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Everything posted by AlexMercer

  1. Hello John, thanks for posing this question! Stock chart reading might prove challenging and confusing for inexperienced stock traders. It is full of lines and data that at first sight might seem too complicated, but the truth is that they are really simple, once you get the hold of them. The first things that you see are price and area volumes and these two together provide data about a stock that are the most important such as what is the value of a stock, and how has that value changed over time. Moving average lines provides insight into the situation of a stock and tells you whether that stock is rapidly sold or bought. Relative strength lines tell you how well your stock is doing compared to the S&P 500. Both of these lines are measures of a stock’s performance, with the first one showing if it is lucrative and attracting new investors, while the latter reflects this claim on a larger scale through its ranking. So, in conclusion it is necessary to gather knowledge which is given through stock charts and utilize this knowledge in such a way that will provide profit.
  2. AlexMercer


    Hi Marko, thanks for posting this question. As you correctly noticed, EUR/USD plunged yesterday after it failed to move above $1.10 for the second time this month. On the data front, the latest PMI data shows that the data is improving but still way below the normal levels. The manufacturing PMI came in at 39.5, higher than 33.4 in April and 38.0 expected from the market. “The eurozone saw a further collapse of business activity in May but the survey data at least brought reassuring signs that the downturn likely bottomed out in April,” commented Chris Wiliamson of IHS Markit, a firm which published the PMI data. Despite the better-than-expected PMI data, EUR/USD sank lower after a failure to clear $1.10. In addition, the failure to build on the positive momentum after closing above the 100-DMA yesterday is likely to hurt the EUR bulls. “Part of the decline is weakness in risk appetite on US-China worries but this is largely a technical move. For the second day, EUR/USD failed to hold gains above the 1.1000/20 range of tough resistance and now the sellers have gained the upper hand,” wrote analyst Adam Button. Looking forward, we may expect a sharper move to the downside after successive failed attempts to get past the $1.10 resistance.
  3. Hi John, thanks for the question. Fibonacci is a technical analysis tool. While there is a range of tools that is based on Fibonacci sequence numbers, retracement and extensions are the most popular among the traders. The Fibonacci sequence looks like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 and so on. Based on this logic, each number is around 61.8% of the next number, roughly 38.2% of the following number, and approximately 23.6% of the number after that. Both Fibonacci retracements and extensions are used to identify support and resistance levels, set stop-loss orders, or target prices. The main retracement levels used by traders are: 23.6%, 38.2%, 50%, 61.8% and 78.6%. On the other hand, the main extensions are 127.2% and 161.8%. Extensions are used when the price action breaks through support and resistance, to point out where it is likely to stop. It shows the levels beyond the Ground Zero. It is important to note that Fibonacci retracements are rather subjective. There is no general rule that forces all traders to draw the same start and ending point i.e. there could be different versions of the Fibonacci retracement/extensions around, and each trader will trade his own plan. Therefore, it is advised to mix signals generated by Fibonacci with other technical indicators.
  4. AlexMercer


    Hi Marko, Thanks for the question and I hope you are doing well. Spotify made an announcement that completely dominated the media in the past 24 hours or so. The media giant agreed to sign Joe Rogan, who is hosting one of the most popular podcasts in the world today “Joe Rogan Experience”. The deal is reported to be worth around $100 million. "It will remain free, and it will be the exact same show. It's just a licensing deal, so Spotify won't have any creative control over the show. They want me to just continue doing it the way I'm doing it right now. I'm excited to have the support of the largest audio platform in the world and I hope you folks are there when we make the switch!," said Rogan. As a result, shares of Spotify surged 8% higher on the announcement. Rogan’s podcast is the second most popular of its kind on the Apple Podcasts. Over the years, Rogan built an impressive audience on Youtube, with some of his videos seen tens of millions of times, while the number of subscribers surpassed 8 million recently.
  5. Hi Fernando, thanks for asking this question. The butterfly is a harmonic chart pattern that consists of five points. Like every other harmonic pattern it is heavily based on the Fibonacci retracement numbers and can come as a bullish and bearish chart pattern. The initial leg (XA) starts the trend in one of the two directions. What follows is a series of measured moves that aim to predict where the final point “D” is to come and which will provide us with an entry to buy (bullish version) or sell (bearish version). In order to come to this point, here are the steps that have to be undertaken: XA - Any bullish or bearish move that starts the trend classifies as the XA leg. AB - This leg takes place opposite of the XA and point B should come as a 78.6% Fibonacci retracement of the XA leg. BC - The point C is either 38.2% or 88.6% Fibonacci retracement of the AB move. CD - If the BC retracement is 38.2%, then the CD leg should end at the 161.8% Fibonacci extension. If the BC leg ends at 88.6% of the AB leg, then the point D arrives at 261.8% or 224.2% extension, according to some school of thoughts. XD - Finally, the ultimate point D should be at 127% or 161.80% Fibonacci extension of the initial XA leg.
  6. AlexMercer


    Hi John, thanks for coming here. The Dividend Discount Model (DDM) is one of the most popular stock valuation methods. It is designed based on future projections as it uses an input from the forecasted growth in future dividends. This way, the method measures the present value (what they would be worth if paid today) of those dividends. This method is very popular to compare companies that have a history of paying dividends to their shareholders, unlike for the startups and young businesses that have no projections of the future dividends. Formula for calculation of the DDM: Value of Stock= (CCE−DGR) EDPS where: EDPS=expected dividend per share CCE=cost of capital equity DGR=dividend growth rate
  7. AlexMercer


    Hi Fernando, thanks for posting this question. I just had a brief look at IOTA and it seems that they are doing quite well recently. The chart tells me that the price action is trading well above the record low of $0.08 made in the mid-March as the coin now trades 150% higher from these levels. A break above $0.22 would open the door for a trip to $0.30, which is a key resistance for the buyers in the short-term. Elsewhere, IOTA Foundation has been selected by the German Federal Ministry as a finalist in the competition to develop innovative tech solutions to help fight the coronavirus outbreak. “Our goal is to build on existing digital solutions and to refine and scale them with partners – across countries and sectors. The Hackathon is intended to adapt proven solutions locally and to promote innovations that provide digital help directly on the spot,” the Ministry said in a statement.
  8. AlexMercer


    Hi Marko, thanks for asking. I guess you are referring to Bundesbank’s regular monthly report about the overall economic situation. If that’s the case, the bank outlined that it expects the economic activity in the Q2 to disappoint, in comparison to the Q1, which was very much expected. According to their data, Germany’s economy shrunk 4.6% in the last month. The much-respected bank said it expects the economy to recover in the closing stages of the second quarter, although there is still “a very high level of uncertainty about future economic developments”. “There is currently much to suggest that overall economic developments will move up again in the course of the second quarter as a result of the easing measures and a recovery is under way. This depends, among other things, on the further course of the global infection process and the containment measures taken, but also on changes in consumer and investment behaviour that are influenced by this,” it is said in the monthly report. It seems that DAX moved higher on the comment from Bundesbank that it expects the economic recovery to start in the second part of the current quarter. I think we can expect a move towards the next important resistance zone, around 11,300 in the coming days as the global risk sentiment improves.
  9. AlexMercer

    PSA - FCA

    Hi Marko, thanks for the question. The proposed merger between the Fiat Chrysler Automobiles NV and Peugeot SA has been discussed for months now. Both Fiat and Peugeot withdrew their dividends for this year, which will save these two companies more than 1 billion EUR combined. Two car giants insist that the agreement is still in place for a 50-50 merger, expected to be worth around $50 billion. Accordingly, the negotiations are advancing well. “With its decision not to accept a discount on PartnerRe, Elkann has sent a strong message to PSA and its CEO (Carlos) Tavares. The message is: don’t expect to come around and get much different conditions on the FCA-PSA merger,” an investment banker was quoted by Reuters. Elkann, who is the CEO of Exor, refused attempts from the French Covea to drive down the price of Exor’s reinsurance business “PartnerRe”. As a result, Covea pulled out from the talks and a $9 billion transaction.
  10. Hi Fernando, thanks for your question. The difference between the absolute and relative valuation methods is the same as the difference between absolute and general in any context. The absolute method looks at stock and it’s 100% focused on the stock only. Analysts focus on earnings, revenue, market performance, future outlook, etc. Contrarily, relative valuation tends to compare the stock with other stocks within the same industry. Hence, analysts wouldn’t be only looking at Facebook, but also at other tech giants from the same sector e.g. Twitter. This way, they compare market performance, earnings per share, price to earnings ratio, etc., to identify best investment opportunities and stocks that are undervalued by the market.
  11. Hi John, thanks for asking this question. I fully agree that for the beginners these financial terms can be quite tricky, so I will try to help you by using the more basic vocabulary. The concept of market value and intrinsic value is very closely associated with fundamental and technical analysis. The terms that you mentioned in your question are more focused on the stock market in particular, while fundamental and technical values/analysis are terms used for all types of financial markets. Hence, the supporters of the market value theory focus on the market performance of a given stock. For instance, this school of thought believes that each share of Apple is worth $100, simply because that is the current market price of the Apple stock (an example). On the other hand, the intrinsic (fundamental) value is calculated by looking to measure the underlying value of the stock/company by scrutinizing publicly available data e.g. earnings, revenue, profit margins, industry environment, management, etc. This way, analysts may conclude that the intrinsic value of the Apple stock is $90, which means that the stock is currently overvalued by the market as it trades at $100.
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