Tuesday, July 18, 2017

Should Amazon Buy Tesla?

This idea has just recently occurred to me, should Amazon buy Tesla? They seem to making headways into every aspect of our lives, why not energy generation and electric cars too?

Likely the most upside could come from merging their space programs, Blue Origin and SpaceX. A joining of Elon Musk and Jeff Bezos could reshape technology in a completely new direction.

What kind of growth premium could space exploration demand? Think of the possibilities in travel, colonization, etc. 

I saw a stat last week on Twitter showing AMZN gaining $20B in market cap since the Whole Foods acquisition, and therefore paying for the deal 1.5x already. What an interesting purchase..

Probably the most accessible and immediate application would be Alexa in your car. Imagine the scenario of leaving the office, climbing into your Tesla and your wife calls saying we need a few things from the store. You say: "Alexa, I need Peanut Butter, Milk, Bread, and 1lb of Hamburger". You drive to your newest Whole Foods, pull up outside the entrance, and an employee delivers the groceries to your vehicle. No need to pay either because your Prime account has already been billed.

What Tesla needs is funding, Amazon could provide all the capital they would ever need. Tesla offers the most brilliant engineering minds in the world. Intellectual property meets unlimited capital.  

As far as the stocks are concerned both continue to trade near their all-time highs and are in strong position going forward as growth leaders.

Tesla's stock has just thrown back to retest a 3-year horizontal resistance level. It appears TSLA is beginning a new secular breakout.

I think Goldman has been doing some buying...I'll put it this way, they don't make downgrades to prove how smart they are to us lowly retail investors. They want to accumulate positions...Just a hunch ; )

This doesn't even have to be a full takeover, though I don't see the regulators having too much conflict in such an event. But in my view it appears to be a match made for a possible future merger.

I am sure there are those much smarter than myself who could offer plenty of additional reasons why this should or should not be done, I simply find it intriguing from a technology and diversification standpoint. Whether it ever happens or not I have no idea, but the possibilities from such a merge could absolutely change the way we live.

Saturday, July 8, 2017

Regional Banks Build Bullish Patterns

Taking a look at Regional Bank ETF KRE on multiple timeframes

In November of last year KRE emerged from a 10-year base following its inception in 2006. This is the equivalent of a "post-IPO" base for a newly issued equity. The recent breakout above the prior high from 2006 is what has my attention here.

The base has formed a decade-long Cup/Handle pattern that is currently in motion. November's breakout kicked off the pattern and since we have seen price consolidate sideways, all the while holding above that 2006 high.

This is a huge pattern and these don't resolve overnight or over the course of a few weeks. Often the length of rally will resemble the length of base its emerging from. It is not impossible we could only be 7-months into a 10-year bull market for Regional Banking stocks.

For this analysis to be invalidated price would need to trade below the November 2016 low.

The Weekly shows a closer look at the 7-month breakout consolidation. Participants got quite negative in March and then again in May when there was a lot of discussion that KRE was forming a Head/Shoulder Top. As with any price pattern, nothing is confirmed until price breaks down through key support. In this case the support from those prior highs in '06 was never violated and price has since reversed back higher and is pressing against a significant resistance level.

A breakdown below the $51 support would become more problematic for the intermediate-term trend. Above that however the setup remains very constructive.

The Daily chart looks very positive to me as well. Price continues to press against the $56.50 resistance. Once the range from 3/21 is overcome it should be a quick shot to the prior highs near $60.

Due to the size of the overall pattern on the larger timeframes, this range breakout could be the launchpad to reignite the prior trend.

Zooming in on the Hourly chart the trend is in firm position. The past 4-weeks have formed a Cup/Handle pattern and recently a bull flag into the rising 50 SMA. A move over about $56 would kick off this shorter-term pattern.

When viewing Regional Banks on multiple timeframes it appears to me that they are all suggesting the same thing. Patterns don't always play out but they give us an indication of the market's intentions and a way to measure risk.

From my view it looks like these Banks want to push higher, until price suggests otherwise I will continue to put money to work as the patterns suggest.