In my weekly segment where I take a look at recent trade ideas from across the web and give some of my own picks, I have another batch of setups to keep tabs on.
1. Momentum Switch In MOV
If you have been through my candlestick analysis you will know that one of the better performing price action patterns is the loose kicker. I came up with this pattern as I found it to be a stronger interpretation of the classic bullish kicker pattern.
Consumer goods company Movada Group (MOV) is showing a classic loose kicker setup here and signifying a solid switch in momentum complete with a substantial price gap. MOV is expected to push on from here with a trade duration of 1-5 days. Stops can be held around $26.
2. All eyes on the U.S. defense sector
If there’s anything Trump’s latest moves suggest, it’s that he’s sticking to his word when it comes to protectionist policies and putting America first. Among his goals are to strengthen the defense sector and increase military spending so several companies in this particular industry are worth keeping tabs on.
In particular, companies like Lockheed Martin, General Dynamics, Boeing, Raytheon, and Northop Grunman are on the watch list. These are particularly interesting ones since they list a part of their revenue from commercial sources and a pretty hefty chunk from the Department of Defense, Air Force, and/or Navy.
3. Brinker International earnings miss signals further downside
Last week, Brinker International printed its Q2 earnings report and showed a 2.2% drop in total revenues. Components also indicated that the group is having trouble sustaining sales with slowing traffic as brick-and-mortal shops and restaurants have been experiencing a steady decline in customers over the past years.
To top it off, Brinker is looking highly leveraged and management hasn’t come up with other options to shore up its weakening business. Chili’s franchise comparable restaurant sales in the second quarter of fiscal 2017 decreased 3.5% while Maggiano’s comparable restaurant sales fell 0.8%. In addition, the company cut its full year EPS guidance as margins are looking tight, with restaurant-level operating margin down 15.1%. Note that this already comes with cost-cutting measures incorporated so it looks like a struggle from here.
Although the stock is heavily down since November last year. A short trade is feasible above $45 as stops can be held above the resistance at $48.
4. Descending channel on First Solar shares
This one is lining up to be a neat technical play as First Solar shares are trading in a descending channel since September last year. Price retreated off the channel resistance at $35 and appears poised to make another drop to support at $25.
Keep in mind, however, that the company is scheduled to report its earnings on February 21 so there’s room for additional volatility. If price does break past the $35 mark on speculations of strong earnings results or upbeat actual figures, the next ceiling is located at $45 then at $50.
5. Soft vs. Hard data: Will Trumphoria fade soon?
Trump’s first few days in office have been accompanied by stock market gains on expectations of fiscal stimulus, tax reform, and upbeat soft data. However, some analysts have already pointed out that data and the market are about to revert to the mean as soon as traders get wind of the trends in hard data.
Several economic surprise indexes such as one from Citi and Bloomberg are reflecting significant declines. This shows a divergence between soft data from surveys and business cycle indicators in comparison to hard data from the housing, industrial, retail, and wholesale sectors. In a similar instance in 2011, this was followed by a sharp fall in stocks.
6. Building A Base In Infinera
The Trade Ideas team picked another winner last week with GoPro shares surging 7% on Friday. That makes it two out of two for Trade Ideas picks, although some traders may have missed out on the trade due to the up gap.
This week TI are looking at Infinera Corp (INFN). The stock closed at 8.89 on Friday while doing 29 times normal volume at the close. INFN has been moving sideways and building a base that fits the “Trade of the Week” profile for upside opportunity.
The position to go long INFN is contingent on waiting for a trade of 9.03. The Trade of the week is considered to be live at 9.03. The suggested stop for INFN is 8.22 (just below the recent trading range). An upside target for INFN would be 13.25. So we are risking 80 cents to make over 4 dollars on this position.
The chart for INFN looks nicely set up for a breakout. You can sign up for the Trade Ideas free trade of the week here.
Disclosure: I am long MOV