Tuesday, May 30, 2017

Stocks to Watch: Nvidia Corp. $NVDA

Nvidia Corp. ($NVDA), $149.60.

Today on Wall Street the issue was none other than the fall of Nvidia Corporation, NVDA. The continuous and spectacular growth of its stock (45% YTD), and that comes from the beginning of 2016, forces us to think if this company, previously dedicated solely to manufacture microprocessors, is really worth it, or maybe much more (as estimated by Citibank which projects it to the superbullish $ 300) or is simply the 'fashionable' stock, or more seriously, a 'casino-stock' as Citron Research recently named it. Today at the beginning of the session he reached his all-time-high $168.50, to fall below $150, following the brutal (and healthy!) tech sell off that occurred Friday, and we do not suspect if he will continue in the following days, although the correction of prices in this sector already falls of mature ...

Bret Kenwell makes an interesting analysis of this company in Investor Place, which I recommend reading before investing. While Wall Street has stopped seeing NVDA only as a manufacturer of graphics chips and now covers sectors such as artificial intelligence and autonomous vehicle driving, it is important that it does not rest on its laurels and that it is attentive to competition.

And from the technical point of view, I see that the stock is going to be exhausted, oversold since May and with the MACD close to a reversal cross. The correction becomes necessary and would be healthy, as Citron says. Today, the stock was quite erratic (as the whole Nasdaq -0.52%) to close in slight rise +0.25%. The following days will define it, checking if it approaches and breaks important average levels like the SMA20, today at $141.

The engulfing signal (red arrow below, today) is usually quite accurate to indicate reversals. On Monday we will see if the tech sell-off today was only momentary or has sustenance, as I estimate.

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Friday, May 19, 2017

The FAANG: correction or end of its rally?

As you know, the term FAANG brings together five of the most popular and successful technology companies, leaders in Wall Street, all of top-notch Market Cap: Facebook FB, Apple AAPL, Amazon AMZN, Netflix NFLX and Google GOOG.

Beloved by everyone, from conservative investment funds and stock retailers to newbie traders, these stocks have had an amazing growth in these last 4 years, see if:
Facebook + 544%
Amazon + 268%
Apple + 170%
Netflix + 441%
Google + 124%

The uncertainty today is their immediate future: they have reached the end of their bullish rally, or what happened last Friday (all fell more than 3% with very high volume) was only a usual correction of the market?

History says that when these 'super bullish stocks' fall, they do it abruptly, with corrections that take time (years) to recover. See the recent case of companies in the biotechnology sector (followed by the IBB index) in fashion until about 3 years ago. I am not comparing both sectors, but simply exposing, for didactic purposes, such as the falls in stocks with a lot of momentum, such as today's FAANG. Next weeks can be significant for the FAANG, as one of them, Apple, presents its new iPhone10, which has filtered so far will not make much difference compared to their cheaper Korean and Chinese pairs. 

In my case I have lowered my exposure in these stocks, because they are heavily oversold months ago and, in my "sentiment trading" opinion, (except Google) somewhat overestimated in their value and price. For now, it is only necessary to follow these stocks and wait with caution.

The last 4 years of the FAANG resemble the period 2011-2015 of biotechs IBB. Then came a correction of almost 30%. I do not say that this can happen, I simply state that the falls in stocks with high momentum, like today's FAANG, they tend to be very abrupt.
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Thursday, May 11, 2017

Stocks to Watch: Blackberry Ltd. $BB

Blackberry ($BB), $10.49.

A few years ago, it was usual to see the image of Obama president using his Blackberry BB smartphone, following the daily events. In times when the first iphone governed sales, the Blackberry with keyboard, web and email included became synonymous with excellence and, above all, security. Research in Motion, the Canadian company that manufactured it was a penny stock, which was trading at $2 in 2003 to reach $150 in 2008, the year of its biggest boom. Everything changed in 2011 when the competition grew (Android, Samsung, Chinese smartphones) and RIM did not know how to renew itself, its technology and keyboard became obsolete, not very attractive for the young sector, which led to an epic fall in its stock and almost extinction of the company.

What better than the 15-year graphic of your stock to see the rise, fall and today's stability Blackberry: while the Nasdaq (in gray) went up, BBRY sank, until Chen arrived in 2013.

In those years, another iconic and dear manufacturer of PDAs and smartphones, Palm, had disappeared for the same reasons. Forgotten by Wall Street, RIM seemed to be the next victim, until in 2013 John Chen enters as CEO and in a few years gives a total turn to the company, from the symbolic fact of changing the name of RIM to Blackberry, to give new business approaches, including leaving some hardware to focus on the software, in a new and very future area: artificial intelligence AI. From these developments derives its novel software QNX for autonomous driving of vehicles, recognized as the safest in the market. Today it is installed in 60 million vehicles of almost 20 brands such as Audi, Ford, Honda, Toyota, BMW and Volkswagen, among others. The following video illustrates the comments.

This subsector, I believe, is going to become one of the attractive and lucrative sectors of the coming years. And Intel INTC knows, that is why it acquired 3 months ago the Israeli company Mobileye MBLY leader in the development of anti-collision systems and autonomous driving, for $15.3B. And he did it to compete directly in this area with his rival Qualcomm QCOM, which in 2016 had acquired NXP Semiconductor NXPI, manufacturer of vehicle chips. A third and important member in this fight is Nvidia Corp. NVDA, which I have dealt with recently. And it is known that Google GOOG and Apple AAPL also plan to enter this sector with their own operating systems, even at zero.

In this competition, I particularly like Blackberry, not only because "sentiment trading". For its growth potential (stock near $10.50 and with a long road to recover), the prestige gained from its brand, having its own software in development for many years and that legacy of digital security, vital for a niche such as autonomous driving. And if we add that they have an almost healthy balance with $940M, product of their recent and significant legal victory over Qualcomm for royalties paid in excess, we have the ideal framework for the development and appreciation of BB to continue.

As for trading, we still have to wait for a good moment, such as the end of the current Nasdaq correction (5 of the last 6 sessions down). Also keep in mind that this Friday 23th presents its earnings report. After these events, if they are positive, enter to invest long in this stock taking advantage of its low price, or in options a leap until January 2018 it looks attractive.

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