Talking Stocks 2.0

[tnt]

LITE is in my long term list

[logo]

My belief at this time is that the reopening trade and cyclicals have run somewhat ahead of themselves, and the tech sell off has been overdone (market oscillates towards a mean after all, and I think it has overshot cyclicals and undershot tech). My concern is that despite vaccinations, the variant cases are largely on the rise and the vaccines thus far are quite ineffective against certain problematic strains. Thus, I’m not sure we are in the clear for full reopening just yet.

[huncho]

Originally Posted by logo

My belief at this time is that the reopening trade and cyclicals have run somewhat ahead of themselves, and the tech sell off has been overdone (market oscillates towards a mean after all, and I think it has overshot cyclicals and undershot tech). My concern is that despite vaccinations, the variant cases are largely on the rise and the vaccines thus far are quite ineffective against certain problematic strains. Thus, I’m not sure we are in the clear for full reopening just yet.

i agree, people are too optimistic about reopenings now but i cant see stuff starting to go back to normal until start of next year as a best case scenario

[beshannon]

Originally Posted by logo

My belief at this time is that the reopening trade and cyclicals have run somewhat ahead of themselves, and the tech sell off has been overdone (market oscillates towards a mean after all, and I think it has overshot cyclicals and undershot tech). My concern is that despite vaccinations, the variant cases are largely on the rise and the vaccines thus far are quite ineffective against certain problematic strains. Thus, I’m not sure we are in the clear for full reopening just yet.

Originally Posted by huncho

i agree, people are too optimistic about reopenings now but i cant see stuff starting to go back to normal until start of next year as a best case scenario

In any event the tech trade is still too crowded, too many people looking for a dip to buy so the tech go higher. I am willing to hold tech for the long term (2-5 years) but I am not adding here

[beshannon]

Who is still waiting to buy the tech bounce?


James DePorre
@RevShark
·
12m
ARK Innovation ETF's Top 10 Holdings, % Below High:
1) Tesla $TSLA: -31%
2) Square $SQ: -26%
3) Teladoc $TDOC: -42%
4) Roku $ROKU: -37%
5) Zillow $Z: -39%
6) Zoom $ZM: -46%
7) Spotify $SPOT: -31%
8) Shopify $SHOP: -30%
9) CRISPR $CRSP: -49%
10) Baidu $BIDU: -46%

[scarlet knight]

Originally Posted by beshannon

Who is still waiting to buy the tech bounce?


James DePorre
@RevShark
·
12m
ARK Innovation ETF's Top 10 Holdings, % Below High:
1) Tesla $TSLA: -31%
2) Square $SQ: -26%
3) Teladoc $TDOC: -42%
4) Roku $ROKU: -37%
5) Zillow $Z: -39%
6) Zoom $ZM: -46%
7) Spotify $SPOT: -31%
8) Shopify $SHOP: -30%
9) CRISPR $CRSP: -49%
10) Baidu $BIDU: -46%

I bailed out of all the Ark names. When I lose 5-10% in a stock, I get out to avoid cataclysmic losses. Read that in IBD. Can always get in later.

[JParm]

Originally Posted by beshannon

Who is still waiting to buy the tech bounce?


James DePorre
@RevShark
·
12m
ARK Innovation ETF's Top 10 Holdings, % Below High:
1) Tesla $TSLA: -31%
2) Square $SQ: -26%
3) Teladoc $TDOC: -42%
4) Roku $ROKU: -37%
5) Zillow $Z: -39%
6) Zoom $ZM: -46%
7) Spotify $SPOT: -31%
8) Shopify $SHOP: -30%
9) CRISPR $CRSP: -49%
10) Baidu $BIDU: -46%

A lot of the tech names are in a head and shoulders pattern (take a look at 6 month charts). I am not a chart expert, but generally speaking, this is bearish.

The question I ask myself is do I look at that signal and sell, or do I look at oversold signals in the tech market and see that retail has really gotten ahead of itself (airlines are pretty much at pre-pandemic levels...does that make sense??)? No one (NO ONE) knows the right answer and I am definitely crappy at timing the market, so I stay invested in businesses that I feel are built for the future and are led by strong management.

All I can do in this chop. Again, I'm not concerned for my own portfolio. Short-term pain, long-term we'll be fine.

[beshannon]

Originally Posted by scarlet knight

I bailed out of all the Ark names. When I lose 5-10% in a stock, I get out to avoid cataclysmic losses. Read that in IBD. Can always get in later.

Originally Posted by jpeezy14@hotmail.com

A lot of the tech names are in a head and shoulders pattern (take a look at 6 month charts). I am not a chart expert, but generally speaking, this is bearish.

Agreed, I am waiting for lower prices to buy back in

[huncho]

Originally Posted by beshannon

Who is still waiting to buy the tech bounce?


James DePorre
@RevShark
·
12m
ARK Innovation ETF's Top 10 Holdings, % Below High:
1) Tesla $TSLA: -31%
2) Square $SQ: -26%
3) Teladoc $TDOC: -42%
4) Roku $ROKU: -37%
5) Zillow $Z: -39%
6) Zoom $ZM: -46%
7) Spotify $SPOT: -31%
8) Shopify $SHOP: -30%
9) CRISPR $CRSP: -49%
10) Baidu $BIDU: -46%

it will be interesting to see how ark innovation is managed going forward considering the majority of its success can be attributed to tesla and sq going on crazy runs

Originally Posted by jpeezy14@hotmail.com

A lot of the tech names are in a head and shoulders pattern (take a look at 6 month charts). I am not a chart expert, but generally speaking, this is bearish.

The question I ask myself is do I look at that signal and sell, or do I look at oversold signals in the tech market and see that retail has really gotten ahead of itself (airlines are pretty much at pre-pandemic levels...does that make sense??)? No one (NO ONE) knows the right answer and I am definitely crappy at timing the market, so I stay invested in businesses that I feel are built for the future and are led by strong management.

All I can do in this chop. Again, I'm not concerned for my own portfolio. Short-term pain, long-term we'll be fine.

it kind of reminds me of whenever vaccine news/rumors were coming out and airlines/cruises/etc started to temporarily fly up. i think we all know those sectors have a while to go before they get anywhere close to precovid revenue/profit. just a week ago MGM resorts hit a 5+ year ath of $42 which seems premature

[AshCashEmAll]

Originally Posted by jpeezy14@hotmail.com

A lot of the tech names are in a head and shoulders pattern (take a look at 6 month charts). I am not a chart expert, but generally speaking, this is bearish.

The question I ask myself is do I look at that signal and sell, or do I look at oversold signals in the tech market and see that retail has really gotten ahead of itself (airlines are pretty much at pre-pandemic levels...does that make sense??)? No one (NO ONE) knows the right answer and I am definitely crappy at timing the market, so I stay invested in businesses that I feel are built for the future and are led by strong management.

All I can do in this chop. Again, I'm not concerned for my own portfolio. Short-term pain, long-term we'll be fine.

I completely agree with you. Like you said airlines are at pre-pandemic levels. I am by no means and experienced investors but I would say after the year they had it’s truly unjustifiable. I believe tech got a huge advantage within the lockdown year which allowed them to monopolize and become extremely profitable in the years to come and so that is why I am also long tech. For example, tdoc whether you like it or not has grounded itself in our healthcare system for years to come. E-commerce has changed the game and allowed small business owners to reach out to a larger audience will minimized cost for commercial rent. Whether tomorrow we go completely back to normal the way we conduct business will never be the same and the businesses most impacted by covid can not justify the current values.


Sent from my iPhone using Tapatalk

[supernova]

What happened in that last 30 mins of trading? Not complaining of course but interesting to see what spurred it as haven’t seen or heard anything. A lot of the chips rallied hard into the close along with others.


Sent from my iPad using Tapatalk

[logo]

Looking at NASDAQ as a whole, I see the H+S pattern that played out from mid January to early March, and we had our dip from there to about 12400.

I like to look to AAPL and MSFT as overall tech indicators, as I’m pretty sure Cathie Wood throws darts on a wall to pick stocks and price targets. Both MSFT and AAPL have PE ratios around 32-35. Compare that to HD, which has a PE of 25 (and a +22% gain this past 3 weeks), or COST at a PE of 36 (+16% last 3 weeks), or CAT with a PE of 42 (+28% YTD and a flat straight line gainer of >100% since April last year), several hotels and airlines nearing ATH....

Many of these are best in class, but with gains the past 3 weeks that are overzealous IMO given the state of affairs. When these are compared against the tech flagships, AAPL and MSFT actually seem well priced or cheap to me. Granted, there are other growth names with much higher PE ratios and that’s to be expected, within reason.

I can see the whole market selling off as everything is expensive, but then again there are so many supports to keeping it afloat currently. I guess I’m not sure what the reason would be for ongoing tech-specific selling in the absence of a broader market sell off.

Anyways, just some thoughts. Would love to hear more perspectives.

[supernova]

^^ couldn’t agree more, find it hard to see that some airlines and hotels are near ATH and higher than pre pandemic. These companies just made catastrophic losses in past year and will take years to cover the holes and get back to pre pandemic business and balance sheets.

Whereas tech continues to beat and report record profits even through all this. Tech has had high valuations which I feel are warranted as even a global pandemic doesn’t slow them down.


Sent from my iPad using Tapatalk

[FLGatorM5]

Personally, think the QQQs still look horrendous despite today’s 11th hour buying. The current trend hasn’t been broken yet...lower highs, lower lows. Not saying that can’t change, but I’ll believe it when I see it.

[bimmer nerd]

Originally Posted by logo

Looking at NASDAQ as a whole, I see the H+S pattern that played out from mid January to early March, and we had our dip from there to about 12400.

I like to look to AAPL and MSFT as overall tech indicators, as I’m pretty sure Cathie Wood throws darts on a wall to pick stocks and price targets. Both MSFT and AAPL have PE ratios around 32-35. Compare that to HD, which has a PE of 25 (and a +22% gain this past 3 weeks), or COST at a PE of 36 (+16% last 3 weeks), or CAT with a PE of 42 (+28% YTD and a flat straight line gainer of >100% since April last year), several hotels and airlines nearing ATH....

Many of these are best in class, but with gains the past 3 weeks that are overzealous IMO given the state of affairs. When these are compared against the tech flagships, AAPL and MSFT actually seem well priced or cheap to me. Granted, there are other growth names with much higher PE ratios and that’s to be expected, within reason.

I can see the whole market selling off as everything is expensive, but then again there are so many supports to keeping it afloat currently. I guess I’m not sure what the reason would be for ongoing tech-specific selling in the absence of a broader market sell off.

Anyways, just some thoughts. Would love to hear more perspectives.

Originally Posted by supernova

^^ couldn’t agree more, find it hard to see that some airlines and hotels are near ATH and higher than pre pandemic. These companies just made catastrophic losses in past year and will take years to cover the holes and get back to pre pandemic business and balance sheets.

Whereas tech continues to beat and report record profits even through all this. Tech has had high valuations which I feel are warranted as even a global pandemic doesn’t slow them down.


Sent from my iPad using Tapatalk

I'll be the first to admit it. I was short against WYNN resorts for the same reasons as you two have stated above.

I do not believe their current pricing is justified. I entered the put about 3 months too early it seems, but we'll see where things end up.

In regards to tech, I'm holding onto large/well established tech companies that did not see as huge of swings during the COVID meltdown and we know they'll be around in the future Ex. AAPL, QCOM...etc.

I also invested in COST and VOO/VOOG, but I'm holding to the rest of my cash now till we see some sort of a normality in the market and selling secured calls on green days against some of my holdings to ride it out.

[0xalate]

A Tiger cub with heavy focus on Chinese tech holdings blew up yesterday:

https://twitter.com/doveywan/status/...486203394?s=21

It brought down others like Viacom with it.

These funds are overleveraged and seems like not much has changed since 2008. The last 30 mins before market close is probably people buying the dip.


Sent from my iPhone using Tapatalk

[FLGatorM5]

Originally Posted by 0xalate

A Tiger cub with heavy focus on Chinese tech holdings blew up yesterday:

https://twitter.com/doveywan/status/...486203394?s=21

It brought down others like Viacom with it.

These funds are overleveraged and seems like not much has changed since 2008. The last 30 mins before market close is probably people buying the dip.


Sent from my iPhone using Tapatalk

But who was buying it?

[chadwick4eva]

Originally Posted by beshannon

Who is still waiting to buy the tech bounce?


James DePorre
@RevShark
·
12m
ARK Innovation ETF's Top 10 Holdings, % Below High:
1) Tesla $TSLA: -31%
2) Square $SQ: -26%
3) Teladoc $TDOC: -42%
4) Roku $ROKU: -37%
5) Zillow $Z: -39%
6) Zoom $ZM: -46%
7) Spotify $SPOT: -31%
8) Shopify $SHOP: -30%
9) CRISPR $CRSP: -49%
10) Baidu $BIDU: -46%

I still don't love the valuation on tesla- it is hard for me to forecast a world where the car business is worth this much even with the added other businesses. I am unsure if the vast majority of people have the money to shell out $20-40k on a solar roof and battery unit for their homes. Their YoY sales on solar roof went down from 2019 to 2020- maybe that had something to do with pandemic but it's really not a good sign that this is something that's going to see widespread adoption. Also unsure if people are willing to pay upwards of $10k a year for an autonomous driving SaaS business. There are just too many "what ifs" here for this to be a safe place to allocate capital. That being said, I do like the company. The product is great, the execution has been great to date, and I fully believe their car business will continue to be a worldwide success going forward. Just don't like the valuation right now for me to want to get involved.

I think square is still one of the most overvalued companies out there today. There are plenty of competing products to square- in the past year JPM announced they would have a piece of transactional hardware that is essentially the same thing as square but doesn't take a cut of transactions. It will just be another piece of the "suite" of financial products they offer to business account customers. From a free cash flow perspective, even with insanely aggressive growth projections, I see upwards of 70-80% downside for the current price assuming a 10% discount rate. I probably wouldn't even touch it if it fell that much. Square had the advantage of being a first mover in their business transaction hardware space, but there is no moat to this business and other firms are catching up. Their recent move to being involved in banking shows that they are struggling to find new areas of growth and are slowly morphing into an old school bank.

TDOC is still incredibly overpriced, their recent quarter results have been poor as they showed a reverse trend in terms of deeper negative earnings and switched from positive to negative free cash flow. Seeing a doctor is something that is just much better done in person- the doctor/patient relationship, rapport, and longitudinal care are all better when this occurs imo. Staying away from this one as well as they have not demonstrated a strong record of success yet.

Roku is another company I think is hilariously overvalued. Yes they have had impressive revenue growth- but their profitability is still an issue. For many of these companies you have to project out literally multiple decades with sustained, absurdly high profit growth for them to make any sense. Projecting past 10 years is something many people will not try to do as it's just so far into the future that to think something couldn't go wrong or the world could change in some way is folly. Many analysts don't look past 5 years because things are just so unpredictable.

Zillow is maybe entering buy territory, but I think it remains to be seen whether or not they can remain profitable. From a free cash flow perspective they are doing okay in the last few quarters. The issue with them, I think, is scale- we're in the middle of a boom in housing, and it's unclear whether the increased traffic and business is sustainable. If it is, then this very well good be entering buy territory soon. Home sales, however, tend to be cyclical in nature.

Zoom is also potentially entering buy territory. Their fundamental trends and margins are solid. The issue I think is similar to the issue with zillow- is this level of business sustainable in the long term, and are we currently at the beginning of their run in terms of growing the business?

Spotify is too risky for me based on their fundamental trends. The profitability of the business has wavered in the past few years and the margins are razor thin. If they can figure out a way to dramatically improve their operating margins then it could be a buy, but I'm not willing to take that gamble at the moment- Apple music, youtube premium are too big of competitors to make me want to risk it with them.

Shopify is the company I think is most unique and has one of the widest moats out of all of these companies. They are a truly unique service and have brought a lot of success to a lot of small businesses. Awesome platform. Still, the valuation right now leaves much to be desired based on how much they have to scale for it to make any sense. If they are able to consistently grow the top line like they have been and also manage to keep improving their operating margin then it could be an investment you could expect to perform or outperform the major indices. However, I don't think you are stealing it at these levels. There also is a little bit of a worry that their business growth could decelerate as less transactions occur online after the reopening has completely occurred in the next year.

CRSP has pretty bad fundamental trends- the business has returned to unprofitability in the past year while the stock price is soared. The share prices are completely disconnected from the reality of the financial situation. I have an older family member who is a physician, and when I asked him about the potential for genetics to significantly impact healthcare with "personalized medicine," his answer was, "we have been waiting for genetics to significantly change healthcare across the board for 30+ years and have been told that it would that entire time," while genetic research has certainly led to some breakthroughs and promising therapeutics, the reality is that the healthcare world moves very slow- the development of product, regulatory approval of products, reimbursement by CMS/Private insurers, and ultimately uptake in the healthcare marketplace all take significant amounts of time and money, and it would be foolish to underestimate how long it can really take to change the healthcare landscape. I am not a fan of CRSP at current levels.

Baidu, similar to many of the big and profitable Chinese tech companies, seems like a reasonable buy at current levels. I feel the same way about Tencent and Alibaba, which is why I loaded up on emerging markets ETFs in the past week. These were oversold as the valuations were already fair for these companies and I think once some of the banter in the mainstream media calms down about delisting of Chinese securities off the NYSE then they will likely have a rally.

So overall my hot take is that few of these are entering buy territory, some you should definitely have on your watchlist, and others are still hard passes. About par for the course.

[gabrielnovar]

I think consensus is head and shoulders pattern in tech and a huge sell off coming. Bad if you want to cash out and be rich short term. Long term its needed.

[huncho]

Originally Posted by chadwick4eva

I still don't love the valuation on tesla- it is hard for me to forecast a world where the car business is worth this much even with the added other businesses. I am unsure if the vast majority of people have the money to shell out $20-40k on a solar roof and battery unit for their homes. Their YoY sales on solar roof went down from 2019 to 2020- maybe that had something to do with pandemic but it's really not a good sign that this is something that's going to see widespread adoption. Also unsure if people are willing to pay upwards of $10k a year for an autonomous driving SaaS business. There are just too many "what ifs" here for this to be a safe place to allocate capital. That being said, I do like the company. The product is great, the execution has been great to date, and I fully believe their car business will continue to be a worldwide success going forward. Just don't like the valuation right now for me to want to get involved.

I think square is still one of the most overvalued companies out there today. There are plenty of competing products to square- in the past year JPM announced they would have a piece of transactional hardware that is essentially the same thing as square but doesn't take a cut of transactions. It will just be another piece of the "suite" of financial products they offer to business account customers. From a free cash flow perspective, even with insanely aggressive growth projections, I see upwards of 70-80% downside for the current price assuming a 10% discount rate. I probably wouldn't even touch it if it fell that much. Square had the advantage of being a first mover in their business transaction hardware space, but there is no moat to this business and other firms are catching up. Their recent move to being involved in banking shows that they are struggling to find new areas of growth and are slowly morphing into an old school bank.

TDOC is still incredibly overpriced, their recent quarter results have been poor as they showed a reverse trend in terms of deeper negative earnings and switched from positive to negative free cash flow. Seeing a doctor is something that is just much better done in person- the doctor/patient relationship, rapport, and longitudinal care are all better when this occurs imo. Staying away from this one as well as they have not demonstrated a strong record of success yet.

Roku is another company I think is hilariously overvalued. Yes they have had impressive revenue growth- but their profitability is still an issue. For many of these companies you have to project out literally multiple decades with sustained, absurdly high profit growth for them to make any sense. Projecting past 10 years is something many people will not try to do as it's just so far into the future that to think something couldn't go wrong or the world could change in some way is folly. Many analysts don't look past 5 years because things are just so unpredictable.

Zillow is maybe entering buy territory, but I think it remains to be seen whether or not they can remain profitable. From a free cash flow perspective they are doing okay in the last few quarters. The issue with them, I think, is scale- we're in the middle of a boom in housing, and it's unclear whether the increased traffic and business is sustainable. If it is, then this very well good be entering buy territory soon. Home sales, however, tend to be cyclical in nature.

Zoom is also potentially entering buy territory. Their fundamental trends and margins are solid. The issue I think is similar to the issue with zillow- is this level of business sustainable in the long term, and are we currently at the beginning of their run in terms of growing the business?

Spotify is too risky for me based on their fundamental trends. The profitability of the business has wavered in the past few years and the margins are razor thin. If they can figure out a way to dramatically improve their operating margins then it could be a buy, but I'm not willing to take that gamble at the moment- Apple music, youtube premium are too big of competitors to make me want to risk it with them.

Shopify is the company I think is most unique and has one of the widest moats out of all of these companies. They are a truly unique service and have brought a lot of success to a lot of small businesses. Awesome platform. Still, the valuation right now leaves much to be desired based on how much they have to scale for it to make any sense. If they are able to consistently grow the top line like they have been and also manage to keep improving their operating margin then it could be an investment you could expect to perform or outperform the major indices. However, I don't think you are stealing it at these levels. There also is a little bit of a worry that their business growth could decelerate as less transactions occur online after the reopening has completely occurred in the next year.

CRSP has pretty bad fundamental trends- the business has returned to unprofitability in the past year while the stock price is soared. The share prices are completely disconnected from the reality of the financial situation. I have an older family member who is a physician, and when I asked him about the potential for genetics to significantly impact healthcare with "personalized medicine," his answer was, "we have been waiting for genetics to significantly change healthcare across the board for 30+ years and have been told that it would that entire time," while genetic research has certainly led to some breakthroughs and promising therapeutics, the reality is that the healthcare world moves very slow- the development of product, regulatory approval of products, reimbursement by CMS/Private insurers, and ultimately uptake in the healthcare marketplace all take significant amounts of time and money, and it would be foolish to underestimate how long it can really take to change the healthcare landscape. I am not a fan of CRSP at current levels.

Baidu, similar to many of the big and profitable Chinese tech companies, seems like a reasonable buy at current levels. I feel the same way about Tencent and Alibaba, which is why I loaded up on emerging markets ETFs in the past week. These were oversold as the valuations were already fair for these companies and I think once some of the banter in the mainstream media calms down about delisting of Chinese securities off the NYSE then they will likely have a rally.

So overall my hot take is that few of these are entering buy territory, some you should definitely have on your watchlist, and others are still hard passes. About par for the course.

another problem with zoom is microsoft is pushing teams very hard and because everyone uses outlook it gives them a huge advantage due to how seamlessly integrated teams is with outlook

[chadwick4eva]

Has anyone here ever looked at Dick's Sporting Goods (DKS)? I'm running some numbers through a discounted cash flow using their TTM free cash flow data and I like what I see. Based on my own forecasting it looks like the stock could provide an IRR of 15-20% for the next 5-10 years or so and there is still a nice margin of safety built into my conservative scenarios. I guess using the TTM data could be a bit skewed because it seems like they experienced a huge boom in the business the past couple of quarters after they got hit hard during the pandemic- using this TTM data as a starting point in a DCF model is probably not the greatest idea. Even using averaged data from the past 5 years the numbers still look solid to me, however.

Looking at dividend and share buyback data it also looks like the company knows how to drive shareholder value- while they did issue some shares in the past year (guessing they just wanted to make sure they had enough cash on the balance sheet to weather a covid storm), their previous share buyback history is really solid- buying back 4-10% of outstanding shares a year from 2014-2019. I'm guessing this will continue as long as the business continues to perform. Dividend growth in the past 5 years has also been really solid at 17.8% year over year.

The only things that scare me a bit are:
a) Total assets/ liabilities ratio leaves a bit to be desired. Quick/current ratios aren't quite where I'd like to seem them.
b) The company doesn't have the greatest margins- while the operating margin has bounced back significantly since the start of covid they historically run the business at a sub 10% operating margin.
c) the stock has run up quite a bit in the past year, but honestly it's deserved- the business has thrived. TTM free cash flow per share rocketed from ~$5 pre pandemic to over $14 per share in the most recent reporting period. The concern here is that this was just a lot of pent up demand and the business thrived because of it- maybe things will return to prepandemic levels going forward? Hard to say which way the wind will blow.

Dick's is a big box sports equipment store. It's funny because there are a lot of "big box" stores that are thriving at the moment (LOW, HD, TGT, COST, BBY) and most of them carry goods that are usually too large to ship via amazon or ecommerce (TVs, home appliances, wholesale grocery, home wares). I kind of feel the same way about Dick's- you wouldn't buy a bike on amazon when you could just drive to the local sports shop and get one.

Definitely going to keep it on a watchlist for now, if there's any upcoming price weakness I'll likely jump into this one.

[logo]

Originally Posted by gabrielnovar

I think consensus is head and shoulders pattern in tech and a huge sell off coming. Bad if you want to cash out and be rich short term. Long term its needed.

Just to add to the discussion, I've posted the Nasdaq chart here.

The definition of a head and shoulders pattern is that there is a base or neckline, an initial peak and reversion to the neckline, a more prominent "head peak" then reversion to the neckline, followed by a third shoulder and reversion to the neckline.

Investopedia says this: "The head and shoulders chart is said to depict a bullish-to-bearish trend reversal and signals that an upward trend is nearing its end." Note, it does not indicate there will be a guaranteed bear run, just that the bull run is on hold. It also does not dictate the duration for which the bull run is on hold.

That said, usually there are price targets associated with a head and shoulders pattern that is equal to the difference between the head peak and neckline minus the neckline. In our case, that puts the Nasdaq target post H+S pattern around 12000, or about where we were early November before the breakout.

HOWEVER, Investopedia also says that price targets may not always be hit precisely. If we look at our chart, we actually broke the neckline to the downside by quite a bit, reaching about 60% of the expected target. Also notice, on our worst red day after breaking the neckline, the Nasdaq was bought up quite quickly (happy buyers at that level). Furthermore, we actually regained ABOVE the neckline again, before bouncing back from the shoulder line resistance, and then bouncing off neckline resistance again.

Thus, in my opinion, the H+S pattern has likely already played out, as we broke neckline, approached our target to 60+%, and then regained the neckline. Now, we could be in a horizontal channel trading between neckline support and shoulder resistance, and maybe we lose neckline support and drop further. Or, maybe we break the shoulder and move higher. OR, maybe the pattern was incorrect - another possibility is a descending channel, as shown here, which could be bullish or bearish depending on whether we break upwards or downwards.

My point here is not to say what pattern the chart is or is not showing, or what will happen next. I think chart analysis can be a useful tool, but taken in isolation I think it has many pitfalls, because it's very susceptible to bias in the form of "you will look for patterns that validate your expectations expectations." Or, you only see what you are looking for, not what you're not looking for. It's subjective.

As I mentioned previously, fundamentally I see no issues with tech at their current levels (of course there will always be outliers that have crazy valuations, but look at the big, major players - even some of the smaller ones, a 40% haircut off all-time highs is huge IMO). That doesn't mean tech will go straight up from here, but I'm not necessarily waiting for a huge dip that may or may not be indicated by chart technicals. By end of 2021, I expect tech to be significantly higher than where we are currently. Remember - last year, March saw big tech/Nasdaq selloffs, only to surge 100% within a year. Whether we go another 10% lower from here I have no idea, and maybe it will - but to me there is far more upside potential than downside potential over the next 8-12 months.

Disclaimer: I could be 100% completely wrong.

[beshannon]

I may be looking to add bank names today

Bank stocks drop after Archegos Capital collapses

https://seekingalpha.com/news/367708...ital-collapses

I am long MS and JPM

[chadwick4eva]

Originally Posted by beshannon

I may be looking to add bank names today

Bank stocks drop after Archegos Capital collapses

https://seekingalpha.com/news/367708...ital-collapses

I am long MS and JPM

I too am long JPM as well and think MS is one of the premiere large wealth management firms as well. Both solid choices in financials. However, I'm a bit concerned about where they are sitting at in terms of the p/b value relative to historic levels. Here are the p/b ratios over time for both:

https://www.macrotrends.net/stocks/c...ase/price-book

https://www.macrotrends.net/stocks/c...ley/price-book

In both of these cases the run on both stocks is a bit concerning. We are looking at a multidecade high in both names for the p/b ratio. Personally I feel that now is the time to trim in financials as much of the sector has run red hot so far this year. JPM is one of my best yielding stocks, however, and I don't really want to trim as I have multi decade time horizon.

The only subset of the financials I feel differently about is many insurers- I feel that a lot of the health insurers (UNH, ANTM, HUM), and property/casualty insurance companies (ALL, PGR, AFL, etc.) are actually reasonably priced based on historical trading levels. For the most part these companies also have good fundamental trends and strong histories of driving shareholder value with buybacks and dividends. While these companies have had a solid little run in the past few months, they have not experienced the same level of gains that a lot of the major bank stocks/ capital markets stocks have enjoyed. I made a post on it a while ago but from a Free Cash Flow perspective many of these businesses are also total monsters. There is a CFA youtuber I like who recently did a deep dive on AllState and by his modeling he thought they should provide a 20% IRR the next 5-10 years. Here's his video analysis:

https://www.youtube.com/watch?v=PjgxF8dFAf4

[beshannon]

Originally Posted by chadwick4eva

I too am long JPM as well and think MS is one of the premiere large wealth management firms as well. Both solid choices in financials. However, I'm a bit concerned about where they are sitting at in terms of the p/b value relative to historic levels. Here are the p/b ratios over time for both:

https://www.macrotrends.net/stocks/c...ase/price-book

https://www.macrotrends.net/stocks/c...ley/price-book

In both of these cases the run on both stocks is a bit concerning. We are looking at a multidecade high in both names for the p/b ratio. Personally I feel that now is the time to trim in financials as much of the sector has run red hot so far this year. JPM is one of my best yielding stocks, however, and I don't really want to trim as I have multi decade time horizon.

The only subset of the financials I feel differently about is many insurers- I feel that a lot of the health insurers (UNH, ANTM, HUM), and property/casualty insurance companies (ALL, PGR, AFL, etc.) are actually reasonably priced based on historical trading levels. For the most part these companies also have good fundamental trends and strong histories of driving shareholder value with buybacks and dividends. While these companies have had a solid little run in the past few months, they have not experienced the same level of gains that a lot of the major bank stocks/ capital markets stocks have enjoyed. I made a post on it a while ago but from a Free Cash Flow perspective many of these businesses are also total monsters. There is a CFA youtuber I like who recently did a deep dive on AllState and by his modeling he thought they should provide a 20% IRR the next 5-10 years. Here's his video analysis:

https://www.youtube.com/watch?v=PjgxF8dFAf4

I am going to disagree in that Financials will do better in a rising rate environment which we are going to seeing in the next 2-5 years. The P/E of MS here 12 and the stock bounced off support today at ~76. A 12 month target of 86 give a forward P/E of only 16.

I am holding JPM here and not adding as I am fully into that position as a long term core holding. I added to MS this morning

[asloper6001]

I have a great idea guys. Lets give someone who has been banned from the HK market billions of dollars of margin. Makes complete sense right? Don't worry he's just a "family" shop aka loophole and we can dump his shares if anything arises. Oh... but we forgot to think about if he is doing the same tactic across the board. This is probably just the first guy we hear about out of a million more they over leveraged. Banks fighting over margin fees and fail to see the bigger problem of at least doing a KYC. GREED outweighing compliance as usual with the banks.

[asloper6001]

Arks new fund - ARK Space Exploration & Innovation (ARKX) HOLDINGS

Holdings - https://ark-funds.com/wp-content/fun...X_HOLDINGS.pdf

[logo]

Originally Posted by asloper6001

Arks new fund - ARK Space Exploration & Innovation (ARKX) HOLDINGS

Holdings - https://ark-funds.com/wp-content/fun...X_HOLDINGS.pdf

Ah yes. Because WKHS will be going to the moon? This ETF is pretty funny.

[TradingLoss]

Originally Posted by chadwick4eva

I too am long JPM as well and think MS is one of the premiere large wealth management firms as well. Both solid choices in financials. However, I'm a bit concerned about where they are sitting at in terms of the p/b value relative to historic levels. Here are the p/b ratios over time for both:

https://www.macrotrends.net/stocks/c...ase/price-book

https://www.macrotrends.net/stocks/c...ley/price-book

In both of these cases the run on both stocks is a bit concerning. We are looking at a multidecade high in both names for the p/b ratio. Personally I feel that now is the time to trim in financials as much of the sector has run red hot so far this year. JPM is one of my best yielding stocks, however, and I don't really want to trim as I have multi decade time horizon.

The only subset of the financials I feel differently about is many insurers- I feel that a lot of the health insurers (UNH, ANTM, HUM), and property/casualty insurance companies (ALL, PGR, AFL, etc.) are actually reasonably priced based on historical trading levels. For the most part these companies also have good fundamental trends and strong histories of driving shareholder value with buybacks and dividends. While these companies have had a solid little run in the past few months, they have not experienced the same level of gains that a lot of the major bank stocks/ capital markets stocks have enjoyed. I made a post on it a while ago but from a Free Cash Flow perspective many of these businesses are also total monsters. There is a CFA youtuber I like who recently did a deep dive on AllState and by his modeling he thought they should provide a 20% IRR the next 5-10 years. Here's his video analysis:

https://www.youtube.com/watch?v=PjgxF8dFAf4

Holding JPM for the dividend yield is good. MS and GS are dogs.

I keep that out of the portfolio due to long-term drama with those firms on the institutional side lol.

//opinions absolutely not advice or relevant positions\\

[TradingLoss]

Originally Posted by logo

Just to add to the discussion, I've posted the Nasdaq chart here.

The definition of a head and shoulders pattern is that there is a base or neckline, an initial peak and reversion to the neckline, a more prominent "head peak" then reversion to the neckline, followed by a third shoulder and reversion to the neckline.

Investopedia says this: "The head and shoulders chart is said to depict a bullish-to-bearish trend reversal and signals that an upward trend is nearing its end." Note, it does not indicate there will be a guaranteed bear run, just that the bull run is on hold. It also does not dictate the duration for which the bull run is on hold.

That said, usually there are price targets associated with a head and shoulders pattern that is equal to the difference between the head peak and neckline minus the neckline. In our case, that puts the Nasdaq target post H+S pattern around 12000, or about where we were early November before the breakout.

HOWEVER, Investopedia also says that price targets may not always be hit precisely. If we look at our chart, we actually broke the neckline to the downside by quite a bit, reaching about 60% of the expected target. Also notice, on our worst red day after breaking the neckline, the Nasdaq was bought up quite quickly (happy buyers at that level). Furthermore, we actually regained ABOVE the neckline again, before bouncing back from the shoulder line resistance, and then bouncing off neckline resistance again.

Thus, in my opinion, the H+S pattern has likely already played out, as we broke neckline, approached our target to 60+%, and then regained the neckline. Now, we could be in a horizontal channel trading between neckline support and shoulder resistance, and maybe we lose neckline support and drop further. Or, maybe we break the shoulder and move higher. OR, maybe the pattern was incorrect - another possibility is a descending channel, as shown here, which could be bullish or bearish depending on whether we break upwards or downwards.

My point here is not to say what pattern the chart is or is not showing, or what will happen next. I think chart analysis can be a useful tool, but taken in isolation I think it has many pitfalls, because it's very susceptible to bias in the form of "you will look for patterns that validate your expectations expectations." Or, you only see what you are looking for, not what you're not looking for. It's subjective.

As I mentioned previously, fundamentally I see no issues with tech at their current levels (of course there will always be outliers that have crazy valuations, but look at the big, major players - even some of the smaller ones, a 40% haircut off all-time highs is huge IMO). That doesn't mean tech will go straight up from here, but I'm not necessarily waiting for a huge dip that may or may not be indicated by chart technicals. By end of 2021, I expect tech to be significantly higher than where we are currently. Remember - last year, March saw big tech/Nasdaq selloffs, only to surge 100% within a year. Whether we go another 10% lower from here I have no idea, and maybe it will - but to me there is far more upside potential than downside potential over the next 8-12 months.

Disclaimer: I could be 100% completely wrong.

/NQ + Market vodoo my favourite.