Archive for November, 2014

Market Under Pressure

Wednesday, November 26th, 2014

spx-annotated

Double Click on the Image for a Full Size View

As we head into Thanksgiving, I wanted to give you a quick technical picture of the stock market.

If you look at the image above, I have drawn blue circles around the short-term indicators indicators that show the market is extended to the upside and is likely to either (1) move sideways for a period of time or (2) pull back a bit to get the indicators back into normal range. If you look at each of the indicators, you can see that whenever it moves above the top indicator line it also represents a short-term top in the market (the red/black candlesticks graph in the middle is the Dow Jones Industrial Average, or our representation of the market). The market then proceeds to pull back a couple of percent (or in the case of the post Alibaba IPO, 9%).

I’ve also add two blue squares on the two trend indicators. You can see that the trend is weakening because the top black line is converging on the other indicator line.

A weakening trend and an overextended market are signs that we should have some profit taking – even if its just two or three percentage points – in the near future.

Its not a huge problem, but if you wanted to book some profits before year-end, you might want to take these indicators as a sign that the time is right to do so.

Have a Happy Thanksgiving and I will see you back on the blog soon – until then, how about a Twofer for the Holiday!

AND

Mark

The Power of EBITDA

Wednesday, November 12th, 2014

dxcm

The Chart above is of Dexcom, a small cap company that operates in the diabetes testing market. I thought it and some of the charts that follow would be interesting for you to see how a company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) – or basically its operating cash flow – correlates with its stock price.

I’ve plotted the stock price (blue line) against their EBITDA per share (gold line). I think that as investors its important to note that when you look as stocks for your portfolio, you can focus on EBITDA per share as stock price tends to follow it and when it doesn’t it can tell you that you have an opportunity.

You can see for Dexcom, that the correlation is quite clear.

Here is J2 Global Communications (JCOM):

jcom

Here is EMC (EMC):

emc

Here is GreenDot (GDOT):

gdot

Here is Novo NorDisk (NVO):

nvo

Here is Aerovironment (AVAV):

avav

Here is HAIN:

hain

Some things to take away from the above that I see (which would lead me to do more research) are: (1) for AVAV, EBITDA is up but the price has pulled back – this may present a buying opportunity before the next leg up in price for this stock; and (2) for HAIN, you have exactly the opposite situation, with EBITDA down but price up – this may be an indication to sell it or to hold off to be a buyer for a better entry point.

EBITDA is one of the key pieces of financial information that investors need to follow.

In coming posts, I plan to provide you with other similar things to look for when reviewing companies.

Stay tuned :)

Mark