Buzz on the Street: Bulls Rebound as Gold Hits New Highs
Some of this week's most insightful and timely vibes.
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Monday, June 14, 2010
JPM on the Radar
Banks have been lagging this market for months but a descending channels typically resolves to the upside. The Regulatory Reform News Should be out soon and typically the market likes certainty, so that could help. Plus if we get any “Favorable Bank Regulation” these can get
a nice move through their Descending Channels.
I'm looking to buy JPMorgan (JPM) around 38.30-38.50 on big volume. The stock could go to $40 just in time for option expiration on Friday. My Resistance level #2 would be around 41.75-42.25.
Put on the radar and remember to use a stop of $37.
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Position in JPM
- Sandisk (SNDK) is up big today on a positive write-up in this week's Barron's. I want to highlight the Solid State Drive (SSD) side of the Barron's thesis. I have been using SSD's in my PC's for the last 8 months, and the difference between hard drives and SSD's in terms of performance is like comparing a Geo Metro to a Lamborghini. Not to mention that the lack of moving parts in a SSD will make it a no brainer for notebooks.
- My sense is that at current prices SNDK is already pricing in a fair chunk of the SSD story, and for SSD's to be broadly accepted, prices are going to have to come down dramatically, including the prices of components. A pure play in enterprise class SSD's is a tiny company called Stec Inc. (STEC), with pathetically bad management and flair for attracting short sellers. That said, with 25% of its market cap in net cash (the stock has cratered this year) STEC may have snatched all the available defeats out of the jaws of victory;
- Akamai (AKAM) is down today on a valuation downgrade from Citi; despite the red-dye, to these eyes it trades with a persistent bid under it. As I suggested back in March, the low $40's give AKAM a reasonable valuation. But if you continue to compare it to F5 Networks (FFIV) and VMWare (VMW) on various metrics, AKAM could easily trade up to the mid $50's and as high as $125.
- The daily chart of the 30yr bond (USU0) is looking rather ominous on both a DeMark and traditional basis;
- On the other hoof, water-theme fave Itron (ITRI) is starting to get jiggy again.
BHP Billiton Boost
The BHP Billiton (BBL) ADR is getting a boost today from the weakening green back. This miner’s chart is close to confirming a double-bottom. Momentum backs this base development with strong bullish divergence evident on the 14-day RSI. This bottom, if activated with a break above $57, has a target to $65.
The P&F relative chart against the US market clearly shows a strong primary uptrend and a reassertion of this is underway now. The P&F chart is also on the brink of a triple-top breakout.
Consider longs in BBL but look to exit if there is a sustained violation of the $49 level.
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Has the S&P 500 Gone Too Far Too Fast?
The S&P bounced from 1042 to 1105 in less than a week, so it was no surprise yesterday when we failed to power through resistance on the first try. If market can hold higher at 1077-1082 or above, I think the next time we try to break through resistance we could have a little more success.
The weakest stocks on the board yesterday were the banks and energy. We need both of those troubled sectors to cooperate if we are going to get a strong push higher to break through resistance. We need this reform bill finished. Eliminating uncertainty will definitely provide a boost. Tech has been the place to be, with some new move highs and nice price action. A trade and close above 1103 should open the window up for a move to 1120-1140.
TECH is the place to be for strong stocks.
- Apple (AAPL) had a nice move from 242 back to 259. Now if it can hang in this range, I will look for range resolution to the upside above 260.
- Sandisk (SNDK) was on the cover of Barron’s, which pushed this “go-to" stock to new highs. I think it needs time to set up now.
- VMWare (VMW) is still sitting in its upper range and looking good. Watch the 71-71.50 for a momentum move if we see strong action.
- Netflix (NFLX) had a "rock star" move, knocking some teeth out in the shorts. It’s now a bit extended. We might get a 80-20 trade here for a scalp short. Use 127.96 as the pivot for this strategy.
- Amazon (AMZN) was upgraded this morning and is in a nice descending channel. If it can get above 124-125 and hold we can see a long trade here.
- Microsoft (MSFT) opened near 25.90. We sold some pre-market and held some; it can still work higher.
- Goldman Sachs (GS) remains weak and composure must change for market to have some power. Watch 133.40 as pivot support, or if they come after it with strong volume (if we see a watered down “reform bill”) but word is it will be stronger than thought.
- JP Morgan (JPM) is still in a descending channel. The stock never triggered yesterday. One day complexion will change, keep an eye on it.
- PNC Financial (PNC) is also in a descending channel. I like the 61-62 area as a potential entry.
- BP (BP) got hit hard yesterday. I might try and look for a buy set up as we are back to the capitulation levels that I bought last time, but you must have tight stops.
- Las Vegas Sands (LVS) has been on my radar for the past week. It made new highs yesterday then sold off a bit, now it needs time.
- Wynn (WYNN) needs time.
- MGM (MGM) is lagging with no set up.
- GLD has been weak since the push through failure last week. I’d be in tier one at best and watch close.
Position in JPM
Today’s 10 min S&P shows a Head & Shoulders with an ORB Reversal sell in effect on trade back below the opening range breakout.
A break below the morning low which is occurring as I write this projects down to our old friend, 1080, a level of lore since a Key Reversal played out there on the Autumnal Equinox last year.
See 10 min below.
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Adios, Financial Services Authority
The Chancellor of the Exchequer (is that a cool title, or what?) is proposing to scrap the Financial Services Authority, which has acted as a combination of our SEC and CFTC. Regulatory authority will be concentrated in the Bank of England.
I haven't quite put my finger on why this will fail and be the subject of a future reform, but it just doesn't seem right. The BOE will be called upon to execute monetary decisions that will reward certain firms and punish others, and will inevitably make monetary decisions with regulatory considerations in mind.
We are probably heading toward a single regulator and to giving the Federal Reserve more power. Before we rush in to do so, let's ask why the present system failed so badly and why concentrating authority won't result in "Too Big To Regulate Effectively."
"Reform" is the most dangerous word in the English language.
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