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June 6, 2004
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PREMIUM EDITION
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Issue #120
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Latest Updates:
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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 StockmarketTimer.com on the internet since 1997 and provides investment advice to both individual and institutional clients. Make sure to visit his site, StockMarketTimer.com. |
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The Week on Wall Street
Friday's Action: Stocks finished higher Friday, led by Intel's upbeat sales forecast and a strong May employment report. Adding to the positive news was a second day of declining oil prices, with light crude futures closing below $39 per barrel. Major world markets reported higher results on Friday. London's FTSE closed up 0.43%; Frankfurt's DAX closed up 1.14%, and Paris' CAC 40 finished higher by 1.22%. Japan's Nikkei closed up 0.92%, Hong Kong's Hang Seng closed up 0.78%, and Sydney's All Ordinaries finished up 0.03%. In economic news, Non-farm Payrolls in May rose by 248,000 jobs, the Unemployment Rate held steady at 5.6% and Hourly Earnings showed a gain of 0.3%. Volume came in at 1.12 billion shares traded on the NYSE and 1.43 billion shares traded on the Nasdaq. Market breadth was positive, with NYSE advancing issues over declining issues by 1.95, and up volume over down volume by 3.02; Nasdaq advancing issues over declining issues by 1.95, and up volume over down volume by 3.34. Leading sectors were Gold/Silver, +1.97%, Airlines, +1.93% and Broker/Dealers, +1.88%. Laggards were Integrated Oils, -0.53% and Natural Gas, -0.03%. Nasdaq 100 futures closed 13.50 pts higher to settle at 1456.50, while the S&P's settled up 8.30 pts at 1123.20.
Weekly Recap: Stocks finished the holiday-shortened week on a mixed note, despite a number of positive developments. Those included an announcement by OPEC that it will increase its output to help reduce oil prices, strong same-store sales for May, a better than expected mid-quarter forecast from Intel, and a May employment report that pointed to an improving labor market. Other upbeat news on the economic front included the ISM Manufacturing Employment Index, weekly initial jobless claims, the ISM Services Index, and auto and truck sales, all of which provided evidence of a strengthening U.S. economy.
Despite the positive tone of the economy, there wasnt much conviction on the part of buyers. Volume at the NYSE averaged an anemic 1.2 bln shares for the week. Even Fridays robust jobs report failed to inspire investors, as the volume accompanying the advance was the lightest all week. Traders remained skeptical of rising interest rates and geopolitical considerations. Both items served as deterrents last week, with the yield on the 10-yr note rising 12 basis points to 4.77% and terrorists murdering 22 foreign oil industry workers in Khobar, Saudi Arabia. The latter occurred over the holiday weekend and led to a rally in the energy market where crude oil futures hit a new record high on Wednesday of $42.45/bbl.
For the week, the Dow gained +0.5%, the S&P 500 finished +0.2% higher, while the Nasdaq slipped -0.4%. The small cap Russell 2000 fell -0.1%. Next week, both the economic and earnings calendars are rather limited. Trading volume is expected to pick up somewhat, but is likely to remain below average as the summer vacation season gets underway.
The Housing Bubble: Last Wednesday's MBA Mortgage Applications Survey was not a particularly bullish report for the housing market. The MBA index for mortgage applications declined by 1.2% to 624.6, led by a decline in the refi index. The purchase index increased modestly. Mortgage rates declined slightly, but remain well above where they stood a few weeks ago, softening the overall demand for mortgages. Mortgage interest rates are expected to rise further, slowing the housing market in the coming quarters.
But to put the above report in perspective, the chart below indicates that real residential investment has jumped far above both its historical trend and its cyclical channel, suggesting that a bubble exists in residential real estate. The data for this chart stop at the beginning of 2003, but we know investment in housing increased by 8.8% last year. This is a historically high rate of construction, but far from a record rate increase. However, 2003 marks the ninth year in a row that housing investment was positive, the first time that has ever occurred in the history of the statistic.
The US housing bubble appears similar to Japan's real estate bubble of a few years ago. Japan had a stock market bubble in the 1980s that was very similar to the U.S. stock market bubble of the 1990s. As the Japanese stock market started to burst, the real estate market continued to bubble. Japanese real estate prices rose for almost two years after the stock market crashed, with prices staying above pre-crash levels for more than five years. The boom in home construction continued for nearly six years after the stock market crash. Since the real estate bubble peak, prices for Japanese commercial, industrial, and residential real estate continue to fall and are now below 1985 levels. The prospect of higher interest rates in the US could well trigger a similar bubble burst in the U.S. real estate market, resulting in foreclosure sales, bankruptcies and mortgage bank failures.
More on SMT's Market Trend Indicator: Last week's spotlight on our Market Trend Indicator (MTI) resulted in a flood of inquiries requesting more detail. The graph below shows the intermediate term trend of the general market (MTI). The trend is determined by the slope of the blue line shown on the graph. Changes in trend direction are indicated when the blue trend line crosses over the red moving average line.
The Dominant Market Cycle (DMC) is shown at the bottom of the graph. Cycle lengths are calculated from top to top and from top to bottom. The DMC is useful in predicting the next trend change date. Trend changes may also occur around half cycle dates.
Key Reversal Points are shown as circles on the line graph. Key points will often act as important support and resistance levels.
The MTI has consistently out-performed a buy-and-hold strategy. The indicator is updated daily and is available to subscribers of our Basic Service. To learn more about the MTI and the other features included in this service, click HERE.
The COT Report: The latest Commitments of Traders report from the CFTC shows that Commercial Hedgers bought some 5,000 S&P 500 futures contracts last week to bring their net short position to -15,016 contracts. Large Traders remained net short -42,501 contracts, with the entire offsetting net long position of +57,517 contracts held by Small Traders, the so-called "weak hands". For the Nasdaq 100 futures, Commercials bought some 2,900 contracts to bring their net long position to +25,160 contracts. Small Traders were net short -20,270 contracts in the Nasdaq. Commercial action in Dow futures saw the smart money buy some 50 contracts to bring their position to net short -996 contracts.
Commercial Hedgers were better buyers in the S&P's last week but remained net short, while Small Traders increased their net long position. For the intermediate term, their opposing positions should be considered bearish.
Sentiment Surveys: The latest Investors Intelligence survey showed that the percentage of bullish newsletter writers came in at 45.1%, while the percentage of bears was 24.5%. The bullish ratio (bulls/bulls +bears) was 64.8%.
The latest AAII survey showed a decrease to 33% bulls, and a decrease to 27% bears. The bullish ratio came in at 55%, while the 4-week moving average is 48%. 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 63%, 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, but the S&P's had a better chance of closing higher on the day. The S&P's gapped up at the open on the favorable jobs report and did close higher. Friday's price action was mixed, so we don't have a clear directional bias for Monday. Buyers were unable to hold the line Friday, and we saw the Naz make an intra-day reversal, closing on it's low for the day. That's a short-term bearish sign. In fact, trading was much less impressive than the closing numbers indicated. Volume was extremely light on both the NYSE and the NASD. Usually, an emerging up-trend will move on increasing volume, and that isn't happening, at least so far. Both the SPX and the NDX topped out Friday at trendline resistance before settling lower at the close. The daily stochastics lines are rolling over from overbought territory, suggesting that the path of least resistance is to the downside.
SMT's Pivot Point Forecast; 1-2 Weeks: Our Pivot Point RS indicator is currently on a SELL signal. Our next Pivot Point is forecast to occur on or near June 4th.
The 60-min SPX chart below shows that the StochRSI indicator is in the NEUTRAL zone. For Monday, resistance for the S&P's comes in at 1130.50 and then 1137. Support lies at 1116.50 and then 1109. For the Naz, resistance comes in at 1465.50 and then 1479. Support lies at 1446.50 and then 1441.
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 positive  and trended slightly higher on Friday.
Good Trading!
Charts and data appearing in today's column are courtesy of:
StockCharts.com
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Last week's Fresh Picks split the line once again with one stock hitting our stop-loss trigger and the other pushing to within pennies of our target price.
Healthcare play CURE hit the tight suggested stop loss trigger for a 3% loss while biotech pick CERS went the other direction and closed out the week on escalating volume for a nice gain of 8%. This one just seems to be picking up solid momentum so we'd look for it to run through out initial target early this week.
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 comments@talkingpoints.com.
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| TECH WATCH: New Chip Sales Momentum a Boon for the Semiconductor Sector / 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 (http://www.optionetics.com/) 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 - Optionetics.com ~ Your Options Education Site
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New Chip Sales Momentum a Boon for the Semiconductor Sector
By Jeff Neal
Optionetics
Recent sales data released by the Semiconductor Industry Association showed better-than-expected numbers in the chip arena. Revenue generated by semiconductor sales in the first quarter increased more than 34 percent from the previous year and it even showed an improvement from the fourth quarter of last year, which is really significant considering that the fourth quarter represents holiday sales typically the heaviest of the year. This indicates a definite increase in business spending which is indeed great news going forward for the semiconductor industry.
The forecast for the rest of 2004 seems to be even rosier with personal computer sales to increase 15 percent over the 2003 figures. The numbers for cellphone and DVD sales are also to increase at a 16 percent and 35 percent clip respectively according to the Semiconductor Industry Association. The increases are primarily attributed to a higher level of corporate spending even though consumer spending still remains strong.
The key fact is that after years of depressed business spending levels we are finally seeing an uptick. A recent information technology poll found most IT executives plan to expand their technology budgets almost 7 percent on average for 2004. The target of much of this spending will be personal computers and other electronic devices fueling further growth for the chip sector. This current growth is further evidenced by the fact that semiconductor plants are operating in excess of 92 percent capacity. This is a huge improvement from the dismal 60 percentile numbers seen previously at the bottom of the business cycle. This also indicates that semiconductor sales are terrific for all segments of the industry.
Economists also have taken note of the good news related to increased chip sales. They have historically considered semiconductor sales a great measuring stick for technology spending due to the fact that semiconductor components are found in virtually every electronic device. This is why this important data is monitored regularly to forecast corporate spending and determine current trends.
Many major technology companies has seen their first quarter earnings exceed expectations leading other sectors. For example, non-tech companies saw a revenue increase of around 14 percent while technology companies posted an average just over 21 percent, according to Zacks Investment Research. This has prompted many chip industry experts to say that the renewed technology spending will start a new prosperity cycle.
Of course there are still major economic issues that still loom large on the horizon and have the potential of raining on the parade. One such concern is the ongoing conflict in Iraq which generates an environment of uncertainty which consequently makes many business executives nervous and could deter spending. In addition, the ongoing chatter about inflation, which if it shows signs of getting out of hand will certainly spur interest rate hikes which, could dampen economic growth. Finally, there is always the risk that the chip sector becomes overly confident and increases inventories way beyond needed levels especially given the cyclical nature of many semiconductor companies.
However, as of now, the chip sector indeed appears to have a very healthy 2004 to look forward to. This includes the major blue chip semiconductor companies such as Intel to the small to mid-cap firms like Skyworks. Each type of company should profit handsomely in 2004 especially if corporate spending hits the forecasted levels.
Happy Trading.
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| 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 http://www.woodsonwave.com and please see Dale's complete bio following his column.
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TIMER DIGEST’S (P.O. BOX 1688, Greenwich, CT. 06836/ 203-629-3503)
#9 LONG TERM STOCK MARKET TIMER FOR THE YEAR 2003.
#4 GOLD MARKET TIMER FOR THE YEAR 2003.
#8 STOCK MARKET TIMER FOR THE FIVE-YEAR PERIOD OF 12/31/98- 12/31/03.
#6 STOCK MARKET TIMER FOR THREE-YEAR PERIOD OF 12/29/00- 12/31/03.
#4 STOCK MARKET TIMER FOR THREE-YEAR PERIOD OF 12/31/99- 12/31/02.
#5 STOCK MARKET TIMER FOR THREE-YEAR PERIOD OF 12/31/98- 12/31/01.
#4 STOCK MARKET TIMER FOR THE YEAR 2001.
#7 STOCK MARKET TIMER FOR THE YEAR 2000.
#5 BOND MARKET TIMER FOR THREE-YEAR PERIOD OF 12/31/99- 12/31/02.
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DOW
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WAVE DEGREE
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COUNT
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FROM
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DIRECTION
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TARGET
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GRAND
SUPERCYCLE
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THREE
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1784
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UP
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Year 2012
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SUPERCYCLE
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(V)
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1932 or 1942
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UP
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Year 2012*
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CYCLE
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V
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12/6/74 or 8/12/82
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UP
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Year 2012
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PRIMARY
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4
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8/24/99
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DOWN
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.618 = 5803
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INTERMEDIATE
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(A)
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8/24/99
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DOWN
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Complete @ 8062 on 9/21/01
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(B)
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9/21/01
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UP
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Complete @ 10,673 on 3/19/02
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(C)
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3/19/02
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DOWN
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Complete @ 7197 on 10/10/02
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(D)
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10/10/02
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UP
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Topping, high 10,753 on 2/19/04
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(E)
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12/31/03
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DOWN
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.500 = 6865/ .618 = 5803
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PRIMARY
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5
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NOT YET
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UP
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Year 2012
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* "…it should terminate about the year 2012"
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* "...not expected to terminate until about 2012"
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R. N. Elliott, Educational Bulletin O
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R.N. Elliott, Interpretive Letter No. 17
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October 26, 1942.
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August 25, 1941.
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Primary degree wave 2 down (1987 - 1990) running flat correction.
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Primary degree wave 3 up (1990 - 1999)
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Primary degree wave 4 down (8/24/99 -?)
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THIRD WAVE DOWN STILL UNFOLDING
In our blueprint for wave (E) down in the May 10 report, we had proposed an ideal wave structure that labeled this third wave as complete today, May 18, 2004. Wave one came to completion a fibonacci 34 days after the wave (D) high on 3/24/04. A fibonacci 89 days from that high marks today, May 18, 2004. As I write this at midday, the market appears stuck in a fourth wave, which upon completion, will yield to wave five down. The end of this third wave is near and should come to completion within the next day or so.
The May 13 email alert noted that the Dow had just completed wave iii of v of 3 down. The chart above illustrates that point. Of course, third waves are always followed by fourth waves. Note that the fourth wave high should hold below the previous first wave low. In this case, that mark is 10,285. The fibonacci retracement levels for this fourth wave remain as stated in the May 13 email alert at 10,055 and 10,180.
At a minimum, the wave v of 3 should break below the 9853 low of wave iii for completion. Wave 3 will gain equality with wave 1 at Dow 9788 and this third wave will gain a fibonacci 1.1618 ratio to wave one at Dow 9326.
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: http://www.woodsonwave.com/orderform.html
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.
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| GOLD RUSH: Golden Base/ by John Dowdee, Ph.D., Gold Editor |
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Golden Base
Last week, gold continued to build a base below the psychologically important $400 level. The metal opened at $395.60, sprinted upward to $399.80 and then slumped to a low of $385.50 before closing at $391.70. The gold action mirrored the dollar, which also traded in a tight region between 88.38 and 89.47. The dollar slumped on Friday to close at 88.54, near the bottom of range.
The percentage change chart provides some valuable insights, showing that gold and the dollar have been negatively correlated for over three years. The chart starts in April of 2001 (the beginning of the gold bull market). Since that time, gold has risen over 50% while the dollar has declined by almost 25%. Although not always the case, the tight coupling between the greenback and the yellow metal does not show any signs of abating.
Gold stocks, as measured by the XAU index, are still technically weak and did not have a good week. The index opened the holiday shortened week at 90.39, increased to the 50 day moving average line, and then bounced off, sinking to 85.50 before recovering to close at 87.47.
Where does this action leave us? I believe gold is building a base from which another assault on the $400 level is likely. It may take several weeks for the bull to gain sufficient strength for another attack. If gold can surpass $400, then we should have a good summer but if bullion falls below $370, then look out for severe storms.
Last week we discussed how Coeur d’Alene Mines (CDE) was attempting to takeover Wheaton River (WHT). The board of WHT was quick to reject the unsolicited bid, saying in effect that they had no desire to merge with a silver mine, especially one that was losing money. As the gold bull market gathers momentum, we should see more and more merger offers. With the tremendous bear market of the 80s and 90s, exploration efforts were severely curtailed, leaving a dearth of new mines. Now, to fast track growth, companies will have to purchase additional assets rather than relying on new discoveries.
In summary, I am still cautiously optimistic about the precious metals. My portfolio is currently on hold—I am not buying or selling until I can see a clearer trend. As with all financial endeavors, there are no guarantees. Gold offers the opportunity for exceptional gains but at the same time, this potential reward is offset by the agony of prospective losses. As always, we advise you to 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!
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| 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 MrSWING.com will be useful to you in the near future...
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These are your Swing Trading Opportunities for this week:
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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. Swing.com. Take advantage of some of the great programs available by clicking here.
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Long Swings:
bullish
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SWINGS
^ click here
BSX,Boston Scientific
IWM,iShares Russell 2000 Index Tr
GLW,Corning Inc
RHAT,Red Hat Inc
ASKJ,ASK Jeeves
MAV20 >=500000 AND CLOSE>12 AND FORCE3<= 0 AND FORCE13>=0 AND ADX10>30 AND HIGH < HIGH1 and HIGH1 < HIGH2 AND CLOSE > SMAC10 and CLOSE > SMAC20
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Short Swings:
bearish
what
is
short
selling?
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SWINGS
^ click here
T,AT&T Corp
VZ,Verizon Communications
MAV20 >=500000 AND CLOSE>12 AND FORCE3>=0 AND FORCE13<=0 AND ADX10>30 AND LOW >LOW1 and LOW1 > LOW2 AND CLOSE < SMAC10 and CLOSE < SMAC20 |
WINDOW
^ click here
BSX,Boston Scientific
RIMM,Research in Motion
NVLS,Novellus Systems
UTSI,UTStarcom Inc
GILD,Gilead Sciences
MAV20 >=500000 AND CLOSE>7 AND ADX10 > 30 AND PDI10 > MDI10 AND HIGH < SMAC5 |
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WINDOW
^ click here
T,AT&T Corp
ADM,Archer-Daniels-Midland
MAV20 >=500000 AND CLOSE>7 AND ADX10 > 30 AND PDI10 < MDI10 AND LOW > SMAC5 |
1-2-3-4
^ click here
BSX,Boston Scientific
RHAT,Red Hat Inc
QLGC,QLogic Corp
DNA,Genentech Inc
IMCL,ImClone Systems
MAV20 >=500000 AND CLOSE>12 AND ( ADX10+ ADX20)/2 > 30 AND ( PDI10+ PDI20)>( MDI10+ MDI20) AND LOW< LOW1 and LOW1< LOW2 AND HIGH< HIGH1 and HIGH1< HIGH2 |
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1-2-3-4
^ click here
T,AT&T Corp
SYMC,Symantec Corp
ADM,Archer-Daniels-Midland
BLTI,BIOLASE Technology
MAV20 >=500000 AND CLOSE>12 AND ( ADX10+ ADX20)/2 > 30 AND ( PDI10+ PDI20)<( MDI10+ MDI20) AND LOW> LOW1 and LOW1> LOW2 AND HIGH> HIGH1 and HIGH1> HIGH2
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CROSS
^ click here
IWM,iShares Russell 2000 Index Tr
RHAT,Red Hat Inc
AA,Alcoa Inc
FCX,Freept McMoRan Copper&GoldB
DOW,Dow Chemical
MAV20 >= 500000 AND CLOSE >12 AND SMAC5 > SMAC15 AND CLOSE < SMAC5 AND CLOSE > SMAC15 AND HIGH<HIGH1 AND CLOSE > OPEN |
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CROSS
^ click here
ADP,Automatic Data Proc
MYL,Mylan Labs
CPB,Campbell Soup
CZN,Citizens Communications
QLTI,QLT Inc
MAV20 >=500000 AND CLOSE>12 AND SMAC5< SMAC15 AND CLOSE> SMAC5 AND CLOSE < SMAC15 and LOW > LOW1 and CLOSE < OPEN
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REVIVAL
^ click here
BNI,Burlington Northn Santa Fe
KMG,Kerr-McGee
CKFR,CheckFree Corp
KROL,Kroll Inc
MDG,Meridian Gold
MAV20 >=500000 AND CLOSE>12 AND (CLOSE1 - LOW1) <= 0.1 * ( HIGH1- LOW1) AND ( CLOSE - LOW) >= 0.95* ( HIGH- LOW) AND CLOSE > SMAC15 AND CLOSE > SMAC50 |
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REVIVAL
^ click here
0
MAV20 >=500000 AND CLOSE>12 AND( CLOSE1 - LOW1) >= 0.9 * ( HIGH1- LOW1) AND ( CLOSE - LOW) <= 0.1 * ( HIGH- LOW) AND CLOSE< SMAC15 AND CLOSE < SMAC50 |
REVERSE
^ click here
0
MAV20 >=500000 AND CLOSE>12 AND HIGH2 > HIGH1 AND HIGH1 > HIGH AND LOW2 > LOW1 AND LOW1 > LOW AND CLOSE2 <= OPEN2 AND CLOSE1 <= OPEN1 AND CLOSE >= OPEN AND VOLUME>1.5* MAV20 |
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REVERSE
^ click here
0
MAV20 >=500000 AND CLOSE>12 AND HIGH2 < HIGH1 AND HIGH1 < HIGH AND LOW2 < LOW1 AND LOW1 < LOW AND CLOSE2 >= OPEN2 AND CLOSE1 >= OPEN1 AND CLOSE <= OPEN AND VOLUME>1.5* MAV20 |
TRIANGLE
^ click here
ERES,eResearchTechnology Inc
CEPH,Cephalon Inc
LNC,Lincoln Natl Corp
PAAS,Pan Amer Silver
FAF,First American
MAV20 >=500000 AND CLOSE>12 AND CLOSE> SMAC20 AND HIGH2 > HIGH1 AND HIGH2 > HIGH AND LOW2 < LOW1 AND LOW2 < LOW AND HIGH1 > HIGH AND LOW1 < LOW |
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TRIANGLE
^ click here
CAG,ConAgra Foods
MAV20 >=500000 AND CLOSE>12 AND CLOSE < SMAC20 AND HIGH2 > HIGH1 AND HIGH2 > HIGH AND LOW2 < LOW1 AND LOW2 < LOW AND HIGH1 > HIGH AND LOW1 < LOW |
BREAKOUTS
^ click here
JBHT,Hunt(J.B.)Transport
SHFL,Shuffle Master
NUTR,Nutraceutical Intl
ITRI,Itron Inc
LACO,Lakes Entertainment
MAV20 >=200000 AND CLOSE>7 AND HIGH>=MAX40 and HIGH1 <> MAX40_1 AND VOLUME>1.5 * MAV20 AND CLOSE > OPEN AND VOLUME1 < MAV20 and ( ( CLOSE - LOW ) ) >=0.75*( HIGH - LOW ) |
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BREAKDOWNS
^ click here
MDCO,Medicines Co
ETH,Ethan Allen Interiors
MAV20 >=200000 AND CLOSE>7 AND LOW<=MIN40 AND LOW1<> MIN40_1 and VOLUME>2*MAV20 AND CLOSE < OPEN AND VOLUME1 < MAV20 and ( ( CLOSE - LOW ) ) <=0.25*( HIGH - LOW) |
REVERSALS
^ click here
RDEN,Elizabeth Arden
MYGN,Myriad Genetics
MAV20 >=200000 AND CLOSE>12 AND LOW <= MIN40_1 AND VOLUME>2* MAV20 AND CLOSE > OPEN |
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REVERSALS
^ click here
0
MAV20 >=200000 AND CLOSE>12 AND HIGH >= MAX40_1 AND VOLUME>2* MAV20 AND CLOSE < OPEN |
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REVIVAL (Track1) + REVERSE (Track2) + TRIANGLE (Track3) are different scans developed by MrSwing.
Try for yourself to find the LIST that fits you the BEST...
Tracks, Breakouts & Reversals are explained in our new section called: SWINGLAB...
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REVIVAL (Track1) + REVERSE (Track2) + TRIANGLE (Track3) are different scans developed by MrSwing.
Try for yourself to find the LIST that fits you the BEST...
Tracks, Breakouts & Reversals are e explained in our new section called: SWINGLAB...
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FBN (Short) - Chart of the Week
Furniture Brands International Inc. has been selected as one of my top (short) swing ideas for this week. To reduce your capital outlay and increase your leverage, I recommend buying this Company’s put options to maximize short-term profitability. Please read on for more swing details…
Furniture Brands International Inc. (NYSE:FBN)
Industry: Consumer Cyclicals Sector: Furniture & Fixtures
Employees: 20,250 Market Cap: 1.42 Billion
Institutional Ownership: 95.0%
Insider Ownership: 9.55%
Shares Issued & Out: 56.1 Million
Present Short Position: 2.25 million
Recommended Option Swing Play:
Company Information: www.furniturebrands.com
Option Information: www.optionsxpress.com
Option Symbol: FBNRE Type: PUT Exchange: AMEX
Strike Month: JUNE 2004 Strike Price: 25.00
Swing Trade Information:
Trade Strategy: Buy Put Options (Short-Term : Bearish)
Trade Targets: Common (5%) / Option (50%+)
Trade Composition: 40 % Technical / 60 % Fundamental
Trade Duration: 1 to 7 trading sessions
Risk/s: strong market rally; pre-mature short covering; sector (broad) short covering
Entry Strategy: Buy FBNRE When FBN Trades Below $24.50
I recommend that traders buy the put options (symbol:FBNRE) when the underlying common stock (symbol:FBN) trades below $24.50.
Exit Strategy: Sell FBNRE When FBN Trades Down 5%
I recommend that traders close out their put option positions once the underlying common (FBN) trades down 5% from your opening position. My short-term target on this stock is $22.65; mid-term $20.14.
“If” FBN gaps lower on market opening Friday June 4th., wait for short covering in first 15 minutes then initate your put option positions. You should be buying your put option positions on price strength, about 15-30 minutes after market opening.
Stop-Loss: Place a 3% Mental Stop-Loss Limit: (Based On The Common )
If the common stock rises 3% above the equivalent entry price of your options, I recommend selling all of your options “at market” to minimize losses.
Note: You should move your mental stop loss down as the common stock falls. The best way to protect your intra-day profits and minimize potential loss, is to keep your stop-loss about 3% from the common’s intra-day low price.
Urgent: Don’t forget to write down the equivalent entry and target price for the underlying common stock, as soon as you purchase your options. It is much easier for novice option traders to buy or sell these options based strictly on the price or movement of the underlying common stock.
Risk/s strong market conditions; sector price strength
Need More Help: *also see Larry’s trading tips at the bottom*
Business Summary:
Furniture Brands International, Inc. is a leading manufacturer (largest U.S. home furnishing manufacturer) of residential furniture in the United States. For the three months ended 3/04, Furniture Brands’ revenues rose 7% to $658.5 million, while net income rose 14% to $33.2 million. Revenues reflected improved results of Thomasville, Drexel Heritage and Henderson locations. The Company’s net income reflected lower interest expenses.
Primary Trade Catalyst/s:
1. Company Warns On Q2 Guidance
Furniture Brands (FBN) announced late Thursday June 3rd (after-hours) that they were lowering their revenue and earnings outlook for the second-quarter of 2004, citing substantially weaker demand at each of its six operating companies and identifying an industry-wide slowdown in consumer sales. Furniture Brands said they expect earnings per-share for Q2 to come in at 37 cents to 39 cents, down considerably from previous estimates and/or forecasts of 44 cents to 48 cents. These estimates include a $0.04 charge for closing of facilties.
"Notwithstanding the strong order activity in the first quarter and highly successful results from the April Home Furnishings Market, we have recently seen substantially weaker demand levels at each of our operating companies," said Furniture Brands' CEO W.G. Holliman. The company also noted it was concerned about increasing energy costs and uncertainties in the financial markets. Also, Furniture Brands will report second-quarter results on July 28.
2. Multiple Downward Earnings Revisions/ Weak Earnings Momentum
FBN’s has had 6 revenue revisions and 4 earnings revisions to the downside in the last 7 business days from analysts. The Company’s (average) earnings per share estimate for Q2 of 04’ from 8 different Wallstreet Analysts, has dropped 27% from $0.52 to $0.38 in the last 60 days. FBN’s Q2 earnings are estimated to fall by 10% from $0.42 per share in Q2 of 2003 to $0.38 per share in Q2 of 04’, which is about 200% below the industry average growth rate for Q2 of 04.
3. Weakening Analyst Confidence
The average Wallstreet Analyst recommendation on FBN has fallen from 1.44 to 2.00. This is a considerable drop as you can see from the analyst rating scale below:
(Strong Buy) 1.0 - 5.0 (Strong Sell). This is a 39% drop in analyst rating confidence in the last 30 business days. Moreover, FBN has been downgraded by Raymond James on 5/13/04 and downgraded by J.P. Morgan on 5/5/04. I am expecting one or more analyst downgrades to manifest in upcoming trading sessions as well.
4. Multiple Downgrades In Sector
Several companies in the furniture and fixtures industry have been down graded by Wallstreet Analysts in the last 30 business days, of which include: Lazyboy; Stanley Furniture; Flexsteel Industries; and Ethan Allan. Also, on May 25th. 2004 UBS downgraded 4 furniture stocks and lowered the price target on 4 companies, including FBN; citing weakening business trends.
5. Overvalued Fundamentally
Based on my fundamental research of Furniture Brands Int’l, I believe FBN is currently OVERVALUED. FBN’s price earnings growth ratio (which divides its current p/e ratio with its earnings growth rate) is 25% above the average Company peg ratio within its industry. FBN’s peg ratio is about 0.90 versus an industry average of 0.66. Usually the lower the peg ratio the better, it most instances. FBN’s p/e ratio is also 12.6; 40% above the industry average of 9.2.
6. Overvalued Technically
Based on my technical analysis of FBN, my research indicates the stock is only 25% oversold in the short-term, leaving plenty of room for our put option swing strategy. FBN’s relative strength (RSI) indicator, Commodity Channel Index, and Average Directional Index (ADX) are revealing sell signals. The stock’s has bearish 15, 45, and 100 day trends and is close to testing new 52 week lows at
$22.51. FBN closed down $1.48 on 200 shares volume after-hours.
*A break through the stock’s 52 week low, on high volume, will reveal a “Sell Signal” to tech traders and will present an excellent opportunity for initiating our put option positions.
7. Good News Coverage (Recent)
In the last 48 hours FBN has appeared in news articles written from the following sources: CBS Marketwatch “Stocks To Watch”; StreetInsider.com; Business Wire; Knobias.com; CSFB; Briefing.com; and Comtex.
8. Rising Sentiment For Put Options/ Fair Liquidity
The stock’s current put to call volume ratio and its current put to call open interest ratio have risen in recent days, indicating falling or bearish investor sentiment in the short term. When these ratios fall in tandem, investor sentiment or demand for FBN’s put options improves. FBN’s current put to call volume ratio is 0.88 and its p/c open interest ratio is 0.29.
FBN’s common shares are providing good liquidity for investors with a 10-day average volume at 656,000 shares. FBN’s option liquidity is low to fair with total open interest on FBN’s puts is steady at 789 contracts, while total open interest on FBN’s calls are 2,767 contracts. So please stick to my recommended put option strike price of 25.00, or you may run into liquidity problems.
Fundamental Summary:
2001 2002 2003 2004 2005
Revenue: (mil.) $1891. $2397. $2367. (forecast)
Earnings Per Share: 1.13 2.10 1.68 2.09 2.53
* the firm’s 5 year revenue and earnings growth rates are 3.85% and –1.58%, respectively. Both values are well below industry and sector averages.
Swing Alerts:
“Sell Signal” Potential: Break-Out Below 52 Week Low at $22.51
New 26 Week Low: May 3/04
Negative 8/17/0 Week MACD Break-Out: After-Hours (May 3/04)
Negative 30/15 Day Stochastics Break-Out: After-Hours (May 3/04
Technical Statistics:
Recent Close: $25.35 (-0.40) on 614,100 shares traded
After-Hours Close: $25.35 (-1.48) on only 200 shares traded
10-Day Average Volume: 656,000 shares (Good Liquidity)
Short Term Indicators: 80% Sell Signal (Very-Bearish)
Investor Sentiment: Put/Call Volume Ratio= 0.88 (Neutral Bearish)
9-Day RSI: 30.2 and falling (Bearish)
Short Position Of Share Float: 7.7% (Very Bullish)
Average Analyst Recommendation: 1.9 (Bullish)
Overall Rating: Bearish
Larry’s Tips For Trading Success:
1. Swing trading is a numbers game. So it is important to maximize your winners and minimize your losers. Don’t be discouraged by the losers, they will come.
2. Please do not deviate from my recommended swing trade strategy, unless you are an experienced options trader.
3. I do not recommend using stop-loss orders on options, as they are often too volatile. Instead, I recommend that you use mental stops based on the underlying price of the common. Always move your stop up as your position appreciates.
4. “If” the common stock trades above the my set target price, sell all of your options at market to lock-in your profit. Follow my exit strategy and resist the tendency of getting greedy!
5. Practice buying on weakness and selling on strength, if possible.
6. In consolidating or downward markets: always take your option profits off the table once your target price is reached. Do not risk your profit in these conditions.
7. In bullish/bearish market conditions: always let your winners run and cut your losers short. Hence, once your original option position doubles in price, sell only half of your original position. Then try to repeat this process for every additional 100% increase in option price. This will ensure that you truly do buy low and sell high, and even higher yet.
** Note: we are in consolidating markets at present, so cut your winners short at the recommended target price, please.
Past, Active “Swing Ideas”: HOV; CMVT; NAVR; ARO; UTEK; INTU
Raised Guidance May 3/04: BEBE; COO; DIOD; RAE; SMDI; SRE
Lowered Guidance May 3/04: CBK; IR; PIR; POWL
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>TRADE in the DIRECTION OF THE MARKET<
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| 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 MRSWING.com 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, MrSwing.com. 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: Don't Lose Your Perspective / by Bennett McDowell, Columnist |
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Founder and President of TradersCoach.com, 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 TradersCoach.com.
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.
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Don’t Lose Your Perspective!
In counseling financial traders, I have noticed an interesting condition that occurs in their learning process.
The condition usually presents itself after a trade where a large loss occurs. Symptoms occur when the trader feels a loss was serious thus causing feelings of inadequateness and feeling sorry for themselves. The trader feels crushed, frustrated, victimized, and guilty about their large loss. Even a string of smaller losses can cause this condition as well, but it is usually large losses that cause it. I call this condition, “Losing Your Perspective.”
At this crucial stage, the trader must not lose their perspective, for if they do, they spiral into a state of depression making it much more difficult to recover. At this point, many traders give up on trading. Before the problem gets this far, traders need to either seek help, or be emotionally strong enough to help themselves.
Losing your perspective is worse than the money you lost! Why? Because losing your perspective is similar to losing your soul. You are all you have, so if you give up on yourself by losing your perspective, you have failed! You only fail if you give up! Many traders that lose their perspective begin to feel like total losers not only in trading but in life. It is sad to see traders that have lost their soul because they lost money on a trade!
Here are a few guidelines to help keep you from losing your perspective.
- Trade only with money you afford to risk
- Always use stop-losses when trading
- Expect some losses and keep them small
- Stay objective
- Enjoy the process of trading and learning to trade
- Be able to laugh at yourself
- Have balance in your life
- Have activities outside of trading
- Don’t think about trading all the time
- Focus on skill development, not money
- Be humble
- Let go and have fun trading
These points all have one major objective, to segregate trading into a manageable segment of your life and not make trading your entire life. This way, you stay objective, balanced, and fresh when trading. This is much healthier than making trading all you have in your life. Usually a well balanced person will outperform an unbalanced person whether it be trading, athletics, or a business venture.
It is good to be a focused trader. This focus gives us the energy and drive to excel, but be careful and look for the signs of becoming obsessed with trading. You do not want the obsession to take over your soul. For as soon as it does, you are setting yourself up for a big fall because trading or any endeavor will never be able to fill the void that is causing your obsession. Obsessions usually occur when personalities lack self esteem.
So remember, never lose your perspective. But if you feel you are, then immediately take some time off from trading and begin to follow the guidelines above to regain your soul and confidence.
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| CONTRARIAN CORNER / by Jeff Weber, Columnist |
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The Best Seat on the Floor
I will now tell you about the most exclusive ‘furniture’ store in the world. And they only sell one type of seat. And the ‘seat’ is very expensive and they have lots of people who want to buy that ‘seat’. The furniture store I’m talking about is the New York Stock exchange.
This furniture store some negative number in its latest financial statement in May. The NYSE has set aside $36 million in case it loses its fight against the compensation claims of former Chairman Richard Grasso. And it ain’t cheap about compensation for other high rankers – two VPs (Robert Britz & Catherine Kinney) will get $19 million each if they step down at age 55 – hey, sure beats Social Security doesn’t it? But are the ‘seaters’ abandoning ship? Heck no.
But around the end of April, another number came in showing strong faith in the New York Stock Exchange from people who should know. At the end of April, a seat on the NYSE was sold for $1,510,000. Why should us contrarians be concerned about the price of an Exchange Membership at the NYSE? We ain’t likely to be buying one soon. Well, here’s why!
The stock market has had a pretty crazy last six months. The market hasn’t done much of anything as all the experts say inflation, the Iraq war, oil prices, Aunt Martha’s burned apple pie, have scared investors. You would think that insiders would be bailing out like investors; selling their seats for any amount of money because the sky is falling!
Or could the media, the experts have gotten it wrong again (they are consistent!) and maybe the Sky isn’t falling?
What do you think? Always bet with the insiders! These people ain’t just getting off the turnip truck. They know a lot more than you or I will ever know. As one experienced insider said; the move toward electronic trading and future market-structure changes actually will benefit the NYSE. Trades will still be down at the floor of the NYSE. A
The biggest reason for the still high seat prices is that members are not worried about all the bad publicity the NYSE has received lately and proposed regulatory steps. Even in the last year, NYSE’s share of trades has only dropped a few percentage points.
Believe me, I know Exchange-members don’t do this because their fond memories of their days on the floor. The reason seat prices remain high is because insiders know there is still plenty of money to be made trading stocks. If you want to see if this true, just look at the American Stock Exchange. Anyone still remember the American Stock Exchange? Over there seats are basically being shorted – a seat that used to sell for $725,000 in 2000; now sells for about $100,000. So you know that “Seaters” there don’t think their stocks, funds etc. will make them much profit. If you want to find the Bear, then follow the bloodhound!
Here’s further proof. When the NYSE announced that expanded electronic trading would start on February 25, 2004, not one seat was sold for a month. That seat sold for $1,500,000 – what does that tell you!!!! Also Exchange members yawned when our 98-lb. weakling, the SEC, announced widely-heralded market structure changes. Exchangers also didn’t seem to care much about the $242,000,000 settlement with five specialist firms for “alleged” trading violations. Traders aren’t fools – they know they can “spit into the wind, tug on Superman’s cape, and mess with the junkyard dog” (by the late, great Jim Croce!)
Here are three stocks I like:
Nortel Network (NYSE: NT, $3.87)
52-week High - $8.50 52-week Low - $2.68
Nortel has had a roller-coaster read but will be great stock for the long-term.
Nokia (NYSE: NOK, $13.97)
52-week High - $23.52 52-week Low - $12.86
Nokia another great long-term play.
Cisco Sys (Nasdaq: CSCO: $22.78)
52-week High - $29.39 52-week Low - $16.52
Will be big player in VOIP – Internet phoning – which is in its infancy and will grow tremendously in the next few years.
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| INSIDE TRACK: Weekly Insider Report / By Jeff Williams |
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| Jeff Williams is a partner with http://www.insiderreview.com 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. |
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Interesting Buy Patterns
Open market insider trading activity for NFI 04/29/04 through 05/05/04
NovaStar Financial Inc.
NovaStar Financial Inc. is a specialty finance company that originates, invests in and services residential nonconforming loans. The Company operates through three separate but inter-related units: mortgage lending and loan servicing, mortgage portfolio management and branch operations. The Company offers a range of mortgage loan products to borrowers (nonconforming borrowers) that generally do not satisfy the credit, collateral, documentation or other underwriting standards prescribed by conventional mortgage lenders and loan buyers, including government-sponsored entities such as Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac). NovaStar retains interests in the nonconforming loans it originates through its mortgage securities investment portfolio. Through its servicing platform, the Company then services all of the loans it retain interests in, in order to better manage the credit performance of those loans.
Gregory T. Barmore has served on the Board of Directors since 1996. Since 1997, he has been a director and is currently Chairman of the Board of Directors of Mortgage Electronic Registration Services, Inc. (MERSCORP, Inc.), Vienna, Virginia, a company which acts as nominee in county records for mortgage lenders and servicers. He retired as Chairman of the Board of GE Capital Mortgage Corporation (GECMC), a subsidiary of General Electric Capital Corporation (GE Capital) headquartered in Raleigh, North Carolina in 1997. He was responsible for overseeing the strategic development of GECMC's residential real estate-affiliated financial business, including mortgage insurance, mortgage services and mortgage funding. Prior to joining GECMC in 1986, Mr. Barmore was Chief Financial Officer of Employers Reinsurance Corporation (ERC), one of the nation's largest property and casualty reinsurance companies and also a subsidiary of GE Capital.
We like these purchases by Barmore. NFI took a pretty good beating lately on negative news that they may have not been licensed to do business in certain states. When stocks go down like this, it is encouraging to see some sort of insider buying surface which often suggests that things are going to be ok. In the case of Barmore, he has been around long enough to know the value of this company. We doubt he would be buying if he did not see things stabilizing going forward. He is also very knowledgeable in the finance area, previously being the CB of GE Capital Mortage Corporation. NFI currently has a dividend yield around 15%. We suspect this may put a floor on the stock. Perhaps Barmore does not see this dividend being cut. It is also encouraging that almost all of Barmore's previous purchases in NFI have worked out. His buying indicates value at the current price level and upside in the months ahead.
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Do you have comments, thoughts or opinions on Talking Points that you would like to share? Email them to letters@talking-points.com.
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Weekly Stock Picks From Bob Coppo - New Feature!
Top Stock PickS for Monday, June 7th, 2004:
We have no new buy signals for Monday.
Bob Coppo is Managing Director and Chief Technical Analyst for JNL Financial Consultants, Inc. The company has operated StockmarketTimer.com on the internet since 1997 and provides investment advice to both individual and institutional clients. Make sure to visit his site, StockMarketTimer.com.
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1. GRMN (Garmin Ltd, Communications Equipment) $33.84 - Buy. This week we take a look at a couple of solid fundamental plays in the telco space, a sector still buried around the bottom of its 52-week range. Many solid companies are toiling near their lows over the period, and bargains are certainly to be had. "Garmin Ltd. is a worldwide provider of navigation, communications and information devices, most of which are enabled by global positioning system (GPS) technology. The Company designs, develops, manufactures and markets a diverse family of handheld, portable and fixed-mount GPS-enabled products and other navigation, communications and information products for the general aviation and consumer markets. Each of Garmin's GPS products utilizes its proprietary integrated circuit and receiver designs to collect, calculate and display location, direction, speed and other information in forms optimized for specific uses." GPS is a technology we love at this point, with the affordable explosion of GPS products into the consumer market a booming expansion. From keeping tabs on children at amusement parks to car theft prevention and a myriad of applications in between, GPS is an innovation that will certainly be making its way into quite a number of everyday uses. GRMN holds some excellent fundamentals under the hood. Seeing the stock trading off 33% over the 52-week period is what caught our eye in our screen, and what we saw in the numbers inspired us to make it one of this week's Fresh Picks. Impressive revenue growth of 23%, a profit margin of 28.28%, operating margin of 36.92%, return on assets of 20.98%, return on equity of 24.00% and zero debt were at the top of the list of sparkling numbers. For the 13 weeks ended March 27, revenues increased 28% to $158.3M and the stock now trades with an impressive forward price-to-earnings ratio of just 16.56, a number you wouldn't expect from a company growing revenue so aggressively. Additionally, GRMN will likely pay out another $0.50 dividend this year as it did last year. Looking at the chart, GRMN started sliding early in the year after topping out at $59.47 in the first week of January. Over the next five months, GRMN was caught in an ugly downturn that saw it bottom at $28.08 in mid-May, a loss of more than 50%. Since that low-water mark, the stock has turned nicely into a strong uptrend marked by nice volume on up days and below-average volume on down days. Additionally, the stocks 13 and 50-day moving averages are nearing a convergence point, one of our favorite bullish indicators. From here, the first major point of overhead resistance will be the March low of $39.71. A successful move above that level would open the door to a move toward $44. Keep an eye on volume. We'd like to see GRMN hold above its 13-day MA of $33.18, so we'd look to keep a pretty tight stop just below that level. Short-term price target: $39.00 (15% gain) Stop loss trigger: $33.00 (2% loss)
2. WSTL (Westell Technologies Inc., Communications Equipment) $5.262 - Buy. Our second pick for the week ahead is another communications equipment play, this one a bit more speculative than GRMN. "Westell Technologies Inc. is a holding company that operates through its two wholly owned subsidiaries, Westell, Inc. and Teltrend LLC, and a 91.5%-owned subsidiary, Conference Plus, Inc. Westell and Teltrend design, manufacture, market and service a range of digital and legacy analog products used by telephone companies and other telecommunications service providers to deliver broadband services primarily over existing copper telephone wires that connect end users to a telephone company's central office." WSTL's fundamentals are not quite as impressive as GRMN, but they aren't too shabby, either. For the nine months ended Dec. 31, 2003, revenues rose 12% to $173.6 million while net income totaled $15.3M, up from $3.5 million. Some of the highlights include a profit margin of 14.79%, an operating margin of 9.08%, a return on assets of 32.25% and a return on equity of 63.56%. Additionally, the stock trades with a price-to-earnings ratio of just 10.56 with a forward P/E of an equally solid 12.23. Looking at the chart, WSTL's fall from its 2004 high of $8.32 was much more radical, and faster, than GRMN's slide, occuring just since late April. WSTL bottomed out in late may at $4.76 as deeply oversold, and has since started to recover, recently making its way back above its 13-day MA. Over the last several sessions last week, some profit-taking dropped the stock off its intraweek highs, but volume was light, indicating the sellers were likely those who picked up WSTL near its bottom and were turning a nice profit. Still, the stock remained above its 13-day MA, a trend we'd like to see continue. We'd use that point as a stop-loss trigger as a breach could take WSTL lower. For a target, we'd look first at the March low of $6.71 which would represent a solid 29% move from here. Short-term price target: $6.60 (26% gain) Stop loss trigger: $5.10 (3% loss)
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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Online issues can be found at
http://www.talking-points.com
and click on the "Past Issues" menu item.
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1. We are not brokers, investment advisors, or securities dealers. Our newsletter is provided as our personal opinions and are for informational purposes only.
2. Information on our website may contain "forward looking statements" as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.
3. Always research your own investments, and consult your investment advisor before investing.
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5. Understand that we at Talking-Points.com may buy stock in the companies that we recommend in our newsletter, and may sell those shares after recommending them.
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Our Picks
The stocks profiled on Talking-Points.com are only the opinions of Talking-Points.com and its representatives. These opinions are based on our research, which may be extensive or limited, done on each individual stock. Our sources include, but are not limited to, online research, company profiles, member suggestions, past performance, magazines, newspapers, analyst suggestions, broker recommendations, contact with the company, company rumors, and other similar information sources. All opinions are based on information that is accessible by the public.
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Our Positions in the Stocks Mentioned
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Compensation Received if Any
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Forward Looking Statements
Information presented on the Talking-Points.com web site and supplied through the newsletter may contain "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact and may be "forward looking statements." Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through the use of words such as "projects", "foresee", "expects'", "will," "anticipates," "estimates," "believes," "understands" or that by statements indicating certain actions "may," "could," or "might" occur.
General Risks, Research and Types of Orders
Short-term trading can be extremely risky. It is highly recommended that when ever making a decision to buy or sell you use limit orders. As with any investment decision, careful research should be done before making any decision to invest. As with any decision to invest it is usually recommended that you use limit orders, especially in fast moving, volatile stocks. You should only invest money that you are willing to lose. We also encourage you to read up on the SEC policies regarding online newsletters. Also before investing online please visit the Securities Exchanges Commission website and read about how to avoid internet scams.
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