Aerospace Cycles Rise for Textron

Out latest Focus Stock is an aerospace and defense-focused industrial conglomerate company; it owns iconic aerospace industry brands Cessna Aircraft and Bell Helicopter, notes S&P Capital IQ equity analyst Eric Hugel in The Outlook.

We see Textron (TXT) as a business with solid long-term growth. Recently, sales and earnings disappointments at the Cessna and Bell units have resulted in the stock currently trading at a significant discount to its peers.

While we believe this discount is understandable, we view the issues at Textron as largely cyclical and transitory in nature, and we think the discount will diminish over time, as conditions improve over the next couple of quarters.

The Bell business has been working through a troublesome enterprise resource planning system implementation since the beginning of 2013.

While we expect some lingering impact of these issues over the next couple of quarters, we believe Bell's underlying military and commercial rotorcraft businesses are solid and we expect to see margins and aftermarket part shipments improve going forward.

At Cessna, we believe that we are currently at, or near, the bottom of the demand cycle for small and medium-sized business jets, while at the same time, at the top of Cessna's new product development cycle.

The combination of the timing of these two-cycle dynamics has served to depress Cessna's earnings severely over the past several quarters, but we believe they have not impacted the business' long-term earnings power.

In fact, we see Cessna emerging from the bottom of this cycle with a largely modernized and refreshed product line, which we believe will attract new customers and help retain existing ones.

We estimate EPS will decline 10% to $1.77 in 2013, and rebound 30% in 2014 to $2.30, as many of the transitory headwinds faced in 2013 subside and pension costs decrease.

Our 12-month target price of $35 is based on applying the S&P Aerospace & Defense Select Industry Index's (XAR) current 2014 P/E multiple of 15.4 to our 2014 EPS estimate of $2.30 for Textron.

We see the stock's discount to the index narrowing further over the next couple of months as Cessna actually begins to deliver its new aircraft models and shows stabilization in the Bell businesses. Textron carries S&P Capital IQ's highest investment recommendation of five-stars or strong buy.

Subscribe to Standard & Poor's The Outlook here…

More from MoneyShow.com:

Aero Buys: Set to Soar?

Honeywell: Industrial Strength

Boeing: Big, Safe, and Under-Appreciated

The Multiple Strategies Of Hedge Funds

Ever consider investing in a hedge fund? As a first step, potential investors need to know how these funds make money and how much risk they take. While no two funds are identical, most generate their returns from one or more of the following strategies:

Long/Short Equity The first hedge fund - launched by Alfred W. Jones in 1949 - used a long/short equity strategy, which still accounts for the lion's share of equity hedge fund assets today. The concept is simple: Investment research turns up expected winners and losers, so why not bet on both? Pledge long positions in the winners as collateral to finance short positions in the losers. The combined portfolio creates more opportunities for idiosyncratic (i.e. stock-specific) gains, and reduces market risk because the shorts offset long market exposure.

In essence, long/short equity is an extension of pairs trading, in which investors go long and short two competing companies in the same industry based on their relative valuations. If General Motors (GM) looks cheap relative to Ford, for example, a pairs trader might buy $100,000 worth of GM and short an equal value of Ford shares. The net market exposure is zero, but if GM does outperform Ford, the investor will make money no matter what happens to the overall market. Suppose Ford rises 20% and GM rises 27%; the trader sells GM for $127,000, covers the Ford short for $120,000 and pockets $7,000. If Ford falls 30% and GM falls 23%, he sells GM for $77,000, covers the Ford short for $70,000, and still pockets $7,000. If the trader is wrong and Ford outperforms GM, however, he will lose money.

Long/short equity is a relatively low-risk leveraged bet on the manager's stock-picking skill.

Market Neutral Long/short equity hedge funds typically have net long market exposure, because most managers do not hedge their entire long market value with short positions. The portfolio's unhedged portion may fluctuate, introducing an element of market timing to the overall return. By contrast, market-neutral hedge funds target zero net-market exposure - i.e. shorts and longs have equal market value, which means the managers generate their entire return from stock selection. This strategy has a lower risk than a long-biased strategy - but the expected returns are lower, too.

Long/short and market-neutral hedge funds struggled for several years after the 2007 financial crisis. Investor attitudes were often binary: risk-on (bullish) or risk-off (bearish) - and when stocks go up or down in unison, strategies that depend on stock selection don't work. In addition, record-low interest rates eliminated earnings from the stock loan rebate, or interest earned on cash collateral posted against borrowed stock sold short. The cash is lent out overnight, and the lending broker keeps a proportion - typically 20% of the interest - as a fee for arranging the stock loan and "rebates" the remaining interest to the borrower (to whom the cash belongs). If overnight interest rates are 4% and a market-neutral fund earns the typical 80% rebate, it will earn 0.04 x 0.8 = 3.2% per annum before fees, even if the portfolio is flat. But when rates are near zero, so is the rebate.

Merger Arbitrage A riskier version of market neutral called merger arbitrage derives its returns from takeover activity. After a share-exchange transaction is announced, the hedge fund manager may buy shares in the target company and sell short buyer shares in the ratio prescribed by the merger agreement. The deal is subject to certain conditions - regulatory approval, a favorable vote by target company shareholders and no material adverse change in the target's business or financial position, for example. The target company shares trade for less than the merger consideration's per-share value, a spread that compensates the investor for the risk that the transaction may not close and for the time value of money until closing.

In cash transactions, target company shares trade at a discount to the cash payable at closing so the manager does not need to hedge. In either case, the spread delivers a return when the deal goes through no matter what happens to the market. The catch? The buyer often pays a big premium over the pre-deal stock price, so investors face large losses when transactions fall apart.

Convertible Arbitrage Convertibles are hybrid securities that combine a straight bond with an equity option. A convertible arbitrage hedge fund is typically long convertible bonds and short a proportion of the shares into which they convert. Managers try to maintain a delta-neutral position in which the bond and stock positions offset each other as the market fluctuates. To preserve delta-neutrality, traders must increase their hedge - i.e. sell more shares short if the price goes up and buy shares back to reduce the hedge if the price goes down, forcing them to buy low and sell high.

Convertible arbitrage thrives on volatility. The more the shares bounce around, the more opportunities arise to adjust the delta-neutral hedge and book trading profits. Funds thrive when volatility is high or declining but struggle when volatility spikes - as it always does in times of market stress. Convertible arbitrage faces event risk, too: If an issuer becomes a takeover target, the conversion premium collapses before the manager can adjust the hedge, inflicting a significant loss.

Event Driven On the border between equity and fixed income lie event-driven strategies, in which hedge funds buy the debt of companies that are in financial distress or have already filed for bankruptcy. Managers often focus on the senior debt, which is most likely to be repaid at par or with the smallest haircut in any reorganization plan. If the company has not yet filed for bankruptcy, the manager may sell short equity, betting the shares will fall either when it does file or when a negotiated equity for debt swap forestalls bankruptcy. If the company is already in bankruptcy, a junior class of debt entitled to a lower recovery upon reorganization may be a better hedge.

Investors in event-driven funds have to be patient. Corporate reorganizations play out over months or even years, during which the troubled company's operations may deteriorate. Changing financial-market conditions can also affect the outcome - for better or worse.

Credit Capital structure arbitrage, similar to event-driven trades, underlies most hedge fund credit strategies, too. Managers look for relative value between senior and junior securities of the same corporate issuer. They also trade securities of equivalent credit quality from different corporate issuers, or different tranches in the complex capital of structured debt vehicles like mortgage-backed securities or collateralized loan obligations. Credit hedge funds focus on credit rather than interest rates; indeed, many managers sell short interest rate futures or Treasury bonds to hedge their rate exposure.

Credit funds tend to prosper when credit spreads narrow during robust economic growth periods but may suffer losses when the economy slows and spreads blow out.

Fixed-Income Arbitrage Hedge funds that engage in fixed-income arbitrage eke out returns from risk-free government bonds, eliminating credit risk. Managers make leveraged bets on how the shape of the yield curve will change. For example, if they expect long rates to rise relative to short rates, they will sell short long-dated bonds or bond futures and buy short-dated securities or interest rate futures.

These funds typically use high leverage to boost what would otherwise be modest returns. By definition, leverage increases the risk of loss when the manager is wrong.

Global Macro Some hedge funds analyze how macroeconomic trends will affect interest rates, currencies, commodities or equities around the world and take long or short positions in whichever asset class is most sensitive to their views. Although global macro funds can trade almost anything, managers usually prefer highly liquid instruments like futures and currency forwards.

Macro funds don't always hedge, however - managers often take big directional bets, which sometimes don't pan out. As a result, returns are among the most volatile of any hedge fund strategy.

Short Only The ultimate directional traders are short-only hedge funds, the professional pessimists who devote their energy to finding overvalued stocks. They scour financial statement footnotes and talk to suppliers or competitors to unearth signs of trouble investors are ignoring. Occasionally managers score a home run when they uncover accounting fraud or other malfeasance.

Short-only funds can provide a portfolio hedge against bear markets, but they are not for the faint of heart. Managers face a permanent handicap: they must overcome the long-term upward bias in the equity market.

The Bottom Line

Investors should conduct extensive due diligence before they commit money to any hedge fund, but understanding which strategies the fund uses and its risk profile is an essential first step.

U.S. Stocks Rise on Summers’ Exit, Syria Weapons Deal

U.S. stocks and Treasuries rose, and the dollar fell, after Lawrence Summers withdrew his bid to be the next Federal Reserve chairman and America and Russia agreed on a plan to remove Syria's chemical weapons.

The Standard & Poor's 500 Index added 0.6 percent to 1,697.39 at 9:30 a.m. in New York. Ten-year Treasury yields dropped eight basis points, or 0.10 percentage point, to 2.79 percent, according to Bloomberg Bond Trader data. The greenback slumped against all of its Group of 10 currency peers.

Summers withdrew from contention before a two-day Fed meeting starting tomorrow, at which the central bank is forecast to begin paring bond purchases known as quantitative easing. Summers would tighten policy more than Janet Yellen, who was his main rival to replace Chairman Ben S. Bernanke, according to a Bloomberg Global Poll of investors, analysts and traders last week.

"Investors are saying that QE may not be as aggressively dialed back under Yellen, who is now the front-runner," Walter "Bucky" Hellwig, who helps manage $17 billion at B&T Wealth Management in Birmingham, Alabama, said in a telephone interview. "QE is still a very important factor in the minds of investors and we can see this in the potential movement of the stock and bond markets."

Summers, 58, was one of three names that Obama had mentioned as possible replacements for Bernanke, whose term as Fed chairman ends on Jan. 31. Yellen, 67, the current Fed vice chairman, was also on Obama's candidate list along with Donald Kohn, 70, a former Fed vice chairman, the president said earlier.

Economic Data

The S&P 500 rose 2 percent last week to close within 1.3 percent of its record high. Treasuries trading was closed in Japan today for a holiday, and the securities advanced when markets opened in London.

Investors have been weighing data to determine the timing and pace of any reductions in stimulus. A report today showed manufacturing in the New York region expanded ! less than forecast in September even as orders and shipments picked up, while factories' outlooks improved.

Separate data showed industrial production rose in August by the most in six months, indicating U.S. manufacturing will contribute more to the expansion.

The U.S. central bank will reduce its $85 billion in monthly bond-buying by $10 billion this week, according to the median forecast of economists in a Bloomberg News survey.

'Aggressive Tightening'

"Summers had been seen as a person who can add volatility to the market given his bias toward more aggressive tightening, should he take up the Fed chairmanship," Gary Dugan, the Singapore-based chief investment officer for Asia and the Middle East at Coutts & Co., said in a telephone interview. "This brings Janet Yellen to the forefront and the consensus is she'll build a follow-through of Bernanke's policies."

The S&P 500 has rallied 3.4 percent so far in September, rebounding from the worst monthly loss since May 2012, as reports showed China's economy strengthened and the U.S. looked less likely to attack Syria.

The U.S. and Russia struck a deal on Sept. 14 demanding the destruction of Syria's chemical weapons by mid-2014, with the U.S. saying it maintained a military option to ensure compliance.

The dollar has depreciated 1.2 percent in the past week, the biggest drop among 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. Treasuries lost 0.4 percent in September to the end of last week, heading for a fifth monthly decline, according to the Bloomberg U.S. Treasury Bond Index.

'Shorter Maturities'

"Markets were priced for the likelihood of a Summers nomination, primarily for the notion that he might raise interest rates sooner than perhaps other candidates, including Janet Yellen," Tony Crescenzi, a portfolio manager and strategist at Newport Beach, California-based Pacific Investment Management Co., which runs the world�! �s bigges! t bond fund, said in an e-mail. "This news should result in outperformance of shorter maturities" before the Federal Reserve Open Market Committee meeting starting tomorrow.

Summers had been the president's favorite for the job. Twenty U.S. senators, 19 Democrats and one independent, signed a letter of support for Yellen in July, who would be the first female Fed chairman if nominated and confirmed.

Former Treasury Secretary Timothy Geithner, sometimes mentioned as another alternative, doesn't want the Fed post and has made that clear since leaving the Treasury early this year, according to a person familiar with his thinking, who asked for anonymity to discuss private conversations.

Dovish Stance

"Summers withdrawing helps to crystalize the outlook and it does put the market on a more dovish stance going forward," Tai Hui, the Hong Kong-based chief Asia market strategist at JPMorgan Asset Management, which oversees about $1.5 trillion, said by telephone. "Obviously we have other names, but the reality seems a bit more support for Yellen after Summers' exit from the race."

A poll of investors, analysts and traders who are Bloomberg subscribers, conducted Sept. 10, showed Yellen was viewed more favorably. Sixty percent of respondents had a positive view of Yellen, compared with 37 percent for Summers.

Options traders have scaled back hedges against potential stock losses. The CBOE Volatility Index (VIX), the gauge of S&P 500 options prices known as the VIX, last week capped an 11 percent five-day drop, its biggest weekly slide since the week ended July 5.

Nothing to Build On: Homebuilders Tank as New Home Sales Plunge

Remember all that talk that may home buyers would shrug off rising mortgage rates? Well, for one month at least, it looks to be just that–talk.

Scott Dalton

Sales of single-family homes fell 13.4% to an annualized rated 394,000 in July, the Census Bureau reported today, well below forecasts for 487,000.

Homebuilding stocks have plunged on the news. The Ryland Group (RYL) has fallen 4.6% to $35.15, Toll Brothers (TOL) has dropped 3.1% to $31.45, KB Home (KBH) has declined 3.1% to $16.67 and DR Horton (DHI) is off 2.8% at $18.74. Pulte Group (PHM) has dropped 2.7% at $15.80.

Not everyone thinks the drop is such a big deal, however. Here’s Peirpont Securities’ Stephen Stanley:

I am highly dubious, however, that new home sales have weakened in any meaningful way.  The anecdotal and survey evidence do not support such a dramatic weakening in the demand for homes.  Perhaps the backup in rates has had a marginal impact, but July's reading was roughly 25% lower than expectations, and there is nothing I've seen that corroborates anything like that!  Keep in mind that this series tends to be very volatile, and I would wait to see the August reading before getting too excited.

Marketfield’s Michael Shaoul calls the report a “glaring outlier.” He writes:

Regarding the Census Bureau report it is simply too early to be sure. Public statements from homebuilders (and private surveys too) have not suggested a rapid deceleration of housing demand and the NAHB survey (which had no problem registering bearish sentiment in recent years) would generally have been expected to decline sharply if the surveyed homebuilders had actually seen demand destruction on this level…

[We] doubt whether the New Home market has suffered a reverse close to the magnitude contained in this report, but we respect the fact that for the time being the market will keep the homebuilding sector under a cloud, at least until corporate earnings and additional data prove the matter one way or another.

Sounds like good advice.

5 Stocks Ready to Break Out

 DELAFIELD, Wis. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high, or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players that can ultimately push the stock significantly higher.

One example of a successful breakout trade I flagged recently was biopharmaceutical player Vanda Pharmaceuticals (VNDA), which I featured in July 11's "5 Stocks Setting Up to Break Out" at around $8.70 a share. I mentioned in that piece that shares of VNDA had recently pulled back sharply from its 52-week high of $13.30 to its low of $7.44 a share. Following that pullback, shares of VNDA were starting to reverse its downtrend and enter an uptrend with the stock moving back above its 50-day moving average. That move was quickly pushing VNDA within range of triggering a near-term breakout trade above some key overhead resistance levels at $8.74 to $10 a share.

Guess what happened? Shares of VNDA started to move into breakout territory the following week with the stock hitting an intraday high of $9.50 a share. Then shares of VNDA pulled back again back below its 50-day moving average to a low of $8.01 a share. That pullback never took VNDA below that prior $7.44 a share low. Then VNDA exploded higher on July 30 with monster upside volume after U.S. regulators said they would give a priority review to the company's treatment for sleep disorders. This stock went on to hit an intraday high of $12.12 a share on July 31 with strong upside volume. That represents a gain of close to 40% for anyone who bought the stock near $8.70 a share.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels, and hold above those breakout prices, then it can easily trend significantly higher.

With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

AcelRx Pharmaceuticals

One stock that's starting to trend within range of triggering a major breakout trade is AcelRx Pharmaceuticals (ACRX), a specialty pharmaceutical company involved in the development and commercialization of therapies for the treatment of acute and breakthrough pain. This stock is off to a booming start for the bulls so far in 2013, with shares up a whopping 189%.

If you take a look at the chart for AcelRx Pharmaceuticals, you'll notice that this stock recently formed a double-bottom chart pattern at $11.46 to $11.43 a share. Following that bottom, shares of ACRX have now started to spike higher and move within range of taking out some key near-term overhead resistance levels. If those levels get taken out with volume soon, then ACRX will trigger a major breakout trade.

Traders should now look for long-biased trades in ACRX if it manages to break out above some near-term overhead resistance levels at $12.57 to its 52-week high at $13.50 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 648,667 shares. If that breakout triggers soon, then ACRX will set up to enter new 52-week-high territory above $13.50, which is bullish technical price action. Some possible upside targets off that breakout are $17 to $20 a share.

Traders can look to buy ACRX off any weakness to anticipate that breakout and simply use a stop that sits right below $11.43 a share, or near its 50-day at $10.27 a share. One could also buy ACRX off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

This stock is a favorite target of the bears, since the current short interest as a percentage of the float for ACRX is very high at 16.9%. The bears have also been increasing their bets from the last reporting period by 35.5%, or by about 836,000 shares. If that breakout triggers soon, then ACRX could easily experience a monster short-squeeze, so make sure to put this name on your breakout trading radar.

Jive Software

Another stock that looks poised to trigger a near-term breakout trade is Jive Software (JIVE), which provides a social business software platform. It provides the Jive Engage platform for its customers for business. This stock has been under selling pressure over the last six months, with shares off by 14%.

If you take a look at the chart for Jive Software, you'll notice that this stock recently gapped down sharply from over $17 a share to under $13.50 a share with heavy downside volume. Following that move, shares of JIVE went on to tag its recent low of $12.74 a share. That move has now pushed shares of JIVE into oversold territory, since its current relative strength index reading is 19.23. Oversold can always get more oversold, but it's also an area from which a stock can experience a powerful bounce higher. Shares of JIVE are now starting to trend back up and move within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in JIVE if it manages to break out above Friday's intraday high of $13.87 a share and then once it clears its gap down day high of $14.13 a share high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 812,638 shares. If that breakout triggers soon, then JIVE will set up to re-fill some of its previous gap down zone that started just above $17 a share.

Traders can look to buy JIVE off any weakness to anticipate that breakout and simply use a stop that sits right below its recent low of $12.74 a share. One could also buy JIVE off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

The short-sellers love this stock, since the current short interest as a percentage of the float for JIVE is very high at 17.6%. This stock could easily experience a sharp short-covering rally if it gets into that gap with volume soon, so make sure to put this name on your breakout trading radar.

Cliffs Natural Resources

Another stock that's starting to move within range of triggering a near-term breakout trade is Cliffs Natural Resources (CLF), a mining and natural resources company that produces iron ore pellets, fines and lump ore, and metallurgical coal. This stock has been hammered by the sellers so far in 2013, with shares off by 47%.

If you look at the chart for Cliffs Natural Resources, you'll notice that this stock recently formed a double bottom chart pattern at $15.50 to $15.41 a share. Following that bottom, shares of CLF have started to uptrend strong, with the stock moving higher from its low of $15.41 to its intraday high of $20.50 a share. During that uptrend, shares of CLF have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CLF within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in CLF if it manages to break out above some near-term overhead resistance levels at $20.30 to $21.96 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 9.87 million shares. If that breakout triggers soon, then CLF will set up to re-test or possibly take out its next major overhead resistance levels at $23.59 to its 200-day moving average at $26.26 a share. Any high-volume move above its 200-day will then put $30 within range for shears of CLF.

Traders can look to buy CLF off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $19.27 a share, or right near its 50-day at $17.93 a share. One can also buy CLF off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

This is another name that is very popular among the bears, since the current short interest as a percentage of the float for CLF is very high at 36.8%. If that breakout hits soon, then CLF could easily see a monster short-squeeze, so be prepared to play it if it triggers with volume.

Celldex Therapeutics

Another stock that's quickly moving within range of triggering a major breakout trade is Celldex Therapeutics (CLDX), which is focused on the development and commercialization of several immunotherapy technologies for the treatment of cancer and other difficult-to-treat diseases. This stock has been red hot so far in 2013, with shares up 222%.

If you look at the chart for Celldex Therapeutics, you'll notice that this stock has recently formed a perfect double bottom chart pattern at $19.20 a share. Following that bottom, shares of CLDX have started to uptrend and move within range of triggering a major breakout trade. That trade will trigger if CLDX manages to take out some key near-term overhead resistance levels with strong upside volume flows.

Traders should now look for long-biased trades in CLDX if it manages to break out above some near-term overhead resistance at $21.88 to its 52-week high at $21.98 a share volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.79 million shares. If that breakout triggers soon, then CLDX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $25 to $30 a share.

Traders can look to buy CLDX off any weakness to anticipate that breakout and simply use a stop that sits right below $19.20 a share, or below more support at $18 a share. One can also buy CLDX off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

The short-sellers love to target this stock, since the current short interest as a percentage of the float for CLDX is pretty high at 10.5%. A decent short-squeeze could materialize for CLDX if it breaks out soon with volume, so keep an eye on this name.

Alnylam Pharmaceuticals

My final breakout trading prospect is Alnylam Pharmaceuticals (ALNY), which is developing novel therapeutics based on RNA interference, a naturally occurring biological pathway within cells for selectively silencing and regulating the expression of specific genes. This stock has been on fire so far in 2013, with shares up 166%.

If you look at the chart for Alnylam Pharmaceuticals, you'll notice that this stock has been uptrending strong for the last month, with shares moving higher from its low of $42.19 to its intraday high of $49.73 a share. During that uptrend, shares of ALNY have been consistently making higher lows and higher highs, which is bullish technical price action. That move is coming after ALNY recently pulled back from its 52-week high of $51 to $42.19 a share. Shares of ALNY are now quickly moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in ALNY if it manages to break out above Friday's intraday high of $49.73 a share and then once it takes out its 52-week high at $51 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 647,812 shares. If that breakout triggers soon, then ALNY will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $55 to $65 a share.

Traders can look to buy ALNY off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $45 a share, or below more support at $42.19 a share. One could also buy ALNY off strength once it clears those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

Keep in mind that this company is set to report earnings on Thursday, August 8, 2013 after the market close. Temper your upside expectations if you play the breakout ahead of the quarter, and look for much bigger upside after the quarter if the stock remains in its uptrend. Holding through earnings is always risky, so only play ALNY after earnings if the stock reacts positively to the numbers.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Hot Small Cap Companies To Watch For 2014

Small cap mining stocks Brazil Gold Corp (OTCMKTS: BRZG) and Trulan Resources (OTCMKTS: TRLR) were either active on the charts last week (in the case of the former) or recently the subject of paid promotions (in the case of the latter). However, mining is not exactly an easy business for a small and usually undercapitalized small cap mining stock given the amount it can cost to get a mine up and running. On the other hand, they could always be sitting on the next mother lode just waiting to come out of the ground. With that in mind, here is a quick reality check about these two small cap mining stocks:

Brazil Gold Corp (OTCMKTS: BRZG) Recently Announced a New Deal

Small cap Brazil Gold Corp owns a portfolio of road accessible, grass-roots to advance stage (S茫o Jorge) gold projects in the Tapaj贸s region of northern Brazil. On Friday, Brazil Gold Corp fell 7.14% to $0.0013 for a market cap of 154,427 plus BRZG is down 93.5% over the past year and down 99.3% since January 2011 according to Google Finance.

Hot Small Cap Companies To Watch For 2014: KongZhong Corporation(KONG)

KongZhong Corporation, together with its subsidiaries, provides wireless interactive entertainment, media, and community services to mobile phone users in the People's Republic of China. It also involves in the development, distribution, and marketing of consumer wireless value-added services, including wireless application protocol, multimedia messaging services, short messaging services, interactive voice response services, and color ring back tones. In addition, it offers interactive entertainment services, such as mobile games, pictures, karaoke, electronic books, mobile phone personalization features, entertainment news, chat, and message boards; and through Kong.net offer news, community services, games, and other interactive media and entertainment services; and sells advertising space in the form of text-link, banner, and button advertisements. Further, the company develops and publishes mobile games, including downloadable mobile games and online mobile games cons isting of action, role-playing, and leisure games. As of December 31, 2009, it had a library of approximately 300 internally developed mobile games. Additionally, it develops online games; and provides consulting and technology services, as well as media and net book services. The company was formerly known as Communication Over The Air Inc. and changed its name to KongZhong Corporation in March 2004. KongZhong Corporation was founded in 2002 and is headquartered in Beijing, the People?s Republic of China

Advisors' Opinion:

• [By Roberto Pedone]

  One under-$10 wireless services player that looks poised for a big spike higher is KongZhong (KONG), which is a provider of WVAS and mobile games to mobile phone users and a wireless media company providing news, content, community and mobile advertising services through its wireless Internet sites in the PRC. This stock is off to a hot start in 2013, with shares up sharply by 53%.

  If you take a look at the chart for KongZhong, you'll notice that this stock has been downtrending badly for the last two months, with shares plunging lower from its high of $14.92 to its recent low of $7.78 a share. During that downtrend, shares of KONG have been consistently making lower highs and lower lows, which is bearish technical price action. That move has now pushed shares of KONG into oversold territory, since its current relative strength index reading is 30.21. Shares of KONG are now starting to spike higher off its recent low of $7.78 a share and off its 200-day moving average of $7.95 a share. This spike could be signaling that the downside volatility for KONG is over in the short-term and the stock is ready to trend higher.

  Traders should now look for long-biased trades in KONG if it manages to break out above some near-term overhead resistance at $8.50 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 519,857 shares. If that breakout triggers soon, then KONG will set up to re-test or possibly take out its next major overhead resistance levels at $10 to its 50-day moving average at $11.33 a share.

  Traders can look to buy KONG off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $7.78 a share. One can also buy KONG off strength once it takes out $8.50 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

• [By Seth Jayson]

  Calling all cash flows
  When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Kongzhong (Nasdaq: KONG  ) , whose recent revenue and earnings are plotted below.

Hot Small Cap Companies To Watch For 2014: InterDigital Inc.(IDCC)

Interdigital, Inc. engages in the design and development of digital wireless technology solutions. The company offers technology solutions for use in digital cellular and wireless products and networks, including 2G, 3G, 4G, and IEEE 802-related products and networks. It holds patents related to the fundamental technologies that enable wireless communications. The company licenses its patents to equipment producers that manufacture, use, and sell digital cellular and IEEE 802-related products; and licenses or sells mobile broadband modem solutions, including modem IP, know-how, and reference platforms to mobile device manufacturers, semiconductor companies, and other equipment producers that manufacture, use, and sell digital cellular products. InterDigital?s solutions are incorporated in various products comprising mobile devices, such as cellular phones, tablets, notebook computers, and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; and components, dongles, and modules for wireless devices. The company was founded in 1972 and is headquartered in King of Prussia, Pennsylvania.

Advisors' Opinion:

• [By Eric Volkman]

  InterDigital (NASDAQ: IDCC  ) is about to raise its global profile following an international patent licensing deal. The company announced that it has entered an agreement with Spain-based Teltronic Unipersonal for the latter to license a set of its 4G technologies. The terms of the arrangement were not disclosed.

• [By Bryan Murphy]

  Well, it would be inaccurate to see patent-defense companies like Vringo, Inc. (NASDAQ:VRNG), InterDigital, Inc. (NASDAQ:IDCC), and Acacia Research Corp. (NASDAQ:ACTG) have been forced into going out of business. But, it wouldn't be inaccurate to say some of these so-called patent trolls are now potentially facing a much bigger legal headwind. Investors of companies like IDCC, ACTG, and VRNG may want to reassess the upside of their holdings, now that new laws regarding patent litigation have all but been put into place.

Top Bank Stocks For 2014: OmniVision Technologies Inc.(OVTI)

OmniVision Technologies, Inc. designs, develops, and markets semiconductor image-sensor devices. The company offers CameraChip image sensors, which are single-chip solutions that integrate various functions, such as image capture, image processing, color processing, signal conversion, and output of a processed image or video stream for use in various consumer and commercial mass-market applications; and CameraCube imaging devices that are image sensors with integrated wafer-level optics. It also provides companion chips used to connect its image sensors to various interfaces, including the universal serial bus and other industry standard interfaces; and companion digital signal processors that perform compression in standardized still photo and digital video formats. In addition, the company designs and develops software drivers for Linux, Mac OS, and Microsoft Windows, as well as for embedded operating systems, such as Blackberry OS, Palm OS, Symbian, Windows CE, Windows Embedded, and Windows Mobile. Its products are used in mobile phones, notebooks, Webcams, digital still and video cameras, commercial and security and surveillance, and automotive and medical applications, as well as in entertainment devices. The company sells its products directly to original equipment manufacturers and value added resellers, as well as indirectly through distributors worldwide. OmniVision Technologies, Inc. was founded in 1995 and is based in Santa Clara, California.

Advisors' Opinion:

• [By Evan Niu, CFA]

  STMicroelectronics (NYSE: STM  ) and OmniVision (NASDAQ: OVTI  ) are the two camera suppliers, and HTC is reportedly no longer considered a "tier one" manufacturer so it doesn't get priority any more. That implies that one of these image sensor specialists was giving HTC the cold shoulder in favor of bigger names.

• [By Rich Bieglmeier]

  OmniVision Technologies, Inc. (OVTI) plans to release its financial results for the second quarter of fiscal year 2014 on Tuesday, December 03, 2013, shortly after the market closes.� The Company plans to host a conference call to review the results and management's outlook for future periods at 5 p.m. (ET) that day.

Hot Small Cap Companies To Watch For 2014: Texas Instruments Incorporated(TXN)

Texas Instruments Incorporated engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. The company?s Analog segment offers high-performance analog products comprising standard analog semiconductors, such as amplifiers, data converters, and interface semiconductors; high-volume analog and logic products; and power management semiconductors and line-powered systems. Its Embedded Processing segment includes DSPs that perform mathematical computations to process and enhance digital data; and microcontrollers, which are designed to control a set of specific tasks for electronic equipment. The company?s Wireless segment designs, manufactures, and sells application processors and connectivity products. Its Other segment offers smaller semiconductor products, which include DLP products that are primarily used in projectors to create high-definition images; and application-specific integrated circuits. This segment also provides handhe ld graphing and scientific calculators, as well as licenses technologies to other electronic companies. The company serves the communications, computing, industrial, consumer electronics, automotive, and education sectors. Texas Instruments Incorporated sells its products through a direct sales force, distributors, and third-party sales representatives. It has collaboration agreements with PLX Technology Inc.; Neonode, Inc.; and Ubiquisys Ltd. The company was founded in 1938 and is headquartered in Dallas, Texas.

Advisors' Opinion:

• [By Benjamin Pimentel]

  Apple (AAPL) �shed 0.5% to close at $520.03 as the company�� new iPad Air hit the stores. Chip stocks also retreated, led by Intel Corp. (INTC) , Texas Instruments (TXN) , Advanced Micro Devices (AMD) and SanDisk (SNDK) .

• [By Sue Chang]

  Texas Instruments (TXN) �is expected to post third-quarter earnings of 53 cents a share. TI�� results are generally expected to meet expectations, according to analysts at Wedbush. ��ur industry checks indicate that TI likely benefited from growth in industrial, automotive, and communications infrastructure, and new product launches of handsets, notebooks, and gaming consoles,��Betsy Van Hees at Wedbush said in a report.

• [By Paul Ausick]

  Broadcom�� fourth-quarter forecast will cancel the top and bottom line beats the company posted for the third quarter. Lower pricing for high-end mobile devices from all manufacturers has taken a particular toll on Broadcom. Shares are down nearly 20% over the past 12 months, while peers like Qualcomm Corp. (NASDAQ: QCOM), Texas Instruments Inc. (NASDAQ: TXN), and Nvidia Corp. (NASDAQ: NVDA) are up around 17%, 45%, and 30%, respectively.

Hot Small Cap Companies To Watch For 2014: Panera Bread Company(PNRA)

Panera Bread Company, together with its subsidiaries, owns, operates, and franchises retail bakery-cafes in the United States and Canada. Its bakery-cafes offer fresh baked goods, sandwiches, soups, salads, custom roasted coffees, and other complementary products, as well as provide catering services. The company also manufactures and supplies dough and other products to company-owned and franchise-operated bakery-cafes. As of March 29, 2011, it owned and franchised 1,467 bakery-cafes under the Panera Bread, Saint Louis Bread Co., and Paradise Bakery & Cafe names. The company was founded in 1981 and is based in St. Louis, Missouri.

Advisors' Opinion:

• [By Steve Symington]

  Meanwhile, same-store sales increased 1.4% at Buffalo Wild Wings' company-owned restaurants and 2.2% at franchised locations. While that still fell short of fast-casual competitor Panera Bread (NASDAQ: PNRA  ) , which posted company-owned same-store sales growth of 3.3%, CEO Sally Smith reminded investors that her company still outpaced the negative same-store sales trend prominent in the casual-dining category as a whole. What's more, remember that in February, B-Wild management had said same-store sales for the first six weeks of Q1 were�down 2.8%, so ending Q1 in positive territory reflected a huge improvement for the chain.

• [By Demitrios Kalogeropoulos]

  But, with sales growth slowing, management hasn't felt confident enough to pull the trigger on price hikes and risk making the problem worse. Other fast-casual restaurants haven't had the same issue. Panera Bread� (NASDAQ: PNRA  ) , for example, benefited from a 2.3% rise in prices last quarter that helped fuel a 3.3% jump in comps. And, despite a similar reputation for using high-quality ingredients, the baker's food costs are much lower than Chipotle's, at a steady 29% of sales. Assuming sales growth firms up, there's no reason why Chipotle can't follow Panera's path and pass along some of its rising costs to customers.

• [By Demitrios Kalogeropoulos]

  You could argue that Chipotle has even more reason to raise prices now. Food costs ticked up again this past quarter, to 33.1% of sales. Those rising costs bit into restaurant margins, cleaving almost two percentage points from profits. Chipotle's expenses are well above fast-casual rivals like Panera Bread (NASDAQ: PNRA  ) , which books a steady 29% food charge. For its part, Panera hasn't shied away from pricing boosts. A 2.3% price rise helped the baker log a 3.3% jump in sales for the first quarter.

Hot Small Cap Companies To Watch For 2014: Sify Technologies Limited(SIFY)

Sify Technologies Limited provides enterprise and consumer Internet services primarily in India. The company offers various corporate network/data services comprising e-commerce and network connectivity solutions, such as end-to-end services network, application, and security services; voice origination and termination services; co-location and managed hosting services; and system integration services for data centre build, hardware distribution, security solutions, and turnkey projects. It also provides application services, including SLEMS and Microsoft Exchange messaging platforms; I-test for online assessment and LiveWire, which enable management of training processes across the organization; document management system for the management of documents electronically; and Forum, a forward supply chain solution. In addition, the company operates e-Ports that offer browsing, chat, email, gaming, utility bill payment, travel ticketing, hotel booking, mobile recharge, Intern et telephony, and online share trading services; and portals, which provide news, views, reviews, interactions, and services in the areas of movies, sports, finance, food, videos, astrology, online games, shopping, and travel, as well as offers content offerings and broadband services. Further, it provides infrastructure management services, such as network management, datacenter and helpdesk outsourcing, desktop and storage outsourcing, IT security outsourcing, LAN and WAN outsourcing, database and telecom outsourcing, and application monitoring and management services to automotive, chemical, media, and financial enterprises; and virtualization design, integration, and deployment services for servers, storage, networks, and end user clients. Sify has approximately 1,278 e-Ports in 200 towns and cities; and serves 1,06,000 broadband subscribers through 1500 cable TV Operators. The company, formerly known as Sify Limited, was founded in 1995 and is based in Chennai, India.

PLX Technology Beats Up on Analysts Yet Again

PLX Technology (Nasdaq: PLXT  ) reported earnings on April 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), PLX Technology met expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew. Non-GAAP earnings per share increased. GAAP earnings per share increased.

Margins increased across the board.

Revenue details
PLX Technology booked revenue of $26.2 million. The two analysts polled by S&P Capital IQ predicted sales of $26.0 million on the same basis. GAAP reported sales were the same as the prior-year quarter's.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.09. The two earnings estimates compiled by S&P Capital IQ forecast $0.06 per share. Non-GAAP EPS were $0.09 for Q1 compared to -$0.12 per share for the prior-year quarter. GAAP EPS were $0.06 for Q1 versus -$0.17 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 59.2%, 410 basis points better than the prior-year quarter. Operating margin was 12.0%, much better than the prior-year quarter. Net margin was 10.1%, much better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $26.6 million. On the bottom line, the average EPS estimate is $0.06.

Next year's average estimate for revenue is $109.6 million. The average EPS estimate is $0.28.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 41 members out of 54 rating the stock outperform, and 13 members rating it underperform. Among 12 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), seven give PLX Technology a green thumbs-up, and five give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on PLX Technology is buy, with an average price target of $6.67.

Is PLX Technology the best semiconductor stock for you? You may be missing something obvious. Check out the semiconductor company that Motley Fool analysts expect to lead "The Next Trillion-dollar Revolution." Click here for instant access to this free report.

Add PLX Technology to My Watchlist.

Stoxx Europe 600 eyes best week since April

LONDON (MarketWatch) -- European stock indexes headed for the strongest weekly gain since April on Friday, as the U.S. Federal Reserve's tapering decision spurred optimism about the U.S. economy. The Stoxx Europe 600 index (XX:SXXP) climbed 0.1% to 319.85, on track for a 3.3% weekly advance. On Thursday, the benchmark posted its biggest gain since early September, after the Fed decided to reduce its asset purchases. Drug makers were among major gainers on Friday, with shares of Novartis AG (CH:NOVN) up 0.6% and GlaxoSmithKline PLC (UK:GSK) (GSK) rising 0.6%. Shares of SKF AB slid 5% after the Swedish ball-bearing firm said a European Commission probe will impact fourth-quarter earnings. Among country-specific indexes, Germany's DAX 30 index (DX:DAX) rose 0.3% to 9,358.53, while the U.K.'s FTSE 100 index (UK:UKX) slipped 0.1% to 6,580.87. France's CAC 40 index (FR:PX1) fell 0.2% to 4,167.30.

Can BlackBerry Stock See a Turnaround?

With shares of BlackBerry (NASDAQ:BBRY) trading around $6, is BBRY 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

BlackBerry is a designer, manufacturer, and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software, and services it provides platforms and solutions for seamless access to information such as email, voice, instant messaging, SMS, Internet, intranet-based applications, and browsing. Its products and services feature the BlackBerry wireless solution, the Research In Motion Wireless Handheld product line, the BlackBerry PlayBook tablet, software development tools, and other software and hardware.

BlackBerry is losing two more long-term executives as the struggling smartphone maker attempts to undergo a massive turnaround after abandoning plans to sell itself last month. According to a report from the Wall Street Journal, executive vice president of global sales Rick Costanzo and mergers and acquisitions strategy head Chris Wormald will be leaving the company in the coming weeks. Costanzo will be gone by early 2014, while Wormald plans to leave before the New Year.

T = Technicals on the Stock Chart Are Weak

BlackBerry stock has struggled to make positive progress in the last several years. The stock is currently trading near all time lows and may need time to stabilize before heading 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, BlackBerry is trading below its rising key averages, which signal neutral to bearish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
BlackBerry options	90.27%	86%	84%

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
January Options	Steep	Average
February 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 Increasing 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 BlackBerry's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for BlackBerry look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	-308.89%	83.84%	178.41%	-96.08%
Revenue Growth (Y-O-Y)	-45.02%	9.37%	-35.97%	-47.21%
Earnings Reaction	-1.12%	-27.76%	-0.89%	-22.73%

BlackBerry has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have not been too happy about BlackBerry's recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has BlackBerry stock done relative to its peers, Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Nokia (NYSE:NOK), and sector?

	BlackBerry	Apple	Google	Nokia	Sector
Year-to-Date Return	-56.20%	9.92%	52.54%	96.20%	3.08%

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

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide.  The company is losing two more long-term executives as the struggling smartphone maker attempts to undergo a massive turnaround after abandoning plans to sell itself last month. The stock has not done well in recent years and is now trading near all time lows. Over the last four quarters, earnings have been mixed while revenues have been decreasing which has disappointed investors. Relative to its peers and sector, BlackBerry has been a weak year-to-date performer. STAY AWAY from BlackBerry for now.

Evercore Partners Upgrades Fifth Third Bancorp to “Overweight”; Sees Additional Top-Line Growth Ahead (FITB)

Regional banker Fifth Third Bancorp (FITB) on Monday received a big upgrade from analysts at Evercore Partners.

The firm lifted its rating on FITB from “Equal Weight” to “Overweight” while boosting its price target to $23. That new target suggests a 15% upside to the stock’s Friday closing price of $20.09.

Evercore analyst Andrew Marquardt commented, “We are upgrading shares of FITB to OW (from EW) based on above avg top line growth/profitability, expense flexibility, continued AQ leverage, and strong capital/deployment.” Accordingly, the firm also lifted its earnings estimates for the company through 2015.

Fifth Third Bancorp shares were inactive in pre-market trading Monday. The stock has gained 32% since the beginning of 2013.

Top Oil Companies For 2014

NEW YORK (TheStreet) -- As the Federal Reserve meeting approaches this Wednesday, low volumes and declining interest rates are leading to surprising correlations among financial markets.

For investors looking to see the negative effects in assets tied to tighter monetary policy, they can continue looking.

Equities are at record highs and investors continue to buy treasuries and sell U.S. dollars. Although it can be said that much of the cut for future bond purchases is already priced in, only commodities look to be acting as if the future holds higher rate.

[Read: Before Buying ConAgra, Read the Label] The first chart below is of SPDR Gold Shares (GLD). The decline in gold prices is partially due to the easing of Western tension over the Syrian conflict. Gold spiked higher as investors feared potential military intervention in the Middle East in late August, which would have led to volatile market trading. What can be seen now is that rates are declining, gold is falling and the dollar is reaching yearly lows. The low volumes leading up to Fed events generally cause correlations to loosen as investors sell particular assets in aggregate and buy up others. Currently equities and bonds are showing strength, as the fear that once existed over stimulus cuts has diminished considerably. Regardless of the fundamental reasons surrounding gold's fall, the fact is that gold has broken a strong upward channel support and has room to fall further. If rates do begin to rise and the dollar catches a bid, expect gold to push toward its July lows. The next chart is of the United States Oil Price (USO). Like the gold chart above, the premium in oil due to the Syrian conflict has largely diminished, which has led to the vast decline in prices over the past few weeks. Although oil and interest rates tend to negatively correlate as well, irregular behavior due to the Fed policy meeting is likewise having adverse affects on this relationship. [Read: Affordable Care Act Reality Check] The difference between gold and oil, however, is that oil prices have yet to break its channel-support range. That is not to say prices won't eventually breakdown, it is just that oil has had relative strength vs. gold recently. If rates do rise because of the Fed decision on Wednesday, look for both commodities above to show weakness and drag down with them other assets, such as equities and bonds. At the time of publication the author had no position in any of the stocks mentioned. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Top Oil Companies For 2014: Apache Corporation(APA)

Apache Corporation, together with its subsidiaries, engages in the exploration, development, and production of natural gas, crude oil, and natural gas liquids. The company has exploration and production interests in the Gulf of Mexico, the Gulf Coast, east Texas, the Permian basin, the Anadarko basin, and the Western Sedimentary basin of Canada; and onshore Egypt, offshore Western Australia, offshore the United Kingdom in the North Sea, and onshore Argentina, as well as on the Chilean side of the island of Tierra del Fuego. Apache Corporation sells its natural gas to local distribution companies, utilities, end-users, integrated oil and gas companies, and marketers; and crude oil to integrated oil companies, marketing and transportation companies, and refiners. As of December 31, 2009, it had total estimated proved reserves of 1,067 million barrels of crude oil, condensate, and natural gas liquids, as well as 7.8 trillion cubic feet of natural gas. The company was founded in 1954 and is based in Houston, Texas.

Advisors' Opinion:

• [By Ben Levisohn]

  Shares of Devon have gained 5.6% to $63.13 at 3:14 p.m., easily outpacing the likes of Anadarko Petroleum (APC), which has gained just 0.6% to $90.91, Occidental Petroleum (OXY), which is little changed at $97.11, and Apache Corp. (APA), which has advanced 1.2% to $93.10.

• [By Rich Smith]

  Since the arrival of "Arab Spring" in Egypt, that nation has been wracked by rising prices for food and fuel, rising unemployment, declines in tourism, and political turmoil. The Egyptian people have been due for some good news for a change, and this week, Apache (NYSE: APA  ) brought it to them.

• [By Myles McCabe]

  Apache Corporation (APA) is one of the world's largest mid-major oil and gas exploration and production companies. They have a diversified portfolio of energy assets including on-shore, offshore, international, and domestic exposure. Diverse revenue streams protect Apache against volatility in any particular operating segment or region.

• [By Matt DiLallo]

  With a recent announcement to buy back up to $2 billion of its own shares, Apache (NYSE: APA  ) is just one of the latest companies joining the buyback parade. The company will soon have some extra cash at its disposal as it's planning to unload as much as $4 billion in assets. In essence, what the company is doing is selling the assets it likes least so it can own more of what it likes best.

Top Oil Companies For 2014: ATP Oil And Gas Corp (ATPO.MU)

ATP Oil & Gas Corporation, incorporated in 1991, is engaged in the acquisition, development and production of oil and natural gas properties. As of December 31, 2011, the Company had estimated net proved reserves of 118.9 Million barrels of crude oil equivalent (MMBoe), of which approximately 75.9 MMboe (64%) were in the Gulf of Mexico and 42.9 MMBoe (36%) were in the North Sea. The reserves consisted of 78.6 Million barrels (MMBbls) of oil (66%) and 241.5 billion cubic feet (Bcf) of natural gas (34%). Its proved reserves in the deepwater area of the Gulf of Mexico account for 62% of the Company�� total proved reserves and its proved reserves on the Gulf of Mexico Outer Continental Shelf account for 2% of its total proved reserves. During the year ended December 31, 2011, the Company acquired three licenses in the Mediterranean Sea covering potential natural gas resources in the deepwater off the coast of Israel (East Mediterranean). On August 17, 2012, ATP Oil And Ga s Corp filed for Chapter 11 bankruptcy protection.

The Company�� natural gas reserves are split between the Gulf of Mexico (57%) and the North Sea (43%). Of its total proved reserves, 8.3 MMBoe (7%) were producing, 19.0 MMBoe (16%) were developed and not producing and 91.6 MMBoe (77%) were undeveloped. The Company�� average working interest in its properties at December 31, 2011, was approximately 81%. The Company operates 92% of its platforms. At December 31, 2011, in the Gulf of Mexico, it owned leasehold and other interests in 38 offshore blocks and 49 wells, including 23 subsea wells. The Company operates 43 (88%) of these wells, including 100% of the subsea wells. In the North Sea, it also had interests in 13 blocks and two Company-operated subsea wells. As of March 15, 2011, the Company owned an interest in 13 platforms, including two floating production facilities in the Gulf of Mexico, the ATP Titan at its Telemark Hub and the ATP Innovator at its G omez Hub. It operates the ATP Innovator and the ATP Titan.!

5 Best Undervalued Stocks To Buy For 2014: EQT Corporation(EQT)

EQT Corporation, together with its subsidiaries, operates as an integrated energy company in the United States. It operates in three segments: EQT Production, EQT Midstream, and Distribution. The EQT Production segment engages in the exploration, development, and production of natural gas, natural gas liquids, and crude oil in the Appalachian Basin. This segment?s properties are located primarily in Kentucky, West Virginia, Virginia, and Pennsylvania. As of December 31, 2010, it had 5.2 trillion cubic feet of proved reserves across 3.5 million acres. The EQT Midstream segment provides gathering, processing, transmission, and storage services for the independent third parties in the Appalachian Basin. It has approximately 10,900 miles of gathering lines and 770 miles of transmission lines. The Distribution segment distributes and sells natural gas to residential, commercial, and industrial customers in southwestern Pennsylvania, West Virginia, and eastern Kentucky. It also operates a gathering system in Pennsylvania; and purchases and delivers gas to customers. This segment serves approximately 276,500 customers consisting of 257,900 residential customers, and 18,600 commercial and industrial customers. The company was formerly known as Equitable Resources, Inc. and changed its name to EQT Corporation in February 2009. EQT Corporation was founded in 1925 and is headquartered in Pittsburgh, Pennsylvania.

Advisors' Opinion:

• [By Matt DiLallo]

  The�Marcellus is well-known for its�low cost of production, which is why many drillers have seen it fuel a recent surge in their stock prices. Marcellus-focused companies like Range Resources (NYSE: RRC  ) , Cabot Oil & Gas (NYSE: COG  ) , and EQT Resources (NYSE: EQT  ) are among those enjoying a nice run so far this year as you can see in the following chart:

• [By Matt DiLallo]

  Natural gas has the power to change the face of the fuel industry. In the state we've seen drillers like EQT (NYSE: EQT  ) build its own natural gas fuel station, only to find it necessary to expand within 18 months. That's without any help from the government, which gives a bit of an indication as to how powerful the economics of switching has become.

• [By Matt DiLallo]

  This is why several of the play's producers, including Range Resources (NYSE: RRC  ) and EQT Corp (NYSE: EQT  ) , are coming together on a joint industry project to gain better insight into the play. The project, which is expected to last at least a year, will help the companies gain a better fundamental understanding of what rock properties are the most important for good wells. The hope is that the project will enable producers to better target the play in order to earn a return.

• [By Joel South and Taylor Muckerman]

  In today's segment, Joel South talks about an intriguing development from EQT Corp. (NYSE: EQT  ) and Green Field Services, where the companies drilled a multistage fracked natural gas well in the Marcellus shale using 100% field natural gas. Using natural gas from close wells instead of�diesel�to power rigs could be another game changer as oil and gas companies continue to increase drilling efficiencies and thereby significantly lower costs.���

Top Oil Companies For 2014: Range Resources Corporation(RRC)

Range Resources Corporation, an independent natural gas company, engages in the acquisition, exploration, and development of natural gas properties primarily in the Appalachian and southwestern regions of the United States. The company?s Appalachian region drilling and producing activities include tight-gas, shale, coal bed methane, and conventional natural gas and oil production in Pennsylvania, Virginia, Ohio, and West Virginia. It owns 4,969 net producing wells, approximately 2,750 miles of gas gathering lines, and approximately 1.8 million gross acres under lease. The company?s Southwestern drilling and producing activities cover the Barnett Shale of North Texas, the Permian Basin of West Texas and eastern New Mexico, the East Texas Basin, the Texas Panhandle, and the Anadarko Basin of Western Oklahoma. It owns 1,954 net producing wells, as well as approximately 886,000 gross acres under lease. As of December 31, 2010, Range Resources Corporation had had 4.4 Tcfe of pr oved reserves. It sells gas to utilities, marketing companies, and industrial users. The company was formerly known as Lomak Petroleum, Inc. and changed its name to Range Resources Corporation in 1998. Range Resources Corporation was founded in 1975 and is headquartered in Fort Worth, Texas.

Advisors' Opinion:

• [By Tyler Crowe]

  With natural gas prices back on the upswing today, those same companies that had written down their assets in 2012 can start to put them back on the books. This is why�Range Resources (NYSE: RRC  ) and Cabot Oil & Gas (NYSE: COG  ) both have reserve replacement costs below $6.25, one-fifth of the industry average. Both of these companies have very natural gas-heavy portfolios, so as gas prices go back up, they can put these assets back on their books without spending any money on further exploration or acquisitions.

Top Oil Companies For 2014: Caiterra International Energy Corp (CTI)

CaiTerra International Energy Corporation (Caiterra), formerly Cyterra Capital Corp., is a Canada-based company is engaged in the exploration and development of oil and gas properties. The Company�� project includes Faust, Amadou and Lac La Biche. On March 9, 2012, the Company completed its qualifying transaction with West Pacific Petroleum Inc. (WPP), pursuant to which the Company acquired all of WPP�� working interests in certain petroleum and natural gas leases and an oil sand lease in the Lac La Biche and Amadou Projects located in Alberta, Canada and certain other assets (the QT Oil and Gas Properties) from West Pacific Petroleum Inc. (WPP). On December 17, 2012 the Company acquired the Faust Property located just north of the Swan Hills oil field and south of the Town of Slave Lake.

The 2015 Ford Mustang: Up Close With the Mustang's Chief Engineer

It still looks like nothing but a Ford Mustang, but when you see it next to its predecessor, the 2015 Ford Mustang (on the right) looks quite a bit different. It's different under the skin, too. Photo by John Rosevear

Ford's  (NYSE: F  ) all-new 2015 Mustang is the first Mustang to be designed from the start as a global model. Unlike past Mustangs, this one will be sold in markets all over the world. 

That's a big change. To emphasize that point, Ford unveiled its new pony in a series of events all over the world. In six different cities on four continents, Ford hosted events featuring members of the Mustang's design team along with senior executives, giving analysts and media members an up-close look at the new Mustang and the thinking that went into its design. 

Our "Motor Money" team of Rex Moore and John Rosevear were front and center at Ford's New York event to take a close look and share their impressions of this all-new global Mustang. So what's the verdict? Long story short, it's still very much a Mustang. It hasn't been watered down at all for its new global audience, and even though it's now part of Ford's global product plan, it still has a unique and special status.

Why is that? We went right to the top to find out. John talked to Ford's Dave Pericak, who holds what must be one of the coolest titles in the entire global auto business: Mustang chief engineer. In this video, shot live at Ford's New York event, Pericak tells John how the Mustang evolved into an all-new model, on an all-new platform -- and explains how that new platform fits into Ford's global product plan.

These three stocks will help you retire rich!
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Danger Zone: Momentum Investors and the Financial Sector

 

Check out this week’s Danger Zone Interview with Chuck Jaffe of Money Life and MarketWatch.com.

Regulators are cracking down on the financial sector. As they dole out punishments that fit the crimes, regulators are finally closing many of the illegal trading loopholes that have driven so much of Wall Street profits over the past decade. A side-effect of these changes is that investors are beginning to abandon the crowded momentum trading strategies to which they’ve grown so accustomed and return to good old-fashioned value investing.

Enhanced Regulatory Enforcement

Last week, the Department of Justice reached a landmark settlement with JPMorgan Chase (NYSE: JPM) that results in the bank paying $13 billion for wrongdoing and misrepresentation before and during the financial crisis. More importantly, JPM admitted guilt, which may open it up to more class action lawsuits and fines.

Both the scale of the fine and the admission of wrongdoing would have been inconceivable just a few years ago. In 2010, Goldman Sachs (NYSE: GS) received a penalty of only $550 million for similar charges, and it escaped without admitting or denying the allegations. In 2011, Citigroup (NYSE: C) was set to settle with the SEC for only $285 million and no admission of wrongdoing until a federal judge rejected the deal.

The size of the JPM settlement would have been shocking a decade ago. For comparison, JPM’s $13 billion settlement is significantly larger than the post-tech-bubble fines paid by all financial sector firms from 2001-2003. It is nearly ten times larger than $1.4 billion fine given the ten largest broker-dealers for the Global Settlement reached in 2003. This Global Research Settlement fine is relatively minuscule despite the fact that the SEC had evidence of senior analysts at the offending banks fraudulently boosting stock ratings.

Figure 1: Global Research Settlement Fines Breakdown

Sources: http://www.sec.gov/news/press/2003-54.htm

Clearly, regulators are reacting more forcefully to the financial crisis of 2008 than they did to the dotcom bubble. This crackdown is not restricted to those dealing in mortgage-backed securities either. Earlier this month, the hedge fund SAC Capital agreed to plead guilty to insider trading charges and pay $1.8 billion in penalties. SAC was the first Wall Street company to plead guilty to financial wrong-doing charges since the 1980’s, and now some of its individual employees are on trial.

Combined with the conviction and prison sentence of former hedge fund manager Raj Rajaratnam for insider trading, these fines and admissions of guilt send a clear message. Wall Street traders and investment bankers face more scrutiny and harsher enforcement than ever before.

What Does This Mean For the Market?

For one thing, it means less trading. SAC Capital alone often made up around 3% of theaverage daily trading on the NYSE. The restriction of inside information, legal or not, has diminished trading volume in several areas of the market. When Thomson Reuters stopped selling early access to the University of Michigan Consumer Sentiment surveyto high frequency traders, the pre-market volume in the S&P 500 Index ETF (NYSE: SPY) dropped from 200,000 shares in a 10-millisecond window to 400 shares.

Harsher enforcement also means less cash available for these large firms to use for trading. JPM is holding $23 billion in reserves for potential litigation expenses and spent more on legal expenses in 3Q13 than any other expense item. Bloomberg recently reported that the six biggest U.S. banks have piled up $103 billion in legal costs since the financial crisis.

More enforcement also means less market manipulation. A recent Bloomberg articlerevealed that the Justice Department is investigating JPMorgan and several other large banks for potentially manipulating global foreign exchange markets. Regulators are taking an interest in an instant messaging group between analysts at JPM, Citigroup, RBS, and Barclays that was brazenly referred to as ‘The Cartel’. Those four banks accounted for more than 40% of the trading in the foreign exchange market. If their ability to influence price movements gets taken away, the volume of trading would likely decrease. Earlier this year, JPM agreed to pay $410 million to settle accusations of illegal activity in California electricity markets. That settlement is the largest ever reached with the Federal Energy Regulatory Commission since it received new powers in the wake of the Enron Corp. fiasco.

High Volume Momentum Stocks Suffer

As regulators close the loopholes that allowed for these illegal activities, many others (besides those being fined and prosecuted) will suffer.

For one, momentum investors who piggybacked institutional trading trends to bag quick profits on high volume run-ups will be out of luck. These high-flying momentum stockspresent long-term risks that have been routinely ignored over the last decade by investors who have become addicted to the illusion of quick and easy profits. As the trading volume from the Wall Street players dries up, a lot of the hot air in momentum stocks will disappear. Rapid upward price movements will be less frequent while many high-flying stocks drop to earth.

For examples of large investment firms propping up stock prices and fueling large moves, see my recent Danger Zone articles on InnerWorkings (NASDAQ: INWK) and Tangoe (NASDAQ: TNGO). Both stocks had heavy institutional ownership and rapid upward price moves driven by Wall Street propaganda and momentum traders. Soon after we revealed how disconnected the price moves were from the companies’ fundamentals the stocks fell 30+%.

Big broker-dealers, even the divisions not under investigation, will suffer as well. Many of these companies’ activities, like equity research, were tied to and subsidized by the outsized profits from illegal activities. As those funds dry up, so do the businesses that relied on them.

Declining trading volume also hurts revenues. High volume traders are lucrative clients for these brokers, and they won’t like losing them. Even after SAC plead guilty, Bank of America (NYSE: BAC), JPM, and GS continued to do business with the hedge fund. They need to keep that business to keep profits up.

Smaller trading firms could suffer as well. E*TRADE (NASDAQ: ETFC) and Scottrade depend heavily on commissions and transaction fees for their revenue streams. ETFC swung to a loss in 2012 due, at least in part, to an 11% decrease in commissions and fees due to declining trading activity.

Return to Value Investing

Momentum strategies have become increasingly crowded in recent years, but that trend is on a decline. Closing the loopholes for illegal trading and market manipulation means the big hedge funds and banks have less means to  stoke the volume for momentum trades. Recent results from E*TRADE show that individual investors are trading less frequently.

As it becomes harder for institutional investors to beat the market illegally, it will become harder for individual investors to profit from piggybacking off those trades. When this happens, investors large and small will need to find another way to generate returns.

I see a return to value investing coming for the market. We know from Warren Buffet and others that, when done right, value investing can deliver large returns. Though not as sexy as momentum trading, value investing brings peace of mind and long-term trust in one’s decisions. Given all the turmoil and treachery we have seen in the markets, I think investors are ready for some peace of mind and will look increasingly to advisors and strategies they can trust.

Sam McBride contributed to this article.

Disclosure: David Trainer and Sam McBride receive no compensation to write about any specific stock, sector, or theme.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Markets Trading Ideas

  Most Popular Short Sellers Climb Aboard The Twitter Train (GRPN, TWTR, ZNGA) MasterCard Announces 10-for-1 Split, Announces $3.5B Buyback Plan, Boosts Qtr. Dividend to $1.10/Share Biogen Idec, Pharmacyclics See Surges In Short Interest (BIIB, CELG, PCYC) A High-Yield Blue Chip on the Pink Sheets? Five Basing Stocks That Could Move Higher Why Google Wants To Plant a Microchip In Your Head Related Articles (BAC + C) Danger Zone: Momentum Investors and the Financial Sector UPDATE: Bank of America Raises PT on Citigroup on Strong Return Forecast #PreMarket Primer: Thursday, December 12: US Budget Deal Gaining Momentum Market Wrap For December 11: S&P 500 Drops Most in a Month, Dow Suffers Triple Digit Losses #PreMarket Primer for December 11: US Government Takes First Steps Towards Budget Deal Bank of America Ups Price Target on Apple to $600 Around the Web, We're Loving... Lightspeed Trading Presents: Thunder and Tubleweeds: Trading Techniques for the New Market Enviroment Pope Francis Rips 'Trickle-Down' Economics Come See How the Pro's Trade in this Exclusive Webinar Wynn, MGM, Other Casino Giants Vying For U.S. Turf What Should You Know About AMZN? View the discussion thread. Partner Network var ads_url = ""+""; document.wr

Removing the problem from the trading equation i.e YOU!

Simple automatic investing that makes you money is something we all dream about. Lets face it, who would not want to be making money without having to do anything?

The crazy thing is that this type of thing already exists and it's the reason why algorithmic trading systems are becoming more popular with individuals. With more online algorithmic building services popping up each year they are making it easier for individuals to build their own simple automatic trading systems.

In Part I and Part II of this series of how I got started in systems trading and how I built a simple automatic trading system for trading my own capital which now going to be available to you (a select group of my followers) I want to continue this serious talking about how we as humans are the root of most of our bad trading habits and problems.

Understanding how and why a system is trading is important for you as it provides comfort in knowing the system complies with your line of thinking and marks logical sense in your head also.

Through my simple automatic trading system which is complete with order execution, you can free yourself from the painful grind of staring at a computer screen and struggling with yourself to follow system rules and execute trades according to plan. Do not get me wrong, the creator of the automatic trading system must always be monitoring the system, maintaining and updating the code when required. But end users of this simple automatic trading strategy can simply set-up their trading account, link it with the automated trading system and walk away without ever having to learn or do anything else.

How My Simple Automatic Trading System Works

Keeping things short and to the point, my system is based around the S&P 500 index. You can opt to trade either the 3x leveraged ETFs (UPRO & SPXU) or trade the original automated trading strategy using the ES mini futures contract.

Both trade virtually the same but can vary at times. Because ETF's have the tendency to fluctuate a little more than the underlying index. It can lead to an extra trade or missed opportunity from time to time. The real difference is in the performance. The ETF's use 3x leverage while the futures contracts are using more likes 10x leverage. You definitely get a better bang for your buck with futures, but it cuts both ways…

Why Automatic Trading and Why Trade the S&P 500 Index?

Automatic trading may sound risky and crazy and it can be depending on how active the system is, the creator, the programmers experience and what platform the system is run on (server, charting program etc..) but in reality it's just a set of trading rules which you create, test, approve and trade via computer.

If you have common sense, a solid logical strategy, and a top notch programmer you should eventually be able to create your own profitable automatic investing system. Also if you trade more than one investment then you know how easy it is miss a trade because you were watching another chart or responding to emails or living life… Well automated trading systems make it so you do not miss another trade again.

The S&P 500 index I think carries the least amount of volatility and is diversified with the top 500 global corporations. Also it is the most liquid investing vehicle available for the stock market which keeps slippage to a minimum for optimum order fills.

Simple Automatic Trading – It Takes Money to Make Money – Ante Up!

We all know the saying "It Takes Money To Make Money" and it could not be more true. Unfortunately most traders fall victim to all the false advertising in this industry thinking they can make $87,523 in one trade with only $5,000 etc… marketing tactics…

There are several things an individual must have in place to make money in the market and a properly funded trading account with enough money to properly manage positions is one of the most important things. But again most people are trading with accounts of $500 – $10,000 in size which is not enough to make any real money. Sure it's fun trading and dabble with a little money, but do not expect make much.

The financial markets are a numbers game in almost every way, shape and form. If you truly understand how the market moves, probabilities and percentages then you know the more money you have the more likely you are to succeed with a winning strategy. Even if one is given a winning strategy but their account is underfunded that individual will struggle to make money.

There are fixed fees with trading and just to overcome them with profits requires more capital than $10,000 in most cases.

The general rule I think is to trade with a minimum of $35,000 which is just enough for you to trade a position size that can generate gains while allowing you to scale in and out of the market at key turning points.

Knowing how much money is required to trade and manage my ETF and futures automatic trading system is important and I will show you some conservative numbers of what to expect each month on average in the another report later this month.

Make $1,000 to $2400 Each Month with a Simple Automatic Trading System

Since creation of the strategy in March 2007 when I started tracking and trading this strategy (now my automated trading system) it has posted some very exciting returns. It shows to be averaging $2400 a month and this is trading only a $35,000 account and never trading more than $15,000 per trade (3 emini contracts). The results have been truly amazing!

Money buys you time – and time translates to the freedomto pursue happiness and personal growth, the freedom to
help others, and do whatever you want.

Simply put, I offer a simple automatic trading solution that has your best interest in mind. To try and making as much money as possible through my algorithmic trading system while also controlling downside risk. The most exciting part is that it's automatically traded within your brokerage account making it a true hands free trading experience.

PUT SOME OF YOUR INVESTMENT CAPITAL TO WORK WITH OUR SIMPLE AUTOMATIC TRADING SERVICE & SEE WHAT AUTOMATED TRADING CAN DO FOR YOU.