Bitstream (BITS) In the News
::: Today’s Market Action :::
It’s been a long day and the words are beginning to blur together, so I’ll try and keep this short tonight –
I mentioned last night that after weighing the negatives and positives, it was quite clear this market was on shaky ground but that it wasn’t time to head for the exits en masse just yet. Today’s action indicated you may at least want to start moving towards the door, possibly with one foot in. The selling was particularly heavy on a day that saw further weakness in housing and fed funds futures erasing expectations of a rate cut in the near future. Bonds began selling off and so did stocks. With higher volume selling across all indices, today marked the 3rd day of distribution over the past couple weeks, leaving the current rally in doubt. It will pay to increase your level of cautiousness another notch.
::: 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 Jan 25th 2007
Distribution across all indices today.
Nasdaq: DOWN 1.3% today with volume 15% ABOVE average
Nasdaq ETF (QQQQ) DOWN 1.29*%, volume 40% ABOVE average
Dow: DOWN .94%, volume 4% ABOVE the average
Dow ETF (DIA): DOWN .87%, volume 11% ABOVE the average
S&P ETF (SPY): DOWN 1.17%, volume 8% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 1.26%, volume 21% 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. Not surprising, leading stocks were hit fairly hard today.
Summary:
* Decliners led Advancers 329 to 79
* Advancers were up an average of .96% today, with volume 22% ABOVE average
* Decliners were down an average of 1.99% with volume 11% ABOVE average
* The total SI Leading Stocks Index was DOWN 1.42% today with volume 13% 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 guaging 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://investing.typepad.com/tradingstocks/2006/09/wheres_the_big_.html
* Current Leading Sectors/Industries (over last 30 trading days):
Aerospace/Defense, Internet, Retail, Biotech, Transports, Retail
[Aerospace/Defense takes the top position for first time and Transports make first appearance]
* Current Lagging Sectors/Industries (over last 30 trading days):
Oil, Oil Services, Semis, Commodities
* Today’s Market Moving Industries/Sectors (UP):
Surprisingly, there some areas that did well today – Internet, REIT’s
* Today’s Market Moving Industries/Sectors (DOWN):
Broker/Dealers, Homebuilders, Gold, Oil, Energy
::: 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. Not much to choose from today, but one stock shined amidst all the red. Bitstream (BITS)
ABOUT: Bitstream Inc. (Bitstream) is a software development company that enables its customers worldwide to render text, browse the Web on wireless devices, select from a collection of fonts online and customize documents over the Internet. Bitstream categorizes its products and technologies into three product lines: fonts and font technology, browsing technology and publishing technology. The Company’s wholly owned subsidiaries are Bitstream World Trade, Inc., a holding company for Bitstream, B.V. (a Dutch corporation), Pageflex, Inc. and MyFonts.com, Inc.
FUNDAMENTALS: Itty bitty Bitstream is by all indications a company on the upswing. For the first time, the company reached profitablility in ’05. Over the past year, earnings have tripled on 50% sales growth. Net margins and ROE are outstanding and soaring. I’ve mentioned before that one key to finding the market’s next big winners is to look for rising ROE and margins. BITS margins (18%) and ROE (46%) aren’t rising, they have been lifting to the moon over the past 2 years.
TECHNICAL: This is a stock that trades a bit thin at 100K, but that should change in the coming months as Wall St discovers this gem. Today, the stock broke out of a base on base pattern and looks ready to tackle multi year highs around 11. If it can clear that level with volume, the next stop is 16 (all time highs reached back in 2000). Despite more than doubling in the past year, the price and volume levels indicate there is still strong demand. Relative strength is very good at 77. The stock did close in the lower half of its trading range after breaking out today, so it could move a bit lower from here in the coming days. However, the overall action indicates it may be headed higher very soon.
SELFINVESTORS RATING: With a total score of 53/60 (27/30 for fundamentals, 26/30 for technical), BITS is currently a top 5 Self Investors break out 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 not hold a position in BITS.