Caterpillar May be a Buy at around $131

Caterpillar (CAT) may be signalling a buy at around $131. This could be short term trade and the exit could be around $140, where the stock could face resistance. Bollinger Bands indicate that the stock is relatively cheap at around $131. There was a 30% upside on reported earnings compared to Wall Street estimates. EPS on Jul 31, 2020 was $0.84 compared to estimate of $0.64.  The earning beat indicate that the stock can go higher in the short-term. 

Exhibit: CAT's SMA is mostly bullish and Bollinger Bands indicate relative low prices.

(Source: Tradingview)

(Disclosure: I own CAT)   

Boeing has broken below a key support level

Boeing missed earnings targets by a huge margin on June 29, 2020. One Wall Street analyst called it a "planewreck"! The company reported a loss of $4.20 when the Wall Street estimate was for a loss of $2.55. This huge miss is driving the stock even lower. I have done a brief technical analysis of Boeing's 3-month chart and it does not paint a pretty picture.  The stock dropped below key support level of around $169. Today's small rally in the stock that brought it to $162 may be a false one and Boeing may continue dropping. 

(Source: TradingView)

(Disclosure: I own Boeing)

Caterpillar May be Set to Weaken Further.

Caterpillar recently announced that it may face a prolonged sales decline. The stock lost considerable ground on the day of this news. Looking at the Caterpillar's chart, it seems like weakness is set to continue. Caterpillar's sales have declined by 30% in Q2 2020. That's a very substantial decline. Given that the company sells very high-priced capital equipment that last a long time, demand for this equipment may recover slowly.

Exhibit: Caterpillar's Sales Were Down 30% Compared To Q2 2019.

(Source: SeekingAlpha)

I have also done a trend analysis on TradingView that seem to indicate further weakness to come in the stock.  

Exhibit: Caterpillar's chart is reflecting its weak fundamental. 

(Source: Author's chart on TradingView)  

Morningstar's analyst report on July 31 2020 makes a couple of interesting points:

• Many end markets served by the company are not directly affected. 
  
• Given the rally in gold, that may spur more mining.
  

All this may not be enough to save the company from a prolonged downturn. 

Big Tech is Taking a Break From the Rally

    Both Apple (AAPL) and Microsoft (MSFT) are trading below its 10-day moving average. Apple is down from its 52-week high of $399.82 and currently trades at $380.16. That's a drop from the 52-week high of - 4.97%. Apple's 10-day moving average is 382.436 (Tuesday, July 28, 2020). Microsoft is down from $216.38 to $204.06 that's a -5.6% change. Its 10-day moving average is $202.15. Amazon (AMZN), Facebook (FB), and Alphabet (GOOG) are all trading below their 10-day moving average. Out of this cohort only Facebook is trading below its 50-day moving average. 

Exhibit: Big Tech's Downturn has Started. When will it end? 

(Source: SECURFII)

    Microsoft has gained 53% from its lows in March 2020. Apple has gained 76% form its March 2020 lows.  The gains have been spectacular. Google has gained 50% from its March lows. Amazon has gained nearly 82% from its March 2020 lows.     

    It seems like all these stocks are starting a downward trend after the huge run-up they have had over the last few years and the rebound they have had since the pandemic induced crash of March 2020.           

Boeing Lost Support at 50-Day Moving Average In a Bearish Sign For the Stock

Boeing has lost support at the 50-day moving average. This is a bearish sign for the stock.

Exhibit: Boeing's Simple Moving Average (Data based on Monday, July 27, 2020)

(Source: Secure Your Financial Independence - DJIA SMA Report)

Boeing is currently trading at $169.26. There seems to be support at this level. If it loses support here, then Boeing may drop all the way to $120 for the next support level.  Given the bad news at Boeing, it is entirely possible that it will touch $120 in the coming weeks or months. 

Exhibit: Boeing Has Support at $169. If it loses this support, it may drop all the way to $120. 

(Source: SeekingAlpha & Author Annotations)

    Boeing recently announced that it will delay its 777x jet by up to an year. Even before the pandemic, Boeing was dealing with the problems with its 737 Max jets. When the pandemic hit, it grounded the entire travel industry. It now seems like it may take years before the travel industry can fully recover. It may take a couple of years after travel gets back to 2019 level that Boeing will start to get new orders for jets. There's so much excess inventory of jets across the globe that airlines may put off buying new jets for years. Combine this with the problem of airlines going bankrupt and you have lesser number of customers to chase for new jet orders.  Given all these factors, it's entirely plausible that Boeing's stock could give-up much of its gain since May 2020 and retrace to $120. If it loses support at $120, it may test its lows below $100.

    This crisis is a real test of leadership. Boeing is such an iconic company that it's painful to see this downfall. I am confident that in 3-5 years Boeing will be in much better shape.

(Disclosure: I own Boeing)        

Climate Change Mitigation Technologies Will be Winners in the Future

    For all the efforts that are underway across the globe to keep the earth's temperature from rising, one thing is becoming clearer with each passing day - climate change mitigation technologies and projects will have to be employed at a large scale to tackle its effects. Companies in the climate mitigation space should be on the radar for investors. 

    I have come to this conclusion after reading various articles on the topic of climate change over a number of years. A couple of recent articles in the New York Times only got be thinking more seriously about the kind of climate change mitigation technologies that will be winners in the future. One article discusses the crisis that could be brought on by the mass migration of people due to excessive heat caused by climate change. When excessive heat causes drought, destroys crops, and makes living conditions very hard, people may have no choice than to start migrating towards cities and seek refuge there.

    Various technologies may have to be employed to prevent farmers from dying of hunger and excessive heat. Providing people with air conditioned spaces could be one of the mitigation project that could be more broadly applied. Air conditioner makers such as Carrier (NYSE: CARR) may be a big beneficiaries of this trend. Use of air conditioners increases the global warming and those effects need to be mitigated too.

    To mitigate the effects of drought, more desalination plants will have to be built to supply growing cities with water.  These plants can also be used to supply water for irrigation. Israel is a leader in the use of desalination technology and it's just a matter of time before many other parts of the world - like India, Africa, the United States, and South America - need massive desalination capabilities. These plants are primarily based on seawater reverse osmosis (SWRO) technology. The reverse osmosis plants consume a lot of energy. To reduce energy use, these plants employ energy recovery devices such as the one manufactured by Energy Recovery Inc (NASDAQ: ERII).

Exhibit: A Energy Recovery Device Built by Energy Recovery Inc.

(Source: Energy Recovery Inc.)

   

    Other technologies and projects that will gain wide spread use in the future are vertical or indoor farming and drip irrigation systems. A lot of venture capital investment is going into vertical farming companies. Softbank has invested in an indoor farming start-up called Plenty. While investors focus on high-tech startups like Plenty, they should not lose focus of "old school" technology such as water pumps, drip irrigation systems and water meters that could also see increasing demand in the years to come. Water conservation technologies beyond drip irrigation will gain ground. For example, low-flush toilets could gain wide-spread use in households. Sophisticated leak detection systems could be employed at a much wider scale to prevent water loss in the water distribution networks and at home. 

    As the world tackles climate change, investors should keep a close eye on mitigation technologies that could improve lives.  

(Disclosure: I own shares in Energy Recovery Inc.) 

            

      

Visa, Home Depot, and Nike are a Buy Based on Simple Moving Average

    Home Depot (HD), Visa (V), and Nike (NKE) are buys at these levels when you consider only the 50-Day and 200-Day simple moving averages of all the stocks in the Dow Jones Industrial Average. Nike's 50-day simple moving average (SMA) is greater than its 200-day SMA. That's considered a bullish signal for the stock. Its 10-day SMA is greater than both its 50-day and 200-day. Both Visa and Home Depot exhibit the Golden Cross pattern where the 50-day SMA exceeds the 200-day SMA. But, based on fundamentals are they too expensive? 

Exhibit: Simple Moving Average May be Indicating that Nike is Buy

    

(Source: Securfii)

Exhibit: Simple Moving Average May be Indicating that Home Depot and Visa are a Buy

(Source: Securfii)

Nike is currently trading at 40x forward earnings. Home Depot is trading at 25x forward earnings and Visa is trading at 39x forward earnings. From a fundamental perspective all three companies are trading at a premium. But, on the other hand all three companies are one-of-a-kind in the world. Nike has an incomparable brand that is cherished across the globe. Visa has global network effects that cannot be easily replicated.  Home Depot's biggest strength may be its operational excellence.

Disclosure: I do not currently own HD, V, and NKE.

 

Goldman Sachs Looks Attractive Based on Moving Averages and Q2 Results

    The Goldman Sachs (NYSE: GS) is on the move - both the company and the stock. As of July 20th, 2020, the stock is currently trading above its 10-day, 50-day, 100-day, and 200-day moving averages. Even thought the 50-day moving average is below the 200-day moving average, I believe it's just a matter of time when the 50-day moving average crosses the 200-day moving average. On top of that the company reported blockbuster earnings in Q2, FY 2020. The company reported its second highest quarterly net revenue in its history. Revenues were up 41% compared to Q2 FY 2019.

Exhibit: Goldman Sachs Q2 FY 2020 Results Snapshot

(Source: SeekingAlpha)

Exhibit: Goldman Sachs Revenue Grew by 41% in Q2 FY 2020

(Source: SeekingAlpha)

    Goldman Sachs has been busy launching new products and services bringing innovation to the field. They have launched a new cloud-based transaction banking service that would bring modern treasury services and working capital management for customers worldwide. They have also launched a new buyout fund.      

Exhibit: Moving Averages for Goldman Sachs is Bullish     

(Source: SECURFII)

Disclosure: I own Goldman Sachs.

Simple Moving Average of All 30 Stocks in the Dow Jones Industrial Average

    Moving averages can be powerful momentum indicator for stock price movements. The simple moving average provides a way to find attractive entry points for stock. For example, the golden cross is a bullish signal for a stock when its short-term moving average breaks above a long-term one. For example, when a 50-day moving average crosses above the 200-day moving average. I have created a website that generates the simple moving average of all stocks in the Dow Jones Industrial Average.  This report will be generated daily after market close and can help you get ready for the next trading day. This report generates the 10-Day, 50-Day, 100-Day, 200-Day moving average of stocks in the DJIA.  It also compares the moving average price against the last price of that stock.  This gives you a perspective on where the last stock price stands in relationship to the moving averages.

                   Exhibit: Sample of the Simple Moving Average Report 

(Source: securfii.com)