Year: 2019

What to Expect From the Stock Market in 2020?

Create portfolios that will work no matter what the next year is going to bring. The recession will come or not, but your investments have to be protected.

By Guy Avtalyon

What to expect from the stock market in the year ahead? The stock market could correct itself during the early days of 2020. But, despite some dark predictions, the stock market may keep rising over the long run.
This is the last day (at the moment of writing) of the year during which the market was so unpredictable. At least, it was surprising.
For example, Uber’s IPO was followed by fanfare, and what happened? Great disappointment.
But many other stocks hit their highest-ever highs and quickly dropped to the lowest lows. The only truth in the stock market is that there will always be shocks.

Okay, that year is behind us so let’s take a look at what to expect in the stock market for 2020.

The stock market will rise more

The stock market boomed in 2019. The S&P 500 recorded a gain of 29.2% in 2019. Some analysts already told us the market will be down in 2020 but, to be honest, they could be wrong. Since the stock market rose over 20% in 2019 it is more likely in 2020 to see even greater returns than it was in the previous year.

What you have to do? the answer is simple. If you had good returns in 2019 and your investment portfolio was doing well, just stay with it. Why would you change the winners?

But…

Nothing related to the stock market is for sure and forever. There is always something to worry about. It’s our money. If you hold cash and not invest in stocks or somewhere else, your money will go anyway. So, don’t be frightened, come back to the market, and invest smartly. The year ahead could be promising. Build your portfolio, mix the assets, and avoid emotions. Yes, the stock market could be more volatile in the next year could since 2019 was much less volatile than the prior year.

Some unpleasant occasions may arise over the coming year.

Firstly, in January due to the January Effect. What is this? The January effect is an increase in stock prices during that month. But is a seasonal increase. Usually, In December, the stock market records an increase in buying, and the stock price is dropping. In January, stock prices will increase as always.

In fact, the January effect is a theory and calendar-related effect. Some small caps could be affected more than any other. But according to history, it was a case until several years ago. Since then, markets seem to have adjusted for it.

What to expect from the stock market

The stock market is pretty much unpredictable, we can only guess. Maybe the right question is what to expect from the investors. So far the majority showed spectacularly bad timing when it comes to stocks. They are selling and buying at the wrong time. Many of them are selling just before rallies or accumulate stocks when they have to sell.

If you believe that the market is increasing and that it is a predominant trend, adjust your portfolio for the ups and downs in 2020. But it is the same as always. Your actions will depend on what your expectations are toward the stock market in the next year. Maybe, you will invest more money when the markets are more volatile with the expectation that pullback is temporary, who knows?

The value stocks will come back

Yes, stocks are growth or value type. Growth stocks are so attractive and popular. Everyone is talking about them, they are in the headlines, media are paying a lot of attention to them and burn our brains too. The whole world is watching the stocks of Amazon, Facebook, Uber, and many others because the growth stocks are giving great returns, they are well-known companies, famous brands.

On the other side, we have value stocks. They are mostly companies form the utility industry, or energy or something else less attractive. Such stocks don’t have spectacular prices, the companies are not fast-growing.

Yes, the growth stocks are performing better results in growing markets but the value stocks will always do better in down markets.

To be told, the growth stocks are increasing their value year-to-year and some experts are expecting a reversal in 2020. So, growth stocks may change their prices and decrease.

A diversified portfolio will be helpful as always. If you hold any of these great players just sell part of it if you follow the experts’ estimations. At least, your portfolio will be less volatile.

What to expect from the stock market: The bear market is coming for sure

This prediction was wrong for many prior years. But, maybe the next year may confirm market bears’ expectations. We have a bull market and it showed a great strength over the year. It was faced with a yield curve inverted, trade war, Brexit, the possibility of a recession. Well, to add more pain into your lives, the bull market has to end at some point. Some experts expect that 2020 is that time.

So, what investors have to do is to hedge the risk and take some profit, of course. As the market motto advises “you will never go broke taking profits.” Maybe it is really time to take some profit from your investment. If you believe the downturn in the stock market will come for sure, be ready to reinvest big gains. What different could you do when the important selloff comes in 2020?

Will the recession surely come?

Recession is an element of any business. So, we can expect it to come at any time, sooner or later. It may happen in 2020 or 2021 or 2022, literally anytime. Many circumstances have an influence on it, we are witnesses of some, that’s true.

Investors shouldn’t adjust their portfolios based on guessing. However, it is smart to analyze your allocation. Maybe some stocks are out of balance. Let’s say you wanted to hold 50% in stocks but you noticed that suddenly you hold 70%. That would be a clear sign that is clever to exit some positions. Just adjust your portfolio with your risk tolerance and investment goals.

We all know that the stock market forecasts are useless. No one can predict how the market will perform. But still, we click on them to see and compare them with our opinions. The reduction of difficulties is in the essence of human nature.
However, investing in the stock market certainly includes difficulties and risks. Seeking out for expert opinions about what to expect from the stock market in 2020 can be the wrong way to lessen risks or uncertainty.
Investors must do their own examination. If you think the crypto will go up, just buy some of them or parts of them, or if you think Uber is a great investment, just buy some shares of it. A small portion will be quite enough notwithstanding that experts are expecting a big increase.

One is a-hundred-percent sure, you will make at least one mistake. Take it as certain. But that’s life and also, that’s investing, be prepared for that.
Just do your best to secure your right calls overpass your wrong ones.

Happy New Year!

31st December 2019
Investing In Gold Will Always Be the Smart Move

Get exposure to gold, it isn’t as risky as some may think and deserves a place in your portfolio.
Gold can be a hedge against inflation and deflation

By Guy Avtalyon

Investing in gold whether own it as a metal, jewelry, mining stock or mutual fund is always a smart decision. This is especially true when the main currencies are dropping. There is one interesting situation that confirms the gold to be the most valuable asset. Gold is a benchmark for national currencies, for example. As the currency falls, gold will rise.

So, let’s highlight the chance of gold’s future.

Some may say that investing in blue-chips is better. Okay, it is still a good investment, yes. But is there a true potential for profit? Can blue-chips persist in the global market? They are mastodons. We are talking about them with respect but for most investors they are unachievable.

What is investing in gold?

Gold has a possibility for future growth. The “golden standard” is still live no matter what the banks will insist on. It was in the past, it is now, and it will be.

Traders-Paradise wants to highlight some opportunities for investing in gold and how to do so. Hopefully, you will find your way.

Why investing in gold?

Gold is respected everywhere in the world because of its value and bright history.

Gold’s history started in 3000 B.C but from 560 B.C. gold is used as a currency. The need of the ancient merchants was to use something broadly accepted in order to make trade simpler. Since the gold was universally accepted for expensive jewelry they recognized the potential in gold for valuing their products. And in trading, also.

A coin with a seal was accepted all over the world as value for products. Since then, this rare metal that comes back, when other currencies don’t work.

So, we can conclude that gold prices are negatively proportional to equity. Speaking about returns in long-term investments, gold isn’t so good because stocks or funds will always give better returns.

Gold returns in comparison to assets returns

Yes, the asset will always do better. But it can be volatile during the time.

Oh, wait! Gold is a volatile investment too.

Let’s look at some stats, like standard deviation. What is the standard deviation? It is a degree of how spread out numbers is. In the example of a stock price, it measures the volume of variability and dispersion around an average. It is a measure of volatility, also. Generally, dispersion is the difference between the current value and the average value. The larger the dispersion or variability means the higher the standard deviation. And vice versa, the lower figures are implying less price variability. Investors use the standard deviation to estimate the supposed risk and define the importance of specific price movements.

During the last five years, the annual standard deviation of gold was 16. The annual loss was about 4%. This means that the chance that gold will give a profit is about 12% and a loss of 20%. That represents a big range and falls into a negative area.

If we compare data for, let’s say the S&P 500, we will see that the standard deviation was a bit under 10, for the same period of five years and an annual average return was around 13%.

Let’s calculate again and we will see the range was between a gain of 23% and a gain of 3%.

Is gold volatile?

But, keep in mind, the higher volatility of gold is the standard, not the anomaly. As an investment, gold is risky. But, something very similar to the relationship with currencies arises.
Gold and stocks very rarely perform the same thing at the same time. Meaning, when the stock market lags, gold will be doing well. This doesn’t mean you shouldn’t invest in gold. Investing in gold ONLY is a risky position.
This synergy between stocks and gold is where gold is a good investment. Honestly, gold can be a very safe investment.

For example, the relationship between the entire stock market and the midcap over the past 10 years is about 0.98. Gold has a relationship with the stock market of 0.04 during the same period. Basically, gold creates its own game.

Is gold a good hedge against inflation

Historically speaking, gold has been a good hedge against inflation.

The price of gold will always increase along with the increased cost of living. If we consider how gold prices performed over the past 50 years, we could see that its price has been rising while the stock market has been falling during the inflation periods. Do you remember the relationship between gold and currencies?

When fiat reduces its buying power during inflation, meaning, you will need more units of money to buy anything. Also, gold is much more valued in money, and, therefore, gold price tends to rise. Furthermore, gold is a good store of value. People are more willing to buy gold when they think that their national coin is dropping in value.

But, should gold can be used as a hedge against inflation? In short, according to the mentioned above, yes.

Investing in gold as deflation protection

When the business operations decrease, the economy has excessive debt, and prices decrease too, we are speaking about deflation. The full deflation we saw last time was the Great Depression (1930). Part of deflation happened after the 2008 financial crisis. But it has happened in some parts of the world.

During the deflation (Great Depression), the buying power of gold rose while other assets’ prices fell. The most secure place to put cash in that time was gold. Today, we have a similar situation in some parts of the world.

A portfolio plan

Let’s explain this in the example from the recent past. During the recession from 2007 to 2009, the S$P 500 Index dropped 36%. But the gold price increased by 25%. Yes, it was extremely. But, can you see how good is to diversify your portfolio by adding gold? Even with the knowledge that gold is a volatile investment.

When you add the gold in your portfolio you will have that one that performs differently from the others. Gold will always act differently from bonds and stocks. That’s why many investors add gold to their portfolios. The recommended part is 10% of the overall portfolio in gold. That will create a good balance and good diversification of your investments. Moreover, you will provide the safety of the complete portfolio. By adding gold you will reduce volatility and risk. Moreover, investors are investing in gold as a safe haven during political and economic difficulties.

Investing to have the dividend

Gold stocks are suitable for growth investors, but a lot less for income investors. That is because the gold stock will change the prices along with the gold prices. But you can find well-managed mining companies, profitable even when the gold prices are falling.
Rises in the price of gold are often increased in gold-stock prices. A small rise in gold prices can lead to important gains in the gold stocks. Moreover, holders of gold stocks could get a much higher ROI than holders of natural gold.
Gold stocks that pay dividends tend to produce bigger gains. In periods when the whole industry is rising, they could be twice better than non-paying dividends when the market is in a downturn.

Investing in gold is possible in many different ways.
Today we have more investment options, such as futures, companies, bullion, coins, mutual funds, miners, jewelry, etc.
For example, gold can outperform stocks and bonds which has happened during a period of 45 years. But if we look at 30 years-period, stocks and bonds were better. If we evaluate 15 years-period gold has outperformed both stocks and bonds.

This is one angle of view. The other comes from gold’s ability to protect your portfolio and act as a hedge against inflation.

Anyway, it is smart to consider holding not more than 10% of the portfolio in gold. Choosing how to invest in gold includes analyzing the various gold-related investment products These investment products have various risks and return forms, liquidity components, etc. Consider how gold performs in a correlation with other assets.

30th December 2019
Forex News: Dollar weaker despite the trade optimism

Forex News for December 27: According to FXStreet, the US dollar ends on the last day (December 26) with losses against most major competitors in weak market conditions. Major pairs continue in limited ranges while trading is boring because most markets are closed due to holidays.

Good news comes from the Chinese Foreign Minister and US President Trump. Both of them confirmed that the signing of phase one of the trade deal is just around the corner.

The EUR/USD pair advanced above 1.1100, while the GBP/USD pair re-took the 1.3000 marks, due to the dollar’s weakness, and chances of bigger gains are actually limited.

The Bank of Japan Governor Kuroda said that the central bank would ease policy further if its 2% inflation goal came under peril. He also showed more confidence in the global economic outlook. USD/JPY near December high.

The Canadian dollar is the strongest.

All major markets are opened today (Friday 27), but there is a little action.

Forex News: Dollar Index

The Dollar Index is tanking today as traders await the signing of the “phase one” trade deal.
There are two support levels in the focus of the psychological 97.00 area and below that 96.72 wave low.
There is also a trendline marked in red that might act as support a support area.
Finally, looking at the RSI there seems to be room for a move lower as we are not in the oversold area.

Image source: FXStreet

EUR/USD consolidated near five-day highs of 1.1122 while the Cable traded choppily around the 1.30 handle

Asian stocks hit 1-month highs, Treasury yields traded on the back foot while S&P 500 futures recorded modest gains.

Gold kept its bullishness above $1500. Crude oil traded close to three-month peaks on trade deal hopes and good US Consumer Spending data.

Cryptocurrencies reversed the recent upsurge. Bitcoin slid below $ 7,200 mark.

Don’t miss this: Math Guide for Forex Trading

27th December 2019
Stock Market Correction – The Storm Is Coming

A lot of mergers and acquisitions, drop trade investment and lack of business trust indicate a coming stock market correction Bear in mind that markets will not disappear, so you can get back

By Guy Avtalyon

The dark sign of an upcoming stock market correction might be when the companies are buying back their stocks and use them for buying other companies. In this example, the stocks are used as currencies. We can see that so many companies are doing exactly that. Further, we are witnesses of a lot of mergers and acquisitions. The companies are uniting to survive something. But what? What they are expecting?

Is the logical answer that they are expecting stock dumping and the stock market correction?

Some analysts say YES.

The first sign of possible stock market correction they see in companies buying other companies, in mergers with rivals and financed by shares exchange is the signal that the market is close to the end of its bullish period. The opposite opinion befalls when the companies invest in new activities, new operations, development. That would be a good signal for the stock market. But when the companies are using their own shares to buy growth it only can be a sign of the lost confidence.

Yes, the economy runs in cycles. The sunny days will always follow after rainy days. But we have to be worried when the economy’s condition pattern indicates the coming storm just as we are in a hurry when the real storm is coming.

How to manage the stock market correction?

A stock market correction is an alarming condition but quite normal. Some might be surprised, but it is a sign that the market is healthy. Well, in most cases.

How could we know that the stock market correction is coming? When the stock prices are dropping 10% or higher from their most current peak but not more than 20%. In such a case, we would have a bear market.

Firstly, don’t try to “time the market.” Avoid swing trading even though trading the ups and downs may give you some profit but for a short while. Many investors are trying to avoid losses by putting money in some other investments where they think there is a better possibility of profiting.

Most people lose money by trying to move their money around to participate in the ups and avoid the downs. This is a documented behavior studied by academics around the world. The field of study is called behavioral finance. That is a behavioral bias.

Our two cents

When you build your investment portfolio it should be based on knowledge and your education, not on prejudices. It is normal to expect that for every quarter of the year, you will have some negative returns. Tn order to lessen those negative returns or to control them you have to have a diversified portfolio. That means you need to combine your investments. Pick a mix of assets that have more potential for upsides and fewer chances for high returns because that means less risk.

During the market correction, savvy investors have more discipline, less fear, and stay with their investing playbook. Don’t trade at those times because you may catch larger losses. Behind these words lies the stats, you can easily check it.

Follow the old Wall Street pattern: Never catch a falling knife.

Be mentally prepared

A market crash may happen. When? It doesn’t matter. You have to be mentally prepared for that because the markets are unpredictable and it had happened before. Yes, we all like to be rich even on the paper and it’s really hard to chew a big bite. And the stock market correction is just that – a big bite. Some investors might feel fears, be frightened, and start selling their stocks at the worst time.

If you are a long-term investor type, you must have trust that the stock market will adjust eventually.

Corrections can last from several days to months or longer but the last mentioned are rare. Remember, a correction may damage your investment for short, but it is a great opportunity for adjusting overvalued stocks. So, buying opportunities are undoubted. So, just keep adding stocks to your investment portfolio while others are selling in a panic.

Can we predict a stock market correction

Nope. No one can predict a stock market correction. They aren’t predictable. Moreover, they can be generated by different matters. For example, we know the Great Recession has erupted on the housing bubble. But we know that after everything was finished. But predicting the main cause of the next correction just isn’t possible.

What we know for sure comes from research. According to one conducted on the example of the Dow Jones, the average correction lasted about 72 trading days or three and a half calendar months. And the correction is when the overall stock prices drop more than 10% and if the decline of more than 20% it is a so-called market crash. That’s all.

For whom the market correction matters?

Stock market correction matters for short-term traders. If you stay focused on the long term you will survive anyway. When correction occurs those who’ve adjusted their trading as the short term or those who have leveraged their account with the use of margin, should be worried.

Traders that used margin had bigger losses during the market downturn. Also, active traders had increasing costs united with their losses during the correction. Holding long-term investment was the best way to survive the stock market correction. At least such investors had a peaceful life.

Don’t be afraid of a stock market correction. It is usually a great time to buy high-quality companies at a lower price. So, you can add stocks to your portfolio for long-term investments, even the one that previously appeared to be a bit too pricey. Also, a market correction is a good time to examine again what you hold. Sell your position only if you see that your investment, but each in your portfolio, couldn’t meet the cause of keeping it.

A stock market correction doesn’t need to be terrifying. If you don’t want to taste it, it is best to stay away from investing in the stock market. Instead, stick with safe investments.

Keep your balance.

27th December 2019
Alibaba Stock Could Deliver Strong Growth in 2020

The economic environment is encouraging, the company is paying attention to its development, there is no reason to think that BABA isn’t able to deliver a strong growth next year.

Alibaba stock could deliver strong growth in 2020 valuing the company’s fundamentals. This company has a big challenge to surpass eventual issues due to the trade war between the US and China. But it looks like a possibility of “phase one” trade agreement is just around the corner.
Reversing tariffs on both sides, which will be included in phase one, should boost consumer demand in China. Boosting demand should increase the sympathy for BABA stock.

The company has recorded a 40% year-over-year revenue growth in the latest quarter. Also, the results for the past several quarters were good. In the cloud segment, it had 64% growth year-over-year.

This put together, make Alibaba stock a strong buy for 2020. And here is why.

The economic environment is encouraging for Alibaba stock

The most difficulties of trade are behind two countries now, since phase one of the trade war deal is completed. The fact is that 2020 is an election year in the US and no one wants to upset the voters.

On the other side, the fact is that China’s economy is slowing. Well, yes, but its GDP is increasing by 6% in the 3rd quarter. Moreover, retail sales jumped 8% in November, which is the sign that Chinese citizens have increased consumers’ demand based on better personal financial status.

Moreover, Nike’s (not only Nike’s but also some other US-based companies) sales in China jumped 23% in the last quarter, so Chinese buyers like to spend money on high-end products. This is a good sign for Alibaba too.

With the rollout of 5G mobile e-commerce could increase even faster which is also important for Alibaba. So, Alibaba stock could deliver strong growth in the year ahead.

Alibaba improves algorithms to sell ads

Alibaba earns by selling ads companies and apps. It has adjusted and improved algorithms that help companies sell to buyers. For example, it improved desktop paid-search ranking algorithms, mobile monetization app, and desktop search personalization.

Alibaba’s New Retail business

Alibaba points to its brick-and-mortar stores as a “new retail” business. It unites those stores with the company’s direct sales. Alibaba’s core commerce revenue grew by 40% per year to $14.2 billion last quarter. Due to the acquisition of NetEase’s Kaola e-commerce, Alibaba’s “other” of the total revenue increased by 125% to $2.5 billion.
Also, Alibaba’s core commerce revenue only grew 29% annually which indicates that the company more dependent on the growth of its brick-and-mortar stores.

Alibaba stock

Since the first news of trade tariffs, more than a year ago, BABA had lower price growth of the stock. But its twelve-month revenue has increased by 70%, while earnings per share have increased by 135%, during the same period.
Completion of a “phase one” trade deal should give an immediate boost to Alibaba stock and grow the investors’ opinion of the company. Alibaba could reach a $10 billion annual revenue by the end of next year. This would improve Alibaba’s stock.
The company continues with a stable stock growth. Analysts foresee its revenue to rise 29% and earnings to rise 23% next year. That is the extraordinary growth rate.

However, investors should be conscious that Alibaba’s main business is depending on lower-margin operations, to push its top-line growth.

Alibaba’s core wholesale commerce business is sustaining the record strong growth. Alibaba’s revenue growth has been superior in comparison with JD.com, its main rival in China. So, Alibaba stock could deliver strong growth in 2020. Keep an eye on this stock.

26th December 2019
Cannabis Stocks Could Bounce in 2020

Cannabis is now legal in many countries and their number will increase. Public support for cannabis legalization is undoubted. That all can provide cannabis stocks to jump in 2020.

Even though the cannabis sector gets knocked down almost on a daily base, some pot cannabis stocks could bounce in 2020. Yes, Canadian sales missed expectations after the legalization of recreational use of cannabis and remained to stay limited globally.
But the Canadian sector could have a great stimulus in 2020 with the Cannabis 2.0 rollout. Also, the retail store number increase is one of the trump cards. For example, Canopy Growth plans to open 40 retail stores a month during 2020 in Ontario. Great plan, indeed but will the government really open up the market to such a huge development?
The stock market wasn’t good in 2019 for cannabis stocks, and investors have to look at the chances of beaten-down stocks. But we truly believe that some of the cannabis stocks could bounce in 2020.

One of them is the Cronos Group (CRON)

The Cronos Group missed out on revenue estimates for Q3. It was $1.3 million lower. The stock followed the company’s “success”, it also has dropped and hit the new lows.

The important fact is the company still grew revenues gradually generated $29.4 million in revenues for the last nine months. Also, the company raised up the production but investors didn’t see the benefit from that. Actually, they were very disappointed by the fact that Cronos sold 8x the kilogram in September but at half the net revenue per gram. But the company ended the third quarter with $1.14 billion on the balance sheet while the company’s value was $0.7 billion. So, this cash flow is Cronos’ main advantage.

It gives the company an opportunity to invest further while the majority of the rivals don’t have such a possibility. CRON has an optimistic Buy consensus rating from Wall Street. Moreover, the average analyst price target is $13.45 and the last closing price was at $7.14.

Tilray (TLRY) Cannabis Stocks Could Bounce

Tilray is one of the most popular cannabis companies in the world. The popularity came from an unusual event after its IPO. What happened? The crazy prices followed the IPO with the stock price over $300 shortly after IPO.
Tilray was the first cannabis company in history to list directly on one of the major US exchanges at $17 per share. Only a few weeks later, the stock price hit the insane price of $300 per share. It was the hottest IPO in 2018.

But the year after…

The average net selling price per gram dropped to $3.25 last Q3, the prior price was $6.21. A gross margin of 31%, the adjusted EBITDA loss of $23.5 million, and only $122 million in cash are weak results.
But Tilray appears well-positioned in combination with the InBev JV which may be catalysts in 2020 and make these cannabis stocks could bounce.

The 2020 revenue estimates are only at $316 million but the stock has picked analysts’ optimism. They forecast a possible upside of over 40% and the stock price at $29.57. There is hope for Tilray.

OrganiGram (OGI)

OrganiGram Holdings is down from the high above $8 in May it falls to $2.5 on December, 24 but it is 1.62% more than the previous close price.

The day before, the company announced the first of its ‘Cannabis 2.0’ products have been released. Trailblazer Spark, Flicker, and Glow 510-thread Torch vape cartridges, filled with C0₂-extracted cannabis concentrate oil and botanical terpene.

Some unpleasant events occurred before this announcement.

For the quarter ended in June, OrganiGram generated revenues of $24.8 million. Everyone was expecting a great year. Instead, shipments fail to $20.0 million, the company was faced with $3.7 million in provisions, and the company forecasts revenues of only $16.3 million. The EBITDA profits were shifting into the loss.

Now, OrganiGram could raise more cash.

That’s the reason why the stock has a ‘Strong Buy’ rating. Analysts are predicting an upside potential of 225% from the current price of $2.5.

Bottom line

Why Traders Paradise is so sure that any cannabis stocks could bounce in 2020?

First of all, cannabis sales will increase.
Cannabis is now legal in more-than-ever countries and their number will increase. Some experts state that the cannabis industry has the potential to advance to $130 million per year soon. This isn’t likely to happen in 2020, but this number figure out how fast the industry is growing.

Public support for cannabis legalization is undoubted. The public is more aware of the potential benefits of cannabis. Also, we can expect new strains of cannabis. Moreover, cannabis-infused products will become more broadly available, and some of these products will be produced by companies that are well-known in the drink industry. For example, Molson-Coors and Coca-Cola both are considering to produce drinks with CBD.

Experts found that cannabis can have important benefits for people’s general health. For example, cannabis can potentially lower cancer risk. Moreover, cannabis is much safer than alcohol. Right?

All this put together, the cannabis stock could easily bounce in the year ahead.

26th December 2019
NextEra Energy Could Be The Top Stock Of The Next Year

NextEra Energy’s date of posting quarterly earnings reports is almost here. What investors could expect?

NextEra Energy (NEE) traded the Wednesday, December 24 at $240.51. The most recent price rose for 0.72% from the previous trading day. On the same day the S&P 500’s 0.02% loss, while the Dow lost 0.13%, but Nasdaq scored an increase of 0.08%.

NEE is approaching its next quarterly earnings report. The analysts expect NextEra Energy to post earnings of $1.53 per share. That would represent the growth of 2.68% in comparison to the prior year. Also, there is an expected revenue of $4.69 billion or 6.77% more than in the same period last year.

Speaking about the whole year, analysts’ expectation is earnings of $8.37 per share (an increase of 8.7% compared to the last year) and revenue of $19.27 billion (an increase of 15.09% compared to last year).

The beginning of NextEra Energy

Long-time ago, it was 2001, NextEra Energy’s market value was $10 billion, today it is $117 billion. The company is, in other words, the largest publicly traded utility in the world.
The company has large cash flow thanks to onshore wind-power infrastructure in promising areas, low-cost production and, also, the federal support.

NEE is a good dividend stock too, that paid out $2.1 billion in common stock dividends last year. The current dividend yield is 2.1%. NextEra generates cash flow from a power generation subsidiary NextEra Energy Resources (one of the biggest producers of electricity from the wind and sun) and two Florida utilities.

NEE stock

Currently, the stock’s P/E ratio is 28.53, while the average P/E ratio for the industry is 20.45.

The data shows that the stock price has been in an uptrend for the past 12 months. NextEra Energy stock price has a rising tendency. So we can conclude, the future price of NEE easily could hit $390 which means to increase for more than 28% at the end of the next 12 months period. NextEra Energy stock is a good long-term investment. The experts’ recommendation is to HOLD this stock since the further rise is expected.

But for the short-term traders, this is a good opportunity to sell, because the stock is in the upper part of a weak growing trend so it can be expected the move back towards the lower part of the trend. If the stock passes the level of $242.93 it will be the sign of a strong raising rate. The stock could hit this price in the next 3 months or less, and rise further up to near $250 over the next 3 months.

The company’s ABOUT

NextEra Energy’s headquarters is composed of five buildings in Juno Beach, Florida. It is a leading clean energy company and is the largest rate-regulated electric utility in the US by retail electricity produced and sold.
The center of NextEra Energy’s business is Florida Power & Light. This utility serves about five million customers. It is also the low-cost provider of electricity. The average customer cost is under $100 per month, which is lower than the average of $140.

Recently the company announced that will start the new year with the lower customer bills. The monthly bill for a typical 1,000-kWh residential customer will decrease by nearly $4 due to lower operating costs. That will be about 30% below the national average.

NextEra Energy also owns NextEra Energy Resources, LLC, which is the world’s largest generator of renewable energy and also a global leader in battery storage. The company produces electricity from eight nuclear power units in Florida, New Hampshire, Iowa, and Wisconsin. NextEra Energy is rated as No. 1 in the electric and gas utility industry on Fortune’s 2019 list of “World’s Most Admired Companies”. Also, last year it was rated among the top 25 on Fortune’s list of businesses that “Change the World.”

25th December 2019
A Good Entry Point, the More Chances of Profit

The entry point is very important and can determine the end of your trade both in losses or in profits.

Having a good entry point is the first round in reaching a prosperous trade.
What is the entry point? It is actually the price investors have to pay to buy/sell a stock. The exit point, on the other hand, represents the price at which investors exit the trade with loss or in profit.

While the entry point has been extensively examined from the divergence/convergence aspect, the exit point has not got full attention.

Why is that? Well, exits may have hidden tendencies.

But let’s stay on a good entry point.

Traders’ successes or failures depend a lot on trade entries. One wrong entry can destroy your trading, for example. Yes, traders are using stop-loss to lessen the risk in case the market makes big moves.
But let’s talk about how the risk-reward potential can be enhanced by a better trade entry.

First of all, never enter the trade when the market is near to extreme highs or lows from the recent position. That fault may ruin your trade.
We already have seen traders that decided to enter the trade when the trend broke the final high with the hope that the stock price will continue running up.
That was the wrong decision because when the price reaches its highs, in most cases the only way it can go further is down. The price will drop into the previous range. So, you will make a loss.
The reason behind this is that markets never move in one direction forever. Especially after the trend reaches extreme highs and lows. If you place the entry point when the trend reaches the highest, it will always result in losses.
But if you like to take more risks in trading you can do that but be sure where you want to set the stop-loss to lower your losses when exiting the trade.
The wrong entry may occur if you are trying to enter the trade at the point where a large move is, but you are not sure what caused this move is. The direction may shift quickly in the opposite direction and your trade will end in losses.

Reversal strategy for a good entry point

Some traders like to set entry using reversal strategy. What does that mean?
In this entry strategy, the traders are taking the trade with the hope that the market will make changes its trends. They are using pivot point levels, so-called Fibonacci levels. This entry is useful only when the market isn’t trending in an obvious, clear direction.
Don’t use this in all trading.

The real role of a good entry point

The role of a good entry point is to allow you to identify high probability trades. You need the confirmation that you have an edge by reducing emotions.
You need a trading strategy that makes sense and where you can execute entry orders with confidence. It is very important and your good entry point should provide you that. Otherwise, it isn’t good.
Eventually, with a good entry point, you are more likely to enter the profit target or stop-loss. And the chance to look for other opportunities is here also.
A good entry will help you to repeat your trades and increase your advantage. But don’t be too focused on your entry point. Overoptimizing is never good.

Bottom line

A good entry point is very important for the success of your trade. But the exit point is what will control your profit. So, you will need to optimize it. To be honest, the best way is backtesting and finding out what works best for you. There are two ways to do that. You can use complicated calculations, charting, etc. or you can use Traders Paradise’s unique and simple app for optimizing your exit strategy. It’s up to you.

Remember, all is important. But as you can see, you can enter the trade in many situations but you can end your trade with only two: profit or loss.

Trading is a game, you have to make the best move at the right moment.

25th December 2019
Superstition In the Stock Market May Lead You to Lose the Shirt

Stevie Wonder wrote in his famous song:
Very superstitious
Writing’s on the wall
Very superstitious
Ladder’s about to fall
Thirteen-month-old baby
Broke the looking glass
Seven years of bad luck
Good things in your past

Superstition is so live in the stock market that you can barely believe. Imagine that it is Friday 13, just like it was in April, September, and December this year. Some people, especially scientifically-minded, would roll the eyes. But, despite the fact that Friday 13th is just a day in the calendar and it may occur several times in one year, some investors truly believe that it is a bad-luck day.

When enough investors share this foolish belief, stock prices can be changed but not in the investors’ favor.

But do superstitions really affect the stock markets?

Some studies revealed that people are more risk-averse when thinking about Friday13.
One study from 2005 discovered that hesitation to do business on this day ends in a loss for the US economy of almost $900 billion. Does this scare affect stock prices? Believe or not, yes.

First superstition: Friday 13th

According to a study, returns on Friday 13th are lower compared with other days.

This Friday 13th effect was broad spread among numerous investors until 1980 but has disappeared. The reason is simple: automated trading erased the “Friday 13th effect”.

But it so funny to talk about Wall Street superstitions. So let’s proceed.

Superstition In the stock market No2: Did you know anything about the witching hour?

Several years ago I found an article written by the man who worked as a broker on Wall Street. I am sorry, I didn’t remember his name. But what I remember is the witching hours are between 2 and 3 PM. Superstition linked to this part of the day (notice, it was on a daily base) was related to market close. If the market sold off at that time, it was a sure sign that the market will be closed on a positive mark. In that interval, from 2 to 3 PM, he and his colleagues were maniacally buying stocks. Just to provide a stronger close.

It worked until it didn’t. They didn’t leave the stats.

Superstition In the Stock Market No3: Sell on Rosh Hashanah and buy on Yom Kippur

The superstition works like this: on Rosh Hashanah, which is the first day of Jewish New Year investors should sell some of their positions and buy them back on Yom Kippur. This year Rosh Hashanah began on the evening of Sunday, September 29 and ended on the evening of Tuesday, October 1.

Do you believe that this trade works? Well, yes. More often than not. But for Jewish. Maybe you should try to sell some of your positions on January 1 or on Christmas or on Islamic New Year. In 2020 it will begin in the evening of Wednesday, August 19 and ends in the evening of Thursday, August 20

But I am not so sure, dates may vary.

Chinese new year will begin on Saturday, January 25, 2020.

Did you know that for one part of Orthodox the New Year actually begins on January, 14? Confused? It is just a calendar. But if it works for Jewish why it doesn’t work for others? There is no reason. The only thing to consider is, do you have to trade according to the Jewish calendar or you can use any.

What I learned during my life is: about superstition and taste is worthless to argue. Take it or leave it.

Superstition No 4: Super Bowl theory

This theory goes that the Dow Jones will have a good year if a National Football Conference (NFC) team wins the Super Bowl. But if the American Football Conference (AFC) team wins it will end the year lower.

For those with a lack of knowledge about American football, the American Football Conference (AFC) and National Football Conference (NFC) are parts of the National Football League (NFL). Honestly, European football is simpler.

From 1967 to 2003 this superstition showed it was accurate 68%. Several years in a row AFC teams were winning the Super Bowl and that was a period of economic growth, but who cares?

Let’s ask the stats.

It was 1967 when one AFC team won the first Super Bowl. During the following period, AFC teams have won 11 times, if you check the stock market result you will be surprised. In 6 of those 11 years, the stock market was dropped. On the other side the stats aren’t so favorable, NFC won Super Bowl more than 30 times and Dow Jones didn’t advance in each of them.

October Effect

This one is a bit harder to rebut.

The October effect is a market anomaly. The stocks tend to decrease during October. Honestly, it is mainly a psychological effect rather than a real wonder. The stats show something different than this theory.

But…

October has this reputation thanks to Panic in 1907, Black Monday, Black Tuesday and Black Thursday in 1929, and Black Monday in 1987.

Black Monday, 1987 that happened on October 19. The Dow fall 22.6% in one day. It was possibly one of the most unlucky days for investors and the stock market.

Despite the scary title, this effect is not statistically exact. From a historical view, October has seen the end of bear markets more than it witnessed the beginnings. But, investors see this month as dangerous and they are selling, and that sentiment creates possibilities to buy on the other side. So, superstition or not, while one sees the end, the other will see the beginning.

Bottom line

Irrationality and superstition in investing will always cause lower returns. Traders, whether they admit it or not, are superstitious. Some will have a happy pen, the other lucky shirt or underwear (hard to believe), some will have some other talisman. Superstition in the stock market is broad spread.

Luckily, many investors and traders are devoted to science, education, and knowledge.

As Stevie Wonder wrote:

When you believe in things
That you don’t understand,
Then you suffer,
Superstition ain’t the way

Happy trade!

24th December 2019
Chinese stocks that will benefit from phase one deal between the US and China

Morgan Stanley believes that IT and Transportation stocks will benefit the most from any de-escalation of trade tensions.

Morgan Stanley says there are some Chinese stocks that will benefit from phase one deal between the US and China.

Almost half of them belong to the IT sector. This sector suffered in the trade war because the companies took place on tariff lists. Also, some of them are from the consumer sector.
Morgan Stanley said in last week’s report: “These two sectors saw the biggest scale of valuation re-rating based on their previous reaction to de-escalation events.”

These 29 stocks have significant exposure to U.S. revenues, according to this investment bank.

The so-called phase one trade deal, the US President and President of China, was made several days ago. It is a kind of initial agreement but nevertheless, it caused some optimism. Anyway, it is progress in this situation. The US President said in his tweet on Saturday that the US and China would “very shortly” confirm the deal.

Morgan Stanley wrote: “We believe IT/Internet-related and Transportation stocks will benefit the most from any de-escalation of trade tensions.” The airlines’ stocks or in general, transportation stocks, is going to benefit from, as bank wrote, from “strengthened CNY/USD” and “improved global trade outlook.”

What are the Chines stocks that will benefit?

First on the list could be AAC Technologies, with 58% publicity exposure. It supplies Apple. Further, Lenovo. This laptop producer has 31% exposure to the US revenues. Also, Samsonite could benefit.

As much as Alpha Group, Goodbaby International, Nexteer Automotive Group, Ningbo Joyson Electronic, Regina Miracle International, Zhongji Innolight, Sunwoda Electronic, WuXi AppTec, Crystal International Group, SMIC, Bestway Global Holding, Jiangsu Changjiang Electronics Tech, Cosco Shipping, Jiangsu Yangnong Chemical, Lens Technology, Shandong Nanshan Aluminium, GoerTek, WuXi Biologics Cayman, GigaDevice Semiconductor Beijing, Luxshare Precision Industry, Shenzhen Sunway Communication, Universal Scientific, FIT Hon Teng, or Legends Holdings are also Chinese stocks that will benefit.

All of them are publicly listed on Chinese exchanges.

Morgan Stanley warned that the final outlook for the sector depends on the talks’ “dynamics” among the U.S. and China, including the signing of a deal.
The bank said that both countries have been so close to signing a deal several times in the past 18 months but it didn’t happen.

Some US stocks could benefit too

Intel, the largest producer of semiconductor products in the world. Also, Harsco, a service, and engineered products corporation. Diodes Incorporated, a leading producer and supplier of discrete and analog semiconductor products could benefit from the deal between the US and China, for example.

Unexpectedly, on Dec 11, China made new offers to the US to end the trade deadlock. China proposed to reduce tariffs on U.S. vehicles from 40% to 15%.

It seems that both sides are looking to end this trade war. For example, President Trump has offered to mediate in the case of Huawei’s executive whose arrest had increased trade tensions.

More about China’s economy

China’s economy began this decade in growth and it looks like it will end with the slowdown, the worst seen since 1990.

Well, policymakers have the chance to avoid a crisis and they know how to do that. The question is, do they want. For investors, it is a buying opportunity after Chinese stocks dropped to record lows in comparison to world peers.

The main topic for China for the next 10 years is it going to fix these problems more quickly and dynamic way. The other choice is to have them forever.
It is surprising how they maintain the pace of growth with the state sector involved. The progress away from a state-controlled economy to a more private-sector is lacking.
Further, China has very little or low motivation to allow complete fluidity of capital flows into and out of the country.

Michael Pettis, a finance professor at Peking University recently commented on Bloomberg:

“China was unlikely to experience a financial crisis and a sharp depreciation of the currency. I think the market didn’t understand that these are mainly balance sheet events, and as long as China’s financial system was closed and its regulators powerful, Beijing could easily extend and restructure liabilities so as to prevent a crisis.”

Bottom line

Supplies, Technology, and Industrial are Chinese stocks that will benefit the most from ending a trade war. So, pay close attention to the stocks from those sectors and make your investment choice.

24th December 2019