A Different Look at the Market Provides a Conclusion That Will Scare You

Technical analysts are familiar with breadth indicators. This is a class of indicators designed to measure how broad the participation in a price move is.  The general idea behind breadth indicators is that a healthy trend will have broad participation. In a bull market, for example, most stocks should be in uptrends. This is based on the theory that a market with just narrow leadership is likely to reverse. This was seen in 2000 when just a few stocks were moving higher. These stocks carried a great deal of weight in the indexes and pushed the indexes up. Breadth warned of a problem and th...
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What Harvey Could Mean for Stocks

We are forced to look at history once again. That is a natural response when we are faced with uncertainty. We tend to do this in many parts of our lives. For example, before we go to a family gathering we may recall what happened at previous events and prepare accordingly. On a larger scale, we turn to history when trying to make sense of politics. As a new president is being inaugurated we often look for precedents and compare the modern day with something from the past that we believe to be similar. This gives us at least a sense of security and a baseline for expectations. Although w...
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The Best Trades for September, From a Strategy That’s Beating the Market This Year

As you know, we’ve been providing real time buy recommendations for a successful trading strategy since the beginning of the year. Each month, we provide a list of stocks that have historically delivered gains for the next month. It’s time for us to update on this strategy. We are following 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 we are running a scan to find the stoc...
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Rare Investment Opportunities: Penny Stocks With Earnings:

This week, we came across a list of interesting stocks. They’re cheap stocks with earnings. This is unusual because many low priced stocks, those trading less than $5 a share, don’t have earnings. These are often companies with potential, but risk. Their potential makes them appealing as investments. But, the potential lies in the future. The income statement of any company reflects the past. It’s possible the past may not reflect the potential, especially in the case of stocks that are developing new products. Penny Stocks: Definitions and Risks Penny stocks might have a bad reputation a...
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Moving Averages: How They Should Really Be Used

Market commentators seem to love talking about moving averages. It seems like major market averages are always near an important moving average. One reason for this is that there are a lot of important moving averages, or MAs. Traders often follow the 200-day MA to assess the direction of the long term trend. They might add the 50-day MA to their charts to track the intermediate term trend and the 20-day MA can be used to determine the short term trend of the market. The result is a chart that looks like the one below. Looking closely at the chart, we see that prices frequently mo...
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How to Look for Cheap Stocks that Could Double

Peter Lynch called them “ten baggers.” It’s a stock that can go up in value by ten times, for example from $9 to $90 a share. These stocks are obviously difficult to find but in the past, they have shared certain characteristics. Spotting these characteristics just might help us uncover the future ten baggers. To begin with, a ten bagger will have to be a small company. We know that because it is just impossible for some stocks to increase in value by ten times. Take Apple (Nasdaq: AAPL), as an example. With a market cap of more than $800 billion, Apple would need to become an $8 trillion c...
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History Shows How the Stock Market Handles a Crisis

We often think we live in unprecedented times. But, the truth is, there is very little that’s never been seen before. Almost every event has a historic precedent and studying those precedents can help us understand how the stock market is likely to react to the current events. Let’s start with an event that appears to be unique. North Korea is developing a nuclear weapon. Some investors may believe we have never seen anything like this before. But, of course, we have. China spent more than a decade pursuing atomic weapons, a pursuit that at the time was every bit as alarming as North Kor...
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Cheap Defensive Stocks for a Bear Market

The news grows more and more ominous by the day. The economic news continues to disappoint. Global events are also disappointing. We can find unrest in Latin America, the Middle East and Africa. In Asia, there’s a threat of war. In North America and Europe, sluggish growth and political divides prevent action. These conditions could be the setup for a bear market. And, many investors are worried about that. It’s not just the news that worries investors. Valuations are high and the technical condition of the market is generally overbought. We’ve seen bear markets begin after these condit...
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A Deep Dive Into Stochastics

We often see indicators drawn on a chart. Many times, an analyst will not even explain why the indicators are shown. At other times, they will claim an indicator has some important meaning. Rarely, if ever, does an analyst support their claim about an indicator with facts. The truth is many indicators do not work as their proponents claim they do. They merely show the “well selected example” which is the one time the indicator worked perfectly. With this technique, the failures of the indicator are ignored. Even when they are visible on the chart. Well selected examples are not necessari...
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Cheap Stocks Analysts Believe Could Double

Analysts are almost always wrong. In an average quarter, for example, about two thirds of the companies reporting earnings will deliver results that exceed analysts’ consensus estimates. The consensus estimate is an average of all published estimates. Of the remaining companies, usually more than half miss the consensus estimate. That means, in a typical quarter, the consensus earnings forecast will be right for just 10% of the companies. Analysts are wrong, in other words, about 90% of the time. Despite that fact, analyst estimates are important to consider. Ignoring them because they a...
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