Buzz on the Street: Bulls Regain Advantage
Some of this week's most insightful and timely vibes.
Note: Some links may require Buzz subscriptions.
Monday, February 22, 2010
Dr. Janice Dorn
A "Stock on Radar" this week is JDS Uniphase Corp (JDSU). This former "high flyer" displayed strength recently and may be ready for some upside action soon.
JDSU is trading at a 16 -month high price of $9.55. Last week was a consolidation week for JDSU as it traded in a $.38 range. Last month, JDSU's short term moving average crossed over the longer term moving average. I will be watching this week to see if JDSU can close the month on a strong note.
In my analysis, I see that JDSU has approximately 20% in upside potential before running into heavy resistance.
I am looking to accumulate JDSU near these levels and on any weakness closer to the $9.00 area. Our stop loss is a daily close at or below $8.50. The target area is $11.50.
Click to enlarge
Tuesday, February 23, 2010
The overbought readings (for more details please see my note on 2/19) seem to have pushed the market for a forced respite.
1086 is the next important technical support on S&P since 10-and 20-day Simple Moving Averages converge at a lateral trendline.
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Final Dip for Ford Ahead of Expected Rally
The coil pattern that is enticing me on the long side of Ford (F) has the right look of completion ahead of a powerful thrust to the upside that should propel F above the Jan high at 12.14 towards 13.50-14.00 and possibly to 15.00 thereafter based on my medium and longer-term work. This morning's swoon to an intraday low at 11.15 and pivot to the upside to 11.47 so far looks like the final dip within the coil followed by the start of a new upleg. If my work proves correct, then F will continue to outperform the overall market in an increasingly significant way in the upcoming hours/days.
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Wednesday, February 24, 2010
Trading Lessons from STEC
STEC (STEC) is getting murdered after hours, trading down 20%+ on a massive Q1 guidance disappointment. The company's revenue forecast is less than half the consensus Wall Street forecast, with the culprit being an inventory carryover at EMC (EMC), STEC's largest customer.
Let this blowup be a lesson to you, because it's one I've learned through the loss of my own dollars and the wrath of my readers:
Customer concentration is a major, major investment risk, particularly for commodity-type technology companies.
EMC went from being 15% of STEC revenues in 2008 to 45% of revenues in 2009. 15% is extremely high; 45% is simply off the charts in terms of risk. And you can't say you weren't warned - this number was 38% in the third quarter of 2009, when STEC noted in its 10/Q filing.
In a situation like this, you have a major customer holding 100% of the cards, and a vendor that's one contract loss away from a financial catastrophe. Don't get on the wrong side of these types of relationships.
JDSU: Just What the Doctor Ordered
Dr. Janice Dorn
JDS Uniphase (JDSU) continues to break to a 16 -month high. This stock had been displaying relative strength in the markets. My proprietary research found a technical set up that offered a great risk/reward along with a high probability opportunity.
I purchased JDSU on 2/22 at $9.75. Our target area is the next level of resistance at $11.50.I am raising our stop loss to break even at $9.75.
Click to enlarge
Position in JDSU
Thursday, February 25, 2010
A Gold Value Play
Heads up on Newmont's (NEM) Q4 2009 earnings. The company earned $1.13 a share for the quarter. NEM said its average selling price was $1,102 for the quarter. In other words, even if gold simply stays in the trading range it has been in for the past week for all of 2010 and NEM's costs remain roughly flat with Q4's, NEM earn will earn over $4.50 a share for the year, which means it's trading at roughly 10x its 2010 earnings, not mention what it might earn if gold prices rise even higher like I believe they will. In other words, this particular gold mining stock is now a VALUE stock believe it or not.
Position in NEM
Thanks to Minyan Miley for pointing this out to me. Below is a chart of the Dow Jones Shanghai Index (DJSH).
Noteworthy is that it's making a series of lower lows and appears to have successfully tested its 200 DMA -- all bullish signs.
Click to enlarge
Friday, February 26, 2010
Treasury Outlook for Feb 26, 2010
Treasuries are higher, but have yet to break any major trading ranges. Supply was basically eaten up this week, the market has a strong appetite for longer dated paper, as yesterday's 7 year auction went off very well.
I am not an equity trader, but the continued demand for the 7 to 30 year paper is not a good long term sign for stocks. Despite what we all read and understand to be true, "flight to quality" trade usually occurs with the "flight" ( buying bonds) happening before the selling of stocks ? Or in this case maybe foreign debt ? Markets have a way tipping off future trouble before the rest of the world knows about it. Is this the "flight"? Not sure yet , below 3.53% in Ten Year Yields and the answer looks like yes.
The market is very suspicious of two things now. First jobs, claims came in very high on Thurs. (496k) , if they start going over 500k regularly again we are going to have talk of more stimulus. Second , Greece, and its really not about Greece at all, its the innuendo that maybe some other big EU nations, or even Great Britain could be as bad as the U.S.
The dollar is holding really strong, it looked nothing more than a long term retracement of the 75 level , briefly broken with high volume in late fall. Very interesting for Treasuries to see if the dollar keeps going , if it does, confirming Europe is weaker than we think, lower rates and higher prices are in the cards for treasuries.
We get a look at the Chicago PMI ( exp 59) , Univ of Michigan consumer sentiment( exp 73.8) and Existing Home Sales( exp 5.50 mil). GDP is a revision , and very backward looking anyways. Manufacturing has been strong lately, it's not what is in focus now so fade a strong Chicago number. Mich might matter today given the last consumer confidence bomb. Also keep an eye on projections for next week's employment number, early consensus looks to be -25k. Sometimes the estimates take on a life of their own and can foreshadow pre- number panic. Support is getting stronger for Ten Year Futures at 118-10.5 , 118-00, and 117-12. Resistance at 119-00, 119-20 , and 119-31.5 looks very big. As mentioned above, Yields really need to get below 3.537% for a bigger rally. Above 3.710% and its back to the doldrums.
I started this morning in cash per last night's buzz as we saw the bullish hammer to end Thursday's session and didn't want to come in biased for further weakness. Bears were on their heels to end the day, and this morning's dip was bought up quickly solidifying in my mind that the bulls have come back to play. After the big back and forth, I am actually finding many bullish charts setting up; however, they aren't the conventional TA 101 setups. Rather they are bearish turned bullish reversals, which must be played slightly different with an eye on a squeeze move rather than sustained buying.
A perfect example is JP Morgan Chase (JPM) which I was recently short, and have moved to the long side on today, with a stop at today's low. It is my view here that the bears had their shot to crack the name when it hovered below $40 and now that they have lost the ball, it's the bulls turn to walk this one back up towards $44.
If you don't feel comfortable switching sides so quickly or aren't convinced of the move altogether, rather than fight it, maybe ring in the weekend a bit early.
Position in JPM
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