Chemical reaction...
Friday, January 4, 2008 at 07:21AM The trigger earlier was a nice report from MON, a report we noted to watch in the previous Journal with secondary plays in tow. Unfortunately, the market was just not able to gather any momentum outside of the oil, chemical and mining area. Semi stocks also got hammered today but fortunately we haven't had a semi stock on our watchlist lately. For what it's worth, most of the stocks on our watchlist had a decent day. So what can we conclude from the action today? You want to be trading the stuff that is still working.
Tomorrow's job report, assuming it's decent, should provide some relief to this market in our opinion. Market is really in need of a bounce and it wouldn't surprise us if it shoots up because of a bullish job report. Basically, this is what we meant by "more of the same" trading environment starting the year. Just when you think we should test the November low, we may just get a hard rally over the next week or two if we don't break Nov. lows.
Regardless, lets look at some of the stuff that are working today and recently....
Chemical biz, as long as the earnings are exceeding the expectation, there's no reason to believe this run-up is over. The group (MON, AGU, CF, MOS, SYT, TNH...) had a big year in 07, it's looking probable that the group can carry the same momentum into at least the early period of 08. SYT, is a new name we tossed out into the mix and it didn't disappoint closing at highs.
Solars, the one thing we have to remember is that we shouldn't get too greedy with some of the volatile and speculative names. It doesn't hurt to take some off the table and reload when things are calmer. Thursday was definitely a day for the cheaper alternative energy plays as AKNS HOKU DSTI etc.
GU, this is a play we are putting on our active watchlist and started a position earlier today. Briefing mentioned it after our note by throwing it into a mix of the names above. We think this area may deserve some more attention now that the oil price is hovering around $100. Based on its action today, we think it has caught some traders attention and we are hoping that the momentum will pick up from this point on.
SDTH, this one can trade in a volatile fashion but it does feel that its trading path is going higher. You can take advantage of its swings to trade around a core position. Friday is the day that will determine if it'd be added to IBD100 or not. In our opinion, you'd want to buy dips regardless what happens tomorrow and remember this is not a one trick pony as in being a pure IBD play only as it is in the AG/Chem mix of names.
China plays, it seems some of the Chinese plays like CMED HRBN have been doing really well recently. Throw in the IPO name VISN as well now. We are also keeping an eye on some of the older favourites WX, EJ, STV, EDU just in case they get a bid too.
Friday is likely going to be a very busy day and we'll be looking forward to it. Today was a day you wished the market closes at 1-2pm, hopefully, today we're not wishing it never opened after the report comes out.