So here we are in September, let’s have a quick look at some stocks and figure out where things are.
From my perspective August/September have always been a bit choppy and the first week of September has been no different.
However, i think we’re approaching some oversold conditions – whether we rebound or not, i don’t know but i look for value and look for extremes of sentiment and take advantage of it for the long-term.
According to the Stock Trader’s almanac, november to march are typically pretty bullish. Will this play out? Statistically there is a good chance of this, will it happen? Again, nobody knows, you just have to plan around risk accordingly.
Below is a chart of the /ES mini futures with a daily chart
I’ve highlighted 3 zones on the downside in the short-term where there is support from what i can see. We’re right on a zone now, the next stop is around the 1950’s and then we’re back to 1900. I think we’ll probably test 1950’s and then grind our way back up, i am still expecting us to finish around 2000 for the end of the year. Upside there is 2010, if we take that out then the game has changed again. There is a lot of crap going on geo-politically but the US market is pretty strong. We’ll see how things turn out. If the market does just decide to roll over, try and look at what the typical percentages are for a correction from the most recent high, we just hit 2010, so 5% is about 1900, 10%about 1800, 20% about 1600. If we ever have a huge sell-off like 2007 then 50%+ = 1100 or so, and just like the Hitchhiker’s guide to the Galaxy, DON’T PANIC 🙂 Take advantage of the sale on offer. I doubt we’ll ever get back to the low put in at 2008-2009 in our lifetime again ( but never say never ;)) Almost everyone has been wrong for the last 5 years but clearly nothing goes up forever.
Above is a quick daily chart of apple showing the run into WWDC which almost happens like clockwork every year. The sell-off occurred a few days early, a wild day of chop and then the stock begins to grind higher. Why is AAPL exciting now? For me, not the iPhone, not the iWatch, it was the Mobile Payments which i hinted at 6-9 months ago on the blog. This will be a game changer but it may take time before this system is up to full speed. Keep an eye out shopping over the next 12-18 months for a fundamental change in retail payment. It will be interesting to see what Android does as a result of this because they obviously will want something along the lines of ‘Google Pay’ or whatever. It will be another huge revenue stream.
BP is looking interesting here at $45 – given the huge bill they just incurred ( another $18billion ). However, BP is one of those companies that can afford it and generates a ridiculous amount of $$. They also pay a nice dividend so take advantage. If $45 doesn’t hold, i’d be surprised if it got below $39 so for me, any price in this $39-$45 range is a good long-term hold.
I don’t own MCD and i don’t trade it but it seems a shift in food ‘sentiment’ is happening. MCD seems to be an extremely popular stock for dividend plays and for good reason, for the longest time they have been able to capitalize on fast food growth and supplied a reliable dividend. I’ve never been a fan of their products unless i’ve had one too many and literally can’t find anything else to eat. However, i’ve seen and read about more and more people trying to find ‘fast food healthy eating alternatives’.
You can get see this quite starkly with CMG ( Chipotle ). Here where i live there have been some boutique ‘fast food’ shops opening recently which sell only ‘healthy’ fast food aswell. They are expensive, the food is tasty BUT the shop is constantly rammed – people are prepared to pay up. That is a sign to me that something more fundamental is going on. Is MCD dead money? Probably not but something is definitely going on. In the meantime, the chart is telling you a story, over $100 is too expensive, under $90 is too cheap? A lot of people stepped in at $90 and maybe the stock will hold and gyrate in the low to mid-90$ subject to broad market conditions.
One of my core holdings, AIG has been moving like a champ for the last 2-3 years. The stock is in great shape, it is cheap, you can see where the buying support is coming in. If for whatever reason AIG gets back into the $40s then it is a steal. However, given the price targets keep going up, the book value is going up and the stock isn’t moving, i think it is only a matter of time before it explodes up another $5-$10 .Watch the $56 level. I fully expect AIG to retest 2011 highs around the $60-$62 by the end of the year. Right now, it looks like it is in the process of an inverse head and shoulders pattern. I don’t tend to put too much faith in these patterns, i just look purely at support/resistance and extremes only but just pointing it out for those that do use that kind of stuff.
Finally, Brazil once more, where i think stocks are being priced in for the worst. PBR is still massively undervalued in my eyes and i fully expect it to eventually return to $30+ in the coming years however, i thought it was interesting to show the impact of politics on a stock to show how much emotion is here. The run from 16 to 20 was pretty much a combination of the stock pushing new highs and the polls showing Dilma Rousseff was losing then a few weeks later, another poll comes out right around PBR hitting $20 and boom, Rousseff has now closed the gap, all the hot money runs away. For me, it presents another buying opportunity for the long-term.
Dr Brett Steenbarger
Finally, here is a video on Trader Psychology by the awesome Dr Brett Steenbarger from June courtesy of Big Mike Trading.This can be applied to >anything<, investing, sports, something else in your life. Listen, learn and enjoy.