Fun Fact #46
Since a stock price drops the same amount as the dividend declared, you may be wondering why companies even give out dividends at all. I recently learned in my accounting class that dividends are a “signal” that the company is financially healthy.
Growing dividends = healthy company. It’s as simple as that!
If SPY can sustain the breakout above 271, we will likely see a test of the resistance zone from 275-280.
BABA continues to have trouble pushing through the resistance zone from 197.5-200. An upward break above 200 might send the stock soaring above 205. I expect some profit taking soon.
Fun Fact #44
When a company buys back its own shares (share buyback), the common misconception is that the EPS will increase. The EPS is Earnings “Per Share,” or Earnings/Shares, so if the company bought back shares, lowering the denominator, wouldn’t the EPS go up?
Unfortunately, the denominator of EPS is actually the “weighted average number of shares,” meaning the number of shares is averaged over a year. Thus, buying back shares will not impact the EPS ratio.
I think that if QQQ doesn’t close green tomorrow, we will probably see a retest of 162 by the end of this week or early next week. Notice how the downtrend line from the March highs intercept with the 162 support level. That makes the this level even more important. If QQQ did drop to 162, that’s a drop of another 4 points. Since 4 points is only 2.5%, this drop could happen in one day.
The reason why I’m bearish all of a sudden is because I think Apple will see a pullback due to aggressive profit takers. Also as a side note, I just sold my Apple position today.
See you tomorrow!
Fun Fact #43
Warren Buffett still plays Ping-Pong! He played against Bill Gates at Berkshire’s annual shareholder meeting today. Source.
QQQ is running into overhead resistance. We will have to see if QQQ can push through this level tomorrow or if we pullback from here.
Apple is the largest component of QQQ, and it looks like it has found a temporary top. It looks good to buy in the 177.5-182.5 zone, although I favor the high 170s since it offers a better risk to reward.
One more push, and BABA will be at 200 again! Unless you think we break out over 205, it’s probably a good idea to take partial or full profits near this price.
The weekly chart of QQQ is above. I’ve circled the lower tails displaying buying pressure, as well as highlighting a divergent high. A divergent high means that the index/stock made a higher high, but the RSI indicator made a lower low. That is bearish. However, we are still in an uptrend, so it’s generally a better idea to buy on dips instead of short selling high points.
The weekly chart of SPY is currently stuck between the support and resistance area. That makes the direction unclear, although currently, there’s more evidence supporting a move up.
Look at the weekly chart of BABA above. I’ve mentioned in multiple posts that BABA was a good buy in the 165-175 zone, and a good sell in the 190-200 zone. BABA is now approaching the 190 area, which represents a good price to sell at. However, I believe BABA can hit 200 on this move up before pulling back because BABA had good earnings last Thursday. Note that a break and close above 205 on the weekly chart would be very bullish.
Here’s the weekly chart of MU. I think MU is a good long term hold and represents a good swing trading opportunity here. As long as MU holds 45 on the weekly chart, I think we retest the highs near 60. Do note that we’ve made a divergent high. Like I described in the QQQ chart near the top of the page, this is bearish. As you can see in the chart, prices fell from the recent high.
Apple broke out to an all time high (ATH) after selling off hard in the last few months. Although Apple is up 13.25% in just one week, the chart hints that Apple has enough juice for another move up before pulling back. If we move up, I suspect a test of 190 since it’s a nice round number.
Chipotle (CMG) recently broke out upwards after releasing a very strong earnings report. Judging from the price action and moving averages, I think CMG will pullback to at least the 380-400 area from a weekly perspective, which is another 5-10% down. Of course, the upward momentum could easily carry the stock higher too, but my bet is down.
Thanks for reading!
Fun Fact #42
A deer market is a flat/neutral market, being neither a bull nor bear market.
Apple hit my target 3 weeks ahead of schedule… Interesting. I’ve put in a target for BABA now that earnings are out of the way.
From the current look of things, it looks like the markets won’t drop unless some unexpected event happens. Perhaps most of the above stocks will reach my “If wrong” targets instead.
This morning, I woke up to see BABA in the premarket hovering near 191 due to an earnings beat. By 8:30 AM, BABA was red (dropped 4% from where I was watching it), which was quite uncomfortable. After checking back on it at the end of the day, I was pleasantly surprised 🙂
Warren Buffett announced a purchase of 75 million additional shares of Apple (AAPL) in Q1 this year. That sent the stock flying today, carrying the entire market up with it. Job payroll numbers came in much lower than expected, which I guess was “good news.”
Notice the extremely high volume today. Although the target is set for 5/25, I could see BABA hitting that 200 target within 5-7 trading days. If I’m wrong, I expect BABA to retest 175, which is the bottom black horizontal line in the chart above.
Apple has hit my 183 target 3 weeks ahead of schedule. Although I could see it moving higher in the coming weeks (perhaps to the 188-190 level), taking partial or full profits here seems appropriate. After glancing at the last few times when Apple made a new all time high, it seems to either rocket higher, or have a significant correction.
I look forward to updating my blog with weekly charts this weekend! Thanks for reading, and have a great weekend.
Fun Fact #40
Did you know that France cut Cryptocurrency taxes by 50% a couple days ago?
I’ve updated targets for May 25th, which is 3 weeks from this Friday. As you can see, I’m medium term bearish after today’s price action. Despite Feds not hiking rates, the market still sold off. I am still bullish on Facebook and Apple though, as I think their earnings reports were really strong and will propel them upwards.
I’ve also added an “If wrong” target, meaning if the market decides to rally (against my prediction), I expect the market to reach those targets by May 25th.
My May 25th target for Apple is the top of the trading range, which is at 183. If Apple decides to sell off with the market, I expect it to gap fill back to 169.
I think Facebook has a good chance of climbing to 185 within the next three weeks, highlighted by the upper horizontal line in the chart above. In case I’m wrong and Facebook sells off, I think it will drop to the previous support/resistance level at 168.
Lastly, let’s look at QQQ. I think there’s a better chance we hit 155 before we gap fill to 171. I do not think the bull market is over, but I think QQQ will retest 155 before moving back to the 170s.
Fun Fact #39
Today, Facebook (FB) announced a new dating feature, and Match stock (MTCH) tanks over 22%.
Targets will be updated tomorrow now that Apple has reported earnings 😀
QQQ printed a nice strong candle today due to Apple moving higher. I expect Apple to close below 175 tomorrow simply because it usually moves down after earnings beats.
QQQ was near 163.5 in after hours but I expect it to retest 162 tomorrow.
Remember to check back tomorrow for updated targets! Have a great evening -Nathan