As you most likely already know, the market has been a bloodbath over the past month or so due to fears of the coronavirus and its effect on the economy. Businesses have been closing and people have been ordered to stay at home to prevent the spread the disease. Inevitably, this will affect the economy and the stock market. Since all of this started happening, $SPY (the ETF tracking the S&P 500) has fallen over 35% from its high of $339.08 in February 2020 to its recent low of $218.26 in March 2020.
A lot of people are under the impression that money can't be made in the market with such bearish conditions, which is not true. A bear market actually offers plenty of opportunities that are not always available in a bull market. In this post I'll be sharing some tips on how to handle the current market conditions, and how you can take advantage of it for both day trading and long-term investing profits!
When it comes to day trading in a bear market, it's extra important to manage your risk. Bearish conditions typically bring along increased volatility in the market. That volatility is a great thing for day trading… but it can also be terrible thing. If you're not properly managing your risk, you should expect larger drawdowns and losses on your positions than you're typically used to while the market's volatility is high.
Obviously this is something most traders want to avoid, because managing risk properly is the name of the game. Because of that, I recommend trading with smaller-than-usual position sizes to offset the increased volatility. For example, if an average day trade position size for you is $10,000, you may want to try cutting that down to maybe $7,500, $5,000, or even less to avoid dealing with increased risk in a volatile market.
You may be worried that smaller positions will also take away from your profits, which should not be the case. You have to keep in mind that the increased volatility also can work in your favor when you're on the right side of a trade. If done properly, you should be both risking and profiting the same as you would on an average trade, even with a fraction of the position size.
Position size aside, it may be more difficult to find winning trades in a bear market if you only buy and sell. Instead, bear markets offer great short-selling opportunities. Short-selling lets us profit from stocks going down, which can be a huge benefit in the weakness of a bear market.
Here's a rundown on how short-selling works:
1. You place an order to short-sell 100 shares of stock symbol ABC.
2. That order automatically requests to borrow 100 shares of ABC from your broker.
3. You sell the borrowed shares when you believe the price is going to go down.
4. Later you buy back the shares (or cover), which automatically returns them to your broker.
5. You either profit or lose the difference between where you bought and sold, multiplied by the number of shares traded.
You always want to buy low and sell high in the market! The only difference with short-selling is that you're selling high first and hopefully buying low after, which is easier in a bear market.
Even though I personally am mostly a short-term trader, I'm still excited about the long-term investment opportunities that this market selloff will offer too. Eventually, $SPY and the S&P 500 will be back at their highs. This selloff is only making the future return to the highs more profitable for those that take advantage of it!
Now is not the time to afraid of the market and not the time to be afraid of losing… even though most people are. Warren Buffett even said "Be fearful when others are greedy. Be greedy when others are fearful." The fear in the market is higher than it's been in a long time, which means it's almost time to get greedy and buy, buy, and some more.
Although, it's important to not buy all at once. You can never expect to buy at the exact bottom, so it's better to slowly build a position over days, weeks or even months rather than buying your full position all at once. If you're planning on investing $10,000 into the market, you may want to buy $2,000 at a time as the price bottoms out.
Alternatively, you can also wait for the bottom of the selloff to be confirmed and for the price to start bouncing back up. By doing this you're guaranteeing that you are not buying the exact bottom, but you can also be confident that the selloff is over and the price is likely to start its climb back up.
Regardless, there is a lot more strategy to investing than most people think. You can't always find winners by buying into well-known companies. You should be doing some fundamental analysis to find strong companies that will survive a recession and even out-perform the market. Looking for things like quarter over quarter and annual EPS growth, growing revenues, and high institutional ownership is a great start for a long-term investment.
On the technical side, it's best to see that the individual stock is performing better than $SPY and the S&P 500. As I mentioned, $SPY is currently down about 35% from its highs at the time of this writing. A good investment is likely to also be dragged down by the market, but not a full 35%.
I hope this post calms some nerves about the current market selloff we're facing and gives you some ideas on how you can take advantage of it.
Trading Mindset: How to Get It Right (and the Biggest Mistakes to Avoid)
Finding success in the stock market is so much more than learning patterns. You need to have the right trading mindset.
Don’t get me wrong, patterns are essential and important. In fact, I think anyone can learn my penny stock patterns that present themselves every day in the stock market … As long as they put in the time…
And as you start your trading career, it’s imperative that you work to develop the right trading mindset.
Your mindset is the foundation for every trade and your entire trading career. It’s something that you have to hone and refine all the time. I know that personally from trading for 20+ years. If I don’t check my mindset, I run the risk of overtrading.
That’s exactly why I’m dedicating this post to the trading mindset. Because the wrong approach to the markets can lead to loss of confidence, chasing trades, and even blown-up accounts.
Let’s get to it!
What Is the Trading Mindset?
The trading mindset is really a set of rules for how you’ll conduct yourself as a trader and in the markets. And you can actually apply it to a lot of other aspects of life — not just trading.
During my two decades of experience in trading penny stocks, I’ve learned key facets of the trading mindset. That’s what I base my trading rules on. My top students know just how important it is to follow these rules to become self-sufficient in the markets.
So let’s break down the rules that go into the right trading mindset … and the biggest mistakes you should avoid as a trader.
Let’s start with my #1 rule…
Cut Losses Quickly
Veteran traders: when a stock breaks below a key level, exit the position safely
Pumpers: The drop is due to weak hands/short sellers, keep holding or you're my enemy, this is a longterm hold not a day trade
Veterans: cut losses quickly
Pumpers: It's not a loss until you sell!
— Timothy Sykes (@timothysykes) June 24, 2020
When it comes to trading penny stocks, this is the most important thing both new and veteran traders focus on.
My newest six-figure students like Matthew Monaco, Jack Kellogg, and Kyle Williams swear by this rule.* It’s a big part of what’s helped them to grow their accounts. It’s not just how you win — it’s also how you manage your losses.
You have to cut losses quickly because penny stocks are volatile. They can make rapid gains and lose them just as fast. Too many newbie traders think these crap penny stocks will be the next Amazon or Netflix. But that’s just not the case.
A lot of these companies dilute their stock to raise money for execs and insiders. That’s what we call toxic financing. It’s a big reason you don’t hold a penny stock position and hope for the best.
Learn the patterns and how to trade them. When a trade doesn’t go as you expect, get out.
When I trade, I keep my losses small and let my winners run — even if it’s only 20%–30%. Which brings me to my next key rule…
Learn to Take Singles
Veteran traders: take singles, 10, 20, 30% gains add up over time, don't go for home runs
Pumpers: It's going to the moon, minimum of 10x your $, more likely 100x your money
Veterans: Lasting wealth is built one trade, one single at a time
Pumpers: Home runs only, no singles!
— Timothy Sykes (@timothysykes) June 24, 2020
Too many traders want every trade to be a 100%+ home run. We’ve seen some astounding moves in the wild pandemic market … but that’s not typical. And even Wall Street aims for about 8%–10% per year.
This rule goes back to cutting losses quickly. Once, I lost over $500K in one trade because I didn’t cut losses. You can read about that in my free book, “An American Hedge Fund.”
After learning that lesson the hard way, I shifted my strategy to trade more conservatively. And if you’re managing your risk, those singles add up over time. That’s how you build a small account, and exactly what I teach in my Trading Challenge.
Here’s what you don’t do…
Hold and Hope
Veterans: penny stock research is a sideshow for companies to do financings/insiders to sell at pumped up prices
Pumpers: I have the best research, I talk with IR daily!
Veterans: There's been manias before, see https://t.co/QTYT7tytOA never hold & hope
Pumpers: Hold longterm!
— Timothy Sykes (@timothysykes) June 24, 2020
Most penny stocks won’t become large-cap stocks. Don’t look at these trades as investments…
That’s the wrong trading mindset. Maybe a few of these sketchy will become real companies one day. But I don’t like those odds, and I’m not that patient. I’d rather take my quick singles trades and let them add up.
I teach my Challenge students to do the same. Let’s look at an example of how I trade with the right tools and the trading mindset…
Artificial Intelligence Technology Solutions Inc. (OTCPK: AITX)
I ended up selling at $0.032 per share for a $1,600 gain, which you can check out on Profit.ly.*
This was a 39% gain, which is bigger than my average. But I waited for the right setup, then I took my single and got out.
You don’t need to aim for 100% or more for winning trades. Again, trades like this add up over time. I’m up over $5.5 million in trading profits over my past 20 years of trading.* And I didn’t do it through holding and hoping.*
(*My results, along with the results of my top students are far from typical. Individual results will vary. Most traders lose money. My top students and I have the benefit of many years of hard work and dedication under our belts. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)
Notice I mentioned former runners? This is exactly why you need to…
Study the Past
Veteran traders: the market doesn't owe you anything, 90% of traders lose due to lack of preparation
Pumpers: God wants you to be rich, I didn't pick this stock, God did!
Veterans: Study the past, history repeats
Pumpers: This is a breakthrough technology, ignore the past!
— Timothy Sykes (@timothysykes) June 24, 2020
History repeats. I often say I’m just a glorified history teacher. I’ve been trading the same patterns for over 20+ years in the market. It’s not exactly the same — I have to adapt to what the market is giving me right now.
But too many traders think studying the past is a waste of time. Then they ask me how I know about former runners or how to spot my favorite patterns again and again.
You have to prepare. If you study what stocks moved in past pandemics like Ebola or SARS, you’d know to watch a lot of stocks that spiked in the current pandemic. I broke some of those down in this post.
There’s not just one thing you can focus on in the markets. You have to learn it all. That’s how you…
Work to Become a Self-Sufficient Trader
Veterans: NEVER follow alerts/picks from anyone, learn to be self-sufficient
Pumpers: I want as many followers to buy my plays because that's my strategy!
Veterans: All penny stocks are junk, research is a joke
Pumpers: This penny stock is the future & will change the world!
— Timothy Sykes (@timothysykes) June 24, 2020
All the watchlists and alerts I send out to subscribers aren’t to get them to blindly follow my picks. In reality, the stocks in the penny stock niche can move so fast that by the time I send out the alert, it’s too late.
So why do I send them? To teach the process. I want you to understand why I picked those stocks. It’s another opportunity for you to study. What was the catalyst, the volume? How high did the spike run? Was it a short squeeze — and how can you tell?
Start your learning process — sign up for my no-cost weekly watchlist here.
There’s something you have to always remember…
Discipline Is Key
Veteran traders: never get emotional about a trade, create a plan & stick to it, discipline is key
Pumpers: I'm in love with this company (who's paying me in shares/$ I'll never discuss publicly)
Veterans: treat trading like a business, be meticulous
Pumpers: Let's get coke $!
— Timothy Sykes (@timothysykes) June 24, 2020
You can learn all the right rules and strategies, but if you don’t stay focused and disciplined with the right trading mindset … you’re putting your trading career in jeopardy.
This another lesson I’ve learned the hard way. It’s why I trade like I’m a retired trader. A setup has to be so good, I’d feel awful for missing it.
That mindset helps me to not overtrade. Not gonna lie, it’s hard in this wild market. There are SO many hot plays. The volatility is insane. And I’m thrilled that all my wins will help someone in need since I donate all my profits to charity and causes like my Yemen fundraiser.
Get smart tips for navigating this volatile market — and any future volatility. I put together this no-cost two-hour video lesson to help you get through it. Get access to “The Volatility Survival Guide” here.
But the market won’t be like this forever. It’s bound to slow down. So overtrading now can mess with your mindset. You risk learning the wrong lessons and losing more when the market slows down.
I’d rather see students make a few good trades per week than take a bunch of subpar trades. That’s especially true if you trade with a small account. If you use a cash account and aren’t limited by the PDT rule, it can be easy to take more speculative plays rather than waiting for a great pattern.
Don’t do it! And in this niche, always…
Expect the Worse
Veterans: It's very low odds to buy when a pump goes red on day 3
Pumpers: Let's coordinate this pump with a few other promoters, we create our own odds!
Veterans: Never trade with anyone else, expect the worst out of everyone
Pumpers: Let's get multiple chats buying together!
— Timothy Sykes (@timothysykes) June 24, 2020
If you expect the worse out of these companies, you’ll never be disappointed.
Don’t believe the hype you see on Twitter. This is where the new promoters are. They love to tout these stocks. You can’t fall for it. Don’t fall in love with stocks — trade them and move on.
When I started in the markets, I was a young guy looking to make money in the markets. I had to learn to trade the hard way — through trial and error. Along the way, I had some big wins … and losses. I didn’t have a trading mentor.
There was no one willing to share what they knew about this industry.
That’s why I started teaching. I want to help dedicated students become self-sufficient traders. You can’t do that unless you really understand this industry.
People love to hate on penny stocks, but they don’t understand how to play the game. They don’t understand how to slowly build a small account. So here’s my last tip on how to get into the right trading mindset…
Build Your Knowledge Account
The best part? You can choose your level of commitment based on what works for you.
Start with my FREE online guide to penny stocks.
You can get my student Jamil’s book “The Complete Penny Stock Course” to get a thorough overview of all my core lessons.
You can join Pennystocking Silver for access to over 6,000 video lessons and more.
And when you’re ready for the ultimate trading commitment, you can apply for my Trading Challenge. That’s where all my top students started. It includes access to the best chat room and trading community, live webinars, DVDs, and so much more.
It’s not easy. It’s taken all my top students years of hard work and studying to hit their market stride. But if you’re in the Challenge, you can trade right alongside them.
Think you have the discipline to make it in the Trading Challenge? Apply today and find out.
The Trading Mindset Conclusion
At the end of the day, there’s no single right way to trade.
What matters is your right trading mindset. Without discipline, it’s near impossible to make it in trading or to grow and protect your account. You gotta follow rules like cutting losses quickly and taking those singles.
You have to study every day.
If you’re serious about learning how to trade penny stocks, apply to my Trading Challenge.
What’s your biggest trading mindset issue? Let me know in the comments below!
The post Trading Mindset: How to Get It Right (and the Biggest Mistakes to Avoid) appeared first on Timothy Sykes.
DECN – Some DD for you on this Saturday
DECN is a company that was founded in the early 2000s. Before COVID-19 shocked the world, their product was(and still is) an at-home blood glucose testing strip; these items can be found on Amazon and a plethora of other medical sites.
On March 3rd, 2020, they announced an introduction to their screening method for COVID-19.
"Our product is timely, simple to use, cost-effective, and will be commercially ready in the summer of 2020."
"I want to say straight on that we have developed a Coronavirus screening method, not a cure or a vaccine for this virus. That being said, our screening method should allow for 80% of the suspected carriers of Coronavirus to exit the quarantine systems in the places where Coronavirus is rampant."
Before this announcement, the stock was trading sub $0.02. On March 3rd, the stock reached a peak of $0.045.
The next day, they had more PR come out that stated the following:
"….. GenViro for the Coronavirus (covid19) began as an outgrowth of our GenUltimate TBG product line. What makes the testing for the Coronavirus possible, and the GenUltimate TBG special is the company's Impedance measurement technology."
DECN's stock price stayed within the $0.03-$0.04 range with this PR
On March 11th, just a week after their first announcement, they put out a PR that started a lot of buzz and hype.
"Today… we present the Coronavirus test kit and the Phase 1 unit forecast… We anticipate the sale of 420,000,000 kits in the first full year of commercial sale. The company has retained FDA counsel who is in the process of securing expected emergency waiver for diagnostics and diagnostic devices."
"Keith Berman, CEO of DECN commented, "Because we perfected the Impedance technology in 2019 for our GenUltimate TBG glucose test strip and meter, we have shaved months off of the development time for the GenViro! device."
This caused the stock price to jump from sub $0.025 to over $0.07; within a week it went up 350% and started gaining a lot more eyes due to how big this virus was starting to get around the world.
Over the coming weeks, they would put out more and more PR highlighting the product previously spoken about, and this would gain the eyes of a lot of investors because of how rapidly the virus was spreading.
Some key quotes from their PR:
"We are awaiting (the) release of blood samples from previously infected people in Daegu, Korea, so that we can complete testing and make a final report to the U.S. FDA so that we may secure our Emergency Waiver."
"We are happy to inform all interested parties that we have raised our 12-month forecast to 525 million kits."
"… receiving a plan from our technical and R&D director, we decided to take the next step with GenViro™and further refine its use for hospitals. While we have not yet forecast sales to hospitals, and while most of the lesser but competitive products are directed toward hospital uses, we nonetheless believe that hospitals will be a large future source of revenues."
"Mr. Berman concluded, "I have been in and around the in-vitro diagnostics business for over 40 years, and never before in all of that time, have I witnessed a policy like this. This latest guidance from the FDA shaves months from our product development process, and we all shall reap these benefits. Tomorrow we will discuss our new plans going forward now that we will shortly be a two product coronavirus diagnostics company."
"DECN announces that the company's Board of Directors has approved the offering of $13 million in non-dilutive debt financing, the first $2 million in Notes, followed by a $1 million credit facility to purchase manufacturing equipment for their Korean manufacturing facility, and the remaining $10 million in a revolving line of credit to finance inventory."
At this point, the stock that originally was trading below $0.02 is now trading near $0.26.—————————————————————————————————————————————————–
***** "GenViro! provides results in 15 seconds, based on a small finger-prick blood sample. The method is safe, effective, and its biggest benefit to the healthcare system is that the device can be used to screen out the 97% or 98% of those tested that are negative for COVID-19. Our method is quicker, provides the desired result, is much cheaper, and effective." ***** – March 23rd
Over the coming weeks, they release more and more PR, all leading up to April 23rd, where they announce a 2nd EUA application, followed by a response from the SEC.
Before April 23rd, the stock was now trading around the $0.40 mark, an astounding jump in share price from what it was trading at pre-test kit.
"The company's goal for GenViro! is not just to receive EUA approval from the FDA, but when this approval is received, to become the go-to testing solution, in demand by Professional organizations as well as Fortune 500 companies, even sports teams"
"New markets for our GenViro! have also been recently identified, the latest — large businesses, Fortune 500 companies, seeking to reopen for business in the next month or two…. Some of these businesses have already contacted the company and even tried to place large purchase orders for GenViro! Swift kits, using the first in line principal, so that they may test and retest returning employees. No other test kit can accomplish this."
Then, the SEC announces the following:
"The Commission temporarily suspended trading in the securities of DECN because of questions regarding the accuracy and adequacy of information in the marketplace since at least March 3, 2020."
The stock has a sudden fall to the $0.20 mark and is suspended from trading for 10 days
DECN puts out a response 4 days later
"Prior to the trading suspension Keith Berman, DECN's CEO, had voluntarily submitted to over three hours of interviews conducted by SEC staff members over multiple days. At the conclusion of the second interview, a third interview was requested by the staff. Instead, the SEC suspended trading without warning or further discussion.""Despite the interim trading suspension… intends to press its negotiations with the FDA for expedited approval of the company's GenViro! Swift Kit for the testing of the Covid-19 virus."
Even with the SEC halting the trading of their stock, they continue to press with the kit that is being put into question.
The day the stock became un-halted, it fluctuated from $0.015 to $0.21. May 15th, DECN responded with an amended petition for their trading suspension:
May 20th, SEC publishes their information at the time of the suspension:
May 21st, DECN publishes their testing results for interested parties.
"Both of our Covid-19 test kits are now in the FDA EUA review process. The company has received Pre-EUA Acknowledgement letters from the U.S. FDA for (the) device (serial number) PEUA200232, GenViro Covid-19 Screening Kit for professional use in commercial and group settings and device (serial number) PEUA200947, GenViro Covid-19 Screening Kit for at-home use."
June 17th, DECN responds to the SEC information:
They also apply for a provisional patent for their test-kit:
July 1st, the SEC releases the final documentation for the petition on the suspension of trading:
"… the Commission’s opinion that the public interest and the protection of investors required suspension of trading in DECN’s securities was the right decision and remains the right decision. Accordingly, the Petition should be denied."
Read this, at the very least, if you are going to buy this stock.
July 2nd, CEO Keith Berman releases an open letter:
"Public health experts seem to agree on two things, the need for a vaccine and the importance of increased, immediate, and affordable testing to determine exactly who is ill and contagious. As New York Governor Andrew Cuomo stated, "The more testing, the more open the economy." The President's Advisory Task Force agrees that the economy won't open completely and remain such without wide-scale testing."
"But, testing is only valuable when it is accurate. In the case of a pandemic, it must also be affordable and produce reliable results in minutes, even seconds. On that front, there has to date been a failure to deliver. "
"Companies large and small have jumped in headfirst to the testing race under the FDA's guidance and with big dollars on the line. Unsurprisingly, that favors the large players to the detriment of smaller, often more nimble and innovative players. In the end, it's the public health, really all of us, who suffer. Another article points out the FDA's oversight has been inconsistent at best, stating, "The FDA must stick to its normal process for review but expedite it by giving it top priority with its clinical reviewers and bring in more reviewers if necessary."
"More so, our public health administrators favor familiar technologies whose applications often don't respond to the exact urgent needs of the moment. Worse yet, they seek familiar faces, often the big pharma-med-tech players, who like an oil tanker in the open ocean, take forever to change course in the direction required. Unfortunately for us all, this frequently unfolds at the immediate expense of creative, alternative thinking, new, unknown, smaller players who may actually have the answers, but rarely get the chance and support to appropriately test their solutions."
There are a ton of quotes from this letter, but I wanted to point out a few.
July 8th, DECN announces distribution:
"The company plans to manufacture two GenViro! International Covid-19 Swift Kit packages for sale in Central and Southern Asia and reports that its new distributor will be opening hubs in Singapore, India, and Australia… The company still estimates that sales for its International GenViro! Swift Kits will commence in late Summer 2020."
July 10th, DECN announces a saliva COVID-19 test-kit for professional and home use, as well as re-iterating their blood-prick test-kit is showing results within 11 seconds:
"Test reporting for the GenViro! finger stick kits are currently producing results at :10.5 seconds, and initial testing completed on the saliva version of the kit should yield even faster results since the saliva testing will not require any sample correction."
"Preliminary testing… was run using saliva from human donors and indicated that the saliva exhibits a comparable, and in fact favorable, impedance curve profile when compared to whole blood."
What does this all mean?
DECN says they have a product that will literally have an impact on the world; we need to test everyone and we need to do it in a way that is easy, yet effective. The fact they claim they can make upwards of 500 million test kits within a year of production shows the scale that they are able to bring their product.
– This is an OTC, so it is inherently more risky than other stocks
– This stock will not go up any more than it is currently at now without the EUA from the FDA
– It is still on the Grey Market(normal stocks are on pinks) and you may not even be able to buy it currently, DECN has to submit form 211 in order to get themselves off the grey market; to my knowledge, they have not done this yet
– On a scale of 1-10, 1 being a low risk and 10 being high, I would have to give it a solid 7.5-8.5; again, this stock will not move without the FDA approving their device
– You get in on the low of a stock that has the potential to raise upwards over 1-5$; my PT has been laughed at many times, but think about it… 500 million test kits, $6.95 wholesale price per test kit… stocks with this much in earnings are not penny stocks
Why I believe in this company:
If you double, triple, and quadruple down, saying that you have a product that can produce the results you promise, and then you continue to put out PR that you have come to agreements for distribution, preparing for the moment you get the approval, you would need to actually have that product. The US is seeing the 2nd wave, and this virus is not going to leave our lives for the foreseeable future.
My predictions for the stock:
– If FDA approval comes before it moves off the grey market: $0.70-$0.95
– If it moves off the grey before FDA approval: $0.40-$0.55
– Once it has both FDA approval and is moved off the grey market: $1.00-$1.25
TLDR: DECN claimed to have a quick testing process for COVID-19, SEC halted them due to the belief of misinformation. DECN denounces the halt, still pushes forward with trying to get the EUA from the FDA. DECN has since released multiple statements that they have a product and it does produce the results they previously stated. No EUA has been given to DECN yet, no movement off of the grey market yet, VERY RISKY STOCK TO BUY, but also could be more rewarding than others once they get all of the previously stated items.
Wall Street Week Ahead for the trading week beginning July 13th, 2020
Good Friday evening to all of you here on r/StockMarket. I hope everyone on this sub made out pretty nicely in the market this past week, and is ready for the new trading week ahead.
Here is everything you need to know to get you ready for the trading week beginning July 13th, 2020.
Market heads into worst earnings season in 12 years amid worries virus is slowing recovery – (Source)
The worst earnings season in years is about to begin, and it’s possible the stock market could shrug off the sharp profit decline, as long as companies see some signs of a recovery ahead.
Earnings are expected to fall by 44%, the worst quarterly performance since the Great Recession when S&P 500 profits fell by 67% in the fourth quarter of 2008, according to Refinitiv I/B/E/S data. It is also expected to be the worst quarter of the pandemic crisis, revealing the extent of the earnings damage as the economy slumped more than 30%.
Major financials JPMorgan, Bank of America, Goldman Sachs and Wells Fargo are among the financial firms reporting. Pepsico starts off the week with its report Monday, and Johnson and Johnson, Abbott Labs and Netflix also report.
The financial sector is expected to see a more than 52% decline in profits, according to Refinitiv.
“U.S. companies are about to give us a look into their worst quarter since the Great Financial Crisis,” said Lindsey Bell, chief investment strategist at Ally Invest. “But since so many companies aren’t giving earnings forecasts, investors won’t make moves based on earnings alone. They’ll also be looking at trends since the quarter ended. Increasing coronavirus cases, management outlooks, and price performance could all have an outsized impact, and that could lead to outsized market moves.”
Stocks turned in a mixed performance in the past week, reacting at times to the rising risks to the economy as coronavirus cases continued to increase in some states. The Dow posted a weekly gain of 0.96% while the S&P 500 and Nasdaq were up 1.76% and 4.01%, respectively.
In the week ahead, there are some important economic reports, including CPI inflation data Tuesday and retail sales Thursday. Last month, retail sales rose a surprise 17.7% but this month economists are watching closely to see if the reversal of some openings and the delays in other is impacting consumer spending.
But it’s the earnings that could be a litmus test for markets.
“I think it really comes down to earnings, not what the numbers are going to be. People don’t care about the numbers. They want to hear what the companies have to say,” said Peter Boockvar, chief investment strategist at Bleakley Adivsory Group. “Tech companies are going to have the most important earnings. Companies like semiconductors, that go into automobiles, computers and cell phones. They’re the ones that have to say our outlook is great, and therefore our stocks deserve to be at all-time highs.”
Tech company earnings are only expected to fall by 8%. The worst sectors are expected to be energy, with a decline of 154%, followed by consumer discretionary, expected to be down by 114%, according to Refinitiv.
This past week saw the following moves in the S&P:
Major Indices for this past week:
Major Futures Markets as of Thursday's close:
Economic Calendar for the Week Ahead:
Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:
S&P Sectors for the Past Week:
Major Indices Pullback/Correction Levels as of Friday's close:
Major Indices Rally Levels as of Friday's close:
Most Anticipated Earnings Releases for this week:
Here are the upcoming IPO's for this week:
Thursday's Stock Analyst Upgrades & Downgrades:
Does a Weak First Six Months Mean Trouble?
The wild ride of 2020 continues, with the S&P 500 Index down 20% in the first quarter and up 20% in the second quarter. Much like dropping a 20 dollar bill and picking it up, this doesn’t mean you are 20 dollars wealthier. Down 20% and then up 20% actually comes out to a 4% drop for the first half of the year.
What does a negative first half of the year tell us? Turns out, gains could be hard to come by the second half of this year. “Although 2020 is like nothing we’ve seen before, the fact of the matter is a weak first half of the year could mean weaker than normal returns for the rest of the year,” according to LPL Financial Senior Market Strategist Ryan Detrick.
In fact, the S&P 500 had been higher in the first six months of the year a record nine consecutive years before being lower in 2020. Since 1950, there were 48 times when the first six months were higher and the rest of the year gained 77% of the time and added 5.8% on average those final six months. Compare that with when the first six months of the year were lower 21 times, the final six months were higher only 52% of the time and up only 1.2% on average.
As shown in the LPL Chart of the Day, a move higher is quite likely after strength in the first six months of the year, while very modest gains could be in the cards if those first six months underwhelm.
Earnings Season Lurks
After a relatively quiet week for economic data and practically no earnings reports to speak of, the Q2 earnings season will kick off next week. Normally, earnings season starts quietly with just a handful of reports outside of the major banks, but next week will be relatively busy with some major players on the calendar. Things start off slowly with Pepsi (PEP) on Monday. Tuesday, we’ll get reports from Citigroup (C), Delta (DAL), Fastenal (FAST), JP Morgan Chase (JPM) and Wells Fargo (WFC), all of whom are scheduled to report in the morning. Wednesday’s major reports include Goldman (GS), Progressive (PGR), and UnitedHealth (UNH) in the morning, while Alcoa (AA) will report in the afternoon. Thursday will be the busiest day of the week with too many stocks to list here, but Netflix (NFLX) will highlight the schedule of afternoon reports. Finally, Friday’s key reports include Blackrock (BLK) and State Street (STT).
As far as analyst sentiment stands heading into the current earnings season, while we wouldn't go so far as to say that it has made a full 180-degree turn from last quarter's negative extremes, it has been close. Over the last four weeks, analysts have raised forecasts for 580 companies in the S&P 1500 and lowered forecasts for 419. That works out to a net of 161 or just under 11% of the index. Besides the S&P 1500, six sectors have positive revisions spreads, while just two are negative. Sectors with the most positive revisions spreads include Consumer Staples, Energy, and Technology, while the two sectors with negative spreads are Financials and Real Estate. Financials just can’t find any love these days.
The "Miracle" Nasdaq 100
For anyone unfamiliar with the 1969 Miracle Mets, the "Amazins" were 10 games out of first place as late as mid-August and then went on to win 38 out of their last 49 games to finish in first place over the Cubs. From there, the Mets went on to win the first World Series in the history of the franchise in what at the time was one of the biggest turnarounds in the history of baseball. Ironically, in 2007, the Mets were on the other end of another historic turnaround after they blew a seven-game division lead with less than a month left in the season by losing 12 of their last 17 games. But that collapse is a story for another time.
Like the Miracle Mets in 1969, the Nasdaq 100 in 2020 has also staged a historic turnaround. After trading up over 10% earlier in the year, the gains quickly evaporated with the COVID outbreak. Within two months, the Nasdaq 100 went from a YTD gain of over 10% to a decline of over 20% by late March. From there, though, the Nasdaq has gone on an epic run, not only erasing all of its losses but also trading to record highs and a gain of over 20% on the year.
The frequency of positive days for the Nasdaq 100 provides another illustration of the index's strength this year. So far this year, the index has traded higher on 63% of all trading days. That may not sound like much, but if the year were to end today, it would be the highest percentage of positive days for a given year in the Nasdaq 100's history. On a side note, it's interesting to see in this chart how similar the percentage of positive days has been on a year to year basis over time. There has never been a year where fewer than 46% of all trading days have been positive, and prior to 2020, there has never been a year where more than 62% of all trading days were higher.
China Charges Higher
We've highlighted the run in Chinese equities quite a lot in the last several days, but it keeps getting more and more extreme. With a gain of over 1% overnight, China's CSI 300 not only turned in its eighth straight day of gains but also its eighth straight day of rallying more than 0.5%. In the history of the CSI 300 dating back to 2002, there has only been one other time where the CSI 300 saw eight or more straight daily gains of 0.5%. That was back in April 2007.
If you don't remember what was going on with Chinese equities back in April 2007, take a look at the chart below. The last time the CSI 300 had a streak of 8+ days of 0.5% daily gains, the CSI had already doubled in the prior six months. From there, though, it went on to nearly double again in the next six months. Eventually the bubble burst, and it wasn't much more than a year later that the CSI 300 was back below where it was in April 2007.
The gold ETF (GLD) has gone through a nine-year drought from new all-time highs, but as it gets closer to its prior highs from September 2011, there are three possible upcoming technical set-ups. The first would be a massive multi-year "cup and handle" pattern. You can see the "cup" that has been forming over the last nine years. For the "handle" to form, GLD would need to go into a sideways consolidation phase from here for a bit. Once that consolidation phase occurs, the pattern would suggest a significant leg higher over potentially years (rather than months).
The second — and more negative — setup would be a bearish "double top." This would happen if GLD gets right up to its highs from September 2011 and fails to break through that resistance
Finally, the third setup would simply be a breakout higher from here. GLD could simply continue moving higher and break right through resistance at its 2011 high.
Regardless of what happens, the "cup" that has been forming for nearly a decade now is something you don't see often. It will be interesting to watch this pattern from a technical perspective over the next few months.
STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending July 10th, 2020
STOCK MARKET VIDEO: ShadowTrader Video Weekly 7.12.20
Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-
Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:
Monday 7.13.20 Before Market Open:
Monday 7.13.20 After Market Close:
Tuesday 7.14.20 Before Market Open:
Tuesday 7.14.20 After Market Close:
Wednesday 7.15.20 Before Market Open:
Wednesday 7.15.20 After Market Close:
Thursday 7.16.20 Before Market Open:
Thursday 7.16.20 After Market Close:
Friday 7.17.20 Before Market Open:
Friday 7.17.20 After Market Close:
([CLICK HERE FOR FRIDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())
JPMorgan Chase & Co. $96.27
JPMorgan Chase & Co. (JPM) is confirmed to report earnings at approximately 6:55 AM ET on Tuesday, July 14, 2020. The consensus earnings estimate is $1.26 per share on revenue of $27.12 billion and the Earnings Whisper ® number is $1.37 per share. Investor sentiment going into the company's earnings release has 33% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 51.35% with revenue decreasing by 24.74%. Short interest has decreased by 11.1% since the company's last earnings release while the stock has drifted lower by 4.7% from its open following the earnings release to be 15.4% below its 200 day moving average of $113.76. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, June 24, 2020 there was some notable buying of 12,021 contracts of the $115.00 call expiring on Friday, July 17, 2020. Option traders are pricing in a 7.2% move on earnings and the stock has averaged a 2.2% move in recent quarters.
PepsiCo, Inc. $134.46
PepsiCo, Inc. (PEP) is confirmed to report earnings at approximately 6:00 AM ET on Monday, July 13, 2020. The consensus earnings estimate is $1.25 per share on revenue of $15.68 billion and the Earnings Whisper ® number is $1.28 per share. Investor sentiment going into the company's earnings release has 54% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 18.83% with revenue decreasing by 4.68%. Short interest has decreased by 22.7% since the company's last earnings release while the stock has drifted lower by 1.7% from its open following the earnings release to be 0.5% above its 200 day moving average of $133.80. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, July 10, 2020 there was some notable buying of 2,083 contracts of the $128.00 put expiring on Friday, July 17, 2020. Option traders are pricing in a 3.8% move on earnings and the stock has averaged a 2.0% move in recent quarters.
Netflix, Inc. $548.73
Netflix, Inc. (NFLX) is confirmed to report earnings at approximately 4:00 PM ET on Thursday, July 16, 2020. The consensus earnings estimate is $1.83 per share on revenue of $6.07 billion and the Earnings Whisper ® number is $1.89 per share. Investor sentiment going into the company's earnings release has 79% expecting an earnings beat The company's guidance was for earnings of approximately $1.81 per share. Consensus estimates are for year-over-year earnings growth of 205.00% with revenue increasing by 23.30%. Short interest has decreased by 27.6% since the company's last earnings release while the stock has drifted higher by 27.7% from its open following the earnings release to be 52.5% above its 200 day moving average of $359.71. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, July 10, 2020 there was some notable buying of 21,104 contracts of the $550.00 call expiring on Friday, July 17, 2020. Option traders are pricing in a 9.2% move on earnings and the stock has averaged a 4.1% move in recent quarters.
Wells Fargo & Co. $25.47
Wells Fargo & Co. (WFC) is confirmed to report earnings at approximately 7:55 AM ET on Tuesday, July 14, 2020. The consensus estimate is for a loss of $0.07 per share on revenue of $18.61 billion and the Earnings Whisper ® number is ($0.13) per share. Investor sentiment going into the company's earnings release has 10% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 105.38% with revenue decreasing by 29.71%. Short interest has decreased by 3.9% since the company's last earnings release while the stock has drifted lower by 20.1% from its open following the earnings release to be 38.0% below its 200 day moving average of $41.09. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, July 10, 2020 there was some notable buying of 7,754 contracts of the $26.00 call expiring on Friday, July 17, 2020. Option traders are pricing in a 9.1% move on earnings and the stock has averaged a 3.0% move in recent quarters.
Delta Air Lines, Inc. $27.09
Delta Air Lines, Inc. (DAL) is confirmed to report earnings at approximately 7:00 AM ET on Tuesday, July 14, 2020. The consensus estimate is for a loss of $4.06 per share on revenue of $2.17 billion and the Earnings Whisper ® number is ($3.98) per share. Investor sentiment going into the company's earnings release has 3% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 272.77% with revenue decreasing by 82.69%. Short interest has increased by 8.7% since the company's last earnings release while the stock has drifted higher by 13.4% from its open following the earnings release to be 37.3% below its 200 day moving average of $43.23. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, July 1, 2020 there was some notable buying of 16,088 contracts of the $30.00 call and 10,331 contracts of the $26.00 put expiring on Friday, July 17, 2020. Option traders are pricing in a 11.6% move on earnings and the stock has averaged a 1.7% move in recent quarters.
Domino's Pizza, Inc. $398.31
Domino's Pizza, Inc. (DPZ) is confirmed to report earnings at approximately 7:30 AM ET on Thursday, July 16, 2020. The consensus earnings estimate is $2.24 per share on revenue of $860.80 million and the Earnings Whisper ® number is $2.45 per share. Investor sentiment going into the company's earnings release has 75% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 2.28% with revenue increasing by 6.06%. Short interest has increased by 32.3% since the company's last earnings release while the stock has drifted higher by 4.8% from its open following the earnings release to be 25.8% above its 200 day moving average of $316.54. Overall earnings estimates have been revised higher since the company's last earnings release. On Monday, July 6, 2020 there was some notable buying of 915 contracts of the $430.00 call expiring on Friday, August 21, 2020. Option traders are pricing in a 8.4% move on earnings and the stock has averaged a 9.4% move in recent quarters.
Citigroup, Inc. $52.65
Citigroup, Inc. (C) is confirmed to report earnings at approximately 8:00 AM ET on Tuesday, July 14, 2020. The consensus earnings estimate is $0.55 per share on revenue of $18.11 billion and the Earnings Whisper ® number is $0.55 per share. Investor sentiment going into the company's earnings release has 27% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 69.95% with revenue decreasing by 31.71%. Short interest has increased by 22.2% since the company's last earnings release while the stock has drifted higher by 21.4% from its open following the earnings release to be 15.7% below its 200 day moving average of $62.42. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, July 10, 2020 there was some notable buying of 21,230 contracts of the $42.50 put and 21,175 contracts of the $52.50 call expiring on Friday, September 18, 2020. Option traders are pricing in a 7.7% move on earnings and the stock has averaged a 2.1% move in recent quarters.
Bank of America Corp. $24.02
Bank of America Corp. (BAC) is confirmed to report earnings at approximately 6:45 AM ET on Thursday, July 16, 2020. The consensus earnings estimate is $0.32 per share on revenue of $21.26 billion and the Earnings Whisper ® number is $0.34 per share. Investor sentiment going into the company's earnings release has 34% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 56.76% with revenue decreasing by 26.99%. The stock has drifted higher by 8.4% from its open following the earnings release to be 15.2% below its 200 day moving average of $28.34. Overall earnings estimates have been revised lower since the company's last earnings release. On Tuesday, June 30, 2020 there was some notable buying of 24,305 contracts of the $28.00 call expiring on Friday, August 21, 2020. Option traders are pricing in a 7.8% move on earnings and the stock has averaged a 3.0% move in recent quarters.
UnitedHealth Group, Inc. $291.23
UnitedHealth Group, Inc. (UNH) is confirmed to report earnings at approximately 5:55 AM ET on Wednesday, July 15, 2020. The consensus earnings estimate is $5.00 per share on revenue of $64.18 billion and the Earnings Whisper ® number is $5.11 per share. Investor sentiment going into the company's earnings release has 75% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 38.89% with revenue increasing by 5.92%. Short interest has decreased by 12.8% since the company's last earnings release while the stock has drifted higher by 5.7% from its open following the earnings release to be 6.8% above its 200 day moving average of $272.66. Overall earnings estimates have been revised lower since the company's last earnings release. On Monday, June 29, 2020 there was some notable buying of 1,744 contracts of the $320.00 call and 1,730 contracts of the $240.00 put expiring on Friday, December 18, 2020. Option traders are pricing in a 5.5% move on earnings and the stock has averaged a 4.2% move in recent quarters.
Johnson & Johnson $142.37
Johnson & Johnson (JNJ) is confirmed to report earnings at approximately 6:30 AM ET on Thursday, July 16, 2020. The consensus earnings estimate is $1.46 per share on revenue of $17.33 billion and the Earnings Whisper ® number is $1.53 per share. Investor sentiment going into the company's earnings release has 61% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 43.41% with revenue decreasing by 15.72%. Short interest has decreased by 18.0% since the company's last earnings release while the stock has drifted lower by 2.1% from its open following the earnings release to be 1.6% above its 200 day moving average of $140.18. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, July 10, 2020 there was some notable buying of 2,044 contracts of the $145.00 put expiring on Friday, August 21, 2020. Option traders are pricing in a 3.5% move on earnings and the stock has averaged a 1.8% move in recent quarters.
What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead r/StockMarket.
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