Saturday, April 5, 2014

5 Stocks Poised for Breakouts

DELAFIELD, Wis. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players who can ultimately push the stock significantly higher.

>>5 Stocks Under $10 Set to Soar

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels and hold above those breakout prices, then it can easily trend significantly higher.

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With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

SPDR Gold Shares

One gold ETF that's starting to move within range of triggering a near-term breakout trade is SPDR Gold Shares (GLD), which has an investment objective to reflect the performance of the price of gold bullion. This ETF is off to a decent start in 2014, with shares up around 8%.

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If you take a look at the chart for SPDR Gold Shares, you'll notice that this stock has sold off pretty hard over the last few weeks, with shares dropping sharply from its high of $133.69 to its recent low of $123.11 a share. During that drop, shares of GLD have been consistently making lower highs and lower lows, which is bearish technical price action. That said, GLD has now started to bounce off that $123.11 low and it's quickly moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in GLD if it manages to break out above its 50-day moving average of $126.14 a share and then once it clears more near-term overhead resistance at $127 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 7.95 million shares. If that breakout triggers soon, then GLD will set up to re-test or possibly take out its next major overhead resistance levels at $130 to its recent high of $133.69 a share.

Traders can look to buy GLD off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $123.11 a share or around $120 a share. One can also buy GLD off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.


A entertainment technology player that's starting to trend within range of triggering a near-term breakout trade is Imax (IMAX), which specializes in motion picture technologies and presentations. This stock is up modestly over the last six months, with shares up by around 6%.

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If you take a look at the chart for IMAX, you'll see that this stock recently formed a double bottom chart pattern at $25.97 to $26.27 a share. Following that bottom, shares of IMAX have started to rip higher and move back above both its 50-day and 200-day moving averages. That spike is quickly pushing shares of IMAX within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in IMAX if it manages to break out above some near-term overhead resistance levels at $28.84 to $29.84 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 486,124 shares. If that breakout triggers soon, then IMAX will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $31.23 a share. Any high-volume move above that level will then give IMAX a chance to tag $34 to $35 a share.

Traders can look to buy IMAX off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $27.10 a share or around those double bottom support levels. One could also buy IMAX off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

China Techfaith Wireless Communication Technology

Another technology player that's starting to trend within range of triggering a big breakout trade is China Techfaith Wireless Communications Technology (CNTF), which engages in the original design, development and sale of handsets. This stock has been in play with the bulls over the last six months, with shares up sharply by 32%.

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If you take a glance at the chart for China Techfaith Wireless Communication Technology, you'll notice that this stock recently sold off from its high of $3.01 to its low of $1.77 a share. During that drop, shares of CNTF were consistently making lower highs and lower lows, which is bearish technical price action. Shares of CNTF have now started to stabilize a bit and uptrend modestly from its low of $1.77 to its recent high of $2.05 a share. This stock is now starting to uptick a bit today as it moves within range of triggering a big breakout trade.

Traders should now look for long-biased trades in CNTF if it manages to break out above some near-term overhead resistance levels at $2.05 a share to its 50-day moving average of $2.08 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 540,900 shares. If that breakout materializes soon, then CNTF will set up to re-test or possibly take out its next major overhead resistance levels at $2.40 to $3 a share.

Traders can look to buy CNTF off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.81 to $1.77 a share, or even around $1.66 a share. One can also buy CNTF off strength once it busts above those breakout levels share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Fortuna Silver Mines

Another basic materials player that's starting to trend within range of triggering a near-term breakout trade is Fortuna Silver Mines (FSM), which engages in the exploration, extraction and processing of silver and gold properties in Latin America. This stock is off to a strong start in 2014, with shares up sharply by 37%.

>>Chart Smarts: Trade These 5 Big Stocks for Gains in April

If you look at the chart for Fortuna Silver Mines, you'll notice that this stock recently topped out at $4.79 a share and then subsequently dropped sharply to its low of $3.41 a share. During that drop, shares of FSM were consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of FSM have now started to rebound off that $3.41 low and it has trended back above its 200-day moving average. This bounce is quickly pushing shares of FSM within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in FSM if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $4.07 a share to more near-term overhead resistance at $4.20 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 301,124 shares. If that breakout gets underway soon, then FSM will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $4.79 a share.

Traders can look to buy FSM off weakness to anticipate that breakout and simply use a stop that sits right below its 200-day moving average of $3.65 a share or around more support at $3.41 a share. One can also buy FSM off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.


My final breakout trading prospect is gold mining player B2Gold (BTG), which explores for and develops mineral properties in Nicaragua, the Philippines, Namibia, Burkina Faso and Colombia. This stock has been in play with the bulls so far in 2014, with shares up by a whopping 42%.

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If you look at the chart for B2Gold, you'll see that this stock recently pulled back off its high of $3.33 to its low of $2.59 a share. During that decline, shares of BTG were consistently making lower highs and lower lows, which is bearish technical price action. That pullback took shares of BTG right to its 200-day moving average, where buyers have for now stepped in to support the stock. Shares of BTG are now starting to rebound higher off that $2.59 low and the stock is trending back above its 50-day moving average at $2.75 a share. That move is quickly pushing shares of BTG within range of triggering a big breakout trade.

Traders should now look for long-biased trades in BTG if it manages to break out above some near-term overhead resistance levels at $2.86 to $3 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.83 million shares. If that breakout triggers soon, then BTG will set up to re-test or possibly take out its next major overhead resistance levels $3.20 to $3.33 a share, or even its 52-week high at $3.58 a share. Any high-volume move above $3.58 will then give BTG a chance to tag its next major overhead resistance levels at $4.06 to $4.50 a share.

Traders can look to buy BTG off weakness to anticipate that breakout and simply use a stop that sits right around its 200-day moving average of $2.51 a share. One can also buy BTG off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including and You can follow Pedone on Twitter at or @zerosum24.

Friday, April 4, 2014

5 Best Penny Stocks To Watch For 2014

With an old year like this, who needs a new one?

The S&P 500 gained 29.6%, the biggest percentage gain since 1997, to close at 1843.36, a record. The Dow Jones Industrial Average rose 26.5%, its biggest gain since 1995, to 16,576.66, also an all-time high.

Those gains came despite a wide range of issues that in the past might have shaken the market to its core. It was a year of government dysfunction as Republicans and Democrats battled over the debt ceiling and included a government shutdown; a year when the fear of a Fed taper shook emerging markets and yield-sensitive investments but the real thing came and went with nary a rumble; and a year when TK.

It’s a year that will be remembered as a time when hedge-fund titans did battle with companies–who can forget Carl Icahn calling for Apple (AAPL) to do something with its cash–and each other–William Ackman’s call to short Herbalife (HLF) countered by Icahn and George Soros–as well as admitting defeat–Ackman exiting JC Penny (JCP) when his strategy to turnaround the struggling retailer backfired.

5 Best Penny Stocks To Watch For 2014: RAIT Financial Trust(RAS)

RAIT Financial Trust operates as a self-managed and self-advised real estate investment trust (REIT). The company, through its subsidiaries, invests in, manages, and services real estate-related assets with a focus on commercial real estate. It also offers a set of debt financing options to the commercial real estate industry along with fixed income trading and advisory services. In addition, RAIT Financial Trust owns and manages a portfolio of commercial real estate properties, and manages real estate-related assets for third parties. The company qualifies as a REIT for federal income tax purposes. As a REIT, it would not be subject to federal income tax to the extent that it distributes at least 90% of its taxable income to its shareholders. RAIT Investment Trust was founded in 1997 and is based in Philadelphia, Pennsylvania.

Advisors' Opinion:
  • [By Thomas Sobon]

    Instead of expressing my thoughts in vague generalities, let me be specific and tell you what I am actually doing on a real time basis to cope with the market dynamics occurring right now: I have a core position in one stock, which is the RAIT Financial Trust (RAS). Its size is about 60% of what I would consider to be a "full" position. I also have a lot of cash that I intend to use for trading purposes. Last Friday I sold shares of RAS at $7.55 which I bought on Monday with a low-ball bid of $7.11, so my gain on the trade was 6.2%. In early trading yesterday (Monday July 1) RAS is priced at $7.67, up from where I sold on Friday. That's great news because I accomplished what I wanted to do with the trade and now paper profit on the core shares in my portfolio is increasing.

5 Best Penny Stocks To Watch For 2014: Flexsteel Industries Inc.(FLXS)

Flexsteel Industries, Inc., together with its subsidiaries, engages in the manufacture, import, and market of residential and commercial upholstered and wooden furniture products in the United States. Its upholstered and wooden furniture products include sofas, loveseats, chairs, reclining and rocker-reclining chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables, desks, dining tables and chairs, and bedroom furniture. The company distributes its products for use in home, office, hotel, and other commercial applications through its sales force and various independent representatives, as well as to various national and regional chains. Flexsteel Industries, Inc. was founded in 1929 and is based in Dubuque, Iowa.

Advisors' Opinion:
  • [By Ben Levisohn]

    Shares of La-Z-Boy have gained 11% to $27.02 at 1:54 p.m. today. Its performance is also giving other furniture stocks a boost. Flexsteel (FLXS) has risen 1% to $27.60, Hooker Furniture (HOFT) has jumped 1.6% to $17.12 and Ethan Allen International (ETH) has advanced 1.2% to $29.20. Haverty Furniture (HVT) has dipped 0.3% to $27.87.

Top 10 High Tech Companies To Watch In Right Now: Comtech Telecommunications Corp.(CMTL)

Comtech Telecommunications Corp. engages in the design, development, production, and marketing of products, systems, and services for advanced communications solutions in the United States and internationally. It operates in three segments: Telecommunications Transmission, Mobile Data Communications, and RF Microwave Amplifiers. The Telecommunications Transmission segment provides satellite earth station equipment and systems, over-the-horizon microwave systems, and forward error correction technology, which are used in various commercial and government applications, including backhaul of wireless and cellular traffic, broadcasting (including HDTV), IP-based communications traffic, long distance telephony, and secure defense applications. The Mobile Data Communications segment provides mobile satellite transceivers, and computers and satellite earth station network gateways and associated installation, training, and maintenance services; supplies and operates satellite pac ket data networks, including arranging and providing satellite capacity; and offers microsatellites and related components. The RF Microwave Amplifiers segment designs, develops, manufactures, and markets satellite earth station traveling wave tube amplifiers (TWTA) and broadband amplifiers. Its amplifiers are used in broadcast and broadband satellite communication; defense applications, such as telecommunications systems and electronic warfare systems; and commercial applications comprising oncology treatment systems, as well as to amplify signals carrying voice, video, or data for air-to-satellite-to-ground communications. The company serves satellite systems integrators, wireless and other communication service providers, broadcasters, defense contractors, military, governments, and oil companies. Comtech markets its products through independent representatives and value-added resellers. The company was founded in 1967 and is headquartered in Melville, New York.

Advisors' Opinion:
  • [By Monica Gerson]

    Comtech Telecommunications (NASDAQ: CMTL) reported upbeat fiscal fourth quarter results and issued a strong full-year outlook. Comtech shares jumped 11.12% to $26.77 in the after-hours trading session.

  • [By Dividends4Life]

    Comtech Telecommunications Corp. (CMTL) designs, develops, produces, and markets products, systems, and services for communications solutions. December 9th the company increased its quarterly dividend 9.1% to $0.30 per share. The dividend is payable February 19, 2014, to stockholders of record on January 17, 2014. The yield based on the new payout is 3.6%.

  • [By Rich Smith]

    Maybe there's something to this whole "sequestration" phenomenon after all -- because for all intents and purposes -- and certainly in comparison with recent trends -- Department of Defense spending has come to a screeching halt in recent days. On Wednesday, for example, DoD issued a grand total of three new contracts, totaling a mere Pentagon pittance of just $44.4 million.

5 Best Penny Stocks To Watch For 2014: PostRock Energy Corporation(PSTR)

PostRock Energy Corporation, an integrated independent energy company, engages in the acquisition, exploration, development, production, and transportation of oil and natural gas in the United States. It operates in two segments, Oil and Gas Production, and Natural Gas Pipelines. The Oil and Gas Production segment primarily focuses on the development of coal bed methane in the Cherokee basin and the Marcellus Shale in Appalachian Basin, as well as has oil properties in Central Oklahoma. As of December 31, 2009, it had approximately 51.9 billion cubic feet equivalent (Bcfe) of estimated net proved reserves; development rights to approximately 516,184 net acres; and operated approximately 2,849 gross wells in the Cherokee Basin. It also had approximately 44,507 net acres of oil and natural gas producing properties with estimated proved reserves of 18.9 Bcfe and approximately 498 gross wells in Appalachian Basin; and had 65 gross wells, development rights to approximately 1,4 80 net acres, and estimated net proved reserves, 3.9 Bcfe in Central Oklahoma. The Natural Gas Pipelines segment involves in transporting, gathering, treating, and processing natural gas. It owns and operates a natural gas gathering pipeline networks of approximately 2,173 miles in the Cherokee Basin and 183 miles in the Appalachian Basin; and a 1,120 mile interstate natural gas pipeline, which transports natural gas from northern Oklahoma and western Kansas to the metropolitan Wichita and Kansas City markets. The company is headquartered in Oklahoma City, Oklahoma.

Advisors' Opinion:
  • [By Eric Volkman]

    LeBlanc is a veteran energy industry CFO. He has filled that role at East Resources -- now a unit of Royal Dutch Shell (NYSE: RDS-A  ) -- as well as�PostRock Energy (NASDAQ: PSTR  ) , and Range Resources, among others.

5 Best Penny Stocks To Watch For 2014: China Metro-Rural Holdings Limited(CNR)

China Metro-Rural Holdings Limited, through its subsidiaries, primarily engages in the development and operation of agricultural logistics and trade centers in northeast China. It also involves in purchasing, processing, assembling, merchandising, and distributing pearls and jewelry products. The company markets its pearls and jewelry products to wholesale distributors and mass merchandisers in Europe, the United States, Hong Kong, and other parts of Asia. In addition, it develops, sells, and leases residential and commercial properties in Hong Kong and the People?s Republic of China. The company is based in Tsimshatsui, Hong Kong.

Advisors' Opinion:
  • [By Katie Brennan]

    Canadian National Railway Co. (CNR) added 0.9 percent to C$104.93 and Canadian Pacific Railway Ltd. rose 1.7 percent to C$131.73.

    Niko Resources surged 3.4 percent to $8.64 after the company entered an agreement for a $60 million loan that will be funded by a group of institutional investors. Net proceeds from the loan will be used to fund working capital requirements.

Merck Stock Is Holding Back the Dow

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down following some mixed economic releases and a poor earnings release from Merck (NYSE: MRK  ) . As of 1:10 p.m. EDT the Dow is down 91 points, or 0.61%, to 14,749. The S&P 500 (SNPINDEX: ^GSPC  ) is down 10 points to 1,587.

There were three U.S. economic releases today.





ADP private-sector employment




Institute for Supply Management PMI




Construction spending




Source: MarketWatch U.S. Economic Calendar.

All three releases point to a slowing economy. The ADP private-sector jobs report showed that the private sector added just 119,000 jobs in April, down from 131,000 in March and below analyst expectations of 150,000. The Institute for Supply Management's Purchasing Managers Index fell to 50.7% from March's 51.3%, though it beat analyst expectations of 50.5%. Finally, construction spending dropped 1.7% in March, down from February's 1.5% growth.

The market is eagerly awaiting the Federal Open Market Committee's statement, which is expected to be released at 2 p.m. EDT. With recent data showing that the economy is slowing down but not contracting, the Fed is expected to make no change to QE3. The Fed is currently buying $85 billion of long-term assets each month in an effort to spur the economy on, and it has said it intends to continue doing so until inflation picks up or the unemployment rate drops to 6.5%. Any change to the Fed's actions or plans could make the market jump or drop.

For the second day in a row, a pharmaceutical company disappointed in its earnings release. Yesterday it was Pfizer, and today it was Merck, which is down 2.6%. Merck reported that earnings per share dropped 14% to $0.85 excluding one-time items, beating analyst expectations of $0.79. However, revenue dropped 9% to $10.7 billion, missing  analyst expectations of $11.1 billion. The big drop owed primarily to the loss of exclusivity for asthma drug Singulair. In the first quarter of 2012, Singulair sales reached $1.3 billion; this past quarter, the drug sold only $300 million as generics took market share. In other worrisome news, sales were down 1% for Merck's top drug combo: Januvia and Janumet, which are used to treat diabetes. The main reason the stock is down, however is that the company cut its full-year expectations by $0.15 to a range of $3.45 to $3.55.

It's not all bad news, though: Today Merck announced a $15 billion share buyback, which will be funded through new debt and earnings. This puts Merck's total buyback authorization at $16.1 billion, as $1.1 billion is still left from Merck's 2011 buyback authorization. The company expects half of the buyback to be completed in the next 12 months.

This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, the Fool tackles all of the company's moving parts, its major market opportunities, and reasons both to buy and to sell. To find out more, click here to claim your copy today.

Thursday, April 3, 2014

IMS Health Slated for Year's Second-Biggest IPO

While the initial public offering calendar has been jammed this year, it's mainly been small deals. Tonight, prescription-data provider IMS Health Holdings Inc. plans to bring a rare billion-dollar debut.

The Danbury, Conn.-based company and some of its existing investors — the Canada Pension Plan Investment Board and private-equity firms TPG Capital and Leonard Green & Partners LP — expect to sell 65 million shares for $18 to $21 apiece, according to a regulatory filing.

The deal would raise $1.37 billion at the high end of that range, marking the second-largest IPO in the U.S. this year.

IMS Health maintains healthcare databases used by pharmaceutical manufacturers, healthcare-plan providers, pharmacies and others. Since its acquisition by TPG and the Canadian pension plan in early 2010, it has made a number of acquisitions to build its consulting and software arm, which is growing faster than its legacy data business and drove the 4.1% increase in the company's total revenue last year.

"They have a very stable, large, profitable legacy business, and they're looking to cross-sell additional products and value-added services into their existing client base," said John Schroer, who oversees about $625 million in healthcare stocks as a portfolio manager at Allianz Global Investors.

The bull case for IMS rests on whether "the success they have had thus far is sustainable," he added. Mr. Schroer declined to say whether he plans to buy shares in the IPO.

There has been a flurry of corporate debuts since the start of 2014, on the heels of the most active year for such deals since the financial crisis. But large-company offerings like this one have been scant. Instead early-stage healthcare companies have dominated the calendar, many of them looking to raise a few hundred million, at most.

During the first quarter, 71 companies completed their initial share listings in the U.S., just shy of the 73 that did so in the final three months of 2013. But the proceeds raised in the latest period's deals tumbled to $12.3 billion from $25.3 billion.

The largest IPO so far in 2014, that of auto lender Santander Consumer USA Holdings Inc., raised $2 billion in late January. Natural-gas driller Rice Energy Inc.'s debut the same day raised $1.05 billion.

IMS Health is set to open on the New York Stock Exchange Friday under the symbol "IMS." J.P. Morgan Chase & Co. is leading the deal with Goldman Sachs Group Inc. and Morgan Stanley.

Why Infinera Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Infinera (NASDAQ: INFN  ) have skyrocketed by as much as 28% today after the company reported earnings last night.

So what: Revenue in the quarter was $124.6 million, topping the Street's forecasts of $119.7 million in sales. Infinera posted a non-GAAP net loss of $0.06 per share, which was less than the $0.07 per share that analysts expected the company to lose. CEO Tom Fallon said the company held up well amid a traditionally slow quarter.

Now what: The company's DTN-X platform continued to gain traction, and Infinera received purchase commitments from six additional customers, including two new customers. Needham & Co. has boosted its rating on Infinera from "hold" to "buy" and assigned the stock a $12 price target. The analyst was encouraged by strong guidance. Second-quarter revenue is expected in the range of $130 million to $140 million.

Interested in more info on Infinera? Add it to your watchlist by clicking here.

Wednesday, April 2, 2014

GM and Caterpillar Both Gain Despite Inquiries

Stocks made it three-for-three this week as the S&P 500 closed at a record high for the second day in a row, climbing 0.3% to close at 1,890. The Dow Jones Industrial Average  (DJINDICES: ^DJI  ) , meanwhile, gained 40% or 0.2%, finishing the session at 16,573, just three points short of its record closing high on the last day of 2014.

A strong employment report from ADP helped lift the market as the payroll processor said 191,000 private sector jobs were added in March and revised its February tally up from 139,000 to 153,000. Analysts had actually expected ADP to report 195,000 jobs were added last month, but the numbers were encouraging nonetheless, coming after a winter that froze the economic recovery. The data also bodes well for the official jobs report from the Department of Labor coming out Friday. Analysts are estimating the agency will report 195,000 new jobs were added last month. In a separate report, factory orders increased 1.6% in February, better than the 1.1% pace expected and its strongest mark since September.

Among Dow stocks moving higher today was Caterpillar  (NYSE: CAT  ) , which jumped 2.8% today as it defends its tax-avoidance practices in front of Congress this week. The heavy-equipment maker responded to allegations from a Senate subcommittee that said it has avoided $2.4 billion in taxes over the last 13 years by moving profits to a Swiss affiliate without transferring employees or business activities. Executives defended the practices, saying that "business practices drives our tax structure," not the other way around. Sen. Rand Paul (R-Ky.) took the opposite tack from Democrats in grilling the multinational manufacturer, going as far to salute Caterpillar for its strategy and success as an iconic American business. "We should probably give Caterpillar an award," he said. "It is a requirement that you try to minimize your costs. So rather than chastising Caterpillar we should be complimenting them." Caterpillar is just one of many blue chips that's been hauled before Congress to defend its tax strategy. Investors seemed to like the results of the hearing based on the stock's gains. 

Top 10 Medical Companies To Buy For 2014

Also gaining despite Congressional testimony today was General Motors  (NYSE: GM  ) . Shares of the carmaker finished up 1.6% even as lawmakers were grilled on why a recall on vehicles nearly 10 years old didn't happen sooner. New CEO Mary Barra had no answers for the negligence, saying an internal report due out within two months would provide explanations, but said the company has taken steps to ensure vehicle safety. Although the Justice Department is conducting a criminal investigation into the matter, investors seem to believe that the company won't face severe consequences, bidding shares up today.

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The Fed Says "No" to Citigroup

The Fed rolled out the second phase of it's "Stress Test" and the big surprise was that this bank was turned down, and MoneyShow's Jim Jubak has an idea why.

On March 26, the Federal Reserve announced its second phase of its stress test. The first phase was looking at banks and saying, "Oh well, if the economy does bad things, if debt does bad things, whose going to have enough capital to get by without really stressing their own financials?" Everybody passed that except for Zions Bancorp out of the 30 banks the Fed tested. The second step, the one that was announced on the 26th, was to look and say, "okay, so these banks all have capital plans, they want to do buy backs, they want to increase dividends. Who's really got the capital to do that?"

The feeling was that maybe the bank that would be most at risk for this was Bank of America (BAC), they didn't pass the first test with a whole lot of margin, but it turns out that the real surprise in this whole list was Citigroup (C). Citigroup, which had done relatively well on the first stage, actually got turned down. The Fed said, "No you can't do the capital plan that you wanted to do"—that Citigroup was talking about spending about $6.4 billion buying back stock and raising its dividend from a penny a quarter to five cents a quarter, and investors were looking forward to that, and the Fed said no.

What's really interesting is that the Fed didn't say no because Citibank's balance sheet—its capital—was too weak. What it said is that it didn't like the way that Citigroup ran its bank, that they were worried that there weren't enough internal controls. They were worried that the bank didn't have a good sense of where its cash was going, that it really couldn't do a good job of quantifying risk. Basically, this is in some ways the worst of two worlds, because in the bad scenario, the Fed comes and says, "Well, you don't have enough capital so that's relatively easy to fix. You go out and raise some more capital, you sell down your balance sheet, you get rid of assets that are making your ratios go down."

That's a relatively simple thing to fix because it's easy to do. The worst scenario, the one that I think that Citigroup has fallen into, is the Fed saying, "Well, you know, you just don't run your bank very well. You've got problems with controls in your Mexican subsidiary. You don't really do your risk well. We don't really trust your capital plan."

Best Small Cap Stocks To Watch Right Now

That's a much more difficult thing to turn around because that involves having to restructure the bank, hire new people, set up new rules. All of that has supposed to have been in place over the last two years, and what the Fed is saying is, "Well, Citigroup, you've done a lot of work, but you still have a lot further to go." And that, I think, means that out of all the banks in this list that didn't get their capital plans approved, Citibank, really took the biggest ding.

No Joke: An April Fool’s Day High for the S&P 500

It’s April Fools’ Day, but the joke is on the bears as stocks gained today, led by Intuitive Surgical (ISRG). TripAdvisor (TRIP), Cisco Systems (CSCO), Boeing (BA) and Walt Disney (DIS).

The S&P 500 gained 0.7% to 1,885.52 today, a new record high and its seventh of the year. The Dow Jones Industrial Average rose 0.5% to 16,532.61, its second highest close ever and just 0.3% from a new high.

The Dow was given a boost by Cisco Systems, which gained 3.9% to $23.10, Boeing, which rose 2.2% to $128.21 after finalizing an order for new planes, and Disney, which advanced 1.9% to $81.57. The S&P 500′s biggest gainers included Intuitive Surgical, which rose 13% to $493.60 after the FDA approved a new robot device, and TripAdvisor, which gained 5.5% to $95.55.

April Fools’ Day has been historically strong for stocks, notes S&P Dow Jones Indices’ Howard Silverblatt. He explains:

The market continued its move-up from yesterday (helped by Yellen's remarks), setting  its seventh new closing high year-to-date…The market also set a new closing high on April 1, 1998, and then beat that high the next day.  Guess April fool's day is lucky – 42 of 62 historically are up.

BofA Merrill Lynch’s Stephen Suttmeier reminds investors that April has historically been strong:

Seasonals are bullish in April. Going back to 1928, the S&P 500 is up 62.8% of the time in April. With an average return of 1.25%, April is the 4th best month of the year (side bar). But seasonals turn riskier beginning in May, especially during the mid-term year of the Presidential Cycle.

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Morgan Stanley Wealth Management’s Michael Wilson thinks earnings will have to do the heavy lifting now that the Fed has started to move:

Every economic cycle is different, but as they evolve, they generally share many of the same characteristics. Most recently, the US economic recovery passed a significant milestone—the point at which the Federal Reserve deems it appropriate to tighten monetary policy. One of the ways this cycle has been different is that the Fed has used a new monetary-stimulus tool: Quantitative Easing (QE). In December, the Fed announced it was time to wind down QE. With respect to the economic cycle, this is no different than the Fed's first rate hike after a recession. While this creates some uncertainty, we believe the Fed has it right, and it is time to remove monetary stimulus because the economy can now stand on its own…

Does this mean we should expect equity markets to continue to boom? Not necessarily. Equity markets rallied quite strongly last year, in part anticipating the Fed's affirmation that the recovery could be self-sustaining. Instead, we should expect equity markets to continue to rise more in line with earnings growth, as valuations are now fair. It's no coincidence that valuation measures peaked in December when the Fed announced it would begin tapering QE. To us, this suggests equity returns closer to 7% to 8% in the US and not the 20%-plus average annual return we have enjoyed during the past five years.

After the rocky start to the year, we’ll take it.

Tuesday, April 1, 2014

Qualcomm's 4G gambit in China could be big

SAN FRANCISCO -- Bullish bets on Qualcomm, the No. 1 U.S. supplier of smartphone-chip technology, may depend on more than just the timing of China's transition to more sophisticated wireless networks.

They could also hinge on an investigation of the San Diego-based company by a key government agency in that country.

China is in the middle of a major leap forward in infrastructure, to so-called 4G wireless networks that take full advantage of the latest smartphone features.

That's helped stoke bullishness in Qualcomm shares, which have outperformed the Nasdaq over the last six months.

Chinese consumers are expected to buy 420 million smartphones this year, up 27% from 330 million in 2013, according to a March note from the stock research firm Wedge Partners.

The share of 4G phones in that county over the next the two years is expected to soar, to 61% of the market, from 39% this year, the firm says.

Yet China Mobile, the No. 1 wireless company in the world's largest smartphone market, sold just 1 million iPhones in February, significantly less than Wall Street expected, according to the latest note from the research firm.

That makes expectations among Apple analysts of about 3 million to 5 million iPhones sold to China Mobile in the first quarter look too high by about one-third to one-half.

Coming on the heels of Apple's first-quarter forecast, which missed estimates by a wide margin when it was issued in January, the latest data affirm that the 4G opportunity in China this year won't come until the second half.

That may cause an inventory buildup at Apple and other makers of 4G handsets in the first half, something investors may hear about during the coming tech earnings season.

According to Qualcomm's regulatory filings, the company had just over $12 billion in China sales for the fiscal year ended last September, or nearly half the company's total.

John Shinal, technology columnist for USA TODAY.(Photo: USA TODAY)

Analysts expect sales for this fiscal year to rise 8% to $27 billion.

Qualcomm licenses its technology to more than 100 companies in China, or about 40% of its global total of 250 licensees, Qualcomm President Derek Aberle said during a March 18 interview.

That's why Qualcomm investors betting on growth in China should keep an eye for news of any discussions the company is having with China's National Development and Reform Commission.

That economic-planning agency launched a probe into Qualcomm last year that was first reported in January.

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The inquiry sounds at least as serious as the public scrutiny of Apple in late 2012 by other agencies within the Chinese government.

That scrutiny led to an apology from Apple CEO Tim Cook early last year over the company's warranty policies, about the same time Apple's revenue growth in that country went negative for six months.

The reform commission has the power to levy steep fines if it finds Qualcomm ran afoul of China's laws or regulations, including what it considers any anti-trust violations.

Aberle in an interview declined to comment on any possible Qualcomm communication with the Chinese authorities, saying only that the company's goal related to the inquiry was to demonstrate the value its wireless technology will bring to that nation.

"We hope that things will work out as best as they can," Aberle said.

Qualcomm bulls should be hoping for the same.

Despite S&P 500's New High, Stocks Face Challenges

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Stocks ended the first quarter with a big rally; the Standard & Poor's 500 Index actually closed -- barely -- at a new high. The fact is, however, that the market overall was a muddle -- and likely to stay that way. And second quarters are often dicey.

On the Surface

The S&P 500 finished up nearly 15 points to 1,872.34 on Monday, breaking its old record of 1,872.25, set on March 18. It's up 1.3% for the year. The Nasdaq Composite rose 43 points, or 1%, to 4,199 and is sporting a small gain for the year, 0.5%. The Dow Jones industrials, up 135 points (0.8%) to 16,458, are still down slightly on the year -- about 0.7%.

The one-day gains for the Index, the Dow, and the Nasdaq Composite were their best in two weeks. The S&P 500 and the Dow ended March with their second monthly gains in a row, up 0.7% and 0.8%, respectively. But the Nasdaq fell 2.5% for the month and for the second time in three months.

The market overall gained support from energy and utility stocks. About 288 S&P 500 stocks were higher, led by First Solar (NYSE: FSLR) and steel-maker Allegheny Technologies Inc. (NYSE: ATI), up 22% and 18.6%, respectively.

So much for the surface numbers. This is one of those markets where you must dig through the numbers to get a clear understanding of what happened. March and the quarter didn't treat all stocks alike.

Digging Into The Numbers

Given the strong March of S&P 500 and the Dow, how to explain the Nasdaq's March fall? The short answer is that a lot of momentum stocks ran out of gas and fell, often heavily.

Netflix Inc. (NASDAQ: NFLX) fell $6.84, or 1.9%, to $352.03. For the month, the shares stumbled 21%; they dropped 4.4% for the quarter. Inc. (NASDAQ: AMZN) closed down 0.5% to 336.52. It fell 6.1% for the month and 15.6% for the quarter. Google Inc. (NASDAQ: GOOG) fell 8.3% for the month and 0.6% for the quarter. It at least ended the month as the world's thirst most valuable company. Staples (Nasdaq: SPLS) has no similar silver lining for its lackluster performance.

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Biotechnology stocks suffered a particularly nasty beating in part because they were among the hottest of momentum plays in 2013 and the first two months of this year.

The NYSE ARCA Biotechnology Index fell 8.1%. Two exchange-traded funds fell more: The iShares Nasdaq Biotechnology Index ETF (IBB) fell 10.6%. The SPDR S&P Biotech ETF (XBI) dropped 12.9%. That was after rising 16.6% and 25.8%, respectively, in the first two months of the year. Alexion Pharmaceuticals (NASDAQ: ALXN) fell 18 from its intraday high of $185.43 on Feb. 27. Gilead Sciences Inc. (NASDAQ: GILD) was an S&P 500 laggard.

There were exceptions to the Nasdaq damage. The most visible winner may have been Microsoft Corp. (Nasdaq: MSFT), up 7% for the month and 9.6% for the quarter. Investors are optimistic with Satya Nadella replacing Steve Ballmer as CEO. Microsoft was the second-best Dow performer in March after AT&T Corp. (NYSE: T) and second-best for the quarter after Pfizer Inc. (NYSE: PFE).

Second Quarter Omens

What's ahead depends on the economy's performance and, probably to a larger-than-expected degree on geopolitical concerns.

According to the Stock Traders Almanac, April is the best month for Dow stocks and second-best for S&P 500 stocks. It's the third-best month for Nasdaq stocks. But April tends to tail off when tax season is done and investors have made annual Individual Retirement Account contributions for 2013. Then, comes May, one of the weakest months of the year and traditionally the start of the year's worst six months.

The geopolitical risk comes largely from the Russia, Ukraine and what happens to the Crimean region of Ukraine. Retail gasoline prices moved up 7.1% in the quarter, according to AAA's Daily Fuel Gauge Report as crude oil moved up 3.2%. And there will be continued worries about the health of China.Those concerns alone pushed a number of global investors to move money into the U.S. dollar. Gold fell nearly 2.9% for the month to $1,283.80 an ounce but is still up 6.8% for the year.

Should you worry about the Federal Reserve and interest rates? Probably not. Janet Yellen, the central bank's new chairman, has been signaling interest rates will remain low for the balance of 2014 and into 2015. The 10-year Treasury yield was 2.723% on Monday, up slightly from Friday.

A correction is possible. Stocks often fall 7% to 10% during the course of any year. A big ugly correction, like the crash in 2008, is probably not likely without a real catalyst such as a major and abrupt deterioration of the economy.

Posted-In: News Economics Federal Reserve Pre-Market Outlook After-Hours Center Markets ETFs Best of Benzinga

© 2014 Benzinga does not provide investment advice. All rights reserved.

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Monday, March 31, 2014

Profit Forecasts Put On Ice For First Quarter

It may officially be Spring, but there's a deep chill running through first quarter earnings forecasts.

When earnings season gets under way next week, profits among S&P 500 companies are expected to post a decline of 0.6% in the first quarter, according to FactSet. That would be the first drop in earnings since the third quarter of 2012 and a marked change of fortunes from forecasts at the start of the year, when analysts had been predicting profits would rise 4.2%. While it's not unusual for analysts to slash earnings forecasts, that's a bigger swing in expectations than is usually the case.

At the same time, companies in the S&P 500 are issuing profit warnings in near record numbers.

Ahead of first-quarter earnings reporting season, 93 companies have warned that profits would fall short of forecasts, according to FactSet's count. That makes it the second-highest overall number of companies issuing negative guidance on record.

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But shareholders seem to have been taking these profit warnings in stride. Shares of the companies that warned on first-quarter profits gained an average 0.2% after the news. That's a change from the past five years, when they lost an average 0.8% after a profit warning. And shares of companies saying they will have better-than-expected profits have gained 3.6%, above the average 3% gain over the past five years.

That could be because shares tend to move according to whether companies beat or miss Wall Street's forecasts, so analysts and strategists say that firms have incentive to aim low in their forecasts, strategists and analysts say. And last quarter, which had the strongest profit growth in two years, holds the record for the number of corporate profit warnings.

Plus, the average company is warning that profits will fall just 6.7% below Wall Street consensus, FactSet found, below the average of 11% over the past five years.

The sales side is looking brighter as well, with 40 companies warning investors about their first-quarter sales. That's the lowest number since the first quarter of 2012. And Wall Street is forecasting 2.4% of growth in first-quarter sales from last year.