Once again the market doesn’t deliver on expectations of the masses .. not much of a surprise there. Many market commentators had been wondering if we’d get the Christmas rally. What was that we had in November? The Christmas rally came it a bit early this year and another run up like that was possible but not probable. The market was due for consolidation and that’s exactly what we’re seeing now. No reason for concern as the market works off recent gains and consolidates quietly with holiday volume. There seems to be some trepidation about January as the sell off of last January lingers in the minds of traders. Perhaps the market will surpise the masses again and we’ll get a forceful rally and break to multi year highs once again. We won’t get a true sense of direction until traders return from time off, but currently there is no reason to think that the run can’t continue after a bit more consolidation. Support levels remain intact. Here’s to a great 2006 – Happy New Year!
All posts by Tate Dwinnell
Chesapeake Insiders Continue Buying Spree; Trump Turnaround
Beginning in May of this year, both the CEO and COO of Chesapeake Energy (CHK), snatched up just about every available share they could find. On May 5th alone, both the COO and CEO bought nearly $3 million worth of shares in their company. The very next day, they followed that up with total purchases of nearly $2 million and $1.5 million respectively. The buying spree continued in June with the COO buying over 4 million worth and the CEO buying around 15 million. The CEO upped the ante again in August by making several purchases totaling nearly 20 million! On one day in September another 20 million purchase was made! After a 3 month lull (time probably spent couting money), the insider buying by CEO Aubrey McClendon began again last week, with insider purchases totaling around $1.5 million. The last time insiders made big purchases, it preceded a nearly 100% rise in the stock. While a run like that again isn’t as likely this time around, the amount of insider buying clearly indicates the man running the show at Chesapeake sees more good times ahead for the stock.
Currently it’s in the process of carving out a decent looking base and forming a handle. Keep an eye on it for a breakout.
Donald Trump, master of self promotion, may soon have another reason to pat himself on the back with a turn around of his money losing casino operations. Providing most of the financing for the restructuring deal is Morgan Stanley and they must continue to believe that Trumps’ (“ no, I’m not calling him “the Donaldâ€) casino operations will become profitable some day, because they have been very busy grabbing shares in the last couple weeks. Since November 17th, the company has picked up nearly 370K shares for a total of around 6.7 million. In addition, one director increased his stake in the company by 20% on November 21st.
Note: this is not a fundamentally superior company, but nonetheless an interesting story.. not to mention it has a great looking stock chart (minus yesterday’s reversal from the breakout).
Insider Buying data brought to you by the good folks at:
Awaiting the CPI Data
Once again the Fed spoke and once again (as far as what was said), I could care less. What’s important is how the market responds to the often vague wording of the Fed, which for today was ultimately positive as the volume picked up on the buy side. Let’s see if the move today carries over into tomorrow. I have a feeling it won’t. I think traders will ultimately wait for the upcoming CPI data on Thursday and the PPI data next week before placing large bets either way. I personally will remain bullishly neutral (see also, cautiously optimistic) until the market breaks out of its current trading range (meaning that I’m using margin sparingly). Looking at the charts of the major indices, they do look beautiful up to this point. Tight consolidations after the big runup we saw in November is very bullish action and indicate that another big leg up in the market may be on the horizon. What happens if the Dow breaks 11,000 and all that speculative real estate money gets put to work in the market? Hmmm…
Support and resistance in the Nasdaq isn’t as pronounced as it is in the S&P and Dow, but I think you can currently draw a rough channel of support and resistance based on the previous break out point above 2200 (support) and the highs of the mild consolidation over the past few weeks (resistance). Based on the magnitude of the leg up, it would seem that the market needs to continue to spend time consolidating.
Support and resistance is much more clear in the Dow, with support just above 10,700 and resistance at the all so elusive Dow 11,000. Nice bounce from support today with volume.
The S&P looks similar to the Nasdaq with a tight consolidation over the past couple weeks. Support at 1250 with resistance at around 1270. A break from this trading range, could indicate another sizable leg up.
Top ADRs
Time again for another screen of the SelfInvestors.com database -this time around I’ve chosen to filter the database to return to me all the ADR’s i’m currently tracking, listed in order of Fundamental Rank. Many are extended past a proper buy point, but there are a few interesting set ups I’d like to highlight on both the long and short side.
To see a screenshot of the Top 8 ADR’s currently in the system, you can click here. If you’re not currently a free member of SelfInvestors.com you can sign up to receive the full list of ADRs via an excel spreadsheet. Current members may access the download at this page.
So, here’s a couple on the long side I’d like to highlight – China Medical (CMED), Tenaris (TS) and Internet Initiative (IIJI).
After a tremendous run through most of November, CMED is currently carving out what looks like a decent bullish triangle pattern. That high volume reversal at the top is a bit of a concern, but as long as the stock continues to find support around 30 and volume continues to dry up, the stock has a good chance of staging a nice break from the pattern. Look for the stock to spend some more time filling out the pattern before making a significant move from here.
I think this chart looks great despite the fact that it is a late stage base (so prone to a higher rate of failure). The stock broke out of a double bottom base with good volume above 120 and has been quietly consolidating around the break out point. If the stock drops below support around 120 with heavy volume, I’d move on with just a very small loss. Nice reward vs. risk trade here.
IIJI staged an impressive breakout on Dec 1st, then reversed sharply the very next day. I haven’t been able to determine exactly why the reverse happened, but it’s probably a combination of the secondary offering, a bearish "Cramer" call and general weakness within the industry. Notice that the selling hasn’t been particulary intense as sell volume continues to decrease. I’m typically a little wary of stocks that make wild swings like this, but if the stock can find support at the 50 day moving average and bounce with good volume, it might provide a nice swing trade for a quick profit.
I’ve noticed a few decent looking short set ups amongst the ADR’s too.
It’s amazing how similar the charts of PKX and MBT look. Both appear to be on the verge of another breakdown if they can’t hold current support levels (as outlined in the charts below).
CBI has bounced back after the selloff due to alleged accounting improprieties which led to a delay in reporting results. These kinds of problems tend to linger for a long time, holding the stock price down. The stock is currently meeting resistance of the 50 day moving average as buy volume wanes.. setting up an interesting short trade. I’d probably wait and see how it does with potential support at the 200 day moving average (25/share) before making any decision on a short trade.
Top Breakouts – Oil Stocks Surging
I’m still alive:) I’ve been preoccupied with unexpected events recently… and I apologize for the lack of posts. This blog is important to me and I want to be consistent about posting here and keep readers on top of the market. With that said, I’d like to highlight breakouts of the past couple weeks as well as list the top 10 breakout opportunities right now in the market. However, I’d like to caution that now is the time to be fairly conservative. We’ve had a tremendous run over the past couple weeks.
As always, click here to a larger screenshot of the database, filtered to show the top breakouts (total fundamental + technical score of 50/60 or above) of the past 2 weeks.
Running through the breakouts and scanning through the several hundred stocks that I track, I’ve been noticing that commodities (specifically oil) have been doing particularily well of late. In fact, nearly half of the top 15 breakouts of the past 2 weeks come from the oil and metals groups. Let’s have a look.
It’s been a bit of a mixed bag in terms of breakout success over the past 2 weeks – 39 breakouts, 14 with a gain, 9 with a loss and 6 with no gain. The biggest winners include Core Molding Technologies (CMT) with a 12% gain (a stock highlighted in a report to free and premium members of SelfInvestors.com), OraSure Technologies (OSUR) with a 17% gain and The Pantry (PTRY), also with a 12% gain. The biggest loser (although it remains above support with today’s reversal) was Miller Industries (MLR), down -6% from its breakout point.
Here’s my top ten list of stocks that have already broken out, but remain in a buyable range:
1) Allergan (AGN)
2) Joy Global (JOYG)
3) PetroChina (PTR)
4) Grant Prideco (GRP)
5) ChinaMobile (CHL)
6) Gildan Activewear (GIL)
7) CE Franklin (CFK)
8) Perficient (PRFT)
9) BHP Billiton (BHP)
10) Diamond Offshore Drilling (DO)
As always please do your own research. These are ideas for further research.. Happy Trading and Good Luck!
5 Pictures Worth 5 Thousand Words
.. I think my math is correct there. Let’s see, 5 pictures. One picture is worth a thousand words. So… I knew that math degree would come in handy at some point. Yep, the market is ripe for some consolidation as major resistance comes into play after a steep run up in the past few weeks. But a big move up may be on the horizon. The Q’s are breaking out of a 2 year consolidation and sitting at multi year highs. Very bullish indeed.
Notable Earnings: Hansen Natural (HANS) – Another Monster Quarter
Hansen Natural (HANS) [29/30], maker of alternative sodas, fruit juices, smoothies and iced tea, posted anothe monster quarter, lifted by a continued surge of sales in its Monster energy drinks and rising margins. The company smashed estimates of .60/share by .23/share, which is good for an increase of 246% over the year ago quarter. Revenues rose 100% over the same period.
The company said results were boosted by strong sales of its energy drinks, including Monster Energy drinks, ‘Assault’ drinks and Monster Energy Khaos drinks. The sales increase was partially off-set by lower sales of smoothies and natural sodas. The stock broke out last week from a nice looking base, helped by a Citigroup upgrade. It’s up over 15% in premarket trading.
Notable Earnings: HouseValues.com (SOLD), Dynamic Materials (BOOM)
Good morning – here are a two top companies that could move today on recently reported earnings announcements. Scores in brackets are the proprietary fundamental score from SelfInvestors.com.
[26/30]
- Housevalues.com (SOLD), the provider of internet based marketing for the real estate market reported a very strong quarter yesterday afternoon which should provide a bounce off support of a nice looking base. EPS growth surged 129% over the year ago quarter with revenue growth of 82%. The company recently launched a very cool tool for consumers and real estate professionals called HomePages.com which combines the power of aerial maps, neighborhood information and real estate listings.
The company has 6 pending patents covering novel aspects of its mapping technology applicable to real estate and various other commercial industries. The company also recently announced the acquisition of The Loan Page Inc. The Loan Page provides consumers with competitive offers from up to four lenders. The company markets these consumer requests to enterprise-level customers, including some of the nation’s largest banking and lending institutions. The Loan Page’s mortgage lead generation platform is expected to allow HouseValues to expand its mortgage offerings and meet a broad variety of mortgage industry needs by offering a comprehensive menu of online products. The stock is up more than 10% in premarket trading.
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Dyanamic Materials (BOOM) , which is engaged in high energy metallurgical bonding, isn’t showing any signs of slowing with another outstanding quarter reported this morning. The company reported EPS growth of 225% with revenue growth of 68% over the year ago quarter. Margins increased in the quarter as well as the backlog of orders. The stock broke out of a 6 month consolidation yesterday and may add to those gains this morning.
Nasdaq Makes Biggest Move Since August ’04
I know when my real time watchlist is a sea of green and the prices are flickering rapidly it’s a big day with volume. However, it wasn’t until I took a look at the chart of the Nasdaq over the past year and a half that I realized how big the move was. You have to back to the big rally of August ’04 to see the kind of price/volume move made today in the Nasdaq. It’s certainly the kind of move that can propel the market past the next level of resistance and set up a showdown at multi year highs.
While today’s move was big, the Nasdaq still faces an important test before making a run at multi year highs. The downward trend line – an area it had been unable to clear on two previous occasions. However, just as resistance at the 200 day moving average, 2100 and the 50 day moving average have proven insignificant, I believe the Nasdaq will have no trouble clearing this resistance level in time. It may happen tomorrow, it may happen in two weeks. But it will happen.
The S&P has shoved resistance levels aside as buy volume picks up substantially. In addition, the market has been getting stronger as the trading day goes on and closing near the high. All signs of a very healthy market. The S&P may also face some resistance at the downward trend line.
..last and certainly least are the dogs of the Dow, which continue to lag its smaller, faster growing brethren. I still hear people talking about a big blue chip rally, just as they have for the past few years. I suppose if they just keep talking about it, they will eventually be right!! How much money has Microsoft made you in the last 5 years? Answer: zero, zilch. Maybe the avalanche of new products can make their shareholders a little money in the next year.. we shall see. How about for IBM over the last 6 years? You’re down about 40% and haven’t made a dime during the bull market that began in ’03. Wow! Anyway, you can see the dismal Dow, where the 50 day conintues to lag under the 200 day moving average and strong resistance remains at 10,500. On Monday the Dow closed in the lower half of the trading range and today, it lagged the Nasdaq and S&P significantly with much lighter volume.