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The reason why traders are flocking on Western Digital Corp. (NASDAQ: WDC)

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Today’s object of technical analysis is Western Digital Corporation (WDC). After one does a thorough job of checking for chinks in the armor on the fundamental side, the work of due diligence is only just beginning. The next step is to make sure the technical character of the chart matches the story in an advantageous way. We will look at some of the key points in that analysis today for WDC.

First off, when looking at the overall directional impact of recent money flows, we will use the relative positioning of the 50-day and 200-day simple moving averages. In other words, if the 50-day moving average is trading above the 200-day, it is traditionally seen as a bullish chart trend. Conversely, if the 50-day moving average is trading below the 200-day, it is traditionally labeled a bearish trend or bearing.

In this case, for WDC, that adds up to a bullish designation, which suggests that flows have been working in an overall positive direction on the chart. With that established, the question now turns to whether or not key indicators suggest the action has pushed too far too fast, leading to a statistically likely mean-reversion probability going forward.

For that, we rely on our key overbought/oversold oscillators. There are many out there, but we prefer the 14-day Relative Strength Indicator (RSI) and the 20-day “fast stochastic”. For both of these measures, if we see a score above 75 (overbought) or below 25 (oversold), history suggests one is wise to expect some reversion to the mean. For WDC, the 14-day RSI shows a score of 47.10%, while the 20-day fast stochastic shows a score of 31.67%.

From there, we want to next turn our attention to relative performance and volatility scoring, or Beta. Western Digital Corporation has moved -2.97 over the past month or so. Over the trailing 100 days, the stock is underperforming the S&P 500 by 5.4.

This movement has come on a more volatile bearing from one day to the next relative to the broader market, according to the stock’s 36-month beta. In addition, we can see that the stock’s recent action has come on a historical volatility score of 27.80% (as indicated by taking the standard deviation of returns for a random trading input assuming buying the stock at a given average price during the specified period). Furthermore, the 20-day ATR as a percentage of the 20-day moving average grants another key view into relative volatility scoring. By that measure, we reach a score of 3.02%.

That brings us neatly to an examination of key levels of support and resistance on the chart. For this, we generally bias toward range markets, fib levels, and moving averages. In any of these cases, it’s important to understand that the concept of support and resistance is a bit like what we might call “social gravity”. It’s a game theory concept. It’s the point where people assume other people will be acting.

Keynes called this type of logic the beauty contest. The idea is based on a fictional newspaper contest in which people are asked to pick which of a series of pictures of women’s faces will be the most popular picks for “most beautiful”. Given that the winner will be someone who guesses what other people picked the most, the goal has nothing to do with picking the most beautiful face. It is figuring out which picture the most other people will think the most other people will think is the most beautiful. This is called “recursive logic”. And it forms the basis for key support and resistance in markets as well.

In short, popular meeting points on the chart tend to be established either where they have been before (range extremes), or at key Fibonacci levels or moving averages. In this case, the critical 38.2% level drawn off the 52-week high of $95.77 sits at $79.09. WDC also has additional resistance above at the stock’s 200-day simple moving average, which sits at $ 82.55.

Lastly, we need to quickly cover relative volume. Here, we want to examine relative volume measures to get a feel for interest in the stock of late. Right now, this stock has been showing weak relative volume, which indicates lack of interest among those making a market for shares of the stock, and that should be seen as a key factor in drawing conclusions about your level of interest as well.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Bitcoin, Ripple, Ethereum are crashing and here’s why

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All hell is breaking loose on cryptocurrency this week. Bitcoin is currently trading at $10,805 as we write this article. Earlier on Monday, Bitcoin was trading at $14K+ and looks like investors have already lost over ~40% in a span of 2 days.

Let’s blame is on China for now. China, as we all know, is the major generator (miner) of bitcoin that requires a high magnitude of the energy-intensive process of solving complex math problems to add transactions to the Blockchain. For the novices, Bitcoin mining is estimated to use up to 4 gigawatts of electricity, equivalent to three nuclear reactors’ production levels. This is the prime reason why China’s government is planning to shut down Bitcoin miners in its latest crackdown on the cryptocurrency. It’s important to note that the crackdown is not limited to China. Government agencies in India, South Korea and across the globe have cautioned investors to stay away from the high volatility in daily bitcoin trading.

Ethereum dropped more than 30 percent since yesterday while Ripple, the third-largest digital currency by market capitalization, briefly fell 40 percent.

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Should you spew Intel Corp. (NASDAQ:INTC)?

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We are going to take a deep look at Intel Corp. (NASDAQ:INTC) to get a better view of the company and its prevailing status, as well as the prospect it may offer for investors. Today’s prime focus will be a fundamental assessment of the equity from top to bottom.

As such, let’s begin with the top line, i.e. revenue trends. Last quarter, the firm saw its overall revenue come at $16.15B. That represents a change in revenues, on a quarterly/yearly basis, of 0.02%. If it is translated into sequential terms, the firm witnessed sales grow by 0.09% from quarter to quarter.

It’s important to track the top line data. There’s no better way to compute the end market’s reception of a firms products. But no one wins without bottom line performance, which is what is required to look at next. Intel Corp. (NASDAQ: INTC) is intriguing when segregated to its core data. The cost of selling goods in preceding quarter was $6.13B, resulting in a gross basic income of $10.02B. For shareholders, provided the total diluted due shares of 4.82B, this means earnings per share of $0.94. Note, this assesses with a consensus analyst projection of $0.72 in EPS for its next quarterly report.

Given that data, now is the time to turn to a thorough glance across analyst projections for the firm going forward. At present, analysts have a consensus average recommendation of Overweight. This is grounded on a total of 38 analysts. While we don’t recommend taking analyst calls as face value strategies for action in a portfolio, we do consider it is vital to note where consensus is on an equity to understand what basic assumptions are possibly already discounted into the pricing of shares. As far as price targets, market analysts have an average target of $46.64. In addition, for next year, estimates of a fiscal year forecast is 3.25 in total EPS. On a median price to earnings ratio, that outlook results in a valuation of $12.84 times earnings.

For Intel Corp. (NASDAQ: INTC), the firm presently holds around $9.08B in cash. That cash is balanced against around $4.14B in total current liabilities. The firm’s debt is $growing, while total assets are $127.09B balanced by total liablities of $55.28B. The free cash flow last quarter was $3.29B, representing a net change in cash of $(2.61B). On a net operating level, the cash flow was about $6.26B.

Let’s take a look at the technical analysis. The Barchart Technical Opinion rating is a 8% Sell with a Weakest short term outlook on maintaining the current direction. Longer term, the trend strength is Minimum. The market is approaching oversold territory. Be watchful of a trend reversal.

We will apprise the interesting story of Intel Corp. (NASDAQ: INTC) as new events transpire.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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What will happen to Cisco Systems Inc. (NASDAQ:CSCO) next?

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Today, we are going to evaluate Cisco Systems, Inc. (CSCO) so as to get clarity on this organization and its current standing from a fundamental perspective. In that process, we hope to give some insight into what this stock may offer as an investment opportunity for prospective investors. To accomplish that, we will be moving from top to bottom in our evaluation. As such, our first point of focus will be a look at the company from a revenue perspective.

Over the course of the prior fiscal quarter, the company saw sales of 12.14B[3. Sales mrq]. That number needs context to grant us any insight: by comparison, we can see an overall change in revenues, on a quarterly year/year basis, of -0.02%. However, in sequential terms, the situation looks a little different, with sales grow by 0% from quarter to quarter. While revenue analysis gives us a strong sense of changing demand trends in the company?s end market, and how the company is executing in terms of its relationship with potential customers, real shareholder value is only truly created by profitability. With this in mind, we turn to the company?s bottom line data.

Cisco Systems, Inc. (CSCO) may offer even more interest as an object of analysis if we zoom in a bit more and look at some of its core trends. For example, the cost of selling goods last quarter was 4.63B, which yielded a gross basic income of 7.51B.

The company?s recently reported data shows total diluted outstanding shares of 4.99B, which implies an overall EPS (or earnings per share) of 0.48. To give the reader a little context that number compares to an analyst consensus expected value of 0.62 in next fiscal quarter EPS data. Next, let?s look ahead at coming performance based on what analysts are projecting for the company more generally, before closing with a survey of the balance sheet and cash flow. Among analysts, the average recommendation for this stock is Overweight. That number represents the product of the work of 28 analysts. It is important to consider the views of the analyst community even though we don?t suggest taking analyst recommendations as face value plans for action in a portfolio. The primary value of looking at analyst opinions is in knowing what sort of views may already be priced into the stock.

If we look at price targets, we can see that analysts currently have things pegged around an average target at about 39.76. When we look at next year, we can things shake out in terms of estimates of a fiscal year forecast to bring about 2.60 in terms of total EPS. That works out to a median P/E ratio basis valuation of right around 15.41 times earnings.

So far, we have covered how the company is doing on both the top and bottom line, as well as what professional analysts believe about its core trends and operational and financial performance going forward. However, we would be remiss if we did not also take a quick look at cash flows and the company?s balance sheet to round out our perspective on the name.

The last thing we like to look at for a company like is the balance sheet. That really is the heart of the company?s ability to weather tough times, and the basis for an experienced investor?s sense of the real downside risk inherent in a stock. So, as we like to see, the balance sheet is the seat of faith for the market. In this case, for CSCO, the company has about 11.04B in cash in the bank, according to its most recent reports. That cash sits opposite about 10.24B in total current liabilities on the ledger. But balance sheet health isn?t a fixed idea. Trends matter. And the best way to understand real risk, particularly where debt levels are concerned, is to trace a line connecting the past with the future. In this case, the company?s debt has been growing. The company also has 130.52B in total assets, balanced by 64.97B in total liabilities. That should put things into perspective quite a bit more in terms of how one can justify the current market cap of the stock.

Finally, we want to take a peek at cash flows. In this case, the company saw free cash flowing at 2.91B last quarter, which represents a net change for the quarter in cash levels of (665M). That works out to about 3.08B in terms of cash flow on a net operating basis.

This is certainly an interesting story and one we plan to check back on soon.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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