July 5 Premarket – Value Stocks, Early Growth Stories, Free Cash Flow

There is a new post here.

Fed minutes today, ADP employment, tomorrow jobs day, tariff implementation with China and the US, $34B worth of exports (imports).

 

CNBC actually has an informative article. Besides Jeff Cox articles at CNBC (most of his, not all of his articles), not much worthwhile info over there. The article pertains to cash flow, free cash flow. It is a very good fundamental metric to look at when doing the research, more helpful with turnaround types of opportunities, value stocks. The article is more geared toward “value” stocks, which if someone is very good with that strategy, then great. I focus on “not-value” stocks. Meaning, strong or very strong stocks with outstanding earnings growth, often with very high PEs. I don’t even look at P/E ratios. Sometimes all of this can be combined into one strategy actually – sometimes. Also, I have discussed over and over about AMZN in its earlier days, and about young companies with tremendous sales growth, no earnings, but erratic cash flow, especially free cash flow. The market will “figure out” in advance the earnings turnaround.

All the tools which I’ve taught, that’s how to be already in – well in advance. What was I saying about the retailers for months and months before the crowd discovered them? Did I put a bunch of retailers on my 4/2 stock list? Did I tell you guys -well in advance – how bullish that the retailers were becoming? Should you have been buying the retailers when I first started talking about them? Did many of them go to all-time highs? Are the earnings turning around in a huge way for the group? Should you have known that well in advance, as now everyone sees it?

From months ago with AMZN:

A multi-year sales growth rate which is very high, in a newer company, will almost always lead to solid profits down the line. I was anticipating that with IQ, and what an outstanding stock I gave you guys on 4/2. And for all of those idiot AMZN permabears out there. For years they kept claiming AMZN was a “bubble, a scam a joke”. Why? Because no profits. But the sales growth was stellar. Bezos kept reinvesting in the business, so the perma bear clowns totally blew it with that one, as AMZN eventually started generating profits. And all the while their operating cash flow was stellar.”

But their free cash flow was erratic. Here is a good explanation of the difference between free cash flow and operating cash flow.

Here is the AMZN free cash flow data over many years. Very erratic as they were reinvesting into AMZN itself.

From the WSJ, here is the last 5 years of operating cash flow – look at the growth:

Net Operating Cash Flow18,43416,44311,9206,8425,475

Digital payments, subscription services for younger companies, this is another situation where the cash flow vs the earnings debate is important.

And the most important part – the chart. Look at AMZN from early on. Is that accum? Is there the downside of accum? Is there the upside of accum? Are there SOSes at the important areas? It’s a weekly, SOSes can be “hidden” a bit. Reaccum and springs of the reaccum on the “upside/front-side”? Is there a breakout, reaccum, and retest? Are you understanding why AMZN is in a huge uptrend? Is there a 10 year accum area? Do you wonder how incredibly incompetent that the stock market permabears are?

 

 

And AMZN is beginning the “straight-up” movement. I have a bubble rule specifically designed for the stock market, it works pretty well. I may discuss it someday.

 

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As I discussed – well in advance – as crude oil was falling in early June – it will be a reaccum area within the major uptrend. And $75 then on the next rally. Also, I explained in detail one of my favorite setups. In the chart I put the support area which I need to see broken to the downside to then set up the next bottom – 66.53.  And explained that setup – it is a breakout setup. First the breakout, everyone gets bullish and buys from the strong hands. And then the backup/retest back into the top 1/3 of the OLD trading range. The masses then get shaken out and sell right back to the strong hands, as the bottom process unfolds in the top 1/3 of the OLD range:

All of this given to you – well in advance:

From 6/1:

The back up in crude oil, to me. is reaccum within a major uptrend. More back up into the previous range would shake more people out and help strengthen it for the next push into $75. So many oil shares have been given to you over the last few months, and those are my focus also into backups. I continue to avoid the oil majors, no interest in them.”

Here is the original 6/1 chart:

 

 

Here are the updated ones with the arrow when I wrote those comments on 6/1. Did a 123 setup occur below 66.53?  Was it reaccum? Was there a spring of the reaccum? Was there an SOS as we started rallying out of the spring? Are we back into $75? Is it pausing into $75? Was this all given to you well in advance?:

 

 

 

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As I’ve been discussing, with all of the tariff hoopla, the indexes in a trading range:

 

 

 

 

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About traderscott 991 Articles
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.

2 Comments

    • Raphael, not trying to minimize the situation, but losses are just part of this business. I took a loss with GERN yesterday. We need to first learn how to lose and deal with that. They become less of a burden over time as the good trades build up. The answer is yes. The other answer is you have to build rules for yourself, and know why you are in it. What is your time-frame. Just ;like selling into upthrusts is potentially a good rule, the other side is buying into springs and spike lows makes selling into strength so much easier. And just buying very well period. So selling 1/2 yes very possible good rule. 12 vs 123 is about the technical situation. We’ll discuss later.

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