Andy,
Simply Wall Street, the fundie website I use and trust, judges ENPH to be ‘healthy’ and to have favorable ‘growth’ for its earning six green checkmarks in both of those categories.
‘Valuation’ is a whole 'nother matter, and there ENPH gets six red flags, which means the company is of no interest to me. I need there to be a steep a discount to intrinsic value AND a technically favorable chart before I’m willing to buy.
Andy,
Out of curiosity, I went looking for second opinions on ENPH.
VECTORVEST SUMMARY: ENPH is currently overvalued, has well above average safety, and is currently rated a ‘Sell’. (BINGO! Exactly what I was saying.)
Barchart’s Technical Opinion: STRONG SELL The Barchart Technical Opinion rating is a 72% Sell with a Strengthening short term outlook on maintaining the current direction. (I wouldn’t take BC too seriously. They are generally late to the trade, both in and out.
Schwab rates the stock ‘D’. (‘underperform’) They break down the rating further.
C Growth Grade Neutral
B Quality Grade Positive
C Sentiment Grade Neutral
F Stability Grade Negative
D Valuation Grade Negative
Schwab’s rating system is solid, though other rating agencies (Morningstar, CFRA, MSCI) rate ENPH higher.
What going on here are at least three things:
#1. Markets are complex. So no one is ever going to get it right every time.
#2. Even if each rating system is --on average-- profitable and worth using, they weight the factors they track differently, and they aren’t going to agree on the merits/demerits of specific stocks. ( “A way of seeing is also a way of not seeing”.)
#3. We human suffer from 'confirmation bias". (We tend to discard evidence that disagrees with what we want to believe.)
I would say this, though. ENPH is a speculative stock, and its weighting in your portfolio needs to reflect that.
And as a looong-time MI-er who has learned through sometimes painful experience that some small technical vetting (garbage collection a.k.a. “crap filters”) of the SIPro picks would be a value-add… would love to hear your guys’ ideas. Stockcharts SCTR score, PPO, above / below MA, MACD, whatever.
Flying Circus,
Technical Analysis (TA) can speak to ‘timeliness’, and nearly anything works. It just just doesn’t much matter, because all indicators are derivatives of ‘price’ and/or ‘volume’. So, pick something, anything.
But if you want drop-dead clarity about the direction of the trend, use a smoothed version of Heikin-Ashi bars. E.g., here’s ENPH done with weekly bars and a 2-year lookback.
Right now Andy’s buying, and I’ve been saying that he’s fighting the tide.
tide
Not right Now but on 1/31.
Back into Enphase on 1/31 at 218.26.
Looking good so far and they report tomorrow.
Andy
You’re braver than I am to be holding ahead of an earnings report (that traders have probably already discounted).
This is an investment Arindam, but like I said they have accelerating Earnings and Revenue. I expect them to have a very good earnings report where it will get a big boost.
Andy
What is it you like about Heikin-Ashi bars? (Never heard of them until this moment; always willing to learn.)
For instance. In the above example, I might wait until at least one, or two candlesticks went green before buying. (Brick-stupid TA approach).
How do H-A bars protect against whipsaw? Or should one research them on Stockcharts / &c &c.
"How do H-A bars protect against whipsaws?
Flying Circus,
Let’s go back to basics. What’s a ‘whipsaw’? Investopedia says, “Whipsaw describes the movement of stocks in a volatile market when a stock price will suddenly switch direction. There is no set rule as to how to manage whipsaw movements in a volatile market, as it is an unexpected movement.”
Obviously, their explanation is mostly nonsense. Prices advance, and prices retreat. That’s what’s known. What isn’t known --and has to be guessed at-- is when the trend reversals will take place. Explaining that requires defining ‘trend’. So, let’s be simplistic. Two consecutive data points isn’t a trend, but three is. That’s just standard, classic charting theory and how trend lines get drawn. Now comes a further complication. Is the chart built with 1-minute bars? 1-hour bars? Daily bars? Weeklies" Monthlies? As Mandelbrot has demonstrated, market time is fractal. So the aggregation period used to form price bars doesn’t matter. But whether one is trying to trade the ‘ripples’, the ‘waves’, the ‘tides’ --or any other metaphoric segmentation-- does matter, a lot, and this general observation can be made. The closer the aggregation period is to “the tape” as is revealed in Time & Sales, the “noisier” the signal is going to be. HA bars smooth the signal. Smoothed HA bars smooth it even further.
In his classic intro to value investing, Ben Graham said this. “In the short run, the stock market is a voting machine. In the longer run, a weighing machine.” So, more definitions. What’s a ‘stock’? The naieve answer is “a fractional ownership share of an underlying business”, which is total nonsense. Unless you’re a 5% shareholder (or better), a stock is just an exchange-traded derivative that has an often tangential relationship to its underlying. The closer to Time & Sales you look, the more disconnected that relationship is and the more that exogenous factors determine what happens to prices and trends. The further you move away from the daily froth and hysteria of the auction market, the more “fundamental” factors come into play to determine the direction of prices and trends.
Ques: What’s the most common problem beginning investors face?
Ans: How to vet stock tips.
Using HA bars --especially smoothed HA bars-- makes it easier for them to see the trends than the chicken tracks called OHLC bars or hollow candlesticks (whose patterns they haven’t a clue how to interpret and whose proper use doesn’t extend much beyond ten days).
Lastly, here’s all that needs to be said about how to manage whipsaws.
Arindam
Hey FlyingCircus,
Heikin-Ashi candles are a tool, just a tool. They are not necessarily better or worse. I like them a lot and use frequently, but not as a sole source of info or decision making. The best use is probably in helping to see the trend of a stock in a simple manner. You can google to get a more detailed understanding and different perspectives on them. I think key to understanding them is that by definition the opening price of a HA candle is the average of the previous day’s candle. Therefore, the next candle always starts in the middle of the previous candle. So understand that they eliminate opening gaps. That is why they look so neat and smooth. What’s getting more common is to further “smooth” them by calculating the prices (and subsequently the candles) after taking a moving average of the previous candles OHLC values. To try and help you get a better perspective, I did the following chart of ENPH randomly. The top area is the regular Candle Trend candles of price action. The thick yellow line is actually a line of the same price points, calculated as the average of the smoothed Heikin-Ashi for that day to give you an idea of the relationship of actual price and HA price. (Plotting HA candles over regular candles gets too messy.) The second section is the actual smoothed Heikin-Ashi candles plotted. The bottom panel is standard, non-smoothed Heikin-Ashi candles.
The smoothing makes it look more apparent as to what the trend and movement is. But beware, look at the actual price action. Large candles and gaps are disguised. Hence, for me, they are a great tool, but not the Holy Grail.
Again, Google them and you’ll be amazed. Please ask questions as things go along.
Happy hunting,
Lakedog
