Top Undervalued Stock Ripe for the Picking: Analysis for Experienced Binary Options Traders
Top Undervalued Stock Ripe for the Picking: Analysis for Experienced Binary Options TradersApril 9, 2013
What is an undervalued stock and how do you identify it without falling into traps? Well, before anything a solid dose of common sense is always useful, particularly when it comes to high risk high reward financial instruments such as binary (all or nothing) options.
The first stock is Telefonica (TEF.MC). Taking a look at the chart below its clear to see that the downtrend formation (Red Line) after indicator confirmation has reached the 9.5 mark (see red triangle). Since we are looking at a 6 month snapshot I would say that the dark cloud cover followed by a dark candle is starting to signal an uptrend and strictly from a technical perspective I would buy this stock and hold on to it until it reached 11.2 or 11.3 as the green line would indicate.
The second stock is Bank of America (BAC – see chart below), and you can clearly see that this giant is currently on the decline mainly due to these factors:
A. Current Ratio:
The current ratio must be ≥ 2. Companies that meet this criteria usually tend to be more financially stable as well as defensive. BAC’s current ratio is unavailable hence this variable cannot be presently measured.
*The same is also true for total long-term debt versus total net asset value.
B. Long-Term EPS Growth:
Companies must increase their Earnings Per Share by a minimum of 25-30% over a 10 year time frame. Furthermore, EPS must not indicate a negative trend (red brackets) for any given year within a minimum time frame of 5 years. EPS for BAC showed negative trends within the last 5 years, hence the markets are telling BAC they are not happy and the stock is on the decline.
However, if we look at the general pattern during the last six months, you can pretty much guess the general direction. At the end of the day it’s about sales and business development. This is a huge financial institution that has acquired Merril Lynch during 2008-2009 for 31.8 billion dollars and is now reaping the rewards. BAC is a long hold for me and any trader foolish enough to sell this stock particularly on 60 Second options deserves to get hammered.
My last recommendation is Bank Santander (SAN). If you are interested in taking risks this is the stock for you. Spain, with all its problems has wreaked havoc in the Eurozone and was the main source of disdain in the eyes of top financial analysts. However, I am of the opinion that Europe in its current state can’t afford to let Spain and the biggest bank in the world in terms of market capitalization (cap) get axed. In fact, I am so sure the European Central Bank (ECB) led by Mario Draghi and Angela Merkel will continue bailing them out, I have purchased some of this stock myself and will hold on to it until it hits 8.5 -8.6 looking at a period of about 2 weeks. After that I’ll ditch the stock and move on regardless if I profit or lose money because of the high level of volatility.
A bit of disclosure: These three stocks represent a part of my investment portfolio along with other assets. To sum up, identifying undervalued stock, reading the markets correctly, and choosing the correct entry and reversal signals are all extremely important components in your trading strategy. However, if you don’t find the right binary options broker you will pay the ultimate price.