Where is Dow's Heading to Going Forward?

Here is an interesting article from Daryl Guppy. I have 2 books by this author, he is a very experience technical analyst using candlestick and trend methods.

Below are the recent article by him on where is Dow's heading to next:

Dow's Next Upside Target 13,000-13,500: Charts

Published: Thursday, 30 Dec 2010

By: Daryl Guppy

CNBC Contributor

U.S. markets are looking to end off the year on a positive note, hitting new closing-highs on Wednesday, as investors remain optimistic about the prospects for equities in 2011. But how much further can this uptrend continue for?

When a market has been moribund for so long, any movement, no matter how small, takes on additional significance.  The Dow's [.DJIA  11583.64    13.93  (+0.12%)] rise above 11,600 is a move towards the upper part of a sideways trading range that dominated the markets in 2010.

It is driven by changes in money supply conditions created by the latest round of quantitative easing and some suggest this does not reflect any fundamental change in economic conditions.

The move from the trading band low at 9,600 to 11,600 looks an impressive 20 percent but it hides a generally weaker performance of the market when measured against Asian markets.

Year-on-year the Dow's rise is around 10 percent from 10,500 to 11,600. This raises some questions about the strength of the move beyond 11,600. The move to 11,600 is interesting from a technical perspective. It has been a long time coming, but 11,600 is the projection target for the inverted head and shoulder pattern that developed between November 2008 and July 2009.  It has taken almost two years for this long term chart pattern to play out.

A number of European markets in particular developed similar inverted head and shoulder patterns around the same time in 2008 to 2009. However these markets have reached their projection targets much earlier and have since developed new patterns of breakout behavior. These markets, including the DAX [.GDAXI  6914.19    -81.28  (-1.16%)] and the FTSE [.FTSE  5899.94    -71.07  (-1.19%)] provide some indication of how the Dow may develop as it tests the inverted head and shoulder target level at 11,600.

Additionally, the breakout from a broad sideways consolidation band is not unique to the Dow. This same pattern of behavior is seen in many European and Asian markets, and in a number of commodity markets, including oil. The width of the trading consolidation band is used to project the next upside target. With the Dow, this is between 13,000 and 13,500. The variation is due to the imprecise support level created at the lower edge of the Dow's consolidation area.

Either of these targets suggests a reasonable level of return for the Dow, but they ignore one important feature associated with the achievement of the inverted head and shoulder pattern targets. The continuation of the uptrend after the target has been achieved is not guaranteed. The market may move sideways, using the 11,600 level as a support level and moving slowly towards the new trading band projection targets. The breakout above 11,600 does not necessarily make for strong trending behavior.

This remains a stock pickers market rather than an investors market. In 2010 the market added, at best, 20 percent. Over the same period Baidu [BIDU  97.408    -0.802  (-0.82%)] added around 130 percent. Finding stocks that display consistent strength is the challenge for 2011. Their strength may be aided by a tepid Dow breakout above 11,600. Traders will look for rally and retreat behavior in the index as the 11,600 level is tested as support and as the market probes towards trading band targets near 13,000 or 13,500.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBC's Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. He is now also on Facebook.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

© 2010 CNBC, Inc. All Rights Reserved

Level 3 Communications - Not for the Faint Hearted

Yesterday while I was browsing through the top volume stocks in NASDAQ market, I happened to see this nicely set up chart which I think is due for a rebound. This stock is none other than Level 3 Communications (LVLT).

 Based on the long term view, the recent down trend line has been broken. It looks like it may head up to the 1st resistance of $1.8 level.

Based on the short term chart, LVLT convincingly broke the down trend line with a bang with very heavy volume and a big gap up. After that, this stock heads a little down for a short term consolidation. Looking at the decreasing volume, it suggest that the selling might be over and the consolidation for the recent upward move appears to be over.

Both the MACD and Stochastic indicate a positive sign for this stock. The MACD histogram appears to be moving towards the middle line into the top. As per the MACD line, the blue line is now touching the red line and it appears that the blue line will go on top anytime.

The stochastic looks strong and it has not yet reach the overbought level which is above the 80% level. It looks like this stock will definetely go up in the next few days.

Based on the technical sides, this stock is definetely a big buy for me.

Lets look at the fundamental side:
The past five quarter earning do not look good at all.
Q3, 2009 = -0.10
Q4, 2009 = -0.11
Q1, 2010 = -0.14
Q2, 2010 = -0.10
Q3, 2010 = -0.10

Going into the future, the estimates earning do not look good as well. Many analysts give a estimate of -0.10 for the coming new few quarters.

Based on this quarterly earning report for the past and the future earnings, I do not intend to go further on my research as I believe this is a waste of time, this stock do not past my 1st criteria as a good fundamental stock.

Therefore, fundamentally this stock is not a buy.

Based on the simple technical and fundamental analysis that I have done above, I would say that this stock is definetely for the daredevil and not the faint hearted. However, if you would like to try, kindly make sure that you put a stop loss whereby if these stock go down to $0.90 from the curent $0.97, you should sell immediately instead of letting the stock goes down further and burn away your hard earned money.

Good luck! and Happy New Year!
=====================================================

Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 

Happy New Year 2011

Every year goes by very fast. It is like a blink on an eye. If we look back at the past 1 year, do I really accomplish anything? I definetely not. I am not doing really well for the year of 2010. It is like a punishment and learning year for me.

However, for this year 2011, I would like to see a new beginning not only for my blog, but for my investment in the stock market as well. I hope that this year, not only I will achieve my target of $1million, but at the same time, I hope to donate more to help the needy and also bring to the readers of my blog, my knowledge and experience, to the journey of reaching $1million.

I pledge to donate more, if I ever achieved this goal and I hope that all my readers of my blog can benefit as well.

Last but not least, I would like to wish a very Happy New Year to everybody and may all your dream and your goal in life will come true and thank you for your visit to my blog which makes this blog lively.

What Now for Supervalu? Buy, Hold or Sell?

 

I have invested half of my capital in this stock at $9.16. So after more than a week, the big question is what now? Will the stock continue to go up from here after a small gain to $9.26 or will Supervalu continue its downward trend? Is Supervalu is really super value now? Well, I hope my technical analysis skill that I have acquired for more than 10 years will help me answer this question. 

I will not analyze this stock based on A-E section that I have indicated on the above chart.

A- Based on the candlestick indicator, it is currently showing a positive outlook. I believe that within 2-3 days more, this stock will shot up with at least a 3% gain.

B- After a small climb from the $8.80 level, the stock now is consolidating at the $9.20 level. The decreasing in volume show that after this small run up, the selling has been well absorbed for the next upward surge. It shows that they are no more selling or has been reduced an the operators is slowly and quietly accumulating the stock for the next upward surge.

C- The MACD histogram show a slight negative indication because the last bar is red, therefore, it is not a good sign. However, I believe that this is only a very small indication on the downside which does carry any weight.

D- As per the MACD line, the blue line is still very much on top of the red line, as long as the blue line is on top putting pressure on the red line, I can definitely sleep well at night and hold on to my darling - Supervalu.

E- Stochastic indicator is now showing a 50-50 indication on whether this stock will move up or down. The blue line is currently touching the red line and it is quite worrying for me actually. Stochastic indicator is a powerful indicator to detect the shift of trend line. I rely on this indicator quite often. As for the current status, I don't have a clue what will happen cause it is currently at the 50-50 cross road.

Based on the above analysis, I am very confidence that Supervalu will continue its upward move within these few days. However, if I am wrong, I will not hesitate to chop off this stock from my portfolio at once. Even thought I believe that the percentage gain for this stock can be 3-4 times more than fundamental stock like Cisco, Supervalu is still a risky stock with very high debt. Therefore, this is a stock that I will take immediate action once I think it is failing me.

As for Cisco, which I have parked my other half of my capital in this stock, I will continue to hold until I have realize at least a 10% gain, no matter what the short term move for this stock is.

=============================================================

Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 

US Airways Group a Hold or a Sell?

A regular visitor to my blog and now a friend ask me whether it is a sell or hold for US Airways Group (LCC). She has bought it at $10.42 and now is trading at $9.90. Although it is just a small losses, however, small losses can turn into big losses in a short time, therefore, swift action must be taken to ensure that losses is kept to the minimum.

Lets look at the technical part and then we shall look at the fundamental side.

Looking at the long term chart, this stock is currently trading at an upward channel line. However, looking at the decreasing volume, it shows that the buying or support for this stock is losing momentum. As per the MACD and the Stochastic Indicators, both indicated a downward move for this stock in the near future.

As for the short term chart, it shows that this stock might be heading towards the 1st support line at around $9 and if it breaks through, I will not be suprised that it will head down to the $7 level. On the last candlestick pattern, it show a bearish engulfing pattern which is bearish.

As per the technical analysis above, I will sell this stock.

As for the fundamental analysis, the past 4 quarterly earning and the next 2 quarters estimate are as follows :

Q4 2009 = $-0.20

Q1 2010 = $-0.55

Q2 2010 = $1.34

Q3 2010 = $1.23

Q4 2010 = $0.05

Q1 2011 = $-0.40

As can be seen from the above quarterly earning, it fluctuate substantially. It is not stable. This is not the kind of stocks that fits into my investment portfolio.

Although this stock is trading at a very low PE ratio at around 4.69, it does not mean that this stock will move upward. Sometimes stock trade at low PE ratio because the investor know that the value of the company is not attractive going forward.

Moreover, this stock does not issue dividend.

As a conclusion, this is not the type of stock that I am looking to buy or hold unless it is trading at $2-$3 when it is in the middle of year 2009.

However, please note that my analysis is not 100% correct, therefore, you need to decide based on your own judgement.

Below are the recent news on this stock:

=============================================

Citigroup (NYSE: C) Analysts Begin Coverage on US Airways Group, Inc. (NYSE: LCC)

December 18th, 2010

Citigroup (NYSE: C) research analysts began coverage for shares of US Airways Group, Inc. (NYSE: LCC) in a research note issued to investors on Wednesday. They set a “hold” rating and a $12.50 price target on the company’s stock. The analysts noted that the move was a result of a valuation call.

US Airways Group, Inc. (NYSE: LCC)’s stock traded down 0.69% on Friday, hitting $10.06. US Airways Group, Inc. has a 52 week range of $4.32 to $12.26. The stock’s 50-day moving average is $11.07 and its 200-day moving average is $9.89. Analysts predict on average that US Airways Group, Inc. will post $-0.40 earnings per share next quarter. The company has a market cap of $1.625 billion and a P/E (price-to-earnings ratio) of 4.69.

About US Airways Group, Inc. (NYSE: LCC)

US Airways, Inc. (US Airways) is engaged in the operation of a network air carrier. The Company provides air transportation for passengers and cargo. US Airways is a wholly owned subsidiary of US Airways Group, Inc. (US Airways Group). US Airways is a member of the Star Alliance, the airline alliance, which has 26 member airlines serving approximately 1,077 destinations in 175 countries as of December 31, 2009. US Airways has hubs in Charlotte, Philadelphia and Phoenix and a focus city at Ronald Reagan Washington National Airport. US Airways offers scheduled passenger service on approximately 3,000 flights daily to approximately 190 communities in the United States, Canada, Mexico, Europe, the Middle East, the Caribbean, Central and South America.

=====================================================

Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 

The Best Dividend Stocks

I have recently came across this article from a recommendation of a friend. This is an interesting article that I would like to share with everyone here. It mentioned that you can actually get an overall yield of 4% and cash a dividend check every month of the year from these 3 stocks: - Philip Morris International (PM), Bristol-Myers Squibb (BMY), and Intel (INTC).

The details of the article is as per below:

Monthly dividends from a 3-stock portfolio

by Chuck Carlson, editor DRIP Investor

DRIP investors typically reinvest dividends. However, my guess is that many will eventually need to start taking dividends to supplement other forms of cash flow.

And you’d like to receive those dividends on a regular basis. And, in fact, you can get monthly dividend check from a portfolio holding just three stocks.

True, most companies pay dividends either quarterly or semiannually.

Still, with some homework and planning, it is possible to turn that quarterly event into a monthly one by owning a basket of stocks that pay dividends during different months of the year.

For investors especially focused on current yield, Philip Morris International (PM), Bristol-Myers Squibb (BMY), and Intel (INTC) have special appeal.

Intel yields over 3%, and Bristol-Myers Squibb and Philip Morris International have yields well over 4%.

I would expect the companies to boost dividends over the next 12 months.

Philip Morris pays dividends every January, April, July, and October.

Bristol-Myers Squibb pays dividends February, May, August, and November.

Intel pays dividends March, June, September, and December.

As a result, investors who buy this “three-stock portfolio” would see an overall yield of 4.1% and cash a dividend check every month of the year.

In addition, all of these stocks offer direct-purchase plans whereby any investor may buy the first share and every share of stock directly from the company, without a broker.

Learn more about this financial newsletter at Chuck Carlson's DRIP Investor.