Here’s the latest Stock Watch video (just click the play button) taking a look at:
IPO’s: ERII, APEI, GXDX, VISN
Stocks: ISRG, PRXL, STJ, EME
ETFs: DIA, QQQQ, SPY, DUG, DIG
All posts by Tate Dwinnell
Oversold Bounce Still In Good Shape, But Lots of Resistance in the Way
It’s been a couple weeks since I’ve taken an in depth look at the market, but not much has happened, so it was a good time for me too take a bit of a break from the blog here and focus on some other projects I’m working on.
The last time I did a run down of the charts of the indices, we had just catapulted off support of the downward trend as oversold conditions and government/Fed intervention provided a bit of a floor and sent short scrambling. Now the true test begins. Now that some of the short covering and bargain hunting is complete, it’s time for the big fellas to step in and do some meaningful buying.
I think the market is set up for that with the weekly capitulation moves a couple weeks ago, followed by an orderly digestion of those gains. While some of the price moves over the past several days have been significant, the volume didn’t accompany it which is what you like to see. There does appear to be an incremental shift from sellers to buyers here, but we need more of a confirmation move over the next week or two.
Let’s jump right into the indices and have a look at where we’ve been and where we might be headed. Notice I say "might". Technical analysis is a powerful tool for gauging probability, not certainty… for you chartist skeptics out there.
There is very strong support in the Nasdaq around 2150 – 2170 and it’s critical that we hold that level or we’re looking at a move to the next level of support at 2000. I personally think the odds are 50/50 of taking out that level and until we break through major resistance of the downward trend line above 2400, I won’t decrease those odds. We’re in a bear market until proven otherwise. I was encouraged by the close just a hair above the 200 dma at 2300. Now lets see if it can hold that level of support and test the downward trend at 2400. I like those odds, but the closer we get to the downward trend line the more defensive I’ll get.
That really was a massive weekly move off support at the bottom of the downward trend at 1200 and I do think there is enough momentum to test resistance around the 200 day moving average at 1325. If it can get through that level, look for a test of the top of the downward trend around 1350. It would still be nothing more than a tradable bear market rally until it convincingly clears the top of that downward trend. I think we’re really going to have a tough time doing that this year.
The Dow also capitulated off the bottom of the downward trend (around 10800) with a large price and volume move. Now we need to see some confirmation and clear the first level of major resistance of the 200 day moving average around 11700. The longer the Dow stays submerged below that level, the greater the likelihood of another breakdown so we need to get going in the next week or two. It needs to bust through the ceiling and hold the floor at 11700 – 11750.
The strategy I’ve employed following that weekly capitulation move is buying high quality, higher priced stocks in leading industries and in smaller quantities than I ordinarily would. Two examples of recent trades in the Self Investors Model Portfolio include Alcon (ACL) and Accenture (ACN). The higher we push up, the more likely I am to begin pursuing short positions to hedge.
::: Model Portfolio :::
** This section will now appear as a separate report about every other Wednesday.
The Self Investors Model Portolio wrapped up 2006 with a gain of 27.6%, 2007 with a gain of 30.2% and is more than 10% ahead of the S&P in a very difficult 2008. This is a REAL portfolio with position sizing and features annualized returns of 24%.
Would you like to receive buy and sell alerts in the Model Portfolio within minutes (NEW! now get them via instant messaging in near real time) of each transaction? You can receive these along with ALL of the tracking tools and video reports with the very popular Gold membership. Don’t delay, get started today and join me for many more highly profitable months here at SelfInvestors.com.
::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Surety & Title Insurance: 22.05%
2. Banks – Pacific: 11.20%
3. Savings & Loans: 10.45%
4. Internet Service Providers: 9.45%
5. Paper & Paper Products: 8.35%
6. Auto Parts Wholesale: 6.05%
7. Banks – SE: 6.05%
8. Nonmetallic Mineral & Mining: 6.00%
9. Publishing – Books: 5.75%
10. Consumer Services: 5.45%
– Top 10 Worst Performing Industries For the Week –
1. Drug Delivery: -35.00%
2. Broadcasting – Radio: -8.60%
3. Regional Airlines: -7.45%
4. Auto Manufacturers: -7.10%
5. Computer Peripherals: -6.15%
6. Gold: -5.75%
7. Diversified Investments: -5.65%
8. Cement: -5.50%
9. Multimedia & Graphics Software: -4.80%
10. Internet Info Providers: -4.80%
– Top 5 Best Performing ETFs For the Week –
1. Turkish Invest Fund (TKF) 15.90%
2. KBW Banking (KRE) 9.25%
3. HLDRS Regional Bank (RKH) 6.65%
4. PowerShares Dynamic Banking (PJB) 5.10%
5. Claymore Global Solar (TAN) 4.70%
– Worst 5 Performing ETF’s –
1. Internet Infrastructure (IIH) -10.10%
2. iShares Australia (EWA) -5.90%
3. iShares Tawain (EWT) -4.90%
4. Asa Gold (ASA) -4.40%
5. Market Vectors Gold Miners (GDX) -4.20%
::: Upcoming Economic Reports (8/4/2008- 8/8/2008) :::
Monday: Personal Income/Spending, Factory Orders
Tuesday: ISM Services, FOMC Policy Statement
Wednesday: Consumer Credit, Crude Inventories
Thursday: Pending Home Sales, Initial Claims
Friday: Productivity, Wholesale Inventories
::: Earnings I’m Watching This Week :::
Monday: Bankrate (RATE), China Medical (CMED), CommVault (CVLT), China Security (CSR), eResearch (ERES), Genesee & Wyoming (GWR), Intercontinental Exchange (ICE), Life Sciences Research (LSR), Otter Tail Power (OTTR),
Tuesday: Archer Daniels (ADM), Banco Itau (ITU), Central European Distribution (CEDC), Cisco (CSCO), DR Horton (DHI), Marvel Enterprise (MVL), PriceLine.com (PCLN), Skilled Healthcare (SKH), Sun Hydraulics (SNHY), Ultra Petroleum (UPL), WMS Industries (WMS),
Wednesday: Akeena Solar (AKNS), Clayton Williams Energy (CWEI), Clean Harbors (CLHB), Enersys (ENS), Flotek (FTK), FTI Consulting (FCN), GAiam (GAIA), Gerdau (GGB), LMI Aerospace (LMIA), Parexel (PRXL), T3 Energy Services (TTES), Nasdaq Group (NDAQ), Transocean (RIG), Yingli Green Energy (YGE)
Thursday: Aecom (ACM), Ansys (ANSS), Atwood Oceanics (ATW), Deckers (DECK), Divx (DIVX), Exide (XIDE), Hansen Natural (HANS), Natural Gas Services (NGS), SandRidge Energy (SD), Superior Well Services (SWSI), Veolia Environment (VE)
Friday: Beazer Homes (BZH), Darling Intl (DAR)
Greenspan Fueled Selloff, Still on Sidelines in Mastercard (MA), Visa (V)
Just when you thought Greenspan rode off into the sunset on his white horse and enjoyed life a bit, there he was on CNBC talking about the current state of the economy (for which Mr. Artificially Low Interest Rate continues to take no credit for). We all know that when Greenspan talks people tend to listen and the market tends to react. Now, I’m not saying Greenspan’s comments were the catalyst for the late day sell off, but it’s a half way decent explanation, so I’ll go with that tonight.
While Greenspan acknowledged that the economy has shown great resiliency for the most part, he also mentioned in the same breath that we’re living through a "once-in-a-century" crisis and that that housing was nowhere near a bottom. However, this is the same guy that said on June 13th, the worst of the financial crisis was over, so as is the custom with anyone appearing on CNBC, take it with a grain of salt. Mr Artificial Rate, it’s time.. time to enjoy the personal fruits of your excessive rate cuts on a beach in a far away land.
The market didn’t get off on the right foot this morning either, as GDP came in a bit lighter than expected at 1.9% (economists predicted 2.3%) and no doubt propped up a bit by that stimulus check. Let’s see where those GDP numbers are towards the end of the year. Weekly jobless claims rose again as well, marking the 3rd time in the past 5 weeks. The monthly jobs data tomorrow morning will certainly be a market mover.
All in all, it wasn’t that bad today.. at least not as bad as the price plummet headline would have you believe. Once again there wasn’t much conviction behind the move.. that is, not a lot of volume on the sell side. I still view this current market as buy on the pull backs environment, so if we get another 100 or 200 on the downside tomorrow, keep an eye on your watch list and if one or two pull back and offer a decent entry, take a chance on it.
I do think there is some decent upside potential left in this market and I’ll discuss the important resistance levels I’m watching in the weekend report on Sunday, but with Jim Cramer starting to call a bottom in housing and the market… nah, even though Cramer is the ultimate contrarian indicator, I still think this market has some pop in it still. Let’s see how the market reacts to the jobs number tomorrow.
:::::::::::
Why I’m still out of Mastercard and Visa
::::::::::
Visa was the biggest IPO in US history when it began trading back in March. On April 3rd I highlighted the breakout and initiated my first position in the company after it broke out of a very bullish looking triangle formation. http://selfinvestors.com/si/visabreakout
Less than one month later, after vaulting more than $20 bucks, I decided to lock in my profits. Way over hyped, way overbought. At 9:09AM on April 3rd I sent the following to my Gold & Platinum members:
(04/30/08 9:08:58 AM): Ok, I’m going to go ahead and take profits in Visa (V). Lots of giddy people out there with big Visa profits, but this is a stock that is WAY overbought. Considering we are still in a bear market and I’m up 30% in just a couple weeks, I’ll take the gift and sit tight for awhile. I really believe I can get back in at a significantly lower price, particularly when the lock up period
expires and this market pulls back. If you’re a long term holder with a multi year time horizon it probably makes sense to ride it out. I am not. I trade based on current market conditions and the
action in individual stocks over a shorter time period. I’m avoiding the greed in Visa and out at 83.67 as it breaks the bullish formation on the 5 min intraday chart.
As it turns out, the stock ramped up another 6 bucks or so before the run died and it spent the next two months carving out a large, bullish wedge formation. One day before the holiday, on July 3rd it broke that bullish formation setting it up for a much larger cup base which it is forming now. I haven’t had time to analyze the earnings reports of both Visa and Mastercard but I know how the market reacted. Despite beating EPS estimates, both were hit hard on heavy volume setting both up for a deeper correction. These companies are absolutely not immune to a faltering economy and until the deceleration of growth in both earnings and revenues for both companies stabilize, it pays to watch on the sidelines and wait for the next base to form.
Avalanche of Earnings, GDP, Employment Numbers on Tap
Sorry, no detailed look at the market this week.. It’s an R&R weekend for me. I’ll get up an analysis sometime this coming week.
::: Model Portfolio :::
** This section will now appear as a separate report about every other Wednesday.
The Self Investors Model Portolio wrapped up 2006 with a gain of 27.6%, 2007 with a gain of 30.2% and is more than 10% ahead of the S&P in a very difficult 2008. This is a REAL portfolio with position sizing and features annualized returns of 24%.
Would you like to receive buy and sell alerts in the Model Portfolio within minutes (NEW! now get them via instant messaging in near real time) of each transaction? You can receive these along with ALL of the tracking tools and video reports with the very popular Gold membership. Don’t delay, get started today and join me for many more highly profitable months here at SelfInvestors.com.
::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Manufactured Housing: 20.70%
2. Major Airlines: 17.55%
3. Health Care Plans: 12.20%
4. Medical Practitioners: 11.20%
5. Networking & Comm Devices: 8.25%
6. Computer Based Systems: 7.95%
7. Catalog & Mail Order Houses: 7.55%
8. Resorts & Casinos: 6.85%
9. Biotechnology: 6.40%
10. Auto Dealerships: 5.90%
– Top 10 Worst Performing Industries For the Week –
1. Semis – Memory Chips: -13.15%
2. Gold: -7.95%
3. Savings & Loans: -7.70%
4. Semis – Integrated Circuit: -7.55%
5. Surety & Title Insurance: -6.90%
6. Heavy Construction: -6.30%
7. Oil & Gas Drilling & Exploration: -6.20%
8. Independent Oil & Gas: -6.20%
9. Credit Services: -5.60%
10. Semis Equip & Materials: -5.60%
– Top 5 Best Performing ETFs For the Week –
1. HLDRS Broadband (BDH) 11.15%
2. HLDRS Biotech (BBH) 10.30%
3. India Fund (IFN) 9.95%
4. iPath India (INP) 9.20%
5. Morgan Stanley India (IIF) 7.90%
– Worst 5 Performing ETF’s –
1. US Nat Gas (UNG) -15.55%
2. Morgan Stanley E. Europe (RNE) -10.95%
3. Market Vectors Russia (RSX) -10.55%
4. SPDR Oil & Gas (XOP) -8.10%
5. HLDRS Semis (SMH) -7.55%
::: Upcoming Economic Reports (7/28/2008- 8/1/2008) :::
Monday: None
Tuesday: Consumer Confidence
Wednesday: ADP Employment, Crude Inventories
Thursday: GDP (adv), Initial Claims, Chicago PMI
Friday: Auto/Truck Sales, Nonfarm Payrolls, Construction Spending, ISM Index
::: Earnings I’m Watching This Week :::
Monday: Atheros Communications (ATHR), Authentec (AUTH), CF Industries (CF), HDFC Bank (HDB), Manitowoc (MTW), Plum Creek Timber (PCL), Sohu (SOHU), Mosaic (MOS)
Tuesday: Alpha Natural Resources (ANR), Amedisys (AMED), BEA Aerospace (BEAV), Centex (CTX), Coach (COH), Continental Resources (CLR), Cynosure (CYNO), Double Take (DBTK), Portfolio Recovery Associates (PRAA)
Wednesday: Cleveland Cliffs (CLF), Cameron (CAM), Covad (CVD), Cummins (CMI), Echelon (ELON), First Solar (FSLR), Garmin (GRMN), Hologic (HOLX), Itron (ITRI), Oceaneering (OII), Psychiatric Solutions (PSYS), Rubicon Tech (RBCN), Southwestern Energy (SWN), Starbucks (SBUX), Visa (V)
Thursday: Altria Group (MO), American Ecology (ECOL), Balchem (BCPC), Borg Warner (BWA), Capella Educations (CPLA), Chesapeake Energy (CHK), Chart Industries (GTLS), Cognizant Tech (CTSH), Dolby Laboratories (DLB), Forrester Research (FORR), LKQ Corp (LKQX), Morningstar (MORN), Natus Medical (BABY), Partner Communications (PTNR), Stanley (SXE), United Therapeutics (UTHR), VistaPrint (VPRT)
Friday: None
Pickens Plan Profits: Global Wind ETF (FAN), Clean Fuels (CLNE), Fuel Systems (FSYS)
As many of you probably know, oil speculator extraordinaire T Boone Pickens has a plan, a plan to save the world from itself in the form of clean energy (well sorta, more on that later). Mr. Pickens, I applaud you for your efforts and for stepping up at a time when government agrees to disagree on just about every issue including investments in green energy solutions.
The Pickens Plan was announced a few days ago and its aim is simple, at least on paper. Decrease our dependence on foreign oil and do it now with the use of wind power and powering vehicles with natural gas, both of which Pickens claims is abundant in our backyard. Pickens calls the US "The Saudi Arabia of Wind Power" and bases that statement on the fact that studies from around the world show that the Great Plains states are home to the greatest wind energy potential in the world with North Dakota having the potential to power more than a quarter of the country. Will wind power be to North Dakota what oil has been to Dubai? Uh no..but if Pickens has his way and the government cooperates, wind power barons might just replace the farmers of America. Pickens says his plan won’t interfere with farming and grazing and that could certainly be possible but I can’t imagine it will be all that easy logistically.
The 2nd part of the Pickens Plan calls for the use of natural gas as the primary fuel for our transportation needs. According to the California Energy Commission, natural gas greenhouse emissions are 23% lower than diesel and 30% lower than gasoline and according to Pickens comes with a much lower price tag of under $1/gallon in places like Utah and Oklahoma. Unfortunately the infrastructure isn’t in place to make this feasible for most people and the $1/gallon is the exception to the rule. I just checked out a map of natural gas fueling stations around Portland, Oregon and the nearest station is a solid hour away out in the boondocks! The price: $2.53 gallon. Not exactly a buck a gallon. If this plan gains a footing (only 150,000 vehicles in US currently use natural gas) expect those prices to come more in line with what we’re paying at the pump now.
His natural gas transportation plan just doesn’t make much sense to me in terms of cost and environmental impact, but we have to remember that Pickens is a businessman first and the added benefit to the environment would just be icing on the cake. He did tell the Guardian in April "Don’t get the idea that I’ve turned green. My business is making money and I think this is going to make a lot of money (referring to his wind power investments). There’s also the bit about him not putting any wind turbines on his 68,000 acre ranch but preferring to pay royalties to other Texas ranchers (A farmer who gives up a quarter of an acre to a wind farm can earn $10,000 a year from it – some 3 per cent of the value of the electricity it produces. If he planted corn for ethanol he would earn $300). Kids, pack your bags, we’re moving to Sweetwater Texas to build a windfarm!
I still think that electric cars or a hybrid/electric is the best approach, but many think that electric cars are a bit of a pipe dream and that the battery technology will never allow for 100% electric cars, but this is where the research money should go. Is natural gas a better approach? In my opinion, converting infrastructure for natural gas fueling stations is a BIG mistake. The plan is to harness the power of the wind to generate electricity, which frees up the natural gas for our transportation needs, but last time I checked natural gas is still a scarce resource and emissions are ONLY 30% less.. cleaner but far from clean.
At any rate, while the plan has some problems (yeah most plans do) I do applaud Pickens for having a plan rooted in some reality… and it does create discussion, awareness and ideas for change. Long Pickens, short Al Gore.
Now that the rambling out of me is done, let’s get into some profitable ideas that may emerge from the Pickens Plan. Focusing on Wind and Natural Gas transportation there are a few that I can think of, but hopefully this post will bring out the creative genius in some of you and yield a few more ideas. Here’s my take:
There are few, if any pure wind play opportunities out there. Most of them are overseas, but you’re in luck because two Wind ETF’s just launched providing diversified exposure to global wind energy companies and I prefer the First Trust Global Wind Energy ETF (FAN). It’s only been trading a month and as you can see it’s been mostly down. In fact most clean energy funds are down big over the past several months and I think that provides a fantastic opportunity for the patient investor over the long haul. FAN is carving out a large base currently and I’m waiting for it to continue carving out a bottom, then stage some kind of breakout from a cup or double bottom base, although may add an initial small position if it comes back into the 27 range.
My second trade idea for profiting from the Pickens Plan happens to be on the short side, in Fuel Systems Solutions (FSYS). This is a company that provides the necessary components for a car to run on natural gas, so if Pickens Plan proliferates, FSYS stands to benefit in a big way. Ah, but there is a problem. Not in the company itself. This is a company that has seen a huge surge in revenue and profit as overseas customers convert their vehicles to the cheaper natural gas fuel. If that trend catches on in the US, expect FSYS to continue to profit big. However, this is a stock that has quadrupled in just a few months and from a technical standpoint, this is a mighty bearish looking double top (full disclosure: yes I am short on this). It’s a short right here with a stop above 42.50. If it fills the gap around 20, I’m a believer on the long side in this Pickens Plan play.
The other play in this space is Clean Energy Fuels (CLNE), which happens to be controlled by… you guessed it, Mr. Pickens! See, he really does have a plan and it includes profits. CLNE provides compressed natural gas (CNG) and liquefied natural gas (LNG) for use in vehicles. Where FSYS provides the conversion, CLNE is there with the fuel. Some kind of relationship between the two companies seems likely at some point, but that’s for another article.
This is a stock that has run up 40% in the past month right into major resistance (much of that after the Pickens Plan was announced). Wait for the euphoria to wear off and the stock to come back to earth for a longer term play or trade the breakout once it clears the downtrend above 14.
Another Sign of Banks Bottoming? Wachovia (WB) CEO Insider Buying
When I’m looking for signals of a bottom in any sector, first and foremost will be the technicals, followed by rallies on bad news. Long before companies get back on track financially, their stock charts will have already had a big run as most of the bad news was built in. As a distant secondary indicator, I like to keep tabs on the insider buying habits of key executives, particularly the CFO and CEO.
These insiders know their company better than anyone and if they’re making a large bet, there is good reason to assume the prospects for the company in the future are bright. The financials have been beaten mercilessly here in 2008, with several big banks trading in single digits. Who would have thought that a Wachovia (WB) would be trading under 10 or that a Washington Mutual (WM) would hit nearly $3 bucks a share. Time will tell if those moves down were warranted, but many of these banks were well overdue for massive snap back rallies and rally they did. Many have doubled in just 5 to 6 trading days, including banking behemoth Wachovia (WB) which despite recording record losses, job cuts and a huge dividend cut, rallied again as traders bet on "the worst is over".
Also betting big on the company is new CEO Robert Steel which took over just about a month ago to inherit a mess he must feel he can clean up. Just hours ago, he made 3 large purchases of Wachovia stock totaling more than $10 million. That’s one heck of a gutsy move and it will probably pay off in a few years, but I always wonder what these guys are thinking when they’re timing their trades. I realize they aren’t technical analysts but with that kind of money on the line, maybe you should consult with one! Your stock has doubled in little over a week. Why not wait a few days for the short covering to diminish and the longs to lock in their profit and save yourself a few million?
At any rate, it’s a good sign for Wachovia over the long haul and financials do appear to be bottoming out, but I’m waiting for at least a 50% retracement of this move in financials to do some shopping
Disclaimer: no position in Wachovia, but may trade it at 10 or lower.
Weekly Capitulation Off Major Support; Will Drugs & Medical Lead The Way?
In my last weekly report, I mentioned the near vertical drop in the indices as they approached major support areas of a well defined bear market downtrend and to be prepared for a massive snap back rally. We finally got the long awaited rally this week as better than expected results out of Wells Fargo, JP Morgan and Citigroup and plummeting crude prices helped to ignite the rally. The question now becomes just how strong a rally was it and does it have legs? Was that Monday low of last week a long term bottom? I think the chances are good.
With the indices taking out the previous week’s lows then staging a big rally to close at the highs of the week with record volume, a floor in this market has been created. We never quite saw panic reach a feverish pitch but the VIX did ramp up above 30 and as you’ll see in the charts below, capitulation in the Dow and S&P on the weekly charts was impressive. At this point, the only way I see last week’s lows being taken out is if a major bank (Washington Mutual?) or homebuilder goes under which could really ratchet up the panic selling. I’m not even going to try and put an odds on that happening, but there is some possibility there I suppose.
As I mentioned to members in an email last week, I’m not chasing the rallies from here, but rather dabbling in long positions on the pull backs. I’m not willing to get overly aggressive and want to slowly build my long exposure if the pull backs are orderly. There will be plenty of time to profit and given the fact we are just getting into the bulk of earnings, it makes sense to be patient. Wait for your price, it will come. Let’s have a look at the charts of the indices:
I’ve been discussing the possibility of a big double bottom base in the Nasdaq and that still remains a good possibility. Notice that the Nasdaq came very close to touching the 2008 lows before reversing sharply mid week. I would have liked to have seen it take out those lows briefly to shake out a few more weak hands and it still could do that, but that area around 2175 is shaping up to be a very strong level of support. Not even disappointing results out of Google and Microsoft could put much of a dent in the Nasdaq on Friday, so the market is showing some signs of stabilization and resiliency.
In my last report, I said "I do think we will get a furious rally if and when the S&P touches that channel around 1200.". The S&P did touch the bottom of this downward channel as you see below and what a furious rally it was. Note the amount of volume behind the move. Combine that with the fact that the S&P closed at the highs of the week and you have a recipe for considerable momentum. That doesn’t mean I’m chasing this rally. As mentioned above, I’m buying select names on the pull backs with smaller positions. The S&P cleared the first level of resistance at the March lows but will face some resistance at the Jan lows on Monday. If it can clear that, there is a good chance of testing the 50 day moving average around 1325, but I do think we’ll rest just a bit before making a serious run at that level.
Is it any coincidence the Dow hit right at major support at the bottom of the downtrend and rallied? Not likely! As with the S&P there was tremendous volume behind this weekly move and with a close at the highs of the week, there is without a doubt enough momentum to carry it up to at least the next level of major resistance around 11750. We could hit that early next week before taking a breather.
You can clearly see the framework the indices are working within, with major support at the bottom of the downward channel, resistance all the way up to the top. An end to the bear market can not be declared until this well defined downtrend is broken and I’d be surprised if that happened this year. Consider last weeks move the setup for a significant tradeable rally within a bear market.
Commodities continued to unravel last week with much of that money flowing into the beaten down financials and home builders. The give and take between those two extremes was just a matter of time, but it’s too early to tell if a major correction is underway in commodities AND if this is a bottom in financials. Although, I think a bottoming out in financials is closer to reality then the beginnings of a major correction in commodities.
I’m more interested in where new leadership will emerge from and there are some indications that leadership is emerging in medical and drug stocks. Below are the best performing industries over the past 20 and 30 days (those linked with a number indicate that there are high quality breakout stocks from that industry in the Self Investors Breakout Tracker). I have found that focusing on trends within the best performers over 20 days allows me to get in on the next area of strength early enough to capture the big moves, but not so early that it ends up being a false alarm. Over the past 20 trading days, 13 of the top 20 best performing industries are medical/health related. This strength is confirmed in the 30 day timeframe as well, with half of the best performing industries medical/health related.
I’m going to provide an Excel download file to all my members tonight or tomorrow afternoon, with about 40 leading companies within the top performing industries over the last several weeks. If you’d like to download this file it doesn’t cost a thing, just register for the free Bronze membership in the upper right of this page. If you’re privacy paranoid (although no reason to be, you’re in good hands here at SelfInvestors!) and won’t provide a valid email address here’s a few to chew on (in no way buy recommendations, please do your own research): PRXL, EXAC & SRCL.
I::: Model Portfolio :::
** This section will now appear as a separate report about every other Wednesday.
The Self Investors Model Portolio wrapped up 2006 with a gain of 27.6%, 2007 with a gain of 30.2% and is more than 10% ahead of the S&P in a very difficult 2008. This is a REAL portfolio with position sizing and features annualized returns of 24%.
Would you like to receive buy and sell alerts in the Model Portfolio within minutes (NEW! now get them via instant messaging in near real time) of each transaction? You can receive these along with ALL of the tracking tools and video reports with the very popular Gold membership. Don’t delay, get started today and join me for many more highly profitable months here at SelfInvestors.com.
::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Major Airlines: 30.81%
2. Banks – SE: 22.15%
3. General Entertainment: 19.00%
4. Mortgage Investment: 18.00%
5. Drugs – Generic: 17.60%
6. Regional Airlines: 16.85%
7. Surety & Title Insurance: 15.65%
8. Investment Brokerages: 14.85%
9. Residential Construction: 14.65%
10. Investment Brokerages – Regional: 14.00%
– Top 10 Worst Performing Industries For the Week –
1. Nonmetallic Mineral Mining: -11.50%
2. Manufactured Housing: -9.50%
3. Industrial Metals & Minerals: -8.90%
4. Independent Oil & Gas: -8.20%
5. Steel & Iron: -8.15%
6. Oil & Gas Drilling & Exploration: -7.15%
7. Agricultural – Chemicals: -6.85%
8. Oil & Gas Refining & Marketing: -5.45%
9. Copper: -5.20%
10. Heavy Construction: -4.95%
– Top 5 Best Performing ETFs For the Week –
1. SPDR Home Builders (XHB) 16.10%
2. HLDRS Regional Banks (RKH) 15.95%
3. iShares Home Construction (ITB) 15.15%
4. KBW Bank (KBE) 14.50%
5. Turkish Fund (TKF) 13.35%
– Worst 5 Performing ETF’s –
1. Market Vectors Coal (KOL) -12.75%
2. US Oil (USO) -11.05%
3. PowerShares Dynamic Energy (PXE) -10.75%
4. iShares Commodities (GSG) -9.90%
5. US Natural Gas (UNG) -9.80%
::: Upcoming Economic Reports (7/21/2008- 7/25/2008) :::
Monday: Leading Indicators
Tuesday: None
Wednesday: Fed Beige Book, Crude Inventories
Thursday: Existing Home Sales, Initial Claims
Friday: New Home Sales, Durable Orders
::: Earnings I’m Watching This Week :::
Monday: American Express (AXP), Apple (AAPL), Bank of America (BAC), Homex (HXM)
Tuesday: AmSurg (AMSG), Axsys Tech (AXYS), CH Robinson (CHRW), Chicago Mercantile (CME), Icon (ICLR), Intuitive Surgical (ISRG), Jacobs Engineering (JEC), Methanex (MEOH), NVR Inc (NVR), Options Express (OXPS), VMware (VMW), Yahoo (YHOO)
Wednesday: Air Products & Chemicals (APD), Airgas (ARG), Alcon (ACL), Baidu (BIDU), Chipotle Mexican Grill (CMG), EMC (EMC), Genzyme (GENZ), Hudson City Bancorp (HCBK), NVE Corp (NVEC), Omniture (OMTR), OSI Pharma (OSIP), Peabody Energy (BTU), Pulte Homes (PHM), Ryland (RYL)
Thursday: 3M (MMM), AsiaInfo (ASIA), Bucyrus Intl (BUCY), Celgene (CELG), Companhia Rio (RIO), Diamond Offshore (DO), Eastman Chemical (EMN), EZcorp (EZPW), Flir Systems (FLIR), Integral Systems (ISYS), Interactive Brokers (IBKR), Life Time Fitness (LTM), Perdigao (PDA), Potash (POT), Stericycle (SRCL), Strayer Education (STRA), Terra Industries (TRA), Terra Nitrogen (TNH), Dow Chemical (DOW), VCA Antech (WOOF), Vision China Media (VISN), ZOLL Medical (ZOLL)
Friday: Arch Coal (ACI), Honda (HMC), T Rowe Price (TROW)
Another Solar IPO: GT Solar (SOLR) To Debut Thursday
This week, the IPO market will get a bit of boost in what has been a lackluster year for exciting companies coming to market. This week, GT Solar, a New Hampshire maker of solar cell manufacturing equipment, is expected to begin trading under the ticker symbol SOLR. Sure, there are far too many solar companies right now and this sector is overdue for a shakeout of buyouts, blowups and mergers but in this environment it’s good to see any company generating a profit come to market and GT Solar is certainly doing that with revenues and profits exploding over the past year, allowing the company to turn its first profit. I like the fact that they are a "pick and shovel" play in the industry providing a complete turnkey solution with equipment and expertise to allow solar manufacturers to get up and running quickly.
This is a company growing rapidly with a big backlog of $1.3 billion, but with 60% of its business coming from one customer it’s not a company that’s well diversified so carries considerable risk. Also, none of the proceeds from the IPO will go to the company, but rather the investors.
I suggest reading the two analysis articles below for more in depth details on the company. As I do with all IPO’s I’ll let it trade for at least two weeks allowing it time to carve out a bullish technical formation.
A few links of interest:
Presentation by GT Solar executives
Analysis from Small Cap Investor (requires free registration to see entire article)
Analysis from Money Curry (not a fan of all the ads but the analysis is detailed)
Big Blue (IBM) to Beat Again? Earnings Coming..
The following article is provided exclusively to readers of SelfInvestors by the The Correct Call.
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International Business Machines (IBM) is set to report earnings after the market closes on Thursday, July 17th. IBM is one of the largest technology and global financing companies in the world.
Big Blue is expected to earn $1.82 per share for its 2nd quarter. We expect IBM to announce earnings that will beat investors’ and analysts’ expectations. IBM has delivered 21 straight quarters of earnings growth, we are confident it will be 22.
Three Analysts have raised their estimates within the last 30 days, 1 in the past week. During the 1st quarter conference call, IBM’s management lifted its 2008 outlook by a quarter. Since the first 3 months tend to be IBM’s most challenging, we believe more upward guidance could be on the way.
Valuation wise, the company is in solid shape with a PEG ratio of 1.28, a forward PE of 13 with a projected 20% growth rate (although we expect estimates to move up), return on equity of 38.5% and more than $12 billion of cash on hand. There are plenty of reasons to like this company.
Add one more reason as IBM’s chart is also pointing to a higher stock price. IBM has posted 4 recent technical buy signals: closing yesterday at a 20 day high, closing above the 50 day moving average, the short-term moving averages passing the longer-term averages and a positive MACD crossover under ZERO.
Put it all together, solid fundamentals, a possible earnings surprise, hitting for the technical cycle and we see IBM’s shares challenging its 52 week within the 1 to 3 months.
Suggested Stop: $121.63