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

Technical Analysis

Technical analysis is a securities market discipline from which investment decisions are based upon. The other market discipline is fundamental analysis. Technical analysis attempts to forecast future price movements based upon past price and volume movements. The idea is to find patterns within the past movements, and use those patterns to predict what will happen to the price in the future. These patterns have been incorporated into models, from which day-to-day decisions are made.

My Top Five Picks in the Booming Airline Sector

By for Profit Confidential

My Top Five Picks in the Booming Airline SectorThe Boeing Company (NYSE/BA) is going to space and its stock price is following. The top company in the airline sector just won a joint $6.8-billion contract along with SpaceX to build “space taxis” to ferry NASA astronauts to and from the International Space Station.

For Boeing, it’s just more evidence of why it is the “Best of Breed” in the airline sector and a valid component in anyone’s long-term core holdings.

SpaceX, or Space Exploration Technologies Corporation, is a project of Elon Musk’s, the man who is also the brains behind the creation and success of Tesla Motors, Inc. (NASDAQ/TSLA). Musk apparently wants to eventually offer space travel for commercial use, so this deal from NASA is moving him in the right direction.

The airline sector is hot and will continue to expand as the wealth creation around the world grows, especially in the emerging markets, such as China, Asia, and India. When income levels rise, people want to travel, and this has clearly been reflected in the superlative demand for airplanes out of China. Boeing believes China is the top aviation growth area worldwide.

The International Air Transport Association (IATA) estimates that North America will continue to be the largest airline sector market with profits of about $8.6 billion this year. The Asia-Pacific airline sector is predicted to be the second biggest with about $3.7 billion in earnings this year. Europe comes in third with an estimated $3.1 billion. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)

And … Read More

Small-Cap Industrial Play with Excellent Prospects into 2015

By for Profit Confidential

This Small-Cap Industrial Play Has Excellent ProspectsThe first-quarter gross domestic product (GDP) growth suggests some stalling in the economy, but this is expected to pass as we move forward into 2015 as the economic renewal picks up, which will generate a buying opportunity.

A small-cap stock I like as a buying opportunity and play on the economic renewal going forward is Horsehead Holding Corp. (NASDAQ/ZINC).

While the stock is up 70% from its 52-week low and has been easily outperforming the S&P 500 over the past year, I believe the stock still has decent upside potential and could be a buying opportunity, especially as the economy strengthens.

The company’s stock chart shows the steady upward trend in place since November 2012. Note the bullish golden cross with the 50-day moving average (MA) above the 200-day MA, as reflected by the blue oval. We are also seeing a bullish ascending triangle that could signal more gains ahead. A break at $18.00 could see a move to above $20.00, based on my technical analysis.

Horsehead Holding Corp Chart

Chart courtesy of www.StockCharts.com

Via its subsidiary Horsehead Corp., the company is a fast-growing producer of specialty zinc and zinc-based products made via the use of recycled materials.

In a move to improve output and efficiency, the company closed its old facility Monaca and opened a new facility named Mooresboro in North Carolina. The capacity at the new plant once it gets up to speed will be roughly 155,000 tons of zinc annually.

The opening of the new plant will aid the company in producing better fabricated steel products along with raw materials found in the manufacturing of rubber tires, alkaline batteries, paint, … Read More

Double Bottom in for Gold Prices?

By for Profit Confidential

Gold Bullion Fear Index CollapsesWhile the Federal Reserve has cut back on its money printing program, the fact of the matter is that the “official” U.S. national debt is closing in on $18.0 trillion. The unofficial national debt (when obligations like Social Security, Medicare, Medicaid, welfare, and now Obamacare are taken into consideration) is closer to $200 trillion.

The Japanese national debt just hit one quadrillion yuan.

Many countries in the eurozone are drowning under debt. The European Central Bank recently started talking about printing money to finally get the eurozone out of its mess.

All of this is very well-known to Profit Confidential readers.

Why do I bring this up again today? I’m back focusing on debt because it is becoming more and more apparent that the only way to reduce the record national debt many industrialized countries have accumulated since the Credit Crisis of 2008 is to print even more money.

And the collapse in the volatility of gold bullion prices could be pointing to just that. To see what I’m talking about, take a look at this chart:

Volatility Index - CBOE Gold INDX ChartChart courtesy of www.StockCharts.com

In April of 2013, when the sharp decline in gold bullion prices began, volatility for gold prices was very high. Since then, the volatility index for gold, an index that essentially gauges investors’ fear factor for gold bullion prices, has collapsed.

And when we look at the price chart of gold bullion (see next chart below), we see strong support for the metal just below the $1,200-an-ounce level. This level has been tested twice and on both occasions, gold failed to fall below $1,200. In technical analysis, this is … Read More

How to Profit from These Vulnerable Stocks

By for Profit Confidential

Top Plays for Weak Small-Cap & Tech StocksFolks, there is a technical breakdown on the charts of the small-cap, growth, and technology groups in the stock market. I can’t say I’m surprised, given the major run-up in 2013 and the lack of any significant stock market correction.

The fact that the majority of the high-momentum technology stocks have corrected more than 20% is a red flag that there could be more breakdowns on the charts. (Read “My Simple, Safe Investment Strategy for Playing Risky Stocks.”)

While I’m not saying that a bear stock market is on the horizon, I do suggest that the stock market risk is above-average at this time, and we could see a bigger correction pending.

On May 6, there was a downside break of the Russell 2000 to below its key 200-day moving average (MA) of around 1,114. This could signal additional downside moves. As of that time, the index was down 4.78% in 2014 and 8.56% from its record high. The previous time the index corrected 10% from its high, it was subsequently met with buying support in the stock market. Note the downward-trending channel on the Russell 2000 chart below.

Russell 2000 Small Cap Index Chart

Chart courtesy of www.StockCharts.com

With the break, you could consider adding the iShares Russell 2000 (NYSEArca/IWM) exchange-traded fund (ETF) as a play on a possible bounce in small-cap stocks, especially if the index corrects more than 10%.

Technology also continues to be fragile, with the NASDAQ south of its 50-day MA. Watch for a possible move and testing of the 200-day MA at 3,982. This index has corrected 6.67% from its recent high and looks to be setting … Read More

Creation of Wealth Driving Airline Sector Higher

By for Profit Confidential

Top Stocks Highflying Airline SectorThe Boeing Company (NYSE/BA) has proved that the airline sector is continuing to progress after the stock easily beat on both its revenues and earnings in the first-quarter earnings season.

Strong wealth generation in the emerging markets in China and Asia are a major factor for the airline sector’s growth. Add in the global economic renewal, and you have an increased demand for air travel. The growth in Asia is particularly strong and will help to drive up the demand for capacity and routes, which will translate into more planes needed.

The airline sector was nearly dead following the tragedy of 9/11, but it has since made a steady recovery. In fact, the airline sector is on target for its second straight year of higher profits, according to research by the International Air Transport Association (IATA).

IATA suggests that North America will hold onto its title as the biggest airline sector market worldwide, with expected profits of around $8.6 billion in 2014. In second place will be the Asia-Pacific airline sector, earning about $3.7 billion; and Europe is expected to come in third with an estimated $3.1 billion. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)

The evidence is reflected on the chart of the Dow Jones US Airlines Index below, which shows the steady uptrend since November 2012 and a bullish “golden cross,” based on my technical analysis.

Dow Jones US Airlines ChartChart courtesy of www.StockCharts.com

While Boeing is one of the top plane makers as far as wide-body jets, I also like … Read More

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