BABA - Change of Character

Welcome back, Traders and Wealth Builders.

Back in September of 2014, Chinese Internet retailer Alibaba (BABA) went public in what was the largest IPO of all time at least in terms of market capitalization.  After a nervous opening day (perhaps due to the previously botched IPO with Facebook) BABA opened in the 85 range and soon rallied all the way up to the 120 area.

After that it was a slow grind down and BABA disappointed many initial investors.  Earnings have been decent, but the prospect of ongoing litigation regarding not doing enough to stop the selling of counterfeit goods as weighed on the shares.  And your humble blog author lost some money on the shares, looking for a low around 90 but washing out in the high 80's once the shares broke down.

But things changed when the company reported earnings back on 5/7/2015.  Not only did earnings beat estimates by almost 100%, the issues around litigation seem to be resolved.  Since then there has been a steady stream of good news including a partnership between AAPL and BABA.  Add to that the fact that fellow internet retailer AMZN shares have been on a rip to the upside along with the rest of the market.

Taking a look at the voodoo, BABA still has yet to make it back to the top of Elliot Wave 1 at $100. I traded some call option and sold a put spread this past week (Carter would be proud) and had one of my best option trades of the year. As for now, I have no position, but I expect BABA has some further upside at a minimum up to the top of Wave 1 at $100.  A pullback to the breakout point at $90 would provide a good opportunity for re-entry.

Have a great memorial day holiday and a great week ahead.

FB, Amazon and Netflix Revisited

Welcome back traders and Wealth Builders.

In my prior blog post, I covered these same 3 stocks, FB, AMZN and NFLX.  But they are so interesting, and respect the Fib levels so nicely, the trio is worth another look.

First up in Facebook.  After reaching a new all-time high back on March 24 the stock has been in retreat.  This past week is found support just 10 cents from the white line at 76.95.

Obviously this stock has under performed recently.  But sometimes, the long-term trend trumps any short-term weakness and I remain fully positioned to the long side and have not sold any shares.


Next up is AMZN. After an upside earnings surprise, the stock ripped out to a new all-time high gapping past the 423% line. In my prior post, commented that I expected the stock to fill the gap before resuming its uptrend.  But instead, notice how the stock came down and kissed the 423% line then headed straight higher.

I have no position in AMZN, but I am starting to rethink the company.  It's not so much about earnings per share. Its about the dominant affect this company is having on retailing.  Amazon is disrupting traditional retailing and creating entire new economizes where they facilitate business.

I recently listened to a presentation by a John Carter friend who described how he sets up businesses to sell things on Amazon.  He selects the products and has the manufactured and shipped to Amazon who handles the fulfillment and shipping.  He never has to handle the the inventory and his risk is limited more or less the price he paid for the inventory.   Of course he was also selling a course and mentor ship for $5000 where you could learn to do the same.  I passed on that of course, but the impression is made was palpable.

Think about this for a second.  If you wanted to buy something, and knew more or less what you wanted, why not buy it on Amazon?  Up there there is the worlds single largest collection of sellers competing for your business on price and user feedback. And when you are done, you point and click your way to fulfillment.  And with the prospect of Amazon Prime (which includes free shipping) I can see more and more people do business on Amazon.  To summarize, its not about earnings its about market share.  I have no current position in AMZN, but will be watching as the stock approaches the previous high.

Last up is NFLX.  After an upside earning surprise the stock has been consolidating just under the tree line at 574.60.   But it seems determined to make a break to the upside and once it does, the next green line is overhead at 606.  That's neatly a $30 move and could pay off quite well on a small (1 lot) option position.

To summarize, here are 3 fascinating and disruptive companies with the shares all within striking distance of new all-time highs.  Watch them carefully and pounce when the time is right.

And have a great week ahead.

FB, Amazon and Netflix

Welcome back Traders and Wealth Builders.

We saw some historic new highs this past week, particularly in in the Nasdaq Composite which blew out to new all time highs on the heels of huge moves in AMZN and NFLX.

It was a huge week for earnings.  As is ever the case in economics, its a winner-take-all situation.  Once a stock exceeds its expected move into earnings, its off to the races as those positioned against the move rush in to cover their short positions.  And we saw text moves in AMZN and NFLX the prior week.

As for Facebook, it was a pretty tame affair, and the option sellers made out nicely on that trade. Speaking of Facebook, notice how well the Fiblines have been containing the price action. I'm still long the shares and in it for the long haul.

As for AMZN, it blew through the 423% red line at 412.94 and ran up to 445.  That provides and opportunity to recalculate the Fib lines for AMZN.  But I'm not in a hurry to do that since I expect the price will return to the point of the breakout before advancing further.

The company did report a profit and estimates for future earnings are looking promising.  But this company does not have a history of growing earnings, so I'll believe it when I see it.

Nearly any way you look at it, its been a fantastic environment to grow your wealth in the stock market.

If you want to get your hands on free Fiblines indicator for TOS send an e-mail to:

fx-mon-subscribe@yahoogroups.com

Good trading and have a great week.

Fib Lines go International

Welcome back traders.

One key theme which is producing some good returns so far this year is international markets. Take a look at the graphic on the left and you can see that symbols like EEM, EFA and FXI have under performed their US counterparts over 2 year and 5-year time horizons.

But on a year to date basis, note how these key international ETF's are outperforming comparable US markets. Now that Europe has figured out that QE works, those markets have a lot of catching up to do.  So along those lines, I thought it would be a good time to visit Fib Lines for some key international items.

First up in the US Dollar as measured by the dollar index which is up about 20% in the past 3 months
after breaking out to a new 10-year high back in December of 2014.

I found the beginning of Elliot Wave 1 at the low at 70.69 and the high at 89.5 which was an area of resistance going as far back as 2006.  Since then the tree lines have been doing a fairly good job bracketing the price action.  Note the next major point of resistance is the 161% red line up at 101.15.   I also added the US Dollar Index futures /DX which has a very similar interpretation.

Next up are key international ETF's EEM and EFA.  Both are up nearly 10% year to date,  Both ETF's have similar interpretations as most US markets putting in the bottom and top of wave 1 between March and June of 2009.

Next up is FXI, the iShares China Large Cap ETF.  This index was up about 10% as of the end of March and has since then ripped up to a series of new 4 then 10 year highs.  As of now, FXI is up nearly 23% for the year and looking at the longer term chart, has higher to go to the upside with no serious resistance until up in the 54 area.

I struggled mightily with this chart over a period of days and could not find an interpretation that made any sense.  I finally settled the setup as shown in this monthly chart with supporting points as follows:

- Start of wave 1 is at the low at 20.90 set back in 2008

- End of wave 1 is at 31.27 which has been a point of support several times since then

- Price tagged the 261% line and were deflected back

In the past 6-7 years price seems to have more or less pivoted around the 161% line finding resistance at the overhead tree line.  Once price took out the 261% line at 48.05, it was off to the races to the upside.  I still expect higher prices ahead and I am long via the June 47 calls.

Finally, I added support for the Dow Indexes $DJI (Industrials) $DJT (Transports) and $DJU (Utilities) at the request of a group member.

If you want to get your hands on free Fib lines indicator for TOS send an e-mail to:

fx-mon-subscribe@yahoogroups.com

Good trading and may the odds be ever in your favor.

Fib Lines for Futures

Hi Traders and Welcome Back.

Things are moving along well with my Yahoo Group and membership has grown about 20% in the past month or so.  It seems like word of the Fib Lines indicator is starting to spread and I think its great.  Keep it coming and please let your trading friends know and ask them to join the group to get updates.

At the urging of a some new members I have added support for a handful of futures with continuous contracts as follows:

/ES - E-Mini S&P 100

/EMD  E-Mini Midcap 400

/YM - Mini Dow Jones Industrials

/TF - Russell 2000 Index Mini

/NQ - E-Mini Nasdaq 100 Index

/CL - Light Sweet Crude Futures

/GC - Gold Futures

Most of these products are based on the major stock indices. So the interpretations were all highly similar to their ETF counterparts which bottomed at the depths of financial crisis in 2008 and put in the end of Wave 1 in March or April of 2010.

The only chart that gave me some trouble was /CL - Crude Oil Futures.  After some struggle I came up with the following which you can see on the left.

Recall that crude had an incredible spike up to nearly $150 a barrel in June of 2008 just to crash all the way down to a low of about $33 a barrel just a short 6 months later.

What was interesting is where prices held after that crash which was just about $35.  Going back in time, it turns out that price level has been an important point of resistance all the way back to the year 2000!

So I ended Wave 1 at the $35 area and the result is what you see above which shows the entire sequence of lines.  Not shown on the chart is the beginning and end of wave 1 which started in 2000 at $11.05 and and ended in 2009 at $35.6.

What leads me to think this interpretation is correct?

- Note that the high of $150 clearly exceeded the 423% line to the upside (-1)

- Note how the low at $35 corresponds to the 100% line at the top of wave 1 (+1)

- Note how the prices then rallied back up to the 423% line and were turned back (+1)

- After that, prices dropped back down to the 261% line and bounced (+1)

So that provides enough votes (in my mind anyway) to favor the above interpretation.  Based on this, its fair to say that oil seems to show a high degree long term price memory with levels being respected which go far back as 15 years.

The new version of the Fib lines indicator for TOS will be available on my Yahoo group on Sunday 4/2/2015.   If you want to join the group, please send an e-mail to:

fx-mon-subscribe@yahoogroups.com

Enjoy the rest of your weekend

CBM - Bounce off the Red Line

Here are my Fiblines levels for Cambrex Biosciences, ticker symbol CBM.  This stock popped up on my "New High, Positive Earnings, Low PE" scan.

Note how after running up to new highs, it pulled back to the red line and bounced.

This company also has excellent fundamentals with a 5 year earnings growth rate of 45% and a PE of 21.  Cramer says you can pay up to 2x the growth rate which would be a PE of 90 which would mean the stock could quadruple from here.

I am not quite that optimistic, but the stock was recently upgraded by a broker with a price target of $50.  I am long the shares in anticipation of higher prices ahead.

Twitter Breakout with Fiblines

Big day in TWTR today with an upside break of a trend line on the weekly which has been in force since December of 2013.  So this is a significant trend change signal and I'm hanging on for higher prices ahead.

Next resistance is at the green line at 54.75 just short of the recent top.