Buzz on the Street: Banks Making a Comeback
Some of this week's most insightful and timely vibes.
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Monday, January 4, 2010
In a Buzz post on Dec. 18 I ran through some of the signs of exhaustion showing up among members of the PHLX Bank Sector Index (PHLX). Among the stocks showing TD Sequential buy signals that week were BAC, C and ZION. JPM was on bar 12 of a potential 13 as well.
It was a grueling haul waiting for potential price flips. Here we are today right at the 12th bar following the buy signal and finally we get a bullish price flip for BAC. C recorded a bullish price flip on Thursday of last week. This is a bullish price flip on the 11th bar for ZION.
Circling back to JPM, the TD Sequential did not record until last Wednesday and today we are getting a bullish price flip.
Within the context of the weekly, remember that the range projection this week is for a close above the projected high in the SP.
On the weekly chart of the BKX, in the absence of any upside weekly exhaustion showing up, we'll want to pay attention to a potential qualified break of 45.40 this month.
New Upleg for GE
My work continues to indicate that all of the action in General Electric (GE) off of its 12/04 high at 16.49 into Thursday's low at 15.09 represents a correction of the prior advance from 14.15 (11/4) to 16.49 (12/4). Today's powerful advance argues strongly that the corrective period is over and that GE has pivoted into a new upleg, which if accurate means that 1) the stock should head for a retest of 16.49 on the way to 18.00 and 2) that prices should NOT break below 15.09 again anytime soon.
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Tuesday, January 5, 2010
Converting the rumor mill
Two days into the year, and it's time for the rumor mill. One source is buzzing about a possible bid by Nokia (NOK) for Ciena (CIEN). As is our wont, when there is a viable convertible approach, we try to let you know.
Ciena has two convertibles, a 3.25% bond putable in 2013 trading in the mid-70's and an 0.875% issue due in 2017 trading in the high 50's. Since in the event of a cash takeover both of these bonds would go to par, the longer-dated and lower-priced 0.875% is the more appealing way to play.
In the likely event that no takeover materializes, the 0.875% leaves you with a seven-year piece of paper yielding better than 8.5%. I tend to prefer shorter-dated holdings, but it's certainly not the worst outcome in the world even without a deal.
Recently we've been looking at stocks on long-term monthly time-frames. As you know by now, the majority of market indices and individual stocks look similar on the monthly charts. They show completed, or near-completed, TD Sell Setup 9s occurring below TDST Up level resistance.
This is important because the TDST levels (TD Setup Trend) help alert us to the primary underlying trend that is in place. While setups are prerequisites for full countdown signals, fill countdown signals are not required to occur following setups. Therefore, the TDST level is important in helping us discern the probabilities that a setup will proceed to a full countdown. Let me give you a couple of examples.
1. Sell setup occurs AFTER a qualified break of TDST Up level.
In this situation, a sell setup records AFTER breaking a TDST Up level in a qualified manner. This tells us the probabilities are high that the setup will lead to a full countdown. This is what happened with the S&P 500 back in July of 2009.
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2. Sell setup occurs BEFORE a qualified break of TDST Up level.
Here is Intel (INTC) from roughly 2004 through 2007. There were at least four occasions where a sell setup recorded below a TDST Up level. Only one of those saw a full TD Countdown completed. The most recent in late 2007 shows the power of demanding a qualified TDST break. After completing the sell setup, the stock hung out for a whole, flirting with the TDST Up level resistance, but never qualified it and plummeted from there. TDST Up levels are important for context.
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Simply reverse the criteria for TDST Down levels.
And that brings us back to the monthly charts with completed sell setups and, specifically, to Ford (F). Take a look at the monthly chart of Ford.
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Note that despite the disastrous plunge in 2008 and 2009 through the red dashed TDST Down level, that level was never broken in a qualified manner. And now we have Ford showing a qualified UPSIDE break through the TDST Up level. That suggests a high probability we get to a complete sell countdown, which obviously implies higher prices through 2010 for this stock.
On a quarterly basis, the TDST down level was not qualified either. And we are only on bar 4 of a potential sell setup below TDST Up resistance at 15.
Perhaps there is still a business model related to manufacturing cars after all.
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