Coming into this weeks trade, we noted this market is looking for positive catalysts to move it higher and we got a good one Monday premarket , IBM! Funny thing is, IBM was probably dying to pre-announce a good number because its share price has also been under tremendous pressure lately. This is IBM's way of saying "you've been selling our shares for the wrong reason"! ($28.9 billion and earnings of $2.80 per share versus analysts' expectations that called for revenue of $27.8 billion and earnings of $2.60 per share). Ok, so what's good for IBM is pretty much good for everyone. You can argue that it's a technology oriented company but since it's a big part of Dow, it'll just about lift everything up. Certainly, the technology sector benefited the most from the IBM news and most of the betas names (AAPL RIMM BIDU etc.) followed with decent days, yet a few of them traded within a small range after gap and didnt give the usual payoff intraday trade.
This is the exact sort of scenario we've been talking about and looking for to help the market get over its hangover. Good growth forecast from the corporate front can put that much needed confidence back into the investors' mind. Now we are that many points away from last Tuesday's low and this whole process is what we called "marking a bottom"! In the days ahead, we are also going to hear from many financial stocks which will provide an even more important clue as to how this market will react and trade to their news. IBM's news today merely set a tone and it's far from over that this market will get super bullish. If this market rallies again off earning reports from the likes of C or MER, then we are safe to assume that we have some good basis to build up a rally during the next little while. Also, in the technology front, INTC has a bigger impact than IBM when it reports this week and it's guidance will be closely examined. Still as of today, we have a flood of ECO numbers this week to deal with that will either salt the roads or make them slippery once again.
Where to play?
Just because the overall market is in a good mood, it doesn't mean all stocks will rally hard. Again, as we have been saying for a long time, we have to stick to stuff that is working and play the right kind of stuff. If you didn't have any Chemical/Agriculture stocks in your account, you would've probably under performed today. We are not going to go through all of the plays again today as you can easily check for yourself from the top gainer list. But, we did add an extra name to the DJIM 2008 trade list that is connected to this sector just after the opening bell..FCSX
COIN-SEED, these two cheapies went in opposite directions today, but you could've locked in profit in both early on had you gotten some on Friday. As far as COIN goes, the volume is extreme and it doesn't look like fun is over yet.
FCSX, this morning heads up in the $47s turned many heads as it shot to mid 52 on a record volume break out. There was the earning beat, but a major component of the trade today was noted, " commodity risk manager...." The perfect day for a company whose business consists of... Sixty percent of their clients are in the agricultural industry. And corn prices have been highly volatile and at record levels due to the demand for alternative fuels. This not a new name if you check out IBD. It was #6 this weekend 98comp 99 eps 98 rs. If the move was missed, it is probably best to wait for a pullback.
SDTH, this play has been basing and consolidating and we believe it's inevitable it'll try for that $15 IBD 100 level sooner or later. We are willing to buy on dips and accumulate.
APEI, this closely followed DJIM stock chart popped up on a IBD page this weekend and we'll take it for this little known IPO. A little discovery in the form of volume is all it needs. 98 COMP 98 EPS 94 RS. Remember this has only 7mln shares OS and of course fewer in the float.