Notes on Chegg

Chegg is an intriguing brand in the higher education space.  The company is radically transforming itself from a place to buy and sell textbooks, to a student services company.  Here are a few things i'm noting on the company.

• Every chance they get, they compare themselves to some famous tech company.  They're the Facebook of this, the LinkedIn of that and the Uber of tutoring.  All this name dropping makes you wonder.  The CEO mentions communicating the story a lot....   
• They mention matching students with scholarships, colleges and internships.  If they can pull that off, it seems like a huge opportunity.  
• They pass out stock options like candy: 

That is nearly 8% of Chegg's $718 million market cap paid out to insiders in a single year. How does a board approve that? $CHGG

— Asif Suria (@AsifSuria) May 9, 2015 

Technicals 

 It's traded in a post earnings gap range since February.  The trends are flat to higher and price is now above them.  Will buyers show up at the flat 50D MA?  If they can break it over 9, a push to 11 is feasible.  Note the clear demand at the 200D MA if price ever gets there.

The premise of Chegg digital is very interesting and they have a better foothold than any brand in the space.  That said, the loose management practices are a red flag.  It's almost like management is trying to talk up shares into their critical fall quarter.  They might be set up to disappoint in the fall quarter, but the stocks technical position is fine for now.  Heck even here at the 50 day MA is a decent place to look long.

Trade 'em well!

Fallen Angels

Fallen Angels are what we call a formerly quality corporation with investment grade bonds, whose bonds have turned to a junk rating.

There's a Market Vectors Bond ETF out to specifically take advantage of this tendency (ANGL).

“The ‘reduce exposure’ mentality reverses very quickly after the average issuer falls into the high-yield universe. Specifically, we see positioning stability begin to emerge about one week after the downgrade, and within two weeks we begin to see more client buys than sells,”

The cluster of recently fallen angels is one reason why the energy bounce trade was viable.

It's something worth noting for the next group panic.

Trade 'em well!

A tough road to hoe

There's some solid stock action out there, but the environment makes it hard to suggest a sustainable new leg higher is coming. 

Again, it's worth noting the major fib extension level a percent or two away.  

It seems pretty clear that there is meaningful distribution in widely held stocks.  Stalling at key resistances, failing breakouts and downward sloping 20 day moving averages are popping up all over the place.

Key levels for bears aren't being breached in IBB, SOX or XLE.  Maybe that just hasn't happened yet.

As for being a bear - well, there is little bear push, anywhere.  They aren't breaking key levels no matter how many times they touch it.  The IYT weakness is damn near a mirage, given how over-weight it is a handful of rails.  XTN which has a smoother composition, is holding up fine over the support zone.

The places to be long are places where nobody has been.  Financials and agriculture.  Remember how fast the miner and energy trade caught on?  Expect it to be even quicker here.  One last thought, are precious metals next?

Good luck out there!

Trade 'em well!

3 dow stocks worth noting

Pfizer is trying to base out at prior support.  34.20 is huge resistance.

 AXP is breaking a down trend.  It may have some upside to the 200D MA.

UTX is ralling strongly out of a downtrend.  Note resistance at 120 and 124

Trade 'em well.

Red Dragons about to blow chunks?

Why does China keep cutting rates?  The Shanghai exchange has more than doubled over the last year.  They have some of the best growth prospects in the world.  Something doesn't add up here.

This probably has made China investors step back and think.  A lot of the recent stock market gains over there have been a result of policies to make their markets more investment friendly.

Also, they are desperately acting like they want us to trust them.  They are doing and saying all the right things, sending Jack Ma's ass to the U.S. to pitch Alibaba and soften us up talking about how Forest Gump is his hero.  Bull Shit.  At the same time they're the only global power in the world to align themselves with that psycho Putin.  You know the West isn't amused by that.

Back to charts...

The Hang Seng is testing last week's low after being quickly rejected at the flat 20D MA.  A break below 27K and we have a pretty clear top to test that vacuum area down in the 25K area.

Why HSI?  commonly known china etf FXI tends to track it.

Trade 'em well!