IB Traders Insight


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Technical Analysis

VIX (VX) Testing Weekly Chart Upchannel Resistance


The VIX (VX) closed barely higher yesterday after some initial profittaking, and is now testing upchannel resistance (on the weekly chart).  The VX is also within a session or so of hitting the January high, and should be targeting the daily chart upchannel resistance shortly after.  Weekly, daily and 4hr RSI, Stochastics and MACD are mostly rallying.  I am flat and am looking to go long intraday on any dip towards 25-26 today.

 

VIX (CFE VX Feb16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on Euro Stoxx 50, DAX, Nikkei, S&P500, Nasdaq100, GBPUSD, Natural Gas, Silver

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


8622




Technical Analysis

DAX (FDAX) Testing Weekly Chart Downchannel Support


The DAX (FDAX) had a slight up day yesterday but was reversing most of the day's gains by the close.  The FDAX is now just shy of downchannel support (on the daily and weekly charts).  Furthermore, given how the daily RSI and Stochastics are showing early signs of bottoming, the risk:reward in the near-term on shorts at the current level is becoming less compelling.  The weekly RSI still slopes down though, suggesting that any bounce today (on US Unemployment Claims at 830am EST and Janet Yellen's testimony at 10am EST) will likely be short-lived, just like yesterday's.  I won't be trading the FDAX as the FDAX is an overly big contract for my tastes but will continue monitoring it as a leading indicator of where the other index futures on my Watchlist may be headed.

 

DAX (Eurex FDAX Mar16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on Euro Stoxx 50, VIX, Nikkei, S&P500, Nasdaq100, GBPUSD, Natural Gas, Silver

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8621




Technical Analysis

Euro Stoxx 50 (FESX) Testing Weekly Chart Downchannel Support


The Euro Stoxx 50 (FESX) had a slight up day yesterday but was reversing most of the day's gains by the close.  The FESX is now just shy of downchannel support (on the daily and weekly charts).  Furthermore, given how the daily RSI and Stochastics are showing early signs of bottoming, the risk:reward in the near-term on shorts at the current level is becoming less compelling.  The weekly RSI and daily MACD still slope down though, suggesting that any bounce today (on US Unemployment Claims at 830am EST and Janet Yellen's testimony at 10am EST) will likely be short-lived, just like yesterday's.  I am flat currently not liking the odds on either an intraday long or short at this point.

 

Euro Stoxx 50 (Eurex FESX Mar16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on DAX, VIX, Nikkei, S&P500, Nasdaq100, GBPUSD, Natural Gas, Silver

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8620




Futures

Market Sentiment & Other Indicators: Commodity Mass Exodus


While hedge funds became disenchanted with agricultural commodities and seem to be interested in placing money in other sectors, the departure seems hasty and probably overdone, with excellent opportunities. The bullish fever had been stoked previously by the lure of China and the seemingly magical ability of China to turn all to gold as they bought everything related to construction and expansion, aside from feeding a rising middle class population. This insatiable appetite created wealth around the world to those supplying China. Now that China has slowed its spending and the economy is no longer growing as it was, the bloom fell of the rose and the love affair with all China ended. While the full ripple effect from this is probably not yet felt, there are other stories to tell that could make commodity markets appealing and still very much a focus of a basket of commodities. Cotton especially is generally a leading indicator and predictive of emerging cycles because it is a measure of industrial activity as well as consumer behavior and spending. Cotton demand suffers in a downturn in the housing market. If mill use remains strong, so too does the economic outlook. While China may not be spinning as much, other countries are showing stronger gains. Low energy prices may help to lower the cost of production and reduce shipping putting pressure on commodities but it also should allow for increased spending and therefore greater demand.

Markets that lean heavily net short will become attractive opportunities once again, especially for those markets where stocks seem to be relatively tight or declining.

 

For greater details on this, you may wish to purchase the latest J Ganes Consulting Softs In-Depth Report with annual subscriptions or single issues available on www.jganesconsulting.com.
 
This article is from J. Ganes Consulting, LLC and is being posted with J. Ganes Consulting, LLC’s permission. The views expressed in this article are solely those of the author and/or J. Ganes Consulting, LLC and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

8619




Fixed Income

How to Ballast a Portfolio with Bonds


Russ and investment strategist Terry Simpson explain how to ballast a portfolio using fixed income, traditional “safe-haven” Treasuries not included.

 

If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.

Earlier last month, stocks fell faster than any deterioration in fundamentals would seem to warrant. Then, as January drew to a close, equities rallied, spurred on not by improving fundamentals, but rather by shifting sentiment after the Bank of Japan (BOJ) announced more aggressive stimulus.

The road has been bumpy for bonds as well, especially those in credit sectors, whose performance tends to be highly correlated with stocks. For instance, the U.S. high yield market, as measured by the Barclays U.S. Corporate High Yield 2% Issuer Capped index, experienced its worst start to a year ever, going back to 1994, Bloomberg data show.

Looking forward, these sorts of abrupt swings in financial markets are likely to continue, amid sluggish economic growth, rising interest rates, high valuations and geopolitical uncertainties.

It’s not surprising, then, that many investors are questioning where to find safety in the markets, beyond just staying in cash. In an earlier post, “Where to Ride Out the Volatility,” I covered three investing strategies to consider today for the equity side of portfolios, opting for defensive sectors not included. But it’s possible to ballast a portfolio using fixed income as well, and not just through Treasuries.

To put the recent volatility in context, it’s worth taking a look back. After the bull market kicked off six years ago, as investors searched for yield amid low interest rates, they increasingly turned toward fixed income credit sectors, such as high yield, investment grade and emerging market debt. These moves were justified given persistent low yields and the fact that these sectors tend to perform well amid economic improvement. However, these trends also created several imbalances. First, it drove up the valuations on many traditional equity dividend plays. Second, increasing credit exposure increases the risk of an entire portfolio due to the greater correlations between equity and credit.

Taking on such risk may be understandable when markets are only moving up, but in a volatile environment like the one we’re in today, having a portfolio of assets that tend to move together can leave investments especially vulnerable. In today’s volatile environment, it’s a good idea to consider building hedges to existing stock and credit allocations with the help of “safe-haven” bonds that are more sensitive to interest rates. In other words, when markets are volatile and there are worries about a recession, interest rate exposure can help offset credit risk in a fixed income portfolio.

The traditional way to do this would be to add exposure to nominal U.S. Treasuries, perhaps the safest of the “safe-haven” bonds, as they’re backed by full faith and credit of the U.S. government. Yet Treasury yields are still testing all-time low levels, and the Federal Reserve (Fed)’s rate normalization cycle is likely to continue, albeit very slowly. In short, these bonds remain both expensive (remember that bond prices and yields move in opposite directions) and vulnerable.

As such, I advocate shying away from nominal (unadjusted for inflation) Treasuries. Instead, I believe it’s prudent to extend allocations in other bond sectors and exposures that offer similar interest-rate sensitivity to Treasuries, but with more compelling investment cases.

U.S. Municipals: This has been the best performing bond sector over the last year, according to Bloomberg data for the Barclay’s Municipal index. Going forward, the sector should be supported by improving fundamentals and lower bond issues. In addition, yields look attractive on a relative basis with long-dated municipals yielding above comparable Treasuries.

U.S. Treasury Inflation Protected Securities (TIPS): I prefer getting duration exposure from TIPS over Treasuries, given the still very low inflation expectations priced into the market. While I don’t see runaway inflation on the horizon, there are some signs of higher prices ahead. For instance, the tightening labor market may be starting to show long-awaited wage gains. Lastly, TIPS, like U.S. Treasuries, are U.S. government securities.

Barclays Aggregate (Agg): Since 2013, many investors have shunned this bond index, believing the Agg’s higher duration or interest rate risk left portfolios exposed to large losses if interest rates shot up. But historically, BlackRock analysis shows, including some Agg-like products can create a more optimal risk-return portfolio. In addition, while the Barclays Aggregate Index is dominated by Treasuries, it also includes agency mortgage securities as well as investment grade debt. In short, it provides a broad, diversified exposure to help balance out equity risk.


Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog.

Terry Simpson, CFA, contributed to this post. He is a Global Investment Strategist for BlackRock.


Investing involves risks, including possible loss of principal.  Bond values fluctuate, so the value of your investment can go up or down depending on market conditions.  Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of February 2016 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

USR-8423

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8618




Macro

The Only Help Today is Going to an Employee at a Bank...


Those looking for any olive branch from the ECB are romancing the idea that the Committee will expand the “QECB” program to include even riskier assets beyond corporate bonds and asset-backed securities, specifically CoCo Bonds, preferred shares, or common equity bank shares in distressed banks like the ones in Italy first. Put another way, the ECB will soon be forced to adopt the model already deployed by the BoJ and PBoC.

While there are so many issues with this thought process, to our way of thinking it misses the point entirely.

The point is that the bounce in European financials, even if it is happening for the wrong reasons today, is starting to calm the credit stress issues that were noticeably creeping into the market place over the last few days and causing so much anxiety.

This is very visible in all the instruments that have been highlighted to you over the last few days – FRA/OIS, cross-currency basis, CDS, etc. Our favorite observation is that the tightening in European subordinated financial CDS is the most since the OMT was introduced in 2012, or the equivalent of a 5-standard deviation move! (Source: Bespoke)

How long this reprieve lasts are anyone’s guess, but the expectation already is that the European bid will support the US banks today regardless of the Fed Chair’s testimony to Congress.

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

 
This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

8617




Stocks

LinkedIn: How Low Can It Go?


LinkedIn (LNKD: $108/share) has fallen nearly 48% from the beginning of February. Market pundits and analysts are trying to “pick the bottom” largely in an effort to save face. 17 Wall Street firms have “Buy” or “Strong Buy” ratings, 13 firms have “Hold” ratings, and 0 firms have “Underperform” or “Sell” ratings on LinkedIn. While we know that ratings are nearly worthless and the bias is almost always positive, there is a lack of credible research on “just how low can LNKD go?” Our answer has not changed much since we put LinkedIn in the Danger Zone back in August 2013. We think the bottom for this stock is closer to $20/share.

Thesis Remains Unchanged

Our prior reports (from 2013 and 2014) were among the very first to note several problems with LinkedIn:

  1. Significant competition from the likes of Facebook, Twitter, and job search sites such as Monster.com.
  2. Revenue growth was slowing
  3. NOPAT margins were on the decline
  4. Hidden liabilities significantly reduced the value of the company
  5. Valuation implied astronomical growth rates

Our thesis has proven true. The problems above have only worsened. As Figure 1 shows, LinkedIn’s revenue, which grew 86% year-over-year in 2012, only grew 35% YoY in 2015. Even worse, margins have declined from 3.5% in 2011 to -1.5% over the last twelve months.

Figure 1: LinkedIn’s Declining Margins

Sources: New Constructs, LLC and company filings

Hidden Liabilities Undermine Valuation

Because LinkedIn finances its office space and data centers through the use of off-balance sheet debt in the form of operating leases, it has significant hidden obligations. In fact, LinkedIn has a total of $1.4 billion in future operating lease obligations, which we discount to a present value of $1.1 billion (24% of net assets and 8% of market cap). LinkedIn also has $132 million in outstanding employee stock option liabilities that must be removed from shareholder value.

Valuation Still Implies Unrealistic Growth Rates

Even after its 40% price cut, LNKD remains significantly overvalued. In order to justify its current price of $108/share, the company would need to immediately achieve a pre-tax margin of 4%, which was achieved in 2014, but has since fallen to -2.7% over the trailing-twelve-months. After achieving this margin, LinkedIn must grow NOPAT by 35% compounded annually for the next 13 years. This expectation seems even more improbable given that, since 2012, LinkedIn has only grown NOPAT by 7% compounded annually.

Even if LinkedIn can achieve 6% pre-tax margins (average since 2011) and grow NOPAT by 18% compounded annually for the next decade, the stock is worth $20/share today – an 81% downside. This scenario would imply nearly triple LinkedIn’s historical NOPAT growth. It’s not hard to see just how overvalued shares remain.

Valuation Is Unrealistic Even Given Acquisition Premium

With LinkedIn’s lowered valuation, one must wonder if a competitor such as Facebook (FB: $100/share – Dangerous Rating) could come pick up the pieces in an acquisition. Let’s take a look at LNKD’s valuation through the lens of a potential acquirer.

Let’s assume that Facebook acquires LinkedIn and upon acquisition LinkedIn immediately achieves Facebook’s margins and ROIC. In this scenario, the company would still have to grow revenue by 20% compounded annually for the next 11 years to justify buying LinkedIn at is current price (~$108/share). In this scenario, the value of LinkedIn’s business based on the value of the firm if it achieves FB’s 21% NOPAT margin in year 1 of the acquisition is $62/share – a 43% downside. The takeaway is that we think Facebook’s management is smart enough to wait for LNKD to drop to a more reasonable level before swooping in. No need to pay more than you have to.

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

About New Constructs

We find it. You benefit. Cutting-edge technology enables us to scale our forensics accounting expertise across 3000+ stocks. We shine a light in the dark corners of SEC filings so our clients can make safer, more informed decisions.

Our stock rating methodology instantly informs you of the quality of the business and the fairness of the stock’s valuation. We do the diligence on earnings quality and valuation so you don’t have to.

In-depth risk/reward analysis underpins our stock rating. Our stock rating methodology grades every stock according to what we believe are the 5 most important criteria for assessing the quality of a stock. Each grade reflects the balance of potential risk and reward of buying that stock. Our analysis results in the 5 ratings described below. Very Attractive and Attractive correspond to a "Buy" rating, Very Dangerous and Dangerous correspond to a "Sell" rating, while Neutral corresponds to a "Hold" rating.

Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research.

This article is from New Constructs, LLC and is being posted with New Constructs, LLC’s permission. The views expressed in this article are solely those of the author and/or New Constructs, LLC and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

 


8616




Stocks

Sector News Breakdown


Consumer

  • Urban Outfitters (URBN) Q4 revenue $1.01B vs. consensus $1.02B; comp Retail segment net sales, which include our comparable direct-to-consumer channel, decreased 2%. Comparable Retail segment net sales increased 2% at Free People and decreased 2% at the Anthropologie Group and 3% at Urban Outfitters
  • Panera Bread (PNRA) Q4 EPS $1.88/$691.8M vs. est. $1.78/$695.43M; Q4 company-owned comparable net bakery-cafe sales up 3.6%
  • JetBlue (JBLU) reported preliminary traffic for January increased 11.7% from January 2015, on a capacity increase of 10.8%. Load factor for January 2016 was 82.6%, up 0.7 points from January 2015

Energy

  • Algonquin Power & Utilities Corp. agreed to acquire The Empire District Electric Co. (EDE) for $1.49 billion, with EDE shareholders getting $34 per share in cash http://goo.gl/GLi8dS
  • SolarCity (SCTY) Q4 EPS loss ($2.37)/$115M vs. est. loss ($2.59)/$105.62M; sees Q1 EPS loss ($2.55-$2.65) vs. est. loss ($2.06); expects to install 180 MW in 1Q, -34% compared to 4Q 2015
  • The American Petroleum Institute (API) reported that crude supplies rose by 2.4 million barrels for the week ended Feb. 5 (Platts estimate was 3.2M build)

Financials

  • Deutsche Bank AG (DB) shares extended late session gains and credit risk fell as Germany’s biggest bank considers a bond buyback to help ease investor concerns about its funds, according to various reports
  • The Federal Reserve is requiring banks to prepare for the possibility of negatively yielding Treasury rates as part of their stress tests, a source familiar told CNBC. The scenario is "purely hypothetical" and not a forecast, the source pointed out.  http://goo.gl/iXZujn
  • Western Union (WU) Q4 EPS 42c/$1.38B vs. est. 42c/$1.40B; sees 2016 EPS $1.58-$1.70, below consensus $1.72; sees low to mid-single digit constant currency revenue increase in 2016; raises qtr dividend to 16c from 15.5c
  • S&P cut ratings on regional banks BOK Financial Corp. (BOKF) to "BBB+", Comerica Inc. (CMA) to "BBB+", Cullen/Frost Bankers Inc. (CFR) to "A-", and Texas Capital Bancshares Inc. (TCBI) to "BB+" on their exposure to loans in the energy sector amid falling oil prices
  • Arch Capital Group (ACGL) Q4 EPS $1.15 vs. est. $1.08; 4Q net premiums written $738.8M vs. $804.8M YoY and 4Q net premiums earned $824.3M vs. $869.6M YoY
  • Federal Realty (FRT) Q4 FFO $1.37/$192.5M vs. est. $1.38/$188.1M

Healthcare

  • USANA Health Sciences (USNA) Q4 EPS $1.83/$232.6M vs. est. $1.99/$238.7M; sees year EPS $7.60-$8.15 vs est. $8.59 and sales $1.02B-$1.05B vs. est. $1.01B
  • Seattle Genetics (SGEN) Q4 EPS loss (18c)/$93.5M vs. est. loss (20c)/$88.28M; sees FY16 revenue $390M-$430M vs. consensus $414.18M; includes ADCETRIS net product sales that are expected to be in the range of $255M-$275M and revenues from collaboration and license agreements that are expected to be in the range of $75M-$90M

Industrials & Materials

  • Genesee & Wyoming’s (GWR) said same-railroad traffic in Jan. 139,511 carloads, down 27,838 carloads, or 16.6% YoY
  • KapStone Paper (KS) Q4 EPS 17c/$764.2M vs. est. 36c/$775.1M; Q4 adjusted Ebitda of $82M, down $20M or 20% YoY; says 4Q was disappointing on Dec.’s results
  • Forward Air (FWRD) Q4 EPS 75c/$256.4M vs. est. 64c/$258.4M; sees Q1 EPS 41c-45c vs. consensus 45c and revs up 10%-12% YoY

Media & Telecom

  • Disney (DIS) Q1 EPS $1.63/$15.24B vs. est. $1.45/$14.75B; reports Q1 EPS Media Networks revenue $6.33B, Q1 Media Networks revenue $6.33B, Parks and Resorts revenue $4.28B, Studio Entertainment revenue $2.72B, Consumer Products and Interactive Media revenue $1.91B
  • Regal Entertainment (RGC) Q4 EPS 36c/$848.2M vs. est. 33c/$840.5M; said 4Q avg ticket price $9.76 vs. $9.19 QoQ

Technology

  • Akamai Technologies, Inc. (AKAM) announces new $1B share repurchase; Q4 EPS 72c/$579M vs. est. 62c/$568.7M; Q4 adjusted Ebitda $238M, up 3% YoY; said it was re-aligning its products and marketing teams into two divisions focused on media and Web customers
  • Demandware (DWRE) Q4 EPS 38c/$75.6M vs. est. 22c/, consensus $72.58M; said live customers reached 331 at December 31, 2015, an increase of 24% from 267 last year; sees FY16 revenue $295M-$305M vs. consensus $302.3M; sees FY16 Comparable Customer GMV Growth 17%-19% and bookings growth 25%-35%
  • Nuance Communications (NUAN) Q1 EPS 36c/$494.9M vs. est. 33c/$491.5M; Q1 net new bookings $308.7m, up from $303.8M YoY; sees Q2 revs $483M-$497M, vs. est. $493.7M; reaffirms 2016 net bookings growth of 2%-5%
  • Marketo (MKTO) Q4 EPS loss (13c)/$58.3M vs. est. loss (23c)/$58.1M; sees Q1 revs $61M-$62M, vs. est. $61.4M; sees year revs $267M-$277M, vs. est. $277.5M
  • Trimble Navigation (TRMB) Q4 EPS 27c/$559.7M vs. est. 24c/$544.4M; sees Q1 EPS 25c-30c on revs $565M-$595M vs. est. 30c/$579.0M
  • Scansource (SCSC) Q2 EPS 88c/$993.5M vs. est. 76c/$919.73M; said strong demand across our business led to record net sales and record non-GAAP EPS; sees 3Q EPS 62c-70c vs. est. 72c
  • Blackbaud (BLKB) Q4 EPS 38c/$175.9M vs. est. 39c/$179.3M;  sees year EPS $1.90-$1.98 vs. est. $1.83 and revs $725.0M-$740.0M
  • NCR Corp. (NCR) Q4 EPS 92c/$1.68B vs. est. 87c/$1.7B
  • Open Text (OTEX) Q2 EPS $1.01/$465.3M vs. est. 90c/$461.9M; Q2 license revs $81.9M
  • A10 Networks (ANET) Q4 EPS loss (6c)/$56.5M vs. est. loss (8c)/$54.52M

 

The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.



This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8615




Stocks

The Best and Worst of the Health Care Sector 1Q16


Sector Analysis 1Q16

The Health Care sector ranks sixth out of the ten sectors as detailed in our 1Q16 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Health Care sector ranked ninth. It gets our Dangerous rating, which is based on aggregation of ratings of 21 ETFs and 85 mutual funds in the Health Care sector as of January 19, 2016. See a recap of our 4Q15 Sector Ratings here

Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the sector. Not all Health Care sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 23 to 343). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Health Care sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Oak Associates Live Oak Health Sciences Fund (LOGSX) and Saratoga Advantage Health & Biotechnology Portfolio (SBHIX) are excluded from Figure 2 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

State Street Select Health Care Select Sector SPDR Fund (XLV) is the top-rated Health Care ETF and Fidelity Select Health Care Services Portfolio (FSHCX) is the top-rated Health Care mutual fund. XLV earns an Attractive rating and FSHCX earns our Neutral rating.

ETFis Series BioShares Biotechnology Products Fund (BBP) is the worst-rated Health Care ETF and Prudential Jennison Health Sciences Fund (PHLAX) is the worst-rated Health Care mutual fund. Both earn a Very Dangerous rating.

350 stocks of the 3000+ we cover are classified as Health Care stocks.

Amgen Inc. (AMGN: $151/share) is one of our favorite stocks held by XLV and earns an Attractive rating. Amgen is also one of only seven S&P 500 stocks to rise 10% or more in the last market crash. While biotech stocks can be wildly inconsistent, Amgen has consistently grown after-tax profit (NOPAT) by 9% compounded annually over the last decade. During this same timeframe, Amgen has improved its return on invested capital (ROIC) from 12% to a top-quintile 19%. Such consistency and growing profitability translates into AMGN increasing 100% over the past 10 years. However, AMGN remains undervalued in today’s market. At its current price of $151/share, AMGN earns a price to economic book value (PEBV) ratio of 1.2. This ratio means the market expects Amgen’s NOPAT to grow by only 20% over the remaining life of the corporation. If Amgen can grow NOPAT by 9% compounded annually for the next decade, the stock is worth $191/share today – a 26% upside.

DexCom Inc. (DXCM: $70/share) is one of our least favorite stocks held by PTH and earns a Dangerous rating. Since going public in 2005, DexCom has failed to generate any profits. In fact, DXCM’s NOPAT has only gotten worse, falling from -$37 million in 2005 to -$56 million over the last twelve months. DexCom’s ROIC remains a bottom quintile -29% and the company has burned through $440 million (8% of market cap) in cash since 2005. Despite the clear deterioration of business operations, DXCM remains overvalued. To justify its current price of $70/share, DexCom must immediately achieve positive pre-tax margins of 5% (-8% in 2014) and grow revenues by 32% compounded annually for 19 years. This expectation seems overly optimistic given DexCom’s near decade of losses and negative margins.

Figures 3 and 4 show the rating landscape of all Health Care ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.

About New Constructs

QUESTION: Why shouldn’t ETF research be as good as stock research? Why should ETF investors rely on backward-looking price trends?
ANSWER: They should not.

Don’t judge an ETF by its cover. Take a look inside at its holdings and understand the quality of earnings and valuation of the stocks it holds. We enable you to choose the best ETF based on its stock-picking merits so you do not have to rely solely on backward-looking technical metrics. 

The figure below details the drivers of our forward-looking Rating system for ETFs. The drivers of our predictive rating system are Portfolio Management and Total Annual Costs. The Portfolio Management Rating (details here) is the same as our Stock Rating (details here). The Total Annual Costs Rating (details here) captures the all-in cost of being in an ETF fund over a 3-year holding period, the average period for all fund investors.

Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research.

This article is from New Constructs, LLC and is being posted with New Constructs, LLC’s permission. The views expressed in this article are solely those of the author and/or New Constructs, LLC and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

 

 

 


8608




Technical Analysis

Has the Bull Market Finally Returned?


First published Sat Feb 6 for members of ElliottWaveTrader.net

Back in 2011, the market was eagerly waiting for gold to exceed the $2,000 level. Everyone viewed it as a certainty at the time. Yet, we at Elliottwavetrader.net suggested that it was time to sell once we struck the $1,915 level, with the market topping out only 6 dollars higher.

Now in 2016, the great majority of the market was equally certain that gold was going to drop below $1,000. However, our BUY box on our chart – which originally was provided to members at Elliottwavetrader.net several years ago, and has remained quite consistent - was prominently presented just a bit above the $1,000 mark, with the GDX BUY region just below the 13 level, and silver's beginning at 14. And, after a 4+ year correction, our BUY boxes have all been struck.

This past week, we experienced the strongest rally in the miners that has been seen in many years. And, some are questioning if this represents the initial rally off the long term bottom, while many others view this as yet another corrective rally. My personal perspective is that this is the best potential we have seen for a true long term bottom since we struck our highs over 4 years ago.
With regard to the GDX, we have been noting for a few weeks that the bottom struck within our long term BUY box has been struck with a completed bottoming 5-wave structure at the 12.40 level. However, we also noted that in order to confirm a long term bottom being in place, not only must we complete the pattern to the downside, we must also complete an initial 5 wave structure off the lows.

Thus far, we have a completed bottoming pattern in place, and seem to be in the heart of the 3rd wave off that bottoming pattern. Ideally, all 5 waves should be taking us towards the 21/22 region, which is the path we have clearly laid out on our chart for quite a long time. Moreover, we needed certain resistance levels to be broken to dispel the notion of an extended 5th wave lower. This past week, with the last minute move through the 17.04 level on Friday, all those levels have now been broken.

The price action seen on Friday has opened the door for the market to continue higher to complete a larger degree 5 wave move off the 12.40 level, and take us up towards the 21/22 region target to complete wave I off the lows. The only action which would make me reconsider a bottom being in place for GDX is a break down below 15.50 early in the coming week.

But, to be completely honest, I am not as convinced about gold and silver YET. First, the bottoming in the diagonal of GLD has not been at all typical, which has been outlined many times before in my prior analysis. Moreover, the move off the recent lows did not begin with a clearly impulsive rally. In the past, these factors were enough for me to confidently state that the final lows have not been struck.

However, with the action seen in the miners of late, along with the metals having struck our long term BUY targets for this correction, and now, having taken out our initial resistance region on the GLD, I cannot be anywhere near as confident that lower lows will certainly be seen. In fact, I have a “no man's land” designation for where the GLD currently resides. And, should the market be able to move through that “no man's land,” and take out the resistance at 118, it would likely pave the way for the GLD to complete a 5 wave structure (off the recent lows in our BUY box) in the 122-125 region we had targeted for the top of wave I for quite some time.

And, lastly, we move to the problem child – silver. The only way to consider a bottom having been struck in silver is for it to have completed with a truncated ending diagonal. Clearly, this is not the most reliable of bottoming patterns. Moreover, we still have strong resistance overhead which can turn us down for a final wave to a lower low. However, should silver be able to break through the 16 level, and take us up in 5 waves towards the 18-22 region to complete the green wave I (which has also been on our chart for quite some time), then it will be quite clear that silver has transitioned back into a bull market phase.

To date, every time the market has rallied off a bottom, I have been quite confident that lower lows were going to be seen. And, for many years, I have been correct, even though most of the market disagreed at the time. However, this is truly the first time in many years where I am going to strongly entertain that the bottom has been struck, especially since we have struck the targets we set out years ago.

As I have said many times over the last half year, I have had no desire to be shorting this market aggressively, since we are coming to the end of this 4+ year correction. The time for shorting this market has come and gone, and I have even less desire to short this market at this time. Rather, I am now going to give the bull market the opportunity to re-assert itself, and will continue to ride the long positions purchased in our BUY BUY BUY boxes, Now is the time to sit back, and allow the market to prove if we have transitioned back into the bull market, which will then have us apply different “rules,” as to how we react to market action.
Along those lines, I want to re-post something I sent out as an alert this past week in preparation for the resumption of the long-term bull market:

I see some of you attempting to look at the overbought nature of the technicals on the miners and metals and view it as simply another topping pattern just like all the others we have had for years.

The issue that many overlook is that we apply those technicals differently during bull moves vs. bear moves. You see, if the market has truly bottomed and transitioned into a bull phase, then overbought indicators simply remain overbought as the market continues higher in a 3rd wave. This is when technicals embed and why so many are caught off guard when a market transitions from bear to bull.

So, do not assume an overbought indication in the techncials will mark a top this time, and maintain an open mind to the potential that the market may have finally transitioned. Due to the potential of a bottoming pattern in place in GDX, we now need more than just an overbought indication on the technicals to confirm a top to a corrective rally. We also need to see a Fibonacci Pinball support level broken by an impulsive structure to the downside.

In conclusion, this post is simply to note that indicators should be used differently during bull phases and bear phases, and one has to be able to understand how to use them appropriately during the different phases of a market move.


See charts illustrating the wave counts on the $HUI, GLD, GDX, and YI.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net , a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.
 
This article is from ElliottWaveTrader.net and is being posted with ElliottWaveTrader.net’s permission. The views expressed in this article are solely those of the author and/or ElliottWaveTrader.net and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


 


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