Two Stocks That Surprised Everyone This Year

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FOSL which is up 170% year-to-date which makes it the best-performing S&P 500 stock so far. Who would’ve thought that a watch-maker would be one of the price leaders in 2018? Probably, no one. This is one of the reasons why it is happening.

The best-performing stocks in any given year are usually the ones that surprise the most which mean that they are either:

A) High-growth stocks that keep growing much faster than most analysts expect. They have established a powerful price momentum and no one believes they can possibly go any higher. NFLX is a good recent example.

Or

B) They come from an industry with extremely low expectations and high short interest. Extremely low expectations are easier to beat by a wide margin and high short interest is a potential fuel for higher prices because short sellers eventually will cover their bets (the question is if they will do it voluntarily when a stock sells off or involuntarily when a stock rallies and their bets are squeezed higher). FOSL and MOV are good recent examples.

Low expectations + New 52-week High can be a powerful combination.

Think about it. What’s your most likely reaction when you see a stock from low-expectations industry make new 52-week highs? You are very likely to dismiss the price action and think that the market must have gone crazy.

All trends need skeptics and doubters otherwise there would not be anyone left to buy.

When I highlighted MOV on Momentum Monday ten days ago, Howard’s reaction was: “Don’t they make watches? I am not interested in that stock”. His reaction made me smile. Almost every time when I highlight a great technical setup that Howard doesn’t like for fundamental reasons, the stock in question ends up making a significant move higher.

Today, MOV broke out to new 52-week highs after beating earnings estimates by 240%!

I don’t know what the future of FOSL and MOV is. I don’t use their products. Maybe, this year’s rally is just a temporary blip and the gradual adoption of smartwatches like Apple will end up being an extinction process for Fossil and Movado. What I know is that we should be paying attention to stocks from unpopular industries making new 52-week highs. Sometimes the market as a whole is smarter than its individual parts.

Biotech Stocks On The Move

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Many biotech stocks don’t trade on earnings (they don’t have any) but on expectations for future earnings potential. With ASCO right around the corner, we are starting to see some biotech stocks perking up on speculation of good news coming out of the conference. Also keep in mind that the biotech ETF, IBB is at a pivotal level right below its 200dma and if it manages to break out, we are likely to see numerous good trading opportunities in the sector.

Some stocks to keep on your watch list: BLUE, CRSP, QURE, AGIO, ONCE, NTLA, IMMU, CLSD, etc.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.

Momentum Monday – Bull Markets Correct Through Sector Rotation

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The recent rally in interest rates is redrawing the market map. While emerging markets and high-yield stocks are struggling, the U.S. small-cap index broke out to new all-time highs. We continue to trade in a market of stocks environment, where stock picking makes all the difference. We cover stocks like NFLX, BABA, MU, TWTR, and many others.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.

Solar Stocks Are Showing Relative Strength on A Weak Day

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Being up when almost everything is up is not a big deal. But being up when the majority of the market is down is something to pay attention to. This is exactly the current situation of many solar names.

I have little doubt that a lot of solar’s recent strength is related to the rise in crude oil, but the sector has other catalysts going for it. Last week, California announced that starting 2020 every new building needs to have a solar roof. The solar sector rallied hard on the news. The last few days were spent in a sideways consolidation, which is a sign of accumulation.

Both FSLR and SPWR are currently looking constructive on multiple time frames.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.

Facebook, Tinder, and the Battle for Our Time and Attention

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Last week, Facebook announced that it is officially entering the dating world. The market reaction: shares of Match Group went down 30%. It is clear why FB is making this move. They need more young people to spend more time on their platform. There are two main ways to achieve that: dating and games.

Facebook’s new features are not going to kill Match Groups’ offerings. Tinder is not going anywhere. What has changed is the market perception for MTCH’s future growth potential. Perception is half of the stock price in momentum stocks.

MTCH’s bulls say that Facebook’s news is irrelevant and the market has overreacted because 75% of Tinder’s users don’t use FB to log in. The market is forward-looking. The market will assume that the appearance of a new player like FB will slow down MTCH’s growth. And when your stock is priced to perfection, the slightest wind can topple it.

In stage one of the price history in many momentum stocks, price often runs ahead of fundamentals. Stage two is fundamentals catching up with price. I think we might have entered stage two for MTCH. The market wants to see their earnings growth catching up to the price hype. Don’t forget that MTCH doubled last year.

The process of fundamentals catching up might be already underway. Match Group just reported the best quarter since their IPO. Here’s Tinder’s head of product on some of the numbers:

MTCH might spend the next few quarters building a new base – going sideways in a very wide range. There are better places to allocate your money if you want to participate in the dating industry growth.

One way to do it is the so-called Chinese Tinder, MOMO. After a big earnings gap a few months ago, it has been consolidating through time. It managed to retake its 50-day moving average again this week, which will put it on the radar of many traders.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.