Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Archive for the ‘stocks’ Category

September 2011 Technical
Outlook for Stocks

By for Profit Confidential

Lack of hopeful economic data has made it difficult for the deeply oversold stock market to find a trigger for a meaningful and sustainable rebound. The Federal Reserve’s annual symposium inJackson Hole,Wyoming, always a closely watched event, was of extra interest to the financial markets this year. But Fed Chief Ben Bernanke’s vague speech on Friday revealed nothing that was not already heard in recent weeks.

Precious Metals Winners—Three
Excellent Wealth-creating Stocks

By for Profit Confidential

One of the best things you can do as a serious equity investor is to review big stock market winners, even if you didn’t own them. It’s the same thing that professional athletes do. A golfer will review past golf tournaments. A race car driver will watch old races. The goal of the process is to improve your own game by seeing what has worked the best in the past. In the case of stocks, reviewing past winners helps an investor to hone his or her stock picking skills by helping him/her become familiar with what a big winner looks like and discover how it all came to be. It takes time and it takes effort, but then again, money doesn’t grow on trees.

First Stocks, Then Real Estate—What’s
the Winner Going to Be This Decade?

By for Profit Confidential

I think it’s probable that the stock market will continue to convulse for the rest of the third quarter and into the fourth. The trend in economic news is down and so is investor sentiment. We still have a lot of problems with sovereign debt issues in Europe and this is an investment risk that isn’t going away anytime soon.

Patience is the Name of the Game

By for Profit Confidential

Right now the stock market is in a fragile state. It just doesn’t know where it wants to go. The good news is that the price of oil and gasoline is falling so consumers will feel better about filling up at the pump.

My best guess so far is that the broad stock market indices can rally later in the fourth quarter. This is the traditional strong period for stocks. Over the very near-term, however, I’m really cautious.

September and October can be terrible months for stocks. In a sense, all pertinent information comes forth in these months conspiring to create the “sum of all fears” for investors. Literally, anything can happen to the stock market during these months.

As I’ve mentioned before, the stock market needs more certainty regarding the inflation situation. If it can get it, then stocks can rally into 2007. If not, we’re left with the current lackluster environment of range bound, directionless trading.

This doesn’t mean there aren’t great investment opportunities out there, only that the price action for most stocks isn’t as likely to be as robust. If it was my money, I’d be sitting on the sidelines right now waiting for some clear direction or catalyst to get the market averages moving.

In the absence of an upward trend, I’d keep my winners and cull my losers. With lousy stock market conditions comes opportunity to get into positions at attractive prices. So, I’d sit on my money in this environment, keep a keen eye on some attractive new prospects, and wait and watch until there’s some really good news to get things going…. Read More

Review Your Portfolio

By for Profit Confidential

I still remember Black Monday on October 19, 1987 as if it was yesterday when the DOW crashed. I had just graduated from business school and was training at my first job in the credit department of a large financial institution. The world of finance was exciting and I was ready.

 It started like any other Monday, downing my third cup of coffee before the opening of the markets. But, as I looked at the screens and wires prior to the open, I noticed the futures markets were way down and pointing to a disastrous opening. The order books showed an imbalance of sell orders and at that time there was no structure to prevent the kind of day we would see.

 In fact, it soon became apparent that this would not be an ordinary day as sell orders accelerated throughout the day, driving the DOW down 22.6% by the close. And, by the end of October, the selling in the global markets had sliced as much as 50% off some world markets.

 My saving grace at that time was my absence of any investable capital as I only had student loans on the books to pay back. It was probably the only time in my life that I was glad I was broke! While colleagues of mind were in despair for months following the crash, I was relieved.

 So now it is on this 20th anniversary of the infamous crash, that my memories of 1987 are still fresh. The difference is now I have investable capital and a stake in stocks so what happens in the markets is important. … Read More

Keep and Eye on Gold

By for Profit Confidential

Gold has had an incredible run up since breaking above $600 in mid-April so the major sell-off that materialized on Monday should not have been a surprise, especially for those of you that study charts.

 The price of the basis June gold on the COMEX plummeted $32.80 or 4.61% from the close of May 12 due largely to what I believe was technical selling resulting from an overextended market. Just taking a look at he chart, you should notice the relatively steep angle of the trend, which was a setup for some selling. The fact is the rapid rise in gold was not sustainable and reflected too much euphoria. Markets that rise too quickly generally are vulnerable to selling.

 The upward break of the June gold to an intraday and 25-year high of $732 on May 12 was well above the 50-day and 20-day moving averages of $609.37 and $665.53, respectively. In situations like this in which prices break rapidly to well above key moving averages should always be view as a warning of a potential sell- off. You do not enter into new positions. I always generally do not advise chasing prices higher, especially in cases when the rise is rapid. It happens with stocks and commodities alike. Just take a look at Google Inc. (NASDAQ/GOOG).

 Gold prices bounced back yesterday on oversold buying, which is typically normal after a major sell-off. For traders, the next few sessions will help dictate the direction of gold.

 The June contract was able to hold at the 20-day moving average of $665.53. Going forward, watch if gold can form a buying support … Read More

Wait for the “V”

By for Profit Confidential

It really is tough trying to pick turnaround stocks. This strategy can be very profitable, but the investment risks are high.

The vast majority of individual investors want to buy shares in companies whose stock prices are very low. I guess it is human nature, but in my experience, most individual investors want to buy shares in companies with stock prices trading below $5 per share.

This is a valid strategy, but if it was my portfolio, I’d mix things up a bit.

From what I’ve seen in ten years of following the stock market on a daily basis, it is just as easy for a $15 dollar stock to double to $30 per share, than it is for a $3 stock to go to $6 per share. In fact, it is often more difficult for the lower priced stock to go up in value.

In many cases, stocks that trade for under $10 per share are smaller companies that have perhaps had some operating difficulty. Most new initial public offerings (IPOs) of equity occur at prices over $10 per share, so very often a stock trading below this level is indicative of some trouble.

With this in mind, opportunity can easily present itself at this price point. Consider one of my favorite companies, Perficient Inc. (NASDAQ/PRFT). This company sells information technology consulting services to large- and mid-size companies, offering design, build and delivery of eBusiness solutions. Perficient was founded in 1997 and is headquartered in Austin, Texas.

The stock got hit hard after the technology correction and dropped from over $25 per share in early 2000 to below $1 … Read More

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