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.

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

NASDAQ, Russell 2000 Signaling Buying Opportunity Ahead?

By for Profit Confidential

Why I'm Concerned About the Stock Markets Near-TermFolks, I’m beginning to get somewhat concerned about the stock market in the near-term. I’m not saying the stock market is going to crash, but there are some technical indications of a possible correction or adjustment in the near-term.

The S&P 500 recently traded at a new intraday record, but the key stock market indices have declined in three of the last four sessions. What makes matters worse is that the downward slide in the stock market was associated with higher-than-average trading volume, which is a bearish indicator in technical analysis, as it suggests a pick-up in selling momentum.

We all know that momentum can be good or bad depending on which way the stock market is going and whether you long or short the stock market.

What concerns me is not only what’s happening in Crimea and the concerns regarding the Federal Reserve’s recent actions, which I have previously discussed. (Read “The Stock Market Needs to Do This in 2014 Before I Invest More in It.”) Rather, what really concerns me is that we are now seeing a breakdown on the charts of the momentum technology stocks that had helped to drive up past euphoria in the stock market. We are seeing many of the high-momentum stocks fall by 10% or more. This suggests fragility and a potential downward slide coming up for the broader stock market.

Also, the disappointing initial public offering (IPO) debut of King Digital Entertainment plc (NYSE/KING) Wednesday was a red flag; it suggests that the IPO market may be losing some of its recent appeal or that traders are simply nervous about … Read More

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The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
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