ETFs
Things have been good this year. The stock market has had an incredible run. The economy and housing are starting to turn around. And we have all saved enough money to live an incredible lifestyle in retirement. Well, two out of three ain't bad. Most of us have not saved enough for retirement. I've doled out dozens of tips for retirement and common mistakes in 2013. So, as we head into the new year I'd like to remind you of some of the most important. 1. If you haven't already, start thinking about retirement and retirement planning — especially if you've turned 50. "Spend more time on retirement planning and invest more dollars for retirement," says Maclyn Clouse, professor of finance at the University of Denver's Daniels College of Business. "Do not rely only on Social Security. As Congress and the president look for ways to reduce our budget deficits, it is likely that we will see cut backs in payments to future Social Security recipients. It is also likely that the age at which you can begin to receive payments will be increased." RETIREMENT: Your plan for the future 2. Have a plan for your life in retirement. Plan for some sort of transition, and have activities planned. "One program I teach is never retire, which deals with the psychological transition into retirement," says author and former financial planner Frank Maselli. "The typical structure is a man has been working 35 years. The spouse has been home. Suddenly the husband is home. It can be the cause of family stress and many families exploding or imploding. Take normal stress of a transition, and throw in the fact that your wife can't stand seeing you all day." 3. Don't let family members throw your retirement off track. We all love our kids, but financial planners warn to be careful not to let them hurt your retirement preparations. Retirement accounts are not a good way to fund a college education. There are so many more options for saving for college, and with a little planning you can keep you reti! rement on track and send your child to college. Also, parents should have a plan for when the kids return home, whether it's after college or because some of a life emergency. "You have to draw some lines and limits," says Lynnette Khalfani-Cox, founder of AskTheMoneyCoach.com. "Nobody has an infinite amount of cash. We want to help our children or grandkids. For most Americans it is a challenge to secure a comfortable retirement of their own, let alone help extended family." 4. It's never too late to start saving, but late starters need to temper lifestyle expectations. If you are 50 or older, you need to start thinking about changes you need to make to be able to retire. Some may have to keep working to make up for all those years of not saving. Others may have to sell their homes or downsize. 5. The possibility of running out of money in retirement is real for millions of people. You should not underestimate your life span. There's probably a good chance you will live into your 80s or 90s. And if you don't have a well-thought-out plan, you could outlive your savings. Planners recommend that people consider delaying retirement. "If a married couple retires at 65 , there's a good chance one will live into their mid-90s," says Joe Heider, regional managing principal for Rehmann Financial Group in Cleveland. "If you live another 25 years, you're in retirement for half of your working life. If you retire at 60 you are almost in retirement as long as you were working, and you need to account for inflation." 6. If you are planning to continue to work in retirement, you may be in for a shock. Many people who have not saved enough plan to make up the difference by continuing to work and delaying retirement. Problem is, for a variety of reasons, many people are not able to work into their 60s. The biggest reason is health issues. But, yes, age discrimination is an issue as well. POLL: Half of older workers plan to retire later 7. Don't underestimate health care costs! in retir! ement. "A shock that I've seen that devastates people in retirement is unanticipated medial expenses and health issues," says Kent Caldwell-Meeks, senior director of investment and fiduciary services at Wells Fargo Wealth Management Group. He says people will be in retirement for 20 to 40 years, and need to have a financial plan that accounts for that. HEALTH COSTS: Ways to help with health care in retirement 8. The less debt you have going into retirement, the more likely you are to find success in your retirement. "Anybody who is seriously thinking about preparing for retirement must reduce their debt," says Khalfani-Cox. "This goes into a number of areas, not just credit card debt. There's mortgage debt and even student loan debt, because so many older Americans have gone back to school and financed their education or co-signed for their adult children. All of that debt is really a ball and chain around you if you are going into your golden years." 9. Figure out how to make Social Security work best for you. Most financial planners recommend that you delay taking Social Security for as long as you can. That makes sense in that every year you delay receiving Social Security, your check increases by 8%. But the truth is most people cannot afford to wait. A good financial planner will work with you to figure out what strategy is best for you. PLAN AHEAD: What age is best to start taking Social Security? SOCIAL SECURITY: What you don't know about it can hurt you "It's true that the longer you wait, the more you get," says Jeff Bucher, President of Citizen Advisory Group in Perrysburg, Ohio. "But that's not always the easier plan for everybody. We look at the holistic portfolio and all the choices. If we wait till 70 that will be the max age, and for some people they can't do that. Even at 66 or 67, some people need that money earlier. When you boil it down, Social Security is a significant amount of retirement income, but little planning goes into what to elect to get! . There a! re different strategies to maximize what you get." 10. Do not be too conservative in your retirement savings. "There is a tendency to for people in retirement to be way too conservative in their investments," says Heider. "They no longer feel the need to hedge against inflation. Most need exposure to the equity markets. They have to have some exposure, in most cases, if they are going to have a reasonable expectation of maintaining that nest egg during retirement."
Things have been good this year. The stock market has had an incredible run. The economy and housing are starting to turn around. And we have all saved enough money to live an incredible lifestyle in retirement. Well, two out of three ain't bad. Most of us have not saved enough for retirement. I've doled out dozens of tips for retirement and common mistakes in 2013. So, as we head into the new year I'd like to remind you of some of the most important. 1. If you haven't already, start thinking about retirement and retirement planning — especially if you've turned 50. "Spend more time on retirement planning and invest more dollars for retirement," says Maclyn Clouse, professor of finance at the University of Denver's Daniels College of Business. "Do not rely only on Social Security. As Congress and the president look for ways to reduce our budget deficits, it is likely that we will see cut backs in payments to future Social Security recipients. It is also likely that the age at which you can begin to receive payments will be increased." RETIREMENT: Your plan for the future 2. Have a plan for your life in retirement. Plan for some sort of transition, and have activities planned. "One program I teach is never retire, which deals with the psychological transition into retirement," says author and former financial planner Frank Maselli. "The typical structure is a man has been working 35 years. The spouse has been home. Suddenly the husband is home. It can be the cause of family stress and many families exploding or imploding. Take normal stress of a transition, and throw in the fact that your wife can't stand seeing you all day." 3. Don't let family members throw your retirement off track. We all love our kids, but financial planners warn to be careful not to let them hurt your retirement preparations. Retirement accounts are not a good way to fund a college education. There are so many more options for saving for college, and with a little planning you can keep you reti! rement on track and send your child to college. Also, parents should have a plan for when the kids return home, whether it's after college or because some of a life emergency. "You have to draw some lines and limits," says Lynnette Khalfani-Cox, founder of AskTheMoneyCoach.com. "Nobody has an infinite amount of cash. We want to help our children or grandkids. For most Americans it is a challenge to secure a comfortable retirement of their own, let alone help extended family." 4. It's never too late to start saving, but late starters need to temper lifestyle expectations. If you are 50 or older, you need to start thinking about changes you need to make to be able to retire. Some may have to keep working to make up for all those years of not saving. Others may have to sell their homes or downsize. 5. The possibility of running out of money in retirement is real for millions of people. You should not underestimate your life span. There's probably a good chance you will live into your 80s or 90s. And if you don't have a well-thought-out plan, you could outlive your savings. Planners recommend that people consider delaying retirement. "If a married couple retires at 65 , there's a good chance one will live into their mid-90s," says Joe Heider, regional managing principal for Rehmann Financial Group in Cleveland. "If you live another 25 years, you're in retirement for half of your working life. If you retire at 60 you are almost in retirement as long as you were working, and you need to account for inflation." 6. If you are planning to continue to work in retirement, you may be in for a shock. Many people who have not saved enough plan to make up the difference by continuing to work and delaying retirement. Problem is, for a variety of reasons, many people are not able to work into their 60s. The biggest reason is health issues. But, yes, age discrimination is an issue as well. POLL: Half of older workers plan to retire later 7. Don't underestimate health care costs! in retir! ement. "A shock that I've seen that devastates people in retirement is unanticipated medial expenses and health issues," says Kent Caldwell-Meeks, senior director of investment and fiduciary services at Wells Fargo Wealth Management Group. He says people will be in retirement for 20 to 40 years, and need to have a financial plan that accounts for that. HEALTH COSTS: Ways to help with health care in retirement 8. The less debt you have going into retirement, the more likely you are to find success in your retirement. "Anybody who is seriously thinking about preparing for retirement must reduce their debt," says Khalfani-Cox. "This goes into a number of areas, not just credit card debt. There's mortgage debt and even student loan debt, because so many older Americans have gone back to school and financed their education or co-signed for their adult children. All of that debt is really a ball and chain around you if you are going into your golden years." 9. Figure out how to make Social Security work best for you. Most financial planners recommend that you delay taking Social Security for as long as you can. That makes sense in that every year you delay receiving Social Security, your check increases by 8%. But the truth is most people cannot afford to wait. A good financial planner will work with you to figure out what strategy is best for you. PLAN AHEAD: What age is best to start taking Social Security? SOCIAL SECURITY: What you don't know about it can hurt you "It's true that the longer you wait, the more you get," says Jeff Bucher, President of Citizen Advisory Group in Perrysburg, Ohio. "But that's not always the easier plan for everybody. We look at the holistic portfolio and all the choices. If we wait till 70 that will be the max age, and for some people they can't do that. Even at 66 or 67, some people need that money earlier. When you boil it down, Social Security is a significant amount of retirement income, but little planning goes into what to elect to get! . There a! re different strategies to maximize what you get." 10. Do not be too conservative in your retirement savings. "There is a tendency to for people in retirement to be way too conservative in their investments," says Heider. "They no longer feel the need to hedge against inflation. Most need exposure to the equity markets. They have to have some exposure, in most cases, if they are going to have a reasonable expectation of maintaining that nest egg during retirement."
The risk-free rate of return is one of the most basic components of modern finance. Many of the most famous theories in finance - the capital asset pricing model (CAPM), modern portfolio theory (MPT) and the Black-Scholes model - use the risk-free rate as the primary component from which other valuations are derived. The risk-free asset only applies in theory, but its actual safety rarely comes into question until events fall far beyond the normal daily volatile markets. Although it's easy to take shots at theories that have use a risk-free asset as their base, there are limited other options. This article looks at the risk-free security in theory and in reality (as a government security), evaluating how truly risk free it is. The model assumes that investors are risk averse and will expect a certain rate of return for excess risk extending from the intercept, which is the risk-free rate of return. The T-Bill Base The risk-free rate is an important building block for MPT. As referenced in Figure 1, the risk-free rate is the baseline where the lowest return can be found with the least amount of risk.
 |
|
Figure 1 |
|
Copyright Ó 2008 Investopedia.com |
Risk-free assets under MPT, while theoretical, typically are represented by Treasury bills (T-bills), which have the following characteristics:
T-bills are assumed to have zero default risk because they represent and are backed by the good faith of the U.S. government.
T-bills are sold at auction in a weekly competitive bidding process and are sold at a discount from par.
They don't pay traditional interest payments like their cousins, the Treasury notes and Treasury bonds.
They're sold in various maturities in denominations of $1,000.
They can be purchased by individuals directly from the government.
Because there are limited options to use instead of the United States T-bill, it helps to have a grasp of other areas of risk that can have indirect effects on risk-free assumptions. Sources of Risk The term risk is often used very loosely, especially when it comes to the risk-free rate. At its most basic level, risk is the probability of events or outcomes. When applied to investments, risk can be broken down a number of ways:
Absolute risk as defined by volatility: Absolute risk as defined by volatility can be easily quantified by common measures like standard deviation. Since risk-free assets typically mature in three months or less, the volatility measure is very short-term in nature. While daily prices relating to yield can be used to measure volatility, they are not commonly used.
Relative risk: Relative risk when applied to investments is usually represented by the relation of price fluctuation of an asset to an index or base. One important differentiation is that relative risk tells us very little about absolute risk - it only defines how risky the asset is compared to a base. Again, since the risk-free asset used in the theories is so short-term, relative risk does not always apply.
Default risk: What risk is assumed when investing in the three-month T-bill? Default risk, which in this case is the risk that the U.S. government would default on its debt obligations. Credit-risk evaluation measures deployed by securities analysts and lenders can help define the ultimate risk of default.
Although the U.S. government has never defaulted on any of its debt obligations, the risk of default has been raised during extreme economic events. The U.S. government can promise the ultimate security of its debt in unlimited ways, but the reality is that the U.S. dollar is no longer backed by gold, so the only true security for its debt is the government's ability to make the payments from current balances or tax revenues. This raises many questions about the reality of a risk-free asset. For example, say the economic environment is such that there is a large deficit being funded by debt, and the current administration plans to reduce taxes and provide tax incentives to both individuals and companies to spur economic growth. If this plan were used by a publicly held company, how could the company justify its credit quality if the plan were to basically decrease revenue and increase spending? That in itself is the rub: there really is no justification or alternative for the risk-free asset. There have been attempts to use other options, but the U.S. T-bill remains the best option, because it is the closest investment – in theory and reality – to a short-term riskless security. Conclusion The risk-free rate is rarely called into question until the economic environment falls into disarray. Catastrophic events, like credit-market collapses, war, stock market collapses and dramatic currency devaluations, can all lead people to question the safety and security of the U.S. government as a lender. The best way to evaluate the riskless security would be to use standard credit evaluation techniques, such as those an analyst would use to evaluate the creditworthiness of any company. Unfortunately, when the rubber hits the road, the metrics applied to the U.S. government rarely hold up to the fact that the government exists in perpetuity by nature and have unlimited powers to raise funds both short- and long-term for spending and funding.
While you can consider hybrid debt funds to manage your short term goals, you should focus on equity funds to fulfill your long term targets, Rustagi said. Here is the edited transcript of the interview on CNBC-TV18. Q: I can invest Rs 20,000 per month. I require Rs 5 lakh in the next three years and Rs 30 lakh in the next 20 years for child education. I also require Rs 35 lakh for my child's marriage and Rs 1 crore for retirement after 30 years. Right now, I have invested Rs 5 lakh in the stock market and mutual funds. I have around Rs 1.80 lakh by way of mutual funds. How should I allocate the money? A: Clearly, you have taken the right steps to begin with. For example, you have defined your goal and you know exactly how much is the time horizon for each of your goals. Also, you have set some targets which are the first steps to start financial planning. Your short term goal, which is three years away, is not long enough for you to make your portfolio very aggressive. In fact, I would also say that the portfolio for each of the goals has to be separate. Don't make a mistake of having one combined portfolio because as you yourself mentioned, the time horizon for each of these goals is different. So try and make individual portfolio for each of these goals so you can keep track of it and you will know exactly which direction your portfolio is going. Coming back to this three year goal, since you don't have long enough time horizon, you need to focus on options, which are not very aggressive. At best, you can look at some debt oriented hybrid funds. Typically, in this category, you have monthly income plans, where you can opt for growth options or asset allocation plan. MIPs typically invest around 80-85% in debt and the rest is invested in equity. Some of the fund that you can consider here are Reliance MIP or DSP Blackrock MIP. In the asset allocation space, you can consider IDFC asset allocation fund. For your long term goals, your focus has to be on beating inflation and earn a positive real rate of return which is gross return minus inflation. Your focus has to be on equity funds. You already have some of the equity funds in the portfolio. You already have around five ELSS and four open ended funds. Considering your current investment, I think you have far too many funds. You need to reduce the number of funds. Remember that most likely if DTC is implemented from April 1 next year, ELSS schemes will cease to exist. So whenever you complete three years in those ELSS funds, try and exit from there and reinvest that money in some of the existing funds. In your existing portfolio, you can retain HDFC Top 200 . You can also retain SBI Magnum Emerging Business Fund . From the other two funds that you have - Reliance Growth and Reliance Natural Resources, I would say opt for a fund like Reliance Top 200 . As a combination, that will be good. Since you have to invest some more money for your other goals, maybe you can add one or two funds and that should suffice for your portfolio. 1 2 Watch Video Excerpts from Markets and Macros on CNBC-TV18 Watch the full show » .ftCnbcShare{border-top:#d1d1d1 1px solid; padding:8px;margin-bottom: -27px; margin-top:10px;} Markets And Macros at 11:00 am .gD_15nRedN{font:15px/20px Arial;color:#FF0000 !important;text-decoration:none;font-weight:normal;} Related News Should you remain invested in mutual funds? Monthly Income Plans: Should investors put money in? .gD_15nRed{font:15px/20px Arial;color:#FF0000 !important;text-decoration:none;font-weight:bold;} .GoogleNewsTitle{font:14px/16px Trebuchet MS,Arial,Helvetica,sans-serif;color:#005066;text-decoration:none;} .GoogleNewsTitle:hover{text-decoration:underline} .GoogleNewsURL{font:12px Trebuchet MS,Arial,Helvetica,sans-serif;color:#000;text-decoration:none;} .GoogleNewsURL:hover{text-decoration:underline} .GoogleNewsTitleLine{font:20px/22px Trebuchet MS,Arial,Helvetica,sans-serif;color:#F01414;text-decoration:none} .GoogleNewsTitleLine:hover{text-decoration:underline} .GoogleNewsLineURL{font:12px family:Trebuchet MS,Arial,Helvetica,sans-serif;color:#000;text-decoration:none} .GoogleNewsLineURL:hover{text-decoration:underline} Tags: Hemant Rustagi, Wiseinvest Advisors, investment, mutual fund, equity, insurance No intent to control capital; fund-raising door open: FM No intent to control capital; fund-raising door open: FM .scroll_hv .panel{width:250px !important; padding:10px 10px 25px !important} #scroll13{width:540px;} .hv_bx{margin-left:-10px;} .tab_data1{padding:0px;} |
The following video is from Tuesday's Investor Beat, in which host Chris Hill and analysts Jason Moser and Matt Koppenheffer dissect the hardest-hitting investing stories of the day. In this installment of Investor Beat, our analysts explain why they're watching Dick's Sporting Goods (NYSE: DKS ) and Bank of America (NYSE: BAC ) . Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analyst Anand Chokkavelu, CFA, joins Matt to lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy. The relevant video segment can be found between 5:22 and 6:59.
Big bank JPMorgan Chase (NYSE: JPM ) is on the rise once again this morning, with a 0.9% rise just after trading began. Not to mention the bank's stock is up 1.99% so far this week. JPM has been enjoying some much needed gains in the market despite more than one piece of negative news for its operations in the past week. Quick rundown
Just to highlight the headwinds that JPMorgan faces, here are the latest headlines that may have investors concerned: Another top executive left the bank last week, bringing the total to eight over the past few years. This gives rise to questions about succession plans and "deep benches." Energy rigging in California and Michigan -- not something you would normally think of for a bank's operations, but at least one executive has been called out as lying while under oath about the matter. Oversight. After the London Whale debacle, many investors cried out for more oversight (as did some regulators), and now they have their chance to demand it once again. Later this month a non-binding vote at the annual shareholders meeting will allow investors to speak up on whether Jamie Dimon's dual role as CEO and Chairman should be split up. So with more and more pressure building on Dimon and the bank, how can it be making such a huge run this week? Outside influences
Half of a week has already gone by and the market is still basking in the afterglow of the Berkshire Hathaway (NYSE: BRK-B ) shareholder-palooza. While generally this would lead to boosts in other bank stocks, JPMorgan and more specifically Jamie Dimon, got a big plug from the Great One himself. When asked about the upcoming vote to split Dimon's role, Buffett gave the CEO his total support, saying that the bank will be run better with Dimon in both roles. He also said that he couldn't think of a better Chairman and that splitting the two posts would allow the CEO to be replaced much more easily, something that might not be a good thing for the bank. Elsewhere in the banking sphere, competitor Bank of America's (NYSE: BAC ) settlement with MBIA (NYSE: MBI ) may also have something to do with JPM's continued rise.Since most of the banks continue to be plagued by lawsuits stemming from the financial crisis, when one is able to settle or dismiss a case, the others are looked at favorably as well. In the case of B of A, the bank made a big offer to the insurer MBIA and ducked some much larger payouts than it may have been forced to make had the case gone to trial. Old hat
So none of this is new to the markets besides the B of A settlement, which just happened on Monday. But in stock market time, that's eons ago, right? If you're watching your stocks on a daily basis, you're doing yourself and your portfolio a disservice. Even if you don't trade daily, watching your stocks fall for no apparent reason will still hurt twice as much as if they rise for no reason. After time, that stress and pain from daily ups and downs will influence your decision to sell, possibly leaving you out in the cold as the long-term investors continue to profit. With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or if finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, check out The Motley Fool's premium research report on the company. Click here now for instant access!
I'm Professor and Chair of the Department of Economics at LIU Post in New York. I've published several articles in professional journals and magazines, including Barron's, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singapore, European Management Review, Management International Review, and Journal of Risk and Insurance. I've have also published several books, including Collective Entrepreneurship, The Ten Golden Rules, WOM and Buzz Marketing, Business Strategy in a Semiglobal Economy, China's Challenge: Imitation or Innovation in International Business, and New Emerging Japanese Economy: Opportunity and Strategy for World Business. I've traveled extensively throughout the world giving lectures and seminars for private and government organizations, including Beijing Academy of Social Science, Nagoya University, Tokyo Science University, Keimung University, University of Adelaide, Saint Gallen University, Duisburg University, University of Edinburgh, and Athens University of Economics and Business. Interests: Global markets, business, investment strategy, personal success. Contact Panos Mourdoukoutas The author is a Forbes contributor. The opinions expressed are those of the writer.
 Alamy The Obama administration will promote health insurance coverage at shopping malls starting on Black Friday and continuing through the busiest shopping days of the holiday season, officials announced Wednesday. They said more than 462,000 people selected a private insurance plan in the first week of 2015 enrollment through the online marketplace HealthCare.gov. The government's enrollment push with Westfield Shopping Centers will involve setting up outreach tables at malls in Florida, Illinois, New Jersey, Connecticut, Maryland, New York and Washington state. Westfield will post information about enrollment services on its website. Report Card on First Week The administration released what it called a snapshot of signups for the first week of the enrollment period, which started Nov. 15. U.S. Department of Health and Human Services Secretary Sylvia Burwell said 462,125 people chose a health plan in the 37 states using the federal website. Of those, 48 percent are new customers, including enrollees in Oregon and Nevada, which turned over their troubled insurance markets to the federal government. The figures don't include states running their own insurance markets. The numbers represent only the choice of a plan, and not whether consumers paid their first month's premium -- a requirement for coverage to start. "We're off to a solid start but we've got a lot of work every day between now and Feb. 15," the last day of the enrollment period, Burwell said in a conference call with reporters. About 1 million people phoned the enrollment site's help line, she said, and roughly an additional 100,000 callers chose to speak with a Spanish-speaking representative. Burwell said the administration is sticking with its previously announced goal of signing up 9.1 million consumers for coverage in 2015. Unlike last year, the website suffered no outages in the first week, officials said, and it's ready to handle 250,000 users at a time during anticipated surges around deadlines. Consumers must sign up by Dec. 15 for coverage to start on Jan. 1. Partnerships With Two Groups The figures announced Wednesday don't include dental plans, Burwell stressed. Last week, the administration acknowledged it had been over-reporting the number of enrollees by double-counting about 400,000 who had both medical and dental plans. Burwell said she has directed her staff to find out how the double-counting happened. Burwell promised a weekly update on enrollment along with more thorough monthly reports that will include what's happening in state-based markets. Along with the shopping mall campaign, HHS announced marketing partnerships with the National Community Pharmacists Association and the XO Group, a company that runs websites targeting brides, new mothers and homeowners. The pharmacists group will get enrollment information to its members and pharmacy customers, officials said. The XO Group will post blog content on its sites.  Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. More from The Associated Press
•Ohio Legislator Calls for Triple Time for Thanksgiving Retail •U.S. Orders for Durable Goods Make an Unimpressive Gain •Jolly Good Ways to Celebrate Thanksgiving in Britain
Tesla (NASDAQ: TSLA ) stock is up about 7% in after-market hours after reporting third-quarter results. While the financial results for the quarter came in close to expectations, the company's increasingly optimistic outlook for 2015 and beyond is likely the biggest reason for a rise in share price. Here's what you need to know.  Tesla's fully electric Model S is currently the only model in its lineup. Model S sales, therefore, are the key driver behind Tesla's financial results. Image source: Tesla Motors. Financial results
Analysts, on average expected Tesla to report non-GAAP sales of $889 million. Tesla beat expectations with non-GAAP sales of $932 million. But after factoring out Tesla's $93 million in regulatory credits, including $76 million in zero emission vehicle, or ZEV, credits that were "much higher than expected," revenue was probably a bit short of expectations. At about 10% of revenue, up from about 2% of revenue in Q3, it's likely that without the unexpected upside in regulatory credits that Tesla may have slightly missed revenue estimates. Tesla's non-GAAP EPS was $0.11. Again, while this was higher than expectations for a loss of $0.01 per share, the upside is attributable to higher than expected regulatory credits. Deliveries
Tesla delivered 7,785 vehicles, 15 vehicles short of its guidance for 7,800. Reflecting the company's rapid growth, this number is a record for Tesla and is up 42% from its 5,500 vehicle deliveries in the year-ago quarter. The majority of vehicles, Tesla said, were delivered in North America. Tesla has lowered its full-year guidance for vehicle deliveries to 33,000 from 35,000. Tesla says this is because of a production deficit of 2,000 vehicles going into Q4 that that was due to "system integration challenges" as it attempted to ramp to its target production rate. Longer-term, however, Tesla showed great confidence in the demand and delivery trajectory for its flagship Model S. "[W]e expect our annual production will increase by over 50% in 2014, again in 2015 and probably for several years to follow," Tesla said in its third-quarter letter to shareholders. Seeming to anticipate protest from auto industry veterans in such a prediction, Tesla followed with another statement. "This is unusual in the car industry." Other key updates
Model X: After deciding to "build in significantly more validation testing time to achieve the best Model X possible," Tesla now expects Model X deliveries to start in Q3 of 2015, which is a few months later than Tesla previously expected. The company has delayed deliveries of the Model X multiple times, originally predicting first deliveries to begin in 2013.  Model S and prototype of Model X. Image source: Tesla Motors. Gigafactory: Tesla has already started to pour concrete for the foundation of its Gigafactory. More importantly, the company now predicts to begin the first cell production in 2016, which is slightly earlier than the 2017 timeframe Tesla shared initially when it announced plans to build the factory. "Starting operations earlier will reduce ramp-up risks for Model 3 and provide some potential expansion capacity for Model S and Model X," Tesla explained in the letter to shareholders. Demand: During the earnings call, Tesla CEO Elon Musk again attempted to emphasize that demand is not an issue for the company -- an idea that the media continues to struggle with. Even orders, he said, are not a reflection of demand since the company isn't putting any noteworthy efforts into driving up demand. Given Tesla's very forward-looking valuation based on its rapid growth trajectory, the company's confidence in its longer-term future and Tesla's ability to ramp up production on a year-over-year basis are key to understanding the company in relation to its stock price. Over all, both of these items are looking as solid as ever -- if not better. While this doesn't automatically make the stock a buy, continued execution and management's confidence in its growth trajectory make Tesla stock worth holding onto for current shareholders. The most disruptive technology in the auto industry
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to ride this megatrend. Click here to access our exclusive report on this stock.
It always make sense to take a balanced viewpoint in investing, and while there are plenty of positive things happening at Johnson Controls Inc. (NYSE: JCI ) , there are also some negatives. The three things that investors need to worry about are its reliance on certain customer programs, the effects of weather, and the possibility of an unfavorable long-term trend with car usage. It's time to look a little closer at the bearish case for the stock. Auto experience customers may disappoint
Before getting into the nitty-gritty, readers should note that this article is part of a series. The things that management wants you to know are outlined here, and the bullish case for Johnson Controls is here. Focusing on the bearish case, investors should start by appreciating that the automotive experience segment, consisting of automotive seating and interiors, has outperformed most expectations this year. Going into the year, management had talked about 1%-2% revenue growth for the full year, but with 9% growth for the first nine months, it's likely to come in far in excess of expectations. Essentially, its customers' car sales have outperformed the marketplace, particularly in Europe. Indeed, CFO Bruce McDonald noted on the latest conference call that "we are able to exceed the market production levels in all three of the main regions." This is an impressive performance, but investors need to ask themselves whether the market is baking in some expectations that can't be met in the future. Ultimately, the automotive experience segment relies on its customers' production levels, and there is no guarantee that its customers (it has heavy exposure to the premium end with customers such as BMW) will continue to outperform the market. Power solutions and weather
Around three-quarters of the segmental sales in power solutions -- i.e., automotive batteries -- go to the automotive aftermarket. The biggest driver of growth in the aftermarket is wear and tear on automobiles. Essentially, a combination of driving miles (I'll return to this point later) and harsh weather causes automobiles to require maintenance and upkeep -- and this is when car batteries need to be replaced. 
Source: Johnson Controls.
Indeed, one of the issues shareholders faced this year is that expectations were high for the power solutions segment following the harsh winter in many parts of North America. However, it was easy to forget that Europe had a very mild winter. In the end, power solutions came in with zero sales growth in the second quarter (which ended March 31), with Europe's 15% decline offsetting a 10% increase in the Americas. These points illustrate the fact that the segment's prospects are somewhat weather dependent, and investors should be mindful of the risk. Long-term driving trends?
I noted in the bullish article that the amount of miles driven tends to correlate with economic growth. The miles-driven metric is important because it tends to drive aftermarket growth for car batteries. While the current situation is looking positive for Johnson Controls, as U.S. growth is picking up, there are some longer-term concerns that growth in miles driven may not pick up in the way many analysts think. For example, the following chart of total vehicle miles traveled in the U.S. demonstrates how sluggish the pickup in vehicle miles driven has been since the 2008 recession. This could just be a reflection of moderate economic growth, or it may turn out to be something more systemic. If it's the latter, then automotive battery demand growth may not be what the company is traditionally used to, and analysts will have to reduce their estimated long-term growth rate for the power solutions segment -- not good news for the stock.  Source: U.S. Department of Transportation, Federal Highway Administration. The takeaway
All told, these three reasons constitute different types of risk. The risk that the automotive experience segment's customers could underperform in the future is a company-specific issue. The weather risk is also an opportunity, but investors need to appreciate that any extreme weather will create uncertainty. For example, the market was expecting more from the power solutions segment this year, only to be disappointed. The final reason is the most worrying, for Johnson Controls and the other companies servicing the automotive aftermarket. It's too early to tell whether there is a structural issue with growth in vehicle miles traveled in the U.S., so it's definitely something for investors to keep an eye out for. The real winner is behind the Apple Watch (warning -- it may shock you)
Apple recently revealed the product of its secret-development "dream team" -- the Apple Watch. The secret is out, and some early viewers are claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!
Cliffs Natural Resources (CLF) is up 1% today after the beaten-down iron and coal miner said it would spend $200 million to buy back its shares. Citigroup’s Brian Yu would have preferred Cliffs using the cash to pay down its debt:  Reuters Cliffs Natural's Board approved a $200 mln share repurchase program that translates to 8.1% of current shares outstanding or 7.0% of outstanding if we include the mandatory convertible preferred. With net-debt of $3.1 bln at the end of 2Q14 and estimated leverage of 4.4x for 2014E, our expectation is that deleveraging would be more of a priority, especially with iron ore priced around $90/tonne, approximating Citi's 2015 forecast of $90/tonne. On our 2015E numbers, Cliffs Natural's leverage jumps to 6.0x, assuming the company idles Bloom Lake. If management opts to run Bloom Lake to facilitate a drawn-out sale, there would be downside risk to our numbers, holding all else equal. In our opinion, the buyback program could make sense if the Board is more positive on iron ore prices vs our expectations and expects to fund the buyback with proceeds from asset sales. As well the high dividend yield of 3.8% is not supporting the current share price, in our view, and could be jettisoned as a source of funds for the buyback. Shares of Cliffs Natural Resources have gained 1% to $15.96 at 1:37 p.m. today. They’ve dropped 39% so far this year.
Goldman Sachs was already a fan of Barrick Gold (ABX), having it rated Buy. Today, they went a step further and added the gold-mining giant to its Americas Conviction Buy List.  Reuters Goldman’s Andrew Quail and team explain why they’re bullish on Barrick: Key positive catalysts are: (1) Improving operational profile: We expect the company's high-quality core assets to contribute c.80% to total cash flows leading to a decline in overall costs; (2) Inflection in FCF generation: On our estimates, Barrick Gold should turn free cash flow positive beginning in 3Q14, generating more than $5bn of FCF over 2014-18E; (3) Continued portfolio optimization: We expect Barrick to continue divestments in 2014 and beyond which, combined with strong FCF generation, should lower the company's net debt and improve its financial flexibility; and (4) Growth in copper production: An ahead-of-schedule restart at Lumwana and commissioning of the Jabal Sayid project (company expects in 4Q15) should lead to higher copper production. Quail also raised his price target on Barrick Gold to $22 from $21. Yesterday, RBC lifted its price target to $25 from $23. On a day when gold miners are heading higher, Barrick Gold is doing better than most. Barrick has gained 2.3% to $18.93 at 10:15 a.m., while Newmont Mining (NEM) has risen 1% to $26.45 and Goldcorp (GG) is up 0.5% at $28.45. The Market Vectors Gold Miners ETF (GDX) has advanced 1% to $27.03.
DELAFIELD, Wis. (Stockpickr) -- Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.
>>5 Rocket Stocks to Buy for Blastoff Earnings Gains This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.
That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.
Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting technically very bullish and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.
>>5 Stocks Under $10 Set to Soar If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.
With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.
Netflix
My first earnings short-squeeze play is Internet television network player Netflix (NFLX), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Netflix to report revenue of $1.33 billion on earnings of $1.16 per share.
>>5 Stocks Ready for Breakouts
Recently, MKM Partners said that consensus estimates for Netflix's second-quarter results are conservative, given the company's guidance and adoption trends. MKM thinks the stock could double or triple in the next four to five years. The firm has a $435 per share price target and a buy rating on the stock.
The current short interest as a percentage of the float for Netflix is pretty high at 9.3%. That means that out of the 58.71 million shares in the tradable float, 5.25 million shares are sold short by the bears. This is a decent short interest on a stock with a relatively low tradable float. Any bullish earnings news could easily set this stock off on a large short squeeze that could force the bears to start covering some of their bets.
From a technical perspective, NFLX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock is gapping higher today ahead of its earnings report as shares have started to bounce sharply higher right above some near-term support at $428.20 a share. That move is quickly pushing shares of NFLX within range of triggering a major breakout trade above some key near-term overhead resistance levels.
If you're bullish on NFLX, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at around $460 to its 52-week high at $475.87 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 3.23 million shares. If that breakout hits post-earnings, then NFLX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $500 to $520 a share.
I would simply avoid NFLX or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $428.20 to its 50-day moving average of $420.79 a share high volume. If we get that move, then NFLX will set up to re-test or possibly take out its next major support levels at $400 to $380 a share.
World Acceptance
Another potential earnings short-squeeze trade idea is small-loan consumer finance player World Acceptance (WRLD), which is set to release its numbers on Tuesday before the market open. Wall Street analysts, on average, expect World Acceptance to report revenue $151.68 million on earnings of $2.25 per share.
>>Beat the S&P With 5 Stocks Everyone Else Hates The current short interest as a percentage of the float for World Acceptance is extremely high at 58%. That means that out of the 6.95 million shares in the tradable float, 4.01 million shares are sold short by the bears. This is an enormous short interest on a stock with an extremely low tradable float. If the bulls get the earnings news they're looking for, then shares of WRLD could easily explode to the upside post-earnings as the bears rush to cover some of their positions.
From a technical perspective, WRLD is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been basing and consolidating for the last three months and change, with shares moving between $71.58 on the downside and $83.22 on the upside. Shares of WRLD are now starting to spike higher above the lower end of its recent range and it's beginning to move close to triggering a near-term breakout trade above the upper end of its sideways trading chart pattern post-earnings.
If you're in the bull camp on WRLD, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $77.42 and then once it takes out more key overhead resistance levels at $80 to $81.26 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 149,738 shares. If that breakout starts post-earnings, then WRLD will set up to re-test or possibly take out its next major overhead resistance levels at $83.22 to its 200-day moving average of $86.28 a share. Any high-volume move above those levels will then give WRLD a chance to tag $90 to $95 a share.
I would simply avoid WRLD or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $74 to $73.50 a share with high volume. If we get that move, then WRLD will set up to re-test or possibly take out its next major support levels at $71.63 to its 52-week low at $71.58 a share. Any high-volume move below $71.58 will then push shares of WRLD into new 52-week-low territory, which is bearish technical price action.
iRobot
Another potential earnings short-squeeze candidate is consumer, defense and security applications robot maker iRobot (IRBT), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect iRobot to report revenue of $142.51 million on earnings of 22 cents per share.
>>4 Stocks Rising on Unusual Volume This company has beaten analysts estimates for GAAP earnings in the past four consecutive quarters, so another beat for this coming quarter could provide for a sharp boost higher to iRobot's stock price post-earnings.
The current short interest as a percentage of the float for iRobot is extremely high at 33%. That means that out of the 28.36 million shares in the tradable float, 9.85 million shares are sold short by the bears. This is another stock with a very high short-interest and a low tradable float. Any bullish earnings news post-earnings could easily set off a large short squeeze for shares of IRBT as the bears jump to cover some of their positions.
From a technical perspective, IRBT is currently trending above both its 50-day and its 200-day moving averages, which is bullish. This stock is starting to bounce higher today right above some near-term support at $35.62 a share. That bounce is quickly pushing shares of IRBT within range of triggering a big breakout trade above some key near-term overhead resistance levels post-earnings.
If you're bullish on IRBT, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $38.48 to $39 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 740,014 shares. If that breakout materializes post-earnings, then IRBT will set up to re-test or possibly take out its next major overhead resistance levels at $42 to $45 a share, or even its 52-week high at $48.36 a share.
I would avoid IRBT or look for short-biased trades if after earnings it fails to trigger that breakout and then takes out some key near-term support levels at $35.62 to $34 a share with high volume. If we get that move, then IRBT will set up to re-test or possibly take out its next major support levels at $30 its 52-week low at $28.90 a share.
NeuStar
Another earnings short-squeeze prospect is technology and directory services player NeuStar (NSR), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect NeuStar to report revenue of $233.05 million on earnings of 90 cents per share.
>>5 Stocks With Big Insider Buying The current short interest as a percentage of the float for NeuStar is extremely high at 41%. That means that out of the 53.71 million shares in the tradable float, 22.42 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 10.5%, or by about 2.13 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of NSR could easily explode sharply higher post-earnings as the bears rush to cover some of their trades.
From a technical perspective, NSR is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock is basing right now right above its 50-day moving average of $26.47 a share. That move has shares of NSR trending within range of triggering a near-term breakout trade post-earnings.
If you're bullish on NSR, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $27.57 to $27.75 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.60 million shares. If that breakout begins post-earnings, then NSR will set up to re-test or possibly take out its next major overhead resistance levels at $29.50 to $29.75 a share. Any high-volume move above those levels will then give NSR a chance to tag its next major overhead resistance levels at $35 to $36.75 a share.
I would simply avoid NSR or look for short-biased trades if after earnings it fails to trigger that breakout and then takes out its 50-day moving average of $26.47 a share to some more key support at $25.75 a share with high volume. If we get that move, then NSR will set up to re-test or possibly take out its next major support level at its 52-week low of $23.82 a share.
Jakks Pacific
My final earnings short-squeeze trade idea is traditional toys and electronics player Jakks Pacific (JAKK), which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Jakks Pacific to report revenue of $112.86 million on a loss of 29 cents per share. Just recently, Needham upgraded shares of Jakks Pacific to buy from hold based on sales momentum acceleration, a stronger financial position and operating leverage. The firm also slapped a $10 per share price target on the stock. The current short interest as a percentage of the float for Jakks Pacific is extremely high at 74%. That means that out of the 12.92 million shares in the tradable float, 9.56 million shares are sold short by the bears. This is a monster short interest on a stock with an extremely low tradable float. If this company delivers the earnings news the bulls are looking for, then shares of JAKK could easily explode sharply higher post-earnings as the bears rush to cover some of their bets.
From a technical perspective, JAKK is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last two months, with shares moving higher from its low of $7.17 to its recent high of $8.58 a share. During that uptrend, shares of JAKK have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of JAKK within range of triggering a major breakout trade post-earnings.
If you're in the bull camp on JAKK, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $8.58 to $8.97 a share and then once it takes out more resistance at $9.18 to its 52-week high at $9.48 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 535,189 shares. If that breakout kicks off post-earnings, then JAKK will set up to enter new 52-week-high territory above $9.48, which is bullish technical price action. Some possible upside targets off that breakout are $11.75 to $12, or even $13 a share.
I would avoid JAKK or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key near-term support levels at $7.66 to $7.17 a share with high volume. If we get that move, then JAKK will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $6.99 to $6.50 a share. Any high-volume move below $6.50 will then set up JAKK to re-fill some of its previous gap-up-day zone from February that started at $5.75 a share.
To see more potential earnings short squeeze plays, check out the Earnings Short-Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
RELATED LINKS:
>>5 Dividend Stocks Ready to Pay You More
>>5 Big Stocks to Trade for Gains This Summer
>>4 Hot Stocks to Trade (or Not)
Follow Stockpickr on Twitter and become a fan on Facebook.
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 CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.
BALTIMORE (Stockpickr) -- Buckle your seat belts, folks. If this morning's early price action is any indication, investors are in for a rough ride. And an overwhelmingly positive earnings season isn't doing much to stop it.
>>5 Stocks Hedge Funds Love This Summer So far, the early earnings results look good. Of the S&P 500 companies that have already reported their numbers, nearly 70% have posted positive earnings and sales surprises. But the broad market continues to look top heavy, and investor anxiety remains high. Frankly, being within grabbing distance of all time highs in the big stock indices doesn't change the fact that now is a difficult time to be an investor.
That doesn't mean that you've got to take your lumps as the market moves lower. Today, we're turning to five big technical trades that look primed to outperform as Mr. Market stumbles.
If you're new to technical analysis, here's the executive summary.
Technicals are a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technical analysis is a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.
>>5 Stocks Set to Soar on Bullish Earnings Every week, I take an in-depth look at big names that are telling important technical stories. Here's this week's look at five high-volume stocks to trade this week.
SPDR S&P 500 ETF
It makes sense to start with a look at what's happening in the big picture right now. To do that, we're turning to the SPDR S&P 500 ETF (SPY), the biggest investible proxy for "stocks" in general.
>>4 Stocks Rising on Big Volume It may come as some surprise to hear that, from a technical perspective, nothing has changed in the S&P 500 index in nearly the last two years now. Over that stretch, the S&P has continued to bounce its way higher in a well-defined uptrending channel, and even though 2014's price action feels different from the nonstop rally we got last year, we're still in a textbook "buy-the-dips market."
In other words, every test of trend line support in the last 19 months has been a supremely low-risk opportunity to buy SPY, and every brush up against trend line resistance has been a good opportunity to either sell or reduce equity exposure. It's really just as simple as that. So with SPY pressing the top of its channel since the start of June, we look ready for a correction back down to the bottom of the channel.
One more recent signal that's come into play is the bearish divergence in RSI, our momentum gauge at the top of the chart. Higher prices on weakening momentum is typically a big red flag that price is about to reverse.
The broad market's context here is important: A correction isn't the same thing as a crash, and SPY could fall all the way to 187 today without threatening the long-term uptrend in stocks. So take smaller risk exposure up here, and get ready to buy the next support bounce in the S&P.
Microsoft
We're seeing the exact same setup in shares of Microsoft (MSFT) right now, but with one key difference: Microsoft's uptrend looks buyable this week. Granted, the uptrend in Microsoft hasn't lasted nearly as long as the one in the S&P 500, but the correlations between the $344 billion tech stock and the big index are ramping up this summer.
>>5 Tech Stocks to Trade for Gains This Week MSFT has been in a well-defined uptrending channel since mid-January, bouncing its way higher in between a pair of parallel trend lines that identify the high-probability range for Microsoft's stock to stay within. We're getting another important test of trend line support in today's session. Tat means that you should buy the next bounce higher.
Waiting for a bounce is important for two key reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring MSFT can actually still catch a bid along that line before you put your money on shares.
I also featured Microsoft recently in "5 Dividend Stocks That Want to Pay You More in 2014."
Merck
Big pharma name Merck (MRK) has been a serious performer in 2014, rallying close to 17% since the calendar flipped to January. That's more than double what the S&P 500 has managed to accomplish over the same stretch of time. But that performance gap could widen this summer; Merck looks primed for a big breakout here.
>>5 Stocks Insiders Love Right Now Merck is currently forming an ascending triangle pattern, a bullish setup that's formed by horizontal resistance above shares (in this case at $59.50) and uptrending support to the downside. Basically, as MRK bounces in between those two technically important price levels, it's getting squeezed closer to a breakout above that $59.50 price ceiling. When that happens, we've got a buy signal in MRK.
Momentum, measured by 14-day RSI, adds some extra confidence to this setup. In spite of the sideways price movement since April, RSI is still making higher lows in the intermediate term. Don't jump in until price actually punches through $59.50 resistance.
For another take on Merck, check out "Cramer: Five of the Best."
Berkshire Hathaway
Berkshire Hathaway (BRK.B) is another ascending triangle trade to keep an eye on this week. The breakout level to watch in Berkshire is just under $130 -- a price that shares have hit their head on twice since the beginning of May. A breakout above that $130 level is the signal that it's time to join the buyers in this stock.
>>3 Big Stocks on Traders' Radars Why all of that significance at $130? It all comes down to buyers and sellers. Price patterns are a good quick way to identify what's going on in the price action, but they're not the actual reason a stock is tradable. Instead, the "why" comes down to basic supply and demand for Berkshire's stock.
The $130 resistance level is a price where there has been an excess of supply of shares; in other words, it's a spot where sellers have previously been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $130 so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. When it happens, I'd recommend keeping a protective stop just below the 50-day moving average.
Comcast
Last, but not least, is Comcast (CMCSA). The cable and content giant has been turning out some lackluster performance in 2014, more or less remaining flat since January -- but zoom out a bit, and the price action suddenly looks a whole lot more constructive in this $142 billion name. Comcast may be a slow mover, but the rewards in the second half of the year could be worth the wait.
Comcast is currently forming a rounding bottom setup, a price pattern that indicates a gradual transition in control from sellers to buyers. The pattern's name is a pretty good description of how it looks on a chart. Even though Comcast's rounding bottom came in at the top of its recent price range (not the bottom), the trading implications are just the same. The buy signal triggers on a move through our $55 price ceiling.
One final indicator to watch in CMCSA is relative strength. While Comcast's relative strength line spent most of the year trending lower as CMCSA underperformed the S&P, the downtrend broke at the end of May and began making higher lows. Statistically speaking, positive trends in relative strength make a stock likely to keep outperforming the broad market for the following 3-to-10 month window; that bodes well for Comcast buyers right now.
Wait for $55 to get taken out before you take this trade.
To see this week's trades in action, check out the Must-See Charts portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
RELATED LINKS:
>>Book Double the Gains With These 5 Shareholder Yield Champs
>>3 Stocks Under $10 Moving Higher
>>3 Big-Volume Stocks in Breakout Territory
Follow Stockpickr on Twitter and become a fan on Facebook.
At the time of publication, author was long BRK.B.
Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation. Follow Jonas on Twitter @JonasElmerraji
| |
Related EDN Utility Sector Rises; Elizabeth Arden Shares Slide Over 3.6% Mid-Morning Market Update: Markets Mostly Higher; Walgreen Profit Misses Estimates 
Getty Images The collapse of the U.S. housing market in the mid-2000s led to the nation's worst financial crisis in many decades. Yet even though the years of scrutiny and regulatory efforts that followed it have made the financial system a lot safer, there's still a ticking time bomb in the home-loan market. It's a problem that even some lenders see as potentially triggering some of the same issues for borrowers that led to the housing bust. Mortgages vs. home-equity lines of credit The primary problem that plagued homeowners in the 2000s came from mortgage loans that proved impossible for them to repay. In far too many cases, homeowners got mortgages with low introductory teaser repayment rates, allowing them to qualify for larger loans because of their lower upfront payments. However, many of these mortgages had provisions that called for sizable increases in monthly payments within a few years. As long as the housing market was hot and prices kept rising, homeowners had the option of selling those properties before the higher payments kicked in, getting them out from under the mortgage and reaping a sizable capital gain in the process as well. But when home prices collapsed and the market was flooded with homes, those who had taken those mortgages found themselves underwater, with no way to sell, and frequently no way to handle their loan payments. In response, regulators have targeted negative-amortization and interest-only mortgages. Lenders now must require borrowers to demonstrate their ability to repay those loans even after reset-provisions take effect and boost monthly payments. Recently, Wells Fargo (WFC) identified a lingering problem with another home-financing option, the home-equity line of credit. It's time to pay the piper The structure that Wells, Countrywide, Bank of America (BAC), JPMorgan Chase (JPM), and other major lenders generally used with home-equity lines during the housing boom was to allow customers to borrow up to the credit-line limit at will, and they were only required to repay interest during the first 10 years the line was outstanding. After that 10-year mark, banks would require that borrowers not just repay the interest on the outstanding balance but also make principal payments as well. With many home-equity lines of credit approaching the 10-year milestone, banks now worry about the impact of those much-higher monthly payments on borrowers. Already, Wells Fargo has moved most of its customers toward home-equity lines of credit that require early repayments of principal. According to reports, Bank of America and JPMorgan Chase are also looking at modified home-equity lines that would include earlier principal-repayment provisions. By making these changes, banks hope that customers will get used to relatively flat payments based on the amounts they have outstanding, rather than facing the sticker shock that an abrupt change in repayment terms during the course of the home-equity line of credit can cause. Nevertheless, it's important for borrowers to understand that home-equity lines of credit are much different than traditional loans. Because of the way that home-equity lines are set up, borrowers generally have the ability to tap those lines at will, allowing their principal balance to fluctuate upward and downward depending on their needs for withdrawals and their ability to make payments. Even if home-equity lines require principal repayment, only those who've already maxed out their lines will have to figure out how to get money from elsewhere to make the resulting higher monthly payments. Others will still be able to return to their home-equity lines for financing, effectively circumventing the new requirements and putting off the day of reckoning further down the road. It's still on you to act responsibly Efforts from banks and regulators to control the mortgage and home-loan market are commendable as a way to fight the threat of a future financial crisis. In the end, though, it'll take responsible money management from borrowers to ensure that home-equity lines of credit don't create the same trap for the unwary that ordinary mortgages did in the run-up to the housing bust. More from Dan Caplinger
David Winters - What Do You Look For in a Company's Quarterly Report?
Subscribe via Email 
Subscribe RSS Comments Please leave your comment: 
