Precarious Economy; Stock of Day – Intercontinental Exchange (ICE)

My how quickly hopes and predictions have changed.  Wasn’t it just several days ago the market was rocking and rolling higher to new highs on predictions of rate cuts?  With bond yields rising, prospects for a Fed rate cut all but gone, inflation still a major concern, still no signs of an improving housing sector and GDP growth expectations revised lower, all of a sudden traders may be questioning the run we’ve had.  The bottom line is that the economy is in a precarious position and we don’t really know how bad inflation will be or how long housing will slump.   With big profits in hand, the big fellas will most likely continue taking some chips off the table and hold steady for a more defined picture of inflation, of housing, of our economy. 

On a technical note, the selling today wasn’t severe panic selling.  It was actually quite orderly considering the run up we’ve had. The S&P did take out support of its upward trend line again, but the Dow is holding at that level .. for now.  Considering there was distribution in the Dow today (none in the Nasdaq and S&P), it appears there is enough momentum to take out that level of support soon.  All in all, it was another healthy, constructive day of selling. 

::: 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 June 6th 2007

Ony distribution in the Dow today, however significant distribution across all of the major index tracking ETF’s – QQQQ, SPY and DIA

Nasdaq: DOWN .92% today with volume 5% ABOVE  average
Nasdaq ETF (QQQQ) DOWN 1.07%, volume 71% ABOVE average
Dow: DOWN .95%, with volume 4% ABOVE the average
Dow ETF (DIA): DOWN 1.1%, volume 45% ABOVE the average
S&P ETF (SPY): DOWN 1.07%, volume 56% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 1.11%, volume 55% ABOVE 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 were hit a bit harder than the major indices today, but sellling volume wasn’t severe.

Summary:

* Decliners led Advancers 348 to 66
* Advancers were up an average of 1.04% today, with volume 17% ABOVE average
* Decliners were down an average of 1.71% with volume 1% ABOVE average
* The total SI Leading Stocks Index was DOWN  1.27% today with volume 3% ABOVE the 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): 
Semiconductors, Transports, Agriculture, Networking, Aerospace/Defense
                                              
* Current Lagging Sectors/Industries (over last 30 trading days): 
Realty, Broadband, Biotech

* Today’s Market Moving Industries/Sectors (UP):
None

* Today’s Market Moving Industries/Sectors (DOWN):
Global Dividend, Oil & Gas Services, Real Estate, Transports, Utilities

::: 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 Intercontinental Exchange (ICE), which is threatening a breakout from a nice looking second stage base.

ABOUT:  IntercontinentalExchange, Inc. (IntercontinentalExchange) operates as an electronic global futures and over-the-counter (OTC) marketplace for trading an array of energy products. The Company also operates as a soft commodities exchange. IntercontinentalExchange offer an integrated electronic platform for side-by-side trading of energy products in both futures and OTC markets. Through its electronic trading platform, the CompanyGÇÖs marketplace brings together buyers and sellers of derivative and physical commodities contracts. Intercontinental Exchange also offers open-outcry trading in Board of Trade of the City of New York, Inc.GÇÖs (NYBOT) regulated futures and options markets. The Company conducts its OTC business directly and its regulated energy futures business through its wholly owned subsidiary, ICE Futures. It operates in three segments: energy futures, OTC and market data. On January 12, 2007, IntercontinentalExchange acquired NYBOT.

FUNDAMENTALS: ICE is a company with a tremendous acceleration in earnings growth over the last 3 years with year over year growth  67%, 140% and 150%.  The ramp up in  growth isn’t expected to continue, but ’07 and ’08 earnings growth still call for a very impressive growth rate of 40 – 50%.  Net margins are a whopping 45% and ROE, while below industry averages is excellent at around 24%.  With many new positions added over the past year, institutions like what they see in the company.  It’s clear why ICE has been one of the highest rated stocks in the SelfInvestors.com database for a long time.

TECHNICAL:  ICE broke out of its first base since going public back in October of 2006 and quickly doubled in price.  Since February, it’s been digesting those gains constructively with a tight, healthy looking base.  Today, the stock briefly broke out of a nice handle formation near the end of the day before pulling back a bit.  It still looks poised to bust through that level (153.36) and tackle all time highs of 167 very soon.

SELFINVESTORS RATING: With a total score of 52/60 (27/30 for fundamentals, 25/30 for technical), ICE is currently the second highest rated stock in the SelfInvestors.com Breakout Tracker.

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 small position in Intercontinental Exchange (ICE)

5 thoughts on “Precarious Economy; Stock of Day – Intercontinental Exchange (ICE)”

  1. I own ICE as well… I have a cost basis below 40 on my first purchase. While pullbacks can be severe at times, fundamentally ICE should do well in an environment with increasing volatility. Traders on ICE platforms (who also clear through ICE’s clearinghouse) will be more active as energy prices fluctuate and interest rate futures come more into the limelight. I expect when June volume totals are annouced, these first few days will have impacted revenue in a very positive way.

    And keep your eyes peeled for a possible buyout. NYX is stating that they may need to acquire a company to stay competitive in the futures trading arena.

    Thanks for your insight!

  2. One heck of a cost basis Zach..nice! It’s certainly an interesting industry right now with all the buyouts going on and talk of a 24 hour trading platform

    You think ICE going after BOT is off the shelf? It would certainly be good for the stock if it wasn’t weighed down by those rumors. Haven’t heard of any rumors of NYX buying them.

  3. I imagine the meeting this week with BOT seatholders was the final push. Check out the WSJ article today (6/7) on page C2 entitled “NYSE Euronext Eyes Expansion” NYX CEO states that he would like to acquire a US futures exchange to fill product offering holes. This is likely to be either NMX or ICE although there is a possibility it could be BOT or even CME. It will be fun to see where the chips fall.

  4. Tate,

    I do agree with Zachary’s comments. I have been following this idustry for last 1 1/2 + years and have made decent money in CME and NYX. Missed out on BOT and ICE. Did well in ISE as well.

    With ongoing consolidation in this industry, ICE and NMX are ripe for picking. NYX acquiring CME, seems bit far fetched at this time but am not as knowledgeable about the inner workings of this industry.

    Main question is, timing related to these buyouts. ISE was purchased 4 days after their earnings, exactly 1-week after options expiration.

    Please comment, am looking for way to make decent money in their call-options.

    Thanks in advance,

    K. Patel

  5. It’s difficult to say if and when the rumors will materialize. Quite honestly I haven’t been following the nitty gritty details. From a pure technical standpoint ICE and BOT are leading the way right now and have the best looking charts but have to say I really like that NMX long term.

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