5 Big Trades to Take as the Fed Hits the Gas

BALTIMORE (Stockpickr) -- Taper? What taper? Fed Chairman Ben Bernanke may as well have worn a suit made of money and a solid gold grill to his press conference yesterday. It would sent the same message to Wall Street: this tap ain't dry yet.

But even though the Fed went with the boilerplate minutes release and conventional 2 p.m. press conference, it didn't take long for investors to get the message. The S&P 500 shoved up hard to close at 1,725.52 -- a new all-time high for the big index.

From a technical standpoint, this move is textbook after the bounce off support we got earlier this month.

I've heard plenty of people claim that prolonged quantitative easing means "more free money." Make no mistake: QE isn't free. Not by a long shot. But the Fed is dishing it out no matter what, so anyone who doesn't position themselves long equities in the face of it is setting themselves up for failure.

And this week, the technicals are helping us spot some of the most attractive setups. Today, we'll take a closer look at five of them.

If you're new to technical analysis, here's the executive summary.

Technicals are a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technical analysis is a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms, and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.

Every week, I take an in-depth look at big names that are telling important technical stories. Here's this week's look at five high-volume stocks to trade this week.

WisdomTree Investments

2013 has been a stellar year for asset manager WisdomTree Investments (WETF); shares have nearly doubled since the calendar flipped over to January. That's not a huge surprise considering the fact that investment firms are effectively leveraged plays on this equity rally. But now, the technical setup forming in shares of WisdomTree points to even higher ground for the rest of the year.

Right now, WETF is forming an ascending triangle pattern, a bullish setup that's formed by a horizontal resistance level above shares at $14 and uptrending support to the downside. Basically, as WETF bounces in between those two technical levels, it's getting squeezed closer and closer to a breakout above that $14 level. When that happens, investors have a buy signal.

WisdomTree isn't exactly cheap right now. From a fundamental standpoint, this stock looks downright pricey -- but that has little to do with shares' price action right now. Until the technicals change, the high probability returns remain on the long-side of WETF.

Toyota Motors

We're seeing the exact same setup in shares of Japanese automaker Toyota Motors (TM). Toyota has been forming an ascending triangle of its own since the start of May -- but now, shares are getting extremely close to breaking out above their resistance level at $130. That $130 breakout is the buy signal for Toyota.

Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. Triangles and other price pattern names are a good quick way to explain what's going on in this stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That resistance line at $130, for example, is a price where there is an excess of supply for shares; in other words, it's a place where sellers have been more eager to sell and take gains than buyers have been to buy. That's what makes a confirmed breakout above $130 so significant; it means buyers have finally wrestled control of this stock.

The 50-day moving average has acted as a good proxy for support on the way up – that makes it a logical place to keep a protective stop if you decide to become a buyer.

Dunkin' Brands Group

Dunkin' Brands Group (DNKN) is another name that's fared much better than the market since the start of 2013. Year-to-date, Dunkin' has rallied more than 38%, outpacing the S&P by close to double digits. A breakout earlier this week points to more upside in DNKN in the short-term.

After rallying hard to start the year, Dunkin' spent the last few months consolidating sideways, bleeding off some overbought momentum after a long-term move higher. DNKN's consolidation was bounded by horizontal resistance at $45 and horizontal support down at $42, forming a setup called a "rectangle." The rectangle gets its name because it effectively "boxes in" a stock's price action between two levels. When a stock breaks out from the range, it becomes tradable.

The logic behind a rectangle breakout is the same as the triangles in Toyota and WisdomTree; Monday's breakout in DNKN means that buyers have finally wrestled control of this stock from sellers. Shares haven't rocketed away after their move, and that's providing a second chance at a low-risk entry for buyers. If you decide to jump in here, just be sure to use proper risk management with a tight stop under $45.

CA

The chart of CA (CA) doesn't need much introduction -- it's about as simple as a technical pattern gets. CA is currently bouncing higher in an uptrending channel, a setup that gives us a very high probability range for shares of CA to remain within. Here's how to trade it.

Trendline support is the price level to watch right now in CA -- it's been the floor that's kept CA bouncing higher each of the last five times it's been tested. Even though it generally makes sense to be a buyer anywhere in an uptrend, the ideal time to buy comes on a bounce off of support.

Buying off a support bounce makes sense for two big reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). With little room between the trendline support line and CA's most recent price, this week looks like as good a time as any to start building a position.

Oi

There's no two ways about it: Brazilian telco Oi (OIBR) has gotten shellacked in recent months alongside the rest of the emerging market. But this stock is starting to look "bottomy" right now, and the Fed's latest no-taper announcement should provide an extra shot in the arm in September.

Oi is currently forming a double-bottom setup, a pattern that's identified by two swing lows that take place at approximately the same level. The bottoms are separated by an swing high that's in between them. That peak is the breakout level that tells traders when the reversal pattern is complete. In the case of OIBR, that level is $2.10. Yesterday's 9.6% rally in OIBR brought shares within a nickel of closing at that $2.10 breakout level, but I'd suggest waiting for a material move through it before putting money on this trade.

In the meantime, momentum adds some extra confirmation to the move; 14-day RSI has been in an uptrend since the second rally started that's bringing it into "overbought" territory. Contrary to popular belief, going overbought is statistically a better indicator of higher prices than a reversal.

OIBR is a volatile name, so it's likely to move quickly this week. Keep a close eye on that share price if you're looking to trade it.

To see this week's trades in action, check out this week's Must-See Charts portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

Global Giant HSBC Still An Attractive Story

When I last wrote on HSBC (NYSE:HBC) about 18 months ago, I was positive on this global banking giant. In the intervening period the shares are up about 30% (excluding a pretty solid dividend), making that a pretty solid call. Although HSBC's second quarter/first half results were not perfect by any means, this isn't a bank that runs itself on a quarter-by-quarter basis and I see little to quibble with in the bank's excellent ratios and profits, nor its policy of redirecting copious surplus capital to both growing markets and shareholders. With the shares about 10% to 15% undervalued, there's still a case to be made for buying/holding these shares.

Messy Q2 Results
Just how complex are HSBC's financial reports? The company's interim report ran nearly 300 pages and has its own index. Suffice it to say, few (if any) analysts and investors are going to find mission-critical nuggets on information on every page.

Although strong first quarter results allowed the bank to post 4% revenue growth, the second quarter was decidedly weaker (down 22%) and missed the average estimate by about 6%. First half pre-tax profits were up 10%, but there was some confusion as to the "real" average quarterly estimate – for the quarter, HSBC's profits missed by either 5% or 13% on an adjusted basis, though the first half results and market reaction suggest a 5% miss is closer to the target.

SEE: How To Evaluate The Quality Of EPS

Pretty Consistent Results On Balance
Relative to what rival banks in HSBC's core operating regions have already reported, this bank's results were broadly consistent. Loan losses were higher in Mexico and Brazil, while provisions were higher in Europe and lower in North America. Compared to what the market has seen from companies like Santander (NYSE:SAN), Citigroup (NYSE:C), Standard Chartered, and so on, that's basically what's going on in the world.

Underlying loan growth was pretty good (up 6% for the first half), but provisioning expenses were higher than expected. What was a little less encouraging was that the bank's performance was pretty comprehensively "blah". There were some bright points (Hong Kong was strong), but HSBC seemed to come in a little light everywhere – a result that suggests to me that the global economy just isn't picking up for the second half rebound that so many investors have counted on in their forecasts and assumptions.

What Takes The Bank A Step Further?
HSBC has done a very good job with its restructuring plans, with management delivering a mix of better performance and faster results than originally forecast. With that, the bank stands on very solid footing with its global comps in terms of credit ratios, capital, profitability and so on. At the same time, though, HSBC needs higher interest rates to really thrive and the bank's growth could be compromised if the recoveries in China and the U.S. housing market stall or disappoint.

So what happens next? I expect the bank to continue its policy of redeploying capital to faster-growing regions. In other words, markets like Hong Kong and the U.K. will basically underwrite expansion in areas like Asia and Latin America as HSBC manages the slow-growth markets for profits. At the same time, I expect HSBC to generate ample surplus capital over the next three or four years, allowing for more capital to back to shareholders as dividends.

SEE: The Evolution Of Banking

The Bottom Line
HSBC never really got itself into the same sort of mess as banks like Santander or Citi, and I think the company's rate exposure will likely preclude major earnings momentum in the short term (even though HSBC has a lot of non-interest businesses contributing to profits). On the other hand, HSBC should be in good position to return capital to shareholders, and that should help underpin the share price.

Right now I project that HSBC will generate a long-term return on equity of 13%, which translates into a fair value of almost $67 today. Looking at the bank's return on tangible assets and tangible equity, fair value on a price/tangible book basis would seem to be around 1.4x, or just under $63 per share. Accordingly, with HSBC shares trading at about 10% to 15% below fair value, I still think this is a worthwhile stock for investors to consider, particularly those looking for diversified ex-US exposure.

Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Oil Plays: Refining and Shipping

Although we always recommend that investors maintain a highly diversified portfolio, two of our latest featured ideas are in the oil sector; one is a refiner and the other is an oil shipper, notes value investor John Buckingham, editor of The Prudent Speculator.

HollyFrontier (HFC) is one of the largest independent petroleum refiners in the US, with operations throughout the Midwest, Southwest, and Rocky Mountain regions.

Through five complex refineries (which allows Holly to process lower cost heavy sour crude into a higher percentage of fuel), its subsidiaries produce and market gasoline, diesel, jet fuel, asphalt, heavy products, and specialty lubricant products.

We like that its refineries are in good locations, with relatively easy access to multiple pipeline networks, and that it sells its products in some of the fastest growing markets in the country.

We believe the combination of refinery complexity, crude flexibility, and growth markets gives HFC strong competitive advantages.

The firm has a strong balance sheet that sports over $4.90 of net cash per share. HFC generates strong free cash flow, that, coupled with the balance sheet, supports management's ability to continue to pay, not only regular dividends, but also special dividends.

While most publications will show a 2.7% yield for HFC, including special dividends (that have been paid since Q3 2011), the actual payout has been better than 7%.

Ship Finance International (SFL) primarily engages in the transportation of crude oil and oil products, dry bulk, and containerized cargos, and in offshore drilling and related activities.

SFL has a fleet of 65 vessels and rigs, which includes: 17 Very Large Crude Carriers (VLCCs), 15 container vessels, 12 oil/bulk/ore vessels, seven Suezmax vessels, six offshore supply vessels, one jack-up drilling rig, two semi-submersible vessels, two chemical tankers, two car carriers, and one drillship.

While near-term headwinds persist in the oil tanker market, we like that SFL continues to diversify its fleet, moving more heavily into dry bulk, container transportation and drilling.

Long term, we believe that elevated crude oil prices and the demand for global energy infrastructure will benefit the company.

We are also encouraged by SFL's $5.8 billion of contracted revenue backlog, with 68% of that via contracts that have ten or more years remaining on them. Ship Finance shares currently offer investors a juicy 10.1% yield.

Subscribe to The Prudent Speculator here…

More from MoneyShow.com:

Schlumberger: Big is Beautiful

Plains All American: Store of Value

Kinder Morgan: Growth Engine and Yield

Habits That Can Ruin Your Retirement

Getty Images

Many habits creep into our lives without us thinking too much about them. Once bad habits are formed, they often become extremely hard to change. Don't let these behaviors become a part of your lifestyle: Treating retirement as the destination rather than the beginning of another part of life. It's easy for people who are still working to think of retirement as the end goal. But it's a mistake to concentrate only on reaching the finish line with no fuel to keep going afterward. Think about it: Your retired life could be even longer than your working career. Whether it's having assets that last, a strong social network to keep you company or a solid professional network just in case you need to go back to work, it's best to think of retirement as the start of something new instead of the grand finale. Believing retirement will solve all your problems. You will have less stress from work and more free time, but retirement will bring about other challenges you didn't have while you were working. Don't postpone solutions until retirement. Fix your problems now so you don't carry them into your golden years. Burnt out from work? Find another job. No time to pursue your passion? Find time by becoming more productive at what you do. If you don't live a balanced life now, there's no guarantee your retirement will be any less miserable. Anchoring a spending number against your previous salary. Many people estimate that they will spend 70 to 90 percent of their previous salary in retirement. But working from your paychecks is rarely the best way to develop an efficient budget. Build a retirement budget from the ground up instead. Start from $0 and add only expenses that are necessary or will significantly benefit you in retirement. For each cost, ask yourself: Will spending that extra cash really make your life better, or is the expense just there because it's always been there? Avoiding investment risks. Reducing volatility and lowering risks in retirement makes a lot of sense. But not everybody can afford to just buy CDs for the rest of their retirement life and still maintain their desired lifestyle. Inflation will certainly erode any conservative investment strategy given enough time. In a way, conservative investors risk the most because they are almost guaranteeing lower investment performance. For many people, it's more important to embrace some retirement risk. The key is to understand the risk you are taking and to know how to react and deal with the situation when risks show up. Stop being active. It's easy to become lazy in retirement because there's no longer the external push for you to move around every single day. But if you spend just a couple more hours sitting in front of the TV every day, you will see an erosion of muscle and energy. Stay active in retirement, because several decades of deterioration in front of the tube is going to rob you of enjoying the best years of your life.

Corporate 529 plans could be new revenue source

Financial advisers with some expertise in college planning may want to consider helping companies set up Section 529 plans for their employees.

Companies can create an employee benefit program for their workers that automatically deposits funds into tax-advantaged 529 college savings plans. Much the same way that many advisers supplement their individual client-advising business by helping firms set up 401(k) retirement plans for their employees, knowledgeable advisers could help companies create this little-known benefit.

The 2012 Plansponsor Defined Contribution Survey found that only about 15% of companies that sponsor 401(k) retirement plans also offer 529 savings plans as an employee benefit.

Winnie Sun, founding partner of Sun Group Wealth Partners, helped ReTargeter LLC create its corporate 529 plan several months ago. She said employees were quick to see the value of the benefit.

“We met with dozens of employees and talked to them about the use of 529 plans and the accessibility of having employers do direct deposit,” Ms. Sun said. “Employees embraced the idea quickly.”

(See also: Nine tips on using 529s)

Making the plans available to employees helps companies retain workers and can be offered pretty cheaply, Ms. Sun said. Companies with 200 or more employees typically can get the 529 plan costs waived, she said.

“In a time where many companies have had to reduce benefits because of the cost, this is an almost free benefit,” Ms. Sun said.

The biggest challenge for advisers is educating firms about the benefits of 529 plans, which are named for the Internal Revenue Service code that created them, and explaining how companies can create programs that allow employees to invest in different state 529 plans, she said.

Joe Hurley, founder of SavingforCollege.com, said it's good practice for a company to offer employees a choice of 529 plans because many state plans offer residents a state tax break. All the plans offer the federal benefit of tax-free use for qualified college expenses.

Proposed federal legislation, HR 529, would allow employers to provide up to a $600 pretax match to employees' 529 plans and could boost use of corporate 529 plans.

But Mr. Hurley, author of “The Best Way to Save for College: A Complete Guide to 529 Plans” (Saving for College LLC, 2013), said the revenue implications of HR 529 are likely to hold back passage of the measure, which was introduced in February.

Currently, only Illinois offers employers a tax incentive today for matching worker investments in 529 plans, he said.

Now the Venaxis Spring is De-Coiling, & That's Good News (APPY)

To tell the truth, I'm not the least bit surprised that I'm chiming in on Venaxis Inc. (NASDAQ:APPY) today. It was a stock I dissected just two days ago (on Tuesday - here's that chat), pointing out how all the telltale signs of bullishness were brewing. Sure enough, APPY popped on Wednesday, and as a result has gone from a mere potential big mover to an actual mover.

Just to get everyone up to speed, APPY had been getting squeezed into a narrower and narrower trading range. In fact, that range had been whittled down to a mere ten cents, which just isn't enough room for a $1.40 stock like Venaxis Inc. to comfortably move around in. Something had to give soon, and given that the market had been squeezing in on shares for a little over a month, there's was a lot of pent-up energy to unleash.

Well, as of yesterday, Venaxis has broken out of that narrowing range - bullishly - and at the same time has broken above the 100-day moving average line (gray), which had been a nagging resistance area since late July.

That 'unleashing' action alone was enough for me to go ahead and fall in love with APPY, but today's action seals the deal. Today, shares are following through, up five cents (+3.0%) so far, telling us yesterday's surge wasn't just a little volatility. Take a look.

Bolstering the bullish argument is the fact that volume poured into Venaxis Inc. shares on Wednesday. The 1.8 million shares that traded hands - most of it buying volume - yesterday was the most interest we'd seen in the stock in weeks, and in light of the multi-week buildup we've seen [APPY has been moving higher for months, in fits and starts] since June, it's the culmination of a lot of bullish undertows that have been working hard to finally converge at this point. Now that they're all converged, Venaxis is ready to go from good to great.

As for a target, well, this isn't necessarily a long-term call on APPY. Though we should get some good traction now that the taut slingshot has been released, the rally's apt to slow down, if not stop, around $2.25. That was a turbulent area earlier in the year. The $3.00 mark was a firm ceiling in the last half of last year if shares do manage to break past $2.25. Still, that's a pretty good move, and worth a shot.

If you'd like more trading ideas and insights like this one, become a subscriber to the SmallCap Network daily newsletter. You'll get stock picks, market calls, and more, FOR FREE! Sign up today.

U.S. data pull Europe stocks from intraday high

LONDON (MarketWatch) — Europe's benchmark stock index briefly dipped into negative territory Tuesday afternoon after data showed a drop in U.S. consumer confidence, but most indexes headed for a positive close after upbeat figures on German business sentiment.

The Stoxx Europe 600 index (XX:SXXP)  gained 0.2% to 313.18, after closing on Monday with the biggest one-day loss in September.

Click to Play The next 24: U.S. housing prices

KB Home and Lennar report quarterly results and the market prepares for the Case-Shiller home price index before the open. Red Hat is on the move after the bell, and overseas economies look to German confidence and output surveys.

"We're in a bit of a holding phase before we get the Q3 results. There's only economic data to move the market right now, and there's not a lot of that at the moment. But the economic data that has come out is still mildly positive. The Ifo today was mildly positive and the PMIs yesterday were a bit better," said Kevin Lilley, head of European equities at Old Mutual Global Investors.

"I think the market can grind higher before the end of the year, but we will get pockets along the way where markets get worried," he added.

"The Chinese economy seems to be showing some signs of picking up again, the U.S. steadily improves and Europe is coming out of the recession. Things are pointing in the right direction."

Among notable movers in the pan-European index, shares of Total SA (FR:FP)   (TOT)  climbed 3.1% after Barclays lifted the oil giant to equal weight from underweight. The analysts said that the company's capital markets day was "enough to convince us that it can control capex more than we had previously anticipated."

Shares of Telecom Italia SpA (IT:TIT) added 2.8% and Telefonica SA (ES:TEF)  fell 0.2% after the two companies reached a deal to allow the Spanish firm to take control over Telco, which is the largest shareholder in the Italian telecom firm.  

On a more downbeat note, shares of Stora Enso Oyj (FI:STERV)  lost 1.7% after Credit Suisse cut the pulp-and-paper firm to neutral from outperform on valuation grounds.

MarketWatch/William Watts European stocks rise on Tuesday. U.S. consumer confidence drops

More broadly, the markets trimmed earlier gains in afternoon trade after data showed U.S. consumers were less confident in September than in August on renewed worries about stagnant wages and the availability of jobs. The Conference Board's consumer confidence index fell to 79.7 in September from a revised 81.8 the previous month.

Additional data out on Tuesday showed a slowdown in home-price growth for July, as higher mortgage rates appeared to hit the housing market.

Investors are closely watching data from the U.S. to see if it'll strengthen or weaken the case for the Federal Reserve to start tapering its $85-billion-a-month asset purchase program. The central bank surprised the markets last week by keeping its bond buys intact because of soft U.S. growth, prompting a short-term rally in stock markets on the prospect for continued cheap liquidity.

New York Fed President William Dudley said Monday that the economy currently is too weak to scale back the bond-buying program and that "there has been no pickup in its 'forward momentum'".

"As far as I am concerned, the Fed tapering is inevitable and it's something that will only happen on positive economic activity. On the one hand, it will force interest rates a bit higher, which is partly negative for the stock market, but it will happen in an environment where economic conditions have improved," said Lilley.

U.S. stocks were mostly higher on Wall Street.

German Ifo data

Investors also looked to data coming out of Europe, where the Ifo institute said German business confidence rose for a fifth straight month in September. The Ifo business-climate index rose to 107.7 from a revised figure of 107.6 in August, slightly below expectations of a 108.0 print.

"Although companies assessed their current business situation slightly less favorably, their business expectations were once again more optimistic. The German economy made a confident start to the autumn," Kai Carstensen, director at Ifo, said in the release.

Germany's DAX 30 index (DX:DAX)  put on 0.3% to 8,657.61.

France's CAC 40 index (FR:PX1)  gained 0.6% to 4,195.37, while the U.K.'s FTSE 100 index (UK:UKX)  added 0.2% to 6,569.56.

5 Stocks Under $10 Making Big Moves

DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.

>>5 Stocks Set to Soar on Bullish Earnings

Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.

Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success. >>5 Breakout Trades to Take Ahead of the Fed With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside today.

Body CentralContent on this page requires a newer version of Adobe Flash Player.

Body Central (BODY) is a multi-channel specialty retailer that operates apparel stores and also conducts direct business via catalogues and Web site. This stock closed up 3.2% to $6.43 in Tuesday's trading session.

Tuesday's Range: $6.18-$6.43 52-Week Range: $6.00-$13.39 Tuesday's Volume: 418,000 Three-Month Average Volume: 279,597 >>5 Stocks Rising on Big Volume From a technical perspective, BODY jumped notably higher here with above-average volume. This stock gapped down sharply recently from $12 to under $8 with heavy downside volume. Following that move, shares of BODY went on to make a new low at $6 with bearish downside volume flows. That move has now pushed shares of BODY into oversold territory, since the stock's current relative strength index reading is 32.42. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful bounce higher from. Traders should now look for long-biased trades in BODY as long as it's trending above that recent low of $6 and then once it sustains a move or close above some near-term overhead resistance at $6.48 with volume that hits near or above 279,597 shares. If we get that move soon, then BODY could experience a sharp oversold bounce that takes this stock back towards $7.75 to $8.50.

Dynex Content on this page requires a newer version of Adobe Flash Player.

Dynex (DX) is a real estate investment trust that invests in mortgage loans and securities on a leveraged basis. This stock closed up 2.2% to $8.68 in Tuesday's trading session.

Tuesday's Range: $8.51-$8.69 52-Week Range: $7.71-$11.06 Thursday's Volume: 454,000 Three-Month Average Volume: 473,773 >>5 Rocket Stocks to Buy as Mr. Market Climbs From a technical perspective, DX spiked notably higher here with decent upside volume. This stock has been uptrending strong for the last month, with shares moving higher from its low of $7.71 to its intraday high of $8.69. During that move, shares of DX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of DX within range of triggering a major breakout trade. That trade will hit if DX manages to take out its 50-day moving average of $8.82 and then once it clears its gap down day high from July at $8.86 with high volume. Traders should now look for long-biased trades in DX as long as it's trending above some near-term support at $8.25 and then once it sustains a move or close above those breakout levels with volume that hits near or above 473,773 shares. If we get that move soon, then DX will set up to re-fill some of its previous gap down zone from July that started just above $9.75. Any high-volume move above that level will then give DX a chance to tag its next major overhead resistance levels at $10.24 to $10.44.

Inventure FoodsContent on this page requires a newer version of Adobe Flash Player.

Inventure Foods (SNAK) develops, produces markets and distributes snack food products and frozen berry products. This stock closed up 2% to $9.68 in Tuesday's trading session.

Tuesday's Range: $9.39-$9.72 52-Week Range: $5.56-$9.74 Thursday's Volume: 75,000 Three-Month Average Volume: 52,442 >>5 Stocks Ready for Breakouts From a technical perspective, SNAK rose modestly higher here right above its 50-day moving average of $9.25 with above-average volume. This move pushed shares of SNAK into breakout territory, since this stock took out some near-term overhead resistance levels at $9.45 to $9.59. Shares of SNAK are now quickly moving within range of triggering another major breakout trade. That trade will hit if SNAK manages to clear some near-term overhead resistance at $9.69 to its 52-week high at $9.74 with high volume. Traders should now look for long-biased trades in SNAK as long as it's trending above 50-day at $9.25 or above more near-term support at $8.95 and then once it sustains a move or close above those breakout levels with volume that hits near or above 52,442 shares. If that breakout triggers soon, then SNAK will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $12 to $13.

MarchexContent on this page requires a newer version of Adobe Flash Player.

Marchex (MCHX) is a mobile performance advertising company that delivers customer calls to businesses and analyzes those calls so companies can get the most out of their advertising. This stock closed up 4.4% to $7.48 in Tuesday's trading session.

Tuesday's Range: $7.21-$7.48 52-Week Range: $3.41-$7.58 Thursday's Volume: 106,000 Three-Month Average Volume: 83,781 From a technical perspective, MCHX spiked sharply higher here right above some near-term support at $7 with above-average volume. This stock has been uptrending strong for the last five months, with shares moving higher from its low of $3.70 to its recent high of $7.58. During that uptrend, shares of MCHX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MCHX within range of triggering a major breakout trade. That trade will hit if MCHX manages to take out Tuesday's high of $7.48 to its 52-week high at $7.58 with high volume. Traders should now look for long-biased trades in MCHX as long as it's trending above its 50-day at $6.60 and then once it sustains a move or close above those breakout levels with volume that hits near or above 83,781 shares. If that breakout triggers soon, then MCHX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are its next major overhead resistance levels at $8.76 to $9.55, or even $10.

MGIC InvestmentContent on this page requires a newer version of Adobe Flash Player.

MGIC Investment (MTG) is a provider of private mortgage insurance in the U.S. This stock closed up 2.3% to $7.54 in Tuesday's trading session.

Tuesday's Range: $7.33-$7.58 52-Week Range: $1.34-$8.16 Thursday's Volume: 6.21 million Three-Month Average Volume: 8.35 million From a technical perspective, MTG bounced notably higher here right above its 50-day moving average of $7.14 with lighter-than-average volume. This stock has been trending sideways for the last month, with shares moving between $6.75 on the downside and $7.45 on the upside. Shares of MTG have now started to take out the upper-end of that range on Tuesday, since the stock closed at $7.54. This move is quickly pushing shares of MTG within range of triggering a major breakout trade. That trade will hit if MTG manages to take out some near-term overhead resistance levels at $7.84 to its 52-week high at $8.16 with high volume. Traders should now look for long-biased trades in MTG as long as it's trending above its 50-day at $7.14 and then once it sustains a move or close above those breakout levels with volume that hits near or above 8.35 million shares. If that breakout triggers soon, then MTG will set up to enter new 52-week-high territory above $8.16, which is bullish technical price action. Some possible upside targets off that breakout are $9 to $10. To see more stocks that are making notable moves higher today, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr. -- Written by Roberto Pedone in Delafield, Wis. RELATED LINKS: >>Why Wall Street Got Apple Wrong >>5 Stocks With Big Insider Buying >>5 REITs That Call Bernanke's Bluff Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned. Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

The Deal: Chrysler Accelerates Toward IPO

NEW YORK (TheStreet) -- Chrysler Group is poised to file for an initial public offering as soon as this month, as the automaker seeks to complete its transformation from recession lows and resolve a dispute between its two primary shareholders.

Auburn Hills, Mich.-based Chrysler exited a U.S. government-assisted bankruptcy in 2009 with financial support from Fiat (FIATY) as part of a complex deal that has resulted in the Italian carmaker steadily increasing its ownership to a current 58.5%. The remaining shares are owned by a union-managed trust fund established in 2007 to pay retiree healthcare costs.

Fiat has been seeking to bring Chrysler in-house as a wholly owned unit, but the company to date has been unable to reach an agreement with the United Automobile Workers' Voluntary Employee Beneficiary Association on a valuation of the remaining VEBA-owned shares.

Sergio Marchionne, who serves as CEO of both Fiat and Chrysler, told reporters in Europe over the weekend that a Chrysler listing could occur by year's end or in early 2014. Though the executive is eager to fully integrate the two companies, a public offering could help ease tensions between Fiat and the UAW over valuation and set a market value for the U.S. automaker's shares. Marchionne told reporters last week that Fiat would not pay the $5 billion he said the VEBA wants for its stake, saying "they should buy a lottery ticket" instead. The two sides have been unable to come to an agreement even after a Delaware court ruling in July sided with Fiat over a formula for selling a small piece of the VEBA's stake, but stopped short of mandating the trust sell the shares at that price. The potential for a public listing offers risks for both sides, and could push the parties to reach an agreement. A publicly traded Chrysler could attract attention from investors who might advocate a strategy other than combining with Fiat, or at least demand Fiat to pay up for the stake. But under the terms of the restructuring agreement VEBA can only sell about one-quarter of its stake, or about 10% of Chrysler's total shares. Given the very limited stake to be sold and Chrysler's relatively small market position in the U.S., some auto analysts believe VEBA could find demand for the shares tepid. If so, the offering could reinforce Fiat's view on Chrysler's valuation, and give the Italians a chance to buy up the stake at a discount to what VEBA had been seeking. -- Written by Lou Whiteman in New York

Top 10 Analyst Upgrades and Downgrades: Apache, Nokia, Verizon and More

Labor Day is behind us and attendance should be starting back with interest in the markets again. Each morning 24/7 Wall St. reviews literally dozens and dozens of Wall Street analyst research reports. The aim is to find fresh ideas for investors and traders, for stocks to buy and stocks to sell. These are this Tuesday’s top Wall Street analyst upgrades, downgrades and initiations.

Apache Corp. (NYSE: APA) was raised to Buy at Mizuho Securities, and the price target was raised to $100 from $90. Its price target was raised to $113 from $106 at Canaccord Genuity. This was also named as a below book value stock in our recent screenings as well.

First American Financial Corp. (NYSE: FAF) was raised to Outperform from Market Perform at Keefe Bruyette & Woods.

Fidelity National Financial Inc. (NYSE: FNF) was raised to Outperform from Market Perform at Keefe Bruyette & Woods.

Finish Line Inc. (NASDAQ: FINL) was raised to Buy from Neutral at Janney Capital Markets.

Intrexon Corp. (NYSE: XON) was started as Buy at Mizuho Securities, started as Equal Weight at Barclays and started as Overweight at J.P. Morgan.

Nokia Corp. (NYSE: NOK) was raised to Hold from Sell at Deutsche Bank, raised to Neutral from Underperform at Credit Suisse and
Canaccord Genuity raised its price target to $5.50 from $3.30.

Transocean Ltd. Co. (NYSE: RIG) was maintained as Buy but the price target was lowered by $6 to $56 at Argus.

Verizon Communications Inc. (NYSE: VZ) was raised to Outperform from Market Perform at RBC Capital Markets.

Williams-Sonoma Inc. (NYSE: WSM) was downgraded to Hold from Buy at Canaccord Genuity.

World Point Terminals L.P. (NYSE: WPT) was initiated as Outperform with a $23 price target at Credit Suisse.

See also more analyst upgrades and downgrades for Tuesday.

Twitter’s Private Filing Signals New Wave of Secrecy

Twitter Inc., the business that thrives on a culture of excessive sharing, is taking a more discreet route to its initial public offering, adopting a strategy that others will follow.

The microblogging service sent out a 24-word tweet on Sept. 12, announcing that it had confidentially filed to go public with the U.S. Securities and Exchange Commission. It provided no financial details or time frame.

Twitter filed under the Jumpstart our Business Startups, or JOBS, Act signed last year. The legislation lets companies with less than $1 billion in annual revenue keep their most sensitive information away from the competition and the public until shortly before they promote the offering. Investors had better get used to the secrecy as a host of emerging technology companies, including Box Inc., Airbnb Inc., Square Inc. and Dropbox Inc., are likely to take the same path.

"There's a lot of stress in preparing for an IPO," said Jeff Crowe, a partner at Norwest Venture Partners in Palo Alto, California, and director at RetailMeNot Inc., which went public under the JOBS Act in July. "One stress you don't want to have is tipping off the competition any sooner than you have to about what your business model is like."

Under the rules for so-called emerging-growth companies, Twitter's review process with the SEC will be confidential until at least 21 days before the road show, where the company will pitch investors before setting a final price.

Less Costly

The JOBS Act was created to simplify the IPO process for smaller companies and make it less expensive to go public. Between audited financial statements and legal costs, companies spend on average $3.7 million for their IPOs in addition to underwriter fees, according to a report last year from PricewaterhouseCoopers LLP.

Most businesses that can are taking advantage of the rule. Carter Mack, an investment banker who served on the task force that wrote the recommendations for the IPO portion of the act, estimates that more than 80 percent of emerging-growth companies are filing confidentially.

"There's a big backlog," said Mack, president and co-founder of JMP Group Inc. in San Francisco. "Twitter filed because of that and because Internet stocks have done well recently."

Twitter is just small enough to qualify. The company's advertising revenue is projected to rise 63 percent to $950 million next year from $582.8 million this year, according to EMarketer Inc.

Up Next

A group of companies with billion-dollar valuations on the private market will be watching closely. Box Chief Executive Officer Aaron Levie said earlier this year that his business-software company will likely go public in 2014. Airbnb, operator of a home-rental website, was valued at $2.5 billion last year. Square, the payments startup run by Twitter co-founder Jack Dorsey, achieved a valuation of $3.25 billion a year ago after an investment from Starbucks Corp., while document storage provider Dropbox was valued at $4 billion in a 2011 financing.

Kim Rubey, a spokeswoman for Airbnb, Aaron Zamost, a spokesman for Square, and Michael Moeschler, a Box spokesman, all declined to comment. A representatives from Dropbox didn't respond to a request for comment.

Twitter is unusual in even announcing that it's filed. Most JOBS Act candidates, including Workday Inc. (WDAY), Tableau Software Inc., Ruckus Wireless Inc. and RetailMeNot, didn't disclose anything until making their S-1 prospectus public.

Musk's Exception

SolarCity Corp. was an exception. The provider of rooftop solar systems, whose chairman is Elon Musk, announced its confidential filing in a press release in April 2012. The company filed its public S-1 on Oct. 5, ahead of the December debut.

Some high-profile Internet IPOs that filed under standard disclosure rules paid the consequences of heightened scrutiny.

Facebook Inc. (FB), which held one of the biggest IPOs in U.S. history last year, lost more than half its value in the months following the deal. The prospectus was pored over for three months before the offering by analysts, investors and reporters.

Groupon Inc. (GRPN) fell by more than three-quarters after its 2011 debut and was publicly ridiculed during the SEC review because of its accounting methods and exorbitant losses. Neither of those companies would have been eligible for the JOBS Act provision, because they were too big.

Market Rally

Sixteen months have passed since Facebook's troubled offering and the market has bounced back. The social-networking service is finally trading above its IPO price and other consumer-Web companies like Trulia Inc. and RetailMeNot have soared since their IPOs.

In addition to the JOBS Act, "we're seeing a recovery from the hangover effect of the Facebook IPO," Crowe said.

For its size, hype and growth, Twitter is not the kind of company that the JOBS Act was designed for, said Erik Gordon, a private-equity and law professor at the University of Michigan in Ann Arbor, who spoke with legislators when the bill was being drafted.

Twitter is valued at more than $10 billion, based on a public filing last month from an investor. It can afford the IPO process and won't have difficulty attracting underwriters and investors, Gordon said. He said the revenue cap for an emerging-growth company should be lowered to $500 million.

"Twitter is the last IPO in the world that needs the benefits of the JOBS Act," Gordon said. It's unfair to investors, who get "a shorter period in which the S-1 is public for you to tear it apart and do a thorough analysis," he said.

Is IBM a Buy Near All-Time Highs?

With shares of International Business Machines (NYSE:IBM) trading around $206, is IBM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

IBM is an information technology company. The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. Technology products and services are in high demand worldwide as consumers want to be up-to-speed, and companies always need the latest and greatest to stay ahead of the competition. Cloud computing has been hot in recent times, which has not been too good for IBM. Should the company want to hold on to its market share, it needs to make moves quickly, and provide the technology products and services that worldwide consumers and companies demand.

T = Technicals on the Stock Chart are Strong

IBM stock has been on a monster surge higher over the last few years. The stock has been in a consolidation for about a year now and may be setting up to move higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, IBM is trading slightly above its rising key averages which signal neutral to bullish price action in the near-term.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of IBM options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
IBM Options	20.77%	93%	90%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Steep	Average
August Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on IBM’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for IBM look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	3.45%	11.15%	4.39%	11.33%
Revenue Growth (Y-O-Y)	-5.11%	-0.64%	-5.39%	-3.34%
Earnings Reaction	-8.27%	4.4%	-4.91%	3.76%

IBM has seen increasing earnings and and decreasing revenue figures over the last four quarters. From these figures, the markets have been mixed about IBM’s recent earnings announcements.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

P = Poor Relative Performance Versus Peers and Sector

How has IBM stock done relative to its peers, Accenture (NYSE:ACN), Hewlett-Packard (NYSE:HPQ), Microsoft (NASDAQ:MSFT), and sector?

	IBM	Accenture	Hewlett-Packard	Microsoft	Sector
Year-to-Date Return	7.54%	21.97%	72.70%	30.93%	22.89%

IBM has been a relative poor performer, year-to-date.

Conclusion

IBM is a technology company that provides valuable and essential products and services to consumers and companies around the world. The stock has been on a strong run extending back several years but has been in consolidation as of late. Over the last four quarters, earnings have been increasing while revenue figures have been decreasing, overall producing mixed feelings among investors. Relative to its peers and sector, IBM has been a poor year-to-date performer. WAIT AND SEE what IBM does in coming quarters.

Are the Shorts Right On Cliffs?

With shares of Cliffs Natural Resources (NYSE:CLF) trading at around $17.94, is CLF an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Cliffs Natural Resources has headed in mostly one direction over the past two years, which is down. There has been no slowdown in the downward momentum, and the demand situation hasn't improved.

Cliffs Natural Resources is suffering from weak demand and pricing for iron ore, weak steel demand, and oversupply. Geographically, China and Europe have been weak, and the mining situation in the United States has seen much better days. Furthermore, labor and mining costs have increased, and these costs are expected to continue to increase throughout the year. The dividend was cut in order to reduce overall costs. Revenue and earnings have declined last year as well as last quarter on a year-over-year basis. In other words, it’s ugly out there.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

The big question for Cliffs Natural Resources is whether or not the stock is oversold. Some technicians argue that the stock is at a support level, but even if that's the case, support is likely to be broken based on fundamentals and overall weak global demand.

The best possible bullish argument doesn't relate to technical analysis, but the potential in emerging markets. The problem that not many people seem to talk about is that emerging markets are still tied to developed markets. Hence the phrase: global market.

Emerging markets might have the most growth potential, but they will fail if developed markets fail. In simplest terms, they will fail if the largest economy in the world fails, which is the United States. That being the case, a lot comes down to monetary stimulus. Can the Federal Reserve continue to assist markets for a considerable amount of time? Yes. However, if Cliffs Natural Resources is unable to perform well in such an environment, then what would make investors believe that it will perform well when economic support is removed? Of course, the other argument is that this is a real economic recovery that no longer needs monetary stimulus. If that’s the case, then Cliffs Natural Resources is well positioned.

Many analysts are attempting to call a bottom for Cliffs Natural Resources. Attempting to call bottoms on stocks with significant downside momentum is a dangerous game, and it's certainly not a game that will be recommended here.

Let's take a look at some important numbers prior to forming an opinion on this stock.

T = Technicals Are Weak

Cliffs Natural Resources has performed poorly in a bull market. This is a big negative.

	1 Month	Year-To-Date	1 Year	3 Year
CLF	-21.98%	-52.93%	-61.57%	-61.51%
VALE	-16.99%	-29.23%	-18.98%	-35.02%
BHP	-8.77%	-16.84%	5.34%	13.33%

At $17.94, Cliffs Natural Resources is trading well below its averages.

50-Day SMA	$19.72
200-Day SMA	$30.85

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Cliffs Natural Resources is close to the industry average of 0.60. Debt has been managed well.

	Debt-To-Equity	Cash	Long-Term Debt
CLF	0.60	287.20M	3.43B
VALE	0.42	6.81B	32.61B
BHP	0.52	5.27B	35.48B

E = Earnings Have Weakened

Earnings had been improving on an annual basis until 2012. The same can be said for revenue.

Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in millions	3,609	2,342	4,682	6,794	5,873
Diluted EPS ($)	4.75	1.63	7.49	11.48	-6.32

Looking at the last quarter on a year-over-year basis, revenue and earnings significantly declined.

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in millions	1,264.70	1,626	1,544.90	1,535.90	1,140.50
Diluted EPS ($)	2.63	1.81	0.59	-11.36	0.66

Now let's take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

Conclusion

It's impossible to predict stocks with 100 percent accuracy. With that said, based on the current economic environment, downside risk for Cliffs Natural Resources greatly outweighs upside potential. Vale (NYSE:VALE) and BHP Billiton (NYSE:BHP) are lower-cost producers that are likely to hold up better if the broader market suffers a steep market correction. This situation already occurred in 2008. However, none of these companies are safe plays if the market falters.

Is Lockheed Martin Headed for Blue Skies in 2013?

The federal budget sequester went into effect March 1, but given the strong performance defense giant Lockheed Martin (NYSE:LMT) has experienced over the past five months, you wouldn't know it. However, the company has compressed its 2013 outlook to reflect impending spending reductions spurned by sequestration. Will Lockheed Martin be able to keep its momentum despite reduced government funding? Let's use our CHEAT SHEET investing framework to decide whether Lockheed Martin is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.

C = Catalysts for the Stock's Movement

Because around 82 percent of Lockheed Martin's sales are to the U.S. government, the company is highly dependent on the domestic defense budget. Sequestration measures enacted earlier this year require the government to reduce defense spending by $500 billion over the next 10 years. The Department of Defense projects automatic cuts will reduce its budget by around $37 billion this year and $52 billion in 2014. Lockheed Martin announced along with its 2013 earnings report that these budget cuts could reduce its sales by $825 million this year.

Luckily for Lockheed Martin, its industry-leading F-16, F-22, and F-35 fighter jet models may be in the clear — at least for now — as the Pentagon decides how to reduce its budget. Lockheed Martin continues to receive funding from the Department of Defense, including an additional $8.4 billion in funding this year to develop its turbulent F-35 joint strike fighter, a program that is seven years behind schedule. As a result of the domestic spending cuts, CEO Marillyn Hewson indicated that the company might begin concentrating its efforts on its overseas business, which currently makes up around 17 percent of its revenues. Recently, Lockheed Martin announced large contracts to bring its F-35 stealth fighter to both Japan and Israel.

E = Earnings are Increasing Year-Over-Year 

The automatic spending cuts, which began March 1, did not seem to impact Lockheed Martin's first quarter. In fact, the company posted strong earnings per share of $2.33 — a 14.78 percent increase from the previous year's quarter. Lockheed Martin has increased earnings in four of the last five quarters, but with revenue growth decreasing in the last three quarters, the company has increased profitability by reducing expenses. These cost-cutting initiatives come mainly in the form of job cuts, but as revenues continue to fall with sequestration measures, Lockheed Martin may not be able to keep reducing its costs. Lockheed Martin announces its second quarter earnings Tuesday.

	2013 Q1	2012 Q4	2012 Q3	2012 Q2	2012 Q1
Qtrly. EPS	$2.33	$1.74	$2.21	$2.38	$2.03
EPS Growth YoY	14.78%	-16.97%	5.24%	11.22%	35.33%
Revenue Growth YoY	-1.97%	-0.92%	-2.06%	3.27%	6.28%

E = Exceptional Performance Relative to Peers?

The entire defense industry is in a tough spot with looming sequestration of the Pentagon’s budget. Let's see how Lockheed Martin, the biggest government contractor by contracts, stacks up against the other major players: Boeing (NYSE:BA), Northrup Grumman (NYSE:NOC), and Raytheon (NYSE:RTN). All of the companies are trading at a relatively low price-to-equity ratio besides Boeing, mainly because Boeing also has exposure to the commercial aviation industry. Lockheed Martin has a significantly higher return on equity than its peers. Part of this higher ROE has to do with its substantial leverage. However, with a high credit rating and a strong interest coverage ratio, the company's high debt level should not worry investors for now. Lockheed Martin has a very attractive dividend yield of 4.1 percent and has increased its dividend by at least 10 percent in each of the last 10 years.

	LMT	BA	NOC	RTN
Trailing P/E	13.01	19.69	11.08	12.20
Operating Margin	9.15%	17.37%	12.31%	12.22%
ROE	302.40%	64.43%	19.60%	22.91%
Dividend Yield	4.10%	1.90%	2.80%	3.2%

T = Technicals on the Stock Chart are Strong

Lockheed Martin is currently trading at around $112.80, well above both its 200-day moving average of $97.53 and its 50-day moving average of $107.44. The stock has been on a tear since the beginning of March — it’s up around 30 percent since March 4. Additionally, Lockheed Martin experienced a “golden cross” — when the 50-day moving average crosses over the 200-day moving average — right around its first-quarter earnings announcement. A golden cross usually indicates strong investor sentiment.

Conclusion

Lockheed Martin has a lot to prove in its second-quarter earnings announcement, which is less than a week away. As the sequester continues to decrease profit margins and revenues on native soil, the defense giant must look elsewhere in order to grow its revenues. Additionally, in order to continue generating earnings growth, Lockheed Martin must keep reducing its costs. The stock currently trades at a relatively low price-to-earnings multiple of 13.01 and has an attractive dividend yield. The automatic spending cuts have not significantly affected Lockheed Martin, but the company could see some reduction in earnings growth and changing investor sentiment over the coming quarters. For now, Lockheed Martin is a WAIT AND SEE.

Is Vivus a Buy at These Prices?

With shares of Vivus (NASDAQ:VVUS) trading around $13, is VVUS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Vivus is a biopharmaceutical company. It commercializes and develops therapies to address unmet needs in obesity, sleep apnea, diabetes, and sexual health. Its drug, Qsymia was approved by the the United States Food and Drug Administration for the treatment of obesity as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management in obese adult patients or in the presence of hypertension, type 2 diabetes, or high cholesterol. The issues that Vivus is looking to treat are growing concerns among Americans. Should the drugs produced work effectively, Vivus is poised to see explosive demand that will surely translate to rising profits for the company.

T = Technicals on the Stock Chart are Weak

Vivus stock has seen its fair share of volatility over the last several years. The stock is now trying to stabilize after huge selling pressure that cut its share price in half. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? — the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Vivus is trading around its key averages, which signal neutral price action in the near-term.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Vivus options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Vivus Options	53.34%	3%	2%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
June Options	Steep	Average
July Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Vivus’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Vivus look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	-165%	-337.11%	-300%	-20%
Revenue Growth (Y-O-Y)	N/A	N/A	N/A	N/A
Earnings Reaction	9.71%	-12.24%	-20.93%	-4.22%

Vivus has seen decreasing earnings over the last four quarters. From these figures, the markets have had mixed feelings about Vivus’s recent earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

How has Vivus done relative to its peers, Eli Lilly (NYSE:LLY), GlaxoSmithKline (NYSE:GSK), Pfizer (NYSE:PFE), and sector?

	Vivus	Eli Lilly	GlaxoSmithKline	Pfizer	Sector
Year-to-Date Return	-2.31%	14.76%	20.27%	17.11%	16.97%

Vivus has been a relative underperformer, this year to date.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Conclusion

Vivus is a biopharmaceutical company that is attacking issues negatively affecting many Americans. The stock has not done too well lately but may be currently stabilizing from a recent rise in selling. Earnings have been decreasing over the last four quarters, which has not really made investors too happy. Relative to its peers and sector, Vivus has trailed significantly in year-to-date performance. STAY AWAY from Vivus’s stock for now.

The Swiss-U.S. Tax Accord Is Both Good And Bad News For Credit Suisse

Switzerland signed an agreement late last week that will see about 100 small Swiss banks disclose hidden details about their U.S. operations and pay hefty fines for helping U.S. citizens evade taxes. [1] The agreement also gets an additional 200 Swiss local banks off the hook by giving them a clean record with U.S. authorities. [2] The accord, hence, covers all but the 14 Swiss banks which are currently being investigated by the U.S. Department of Justice (DoJ) – Credit Suisse (CS), Julius Baer and HSBC’s Swiss arm among others. The largest Swiss bank, UBS (UBS), already settled tax evasion charges with the U.S. in 2009 for $780 million.

As far as the banks which are still under investigation are concerned, the agreement carries both good and bad news for them. Why do we say so? It’s good news because the agreement largely lays down the amount of fines these banks can expect for their involvement in the alleged tax evasion. The banks will be able to finally settle with the U.S. authorities in the near future. But the agreement also effectively puts an end to Switzerland’s perception as a tax haven among investors around the globe which will negatively impact the growth in assets for the country’s banking industry as a whole and for the largest banks in particular.

The Swiss Government Really Did Not Have Much Choice

Tax authorities around the globe have taken a renewed interest in money tucked away by their country’s citizens in offshore accounts in the wake of the economic downturn of 2008 – quite clearly to make up for reduced tax revenues from the slowing economic conditions by focusing on this potential revenue stream. And Switzerland’s banking sector with its reputation for privacy has been an ideal target for the leading economic giants to begin with. Over the years, the U.K. and Germany have inked their own tax accords with Switzerland and France is looking to reach an agreement of its own soon.

The U.S. DoJ h! as also been quite active in pursuing the Swiss banks over assisting U.S. citizens, starting with the crackdown of UBS in 2009. The DoJ then shifted its focus on fourteen other Swiss banks and demanded that they furnish information about all U.S. clients holding accounts worth at least $50,000 over the last 10 years (see Swiss Bankers and US Gov’t Square off Over Credit Suisse). But the stand-off dragged on for well over two years before the DoJ turned the heat up by threatening to initiate full criminal proceedings against all the banks.

This represented a big problem for the Swiss government on several fronts. Firstly, the increased scrutiny of its biggest banks has had a negative impact on the perception on Swiss banks in general in the eyes of global investors – especially after the oldest Swiss bank Wegelin was forced to cease all operations after pleading guilty to U.S. tax evasion charges. [3] Secondly, some of the banks (notably Credit Suisse) have a strong presence in the U.S., and the criminal proceedings could end up with the banks forfeiting all their U.S. assets and in a worst case scenario even losing their operating licenses in the country. Finally, the fact that two of the fourteen banks named by the DoJ are government-run cantonal (or regional) banks only complicated matters further.

Starting from a weak position due to all these factors, the Swiss government acceded to fines of as much as 50% of the dollar value of assets in hidden offshore accounts for all its tier-two banks to save them from any scrutiny. The fines range from 20% to 50% of the assets held based on when the nearly 100 banks impacted accepted the money from U.S. citizens. Another 200 Swiss banks also come under the ambit of the agreement with those who have any operations in the U.S. required to prove that they did not breach any U.S. law.

So What Does It Mean For Credit Suisse And The Other Unlucky Thirteen Under Investigation?

With the agreement, U.S. tax authorities have only ! 14 top-ti! er Swiss banks on their scanner – those which are already under investigation. The Swiss government’s decision to settle this issue for the larger part of the Swiss banking sector should pave the way for a similar settlement for each of the remaining banks too in the near future, albeit at an admittedly steep one-time cost. And this can be seen as a positive thing for the banks as they can expect to put the nagging tax evasion issue behind them by next year.

But the agreement comes with a significant long-term downside. Swiss banking clients who operated their offshore accounts as a means to save on taxes will find this option closed. This will not only limit the growth in the size of assets under management for these banks in the future but could also trigger a withdrawal of existing assets, the impact of which on Credit Suisse can be estimated by making changes to the chart below.

Notes:

U.S., Switzerland strike bank deal over tax evasion, Reuters, Aug 30 2013 US and Switzerland reach tax evasion accord, Financial Times, Aug 29 2013 Wegelin’s Fall to Tax-Haven Poster Child, The Wall Street Journal, Mar 3 2013

Disclosure: No positions

Source: The Swiss-U.S. Tax Accord Is Both Good And Bad News For Credit Suisse

General Electric Edges Higher on Report It Will Dump Retail Lending

General Electric has gained 0.3% to $23.18 today after a report that it plans to unload its consumer lending division.

Exxon Mobil

The Wall Street Journal has the details:

The decision to divest the business, amid concerns about the company’s exposure to banking, marks an important moment in the evolution of GE and the country’s three-decade long consumer credit boom. GE Capital expanded to the point that its portfolio of loans and other assets now would rank it as the country’s fifth-largest commercial bank.

Preliminary work to separate the business through an initial public offering is under way, according to people familiar with the matter…An IPO could come early next year, the people said.

S&P Capital IQ’s Eric Hugel considers what comes next for the U.S. blue chip:

We view this move as consistent with GE’s plans to reduce the size of GECC. Further, we expect proceeds to be used to expand GE’s role as a global provider of technologies and services critical to economic development. We keep our EPS estimates for ’13 and ’14 at $1.65 and $1.85, while our P/E-based target price stays at $28.

The Dow Industrial Average has dropped 0.3% to 14,795.48, while United Technologies (UTX) has fallen 0.6% to $99.84, Honeywell (HON) has dropped 0.7% to $79.50 and MMM (MMM) has ticked down 0.1% to $113.20.

Emerging Stocks Drop to Seven-Week Low on Syria Concern

Emerging-market stocks fell to a seven-week low and currencies in India and Turkey sank to records as speculation grew that the U.S. will take military action in Syria.

Stocks in the Philippines led declines as the benchmark index tumbled to an eight-month low on concern capital outflows will accelerate. India's rupee plunged the most in two decades as a surge in oil threatened to worsen the current-account deficit, while the Turkish lira sank to the lowest level since at least 1981. Russia's sale of 10-year bonds flopped after the government offered yields below what investors demanded.

The MSCI Emerging Markets Index dropped 0.4 percent to 911.40 at 1:22 p.m. in New York. Rising tension in Syria has worsened a rout that erased more than $1 trillion from the value of developing-nation equities this year. Foreign investors pulled about $2.4 billion this month from markets in India, Indonesia, Thailand and the Philippines amid speculation that the Federal Reserve will reduce monetary stimulus.

"The tensions in the Middle East and the threat of imminent military action are casting a pall over the equity markets," Alan Gayle, senior strategist at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion. "The global concerns about Syria and higher oil prices continue to weigh."

Eight of 10 groups in the MSCI Emerging Markets Index fell today, led by health-care shares. The gauge of developing nations extended this year's plunge to 14 percent, compared with an 11 percent advance for a measure of developed markets.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.9 percent to $37.70. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, retreated 4.5 percent to 27.28.

Brazil's Ibovespa snapped a two-day drop as Brookfield Incorporacoes SA led homebuilders higher. The real climbed as the central bank's effort to support the currency offset demand for a refuge in the U.S. dollar.

The Micex Index (INDEXCF) slid for a fourth day as OAO Rostelecom, Russia's biggest fixed-line operator, was downgraded at Bank of America Merill Lynch. The Finance Ministry shelved the sale of 12.6 billion rubles ($379 million) of January 2023 securities as only one bidder participated. The government had offered the debt at a yield of 7.7 percent to 7.75 percent, while the rate increased to 7.79 percent by yesterday's close.

The lira lost 1.2 percent to the lowest level since when Bloomberg started tracking the data.

South Africa

The FTSE/JSE Africa All Shares Index fell 1.8 percent, the most since July 5. Discovery Ltd. (DSY), South Africa's largest medical-insurance provider, sank 9.1 percent after saying profit will be as much as 10 percent lower than the previous period.

The Philippine Stock Exchange Index dropped 3 percent, extending a monthly drop to 14 percent. SM Investments Corp., owner of the largest shopping-mall operator and biggest grocery chain, slid 7.5 percent to the lowest price since October. The Jakarta Composite Index rose 1.5 percent.

India's S&P BSE Sensex (SENSEX) rebounded from the lowest intraday level in almost a year as some traders closed bearish bets before derivatives contracts expire tomorrow. Reliance Industries Ltd., the owner of the world's largest refining complex, gained 1.1 percent. The rupee slumped 3.9 percent to an unprecedented 68.8450 per dollar in Mumbai.

China's stocks fell from a two-week high as PetroChina Co. (601857) dropped after four senior managers were removed amid a government anti-corruption campaign and drugmakers slid on concern earnings are trailing estimates.

The premium investors demand to own emerging-market debt over U.S. Treasuries slid 0.05 percentage point to 352 basis points, according to JPMorgan Chase & Co.

Does This Caterpillar Have 9 Lives To Survive The Industry Downturn?

On July 24, 2013, Caterpillar (CAT) declared its second quarter results for fiscal year 2013. It posted a disappointing 16% year-over-year revenue decline. Caterpillar blames falling commodity prices since this affects its mining business directly. China's economic slowdown also impacted the company as this region has a significant market share in the mining industry.

What steps will Caterpillar take to overcome, or at least lessen, the impact of the declining mining industry?

Mining business still a huge headwind

In the second quarter this year, the overall global mining results were negative. It was mainly due to the falling commodity prices and rising operating cost, which grew faster than production. This includes the 13% rise in employee cost, while the number of employees grew by only 2%.

In order to reduce the cost structure, Caterpillar has taken cost-cutting measures to dampen the negative effects of its mining business. In the past two months, Caterpillar has laid off over 700 employees, increasing total global layoffs to 10,000 in the past 12 months. Additionally, it will be closing its tunnel-boring machine plant in Toronto, Canada, initiating another 330 job cuts by the first half of 2014.

On the other side, mining companies are reducing their capital expenditure, or capex, due to the overall slowdown. In this scenario, the demand for aftermarket parts and services tends to increase since companies use existing equipment rather than purchasing it new. This trend will help Caterpillar offset declining original equipment sales since it provides quality services for its sold equipment. These services provide higher margins compared to the equipment sold, which will play a large role in mitigating the negative impact from the declining capex of mining companies. Caterpillar is anticipated to experience a reduced-decline in its construction business of just 2% to $18.8 billion in this year on the year-over-year basis.

Declining backlog

In the! second quarter this year, Caterpillar's backlog declined $1.3 billion to $19.1 billion on the quarter-over-quarter basis. The resource industries and the power system segment contributed to this decline, but it was offset by the increase in the construction segment. Orders declined by 11% year-over-year.

The company's book-to-bill ratio stood at 0.91 in the second quarter, which is not a good sign. A ratio below 1.0 implies that fewer orders were received than filled. This also means a decline in the number of future orders, indirectly indicating less business in the coming quarters.

One of the major reasons for the decline in the sales is that dealers, or retailers, are de-stocking. To offset this, the company under produced in the second quarter in order to reduce the dealers' high level of inventory and existing stock. Unlike companies such as Joy Global (JOY), which also manufactures machinery for extraction of minerals like coal, iron ore, and copper, Caterpillar sells its products through a separately owned dealer network.

Joy Global will continue benefiting from legacy-mining orders turning into shipments in the first half of its fiscal year. However, despite this tailwind opportunity, Joy Global is expected to post EPS at $5.60-$5.80 in this fiscal, which is significant reduction from its previous year's EPS of $7.13. It too will be highly impacted from this whole industry downturn.

Peer Comparison

Based on the highest market cap companies in the machinery equipment industry, I am comparing Deere (DE) with Caterpillar in order to gain a better understanding from a valuation standpoint. Deere is also engaged in manufacturing construction equipment, and has a market cap of $32.7 billion. The enterprise value of Caterpillar stays at high levels of $90.29 billion, due t to its large market cap, while Deere's enterprise value is only $61.64 billion. Caterpillar also stands strong when compared on the EV to revenue basis, as it has a ratio of 1.50 times, which is lower t! han Deere! 's 1.63 times. This ratio helps investors understand how much it would cost to buy the company's sales.

Caterpillar also has a better EV to EBITDA ratio, which is 9.50 times compared to Deere's 10.02 times. Through this ratio, it is easy to find out the approximate fair market value of a company and the lower number is considered better. It is surprising that despite high enterprise value, Caterpillar has better ratios than Deere, since Caterpillar has revenue double the level of Deere, and it has 50% higher EBITDA also. Additionally, considering the price to book ratio, the industry standard is 4.9 times, while Caterpillar and Deere have a ratio of 3.17 times and 3.90 times respectively. By comparing the price to book ratio of the industry with its individual companies, we learn whether the company is undervalued or overvalued. The former shows growth prospects in the future, and the latter reflects the overpricing of a stock. This indicates that both the companies are fairly undervalued. Therefore, on valuation basis, Deere is not as an attractive investment when compared to its peer company, Caterpillar.

Conclusion

Presently, Caterpillar isn't doing great business. Nevertheless, on the valuation point-of-view, it stays an attractive investment. To boost investor confidence, the company will buy back shares worth $1 billion, part of its $7.5 billion share repurchase authorization, in this quarter of the year. These aspects give me confidence to recommend this stock as a hold in order to gain long-term gains.

Source: Does This Caterpillar Have 9 Lives To Survive The Industry Downturn?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Market Holds Rally, Investors Don’t Show Up

Is it just your clients who missed the huge stock market rally?

Apparently not, judging from a fund research round table that included top Morningstar analysts Scott Burns, Russel Kinnel, Laura Lutton and John Rekenthaler.

In a free-flowing discussion that is a highlight of each year’s Morningstar Investment Conference, the Chicago-based research firm’s top analysts answered questions from PBS business journalist Consuelo Mack.

Self-defeating behavior on the part of investors was a theme that came up early and often on the late Wednesday panel.

Burns (left) called it “confounding” that a huge segment of investors have not participated in the stock market rally, describing the heavy flow into fixed income as a “retroactive fix” of a bad asset allocation that overweighted stocks prior to the financial crisis.

Rekenthaler’s formulation packed more pain:

“You don’t get too many chances to get over 100% gain without inflation after only four years,” he said, adding that huge numbers of investors compounded the woe of missing the rally by heading for the exits after locking in portfolio losses in 2008 and 2009.

Conversely, Lutton worried about latecomers to the rally, saying “investors chasing performance doesn’t end well historically. Those who see bonds as safe investment are going to be unhappy.”

And Kinnel noted the danger in the investor quest for yield.

“Whether you’re looking at funds, bonds or stocks…the highest yielding areas…are a little scary right now.”

Missing the rally and coming to it late, with all the dangers that entails, made investment strategy another dominant theme in the discussion.

“This fall it will be five years since [the collapse of] Lehman Brothers,” Burns noted, “but people talk about it as if it were five weeks ago. The scars are still so deep.”

For that reason, he said financial advisors should give serious consideration to strategies that might not be optimal from a return perspective, such as target-date or low-volatility funds.

“If at the end of the day they make the investor behave better, they’re better off [with these strategies]. So many did the wrong thing after 2008-09,” he said.

“The two surest ways to not reach your goals are to not save and leave it all in cash,” he added. For advisors, therefore, the challenge is to “keep in the game but in a way that the client can tolerate.”

For Kinnel’s part, “cost and stewardship are the biggest factors FAs should consider in investing clients’ dollars.”

Stewardship, which looks at things such as the culture of the fund firm and whether managers invest in their own fund, was also emphasized by Lutton.

“Is this fund firm a good caretaker of your capital?" she said. "Studies have shown a relationship between these softer [factors] and performance.”

In that regard, Kinnel noted that “some of the big publicly traded fund firms are less careful” stewards of shareholder capital, but he said boutique firms could be found on either extreme, noting that the boutique firm Strong Funds got caught in scandal whereas Vanguard got to where it is through its fund stewardship.

And Burns steered away from large vs. small, saying [bond giant] “PIMCO, at end of the day, is one big boutique—they’re not all things to all people.”

When asked by Mack to name names, Kinnel cited FPA Capital, Primecap and TFS as excellent fund companies.

---

Check out complete coverage of the Morningstar Investment Conference at AdvisorOne.