DJIM #43 2007

RIMM, GOOG, AAPL...... then there's MSFT!    The pattern seemed to be fitting until last Thursday.    Microsoft, a company which isn't known for delivering stellar reports and forecasting strong growth in the longest time, basically dropped a bomb that would surprise even the most optimistic bulls.    Of course, we are talking about an upside surprise.    Regardless how we interpret Microsoft's reports and how much we believe in its rosy forecast, it is what it is.    In the world of trading, this is the kind of news that can simply completely change our trading strategy.    In our opinion, Microsft's news is that powerful and we better be prepared for the kind of market that might follow.

Oh yeah, there's still that housing bubble and credit crunch worries and potential huge losses from the financial sector.   By the way, Country Wide Financial just forecasted a return to profitability for next quarter and there's shakeup in one of the biggest Wall street firms, Merrill Lynch.    Problem solved!    No, it doesn't mean that the actual problems are all being resolved right now.    It just means that there's drastic measures that are being put in place to get the things going, an improvement!    It's a process that we are going to be witnessing for months to come.    As long as smart people in those places are doing things to help recover the losses, that's the kind of confidence market will be looking for.

By the way, did we just mention things are still kicking in the growth sector?   Now you can add Microsoft, an unlikely candidate, into the mix.   It's a company who does close to $60 billion of revenue in the technology sector annually and it's forecasting some wicked growth number.   Enough said!

What does this mean to DJIM kind of stocks?    In case you haven't noticed lately, DJIM selection of stocks have moved away from the ultra small caps to some relatively big small caps and mid caps.    Why?   That's where the action is and we are simply adapting to the trend.    Having a flexible mind and approach to trading is one of the must required element to survive in this competitive business.    We don't want to categorize ourselves as small cap specialists, we want to be trend specialists, and so should you!

The bottom line, market is moving higher and there's simply no reason not to keep biting.    Fed is likely to lower the rate again in the coming week and that would give some more conviction to move the asset away from the interest bearing instrument into the equity market.    Dollar is at a all time low and that's an incentive to attract foreign investment.

Now onto some notable plays....

LFT, to simply put, we really really like this IPO!   We think it has the potential to be the next VMW.   We think there's several factors that have a lot going for it.     First, it's the number one IT solution provider within the domestic Chinese financial sector.    You can verify it with its prospectus which is available on its website.    Secondly, we can't recall any legit Chinese IPOs within the past couple of years that have done badly, at least not the ones we picked up early on like the EDU, MR (also NYSE listed).  Thirdly, this one is very unique in its place among the Chinese IPOs where we think it's a huge institutional attraction.    If you want a piece of the Chinese growth, in one of the most profitable sectors(financial sector), where a company that does things to help the expansion and integration of their services, this LFT is the one to get.    Again, the actual financial reports is within the prospectus and you can see it for yourself.      So our game plan?    We are treating this one as a good long term holdings in our account.   We'd try to establish a sizable position as a core holdings and trade some small sizes around the fluctuations.

EJ, believe it or not, one of the DJIM traders actually visited one of their brokerage office in Shanghai recently.    Yes, these guys are one of the biggest player in the real estate market over there.   If you think Shanghai's stock market is making many locals rich, think again.   The biggest market is still the real estate market.     Technically, this is a fresh breakout!   We do notice that this one has tendency to have erratic pullbacks and therefore you will always have opportunity to buy more.     HMIN continues to trend higher after breaking out recently.     EDU, was making new highs as well Friday.  BIDU flew off another $400 price target.   We do not understand the breakouts have no meaning, set ups not to be trusted, money pit comments in our Forum on Friday and we'll leave it at that.   These DJIM closely followedstocks do not fit these comments and the China's IPO's we cover were not setting up or on verge of a breakout as they are sitting off highs. 

GLDN, besides the late Thursday afternoon move following an alert it also exploded the next day to almost $115.   In some circles that could be a 20% lift overnight.   We have alerted this numerous times over the year and will continue to.   Pullbacks are a natural here and we will go back in size again.  This is similiar to the SPWR as well last week.  If you get these 15% or so moves in hours, you slice the pie up and wait to get in on another pullback.  SPWR proved what a strong quality stock can do late last week.  Just look at the last 3 days finishing up with a NCH.

GHM, remember to glance at the earnings play page so you are prepared for these oldtimers off DJIM at this time of the year.  Another stellar report and a gap up winning day.