Stock Trends for 2017

The trends that I am watching in 2017 are not much different than what I have been following and investing in over the past two years. As Newton’s first law stated,

“An object in motion continues in motion…”.

I could search for the “next hot thing”each year but why make investing more difficult than it already is when certain trends, technologies, products, services and companies continuously work.

Perhaps this list is old and boring (Buffett likes boring) but we’re here to make money, not be sexy.

Investing in the stock market should not be exciting or a path to get rich quick, rather it’s meant to moderately grow our existing capital over longer periods of time.

As I grow older, I have learned that I can beat most investors by being average. By investing (longer term) in low cost index funds and an assortment of stocks that have proven their worth, my returns have consistently outperformed social media stock pickers, active managers and mutual funds.

In fact, I suggest that 99% of all investors stick with low cost index funds and skip individual stocks altogether.

Ask yourself: why would you risk your capital with an active manager who will likely underperform over time, once the fees and activity eat away at the gains?

The S&P has provided an annualized gain of 14.5% over the past 8 years while the Nasdaq 100 has provided a 20.4% annualized gain. That’s a cumulative gain of 195% and 339% respectively.

I haven’t seen many active managers do better than this over the same period. Once again, why risk the guess work of tops, bottoms, trends, fees, commissions, etc.? If active managers were performing 2x-3x+ the averages, over 10+ year periods, then I would consider their services.

Now, let’s get to the list (which contains much of the products and services I use, as well as several of the stocks I already own):

*NOTE: the overall health of the markets must be positive for many these investments to do well.

Digital Currency:
As I did in 2015 (Stock Trends for 2015), I will skip the details surrounding blockchain and Bitcoin (which is above $1,000 as this post). Cash is still king worldwide, as more than 80% of all transactions globally (and 40% in the United States) are still carried out using cash, particularly transactions involving small amounts of money. So why is this good? Because the growth opportunity of electronic transactions is still substantial. I own several on the list and would recommend any of the seven.

  • PYPL: $39.47. PayPal operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide. The stock appears to be building a solid base above the up-trending 200d ma. A few more solid earnings reports and I can see the stock making a 50% move in 2017, from $40 to $60, riding that 200d ma higher.
  • AMZN: $749.87. Amazon Payments service competes with PayPal, Apple Pay, and Google Wallet, already owns a sizeable market share and may be its most “underappreciated” business, per RBC Capital. The stock is consolidating near it’s 200d ma and if it holds, could be poised for the next leg higher ($750 to $1,000?).
  • V: 78.02. Visa operates the world’s largest retail electronic payments network and is one of the most recognized global financial services brands. The stock has been mostly sideways over the past 6-12 months and is currently below the 200d ma during a multi-year up-trend. As a long-term shareholder, I’m holding, until it proves otherwise.
  • MA: 103.25. MasterCard operates the world’s second largest retail electronic payments network. Like Visa, I will continue to ride and recommend this stock until it proves otherwise.
  • AAPL: 115.82. Apple trailed its peers and the broader market in 2016 but may launch a comeback in 2017. The stock can be listed in several “trends” but I’ll place it here due to Apple Pay. The stock is back above its 50d and 200d ma’s. It needs a catalyst to make a run, perhaps the iPhone 8, a new technology and/or its electronic pay network? Deep down, I question whether the magic is gone, now that Jobs is long gone. We’ll see, but for now, I am still bullish on the company and stock. Adding shares below $100 has proved profitable over the past two years.
  • GOOGL: 792.45. Alphabet has both Google Wallet and Android Pay (I am an Android guy, without a doubt). The stock is consolidating above the 200d ma and could be setting up for a run towards $1,000. With wallet, pay, advertising, self-driving cars, etc., the stock could be listed under most trends on this post.
  • VNTV: 59.62. Vantiv is an electronic payment processing services to merchants and financial institutions in the United States. I placed the lesser known company/stock on my “13 Stocks for 2013 – 2nd Half” portfolio. I was early, as the stock traded mostly flat for the next 12 months but then it took off and more than doubled since. Like V and MA, it’s in a profitable business with excellent earnings. I can see this stock trading at $100 per share in the future.

Autonomous Driving:
Tesla, Ford, Uber, etc., each of these companies keep touting the revolution of self-driving cars. It’s coming and the technologies keep expanding. Nvidia was highlighted in 2015 and became the leader by going on a 440% tear, from $19.96 to a high of $119 in December 2016. The chips are hot again, therefore I added Intel to this list (another blast from the past).

  • NVDA: 106.74. NVIDIA Corporation, operates as a visual computing company worldwide. The stock is up big over the past 6-12 months and may need some time to digest the gains. I would advise new investors to allow the stock to consolidate on lower volume above a support area, such as the 50d ma.
  • MBLY: 38.12. Mobileye develops computer vision and machine learning, data analysis, and localization and mapping for advanced driver assistance systems and autonomous driving technologies. The stock is down since making my 2015 Trends list and has had a volatile ride with a high above $64 and a low of $23.57. Look for the stock to stabilize and mature a bit in 2017, now that the IPO is in the rear-view mirror. I could see a move from the upper $30’s to above $50 in 2017, however, it must recapture its major moving averages first.
  • INTC: 36.27. Intel designs, manufactures, and sells integrated digital technology platforms worldwide. Like NVDA, Intel is now in the self-driving game with its chips. The stock gained more than 20% from its low point of 2016 and is currently in an up-trend above the rising 200d ma. Chip stocks appear to be all the rage again (is this good or bad, as memories of the dot-com bubble appear in my head).
  • TSLA: 213.69. Tesla Motors Inc. designs, develops, manufactures, and sells electric vehicles and stationary energy storage products. What can I say, I’m a big fan of Elon Musk. I added the stock due to the Musk factor but I am suspect. It’s struggling to recapture and sustain a move above its 200d ma. December was a big month for the stock but since 2015, it has been mostly flat with lots of volatility (similar to MBLY).

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Stock Screens & Scans for Traders & Investors

As a part time trader & investor, I strictly use end of day data for my screens and scans as I don’t have the luxury of watching the tape all day long (nor do I want to). With that said, I do receive text alerts if a buy signal is made or if a sell signal has been violated. Using my smart phone or tablet, I can and do trade during business hours (when absolutely necessary) but it’s not imperative.

I encourage investors and traders in all time frames to evaluate stocks for investment using both fundamental and technical analysis. A day trader and even a swing trader can get away with avoiding fundamental analysis but I highly recommend both methods of analysis for intermediate and longer term trend traders and investors. Both tools are equally important in making serious decisions with your hard earned CASH!

Let’s start with a list of the key fundamentals that I require to be filtered within my mechanical screeners (please note that you should use your screener of choice):

Simple Fundamental Screener Criteria:
The criteria listed in this section can be used together or arranged in a variety of ways to generate multiple screens containing all possible opportunities. Get a feel for specific screens and determine which are the most successful during certain market conditions.

Most Important Fundamentals:

  • Increasing Earnings (current, past: quarterly, yearly and future estimates)
  • Increasing Sales (current, past: quarterly, yearly and future estimates)
  • Increasing Net Income (current, past: quarterly, yearly)
  • Increasing Institutional Sponsorship
  • Increasing and strong Relative Strength ratings vs. general market

Most Important Price Data:

  • Stocks making New Highs
  • Stocks within 15% of New Highs
  • Stocks trading slightly above or within 5% of the 50-d ma
  • Stocks within 10% of the 200-day moving average (in weaker markets)

Less Important Metrics:

  • Increasing Return on Equity (ROE)
  • Price / Earnings Growth (PEG) – less than 1 is preferable
  • Accumulation/Distribution ratio (up days vs. down days)
  • Up / Down Volume over past several months

Fundamental screeners will scan thousands of stocks narrowing down the universe to a couple dozen to a few hundred each night or weekend. The more bullish the market, the larger the list of stocks will be and vice versa for weak markets. From here, the savvy investor turns to technical analysis to identify “when” and “where” to place a new position for the ideal risk-to-reward ratio.

General Market Metrics & Technical Analysis:

  • Determine if overall market is in a specific trend (up, down or sideways). Use multiple moving averages to quickly determine the trend.
  • Evaluate sister stocks or stocks within the same industry group (strength travels in groups so the probability of success rises when buying into a strong industry).
  • Study the one year weekly chart (preferably candlesticks)
  • Study the six month daily chart (preferably candlesticks)
  • Look for increasing accumulation days (stock up on above average volume)
  • Evaluate the Point & Figure chart for clean support and resistance levels
  • Look for basic chart patterns such as flat bases, cup bases, saucer bases, triangle breakouts, obvious trends along a moving average, etc…
  • Properly forming bases
  • Pivot points
  • Breakout areas
  • Extended stocks
  • Stocks pulling back to key support lines
  • Favorable risk-to-reward setups
  • Check volume action when bases are formed

Market Breadth – Using Screens
It is extremely important to pay attention to the quantity of stocks making your screeners from time to time. The length of the list alone will tell you how healthy or how weak the market currently is, without even checking another factor.

For example, a standard screen of mine searching quality stocks making new highs should be full of candidates during a fresh up-trending market. The list should be full of candidates as long as the trend continues. As soon as this list starts to thin out on a daily and weekly basis, become cautious that the breadth is weakening.

Example of my most successful screens:
When scanning these screens, I will view the stocks in descending order starting with the day’s largest price percentage change and occasionally starting with the day’s largest volume change versus 50-day average.

1. Quality Stocks that are trading within 15% of 52-week Highs

  • Current price is within 15% of the 52-Week High
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 80% of the general market
  • Current 50-Day Average Volume is at least 100k shares per day
  • % Increase in Volume (Current Day) vs. 50-Day Average Volume: Volume 50% larger than the 50-d average

2. Quality Stocks making New 52-week Highs:

  • Current price is trading at a new 52-Week High
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 80% of the general market
  • Current 50-Day Average Volume is at least 100k shares per day
  • % Increase in Volume (Current Day) vs. 50-Day Average Volume: Volume 15% larger than the 50-d average

3. Institutional Sponsorship Increasing

  • % of the number of Institutions for Current Quarter vs. Prior Quarter have increased by 10%
  • % of the number of shares owned by Institutions for Current Quarter vs. Prior Quarter have increased by 5%
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 50% of the general market
  • Current 50-Day Average Volume is at least 100k shares per day

4. Quality Stocks with a new IPO’s within the past two Years

  • Current price is greater than or equal to $10 per share
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 80% of the general market
  • Market Capitalization is greater than or equal to $100M
  • Current 50-Day Average Volume is at least 50k shares per day
  • % Increase in Volume (Current Day) vs. 50-Day Average Volume: Volume 50% larger than the 50-d average
  • IPO Date within past 5 years (sometimes use 3 years)

Although I run these screens at least once per week, one or two will come into favor while others fall out of favor depending on the market environment or situation. Over time, the strength and weakness of certain screens will also give you a hint as to what the overall market is doing (another breadth signal).

For example, a screen that locates quality stocks making new 52-weeks highs is best used when a market is forming a new up-trend and the overall movement is still fairly fresh. This screen is less important near the end of a strong up-trend because at this point, many of the stocks making new highs are exhausted. The trader will see more failed breakout attempts, reversals and late stage bases so the odds are no longer in favor of this screen.

In strong up-trending markets, one cannot expect to buy every stock that makes the screens so it comes down to developing a risk-to-reward calculation to grab shares in the equities that show the greatest upside.

Lastly, it’s important to understand that no investor is perfect and losses are part of the game when it comes to investing and trading. Most traders will have as many winners as they do losers (using successful screeners) so having sell rules is critical for sustainable success. Learn to cut losses short while letting winners run, no questions asked.

By cutting losses, you account will not blow-up and you will be around to trade another day, especially when your screens are screaming buy!

Stocks near 200-d MA Support

The following spreadsheet consists of 175 stocks that are trending back towards their 200 day moving average while maintaining strong relative strength. It’s essentially a screen of the stocks that have potential to catch support at the 200-day moving average and lead the market IF (a BIG “IF”) it decides to resume the up-trend.

I’ll narrow down this list of 175 to 10 – 20 of the best, technically, in my opinion (later this week).

Take a look:

Stocks to Watch: April 3, 2011

This post contains weekly charts of several interesting stocks that I am following personally and on twitter (disclosure: I own shares in more than one). Each of the following stocks have been trending higher on above average volume.

$LOGM – 46.08
$MOBI – 12.85
$NXPI – 30.59
$SODA – 46.80
$SVN – 21.83
$MMYT – 30.99

Let’s see if the $DJIA and $COMPQ will cooperate by maintaining the up-trend. Both are showing some signs of exhausting but we’ll trade what the charts are doing, not what we think they may or should be doing.

Strong Stock Charts

Today’s screen features quality stocks with increasing institutional fund sponsorship and charts with trends moving higher (trading above key moving averages as well). Not many interesting stock charts exist in this market but I can say that these look strong when compared to peers.

The stocks also meet the requirements below:

  • Earnings per Share (EPS) Rating: Increasing quarter over quarter
  • Relative Price Strength (RS) Rating: 60+
  • % of the number of mutual funds owning for current quarter vs. prior quarter: Increased by 10% or more
  • Stocks trading at new 52-week high or within 15% of 52-week high
  • 50-Day Average Volume was greater than or equal to 100% (Friday’s market)

Stock charts listed in alphabetical order:
(ACET), (AIPC), (CFFN), (COCO), (COGT), (DSCP), (EBS), (ENSG), (EZPW), (FCFS), (INSU), (LHCG), (LPHI), (MYGN), (THOR), (TSYS)

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