Trade Radar

H-P buys 3Com -- so what?

2009-11-11T22:23:00.002-05:00

Much is being made of the of the news that Hewlett-Packard (HPQ) has made a bid to acquire 3Com (COMS). This move is being characterized as a challenge to Cisco Systems (CSCO).

So how much of a challenge to Cisco is this?

A comparison of revenue is revealing.

The following table comes from H-P's 10-Q from September 2009 and shows the most recent quarter:

	2009			2008
	In millions
Net revenue	$	193		$	271		(28.8	)%
(Loss) earnings from operations	$	(10	)	$	26		(138.5	)%
(Loss) earnings from operations as a % of net revenue		(5.2	)%		9.6	%

The table shows the revenue and earnings from the Corporate Investments segment whose revenues are derived primarily from sales of networking infrastructure products sold under the ProCurve Networking brand.

The point of this is that, in a good year, the networking segment brings in revenue of maybe a billion dollars per year.

For the last few years, 3Com revenue has been somewhat flat in the neighborhood of $1.3 billion.

So for H-P, the 3Com acquisition is certainly a step forward.

But how does this compare to Cisco?

In its most recent quarter, Cisco had about $8.5 billion in revenue.In poking through their 10-Q the company didn't break out revenue by segment, only by geographical region. Taking a totally wild guess, let's say that Cisco's networking segment is responsible for half of total revenues or roughly $4.25 billion. That is probably conservative.

So at best, the new H-P networking group is only half the size of Cisco's networking group. H-P will certainly provide competition but a challenge? Not so much.

Disclosure: no positions

Yes, this rally's still intact - Alert HQ signals for Nov 10, 2009

2009-11-10T21:56:00.000-05:00

This post is announcing that Tuesday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

176 Swing Signals -- 171 BUY signals and 5 SELL Signals.
209 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 127 stocks that are new additions to the list and 17 that fell off the previous list.
89 Trend Busters of which 84 are BUY signals and 5 are SELL signals.
251 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 127 are bearish gaps and 124 are bullish gaps.

The view from Alert HQ --

A week ago the bears began throwing in the towel. The ensuing rally has been sharp and confirmed our bullish interpretation of the Alert HQ signals from the previous Tuesday. On Monday stocks soared further based on expectations governments would not withdraw stimulus and/or accommodative policies until the world economy was more clearly on its feet.

Today markets took a bit of a rest. So far it's nothing to be alarmed about. On the contrary, our signals are still largely bullish. We still have a hearty list of Swing Trading Signals, almost all of which are BUY signals. The Trend Leaders list is still expanding and the Trend Busters list is completely dominated by BUY signals. And there still seems to be plenty of room to run, at least until we see that Trend Leaders list begins to hold 800 to 1000 stocks and ETFs.

In our opinion, it's not too late for a trade. Furthermore, the primary trend remains up so there's plenty of opportunity remaining in stocks and ETFs for the intermediate-term investor. As always, the TradeRadar signals have a good selection of stocks to choose from.

More on technical analysis --

Readers of this blog know that these lists of alerts are all based on technical analysis of price and volume data and that we aren't really bringing financial or fundamental data into the equation.

If you're interested in delving further into technical analysis, our affiliate INO TV is running a series of seminars on the subject. First up is John Murphy, an award winning teacher and author whose seminars are usually reserved for paying attendees. So feel free to take advantage of the chance to learn from a man with over 30 years successfully trading using technical analysis. Check out John Murphy at INO TV today. There's no charge!

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Another tactic in Google's bid to capture the enterprise - when will Microsoft start to sweat?

2009-11-09T22:49:00.000-05:00

Much of the attention Monday was given to the announcement that Google was acquiring AdMob. This fits neatly and predictably into the search giant's strategy of dominating online advertising.

What was not discussed as loudly is Google's relentless push into Microsoft's turf. Google is serious about gaining access to enterprise computing and the company recognizes where improvements need to be made.

Google has been pushing a couple of initiatives targeted to the enterprise. One is their search appliance. The other is Google Apps. The Google Apps suite of applications includes Gmail, Google Talk, Google Calendar, Google Docs and Google Sites. These tools are meant to support individual work and communication as well as collaboration.

There has been some acceptance of these tools among corporations. At $50 per person per year, the Apps Premier product offering is clearly a cost effective alternative to the Microsoft Office suite of tools. The problem, however, has been security.

IT managers have been reluctant to accept Google Apps. With the applications living in the cloud, IT managers have little control over the administration and security associated with the users, the data and the applications. Google has sought to address those concerns today.

What's Postini?

Postini was a company and also the name of a security tool. Google acquired Postini back in 2007. The company's premier product was designed for establishing and enforcing usage policies, rules and parameters on email. After the acquisition, Google integrated the Postini code into Gmail. This now allows IT personnel to administer Gmail in an enterprise environment to enforce security policies.

Google has now announced that they are working to roll out the Postini functionality across the entire suite of Google Apps.This will eventually allow administrators to set up rules that, for example, would prevent users from sharing a document that includes financial information outside the domain. This will provide a new level of control over how end-users share and collaborate on documents within the Google Apps infrastructure.

This whole initiative is meant to make it easier for Google Apps to make inroads into the enterprise. By overcoming the reservations and objections of IT administrators, Google hopes to make the Apps suite more competitive with the traditional (and expensive) desktop applications sold by Microsoft. In general, that implies Microsoft loses each time Google gains.

One final note: Google claims to make 100s of millions of dollars in revenues from the Google Apps products. For most other companies, that would be a significant amount of money. For Google, which racked up roughly $22 billion in revenue in 2008, Google Apps is a drop in the bucket. It behooves Google, therefore, to do what it can to ramp up the product or pull the plug. It looks like Google is willing to invest to make the product competitive and go toe to toe with Microsoft. Nevertheless, it will be quite a while before Microsoft begins to sweat.

Weekend Winners and Losers - Alert HQ BUY and SELL signals for November 6, 2009

2009-11-07T08:43:00.000-05:00

This is the usual quick post announcing that the weekend's stock signals are now available at Alert HQ.

Today we have the following:

Based on daily data, we have 61 Alert HQ BUY signals and 29 SELL signals
Based on weekly data, we have 1 Alert HQ BUY signal and 53 SELL signals
We have 69 Bollinger Band Breakouts based on daily data and 194 Breakouts based on weekly data.
We have 854 Cash Flow Kings
176 Swing Signals -- 171 BUY signals and 5 SELL Signals.
99 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 29 stocks that are new additions to the list and only 11 that fell off the previous list.
55 Trend Busters based on daily data of which 52 are BUY signals and 3 are SELL signals. We also have 118 Trend Busters based on weekly data.
252 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We also have 55 Gap Signals based on weekly data.

The view from Alert HQ --

All the major averages gained roughly 3% this week. That seems to have effectively ended the recent pullback before it could become a correction.

Accordingly, we've got Alert HQ BUY signals busting out all over. At least that's true in those situations where we are basing our signals on daily data. Where we are using weekly data, we get the opposite situation. This implies the move in our daily data has not yet been confirmed by the weekly data; therefore, there is still some risk in this market.

Currently, we see that stocks are evenly split: half are above their 20-DMA, half are below, half are above their 50-DMA and half are below. This is an improvement from last week but leaves the overall outlook somewhat uncertain.

So if you are comfortable being on the leading edge and are looking to go long, be sure to check out our BUY signals based on daily data. We also see BUY signals outnumber SELL signals by a wide margin on our lists of Swing Trading Signals, Trend Busters and the Gap analysis list. Little by little, the number of stocks and ETFs has been increasing on our Trend Leaders list.

I've stated before that I am optimist. I am looking at this past week's action as confirmation that the primary trend remains UP. I think that, looking back, this past week will turn out to have been a good time to buy stocks. And very likely, next week will provide some opportunities, too.

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you. No matter which preference you have, there are bound to be a few stocks you will want to add to your watch list.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you do favor technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.

Nonfarm Payrolls Report surprisingly bad - or was it?

2009-11-06T09:15:00.000-05:00

How awful was today's non-farm payrolls report?

Let's start with the bad news:

Nonfarm payrolls for October fell 190,000, which is worse than the decline of 175,000 that had been widely forecast.
Job losses for the previous month were upwardly revised to reflect nonfarm job losses of 219,000.
The unemployment rate surged to 10.2%, which is up from 9.8% and higher than the 9.9% that was widely forecast. It also marks the highest unemployment rate since 1982.
The manufacturing sector saw payrolls drop by 61,000. This is worse than the 45,000 jobs lost in the prior month.

But not everything was awful. There was some good news buried in there as well:

A drop of 190,000 is bad but it is still an improvement over the previous month's 219,000
Average weekly hourly hours were unchanged at 33.0, which is a bit below the 33.1 that had been forecast. At least there was no decrease.
Average hourly earnings increased 0.3% month-over-month, which is stronger than the 0.1% monthly increase that had been expected.
Less jobs were cut in October than the previous month in the following sectors: builders, financial firms and service industries which include banks, insurance companies, restaurants and retailers
Temporary workers rose by 34,000, the first gain since December 2007. Temp workers are the first to be brought back after a downturn so we can hope this signals that we are nearing the beginnings of a recovery in the job market.

Today report confirms that it will be a tough slog before the job market fully returns to health.

Today's report also confirms that the "less bad" scenario continues to apply. But I'll take "less bad" over "worse" any day.

Semiconductor turnaround - is the correction over already?

2009-11-05T23:17:00.000-05:00

On Monday I asked if semiconductors were a bargain yet. I proposed that very soon they would be and then the sector would be a clear Buy.

Quite frankly, the sector didn't quite fall as far as I thought it would and now today, in the midst of a tech resurgence based on Cisco's better than expected results, semiconductors appear to running again.

The following chart exhibits several aspects of technical analysis that are worth reviewing:

Here we see the iShares Semiconductor ETF (IGW). There are five points to observe:

IGW fell almost to a major support line as drawn by the horizontal magenta line.It has now bounced strongly up from that area.
The blue line shows the trend line that was solidly broken but the ETF has closed decisively above it today.
The horizontal red line is the first resistance line. IGW closed above this level today, also.
Williams %R shows the ETF is just now moving out of an over-sold state. It should have room to run.
The 200-day moving average never wavered. It is still moving solidly upward.

After a 15% drop from its peak, this ETF certainly endured more than a correction. Seeing the range of the Bollinger Bands and the slope of the 200-DMA, however, I'll go out on a limb and predict that IGW should be able to achieve a 12% to 20% gain before the next serious pullback.

So sometimes a sector never quite reaches bargain levels but when it's making a bullish move, perhaps that's not so important.

Disclosure: couldn't resist nibbling on the ProShares Ultra Semiconductor (USD) again today

Trust this rebound, it's real - Alert HQ signals for Nov 5, 2009

2009-11-05T22:24:00.001-05:00

This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

369 Swing Signals -- 367 BUY signals and 1 SELL Signal plus 1 Strong BUY.
81 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 40 stocks that are new additions to the list and 21 that fell off the previous list.
70 Trend Busters of which 59 are BUY signals and 11 are SELL signals.
251 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 101 are bearish gaps and 150 are bullish gaps.

The view from Alert HQ --

On Tuesday I asked whether the pullback was running out of gas. By the time we got to Thursday, it appears that the answer was a definite "yes."

Between Cisco's earnings beat and positive guidance, the big increase in productivity and the lower than expected initial jobless claims, stocks had to continue the rebound that began to be apparent a couple of days ago.

Is the rebound real? Our signals sure say it is!

Once again, we have tons of BUYs on the Swing Signals list and one, lonely SELL signal. BUY signals outnumber SELL signals on both the Trend Busters and Gap Signals lists. There are more stocks coming back onto the Trend Leaders list than are falling off.

If the signals tell the story then the story is bullish. This is the dip that needs buying. Today's signals provide a variety of plays that will allow you to get into the game. So step right up!

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Pullback running out of gas? - Alert HQ signals for Thursday, Nov 3, 2009

2009-11-03T22:00:00.009-05:00

This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

323 Swing Signals -- 321 BUY signals and 1 SELL Signal plus 1 Strong BUY.
62 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 29 stocks that are new additions to the list and 25 that fell off the previous list.
62 Trend Busters of which 27 are BUY signals and 35 are SELL signals.
222 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed.

The view from Alert HQ --

Charts of major averages still look pretty awful but I think we're seeing this pullback run out of gas.

Why? Once again I'm putting my faith in the Swing Trading Signals. Over 300 stocks and ETFs bouncing off their lower Bollinger Band, coming out of an over-sold state according to Wiliiams %R and showing gains today. Breadth was good in terms of sectors - it seemed that almost all sectors were represented among this set of BUY signals.

Another indication that risk is becoming acceptable again is that small caps were in favor today. Not only did the Russell 2000 ouperform the other major averages today but there were a number of small cap ETFs on the Swing Signals list as well as plenty of individual small cap stocks.

Are our other signals providing confirmation? Yes and no. The Trend Leaders list is getting down to about as low as it can get. That implies it might be ready to go up, right? The Trend Busters list has a lot of foreign stock ETFs listed among the SELL signals. It shows the global nature of this pullback. Does it also show that the selling of U.S. stocks has begun to dry up?

So maybe I'm stretching to arrive at my opinion that stocks are ready to rise soon. But these are the times when you want to have a few stocks or ETFs picked out that you would be happy to own, especially if you can get them at the current lower prices. It's true that we could use another day or two of gains to confirm the turnaround but it sure seems like stock prices have stopped falling for the time being.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Is the Semiconductor sector a bargain yet?

2009-11-02T21:16:00.013-05:00

Semiconductors led the market up and now they are leading the market down. What gives?

First, let's look at where we've been and where we are today. The chart below covers the period from the March low to today, November 2, 2009.

The semiconductor ETF IGW is the red line, the Tech ETF IYW is the blue line and the S&P 500 index is the green line. You can see that semiconductors have been more volatile than the other two. You can also see that semiconductors outperformed the other two during much of this period, doing a bit better than the overall tech sector and significantly better than the S&P 500.

Around the middle of October, however, semiconductors began to underperform. By today, semis were significantly below the overall tech sector and returned to the level of the S&P 500. The sector's growth premium had essentially been wiped out.

This flagging performance of the semiconductors coincided with earnings season. Results of many stocks in the sector were respectable and forward guidance was generally positive. Yet stock prices in the sector stopped rising. As markets began to correct in the last two weeks, the slide in semis only accelerated.

Is the drop warranted?

Is there a good reason for semis to be on the retreat? No bellwethers in the sector reported horrific earnings. On the contrary, bellwethers like Intel (INTC) exceeded expectations.

Just today, the Semiconductor Industry Association announced that sales for the month of September and the quarter ending in September were up. Worldwide semiconductor sales are shown in the chart below.

The chart shows that worldwide sales have been increasing steadily for months now and even accelerated when comparing September to August.

The next chart shows semiconductor revenues for the Americas. This probably more closely tracks the results for those stocks in IGW. Here again revenues have been increasing steadily though maybe not as steeply as worldwide sales.

In both charts, current levels of revenue are still below year-ago levels.

SIA President George Scalise stated that sales in the quarter were above expectations, and that September sales "were in line with historical patterns, reflecting increased demand from end-users as they began the build for the holiday season." He noted that PC and cell phone sales are running ahead of previous forecasts and that "Sales are running well ahead of the worst-case scenarios projected early in the year, and we are optimistic that total sales for 2009 will be better than our mid-year forecast."

The SIA is reporting pretty good sales numbers both worldwide and for the Americas but the Durable Goods report tells a different story. This next chart we presented last week when the most recent Durable Goods report was released.

This chart says that the closer we get to home, the U.S.A., the weaker the results. Month to month, shipments have shown quite a bit of variability (they are not smoothed as in the charts based in SIA data) and, though it appears a bottom is in, the way forward does not appear to be smooth.

Conclusion --

Investors are currently trashing former market leaders. For those who are looking to pick up an ETF with improving sector fundamentals and good growth potential, keep an eye on the semiconductor sector; it could be at bargain levels soon.

We have already mentioned IGW but my favorite has been the ProShares Ultra Semiconductor ETF (USD). I was recently stopped out of USD but under the right conditions I would buy it again, for example when IGW gets down to around $38.

Other ETFs that track the sector include the SPDR Semiconductor ETF (XSD), the PowerShares Dynamic Semiconductors Portfolio ETF (PSI) and the Semiconductor HOLDRs (SMH).

The bottomline is that the fundamentals of the semiconductor sector seem to be steadily on the mend yet prices are dropping. This is an opportunity in the making. We just need a little patience.

Disclosure: no positions at the moment

Not quite a correction yet - will we get there soon?

2009-11-01T16:11:00.010-05:00

Markets were determined to drop this week and drop they did. After a big rally on Thursday based on a better than expected GDP number, stocks got right back to the business of moving steadily downward. The S&P 500 ended the week off 4%, the NASDAQ was down 5.1% and the Russell 2000 plunged 6.3%. The Dow was the top performer with a loss of only 2.6%.

Is this a correction yet? The Russell 2000 is down 9% from its closing high only two weeks ago so you could say small caps are pretty darn close. Other major averages are not in such bad shape yet but are getting there. The S&P is now down 5.5% from its recent high. The NASDAQ Composite is right in the middle.

So with some relief we can say that this is still just a pullback. But there is little comfort in that statement as some the following charts will show.

The view from Alert HQ --

Charts of some of the statistics we track at Alert HQ are presented below:

This first chart tracks our moving average analysis. The count of stocks above their 50-DMA (the yellow line) , has really plunged. Only about 35% of the roughly 7200 stocks and ETFs that we evaluate each weekend are still above their 50-DMA. Extending the signs the of the downturn, the magenta line which tracks the number of stocks whose 20-DMA is above their 50-DMA has also definitively rolled over. Stocks have fallen so fast the magenta line hasn't had time to come anywhere near catching up with the yellow line.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.

This chart is finally showing the cross-over of the red and yellow lines. This means the number of stocks in strong down-trends is now higher than the number of stocks in strong up-trends. This is the sign of a real pullback, not just a few days of sagging stock prices.

As perspective on where we are today, the following is the weekly chart of the S&P 500. Note that the bullish trendline starting at the March low was violated to the downside this week.

In terms of the daily chart, SPX has broken below it's 50-DMA and is now positioned right at its lower Bollinger Band. And we're coming up fast on support levels at 1030 and 1010. Down from there, next stop could be as low as 950.

Conclusion --

Our statistics show a serious downturn underway. In last week's post I said that bearish setups were developing on the charts of our statistics. They have certainly come to fruition this week.

Optimistically speaking, however, it looks like the charts are approaching levels where turn-arounds usually occur. As internals deteriorate, stocks get to a point where things can't get much worse.

We're probably not quite there yet, but in a few days investors will probably stop and ask themselves what is different today, in terms of stock fundamentals and the economic situation. What reasons are there for lower stock prices?

Earnings season is nearly over. Investors were disappointed that so many companies relied on cost cutting and failed to report improved revenues. Yet, many companies did provide positive outlooks that imply revenue growth is imminent. On the other hand, the jobs picture remains disappointing and improvement seems to be coming painfully slowly. This should be no surprise as most economists and analysts have said that unemployment will hit 10%. We're not there yet. Then there is the real estate market. Some improvement was seen during the peak buying months of the summer, aided by the first time buyers credit. As the buying season wanes, investors should expect home sales to sag.

So things aren't getting noticeably worse and a significant number of companies are projecting that things will get better. Emerging markets seem to be recovering quicker than Europe and the U.S. and that should provide some support to manufacturers.

So, stocks are down and still weak while the economic outlook is weak but slowly improving. Not exactly a recipe for soaring markets but is it really a recipe for anything worse than a correction?

Weekend Winners and Losers - Alert HQ BUY and SELL signals for October 30, 2009

2009-10-31T06:31:00.005-04:00

This is a quick post announcing that the weekend's stock signals are now available at Alert HQ.

Today we have the following:

Based on daily data, we have 1 Alert HQ BUY signal and 458 SELL signals
Based on weekly data, we have 1 Alert HQ BUY signal and 80 SELL signals
We have 260 Bollinger Band Breakouts based on daily data and 201 Breakouts based on weekly data.
We have 849 Cash Flow Kings
45 Swing Signals -- 44 BUY signals and 1 SELL Signal.
58 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 10 stocks that are new additions to the list and 40 that fell off the previous list.
162 Trend Busters based on daily data of which 25 are BUY signals and 137 are SELL signals. We also have 219 Trend Busters based on weekly data.
231 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We also have 65 Gap Signals based on weekly data.

The view from Alert HQ --

Looks like no treats for investors this Halloween weekend. Instead, traders have to digest losses ranging from 2.6% on the Dow to 6.3% on the Russell 2000. Trend lines were broken and 50-day moving averages were violated. Despite the GDP-driven rally on Thursday, it was not a pretty week.

Our signals today show the effects, with SELL signals well outnumbering BUY signals and the Trend Leaders list whittled down to less than 60 stocks out of the 7200 or so we evaluate each weekend.

Interestingly, there were quite a few stocks that refused to sink with the markets on Friday. Many of these stocks populate our Swing Signals list this weekend. Check out Athena Health (ATHN), for example, Direct TV (DTV), Las Vegas Sands (LVS) and Zumiez (ZUMZ). This implies there is still life life left in the dip-buyers and that there is hope for this market.

Yes, stocks ended the week in trouble but I'd be very surprised if markets fell more than 3% or 4% further from here. When we can call it a real correction, then I suspect it will be time to start buying again. Keep an eye on Alert HQ, we always have a great variety of investment candidates.

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you. No matter which preference you have, there are bound to be a few stocks you will want to add to your watch list.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you do favor technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.

While the market plunges OPNET rallies - here's why

2009-10-30T20:33:00.011-04:00

Major market averages fell roughly 2.5% Friday but not everything went down. OPNET Technologies (OPNT) gained 4.7% today in the face of relentless selling in most other stocks. What gives?

Background --

OPNET Technologies, Inc. provides software products and related services for managing networks, servers and applications. The company's products are used to troubleshoot performance problems in production applications and perform capacity planning and design optimization of networks and servers. Products are also used to provide centralized, real-time visibility of network topology, traffic, and status in a single, integrated view and perform modeling of designs and configuration changes. The company also has products that perform some of the same functions but on wireless networks. Finally, OPNET offers consulting and professional services.

Financials --

OPNET is a profitable small-cap that actually pays a dividend, unusual for a tech company of its size. My several measures, it is not inexpensive: PEG is high at 3.61 and the 12 month trailing PE of 63 is definitely at nosebleed levels.

Given the economic backdrop, it's not surprising that trends in revenue and earnings have been lackluster. The company actually suffered losses in the first two quarters of 2009.

On Thursday after the close, however, OPNET reported results for the third quarter of calendar year 2009 (which, if you're interested, is equivalent to the second quarter of their fiscal year 2010). The company recorded earnings per share of $0.09 which soundly trounced analyst expectations of $0.03. Revenue for the quarter was $30.6 million, which compares favorably to the estimate of $28.69 million.

Software license revenue grew 30.9%, or $2.8 million over last quarter, and operating margin went from negative 2.3% to positive 7.2% over the last quarter. The company also ended the quarter with record deferred revenue of $34.9 million.

Though the year-over-year revenue comparison was negative, the solid profit was enough to fire up investors. The chart below shows Friday's nice up-move on strong volume. The stock was on the TradeRadar Swing Signals list as a BUY on Thursday night. I wish I could say all the Swing Signals worked out as well as this one.

Outlook --

Despite a stronger than expected quarter, management remains cautious. OPNET sees Q3 revenues of $30.5-$32.5 million, versus the consensus of $30.3 million. They see Q3 EPS of $0.03-$0.09, versus the consensus of $0.06. The CEO claims to be seeing more normal buying patterns after the previous year where deals dried up or were yanked at the last minute.

The company seems resilient and responsive to changes in the industry and committed to growth through innovation. As an example, with virtualization an increasingly important strategy for more and more corporations, OPNET has introduced a product for troubleshooting application performance problems in virtualized environments.

For those who like to see management put their money where their mouth is, fully 36% of shares are owned by insiders.

Though a player in infrastructure performance management (IPM), the company's primary strength is in application performance management (APM) which, as it turns out, is not the strong suit of their biggest competitors (all known by their initials) BMC, CA, HP and IBM. The other competitors are mostly on the same level as OPNET or even smaller so OPNET still has wide open opportunity to grow market share. The company could even be a buy-out target as one of the big four look to shore up their APM product suite.

Conclusion --

As networks and applications grow in complexity, OPNET is there to offer tools that more efficiently identify root causes and potential solutions. As customers routinely seek fast performance and 24/7 availability, OPNET's products provide the ability to monitor in real-time and troubleshoot quickly.

Despite a tough environment OPNET has managed to deliver bottom-line growth. In an improving economy they should do even better. When the current market correction has run its course, OPNET could add to gains.

Disclosure: no positions

Did GDP sound the "All Clear"? - Thursday Swing Signals, Gaps, Trend Busters and Trend Leaders for Oct 29, 2009

2009-10-29T20:49:00.010-04:00

This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

210 Swing Signals -- 207 BUY signals and 2 SELL Signals plus 1 Strong BUY.
88 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 25 stocks that are new additions to the list and 96 that fell off the previous list.
30 Trend Busters of which 7 are BUY signals and 23 are SELL signals.
251 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed.

The view from Alert HQ --

Third quarter GDP came at a 3.5% annualized rate, exceeding almost everyone's expectations. The usually infallible Goldman Sachs had recently dialed down their GDP estimate to less than 3% so even they weren't ready for this. In any case, stocks started strong and just got stronger as the day progressed.

I often look to our Swing Signals as the early indicator of market direction. When there are a ton of BUY signals, the market often turns up. That's what we got today with 207 BUYs, a big spike up from what we have been seeing during the last few weeks. Conspicuous by their absence, however, were semiconductor stocks. Nvidia and ASML were on the list but that was about it. With semis being the leading indicator for the tech sector, it's not a good sign to see that they are not recovering as well as some of the broken financial stocks, for example.

In a contrary kind of indication, our Trend Leaders list has dwindled down to only 88 stocks. When it gets this low, it is often a signal that an intermediate term bottom has been reached. One day's rally isn't enough to turn around the Trend Leaders so we'll have to give it some time before it begins to ramp up again.

As for the Gap Signals, we look for gaps that have occurred during the last five days or that were closed during the last five days. So far, there are almost three times as many bearish gaps as bullish gaps. It will take some time to work this off, as well.

In the meantime, the good GDP number is making investors forget the lackluster durable goods report and the fact that this week's initial jobless claims were again over 500K. Major averages have probed their 50-day moving averages and handily recovered.

Still, this is only a one day recovery so far. Let's see if we can put a few more good days together.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Durable Goods headline number masks weakness in Tech

2009-10-28T21:07:00.018-04:00

The advanced report for Durable Goods for September came out Wednesday. The headline number for new orders showed a 1% month-over-month improvement after a surprisingly poor showing in August. How did things go in the tech sector?

Shipments --

Typically, investors pay the most attention to shipments and new orders. Shipments had the worst outcome in September. This first chart shows the results for Computers and Electronics Products which is the summarized category encompassing most high tech hardware manufacturing including computers, peripherals, storage, semiconductors, communication and networking equipment.

Yup, two down months in a row and we are now approaching the lows that were last seen in March and May.

This next chart shows shipments for the Computers and related products sub-category. Here we have a slight improvement though the previous month was revised downward a bit.

Next is the chart for Communications Equipment. The numbers include both defense and non-defense equipment. Here a nice spike in shipments is heading back toward the basement.

This next chart shows Semiconductor shipments. The declines here are small but there are still two in a row. It is encouraging that it still seems like the recent turnaround is holding on.

New Orders --

Now for the forward looking measure. This next chart shows New Orders for the tech sector as a whole. We have a slight droop in results here but it still looks like a working up-trend to me.

Our next chart shows new orders for the Computers and Related Products sub-category. Happily, we have a slight increase in new orders here. It looks like a bottom is in place but the level of new orders is still far below what was typical back in more normal times.

New orders for Communications Equipment are presented below. What looked like a nice developing up-trend just got slapped down.

Conclusion --

I've been positive on tech for months and tech stocks have certainly performed well -- until the last week or two, anyway. Seeing the results of this report, however, does give me pause. And the fact that I was just stopped out of my position in the ProShares Ultra Semiconductor ETF (USD) only seems to confirm the sense of doubt.

Many of the categories we examined above have now shown declines two months in a row. These declines are jeopardizing the upside reversals that seemed to be playing out just a few months ago.

The slight improvements in the Computer and related products category don't seem to measure up to some of the rosy guidance we have heard from companies such as Intel. Some bloggers have wondered whether enough consumers will show up to absorb all this inventory that is being manufactured. It's a good question but we'll have to wait a few months to find the answer.

Keep an eye on OmniVision

2009-10-28T14:14:00.002-04:00

OmniVision Technologies (OVTI) has seen its stock price decline roughly 40% since mid-September. Can we expect things to turn around?

Background --

The company designs and manufactures CMOS image sensors (CIS) for consumer electronics products such as digital cameras, videocams, phones, PCs, netbooks and notebooks. It is also establishing a presence in the automotive, medical and security markets. Image sensors are the chips that allow all these gadgets to take pictures, capture movies, see what is behind your car, etc. The market for these chips is clearly growing and, though Omnivision has serious competitors, they are one of the leaders in their field.

Financials --

Here is a company that actually showed a sequential quarter-over-quarter increase in revenue when they reported back in August. Unfortunately, they couldn't quite translate that into a profit. Though revenue was up 18.5% to $105.6 million, the company still managed to lose $9.9 million or $0.19 per share. While still a loss, it was a big improvement over the earlier quarter.

Margin also increased as older inventory manufactured at higher cost was used or written off and newer inventory was built up at a more recent lower cost. Better average selling prices (ASP) were also obtained due to the higher resolution and higher complexity of some newer products.

Explore more OVTI Data on Wikinvest

With revenue and margins up, how did OVTI still manage to lose money?

For one thing, R&D was over 17% of revenue; high but not exceedingly so for a high tech semiconductor firm. Cost of Goods Sold was up $8 million or 10.8% from the previous quarter while G&A costs held steady. There wasn't one big item you point to that prevented the company from being profitable and none of the analysts probed the issue during the last conference call.

Outlook --

The company has stated that the current quarter, due to be reported on in late November or early December, should show further growth in revenue. Management indicates that the company has garnered a number of design wins including one for Microsoft's next generation webcam. Guidance provided back in August was quite positive with management saying they expect fiscal year second quarter revenues to be in the range of $155 million to $170 million representing a 47% to 61% increase quarter-over-quarter and GAAP earnings expected to range from break even to a net income of $0.10 per diluted share.

As this current quarter draws to a close, does it look like they are on track to achieve the expectations described in their guidance?

There are reports that the company can barely keep up with orders. The following was reported at DigiTimes.com:

OmniVision Technologies has notified clients to expect upcoming limited supply of CMOS image sensors (CIS) due to strong iPhone 3GS demand for the end-year holiday season, according to market sources. Tight supply is not expected to ease until late November 2009, the sources pointed out.

OmniVision happens to be a supplier to Apple and it is said that Apple has increased fourth-quarter orders for the iPhone 3GS by 17-20%. In addition, OmniVision is the sole supplier for 3.2-megapixel CIS products for new iPod nano, iPod classic and iPod Touch models, all of which were launched last month in preparation for the holiday selling season.

Further tightening supplies, PC and notebook vendors are gearing up to introduce new models following the launch of Windows 7.

Conclusion --

It appears that OmniVision is on track to hit their revenue target for this quarter. The question is, with supplies so tight, did they leave money on the table by not ramping up their inventory sooner? It looks like perhaps they did.

In any case, with the stock down over 40%, the company seems like a low risk proposition. Their relationships with Apple and Microsoft and numerous other tier one customers should support the growth that management is predicting.

The overall market for image sensors reminds me of that for telecom chips where successful small companies like Starent (about to be bought by Cisco) are able to prosper by delivering progressively more complex and integrated offerings, the so-called system-on-a-chip (SOC) solutions that make it easier and easier for OEMs to design in higher value functionality for customers. Leadership in these SOC solutions also make it harder for competitors to keep up. OmniVision is going down that path and, hopefully, should be able to return to profitability and bottom-line growth.

Disclosure: no positions

A couple of sectors fall out of favor - Tuesday Swing Signals, Trend Busters, Trend Leaders and Gap Signals for Oct 27, 2009

2009-10-27T23:04:00.008-04:00

This post is announcing that Tuesday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

24 Swing Signals -- 11 BUY signals and 12 SELL Signals and one Strong BUY.
159 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 34 stocks that are new additions to the list and 293 that fell off the previous list.
87 Trend Busters of which 23 are BUY signals and 64 are SELL signals.
218 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed.

The view from Alert HQ --

This post is a little late but the signals were up on the web site on time. Some of today's signals, though, were not too pleasant.

Case in point: the Trend Busters. The BUY signals on this list were almost exclusively short or ultra short ETFs. That in itself is not a serious sign unless there is confirmation from the ETFs that are based on the same or similar underlying indexes. Unfortunately, we do have some confirmation. Here is the list of regular, non-leveraged ETFs that have violated their up-trend since this pullback began:

IWC	ISHARES RUSSELL MICROCAP INDEX FUND
IWO	ISHARES RUSSELL 2000 GROWTH INDEX FUND
IYT	ISHARES TRUST DOW JONES TRANSPORTATION AVERAGE INDEX FUND
KBE	SPDR KBW BANK ETF
KBW	KBW, INC.
PZI	POWERSHARES ZACKS MICRO CAP PORTFOLIO
RMT	ROYCE MICRO-CAP TRUST INC
RTM	RYDEX S&P EQUAL WEIGHT MATERIALS ETF
RWK	REVENUESHARES MID CAP ETF
RZV	RYDEX S&P SMALLCAP 600 PURE VALUE ETF
VFH	VANGUARD FINANCIALS ETF
XLF	FINANCIAL SEL SECT SPDR FD

Its clear from this list that small-caps and financials have fallen out of favor.

On the Trend Leaders list, I see that the number of stocks in strong up-trends has fallen to such a low level, only 159, that I am beginning to think we are getting close to the end of this correction already. At least, I hope we are.

Our other signals this week are all over the place, with no one sector standing out. With plenty of variety, there should be something for everyone. Just be careful with those small-caps and financials.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Down week for stocks - little blip or start of something bigger?

2009-10-25T06:29:00.014-04:00

Should investors be worried?

Stocks actually closed with losses this week. This is something we haven't seen much of lately so every time it happens, I begin to think maybe this is finally the long awaited pullback.

Certainly, price action in the stock market was not particularly reassuring. Despite a sequence of better than expected earnings from most companies and some spectacular earnings from the likes of Apple (AAPL) and Amazon.com (AMZN), stocks were unable to shake off the blahs. The three major averages lost a fraction of a percent, most of it on Friday. Small-caps got spanked as the Russell 2000 lost a big 2.5%

Economic reports presented a so-so picture of the U.S. struggling to rebound. Initial jobless claims were the big disappointment, rising again after economists predicted a decrease. Coupled with an upward revision of the previous week's numbers, it confirmed that the job market could be much worse than merely a lagging indicator. Real estate also showed that it didn't know which way was up as Existing Home Sales came in higher than expected while Housing Starts and Building Permits were lower.

Let's review some charts and see if the worry is justified.

The view from Alert HQ --

Charts of some of the statistics we track at Alert HQ are presented below:

This first chart tracks our moving average analysis. The count of stocks above their 50-DMA (the yellow line) is decreasing. The line has also again failed to cross above the magenta line which tracks the number of stocks whose 20-DMA is above their 50-DMA. This is a bearish setup that is developing. The only hopeful indication is that the number of stocks tracked by both of these lines are still at reasonably high levels.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.

Here we see that barely 30% of stocks can be considered to be in strong up-trends. This is not the kind of level we have previously seen at market tops or at market bottoms. According to this indicator, we are stuck in no man's land. As the number of stocks in strong down-trends is starting to show a bit of an uptick and the number of stocks in up-trends drops, it suggests that the underpinnings of this rally are weakening.

Looking at the S&P 500 as a proxy for the market, things actually don't look too bad. Up-trend is intact and Aroon indicates it's a reasonably strong trend. All the moving averages are moving up in concert and the index hasn't even broken below the 20-DMA. This implies the major trend remains solidly positive though a short-term downswing could easily be in the offing.

Indeed, stocks seem to be topping out on a short-term basis. MACD is providing a glimmer of confirmation. The overall trend of MACD has been going down while stock prices have been going up. This is a divergence that many investors believe presages a turn in the trend. The faster moving average (black line) has just fallen below the slower moving average (red line). This is a classic short-term bearish setup.

Conclusion --

I've used the phrases "short-term" and "primary trend" several times in this post and for good reason. Investors need to separate the two and understand how their trading strategy plays into this dichotomy. The evidence today seems to be pointing to a short-term pullback, beginning about now. On the other hand, it is hard to think that such a pullback would be a threat to the primary long-term trend which thus far is solidly up.

Consider the outcome of a pullback that more or less looks like the last three pullbacks. This would result in the S&P 500 dropping to the range between 1030 and 1040. This implies a drop of another 4% of so from here. This would confirm the 50-DMA as support, leave the primary up-trend intact and suggest that this pullback should be looked at as a buying opportunity.

So am I worried? Maybe a little bit but so far stocks just seem to be following the usual ebb and flow.

Weekend Winners and Losers - Alert HQ BUY and SELL signals for October 23, 2009

2009-10-24T10:33:00.006-04:00

This is a very quick post announcing that the weekend's stock signals are now available at Alert HQ.

Today we have the following:

Based on daily data, we have 6 Alert HQ BUY signals and 33 SELL signals
Based on weekly data, we have no Alert HQ BUY signals and 24 SELL signals
We have 122 Bollinger Band Breakouts based on daily data and 233 Breakouts based on weekly data.
We have 803 Cash Flow Kings
32 Swing Signals -- 24 BUY signals and 5 SELL Signals plus 3 Strong BUYs.
418 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 43 stocks that are new additions to the list and 161 that fell off the previous list.
19 Trend Busters of which 7 are BUY signals and 12 are SELL signals.
199 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We also have 64 Gap Signals based on weekly data.

Unfortunately, I have no time this morning for analysis of this weekend's signals. Stay tuned. I expect to have a post out on Sunday.

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you. No matter which preference you have, there are bound to be a few stocks you will want to add to your watch list.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you do favor technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.

NASDAQ getting shaky - is it on thin ice or in thin air?

2009-10-23T21:49:00.006-04:00

Another day when a bellwether couldn't save the market. Apple couldn't do it last week and Amazon couldn't do it this week. Even Microsoft's earnings beat today didn't help.

You can see in the chart below that the NAZ was up nicely on Friday but couldn't hold on.

Distressing signs that are developing include the fact that MACD is sneaking negative. The 12-day EMA has moved below the 26-day EMA, a bearish signal if it continues. Williams %R shows the index falling out of an over-bought situation. Where it goes from here is, of course, the big question but it does seem to be skating on thin ice now.

I've been trying to examine the Alert HQ signals over the last couple of weeks and losing confidence in the ability of markets to make significant new highs without some kind of pullback happening first. It seems like tentative signs of that pullback are starting to show up.

Is the NASDAQ Now in Thin Air?

Readers of this blog may be familiar with one of our affiliates, MarketClub. They have created a new video entitled "Is the NASDAQ Now in Thin Air?"

Of the three major indexes they track, the DOW, the NASDAQ and the S&P 500, only the NASDAQ is in thin air.

What do they mean by thin air? So far the NASDAQ is the only index to make it past the 50% Fibonacci retracement levels as measured from the highs seen in 2007 and the lows that were made in March of this year. Fibonacci levels are something we only occasionally discuss on this blog so it is good to see this indicator explored in more detail in a real-life situation playing out this week.

Both the Dow and the S&P 500 have rallied strongly from their March lows but have not made it over the 50% retracement level. Many professional traders - including Adam Hewison at MarketClub - are looking at the NASDAQ’s Fibonacci retracement as it represents a potentially key turning point for this year’s market.

While not all the pieces are in place to go short or get out of long positions, one of the first clues was put in place Wednesday by the Japanese candlestick charts. We can also see some divergences developing that need to be pointed out.

In this new video, Adam at MarketClub shares with you the NASDAQ retracement levels and a deeper discussion of MACD as well as one of the key components that could lead to a potential reversal to the downside.

As always, the video is free to watch and there is no need to register.

Enjoy!

Thursday Swing Signals, Gaps, Trend Busters and Trend Leaders for Oct 22, 2009

2009-10-22T20:04:00.010-04:00

This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

47 Swing Signals -- 32 BUY signals and 13 SELL Signals plus 2 Strong BUYs.
535 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 111 stocks that are new additions to the list and 254 that fell off the previous list.
28 Trend Busters of which 11 are BUY signals and 17 are SELL signals.
202 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed.

The view from Alert HQ --

Stocks came from behind today and finished with solid gains. This doesn't change the fact that stocks have been more or less treading water for the last seven sessions or so. It's been a narrow trading range with the S&P 500 essentially flat and the NASDAQ showing only a small gain.

Our signals absolutely reflect this situation. Trend Leaders list decreasing, more SELL signals than BUY signals on the Trend Buster list and the Gap Signals list. If it wasn't for more of those municipal bond funds enjoying snapback rallies, the Swing Signals list would also show more SELLs than BUYs.

The question for those considering trading tomorrow is whether blow-out earnings from Amazon can lead the market to another gain. Apple failed to carry the market forward but perhaps Amazon has the required mojo.

In another "it's a wacky world" data point, we have a Strong BUY signal for AIG on the Swing Signals list. Though this company has been left for dead several times since the Great Recession began, it has more than rebounded. It now sits astride its 50-day moving average which is moving in a positive direction.

More intriguing even than the BUY signal is the fact that the Bollinger Bands have been getting narrower and narrower. This is generally considered to be a precursor to a big move in one direction or another. Our BUY signal suggests that move could be to the upside. Maybe that's what you get when the CEO gets to keep his ten million dollar salary courtesy of Obama's pay czar.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Why two semiconductor companies bucked the downtrend

2009-10-21T21:56:00.007-04:00

Wednesday the market sold off in the last hour and major indexes ended the day with losses. Semiconductor indexes were underwater pretty much the entire day. The iShares Semiconductor ETF (IGW) ended down 1.72%.

Two well-known semiconductor companies were able to buck the downtrend and close with gains. Who were they and what were the reasons? Are there clues as to else might benefit?

Buried in the semiconductor supply chain are the companies that actually produce the chips for the firms that do much of the design work and handle sales to end users and OEMs.

The two biggest contract manufacturers of semiconductors are Taiwan Semiconductor Mfg. (TSM) and United Microelectronic Corp. (UMC). The item that gave both these stocks a boost was an article on the DigiTimes web site discussing utilization rates.

The article quoted sources that indicated that both companies have

...seen a surge in demand for networking and wireless solutions. TSMC's 65nm-process capacity has been almost fully utilized, while UMC's average utilization rate at its 8-inch fabs remains at above 90%.

There is now an expectation that this will lead to both companies beating earnings expectations when they report later this month. Investors seem to believe it as TSM gained 2.72% today and UMC gained 0.54%.

Other implications --

Who else could be on track to beat based on this information? Some of the prominent customers mentioned in the article are Qualcomm (QCOM) , Broadcom (BRCM) and Atheros Communications (ATHR).

Tellingly, the article says that many of these chip orders are for short lead times. This suggests that OEM companies may be revising their demand expectations upward. This is good news for the tech sector in general. Maybe consumers, especially the gadget-buyers, are finally getting ready to open their wallets.

The following chart contrasts some of the stocks mentioned above:

Explore more UMC Data on Wikinvest

Disclosure: none

Tuesday Swing Signals, Trend Busters, Trend Leaders and Gap Signals for Oct 20, 2009

2009-10-20T21:08:00.008-04:00

This post is announcing that Tuesday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

110 Swing Signals -- 88 BUY signals and 22 SELL Signals.
678 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 140 stocks that are new additions to the list and 199 that fell off the previous list.
19 Trend Busters of which 9 are BUY signals and 10 are SELL signals.
208 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed.

The view from Alert HQ --

It's just a world of wackiness out there. Last week we got a ton of SELL signals on municipal bond funds. A little research revealed that real carnage had been occurring in the muni market. This week we're seeing many of those same muni funds pop up as BUYs on the Swing Signal list. Some have yet to struggle back above their 50-DMA but some look like they might really be in recovery mode. Something to keep an eye on...

Other than munis, the Swing Signals list doesn't offer many other BUY signals. On the other hand, there is a pretty good grouping of materials/energy stocks generating SELL signals. I often use the Swing Signals list as a leading indicator and the current situation is not particularly bullish.

On the list of Gap Signals, 94 out of 208 are bearish gaps down. Among the bullish signals there seems to be a preponderance of tech stocks, especially small-cap tech.

All in all, the market remains noncommittal and future direction is difficult to discern. Apple reported a blow-out quarter last night and the major indices spent most of the day underwater. When an exciting bellwether like Apple can't move the market, it puts me on my guard. Some analysts said the market fell because of a bad housing number. I don't buy it. Everyone should have expected a bad housing number as the selling season is now essentially over.

On the other hand, the number, breadth and variety of stocks on the Trend Leaders list would seem to indicate that the recent bull market is still very much alive. Keep in mind, however, the Trend Leaders are the last ones to roll over and the last ones to show real recovery. This is due to the heavier filtering on the daily price data making this indicator slower to react.

We all know how volatile earnings season can be so at this point it might be considered prudent to grab a few of today's BUY signals and just put them on a watch list. It's not unusual for some of our BUYs to pull back after generating a signal and then resume their upward trajectory. After all, there's nothing wrong with being patient.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Tips for TradeRadar users - setting stops

2009-10-19T21:58:00.010-04:00

Stocks are making new highs these days. This is the time when you should be preparing to lock in profits. That means setting stops.

Setting stops usually entails looking for levels where a stock's descent is liable to halt. If the stock falls below one of those levels, it is sold automatically.

The TradeRadar software can help. Here's how.

Assume you are long a particular stock. You want to set a stop that preserves a reasonable amount of your profit or prevents unacceptable losses. The trick is to set the stop at a point that is high enough to limit losses but low enough so that the stock has some room to move. After all, you don't want to be stopped out and then see the stock rebound.

To accomplish this delicate balancing act, investors commonly look at moving averages, trend lines, Fibonacci retracement lines and support levels.

As it turns out, the TradeRadar software automatically generates three of the four indicators mentioned above. Let's use Yahoo (YHOO) as an example.

All you have to do is click the Auto check box, select Sell Signal-Smooth and click the Update Chart button. The result is shown below (be sure to click the chart to see a larger image).

The TradeRadar software calculates and displays the 20-day moving average and the 50-day moving average. The 20-DMA is often considered too volatile to use as a stop but the 50-DMA is often used by traders. That would mean setting a stop a bit below the 16.25 level that the 50-DMA is currently sitting at.

The software also draws the upward sloping trend line. You could set the stop, therefore, a bit below the 15.03 level.

The software displays the Fibonacci retracement lines based on the price action within the window of data. In this example, the 38.2% retracement line at 14.50 makes a good stop since we see that prices had previously touched and held at this level several times earlier this year.

The Fibonacci lines also make it easier to identify support levels based on previous price peaks. You can see that between the 38.2% retracement line and the 50% retracement line, there are several price peaks that might provide support.

Conclusion --

This post shows how TradeRadar can help you quickly evaluate several alternative candidates for stops. Based on your tolerance for pain, you can choose the one that works for you.

Keep in mind, though, these methods should not be used directly on leveraged ETFs. You should always evaluate the underlying index and then translate the results using our Stop Calculator for Leveraged ETFs.

If you'd like to try the TradeRadar software, you can get it free at the Download page.

Divergence a threat - can stocks keep pushing higher?

2009-10-18T08:57:00.008-04:00

Stocks seem to have continued their winning ways these week. Or did they?

Major averages turned in varied results. The Russell 2000 barely managed a 0.2% gain while, on the other end, the S&P 500 gained 1.5%. The first couple of days of the week stocks meandered. Wednesday saw a big jump. Thursday saw some consolidation and Friday was a definite down day.

Earnings reports were decent but investor reactions were mixed. The market applauded Google and JP Morgan Chase but gave Goldman Sachs, Citi and Bank of America the raspberry.

Economic reports were also decent with retail sales beating expectations, initial jobless claims less than expectations and the Empire State Manufacturing Index coming in at a level almost twice the consensus.

Where do we go from here? We'll look at some of the charts that follow and see if we can figure that out.

The view from Alert HQ --

Charts of some of the statistics we track at Alert HQ are presented below:

This first chart tracks our moving average analysis. What jumps out at me here is that SPY, the SPDR S&P 500 ETF, is moving to new highs while the number of stocks above their 50-DMA (the yellow line) has not. A further worrisome factor is that the number of stocks above their 50-DMA has failed to cross above the number of stocks whose 20-DMA is above the 50-DMA.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.

Here we see a similar pattern. While SPY hits new highs, the number of stocks in strong up-trends just can't seem to get going. Fortunately, the number of stocks in strong down-trends is also knocking around at a reasonably low level.

Conclusion --

It's all about the divergence this week. Major averages hit new highs this week but our statistics tell us that we are starting to see fewer stocks participating. This is seldom a recipe for a strong run to new sustainable highs.

This leaves investors dependent on some kind of strong catalyst that could turn things around. With tons of earnings on tap, good results from a few bellwethers might do the trick. Economic reports this week don't seem sufficiently important to offset the parade of earnings.

So hope for the best as those earnings reports come through. We'll need them to turn divergence into convergence.

Weekend Winners and Losers - Alert HQ BUY and SELL signals for October 16, 2009

2009-10-17T08:06:00.007-04:00

This post is to announce that the weekend's stock signals are available from Alert HQ.

Each week we scan about 7300 stocks and ETFs, checking fundamentals, performing technical analysis and looking for fresh BUY and SELL signals. Out of this process we generate the following lists:

Alert HQ stock alerts - based on a combination of proprietary and standard technical analysis techniques, we identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside
Trend Leaders - just like it says, a collection of stocks in strong up-trends
Cash Flow Kings whose free cash flow yield is 25% or greater
Bollinger Band Breakouts - stocks or ETFs that have moved at least 3% above their upper Bollinger Band or at least 3% below their lower Bollinger Band
Swing Trading Signals - stocks that have bounced off a higher or lower Bollinger Band
Trend Busters - stocks or ETFs that have violated a current trend.
Gap Signals - stocks or ETFs gapping up or down during the last 5 sessions

The view from Alert HQ --

Though Friday's market action was ugly, stocks actually finished the week with gains.

Trading was driven by earnings reports this week and that was both a blessing and a curse. A few stocks solidly beat expectations (Google, for example), some beat but topline growth was anemic (IBM and GE), some beat but still failed to satisfy (Goldman Sachs) and some missed completely (Bank of America).

In the meantime, the dollar continued its descent and the Dow fell back below 10,000. We had a huge sell-off in municipal bond funds as mentioned in Thursday's Alert HQ post and then a big bounce in munis on Friday. The result of all this is that signals this week are inconclusive and confusing. Take the munis. We've got plenty of them on the daily Alert HQ list of SELL signals and we've a good subset on the Swing Signals list as BUYs. Go figure...

On many of our signal lists we see SELLs outnumbering BUYs. The Trend Leaders list seems stuck now in the mid-700's. If you held a gun to my head, I'd say the market is poised for a modest sell-off. On the other hand, stocks are still close to 2009 highs, many upward-sloping trend lines remain intact and 75% of stocks remain above their 50-day moving averages.

So it's anybody's guess where we go from here. Pop a few of our signal stocks on your watch lists and give them a little time to resolve their ultimate direction. For traders, this might be a good week to concentrate on individual stocks rather than sectors.

This week's results --

Here is the detailed breakdown for Alert HQ for this weekend:

Based on daily data, we have 8 Alert HQ BUY signals and 86 SELL signals
Based on weekly data, we have 2 Alert HQ BUY signals and 10 SELL signals
Based on daily data, we have 738 Trend Leaders. 64 new stocks joined the list since Thursday and 52 fell off the list since Thursday.
We have 88 Bollinger Band Breakouts based on daily data and 324 Breakouts based on weekly data.
We have 786 Cash Flow Kings
Based on daily data we have 55 Swing Signals of which 48 are BUY signals and 7 are SELL signals.
We have Trend Busters with 30 signals based on daily data (16 BUY signals and 14 SELL signals) and 39 based on weekly data (4 BUY signals and 35 SELL signals).
Finally, we have 187 Gap Signals based on daily data of which 77 are SELL signals and 110 are BUY signals. Added this week are 54 Gap Signals based on weekly data including 17 SELL signals and 37 BUY signals.

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you. No matter which preference you have, there are bound to be a few stocks you will want to add to your watch list.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you do favor technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.