One down, one to go

January 29, 202015 Comments

Two stocks come to mind when I think of the term “parabolic rise”.

Apple

The first crazy parabolic stock pattern has been that of  Apple’s price chart. Apple has been THE stock, or at least one of THE stocks, over the past few months. Problem being, the stock went parabolic after it broke out last September. The stock had been basing for the better part of a year prior to that breakout. I’ve written about “regression to the mean” in previous blogs, so I won’t bore you. Suffice to say, nothing rises like a rocket forever. Perpetual motion machines have yet to be invented.

 

Apple is an important stock, given its weighing on the major indices. It weighs in at 5% of the SPX, 7.3% of the DJIA, and a whopping 12% of the NASDAQ. So you want to see this big fella do well at earnings time. Last night, AAPL reported. Things went well across the board. Revenue is up, so are earnings. Forward guidance was raised. Hurray for the bull market! As I write this blog, the market is celebrating.

Nevertheless,  some sort of a minor correction may be coming sooner or later to rid this otherwise pristine stock of some excess. The last time the stock went beyond a more controlled angle of ascent was in late 2011 to early 2012. Thats similar to the timing of this rapid rally, which began late 2019. The stock did move on to a higher high after a minor correction in 2012, but eventually fell hard later in 2012. Like I said, perpetual motion machines have yet to be invented.

Tesla

The other recent bad-boy for its parabolic rise is Tesla. Unlike Apple, this stock trades more on a hope and a dream, rather than its current financial successes. Don’t get me wrong. I love Tesla cars. Talk about engineering excellence. The new model S, for example, puts out acceleration numbers like a Porsche 911 turbo – mind you, less the cool exhaust sounds and the dedicated track performance capabilities of the Porsche. But most folks don’t want a two seater that lives to corner at 1.1 g forces like a high-end Porsche. Tesla fits into a niche of fast, comfortable, practical, and environmentally friendly cars. Quite a concept.  Now, if they’d only invent a car that ordinary people can afford. No, the model 3 ain’t that car.  It’s still $56k, base model (who buys a base model?). Bring out a Toyota Prius price competitor.  Then we might see some real earnings growth. We shall see.

Anyhow..back to the charts. After basing for the past five years (!), TSLA broke out at the end of 2019. The stock has pretty near tripled in a month. I mean, come on guys. A 300% return in a month? Is this bitcoin or marijuana? TSLA has more shorts against it than any other stock. Possibly for good reason. Earnings come out tonight (Wed. Jan 29th). If the stock even slightly disappoints, there’s gonna be hell to pay. Despite its lack of significance to the major stock indices, Tesla has some “emotional” influence on the markets. It’s the poster boy for hope and glory. Any sign of weakness will throw the stock to its knees, and probably put the scare into the markets. The last time the stock broke out from a go-nowhere pattern was in 2013. It went up ten-fold in just a few months. Um, OK. It took 5 years of consolidation before the bulls returned. This stock could keep moving. But that will likely depend on tonight’s earnings report.

 

Hold on to your hats, folks. Thursday should be an interesting day.

 

NOTE

I’m in Florida next week. Yeah, it sucks to be me. I’m back on the 11th of Feb.

I’ll post one blog while there (I never take a non-working vacation). I’ll probably not post my usual two blogs. For those interested, I am signed up to race in the Sebring 100 mile bike race. Last February, I came third in age in this same race -picture after that race is below. I’m training to make a grand comeback at this race after recovering from a broken hip last spring. Wish me luck.

While there I will be speaking at the Orlando Moneyshow as well.

15 Comments

  • Good Morning Kieth,
    Great blog, and thank you for providing it.
    Just my two cents, regarding the Coronavirus. It is spreading much faster than SARS, and overtaking the number of infections in only a few short weeks. I do believe with the Kaos that is happening in China with factories shutting down (domestic and international) …..trade, transportation, and supply lines have been grounded to a halt. Companies throughout the world rely on China for supplies, and this is going to be a big negative.
    At the rate of infection of Coronavirus, it will hit 100,000 in a few weeks, now hitting India which I will be devastating due to their dense population living quarters.
    I really believe the markets are just coming to terms with this virus……which will dwarf SARS in a few short weeks.

    Reply
    • Thanks Ray
      I’ll try not to sound like a heartless evil greedy profit monger here. But…with every crises is born opportunity (again, removing the human element from this situation and isolating the financial aspects only…)- I read with interest a bit put out by Jon Vialoux who noted that the last two health scares (SARS, EBOLA) forced markets to fall and then …here’s the important/opportunistic part…bottomed right after the WHO announced the situation as a crises/epidemic.

      Reply
  • I was looking at the same two stocks and both will very soon correct I think. Look for a blowoff bar an up bar longer than any previous bar far above the 20 period MA. Apple already have those bars finished

    Reply
  • Tsla put in a massive blow off bar this week . I expect it to snap back to the low $400 area in the next few weeks

    Reply
  • Hello Keith,
    The market did not bottom after the “Who Announced the situation as a crisis”.
    As I mentioned in message several days ago, this Coronavirus is unlike anything we have ever seen before. As previously stated the infection of Coronavirus has put everything in China to a grinding halt, including international companies. The numbers (sorry to say this) will surpass several hundred thousands in China in a few short weeks (I think China is lying about the number of infections). This is the ‘Black Swan” that threatens to bring the world economies to it’s knees once it spreads in large numbers throughout Europe/America and the entire Asian countries.
    Don’t believe the numbers coming out of China, this is a much bigger problem than they are admitting to. No vaccine will be in place for at least a year, so just think I big a problem this will become. I hope a virus is found quick for the people who are infected.

    Reply
  • I just started reading you article and I do agree with your judgement that AApl abd tsla will fall. Million dollar question is when? What technical signal,the most potent technical signal ,they will emit?

    Reply
    • TSLA has had a couple of gap-ups on the daily chart showing signs of irrational exuberance – could be soon….
      AAPL looks a little like its rounding over on the daily chart but weekly looks fine.
      I’d be looking for any consolidation patterns – then a breakdown of the consolidation pattern (support) before calling it bearish

      Reply
  • Where are we at with gold Keith? It just dropped below 1550. Next stop 1500 or 1600?

    Reply
    • I show spot gold at $1557–support is about $1550. If it breaks, give it minimum 3 days before judging it. If that breaks, 1460 is target. If that holds, $1700++ is target

      Reply

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