A bit of a pre holiday pop today after another round of Monday merger mania and a positive ISM number which came in a bit above expectations. It was a surprisingly strong day today and the Nasdaq came within inches of a new mutli year high, but you really can’t take away too much from it. Trading volume was light ahead of the holiday and that should remain throughout the week. We can’t place too much importance on market moves until probably early next week.
* This will be the last report from me until Thursday – have a great 4th!
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day July 2nd 2007
Nasdaq: UP 1.12% today with volume 11% BELOW average
Nasdaq ETF (QQQQ) UP .86%, volume 34% BELOW average
Dow: UP .95%, with volume 14% BELOW the average
Dow ETF (DIA): UP .8%, volume 37% BELOW the average
S&P ETF (SPY): UP .9%, volume 24% BELOW the average
Russell Small Cap ETF (IWM): UP 1.24%, volume 28% BELOW the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. Leading stocks did extremely well today but the lack of volume behind the move wasn’t surprising given the holiday week.
Summary:
* Advancers led Decliners 313 to 61
* Advancers were up an average of 2.27% today, with volume 8% BELOW average
* Decliners were down an average of 1.04% with volume 4% ABOVE average
* The total SI Leading Stocks Index was UP 1.73% today with volume 5% BELOW average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/
* Current Leading Sectors/Industries (over last 30 trading days):
Technology, Oil & Gas Services, Commodities, Semis
* Current Lagging Sectors/Industries (over last 30 trading days):
Real Estate, Biotech, Regional Banks, Home Construction
* Today’s Market Moving Industries/Sectors (UP):
Realty, Real Estate, Clean Energy, REIT, Utilities, Telecom
* Today’s Market Moving Industries/Sectors (DOWN):
None
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation. Today’s stock is a stock I highlighted to premium members on Friday and purchased for the SelfInvestors Model Portfolio. Today, it followed through from Friday’s move and soared above the high of the handle formation of a large cup base.
ABOUT: NVE Corporation (NVE) develops and sells devices using spintronics, a nanotechnology it helped pioneer, which utilizes electron spin rather than electron charge to acquire, store and transmit information. The Company is a licensor of spintronic magnetoresistive random access memory technology (MRAM), which has the potential to revolutionize electronic memory. NVE also manufactures spintronic products, including sensors and couplers that are used to acquire and transmit data. The Company’s designs use one of two nano-scale spintronic structures: giant magnetoresistors or spin-dependent tunnel junctions. Both structures produce a large change in electrical resistance depending on the electron spin orientation in a free layer. In giant magnetoresistance (GMR) devices, resistance changes due to conduction electrons scattering at interfaces within the devices. NVE operates through a single segment and has three product lines to offer: sensor products, coupler products and MRAM products. The company provides its technology to Starkey Laboratories, which improve the user experience with its hearing aids, allowing for the automatic adjustment during a cell phone call as well as smaller hearing aid devices. Another major customer is St Jude Medical, which uses NVEC technology in its pacemakers and implantable cardioverter defibrillators.
FUNDAMENTALS: NVEC is a very small company (15.4 million in sales in ’06) that experienced tremendous growth in 2003 when it posted its first profitable year and then again in 2004 when earnings more than doubled over ’03. Then the company hit a bit of a snag and posted poor results over the next two years. However, the good times are here again for NVEC. Over the past year, the company has posted quarter over quarter earnings growth of 111%, 238%, 144% and 154% and sales growth has accelerated nearly every quarter over the past year. 2008 estimates call for a 30% increase in earnings over 2007, so it’s clear the company is finding additional customers and larger contracts for its technologies. .. and those companies are willing to pay a premium with pre tax margins of 44%. Return on equity is equally impressive at around 25%.
TECHNICAL: On Friday, NVEC provided the first buy opportunity when it broke through the downward trend (by drawing a line across the highs) of the handle. Today, it confirmed that move and provided a 2nd buy opportunity when it cleared the high of the handle formation above 37.67. Over the past 2 days, the stock has vaulted nearly 20% but the volume behind the move is a bit of a concern. Trading volume today was less than the volume during the move in early May as well as the move on February 26th. That being said, I believe the stock has enough momentum to hit resistance around the November ’06 highs, but should not be chased at these levels. If you missed the two buy opportunities wait for some kind of pull back to at least 37.67 and preferably to the area around 35. I’m looking to take profits around the November highs due to the severity of this base which is too deep with sell volume too intense in the left side. I believe the base is prone to failure after it hits 45 but would reconsider another position if it can surge above that level and hold for a few weeks.
SELFINVESTORS RATING: With a total score of 49/60 (26/30 for fundamentals, 23/30 for technical), NVE Corp (NVEC) is a high quality breakout stock.
Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation. Please do your own research and make a personal decision based on your own tolerance for risk. I currently DO own a position in NVEC.