May 2, 2004


Issue #115

Greg Fry
   Greg Fry

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WEEK ON WALL STREET: Week In Review  /   by Bob Coppo

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Our new Week on Wall Street columnist is Bob Coppo. Bob is Managing Director and Chief Technical Analyst for JNL Financial Consultants, Inc. The company has operated on the internet since 1997 and provides investment advice to both individual and institutional clients. Make sure to visit his site,

Bob Coppo
Week on Wall Street
The Week on Wall Street

Friday's Action:   Shares of Procter & Gamble helped prop up the Dow for much of the session, but Blue Chips followed the Nasdaq lower in late trading. Technologies tumbled for the fifth straight session, with the Nasdaq down about 6% for the week, its biggest decline since September. Major world markets posted mostly lower results on Friday. London's FTSE closed down 0.66%; Frankfurt's DAX closed down 0.59%, and Paris' CAC 40 closed down 0.41%. Japan's Nikkei closed down 2.02%, Hong Kong's Hang Seng closed down 0.52%, and Sydney's All Ordinaries closed unchanged. In economic news, Personal Income in March rose 0.4% and Personal Spending also went up by 0.4%. Consumer Sentiment in April was revised to 94.2 from 93.2, down from 95.8 in March and finally, the Chicago PMI for April came in at 63.9, up from 57.6. Volume came in at 1.63 billion shares traded on the NYSE and 2.18 billion shares traded on the Nasdaq. Market breadth was negative, with NYSE declining issues over advancing issues by 1.41, and down volume over up volume by 2.44; Nasdaq declining issues over advancing issues by 2.31, and down volume over up volume by 5.78. Leading sectors were Hospitals, +0.77%, Integrated Oils, +0.44 and Drugs, +0.22%. Laggards were Internets, -3.64%, Networkers, -3.63% and Hardware, -3.04%. Nasdaq 100 futures closed 33 pts lower to settle at 1403, while the S&P's settled down 8 pts at 1106.10.

Weekly Recap:   The threat of rising interest rates hung heavy on investors minds all week and overshadowed another round of impressive earnings results. The consensus was that rising interest rates will slow the economic recovery and corporate earnings growth. Those worries were exacerbated by reports that China is looking to cool down its hot economy by raising interest rates and curbing lending activity. Escalation of military action in Iraq, rising oil prices and ongoing worries about terrorist activity also weighed on the market.

For the most part, economic news was encouraging as new home sales, existing home sales, consumer confidence, initial claims, and the Chicago PMI were all better than expected. Good economic news is being treated as bad news, however, since it is seen as a catalyst for the Fed to raise rates sooner rather than later. The most important news of the week was the advance Q1 GDP report. It came in weaker than expected at 4.2% (consensus 5.0%), but the market's negative response was linked to the chain deflator which triggered inflation concerns, as it was stronger than expected at 2.5% (consensus 2.0%).

For the week, the Dow lost -2.4%, the S&P 500 finished -2.9% lower and the Nasdaq fell -6.3%. The small cap Russell 2000 lost -5.2%. Next week, market watchers will be anxiously awaiting the FOMC policy statement on interest rates on Tuesday. The market isn't expecting any change in the fed funds rate, as Fed Funds Futures are currently pricing in just 8% odds of a 1/4-point hike at the May 4th meeting. The committee will most likely change the wording of its policy directive to a neutral stance on the economy that will ultimately be regarded as setting the stage for a tightening. If the equity and bond markets don't sell-off following such a shift, it will suggest that the news has already been priced in. The April employment report on Friday will also be an important gauge of market sentiment. Major companies reporting earnings next week include Cephalon, InterActiveCorp, Nanogen,, Principal Financial Group, XL Capital, Clear Channel Communications, Dean Foods, Hecla Mining, Marvel Enterprises, Northrop Grumman, Qwest Communications, Safeway, Tenet Healthcare, Wild Oats Markets, Credit Suisse Group, Roxio, CareMark Rx, EchoStar Communications, NVIDIA, Williams Companies, XM Satellite Radio, and Martha Stewart Living Omnimedia.

The Fate of the Dollar:   The major sell off in the US Dollar was halted during the first quarter when it traded above its 50-day average in mid-February. The recent dollar rally off the February low has been the major cause for the decline in commodity prices over the past few months, especially gold. But the Dollar is now facing stiff resistance at its 200-day moving average and the trendline formed by the June and October lows. If the upturn was just a counter-trend rally in a secular bear market, then the dollar should stall soon and start to weaken again.

A major factor for the Dollar's strength is the net position of foreign private investors. Foreigners are heavily invested in the US, but that rate of investment is likely to continue to slow. Over the past few years, the rate at which new private sector investment has flowed into the US has fallen sharply, but that hasn't yet caused a flight of investment capital from the US capital markets. This is because the reduction in the amount of money invested by the foreign private sector has been essentially offset by large investment increases by foreign governments, particularly the Bank of Japan. In other words, foreign central banks have played a major role in propping up the Dollar. This influx is not likely to continue in the future, however. As the US balance of payments deficit continues to grow, dollar support by foreign central banks will eventually become unsustainable.

The Peak Open Interest Indicator:   The Peak Open Interest Indicator (POI) has predicted where the S&P 100 Index (OEX) will close on options expiration day with a high degree of accuracy. The OEX tends to be attracted to price levels where the largest amount of open interest exists. The indicator is simply a chart showing the amount of call and put options open at each strike price in any given expiration month. Typically, a stock or index will be attracted to the strike price that has the most combined open options contracts for the front month, or the month closest to expiring. What makes this indicator particularly useful for the OEX is its low implied options volatility index. Below is a chart of the POI for the April OEX options contracts with one week to go before expiration.

A review of some previous months' options activity illustrates how the indicator functions. February's expiration saw the OEX close at 564.88, only -0.90% from peak open interest at the 570 strike level. In March, the 550 strike held the most open interest. The OEX was once again attracted to that strike level, this time closing at 543.88, or just -1.15% away. In fact, over the past 13 months, only twice (November 2003, and March 2004) did the OEX close more than one percent away from its peak strike price on expiration day. Below is a table of the previous 13 months of data displaying this phenomenon.

Expire "Target" "Actual" Pt Diff % Diff
18-Apr-03 450.00 453.72 +3.72 +0.83%
16-May-03 480.00 475.72 -4.28 -0.89%
20-Jun-03 500.00 502.40 +2.40 +0.48%
18-Jul-03 500.00 501.50 +1.50 +0.30%
15-Aug-03 500.00 498.30 -1.70 -0.34%
19-Sep-03 520.00 520.62 +0.62 0.12%
17-Oct-03 520.00 518.12 -1.88 -0.36%
21-Nov-03 520.00 511.78 -8.22 -1.58%
19-Dec-03 540.00 540.26 +0.26 +0.05%
16-Jan-04 560.00 564.72 +4.72 +0.84%
20-Feb-04 570.00 564.88 -5.12 -0.90%
19-Mar-04 550.00 543.68 -6.32 -1.15%
16-Apr-04 560.00 554.94 -5.06 -0.90%

The peak strike level will obviously change as expiration draws closer. But that does not diminish the usefulness of this indicator. Of note is the fact that the peak strike level does not normally changed at least one week prior to expiration. One strategy employing this indicator is be to put on either a bearish call spread or bullish put spread. For example, in February, a trader could have put on a bullish put spread, selling the Feb 560 Put and simultaneously buying the Feb 555 Put. The spread credit was good for $190 per contract. Since the OEX closed at 564.88 and above the 560 strike, both puts expired worthless. The trader would have received the full credit amount less commissions. A $5,000 investment (10 contracts) would have returned $1,900 for a 38% gain. The March peak open interest settled at the 550 strike during the last week before expiration. We recommended opening a Bullish Put Spread, selling the Mar 540 Put and buying the Mar 535 Put, for a $1.35 credit. Since the OEX closed at 543.68 on expiration, both of our options expired worthless and we captured the full credit, less commissions. We were only "in the market" for four days and realized a 27% return on the trade.

The April peak open interest settled at the 560 strike during the last week before expiration. We recommended opening a Bullish Put Spread on Tuesday, April 13th, selling the Apr 550 Put and buying the Apr 545 Put, for a $1.30 credit. Since the OEX closed at 554.94 on Friday, both of our options expired worthless and we captured the full credit, less commissions. We were only "in the market" for four days and realized a 26% return on the trade.

If you would like to receive timely updates on this strategy, just send an email to and ask to be put on our distribution list. There is no cost or obligation.

The COT Report:   The latest Commitments of Traders report from the CFTC shows that Commercial Hedgers bought some 2,400 S&P 500 futures contracts last week to bring their net short position to -9,317 contracts. Large Traders remained net short -33,923 contracts, with the entire offsetting net long position of +43,240 contracts held by Small Traders, the so-called "weak hands". For the Nasdaq 100 futures, Commercials bought some 1,400 contracts to bring their net long position to +20,248 contracts. Small Traders were net short -11,339 contracts in the Nasdaq. Commercial action in Dow futures saw the smart money sell some 500 contracts to bring their net long position to +1,667 contracts.

Commercial Hedgers were better buyers in the S&P's last week, but still remain net short. For the intermediate term, their position should be considered a bearish sign.

Sentiment Surveys:   The latest Investors Intelligence survey showed that the percentage of bullish newsletter writers came in at 50%, while the percentage of bears was 22.4%. The bullish ratio (bulls/bulls +bears) was 69%.

The latest AAII survey showed no change at 50% bulls, and a decrease to 22% bears. The bullish ratio came in at 70%, while the 4-week moving average remains high at 74%. One thing to note about the AAII survey is that, while membership in this organization is quite large as investor groups go, the number of members that actually participate in the survey is very small. Thus, large fluctuations in survey results from week to week are not uncommon.

The latest Market Vane survey came in at 60%, indicating that the majority of commodity trading advisors (CTA's) remain bullish on the future direction of the S&P's.

The Short Term Outlook; 1-5 Days:   We said in Thursday night's column that the odds favored making lower lows on Friday, and that happened. Friday's price action favors making lower lows on Monday. The Nasdaq Composite continued to lead the market lower, dropping -1.97% Friday versus -0.20% for the NYSE Composite. The COMPQ:NYA Ratio chart below underscores the weakness in the Nasdaq since it made a short-term peak one week ago. In our Thursday night comments, we wrote, "The next support level for the Nasdaq is it's 200-day moving average, which is roughly 25 pts below today's close. A bounce off that long-term support line during March prevented a more serious market decline and led to a short-term bounce. A retest of the 200-day ma will be important for the Nasdaq and the rest of the market, and that could well happen tomorrow." The Nasdaq did close below it's 200-day ma on Friday, bringing the next support zone at 1887-1897 into play. Almost all of our technical and sentiment indicators are extremely oversold (see our Short Term Indicator graphs), suggesting that the market is very close to putting in a tradeable low. We suspect the Nasdaq will attempt to rally Monday and into Tuesday before the Fed announcement, but then sell off again, possibly undercutting the March low.

SMT's Pivot Point Forecast; 1-2 Weeks:   Our Pivot Point RS indicator is on a SELL signal. Our next Pivot Point is forecast to occur on or near May 7th.

The 60-mn NDX chart below shows that the StochRSI indicator is in the BUY zone. For Monday, resistance for the S&P's comes in at 1118 and then 1126. Support lies at 1097 and then 1091.50. For the Naz, resistance comes in at 1441.50 and then 1452. Support lies at 1390 and then 1377.

The Intermediate Term Outlook; 2-6 Weeks:   The Risk Aversion Indicator, represented by the NDX:Dow Ratio, has been a good forecaster of the general market trend over the last couple of years. As the chart below shows, the ratio crossed below its 70-day exponential moving average at the end of January, coinciding with the year-to-date high for the Nasdaq Composite on Jan 26th. The slope of the EMA has now turned flat however, confirming the trading range the market has been locked in over the last three months.

Our Market Trend Indicator (MTI) is currently negative and trended lower on Friday.

Good Trading!

Charts and data appearing in today's column are courtesy of:


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Last week's Fresh Picks took another hit in the face of broad market declines that saw the Nasdaq slide more than 6% on the week. The Fresh Picks lost an average of 4% each.

The biggest fall belonged to storage play ELX that couldn't gain any traction in the tech bloodbath. ELX tumbled 6% on the week. Still, we are hopeful that most of our subscribers avoided a loss by following our suggestion that:

"keep in mind that there is nothing in the way of support underneath, and so consider waiting for a reversal to emerge before jumping in"

At this point, we'd be looking to enter ELX on any upward reversal as shares are now extremely oversold and due for a correction.

Our second pick, INVX, got through the week a lot less damaged, losing just 2%.

Make sure to also have a look at the Track Record page on the site for our 2003 monthly breakdown showing each and every Fresh Pick from the year, along with its price when recommended and where it ended the year. For specific targets and stops, please see the archives.

Have you traded any of our recommended plays along the way? We'd love to hear from you and how you did. Please send your stories to

TECH WATCH: The Hardware Stock Environment / by Jeff Neal, Technical Market Columnist

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Jeff Neal is a veteran options strategist and trader with over a decade of experience in the trading business. Jeff has had a diversified business career operating a very successful management consulting business with his clients representing some of the largest companies in the world.

He has a B.S. in Computer Science from Indiana University and an MBA in Finance from the University of Indianapolis. Jeff is a writer, mentor, and options strategist for Optionetics ( and as head of his own hedge fund is an active options trader in both the equity and futures markets.

Jeff Neal - Staff Writer & Options Strategist - ~ Your Options Education Site

Jeff Neal
Tech Watch

The Hardware Stock Environment

The computer hardware sector of the stock market has struggled somewhat, even with the apparent upswing in the economy. However, there is reason to believe this could definitely change as economic growth confidence continues to grow and the long awaited business spending starts to increase. There are a handful of hardware stocks poised to take advantage of this anticipated uptick in capital spending.

The first hardware issue that comes to mind is International Business Machines (IBM). Granted hardware is just one of the many things IBM is into but hardware sales still play a significant role in the over all revenue picture. The product offerings range from their traditional mainframe z-series to the midrange servers i-series to the UNIX servers p-series. Their footprint is in virtually every industry and when business spending finally picks up look for these product lines to benefit tremendously. The partnerships and delivery capabilities are certainly a strength, which puts IBM in a very good position to capitalize on the expected market growth in hardware sales.

Another hardware company that is well positioned to take advantage of an increased investment in hardware is Sun Microsystems (SUNW). This company has a wide variety of servers starting with the entry-level servers used for the Web and host ERP database. The midrange servers address larger databases, server consolidation, and data warehousing needs. You can also choose from their high-end servers that are designed for large-scale mission critical applications like offloading mainframe applications and high performance computing.

In addition, the company possesses specialty type servers such as the NEBS-Certified server, which is for harsh environments that need continuous availability and easy management. This also includes the Server Appliances product that is built specifically for Internet web hosting and security. These wide range of hardware applications coupled with Sun Microsystems’ strong client base and partnerships has the company more than ready to pounce on any uptick in capital investment.

Hewlett Packard (HPQ) is also a company that should significantly benefit from future growth in the hardware sector. Much like Sun Microsystems this firm has a nice line of servers designed to meet many different needs. The lower end of the server line is compatible with the Windows, the Linux, and the Netware environments. They also have reliability servers with their HP integrity offering along with the HP 9000 servers for more robust applications. The current customer base along with some key partnerships should allow Hewlett Packard to capitalize on improve market conditions in the hardware arena.

Dell Computer (DELL), a company that has traditionally been known for their desktop and notebook sales, is in a very good position to profit from their server technology especially when it comes to the small and medium sized businesses. The PowerEdge 700 server and the PowerEdge 750 server give Dell great traction for companies where cost and ease of management is a significant issue while at the same time meeting the necessary technical requirements of these small to medium sized firms. This niche should serve Dell well if the economy continues to pick up speed because of the demand that has built up in this area for that last couple of years.

To be sure there are other hardware infrastructure type vendors that should also profit with the expected increase in business spending such as Emulex (ELX) and Iomega (IOM) to name just a few others. However, the companies mentioned in this article should do quite well on an uptick in business spending given their diverse product line and financial strength. In addition, these are very liquid issues that have actively traded options including LEAPS, which gives the savvy investor even more flexibility when it is time to pull the trigger. Keep tracking the capital expenditure number because this will be a key indicator on determining when to enter this area of the technology market.

Happy Trading.

MARKET TA: Riding the Waves / by Dale Woodson, Technical Market Columnist

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Dale Woodson is the editor of Woodson Wave Report, a market-timing newsletter. Woodson Wave Report identifies turning point targets in the Dow, NASDAQ, and S&P 500 index as well as the bond and gold markets using Elliott Wave analysis and fibonacci ratios. Since publishing the newsletter began online in 1998, Woodson Wave Report has been downloaded in twenty-five different countries.

We encourage our subscribers to visit his site at and please see Dale's complete bio following his column.

Dale Woodson

Dale Woodson
Market TA columnist

TIMER DIGEST’S (P.O. BOX 1688, Greenwich, CT. 06836/ 203-629-3503)

















Year 2012



1932 or 1942


Year 2012*



12/6/74 or 8/12/82


Year 2012





.618 = 5803





Complete @ 8062 on 9/21/01





Complete @ 10,673 on 3/19/02





Complete @ 7197 on 10/10/02





Topping, high 10,753 on 2/19/04





 .500 = 6865/ .618 = 5803





Year 2012

* "…it should terminate about the year 2012"

* "...not expected to terminate until about 2012"

R. N. Elliott, Educational Bulletin O

R.N. Elliott, Interpretive Letter No. 17

October 26, 1942.



August 25, 1941.

Primary degree wave 2 down (1987 - 1990) running flat correction.

Primary degree wave 3 up (1990 - 1999)



Primary degree wave 4 down (8/24/99 -?)





It is now safe to say that those early March highs that threatened the highs in the bond market from June of last year represent the entire second wave retracement. Recall that we became concerned about our wave count, as a move above the highs of last June would cause us to rethink that count. The move up surpassed the .618 retracement level. But remember, second waves can retrace up to 100% of the previous first wave. The price action since those highs indicates that the bear market in bonds in back in force and the third wave down is in its initial stages.

In the short term, allow for a counter trend bounce higher (to hold below 116-11). Once that retracement is complete, expect a third of third wave – a powerful thrust to the downside. We will move to a short position in anticipation of that decline. More details and charts in the May newsletter.


While the most recent move up ($433 on 4/1) satisfied the minimum requirement for the fifth wave (a move above the third wave high - $432 on 1/6), we expected one more push up to new highs, then a reversal. From the April 3 report:

“This is a fifth wave and we will need to move to a short position soon…We will remain long gold for one more move up to new highs. After that, prepare for a reversal to the downside.”

To be honest, we expected this move to go a bit higher. Of course, the reversal has occurred without the move higher first. We can count five waves to the downside. While the intermediate and long term direction for gold remains up, for the near term, expect the decline to continue, as the market must correct five waves up. Move to a short position in the gold market. Details and charts will follow in the May report.


As long as the February high of 10,753 holds, the trend remains down in the stock market. Charts and details will follow in the May newsletter.

Positions for rating services:

The “positions for rating services” below are assumed positions taken for rating services such as Timer Digest to rate our newsletter and rank us against other market timing newsletters. While the Elliott wave patterns and fibonacci ratios have implications regarding the overall direction and turning points in the markets, a reader is not justified

in inferring that any trading advice is given. Woodson Wave Report, LLC does not offer specific trading recommendations.

Long-term counts are found on weekly and/or monthly charts and generally cover a time period of years to decades.

Intermediate-term counts are found on daily and/or weekly charts and generally cover a time period of weeks to years.

Short-term counts are found on daily and/or hourly charts and generally cover a time period of days to hours.


Long term: Remain short expecting wave (E) down to new lows.
Intermediate term: Remain short expecting wave (E) down to new lows
Short term: Remain short as wave 2of (E) up is topping. Prepare for wave 3 down. Wave 2 up should not move above 10,753.


Long term: Remain short expecting wave (E) down to new lows
Intermediate term: Remain short expecting wave (E) down to new lows
Short term: Remain short.

S&P 500:

Long term: Remain short expecting wave (E) down to new lows.
Intermediate term: Remain short expecting wave (E) down to new lows
Short term: Remain short.

Bonds: Move to a short position.

Gold: Move to a short position.

Dale Woodson is editor of Woodson Wave Report, a market-timing newsletter. Woodson Wave Report identifies turning point targets in the Dow, NASDAQ, and S&P 500 index as well as the bond and gold markets using Elliott Wave analysis and fibonacci ratios. Since publishing the newsletter began online in 1998, Woodson Wave Report has been downloaded in twenty-five different countries.

Timer Digest rates Woodson Wave Report as the #5 stock market timer and #5 bond market timer for the three-year period from 12/31/98 through 12/31/2001. Woodson broke into the top ten rated stock market timers by placing #7 in the year 2000. He followed that up with a #4 rating for the year in 2001. These ratings were achieved during a period when market timing was extremely difficult as the bull market was turning over to bear and most were caught off guard.

While there is no feeling like catching a turn on the dime, Dale especially enjoys writing the newsletter. He is most proud of the numerous correspondences complimenting him on his writing abilities. He has a real passion for his work. He knows that the market will move in certain Elliott wave patterns and fibonacci sequences. His challenge is to identify those patterns and sequences in advance, while there is still time to profit from them.

Woodson Wave Report offers monthly, quarterly and yearly subscriptions. Newsletters are delivered via email and URL links and are published on the first Friday of every month. Special interim reports are released as market conditions warrant and targets are achieved. All new annual subscribers receive two months free.

You can subscribe to Woodson Wave Report via the secure online order form link below:

Disclaimer: The Woodson Wave Report combines Elliott Wave analysis and Fibonacci ratios to identify turning point targets in the Dow, NASDAQ, S&P 500 cash, bond and gold markets with respect to both price and time. The monthly newsletter is generally released on the first Friday of the month and special interim reports are issued as market conditions warrant and as targets are achieved. The information contained in the report is prepared solely for informational purposes and should not be taken as an offer to buy or sell any investment vehicle. Past performance is no guarantee of future results. Woodson Wave Report is waived of any liabilities.

GOLD RUSH: Golden Blood In the Street/ by John Dowdee, Ph.D., Gold Editor

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Golden Blood In the Street

The old saying is that you should buy when there is “blood on the streets”, meaning you should be a contrarian and buy when everyone else is selling. Last week, the golden street was knee deep in blood as the bear continued to take huge bites from the bull. So if the saying is correct, gold is now a great buying opportunity. However, before you wager your hard earned money, let’s look at some charts.

Bullion opened the week at $395.50, tried to rally to $400 and then the bottom fell out. On Wednesday, gold plummeted from $400 all the way down to $384. But the bear was not finished. On Thursday, the yellow metal fell even further, to a low of $377. On late Thursday and Friday, gold rebounded to close the week at $387.50. As shown on the daily chart, short term gold is in bad shape. It has crashed through support (between 388 and 390) and is now below the 200 day moving average. Bullion is at the lowest level in six months. Not a pretty picture!

On a longer term weekly chart, gold does not look nearly as bad. The bull market began in early 2001 with gold selling for about $255 an ounce. Over the next three years, gold experienced a tremendous bull market, romping all the way to $433 (an increase of over $175 per ounce) with only one major corrections (in early 2003 when gold fell by $50 an ounce). It’s now time for another correction. As shown from the weekly chart, gold has retraced less than 38% of the overall bull market and has retraced about 50% of the last leg up. Neither of these numbers is inconsistent with a correction in a bull market.

So the gold bull, though wounded, may not be dead!

What kind of medicine does the gold bull need to help him recuperate? The dollar rally is looking tired. The dollar has bounced off the underside of the 200 day moving average and the momentum is waning. The MACD is flashing a bearish divergence. So the dollar may be topping and if this is the case, this may be just what the doctor ordered to infuse new strength into gold. If the dollar breaks below support at 88 to 90 and bullion can close above the 200 day moving average at $392, then we have a good chance to see the gold bull recover.

Gold stocks, as measured by the XAU, are in the same boat as gold. The XAU opened the week at 88.88 and began declining almost immediately. Wednesday was a terrible day with gold stocks falling from 86.61 to 81.20, a fall of over 6% in one day! The index then began a slow recovery to end the week at 81.94. As with bullion, the near term chart of the XAU does not provide much encouragement. The index appears to be in free fall. It is the lowest it has been in over a year, sinking well below the 200 day moving average. However, the long term chart is more positive. The bull market in stocks began in late 2000, a little before bullion took off. Since then, the index rose from a low of 41 to a high of 113, an increase of 175%. Along the way there were several significant corrections (of 20 to 30 points) in mid 2002 to early 2003. The last bull leg started in early 2003 with the XAU about 62. As shown from the charts, the XAU has retraced less than 50% of the overall increase since the bull began and has retraced about 62% of the latest leg. As with bullion, both of these of these retracement levels are consistent with a correction in an ongoing bull market. Thus, the bull market in gold stocks may not be as dead as many of the pundits imply.

Where does this leave us? I believe the correction we are experiencing is near the end and within the next few weeks, both gold and stocks will begin to make a slow but steady recovery. By the end of this year, I would expect new highs to be made (gold over $431 and the XAU above 113. However, it is very dangerous to try to catch a falling knife so the conservative approach is to wait until the up trend is re-established. If you are a risk taker and can withstand losses, then you could begin a cautious accumulation.

It should be noted that nothing is for sure when it comes to the stock market (and gold is much more volatile than most equities). I believe the 20 year bear market in precious metals is over. However, the rally we have seen could be a bull trap! The opportunity for exceptional gains is balanced by the agony of potential losses. Only time will tell. As always, we caution that you should never depend on anyone else’s opinion. You should do your own due diligence and evaluate your risk tolerance before making decisions to buy (or sell) any stocks or funds. Best of luck!

MR. SWING'S PLACE: Weekly Swing Trading Ideas / by Larry Swing

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Each week, Mr. Swing analyzes his database of more than 9,200 securities to scan for swing trading opportunities. But be warned: Do not expect a fast way to make money. Mr. Swing is going to show you how you can accumulate small gains weekly, ultimately making money through a disciplined, low-risk trading approach. While he realizes that this short-term swingtrading approach is not for everyone, he hopes that the information given at will be useful to you in the near future...

These are your Swing Trading Opportunities for this week:

Talking Points member - Over the nearly two years that we have carried the Mr. Swing's Place column, Larry's picks have consistently put in great performances. Don't miss out on the full swing-trading content available at Mr. Take advantage of some of the great programs available by clicking here.

Morgan Stanley - MWD (Short) - Chart of the Week
Larry Swing


The financial sector has been under a great deal of pressure recently, as many stocks have fallen ten to twenty percent.  Morgan Stanley (MWD) is amongst the stocks that have been more severely hurt – down ~16.7%.  Meanwhile, the DJ Financial Index is down ~8%, and the DJ Financial Services Index is down ~10%.  However, unlike many declines, this one is apparently not a buying opportunity—financial stocks have shown very little underlying strength as they have fallen; each decline we have watched for a bounce, a suggestion that there exist some investors who believe that the stocks are becoming undervalued.  We have seen no signs of such investors.


Today many financial indices broke below key support levels.  Another small leg down appears likely.


For MWD, the situation is worse.  The stock’s decline resulted in the formation of a Head and Shoulders top.  Consolidation over the past several days has resulted in the secondary formation of a bear flag.  In light of these two bearish patterns, the negative technical picture for the financial sector, and our bearish studies of MWD’s volume, we expect significantly lower prices.


MrSwings Real-Time Stock Charts RISK-FREE TRIAL featuring one-click access to Larry Swing's profit-generating indicators - Force Index, EquiVolume, True Strength Index


Key Levels:


A break below the low of the bear flag (52.03) is the pivot point for the pattern.  The short level is just below that, at 51.97.


The high of the bear flag’s consolidation is 54.72.  A stop slightly above this level would be prudent.  The stop level is 54.76.


MrSwings Real-Time Stock Charts RISK-FREE TRIAL featuring one-click access to Larry Swing's profit-generating indicators - Force Index, EquiVolume, True Strength Index


The pattern’s target is the pivot point plus the pattern low less the pattern high = 2 * 52.03 – 62.83 = 41.23.  However, noting the strong support level at 42, we choose the target to be 42.26 instead.



Mr.Swing DISCLAIMER: Information for the stock observations was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the stock observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the strategies described above. © Copyright 2002, All rights reserved. COPYING AND OR ELECTRONIC TRANSMISSION OF THIS DOCUMENT WITHOUT THE WRITTEN CONSENT OF MRSWING.COM IS A VIOLATION OF THE COPYRIGHT LAW.

THE TRADER'S MINDSET: Catching Significant Trends Equals Big Profits! / by Bennett McDowell, Columnist

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Founder and President of, Bennett started his financial career on Wall Street with the firm J.J. Kenny Co. in 1984 after serving as an officer in the U.S. Navy. Bennett also served as a Retirement Plan Specialist with the Equitable in New York and has investment real estate experience as well. In addition, his 1979 Economics BA degree from Syracuse University in upstate New York gave him a foundation on which he was able to build a solid background in Finance.

Bennett has extensive experience in trading the financial markets and is currently an active trader including day trading the financial futures markets. He also coaches many traders through his company

Considered an expert in technical analysis and complex computer trading platforms and applications, Bennett has educated and helped traders worldwide improve their trading. Bennett is well known for helping traders overcome sabotaging psychological issues that keep them from reaching their full potential. In addition to his educational and coaching abilities, Bennett, a registered securities broker, manages money and trades for clients throughout the United States.

Bennett released his home study course Applied Reality Trading, also known as "ART" in January 2002. His cutting-edge course teaches traders his state of the art Pyramid Trading Points, Money management, and developing the "Trader's Mindset." Bennett is also known for developing The Trader's Assistant - a premier trade-posting record-keeping system for traders, as well as writing and publishing The Survival Guide For Traders, a book on how to set up and organize your trading business.

Bennett provides private consultation/coaching services to many traders throughout the world by telephone, video conferencing, and in person. Working with Bennett, traders spend time focusing on trading system development, trading psychology, and disciplined money management.


The Trader's Mindset Columnist
Catching Significant Trends Equals Big Profits!

Money in trading is made from catching a significant trend. Money lost in trading occurs by missing or being on the wrong side of trends. So the real question is “How do we protect and preserve our trading capital as we position ourselves to catch the next profitable trend?

Significant trends are known to emerge from market consolidations and it is during these consolidations that traders experience “whip-sawing” leading to psychological trauma that can cause havoc with a trader’s life, which can cause the trader to miss the trend altogether!

It is said that markets trend approximately 35% of the time, meaning that 65% of the time they are trend-less. Consolidations are known to occur before many significant market trends and to be a profitable trader you must learn how to exploit these trends while not losing your money when the market is trend-less.

Consolidations: A Textbook Definition

Let’s define a market consolidation. A dictionary definition of a market is “the world of commercial activity where goods and services are bought and sold; without competition there would be no market”. A dictionary definition of a consolidation is “something that has consolidated into a compact mass; combining into a solid mass; an occurrence that results in things being united”. Reading these two text book definitions leads one to believe that a market consolidation is one where the competition between buyers and sellers unite to form a compact mass. A trader’s definition of a market consolidation is one where prices have remained range bound within a narrow price channel.

Is market consolidation an area where little or no new information has come into the market to cause a greater disagreement of value or perceived value which would move prices? And do trends occur because the value or perceived value is changing so much that the price must change to represent the new value? Answering yes to these questions leads to the conclusion that market consolidations are areas where no new value perceptions are being generated. Thus, prices remain “tight” or range bound.

The Nature or Psychology Of Market Consolidations

Consolidations by their very nature can not last too long since they become increasingly unstable with time. Most traders view consolidations as a stabilization of price, but consolidations actually become increasing unstable with time. In fact the longer a market remains consolidated, the more unstable it becomes.

Market consolidations have their own cycles. During their initial formation traders are undecided as to value and the price oscillates. If this condition continues, traders’ perceptions of this asset’s value remain the same until new information enters the market to change perceptions.

Until new information arrives, the consolidation becomes narrower and narrower to a point where the consolidation is now very unstable and this is where new trends are born.

The longer or more mature the consolidation is, the larger the trend usually is as well. Lengthy or mature consolidated markets are so unstable that even just a whisper of new information coming into a consolidated market can make it move, but a shout of information can make it trend fast!

Once you spot a mature consolidation, your trading approach should be to bracket the upper and lower part of the consolidation. This helps to avoid unprofitable “whip-sawing” trades within the consolidation channel caused by insignificant trading reactions from minor market information. It is important that your trading approach not react to every “whisper” of information that the market ultimately finds meaningless.

By bracketing your trade entries above and below the consolidation channel, you automatically eliminate unnecessary losing trades. If you are an aggressive trader who welcomes the additional risk of a few losing trades within the channel to achieve a superior trade entry price, then you should wait for the mature consolidation to get very tight and thus very unstable.

This will increase your odds of successfully timing the next significant trend and therefore reward your aggressive entry approach. Just as important as the length or time of the consolidation is the low Average True Range or volatility of prices in recognizing the mature end of the consolidation before a significant new tend emerges. It is important to note that not all significant trends emerge only from market consolidations. But if you recognize a consolidation in the market, the potential is great for a significant trend to emerge if the consolidation has become so consolidated it is now also become unstable.

Finding & Monitoring Market Consolidations

The first step is to find markets that are in consolidation so you can be ready to trade the breakout when it occurs. To find these consolidated markets, it will be best to scan for markets will low volatility and narrow price movement.  Look for a consolidation with at least 20 price bars before considering it for a potential trade based on "bracketing the high and low of the channel.

Since markets can consolidate for weeks and even months, you will want to monitor several markets simultaneously while they are in consolidation, this way you do not have to wait a long time before entering a trade.

Active traders can use this technique to scan for trade setups, and with 9,000 + stocks the trader can be quite active!  If you’re a day trader, you can scan intraday charts looking for consolidations as well.

Trading Market Consolidations

Once you have identified the consolidation of at least 20 price bars, the next thing to do is to draw a line on the top and the bottom of the consolidation channel effectively "bracketing" the consolidation Then place your long trade entries one-tick above the upper consolidation band, and your short trade entry one-tick below the lower consolidation band.

Where To Place Your Stops

Once the market breaks and begins to trend, stops can be adjusted according to market activity, with the initial stop-loss being placed on the opposite side of the consolidation channel in relation to which way the market started to trend.

Trade Example Combining Bracketing

The stock chart below illustrates a market consolidation in the Nortel’s stock with upper and lower lines drawn in that bracket the consolidation. Trade entries are placed above and below the consolidation. Also note how prices become even more compressed towards the end of the consolidation just before this market begins to trend. This occurs often since markets usually spring from compressed price consolidation.

When the market finally breaks above the channel you should enter your trade one-tick above the upper green colored band or line drawn on the chart above. Your initial stop-loss is placed one-tick under the lower band and adjusted upward as market activity warrants.


Sometimes one good technique is all we need to be profitable traders. Trading from market consolidations may just be the trading technique you have been looking for.

Whether you’re a futures trader, stock traders, day trader or position trader, adding these trading concepts to your trading toolbox should prove worthwhile.

Bennett McDowell, President
Free Video – Trading The Perfect Business!
10755-F Scripps Poway Parkway, #477
San Diego, CA. 92131

Copyrighted © 2003, Inc. All rights reserved.

CONTRARIAN CORNER / by Jeff Weber, Columnist

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As a leading contrary investing expert, Jeff has written own investing book, I Guarantee You Will Buy Low Sell High and Make Money, which shows you when to buy and sell the stocks he recommends in his book. You can order the book by clicking on the title and it comes with a free one-year subscription to his newsletter, one month of coaching articles, and one year free email support.

Jeff Weber of JJJ Investing Services
Jeff Weber
Jeff Weber
Contrarian Columnist

Hey, small investors - are you ready to get educated about investing? Not just the "r's" but real education about basically what you are up against. Critics have rightly complained the "investor education" is little more than self-promotion by the brokers so you think they are kind, wonderful, people who only worry about you - their customer. If you believe that, then you get an F in investing 101. But a ray of hope about getting real "street-wise" education is a possibility. As part of the settlement with the ten largest investment banks, the SEC created a $52.5 million "investor education entity. At first, critics figured it would teach people about stocks - how to buy - rather than warn against perpetual industry abuses on investors. And critics weren't thrilled when a real insider (part of the Problem) was chosen to teach investors the truth. They picked Charles Ellis, an old colleague of SEC Chairman William Donaldson.

At first glance Ellis doesn't look like the guy to lead small investors to the promised land. His selection was criticized as very troubling by a leading investor group. He is a lifetime member on the inside of investing (the part you need protection about). He a former vice-president of Donaldson, Lufkin & Jenrette, founder of a prominent pension fund consulting firm and author of numerous books praised by other insiders. And he isn't making friends with investors by saying he may appoint brokerage execs to the fund's advisory boards - what foxes watching the hen house?

But ye of little faith (I can't blame you) there may be hope yet. He may be inspired choice if - and this is a big if - he practices what he preaches in his books, particularly his best selling Winning the Loser's Game: Timeless Strategies for Successful Investing. Looking at his book shows he does have insightful things to say to help investors against industry abuses.

Here's a real insightful tip - don't trust your broker! Learn the basic rules of the game - your broker's main interests is making money from you - not for you. Ellis said it well in his other book Loser's Game "Don't be confused about stockbrokers. They are usually very nice people, but their job is not to make money for you. Their job is to make money from you." Brokers like to make money. In order for a broker to make $100,000, a broker must make commissions of $300,000. Since the average broker handles about 200 customers worth around $5,000,000, he has to convince these investors to do some buying and selling to make commissions - maybe his need for your commission is important than the advice he gives or is why he is giving you the advice.

Again, the broker knows a lot more than the average investor, so he can overwhelm you with some trendy new investment and you think he is giving you expert advice when the main reason he is giving the advice is to cause you to part with what you know for some new, mysterious investment you don't understand but give in to his or her persuasion.

Here is great advice from Ellis - commodities future are sucker bets with almost no chance for the small investor - only experts should be in this market - avoid like the plague.

I think Ellis goes a bit overboard here about advising investors to not even own stocks - just buy index funds. One thing about them is they make brokers fume because people buying them cost brokers lots in commissions. But just when you thought Ellis was in your corner, he says I have some opinions and I think they're pretty good opinions, but I'm not going to impose them on investor education. I guess investors will just have to wait and see if his "investor education" will really help investors. I would hope so.

Here are three stocks I like this month:

Qlogic - (Nasdaq: QLGC, $27.14)
52 week: High - $58.72 - Low $27.12

QLGC revenues will go up 11% in FY 05 after an anticapted growth of 18% in FY 04. Analysts like management at Qlogic.

Emulex - (NYSE: ELX, $17.48)
52 week: High - $31.30 - Low $17.29

ELX revenues should grow 19% in Fy 05 following the 24% expected gain in FY 04.

Lexar - (Nasdaq: LEXR, $11.03)
52 week: High - $24.49 - Low $4.50

LEXR revenues doubled from 2001 to 2002 - no long-term debt and high S&P IQ score of 102 - better thqn 715 of rated companies.

INSIDE TRACK: Weekly Insider Report / By Jeff Williams

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Jeff Williams is a partner with For the past seven years Jeff has done extensive investment research as a member of an institutional investment team. His background consists of a degree in Finance from the University of South Florida with a minor in Economics. Jeff's everyday activities as an insider stock analyst consist of analyzing data available through a multiple of sources as it applies to all publicly traded companies. With this information he can then make short-term and long-term evaluations on a company’s present and future performance based on insider buying patterns. Each month Jeff will share with you his thoughts on stocks he believes to display the most interesting insider buying patterns.

Jeff Williams
Inside Track Columnist

Interesting Buy Patterns

Open market insider trading activity for AYI April 2004

Acuity Brands, Inc.

Acuity Brands, Inc. operates in two business segments: lighting equipment and specialty products. The lighting equipment segment, operated through Acuity Lighting Group (ALG), manufactures and distributes a variety of fluorescent and non-fluorescent lighting fixtures for markets throughout North America and other foreign markets, primarily western Europe. The specialty products segment, operated through Acuity Specialty Products Group (ASP), produces and distributes cleaning, maintenance, sanitation and water treatment chemicals and other products for customers throughout the United States, Canada and western Europe. In the fiscal year ended August 31, 2002 (fiscal 2002), the lighting equipment segment generated approximately 75% of total revenues, while the specialty products segment provided the remaining 25%.

Mr. Nagel, 45 years old, has served as Executive Vice President and Chief Financial Officer of the Corporation since December 2001. Mr. Nagel was a principal with Jepson Associates, Inc., a private investment company, from 1999 until joining the Corporation. He was Executive Vice President, Chief Financial Officer and Treasurer of Kuhlman Corporation, a diversified industrial manufacturing, from 1993 to 1999. Mr. Nagel is a Certified Public Accountant (inactive).

Interesting that this is Nagel's first purchase despite the fact that he has been with the company since 2001.  Why is he all of a sudden now purchasing $175,000 worth of stock?  We believe he sees improving fundamentals/good news on the way.  He is the CFO, which means he is involved with the daily operations of the company.  He is aware of the revenues and current profit margins. We doubt he would be buying if he saw any trouble ahead.  We expect a strong earnings report based on the purchase and upward pressure on the stock price in the coming months.  

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FRESH PICKS: On the Prowl

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Weekly Stock Picks From Bob Coppo - New Feature!  

Top Stock Picks for Monday, May 3rd, 2004:

Good Trading!

Bob Coppo is Managing Director and Chief Technical Analyst for JNL Financial Consultants, Inc. The company has operated on the internet since 1997 and provides investment advice to both individual and institutional clients. Make sure to visit his site,

1. BBA (Bombay Company, Inc., Retail-Specialty) $5.60 - Buy. There certainly is no shortage of stocks making 52-week lows, and the balance of lows-to-highs across the board suggests to us that the time to go long on many oversold equities is drawing near. Our first pick this week is one of those we believe will be caught up in any coming market bounce, specialty retailer BBA. "The Bombay Company, Inc. designs, sources and markets a line of home accessories, wall decor and furniture through 422 retail stores in 42 states in the United States and nine Canadian provinces, through specialty catalogs and over the Internet principally in the United States and Canada. The Company offers a diverse selection of products consisting of approximately 4,400 stock-keeping units (SKUs), of which over 95% of the product has been designed or styled to Bombay's specifications. Bombay has a fashion component to its product offerings, primarily in the accessory and wall decor areas, which is introduced seasonally." BBA stock hit a 52-week low on Friday, joining 73 other NYSE stocks (compared to just 22 making fresh highs) on the heels of lowered first quarter guidance due to softer-than-planned Easter sales and unexpected charges. BBA revised its forecast down to a loss in the range of $0.13 to $0.16 from a loss ranging from $0.08 to $0.11 and posted 6% lower March same-store sales, vs. a year ago's 30% rise in March same-store sales. All-in-all, not a good day for BBA. Current estimates,.however, still call for fiscal year earnings of a consensus $0.27 per share. This would put the P/E at what we feel is an attractive 20. Looking even further ahead, estimates are for BBA to earn $0.44 the following year, a forward P/E of just 12.7. A number of things caught our eye here in addition to the 52-week low. Insiders have been aquiring the stock all year, a positive sign, at prices higher than today's levels by quite a bit. Also, management numbers are positive, there is no debt on the books and BBA now trades with a miniscule price-to-sales ratio of just 0.35 and is just about even with book value. All that together adds up to a nice intermediate-to-long-term buy. If not tomorrow, then soon. We're waiting to see what the markets do early this week, but would be looking to add BBA on any upward reversal. The stock is clearly oversold here, and, we believe, also undervalued. As a shorter-term trade, we'd look to the pre-selloff 2004 low of $6.30 as an intitial target. Keep in mind, there's no support below here, as the stock is at new lows, so try to await a reversal before entry. Short-term price target: $6.30 (13% gain) Stop loss trigger: $5.20 (7% loss)

BBA Chart

2. WDC (Western Digital Corporation, Computer Storage Devices) $8.08 - Buy. Our second pick for the week ahead is another sold-off play with decent fundamentals. "Western Digital Corporation (WDC) designs, develops, manufactures and markets hard drives. Its hard drives are used in desktop personal computers (PCs), servers, network-attached storage (NAS) devices, video game consoles, digital video recording devices and satellite and cable set-top boxes. The Company's hard drive products include one-inch high, 3.5-inch, form-factor drives with capacities ranging from eight gigabytes (GB) to 250 GB, rotation speeds of 5,400, 7,200 and 10,000 revolutions per minute (RPM) and offer interfaces including enhanced integrated drive electronics (EIDE), serial advanced technology attachment (SATA), 1394/FireWire/i.Link and universal serial bus (USB). WDC sells its products worldwide to computer manufacturers for inclusion in their computer systems or subsystems and to distributors, resellers and retailers." As one of three major players in the market (Seagate, Maxtor are the others), WDC's challenges of late have been in pricing and a glut of drives that shipped late last year, the same problems faced by its competition. Recently, WDC reported a lower quarterly profit on higher revenues - a net incomeof $47.9 million, or $0.22, compared with net income of $54.5 million, or $0.26, a year earlier. Revenue rose to $748.9 million from $705.8 million. Likewise, WDC also forecast earnings per share in the current, fourth quarter, that were below analyst expectations, with revenue higher than expectations - $0.15 to $0.16 on revenue of $700 million to $725 million. Any way you cut the numbers, it looks to us that WDC is undervalued here with a P/E of 10.8 and a forward P/E of just 8.6 in addition to being quite oversold. We like a lot of what we see in the fundamentals here, with strong management numbers of a return on assets of 17.4% and a return on equity of 50.6% with a profit margin of 5.43% and an operating margin of 5.51%. This along with a price-to-sales ratio of just over 0.5 points to the undervalued nature of this one. The chart shows that the selling over the last week came on diminishing volume, a sign we hope indicates that the selling is drying up and the stock will soon reverse. Just like BBA however, be careful not to jump in too soon in case the market continues to get hit early this week, as there's no support built in below this price. Look for a turn with buyers coming in, and then use the low as a stop trigger. We would look at this as an intermediate-term trade, with an initial price target right around the 2004 pre-selloff low of $9.64. Short-term price target: $9.60 (19% gain) Stop loss trigger: $7.60 (6% loss)

WDC Chart

3. RFMD (RF Micro Devices, Inc, Semicon) $7.29 - Buy. Our final pick this week is wireless bellweather RFMD, yet another oversold, undervalued pick for the intermediate term. "RF Micro Devices, Inc. (RFMD) designs, develops, manufactures and markets proprietary radio frequency integrated circuits (RFICs), primarily for wireless communications products and applications. The Company supplies power amplifiers, a critical radio frequency (RF) component in cellular phones. It also manufactures gallium arsenide heterojunction bipolar transistors (GaAs HBT), which offers distinct advantages over other technologies for the manufacture of current and next-generation power amplifiers. RFMD's products are included primarily in cellular phones, base stations, wireless local area networks (WLANs), cable television modems and global positioning systems (GPS)." RFMD continues to grow revenues nicely - for the fiscal year ended 3/31/04, revenues increased 28% to $651.4 million while net income totaled $29.7 million vs. a loss of $9.3M. Last week, however, the stock gapped down and sold off after the company said June quarter earnings would come in slightly short of Wall Street expectations. Apparently, however, the earnings miss is mostly tied to aquisition costs from the company's purchase of Bluetooth provider Silicon Wave. If aquisition costs were removed from the equation, RFMD's numbers would have been right in line with estimates. The company also said it expects sales to rise due to strong demand in the cell telephone market, a market it is a leader in with components in phones from all the biggies - Motorola, Samsung and Nokia. The slam RFMD took last week was a combination of market overreaction to the earnings news and an overall bloodbath in tech that chopped more than 6% off the Nasdaq. Again, we'd wait for a reversal before taking a piece in RFMD. With market conditions as they are and the Fed meeting Tuesday, we'd rather be safe than sorry here. Intermediate term price target: $8.64 (12% gain) Stop loss trigger: $6.80 (6% loss)

RFMD Chart

REITERATE: ELX (Emulex Corporation, Computer Storage Devices) $16.67 - Buy. We kick off the week with a familiar blast-from-the past, Emulex. Most of you will remember the shorting scandal that occured with this stock several years ago, making national news that transcended the business pages. We are looking to catch a falling knife here after the stock sold off Friday following earnings that met expectations and fourth quarter that didn't. "Emulex Corporation designs, develops and supplies Fiber Channel host bus adapters (HBAs), application specific computer chips (ASICs) and embedded firmware and software products that enhance access to, and storage of, electronic data and applications. The Company's products are based on internally developed ASIC and embedded firmware and software technology and offer support for a wide variety of storage area network (SAN) protocols, configurations, system interfaces and operating systems." Friday saw a bloodbath as ELX sold off 11% to levels not seen in more than a year. The numbers weren't so bad, but as is tradtion, The Street reacted to the extreme and drove the stock into the land of the deeply oversold on huge volume. Looking at the cause of the bleeding, ELX said it expects adjusted earnings of $0.25 on revenue of $100 million to $103 million for the fourth quarter ending in June while analysts had expected earnings of $0.26 on revenue of $105.4 million. It also reported fiscal third-quarter net earnings of $14.55 million, or $0.17 per share, compared with a loss of $248 million, or $0.00 per share, in the year-earlier period. Revenue rose to $99 million from $79.6 million a year earlier. The outlook combined with the beating leaves ELX looking extremely attractive to us here, with a forward price-to-earnings ratio of just over 15 for a leader in its space growing revenue at 20%+. Additionally, we like the heavy short position, more than 8% of available shares as of April 8, with a reversal likely to trigger some covering. With the gap down and the stock dredging new lows, keep in mind that there is nothing in the way of support underneath, and so consider waiting for a reversal to emerge before jumping in. On a turn, we'd look first to the March low of $20.35, with a move above that level opening the door to a run at the 50-day MA of $22+. We view this as an intermediate-term trade. Keep a tight stop in place if you intend to time your entry at the bottom.

ELX Chart

As always, do your own research before buying or selling any security. Our recommendations are for informational purposes only and are only our opinions. Make sure to read our Disclaimer

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