Meow! Screech!! The cat bounced today with jet propulsion force from well oversold conditions. That’s not much of a surprise. Bull markets die hard and this one will too. We got a short term capitulation day last Thursday followed by some light volume selling the following two days and a touch of key support levels, so the dead cat was approaching the launch pad. Throw in positive comments from Walmart (hey, the biggest discount retailer is doing well it’s great! or is it?), some reassuring comments regarding the subprime mess over at the Merrill Lynch Conference and you have a recipe for a short covering fueled rally. The price action was mighty impressive I must admit. I was a bit surprised at the magnitude of today’s rise but volume levels were not a surprise. There wasn’t much conviction behind the move today so a classic dead cat bounce it was. That’s not to say there isn’t room to run. Both the Dow and Nasdaq probably have enough juice to run up and kiss their 50 day moving averages and the S&P might just have the gusto to get above the 200 day moving average. All in all though, you should be using this rise as an opportunity to limit your exposure on the long side if you haven’t already done so. For you day and swing traders there will continue to be trading opportunities on both sides but for most this is just an opportunity to reduce exposure on the long side and maybe initiate a short or two.
::: 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 November 13th 2007
Nasdaq: UP 3.46% today with volume 19% ABOVE average
Nasdaq ETF (QQQQ) UP 4.12%, volume 76% ABOVE average
Dow: UP 2.46%, with volume 17% ABOVE the average
Dow ETF (DIA): UP 2.6%, with volume 9% ABOVE the average
S&P ETF (SPY): UP 3.05%, with volume 5% ABOVE the average
Russell Small Cap ETF (IWM): UP 3.09%, with volume 22% 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.
Summary:
* Advancers led Decliners 325 to 48
* Advancers were up an average of 4.41% today, with volume 28% ABOVE average
* Decliners were down an average of 1.82% with volume 57% ABOVE average
* The total SI Leading Stocks Index was UP 3.61% today with volume 32% ABOVE 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):
Internet Infrastructure, US Oil, Commodities, Agriculture, Pharma
* Current Lagging Sectors/Industries (over last 30 trading days):
Semis, Retail, Internet
* Today’s Market Moving Industries/Sectors (UP):
Broker/Dealers, Retail, Clean Energy, Networking, Banks, Financial
* Today’s Market Moving Industries/Sectors (DOWN):
US Oil, Commodities
::: 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 Cellcom Israel (CEL), a recent IPO that broke out of a 2nd stage base a few days ago.
ABOUT:
Cellcom Israel Ltd. (Cellcom) is a provider of cellular communications services in Israel. The Company offers a range of cellular services through its cellular networks. These services include basic and advanced cellular telephone services, text and multimedia messaging services, and advanced cellular content and data services. As of December 31, 2006, Cellcom also offered international roaming services in 171 countries. It offers its subscribers a selection of handsets from various global manufacturers, as well as extended warranty and repair and replacement services. It also offers landline transmission and data services to business customers and telecommunications operators. Since July 2006, Cellcom began offering landline telephony services to selected businesses. As of December 31, 2006, the Company provided cellular communications services to approximately 2.884 million subscribers, including basic cellular telephony services and value-added services, as well as handset sales.
FUNDAMENTALS:
Cellcom Israel is a company that posts a profit every year but struggles with consistency from year to year. That may be changing with 4 straight quarters of excellent quarter over quarter earnings growth of 107%, 59%, 55% and 61%. Sales growth could be a bit stronger but is solid with quarter over quarter growth of 23%, 21%, 10% and 15% over the past year. Following year over year earnings growth of 18% in ’06, the company is expected to post growth of 54% here in 2007 with estimates of 12% growth in ’08. Those kinds of growth numbers aren’t world beating like some of the other companies I’ve posted here in the Stock of the Day section but they are good and represent greater consistency in growth than in years past. Where the company really shines is in Return on Equity which has spiked to 150% recently and indicates a strong management team. Net margins are good at 14% and have also spiked in the past year. Overall, this is a company with strong fundamentals.
TECHNICAL:
CEL is a stock that IPO’d back in February of this year and didn’t take much time to break out from its first base just a couple months later. It ran up roughly 30% before falling into another shallow base with tight price action. Both characteristics of bullish action. I’d have to say that this is one of the best looking base formations and resulting breakouts out there right now. Following today’s move it’s a bit extended from a proper buy point, but any kind of minor pullback from here might offer a great spot to play it.
SELFINVESTORS RATING: With a total score of 51/60 (24/30 for fundamentals, 27/30 for technical), Cellcom Israel (CEL) is a top 15 Self Investors 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 not own a position in Cellcom (CEL).