Leading restaurant stock Chipotle Mexican Grill, Inc. (NYSE:CMG) has been declining since early February 2015. Recently, on April 22, 2015 Chipotle Mexican Grill stock dropped by more than 40.0 points after reporting earnings. Today, Chipotle Mexican Grill stock is trading lower by $2.25 to $641.50 a share. The weekly chart has triggered a bearish inside bar pattern which signals further downside for the stock. Traders should now watch the $610.00 area for major chart support. This is a level where the institutional money will most likely support the equity in the near term.
Many stock analysts have cited that Chipotle Mexican Grill is a healthy alternative to other fast food restaurants. Just yesterday, Chipotle Mexican Grill announced that they would no longer use genetically modified foods (GMO). This could force other fast food restaurant chains to follow their lead.
This morning, leading apparel retailer Gap Inc (NYSE:GPS) is coming under some selling pressure. Traders should note that Gap Inc stock topped out in late March at $42.25 a share. Today, the stock is trading lower by 0.69 cents at $40.19 a share. Swing traders must now watch the $38.15 level as the next major support area for a bounce and potential low in the stock. This was a price level where Gap Inc stock tested and held in November 2014. Often, when old break-out levels get tested they will be good buying opportunities in the future.
Gap Inc (GPS) will report earning on May 21st, 2015. Please remember, it is always very risky to trade in front of an earnings announcement.
The home-builder stocks have been coming under some selling pressure since the start of April. Many talking heads in the financial media are now calling the sector run as being over. Most traders know that every industry group will experience corrections. That seems to be what is happening with the home-builder stocks at this time. Below I will list three reasons why the home-builder sector can still trade higher after this current correction is over.
1. Home rental prices have increased dramatically over the past several years in the United States. Many people are now thinking that it might be cheaper to own a home instead of renting one. Obviously, property taxes and home-owner insurance are two reasons why renters continue to stay in a rental property, but if rental prices continue to surge the psychology of home-ownership will start to change.
2. Over the past five years many hedge funds and private equity firms have bought a lot of single family homes. Leading private equity firm, The Blackstone Group LP (NYSE:BX) was on a home buying binge until last year. These home purchases by the Blackstone and others institutions have taken a lot of supply off of the market. Many people that are now in the market to buy a home are starting to pay the offering price for a house. This will eventually force potential home buyers to build a home as the supply in the market-place continues to diminish.
3. Another major factor that will keep the home-builder sector intact in the near term is the fact that interest rates are at historical lows. Currently, the rate on a 30-year fixed mortgage is around 3.80 percent. The only problem with the low interest rates is that the banks still are not lending money like they did in the past. When the banks start to ease their current lending standards this will only boost home ownership demand.
Recently, many of the major home-builder stocks such as Lennar Corp (NYSE:LEN), PulteGroup, Inc. (NYSE:PHM), and DR Horton Inc NYSE:DHI) have all declined sharply after reporting earnings. All of the declines in these home-builder stocks should eventually lead to another buying opportunity. Traders that want to follow the entire home-builder stock sector can trade and follow the iShares US Home Construction ETF (NYSEARCA:ITB). At this time the ITB will have major chart support around the $24.00 level. This area should be a major buying opportunity in the home-builder sector.
Wal-Mart Stores, Inc. (NYSE:WMT) has been plagued with poor stock performance over the last four months. A compilation of poor sales versus expectations and hiking their minimum wage has killed their stock price. Since its peak in January at $91.00, it has fallen to a recent low of $77.50. This is 15% drop in just four months.
This is all about to change. The stock is reversing today off a major support level shown in the chart below. In addition, with inevitable rising interest rates, the economy is likely to slow, if not slip into another recession within the next 12 months. This will push more people to shop at Wal-Mart and raise revenue. In addition, the hike in pay for employees, while a short term negative to earnings will likely increase the quality of worker. Less stealing, more productivity means more revenue per worker for each store. This combination gives Wal-Mart stores a no brainer buy with upside to $86.00 in the next six months.
These are three potential trade setups I am looking at for this week (on my watch list). All have multiple factors that signal an extremely high reward stock chart setup that is forming. This is how the pros analyze charts and make big profits. Notice how all plays have strong price direction and are retrace candidates. Ultimately, look for strong stocks that are pausing/pulling back for a buy. Once you see that, just patiently wait for the pattern to form and the right price to hit. A time count gives added high reward, low risk points. [more]