selling losers is well known in stock market trading. There is the famous saying of “let winners run and cut losses quickly.” This idea is sometimes applied only to the initial purchase. Many investors are familiar with the idea of a “stop loss” which is a sell order that kicks in when the price falls by a predetermined amount. Th...

1 2 The end of year tends to be a seasonally strong period for stocks. Some analysts believe the January effect has moved into the end of year with stocks doing better in the final weeks of the year as traders try to arbitrage the January effect. Arbitrage is a trading strategy where investors buy an undervalued asset they believe has a high probability of rising. For example, it could be the stock of a company that is being bought by another company. The deal might be for $100 a share but the stock trades at $99, giving the arbitrage trader a riskless profit of $1 a share. Unfortunate...

The stock market seems mysterious at first glance. Prices move up and down, seemingly based on the whims of traders. There is a sense of disorder in the price movements. Since many individuals prefer order to disorder, there have been many efforts to find order in the markets. Much of the effort has been focused on price patterns. The goal here has been spotting recurring patterns in price, including famous patterns like a head and shoulders pattern. These patterns have some value and are often based on principles of behavioral economics. But, price patterns are subjective and often pron...

When the ball drops in Times Square on midnight, January 1, 2018, the old year is over. This means your tax bill is due and there is little you can do at that point to lower the bill. You can make contributions to retirement accounts and take a few other actions after the first, but you have few choices then. Now, you have time to plan, and more importantly you have time to act. There are a number of actions you can take to help preserve gains, potentially defer taxes and possibly even reduce taxes. However, we are not tax advisers and we urge you to consult with a qualified professional to...

Investors are increasingly worried about a bear market. This is probably almost always true but there are more reasons than usual to worry right now. Valuations are stretched, with many fundamental metrics exceeding levels reached in 2007 and 2000. In addition to the fundamentals, technicals are a cause for concern. Prices have been going up for more than a year without even a 10% pullback. There hasn’t been a 20% pullback in more than 8 years. Pullbacks relieve the excesses that build up over time and are usually considered healthy. Of course, these indicators apply to the stock market,...

The stock market is overbought. That is a common theme on CNBC as analysts talk about how extended averages are. They are certainly correct that the S&P 500 and some of the other major averages are overbought. But, that is not necessarily bad news for the bulls. Overbought is a term used by technical analysts to describe a market that seems to have moved too far to the upside. It usually results from a relatively rapid gain. After a market becomes overbought, technical analysts look for a pullback in price. The theory of overbought, and the converse of that idea which is an oversold ...