Thursday, August 21, 2014

Microsoft's Xbox Smartglass App Is a Step Behind the Playstation 4

Source: Xbox.com.

Microsoft (NASDAQ: MSFT  ) and Sony (NYSE: SNE  ) are locked in a heated competition to control the console gaming space and influence the progression of the industry at large. So far, Sony's PlayStation 4 has built a commanding lead over the Xbox One, with global sales surpassing 10 million units and approximately doubling the installed base of Microsoft's new system. The sales gap between the two consoles suggests Sony enjoys a significant advantage as the gaming industry undergoes a transformational period.

Unlike previous cycles, in which hardware, game lineups, and online services provided the most meaningful points of differentiation between platforms, mobile device connectivity and streaming features look to play a significant role in enticing consumers and shaping the futures of the PlayStation and Xbox brands. Do recent updates and upcoming additions to Xbox One's streaming and mobile connectivity capabilities better position the device to compete against PlayStation 4? Why is an increased mobile presence for their respective gaming brands an important undertaking for both platform holders?

Microsoft expands SmartGlass functionality
When Microsoft first unveiled the Xbox One, it positioned its new console as the ultimate multimedia device. Amid criticism, this messaging was later amended to give greater weight to the gaming part of the value proposition equation, however the push for Microsoft's box still retained a greater multimedia focus than that of its chief competitor. As such, the fact that it lagged behind Sony's second-screen and streaming offerings in key areas was somewhat confusing.

With Microsoft's recently released August Xbox One update, users of the SmartGlass app now have the ability to purchase games and other online media products on their mobile device and initiate downloads onto their console, something the PlayStation App has allowed PlayStation 4 users to do since the system's release. Sony is still far ahead of Microsoft in terms of "Remote Play" offerings, thanks to its gaming-centric PS Vita handheld, however, the portable console's negligible market presence means the company will focus its game streaming efforts in other areas.

Will expanded mobile and TV features help Xbox One catch PS4?
The upcoming Digital TV Tuner for Xbox One will bring significantly expanded mobile device connectivity features through the use of the SmartGlass app. With the tuner, users will be able to stream display feed from a television to a mobile device. The setup will also allow for separate feeds across devices, allowing for a game to be displayed on the primary screen while content such as television programs or movies can be streamed through iOS, Android, and Windows mobile devices.

The TV Tuner is slated for an October release in the U.K., France, Germany, Spain, and Italy. Given the extent to which Sony's PlayStation 4 is outselling Xbox One in these territories, a successful launch for the tuner could prove instrumental in improving perceptions about the value proposition of Microsoft's console. The release of the device will push mobile connectivity features on the company's gaming platform above what Sony currently offers, but the tuner may need to be bundled with the console if it's to have a mass-market impact. When, and whether, the Xbox One Digital TV tuner comes stateside will depend on negotiations with cable companies, as licensing rights for television signals are different in America.

Sony pushes game streaming and sharing
October will see the release of Sony's PlayStation TV, a rebranding of the PS Vita TV that launched in Japan last year. The device will allow users to stream content from PlayStation 3 and PlayStation 4 to the television to which it is connected, effectively allowing one console to send a feed to additional displays throughout the home. The PlayStation TV will also connect to Sony's PlayStation Now game streaming service. With the PS Vita looking increasingly irrelevant in Western markets and Sony shuttering its PS Mobile app in favor of focusing on PlayStation Now, the importance of PlayStation TV in pushing the new distribution platform has grown.

Sony is also doing big things with streaming between PlayStation 4 users, allowing a single copy of a game to be shared with other systems over the Internet. A similar feature was part of the original Xbox One product vision, but scrapped once changes to the console's online connectivity requirements were made.

Microsoft has not announced plans for its own game streaming service, but previous tech demonstrations and a growing concentration on cloud computing suggests that one will eventually materialize. Comments from Head of Xbox Phil Spencer also indicate that some type of game-sharing may return to the platform.

Success in the current console cycle is a stepping stone for future models
The rise of mobile devices, set-top boxes, and smart TVs as gaming platforms has led to speculation that the current batch of console hardware may be the last. While it's not unreasonable to think that another round of gaming hardware will follow the current one, both Sony and Microsoft have shown interest in moving away from hardware-based models and toward service oriented structures. Sony's President of Worldwide Studios has confirmed that this is the direction the company sees PlayStation eventually going, while Microsoft CEO Satya Nadella has stated that the Xbox brand will be an important asset in its cloud-first, mobile-first strategy.

Final Foolish takeaway
With gaming standing as the biggest entertainment industry and ongoing growth projected to mostly come from the mobile sector, bridging the PlayStation and Xbox brands outside of the traditional hardware structure is a natural move as Sony and Microsoft increasingly look to service-based models. As such, streaming and mobile features on PlayStation 4 and Xbox One look to be important assets for introducing and strengthening these brands in mobile ecosystems. Whichever company does a better job of pushing streaming technologies and integrating mobile platforms should be better positioned for moving to a service-based model when releasing dedicated gaming platforms becomes unsustainable.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early, in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Tuesday, August 19, 2014

Wars and Bubbles: On the Economic Razor’s Edge

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Recent events such as the downed Malaysian airplane over Ukraine and Israel's invasion of the Gaza Strip remind us of how quickly world events can hurt global economic conditions, and how fragile the world economy remains after the 2008 financial crisis. Given this state, and the easy money policy of the worlds’ central banks, the threat of deflation trumps the threat of inflation now.

On the day of the crash, the Dow Jones Industrial Average dropped almost 1% in its biggest one-day point decline since May 15. U.S. oil futures closed $1.99, or 2%, higher at $103.19 a barrel. That was the largest one-day dollar and percentage gain since June 12, when Islamists launched an uprising in Iraq. Also, investors piled into perceived safe havens such as U.S. Treasuries and gold, pushing their prices sharply higher. 

We don't know the exact impact to the U.S. economy of a protracted period of higher global oil prices if war between Russia and the Ukraine were to break out, or the battle between Hamas and Israel were to spread into a wider war within the Middle East. But we do know that such events, if deep and prolonged, could easily tip the U.S. back into recession.

And given our fragile recovery and these scenarios, the Federal Reserve's accommodative stance is likely to remain for some time.  

Of course, war is  just one of many major concerns that could reverse the economic gains that have been made in the last few years. As we reported recently, The Bank of International Settlements, the institution in Basel, Switzerland that is the central bank for central banks, said that stimulus programs address the immediate problem at the cost of creating a bigger financial crisis down the road. And in the report, the BIS noted that, "the fallout from the financial cycle can be devastating."

What would a financial bust look like in a post-2008 financial bust world? Well, we got a taste ! in early July, when worries over the financial health of a major Portuguese lender, Banco Espirito Santo, spooked global markets, causing shares to plunge in southern Europe and sending U.S. stocks down.

What happened? As the Wall Street Journal reported, "a shock in a small country spread across the continent, pulling down every major stock index in Europe, trickled over into Wall Street and sent investors scurrying for the perceived safety of gold, U.S. and German government bonds," essentially the investors' crisis textbook response of almost every past crisis. 

 

Chart A: The Biggest U.S. Contraction since 1Q2009

Gold 

A large scale financial collapse could start with a bubble in junk corporate and government bonds around the world popping, leaving U.S. investors who have piled into them holding the bag. It would be essentially a reverse 2008 crisis: This time an asset bubble overseas would push the U.S. economy into a recession, or worse.

And what would the Fed do in that event? Would it use even more stimuli to re-inflate the bubble that the U.S. and other global central banks created and then popped? That's a scary scenario.

Federal Reserve Chair Janet Yellen has argued that in increasing capital at banks around the world has made the financial system more stable, but her central bank colleagues have sounded the alarms that the financial system continues to be at risk, and the Federal Reserve appears to be overlooking this.

As investment guru Seth Klarman put it: "Inside the giant Plexiglas dome of modern capital markets, just about everyone is happy, the few doubters are mocked and jeered, bad news is increasingly ignoredn… The artificiality of today's markets is pure Truman Show."

Many financial experts, and your correspondent, still believe that deflation should b! e the big! gest concern on investor minds. The Wells Fargo chief economist said in February that a new model his team developed forecasts a 66% chance of deflationary pressure.

Failure to Launch

It's difficult now to get excited about inflation, especially when recent revisions show the U.S. economy had a much more dramatic contraction in the first quarter than we thought even a few months ago. In fact, the U.S. economy looks far from reaching "escape velocity," or exhibiting sustainable growth, the necessary precursor to inflation.   

The Fed's real GDP growth estimate for 2014 was revised to 2.1%–2.3% from 2.8%–3% at the end of the March FOMC. And the Wall Street Journal found that consensus economist estimates projected lower GDP growth than the Federal Reserve.

As we have advised investors in the past, see A Portfolio Against War, Inflation and Bubbles and The $45 Billion Tipping Point, portfolios can be constructed that simultaneously protect against inflation and deflation, when such outcomes are not clear, and should be implemented well in advance.

 

Sunday, August 17, 2014

Recession Not Nigh; Q1 GDP Drop a Fluke: MFS

How close is the next recession? Not very, according to James Swanson, chief investment strategist for MFS Investment Management, dismissing the first quarter's GDP contraction as a fluke.

Swanson focused on the sustainability of the current economic cycle during the MFS midyear investment roundtable in New York on Tuesday afternoon, confirming what others, like LPL Financial Research and JPMorgan, have also recently concluded.

“I see this cycle as a sustainable, longer-term, more durable cycle,” he said, adding, “I do think this is closer to a 7- or 8-year cycle, not a 5- or 6-year cycle.”

Since World War II, the average cycle — which can range from two to 10 years — has been about five years. And, as Swanson said, the current cycle is just two weeks shy of its fifth birthday.

Something that might normally cause worries of impending recession — like the U.S. economy shrinking by 2.9% in the first quarter — Swanson questions.

“Now to me that’s sort of a mini-depression, if you will,” he said. “I haven’t seen those kinds of numbers in a long time. I thought it was pretty shocking. I just want to submit my first case here that I don’t know if it felt like a mini-depression to you or a sort of one-quarter recession, but it didn’t seem that way to me. I travel on airlines, I look at parking lots on the train on the way to work and things seem to be kind of normal, except for some bad weather.”

Swanson said that any downturn like this should have also shown a collapse in the earnings of the companies in the S&P 500 index. But it didn’t.

He added that in the same quarter that the U.S. economy saw a nearly 3% decline the S&P 500’s net margins “hit practically all-time historic highs — 9.9%, that’s with the banks; slightly less than that without the banks.”

“Something isn’t adding up that the GDP could have shrank in real terms by almost 3%, and these companies continue to pile on what I think are extraordinary profits,” Swanson said.

He added: “Profit share of GDP usually declines a year before a recession, and it only started to decline in the first quarter, and I would question those numbers.”

Swanson also expects the housing sector, which he said is still at depression levels, to “keep the momentum of the cycle elongated.”

“This is a sector that should be responding to higher house prices, and it’s not. Should be responding to the fact that since the bubble in housing we’ve added 12 million people to the economy and jobs are growing and the inventory of unsold homes is now back to or near normal, which is 5 months [of actual sales],” he said. “I think this will be the final propellant to push the economic story forward.”

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Saturday, August 16, 2014

Space Heaters Recalled Due to Fire Risk

www.cpsc.gov It might be hot outside, but it's time to think about space heaters. Specifically, Vornado VH 110 whole-room Vortex electric space heaters. They're being recalled because they can start fires, the Consumer Product Safety Commission said. Vornado told the CPSC that it has received 29 reports of units overheating and melting. Among those were seven that reportedly caught fire. The company said one person suffered smoke inhalation, and another incident caused property damage from the soot and smoke. The 79,000 recalled Chinese-made space heaters were sold for about $60 between June 2013 and May at Bed Bath & Beyond (BBY), Home Depot (HD), Menards, Target (TGT) and other retailers -- and online through the company website and Amazon.com (AMZN). If you have one of the units, you're asked to contact Vornado to get instructions on getting a free replacement. You should not have to pay for shipping. Consumers can contact Vornado at (844) 205-7978 weekdays between 9 a.m. to 6 p.m. Eastern or visit the Vornado recall site. Off-season recalls can be problematic in terms of getting consumers to act. Some companies -- and there's no evidence to suggest that's what happened here -- delay recalls until it's less likely that consumers will return items and ask for replacements. More from Mitch Lipka
•Check Your Spice Rack: Oregano Recalled for Salmonella Risk •E-Z Pass Users Beware: New Phishing Scam Is Targeting You •5 Car Rental Ripoffs You Should Avoid

Saturday, August 9, 2014

Why DC Just Moved 'Batman v. Superman' Away From 'Captain America 3'

Batman v. Superman is no longer opening the same weekend as Captain America 3, Photo credit: Time Warner, Disney

Rejoice, superhero fans! Time Warner (NYSE: TWX  ) just confirmed you'll be able to see Batman v. Superman: Dawn of Justice over a month earlier than originally planned. Specifically, Warner Bros. moved Batman v. Superman's scheduled release date from May 6, 2016, to March 25, 2016.

But there's another reason the decision is important: This means Batman v. Superman is no longer slated to be released the same weekend as Disney (NYSE: DIS  ) Marvel's Captain America 3. And that's a great thing for both Time Warner and Disney, as their respective films surely would have experienced at least some level of sales cannibalization by forcing movie-goers to choose between the two blockbusters in their crucial first weeks.

Not that it should come as a huge surprise. Back in May, I wrote:

I don't think Disney's taking the bigger risk here here. Someone's going to flinch, and nobody really believes they're both going to come out the same weekend. In this case, I think Time Warner would be the one who should flinch and move their date -- if even a couple weeks earlier just to separate the two.

Here's why DC backed down
But why, exactly, did Time Warner "flinch" in this case? First and foremost, it's a matter of brand momentum.

Remember, every film since Marvel's The Avengers has ridden a wave of momentum in Disney's Marvel cinematic universe to exceptional results, recently including the stellar April performance of Captain America: The Winter Soldier earlier this year. Worse yet for DC, Marvel is planning to release Avengers: Age of Ultron on May 1, 2015, and there's little doubt the multi-character tentpole will only propel future Marvel films like Captain America 3 all that much higher.

Disney Avengers: Age of Ultron

Marvel's Avengers: Age of Ultron will create significant momentum for Captain America 3. Credit: Marvel.com

By contrast, and though comic book fans are genuinely excited for the prospects of Batman v. Superman to eventually lead to a Justice League film, the broader movie-going public simply doesn't share the same level of enthusiasm yet for Time Warner's DC cinematic universe.

There's also the matter of principle. To Disney's credit, it did announce Cap 3's May 6 launch first, only to have Time Warner and DC come marching in later to issue Batman v. Superman's shockingly direct challenge. At the same time, it was hard to blame Time Warner and DC for trying to grab the same weekend in May, as the date represents the start of the lucrative summer box office season.

In addition, some historical calendar envy was likely present -- that weekend had already been occupied by Marvel blockbusters in each of the previous three years, including Thor on May 6, 2011, Marvel's The Avengers on May 4, 2012, and Iron Man 3 on May 3, 2013.

My (comically) Foolish takeaway
So where does that leave Time Warner investors now? In short, I think the new March date is great choice for DC.

After all, during the same weekend in 2012, The Hunger Games set a new spring record by tallying an incredible $152.5 million in its own weekend debut. Then this year, Marvel mixed things up with the April 4 release of Captain America: The Winter Soldier, which became the highest-grossing April film of all time following its own record $95 million weekend launch. If one thing seems sure, it's that the The Hunger Games and Cap 2 proved the right cinematic property can bring movie-goers out no matter what its timing.

In the end, I doubt Time Warner will ever completely elaborate on its reasons for moving Batman v. Superman -- especially if those reasons include admitting Marvel's brand is simply more powerful in the cinema right now. If one thing seems sure, however, it's that Batman v. Superman will be much better off with its new date.

Your cable company is scared, but you can get rich
This battle doesn't end with the big screen. You know cable's going away. Do you know how to profit when that happens? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

Wednesday, August 6, 2014

Recession Safeguards Are Coming Under Heavy Attack

Lackluster economic growth in the U.S. has nothing to do with financial services regulatory overreach inherent in new Dodd-Frank rules - as some neo-conservatives would have the American public believe.

Let me say, I'm a staunch fiscal conservative. I am a dyed-in-the-wool free markets entrepreneur. But there's a world of difference between free markets and a free-for-all for financial services oligarchs and officers.

In a July 21, 2014 American Banker article commemorating the four-year anniversary of the signing into law of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Paul H. Kupiec, a resident scholar at the American Enterprise Institute (AEI), makes the misguided case that Dodd-Frank is what's holding back the recovery.

Here's a look at how a recession prevention backstop is coming under siege...

Understanding the (Flawed) American Banker Argument

Just because Mr. Kupiec has been a director of the Center for Financial Research at the Federal Deposit Insurance Corporation and chairman of the Research Task Force of the Basel Committee on Banking Supervision, before hanging his hat at the AEI, doesn't mean his position on behalf of the big-business-centric American Enterprise Institute is objective. It's not.

You can see the July 21 issue for the entire article, but here are excerpts of what Mr. Kupiec wrote in American Banker with my counterpoints attached; see the July 21 issue for the article in its entirety.

The primary goal of Dodd-Frank - preventing another financial crisis - is not at issue. However, well-designed policies must balance costs against benefits. This is where Dodd-Frank fails. It excludes controls that prevent over-regulation and thereby creates incentives that encourage financial stability at the expense of financial intermediation - the monetary transactions that allow goods and services to be efficiently produced and traded, and the means by which consumers' savings are invested.

Shah: The goal of Dodd-Frank preventing another meltdown has not been remotely achieved. Dodd-Frank is barely 60% written and what's been put into place to safeguard the financial system from imploding and ruining the economy again is being challenged by academics and regulators as being unworkable. Dodd-Frank hasn't already failed, that's neo-conservative rhetoric. Mr. Kupiec would rather encourage expensive financial intermediation (for the sake of big banks profiteering) over financial stability. He's got it backwards.

Dodd-Frank grants the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corp. and the Financial Stability Oversight Council vast new powers to regulate, with no checks on the exercise of these powers. Regulators are directed to exercise their new powers to ensure financial stability and mitigate systemic risk, but financial stability and systemic risk are never defined in the legislation.

Shah: One reason financial stability and systemic risks aren't defined is that the rules and regulations are still being written. Another reason they're not defined is that bankers don't want them defined, they don't want transparency into their inner workings. Mr Kupiec says, "Regulators are directed to exercise their new powers to ensure financial stability and mitigate systemic risk," isn't that the whole point?

Mr. Kupiec seems to worry that the Financial Stability Oversight Council (FSOC), whose members are supposedly the most-in-the-know heads of the country's regulatory agencies, wouldn't be up the task of determining which institutions actually pose a threat to the economy if they were to fail.

The ambiguity of the designation standard provides the FSOC with virtually unlimited discretion. For example, under what conditions should the consequences of failure be evaluated: when the firm fails in isolation, or when the firm fails in a recession during which many other financial institutions are also distressed? Two very different standards may generate very different FSOC conclusions, and yet Dodd-Frank is silent on the issue.

Shah: There is no ambiguity as Mr. Kupiec believes. He asks:

"Under what conditions should the consequences of failure be evaluated: when the firm fails in isolation, or when the firm fails in a recession during which many other financial institutions are also distressed?"

Shah: Who cares if a firm fails in isolation or in a recession along with other distressed institutions? A failure is a failure and any failure of any too-big-too-fail institution, by definition, is a threat in isolation and especially en masse to the system they're all interconnected to. Dodd-Frank isn't silent on the issue, Mr. Kupiec's rhetoric is deafening.

Moreover, recent speeches by senior Federal Reserve officials suggest that they will push to use Dodd-Frank powers to extend the Fed's ability to restrict financial investments and the use of short-term debt finance beyond the banking system to control the activities of shadow banks. The stated goal in each case is to prevent "bad" financial intermediation and promote financial stability. But in no case do any of the new rules recognize the cost on economic growth.

Shah: Mr. Kupiec wants us to consider the "cost on economic growth" of bad financial intermediation. Really? The cost is immeasurable once the damage is done. Bad financial intermediation is what Dodd-Frank is trying to address. No-one cares about plain vanilla, transparent lending with reserves and transparency. It's the exotic intermediation conducted in the shadows, most of which are cast by big banks, that has to be considered.

It is easy to understand how the imbalances in the Dodd-Frank Act led to over-regulation. Regulators' highest priority is ensuring that the financial system is stable; for them, slow or moderate economic growth is simply business as usual. But should a financial crisis arise, regulators would be disgraced. Dodd-Frank creates a clear bias encouraging over-regulation in the pursuit of financial stability because, for financial regulators, regulations are costless.

Shah: Apparently, we all don't get it, "Dodd-Frank led (emphasis added) to over-regulation" and that's why we have no economic growth. Who knew we were living in the past already? I also didn't know that regulators ensuring financial system stability empowered them to simultaneously ratchet down economic growth (do they have a lever somewhere?) to their "business as usual" low-water mark.

Four years after the passage of Dodd-Frank, it is clear that Congress needs to revisit the legislation to prevent over-regulation in the pursuit of a single goal of financial stability. Dodd-Frank must be amended to require a balance of the following goals: financial stability, economic growth, and full employment. Otherwise, the economy will continue to get too much regulation and be short-changed on economic growth.

Shah: Mr. Kupiec's closing paragraph speaks to the failure, not of regulators' abilities to prevent economic catastrophes, they've certainly failed, but the failure of financial services institutions to safeguard their own businesses and the country from their greed-mongering. Congress needs to have Dodd-Frank legislation finished before it's revisited midstream by lobbyists and the financial power elites who've commandeered once free markets and the country.

The Great Recession wasn't caused by over-regulation; it was caused by over-leveraged financial intermediaries who hid their pyramid scheming from regulators.

As far as our slow recovery from that travesty, that has nothing to do with regulation, and everything to do with what inadequate regulation wrought...

The oligarchs of D.C. and Wall Street wish Shah would just be quiet... But he's not going to stop anytime soon. And you'll never guess who he's going to take on next. To find out, and to get Shah's Insights & Indictments delivered free, twice weekly, click here.

Monday, August 4, 2014

5 Stocks Ready for Breakouts

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 who can ultimately push the stock significantly higher.

One example of a successful breakout trade I flagged recently was biotechnology player Codexis (CDXS), which I featured in July 28's "5 Stocks Ready for Breakouts" at around $1.95 per share. I mentioned in that piece that shares of Codexis were starting to uptrend again after the stock recently gapped up sharply higher from $1.38 to $2.65 with monster upside volume. That uptrend was quickly pushing shares of CDXS within range of triggering a big breakout trade above some key near-term overhead resistance levels at $1.98 to $2 a share.

Read More: Warren Buffett's Top 10 Dividend Stocks

Guess what happened? Shares Codexis triggered that breakout on July 30 with strong upside volume flows. volume on that day registered 1.18 million shares, which is well above its three-month average action of 209,570 shares. Shares of CDXS soared and tagged an intraday high during that trading session of $2.20 a share. That represents a solid gain of around 20% for anyone who bought the stock near or under $2 a share in anticipation of that breakout. Shares of CDXS still look poised to move higher, so traders should now look for the stock to take out $2.20 a share with strong upside volume flows.

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.

Read More: 5 Breakout Stocks Under $10 Set to Soar

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

Zhaopin


One staffing and outsourcing services player that's starting to move within range of triggering a near-term breakout trade is Zhaopin (ZPIN), which provides online recruitment services in the People's Republic of China. This stock hasn't done much so far over the last month, with shares down modestly by 3.5%.

If you take a look at the chart for Zhaopin, you'll notice that this stock has been uptrending a bit for the last few weeks, with shares moving higher from its low of $12.39 to its recent high of $14.90 a share. During that uptrend, shares of ZPIN have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ZPIN within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in ZPIN if it manages to break out above some near-term overhead resistance levels at $14.90 to around $15 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average volume of 528,211 shares. If that breakout triggers soon, then ZPIN will set up to re-test or possibly take out its next major overhead resistance levels at $15.73 to its all-time high at $16.70 a share. Any high-volume move above those levels will then give ZPIN a chance to make a run at $20 a share.

Read More: 8 Stocks George Soros Is Buying

Traders can look to buy ZPIN off weakness to anticipate that breakout and simply use a stop that sits right around near-term support levels at $13.75 or at $13.20 to $13 a share. One can also buy ZPIN off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

OmniVision Technologies


A semiconductor player that's quickly moving within range of triggering a big breakout trade is OmniVision Technologies (OVTI), which designs, develops, manufactures and markets semiconductor image-sensor devices worldwide. This stock is off to a strong start so far in 2014, with shares up substantially by 35%.

If you take a look at the chart for OmniVision Technologies, you'll notice that this stock bounced sharply higher on Friday right off its 50-day moving average of $22.27 a share with decent upside volume. This move also pushed shares of OVTI into breakout territory, since the stock took out some near-term overhead resistance at $22.92 a share. Shares of OVTI are now starting to move within range of trigger another big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in OVTI if it manages to break out above some near-term overhead resistance levels at $24 to its 52-week high at $24.20 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 1.14 million shares. If that breakout kicks off soon, then OVTI will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $28 to $30 a share, or even north of $30 a share.

Read More: Must-See Charts: 5 Big Stocks to Buy for Tactical Gains

Traders can look to buy OVTI off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $22.27 a share or around $21 a share. One could also buy OVTI off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Bluebird Bio


A biotechnology player that's starting to trend within range of triggering a near-term breakout trade is Bluebird Bio (BLUE), which focuses on developing gene therapies for severe genetic and orphan diseases. This stock has been on fire so far in 2014, with shares up sharply by 63%.

If you take a glance at the chart for Bluebird Bio, you'll notice that this stock has been uptrending a bit over the last month, with shares moving higher from its low of $30.33 to its recent high of $35.28 a share. During that uptrend, shares of BLUE have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of BLUE within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in BLUE if it manages to break out above some near-term overhead resistance levels at $35.28 to around $37.50 a share with high volume. Watch for a sustained move or close above those levels with volume that hits near or above its three-month average action 518,069 shares. If that breakout develops soon, then BLUE will set up to re-test or possibly take out its next major overhead resistance levels at $40 to $41.22 a share, or its all-time high at $41.75 a share.

Read More: 5 M&A Deal Stocks to Watch for Premium Gains

Traders can look to buy BLUE off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $31.85 a share or near more key support at $30.33 a share. One can also buy BLUE off strength once it starts to move above those breakout levels share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Astronics


Another stock that's starting to trend within range of triggering a big breakout trade is Astronics (ATRO), which designs and manufactures products for the aerospace and defense industries worldwide. This stock is off to a decent start in 2014, with shares up notably by 17%.

If you take a glance at the chart for Astronics, you'll notice that this stock recently gapped up sharply higher from around $52 to $61.43 a share with monster upside volume. That move pushed shares of ATRO into breakout territory, since the stock cleared some key near-term overhead resistance levels at $56.14 a share and at $60 to $60.66 a share. Shares of ATRO pulled back a bit after that move, but now the stock is uptrending higher again and quickly approaching another big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in ATRO if it manages to break out above some near-term overhead resistance levels at $61.43 to $62.72 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average volume of 145,861 shares. If that breakout materializes soon, then ATRO will set up to re-test or possibly take out its next major overhead resistance levels at around $68 to $70.40, or even its 52-week high at $72.99 a share.

Traders can look to buy ATRO off weakness to anticipate that breakout and simply use a stop that sits near its 50-day moving average of $56.06 or right around its gap-down-day low of $54.88 a share. One can also buy ATRO off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Read More: 4 Stocks Warren Buffett Is Selling in 2014

Tesla Motors


My final breakout trading prospect is electric car maker Tesla Motors (TSLA), which develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. This stock is off to a very strong start in 2014, with shares up sharply by 55%.

If you look at the chart for Tesla Motors, you'll notice that this stock ripped sharply higher on Friday right above its 50-day moving average of $220.19 a share with heavy upside volume. Volume registered 11.89 million shares, which is well above its three-month average action of 5.82 million shares. This sharp spike to the upside on Friday is quickly pushing shares of TSLA within range of triggering a major breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in TSLA if it manages to break out Friday's intraday high of $237.50 a share to some more key near-term overhead resistance levels at $240 to $244.49 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 5.82 million shares. If that breakout materializes soon, then TSLA will set up to re-test or possibly take out its next major overhead resistance levels at $260 to its all-time high at $265 a share. Any high-volume move above those levels will then give TSLA a chance to make a run at $300 a share.

Traders can look to buy TSLA off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $220.19 a share. One can also buy TSLA off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

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

-- Written by Roberto Pedone in Delafield, Wis.


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Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.


Saturday, August 2, 2014

Canada’s Economy Reaccelerates

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Last week, we asserted that Canada's surprisingly strong May wholesale trade numbers augured a reacceleration for the overall economy after April's disappointing performance.

And according to the latest data from Statistics Canada (StatCan), the country's economy did just that. Gross domestic product (GDP) grew a seasonally adjusted 0.4 percent month over month in May, or 2.3 percent year over year, in line with the consensus forecast among economists. Also of note, this was the fifth consecutive monthly increase.

The service sector, which accounts for nearly 70 percent of GDP, climbed 0.4 percent, with 11 of 15 subsectors posting gains.

In addition to wholesale trade, real estate, which is the single largest subsector among services-producing industries, also delivered a strong performance, rising 0.6 percent month over month and 3.2 percent year over year.

To get a sense of where longer-term investment trends might be emerging, we like to look at which sectors boasted the strongest growth over the past year.

On a year-over-year basis, transportation and warehousing was the single strongest performer among services industries, with a rise of 4.0 percent. It also had a solid increase of 1.0 percent month over month in May.

StatCan notes that growth here was mainly driven by increases in rail and air transportation services. Canada's transportation industry is often a beneficiary of production and export activity from the resource and agricultural spaces.

The goods-producing sector, which accounts for about 30 percent of the economy, was up 0.5 percent in May, with gains reported in three out of five subsectors.

The strongest performer was the manufacturing sector, which rose 0.8 percent month over month following April's 0.2 percent decline. On a year-over-year basis, manufacturing is up 2.9 percent.

The Bank of Canada (BoC) is closely monitoring the country! 's manufacturing industry, particularly exporters. The central bank believes a rise in export activity from the country's beleaguered manufacturing sector will help the economy transition away from its dependence on consumer spending and kick off a virtuous cycle of business investment and job creation.

Although the industry's year-over-year growth of 2.9 percent doesn't sound all that impressive, it was actually the second-fastest pace among the five goods-producing subsectors.

According to StatCan, durable-goods manufacturing grew 0.9 percent, largely thanks to a 13 percent jump in motor vehicle production. And non-durable goods manufacturing grew 0.7 percent, with notable gains in the manufacturing of chemical, petroleum, and coal products.

Given Canada's resource riches, it should come as no surprise that the next strongest performer among goods-producing industries was the mining, quarrying, and oil and gas extraction category, which climbed 0.7 percent month over month. The industry had previously dropped by a revised 0.3 percent in April, owing to the idling of a number of refineries for maintenance.

StatCan observed that oil and gas extraction advanced 0.7 percent, due to increases in both crude oil and natural gas production. And support for mining and oil and gas extraction rose 4.3 percent, as the result of greater drilling and rigging activity.

And on a year-over-year basis, the resource space grew 9.6 percent, the single strongest gain by far among all of Canada's industries, regardless of the sector of the economy in which they operate.

We're pleased with the economy's overall performance, especially since economists with CIBC World Markets note that the April and May numbers put the economy on track to meet the BoC's forecast of 2.5 percent growth for the second quarter.

That's the minimum growth threshold the bank previously cited as necessary to remove excess capacity from the economy. And it would also be a significant th! ree-tenth! s of a percentage point better than the current consensus among private-sector economists, according to data aggregated by Bloomberg.

Canada also got good news from its neighbor to the south. The US Bureau of Labor Statistics reported that US second-quarter GDP grew at a stronger-than-expected 4.0 percent annualized, a full percentage point better than forecast, based on economists surveyed by Bloomberg. Given that the US absorbs roughly three-quarters of Canada's exports, a resurgent US economy will flow through to Canada as well.