DJIM #42 2007

It's been a while since we had a week like the one we just experienced.   Some can argue that the sort of week we just had was due for a while.    The fact of the matter is, that prior to last week, we were actually notching new 52 week high from Naz and all time high from Dow.    Both oil and gold are at record highs and the U.S. dollar is at a record low against other major currencies.   There seems to be enough economical topics out there that can spark some endless discussion.   The bottom line question is, was the sell off last week justified and is there more sell off to come?    In terms of justification, yes and no!   Yes because market has become over extended in a very short time and selling off some would actually bring its pace to a healthier level.   No because other than the names that needed to be taken down, there's no reason for many growth oriented names to get taken down as well.    This is pretty much the effect of "collateral damage"!   When mood is set and things get rolling on the down side, technical support gets breached and it's just a matter of selling everything down.    Many traders, especially the short term ones we know are programmed to sell into a sell off, as oppose to what the contrarians would do.     Since short term traders' majority holdings are from the growth and momentum side, it isn't surprising most of our favourite plays on the watchlist get taken down, severely.    Last, many of us are programmed to stand on the sideline when it comes to a severe sell off like Friday, which means no bids.

So what is the strategy of DJIM traders here?   Just like every other severe sell off we've faced in the past, we stand on the side and wait  for signs of a turn around.     We are still early into this earning season and there are many many big reports that have yet to be released that can turn this market around in a hurry.    From what we have seen so far, majority of the technology and growth oriented companies have reported good earnings.   In any case, we want to see some stability in this market to absorb any more credit crunch related news.  Let it be a concern and let it be the wall of worry.   We haven't hit November yet and that is usually when many of our small caps release their earning.    The bottom line is, that if a sell off is going to come to cool off this market, it might as well be this time of the year.     If you got caught off guard and took some hits last week, make sure those hits get dealt with asap.   The last thing you want is having some losing positions that not only get to you mentally and emotionally, but also inhibit you from making good on the next trading opportunities.

Shaky Start and a Steady Finish

Although it's still a little too early to write off last week's action, we are definitely off to a pretty good start this week.    Monday always sets the tone for the week, doesn't it?    Ok, superstition aside, we are glad to see that there was no follow through to last Friday's sell off today.  Another big fat red candle would not have been a pretty sight.    Even though some of the names on our watchlist felt a little shaky in the early going, many of them all ended in a very rosy way.    This is somewhat reassuring because we didn't want to see last Friday's ugliness get carried over into this week.   Momentum can get built up on the downside just as easily as on the upside.    Honestly, we still couldn't see the reason why the market was sold off that hard last week.    Many of the issues the market pundits were calling for were known for a while and there is really no quick fix to them.    Still, we have been managing to live with some of those issues(credit crunch, high oil, low dollar) for a while now and most importantly, fed has been willing to pump liquidity into the system and adjust the monetary policy when any unfavourable situation does arrive.   What's the big worry?    If you believe the entire stock market and corporate profit are centred around the housing market and high oil price, then you may have already parked your money in t-bills and shouldn't even care about this market.    For those of us who trade names like AAPL or RIMM GOOG BIDU , things don't get any better than now.

The point is, this market is not just about the 3M or CAT or BAC.   There's a bull market in quite a few other sectors and that's what's keeping the game alive.    You can also argue that there's just so much liquidity out there that there's always institutions looking for some hot (growth) area to invest.   We just have to be on the same page as those money managers.

AAPL delivered a nice report and should benefit quite a few momentum names.

CRNT, this plays has been on our watchlist for quite sometimes now.   Today the company reported earnings which beat the estimate and it also raised guidance for next quarter.   Stock saw a flurry of buying and ended near the high of the day.   We really like this kind of earning reaction and we are playing it fairly aggressively.

LULU JASO ISRG HMIN, these three have traded to their recent highs today and we particularly like their action compare to some of the other names on our list.    For the sake of momentum, we think as long as the market shows some favourable action, you'd want be trading these names aggressively.

Momentum stocks

"For those of us who trade names like AAPL or RIMM GOOG BIDU , things don't get any better ...AAPL delivered a nice report and should benefit quite a few momentum names".  Nothing could've have been closer to the truth as momentum stocks ruled yesterdays action.  It all started with a gap up open and then after some shake and bakes midday,  the momo carried into the close.   What we wanted to see yesterday was the follow through that occurred late, the reason being we somewhat feared a repeat of the GOOG earnings.  Seemingly, we were not the only ones as the NASD gave a few shakes before exploding in the afternoon after it took out the morning highs.   Unfortunately, as we all know this market is a jittery one and could turn on a dime with new headlines and this will likely be the case early today as Merrill Lynch will put the credit crunch back in the headlines early on.   It also won't help a few familiar names couldn't keep up to the AAPL's and disappointed after the close.   If you were trading the momo names yesterday,  the action we got was a weeks worth and there would have been some profit taking either way this morning after the big 2 day reversal.  The action yesterday was reaffirmation of why we trade the stocks we do, momentum stocks rule and it is not only the big familiar names that grab the headlines.  The action in the BIDU, FSLR, DRYS's was incredible the past 2 days and the rebounds in the EDU's CETV WBD have not been that bad either.  The melt up to a high of $110 from SPWR was pretty good as well.

Today...we will get a clear indication if the market wants to play the credit crunch game or move on and feed off the many good reports yesterday and maybe give us a rally of sorts during earning season.  No doubt the yo-yo day to day action will continue, but that is something we all should be prepared for after the last few months.   A wait and see this morning... we won't be looking to add positions, but we also won't be selling the ranch at the open.

A trading note,  no matter how well a small cap acts one day as in the case of CRNT...a downgrade the next morning by a small firm should be taken seriously as it can burst a bubble quickly.   It doesn't have to be a tier1 firm, it could be a firm you've never heard of.    It is always better to exit such things early before the news spreads and the selling hits harder.  You can always get back in the game after the dust settles.

One for the bulls...

Regardless how the individual stocks finished yesterday, the action has to look pretty good for the bulls.     Of course, you can say it's only a 200 point reversal on Dow and Naz still finished pretty red.    But, these are the kind of finishes that just cast aside any fear for a further meltdown.   Also, we had some pretty bad news and reports from the likes of MER and BRCM, and a poor trading reaction from AMZN. The market eventually absorbed all these very well.   This doesn't mean that everything is ok now and the market is heading back to new highs.    There will be more bad news from those sectors that are in trouble, and there will also be good news from those sectors that are doing well.    If this market can absorb the bad news and continue to reward the good news, then there's every reason to go long this market.      This was the first time in a while where the market seemed to absorb the bad news really well and give a cause to cheer at the end for bulls.  A big positive.

Don't throw away your momentum favourites.   This is definitely the lesson we have been learning in the past few weeks.   RECYCLE

LFT, this is probably the most exciting Chinese IPO since STV.   Compare to STV, this one has even a smaller issue size which explains the action we saw today toward the end of the day.    In terms of business, these guys design software for the financial market in China.    The financial sector is definitely one of the hottest sector in China right now and there's belief that companies like LFT will reap benefit from the huge growth there.   We were trading this aggressively just past the 3pm mark, timing it with the market turning.  It would be nice to see YTEC get a boost from the late surge in LFT.  It did look good in the morning....maybe this morning it will give it another try.

RBN EJ ISRG, if you hadn't thrown out these names, this would've been a pretty good day for you.

SPWR, with a 6+ pt reversal after 2pm.. you can see why this stock falls right in line with other DJIM plays.  Volume was there again, but after a 2 day run of nearly 10pts off an add alert, we used the strength to sell most.  We'll be back shortly.

Look around ( DJIM watchlist) today for stocks that did not particpate yesterday in the recovery. They might today if we have a good morning vibe going.

...a RED SOX market!

Funny thing was happening after the bell...our grandfathers brokers (maybe it was actually grandson, Junior) calling us looking for the old grumpy man...Why?... supposedly MSFT finally broke out!.    Last time these guys called, they were using a rotary phone and mailing share certificates .    Seriously...how cool was that!.     Even us,  the Bubble and GOOG trading generation were up and cheering for the MSFT trade!!!. Go $34...GO $35  GOOOO  $36...maybe even GO $37 today.   The volume was incredible and it takes that to move a horse the size of 'Softie.     It wasn't about getting in early to make some dollar, ( and it wasn't a dream u saw a MSFT and AMZN alerts the same day, either), it was just pure fun to watch!.....This was about cheering for everything that got us interested in trading!.     It was also cheering for a technical breakout seemingly years in the making,  it was a big cheer that maybe MSFT can be looked like a growth stock again in some circles ( not DJIMS..lol).    All we were thinking as said AH's in a roundabout way, every value investor and manager woke up to this report or will Friday morning.    Sure many are selling the dead wood, but many are getting on the horn and gloating how great they are for the family stock book... so buy more!........ Not only was this a value safe stock,  it's now a growth stock ..Geez..lol...you gotta love it.   What we tried to point out before all the analyst stuff hits is imagine a company followed by every firm on every side of every ocean beating by .6c....we are talking a billion+ revenue in a Q more than expected and the guidance was sweet as well.    Look.... all we have been saying is let this market think earnings and put the other stuff aside.    We've tried with GOOG, AAPL....wouldn't it be something if MSFT actually provided some calmness.    Right now... this market is fighting hard, bullying its way back after every slide.     It's a Red Sox market.    The comeback kids!.    It`s a warrior and why we keep buying, hitting the intraday SPWR, GLDN trades and working our watchlist hard on a daily basis.   There are outside forces working this market,  it has no right to fight the economics of it all...but it does with a helping hand.   A shrinking dollar and a crap market into XMAS makes no sense,  if you have any sense.    Mysterious powers are at work!.   Keep playing along with it.   The action Thursday was 'again' impressive, as we reversed after the 1:50- 2pm start flush.     Honestly, we can't keep harping in Journals to the daily volatility,  let's just accept 100+ /-Dow and 25+/-  point NASD days are old skool.!!!     This is intraday stuff now and we don`t think it was a good day or bad day till we see 250 +/-and 50 point days at the close.    This is the hip hop generation and its come to the market with jolts and bolts intraday.    It`s a thousand beats per minute and it could leave you spinning and empty handed if you panic or it could line your pockets very nicely.     If you are invested this morning , not scratching your head and bailing out daily, today's open should be a nice reward.   It doesn't really matter what you hold as all should benefit early on,  including the foreign stocks as the markets overseas take in the MSFT hoopla as well.   Yippie for MSFT...but we'd like to give congrats to GLDN, a long running member of the DJIM family hitting the $100 plateau during its 8-9 point move late in the day.  

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.

Accumulation...

Despite the overnight surge in the Asian market, the North American market didn't seem to quite match the same kind of intensity as overseas.    Still, market closed pretty well.   We have Fed meeting this coming Wednesday and the consensus is that Fed will lower the rate.    Again, this is not just anticipated,  it's also being expected.   The question now is how big of a rate cut will we be facing?    Is this the real question we should care about?    No, what we really care is how this market reacts to a 25 pt cut or a 50 pt cut?    In the unlikely event, how will the market react to a no rate cut?    Basically, there are two probable scenario and one unlikely one.   At this point, there's really no reason to overwork a strategy to anticipate the reaction, we'll just have to deal with whatever happens.

As we have been saying for a while, we don't think this rate cut will impact the overall market sentiment by much.    Hopefully, this market is still being earnings driven, and not fear driven, which means that the familiar names will carry this market higher.    There's a lot of disbelief of why this market is at the current level and that actually serves as a good point.    You definitely don't want to see everyone being optimistic and basically we need just as many bears calling for downturn, recession etc. in order for this market to go higher.

LFT STV.    Lets talk about these two as we have been getting some emails toward the end of the day concerning the well being of these two plays.    At this point, what we really want to stress is that these two are IPO's and now LONG term plays as yesterdays Journal noted.  These were already short term plays if you're only looking for a fast trade.  Being an IPO, there's basically no historical trading pattern to dictate a stocks movement.   It means that they will be volatile at the early going, especially the first week or two after its IPO.    That's the way it is!    We have to accept the fact these stocks are brand new and we have to slowly work our positions for a longer time frame as oppose to treating it like a JRJC or EFUT!     If you have any doubts about these two plays, just think about the following facts.     When was the last time can you recall a Chinese IPO on NYSE that have done badly three or four weeks into trading?    Yup, we can't recall a name that we've covered that didn't give us some good movement.    WX, EJ, EDU, LDK, TSL, YGE (nice action yesterday), MR... all serve as good examples of the stocks we've been trading in the past and now months later.     If you include the good ones on NASD, then there's just tons more.     Since we are talking about a NYSE stock here, this instantly gives credibility to these IPOs.    It means that the company is not only profitable but also meets the stringent listing requirement.   CSR (CSCT.ob) got that finally and is now trading on NYSE.   So back to the question, why are these stocks down today despite some good action from other Chinese stocks?   Well, one possible scenario is that some traders were looking for some carry through action like STV on its third day and did not get it, hence they just bailed out.    That is just part of trading and we can live with it.   Other recent momo China stocks like YTEC, JRJC put in quiet red days as well, a pattern emerged quickly as these names underperformed those China names near or at highs.   Our game plan is establishing a good position at this level.   We aren't buying all of our shares at once and that would simply be arrogant and undisciplined.     Now does it mean that LFT is done gong down after today?   Well, we don't know that and there could be some more downside action but we think the downside is limited.     As far as STV goes, the recent low is still intact and we are looking to average some more into any more weakness as we see.      Basically folks, we are dealing with a couple of strong growth oriented Chinese stocks here and they have just been out on the market for a few days.     Rome wasn't built in a day,  so let's just give these plays some room and time to work.

Hopefully, you are running a balanced book of sorts and participating in more than just these IPO's.  Just look at the number of charts updated from our closely followed that were hitting new highs yesterday....CETV-CROX-DRYS-EDU-FSLR-JASO-SPWR-VMW-WBD and GHM.     There is always the big caps GS AMZN, AAPL to balance the book even more.

...in front of the Fed

Not surprising to see some profit taking in front of the FED yesterday, especially after a 6 day rebound from Oct 22 lows.   A surprise to some maybe was the late round of selling led by the "dry bulk rate", Chinese games taking down the momentum shipping group hard in the last hour or so.  A few other groups caught the coattails of the dump and sold off as well.   In reality, this was a non-event and all eyes and ears will be on the 2:15pm decision.  This was not a true reflection or a hint of what may come today.  

As far as the shippers, we haven't covered this group on the daily Journal since mid October, ..."This story ain't going away heading into the New Year as we've noted before, but after this latest binge momo run we are more cautious and prefer a pullback to go with a worthy position overnight.   Lets just say, we liked a TBSI more at $50 recently than at $60 now.".    Well.. we haven't missed much action since those words, except one sell off and rebound and now we definitely got a big pullback, but it is too early to say we are looking for an entry back into this group.    This group story isn't going away unless the Chinese don't need ships (if that's the case everything on the market is in trouble).  These are cat and mouse games to get rates down and it is something worth watching now if you are thinking of going long for more than a intra day trade.   When selling hits, it is always best to rid yourself of the stock and ask questions later such as to the reasoning.  You have some political games here now and you need to keep updated.    We don't have the time and will only react when the coast is clear.    Many firms recently raised this groups price targets and will be going on the defensive tomorrow, a bounce here and there should happen.      Nothing could have been more dangerous than trying to find a place to park your money as this group started to sink, looking for an entry and not knowing what is the cause is praying for some blind luck.  Just in the last 30 minutes EXM fell another 7 after giving up that much already.   The 9ema short term was crushed here and it is a second pullback late in the month, this one more extreme.    Hopefully, our constant warnings of this possibility hit home as this group was having yet another binge recently, included was the information given that their are large amounts of hedgies playing a derivative market here in this group.  A dangerous combination,  just waiting to Titanic.  This ain't no Mom and Pop selling yesterday, this was led and taken apart by the bigger money......We`ll let this cool off..

We are about to get a load of EPS reports from recent DJIM names in the next few days. (see earnings link).   Hopefully with a favourable FED reaction and some nice earning we can continue to go forward off this latest bounce.    There is really no use discussing what could be strong in the morning based on Tuesdays action as so much is riding on the reaction in the afternoon.    But a few notables yesterday heading into the morning trade are CETV into earning , EJ YGE BIDU were the Chinese stars on Tuesday and AAPL fit in with the tech sec having a good day.  A few remain near highs like SPWR should remain in play as well.    One thing to possibly watch for in the upcoming days is where is the momentum money flushed out of the shipping group is going to go.  It might sit on the sidelines if the FED reaction is muted or terrible, but if its not,  we'd closely watch the other momo groups such as the Chinese, Solars, IPO's to start with.

...CUTS like a knife

..now it cuts like a knife-- yeah
but it feels so right..
Oh now it cuts like a knife..
Yeah..but it feels so right...Yeeah..

Now we truly know what our fellow Canuck was singing about !.  It was about consecutive rate cuts from the Fed down under.   Yesterday.. the shorts were squealing and the longs were singing as the market squeezed the shorts lights out.   You can read all about it and you will hear all about the ramifications of the Fed cut....let the spin begin.... but we've got people to see.....things to do....most importantly stocks to trade!. We are now done with October and are on to November, which is always a much better month of trading as we lead in years end.  Historically, consecutive rate hikes are liked very much by the markets, it seems the market forgot that for a few minutes yesterday before getting its memory back and started to look forward........So, let's get on to some new names emerging from earnings that we are monitoring and/or trading ...

MA,  this was on all screens premkt yesterday as it traded off an excellent report.  If you've been here for awhile you remember MA well and had its earnings day circled..well we try to circle as many as we can for you on our earning dates page.  The company said any softness US side will be "cushioned' by Global growth.  This was the same song from previous Q's and this idea has always worked well for MA's stock price. If you didn't get a position yesterday, you might want to wait for a pullback, a pullback on a downgrade based on valuation (you always get these after a fast trip up) and make this a quality holding.   Reports Q3 (Sep) earnings of $1.80 per share, excluding $0.51 from the partial sale of the co's investment in Redecard S.A. in Brazil, $0.38 better than the Reuters Estimates consensus of $1.42; revenues rose 20.1% year/year to $1.08 bln vs the $1.03 bln consensus.

PSEM,SIMO,SIRF,MICC.. have you noticed the reaction of some earnings the barely beat or giving in line guidance moving nicely (PSEM SIMO).   Well, if you didn't we're telling you now!.     Simply, we haven't seen such action in a long time and this is a good thing as we will have more opportunities to trade.     It looks like we won't need a big EPS headline to get a stock moving this Q.   We've bunched these 4 to watchlist..you must have 4 lags you can move a screen back and replace with these.    We'll do some homework on these over the weekend and if you see the names here into next week....well then you know it should be on your primary screener this Q.    MICC is a foreign telecom/cellular name you may remember from DJIM when we were trading it as a takeover play with a few like China Mobile interested.  Anything foreign with its foot in a growth business is good with DJIM.

STV, LFT...as we scratch our heads, we come up with ideas it seems.;).  The action in these two has been surprising in one sense, but that is only if you are thinking the past here and expecting momentum to be here on a daily basis.  Yesterday, we had interesting action in some China names early, the FXI was heading to recent highs, the China energy plays were moving nicely and seemingly there was one thing missing in this scene and that was the participation of these two  IPO names.   What reaffirmed our long term and even short term view of these IPO's is that they behaved so well as the market tanked after the Fed decision as we noted.   Well, we all know what happened after as these spiked so nicely.   If you're in for the long term this should give you confidence, if you're short term you now know the power and speed these have and had yourself an easy in and out trade.   STV has been ranging nicely and there was powers at work eating up the $38.00 giving it even more support.   We hope this move is the start of these getting back on radar of momentum traders.   Also YTEC's chart is coming together, so a closer eye should be kept on it.  EJ another new high.

CYNO, GTI ,  past DJIM plays out with earning this morning to watchlist.

November, finally....

So, Thursday's drop is the kind of action we should've gotten yesterday?   Perhaps some will say!    In all fairness, people should focus on the sector that is growing and making profit for a change.    It's unfortunate that we live in a world where media plays such a big role on every day affairs, including the stock market.     Today, we had the spin cycle start all over again.  As we said yesterday...we have things to do and that is only trade individual stocks and mute out the talking heads.     In our opinion, whatever things need to be done by those financial institutions,  just get it done and move on.     If you don't relieve the management team that's responsible for the credit loss of their duties, and if you don't disclose in transparency what you've lost,  you are always inviting those sneaky analysts/market pundits to jump on the bandwagon to call out a doomsday scenario.    Things just aren't that bad, we think!.   Take a look at MSFT, AAPL, GOOG, RIMM... and you'd see a pattern developing.   If you are long just those names in your portfolio/fund, you'd wonder what's with this 362 pt drop?    Ok, the names above isn't the entire stock market and they represent just a specific sector, but it is a very important one!  The point is,  if we all move away from the attention of the Citi and Exxon's, there are stocks out there that can be traded higher, with sizes.  Not just traded, but made money on!

The money comes out of a troubling sector will always flow into somewhere else.    This time around, yield is getting lower so the interest bearing instrument won't look attractive.   The only place you've got left is still the equity sector.     That is why we think the market is still going higher.    As we have said before, companies like Citi or Exxon can afford to take a 8 billion dollar shortfall in earning where as companies like Apple and Rimm can't.    Lets just move on with it....We do remain bullish, just understand we are extremely selective at the same time seeking out plays that produce like CETV, GLDN, SPWR big gains in short periods of time.   We are not holding 10 positions seeking out a paltry return from each and then falling hard on big down days like today while waiting for such.  As we've said this ain't old skool market, it's 250 DJIA ...50 NASD +/- days in the hood!  Selective...the right groups/ sectors is the game.

Tomorrow we have the job report and it seems media is playing it again as if the market can go triple digit either way depending on the outcome of the report.    Our game plan is that if the report sets a negative tone in pre market, we'd most likely go aggressive on the long side in the early going.

Some stocks..

CETV,  we've had some nice runs in $100 stocks the past month from GLDN, WBD, SPWR and of course CETV an alert buy Oct 9.  CETV already had am impressive run to $119 and with Wednesday's big dip we couldn't avoid it for a spec buy into earnings as per forum note.   If it wasn't for the selloff prior to earnings , we wouldn't have moved in.   The drop gave some room for error and provided lots of upside if the report was just good as it may go back to highs just off that.    Yes, we don't recommend buying into earnings, but once in awhile the temptation is there for a few shares.   Looking at the headline today this looked like a big miss on EPS, but the market action dictates and premkt it was trading up.     So the idea is to never just judge a book by its cover or in the case of stocks by the headline number.     Let the market dictate and do some digging inside the report and/or listen to CC to get the big picture before jumping in.   We noted some aspects of the report in a forum note while everything was getting beaten up, yet CETV was still strong and only a few dollars off recent highs.  We liked the impressive revenue beat of expectations and took into consideration the EPS miss was in large part to currency translations.     A few dollars here can go pretty quick and after climbing some more it then spent a lot of time eating at 119.50 before exploding to a day high of $126.50.   Yep, thats 7 points from morning note or about 16-17 off yesterdays low.  So on a dismal day this provided some fire power to offset a lot of the gap down loss.    At this point, we're resting CETV and as with the streaky GLDN's WBD types, we'll look for another entry down very soon.

PSEM, this is a stock which came out with a pretty nice report the day a few days back.   We like this name for the fact it's in the technology sector.   It also did extremely well in Thursday's environment.    This is a fresh name that currently sports a 93 95 IBD rating.    We will be getting more aggressive in trading this one tomorrow.  Note:  NTCT is also in play for IBD and as well as SIMO potentially.

LFT, based on the trading today, it looks as though it put in a short term bottom today.    There's strong reason to believe that any weak hand who's holding this one would've been shaken out today, as evidenced by the drop around 2 o'clock.    Toward the latter half of the afternoon, it looked as though there's a bidder or two sat there and scooped up all the shares that's available which inevitably caused a rush to the upside near the end.    This isn't to say that this play is ready to bust through $30 and beyond right away but we are very encouraged by its action last couple of days, given the circumstance of this market.

STV, does anybody feel there's just a magnet at $38 for this stock?   The company announced that it's releasing earnings on Nov. 15th and we are thinking there's a high probability of an earning run prior to that.  Notice the last minute finish as it climbed and actually hit $39 before some fancy footwork a few times to get the final trade back to $38 even. 

GA, in terms of profitability, this is probably the most profitable Chinese IPO we've seen in the recent history.    This also explains its giant offering of 57.2 million shares.    We are putting this one on watchlist to trade as it did extremely well relative to the market action today.   Given the size of the offering, the action looked pretty impressive.   Just don't overdose on all these China names that are fresh.

Some notable EPS to investigate, potentially watchlist this morning..NRG, ATRO, NTLS, ATNI, SWIM, GFIG, HAIN, MR

DJIM #44, 2007

So the big news over the weekend is the resignation of Citi's CEO and announcement of additional write down?   Or is it the news that Alibaba.com's IPO offering is a gazillion times oversubscribed?    Well, it depends on what you care the most!    We can say both news are kind of expected and hopefully both news are working as potential positive catalysts for this market.    The near term effect of all these write downs isn't over and turmoil will persist for a while from the financial sector.    It is, however, getting to the point where some if not most of those financial institutions are "forced" to disclose the kind of damage they were supposed to disclose a while ago.    Things are moving forward, in a however rocky way it seems.    Hypothetically, some of these banks/investment banks stocks should bottom in the near term.   

Back to Alibaba.com!   This is the hottest internet IPO since Google, in terms of amount of capital that's being raised.   Unfortunately, most of us won't be participating directly in that action.    What does it mean?  It means that the market opposite side of our continent is still live and kicking.   It bodes well for the ADRs trade on this side of the world too.     It's going to be interesting to see how BIDU and some of the other companies behave after the probable crazy debut of Alibaba on Tuesday.  Unfortunately, there is a Monday and the Hang Sang/ Shanghai have taken a beating because expectations of a delay to the highly anticipated plan to allow mainland investors to trade directly in the city's stocks is growing. This has fueled the Hang most recently.

This is the month where many of our DJIM type of stocks report.   It is an important month to us because that's where we gauge what we should be kept or deleted on our watchlist and as well as the potential new plays.    One thing we have noticed so far is that there's no shortage of good earning plays on a daily basis.   Some of the earnings were being rewarded generously.

Citi Prayer..

There's no doubt that there are many people out there today praying for Citi Bank. They are praying that the stock would just stop going down any further;).    It is getting to the comical point where as if the entire stock market hinges on the well being of this little financial outfit.    Ok, it isn't so little and it is an important issue on traders' agenda right now.  But...give it a rest!...  We have talked enough about the credit concern on the banking sector and our view is still firm in this regard.   It's just unfortunate that this thing is dragging on us for as long as it is.    Well, it is kind of like people only pay attention to the lunatics in a party,  but never pay enough attention to the well behaved ones.   Right now, we can say that Citi and couple of others are in bit of a nut state while Google, Baidu and a likes are just chilling quietly.

Alibaba debuted in a predictable fashion today on HK exchange.    We are just glad that there are liquidity out there willing to chase up a good stock or a good play.   

Back to our action Monday!   Market basically got sold off on reasons that are obvious to everyone and it tried to make a pretty good attempt to recover toward the end.   We swear that if the market trades for another 20 minutes or so,  it could've closed green cleanly.    Many Chinese stocks were sold off today on the heel of a wicked drop in Asia.   Volume was particularly light on some of the issues that were sold off here and we were buying into some of our famaliar names including EJ EDU WX  etc.    Besides these, there are a few plays that were simply going the opposite ways of the market from the get go.

SPWR,  solars...compare to the shippers which we blew off this weekend for good as you know from charts updates,  this group had a relatively good day and SPWR stands out the most from the open.   Pretty obvious after many mentions which of the solars we favor.   If you want the JPMorgan report we mentioned before the stock went $5+ up more, just email us.    FSLR .....announced a 1 bill contract extension which may also be an interesting play for today and make others happy here  

PSEM,  although this one did not make it to IBD100 list, but boy did this one have a strong kick today.   Four days of strong closes in a row and this is obviously a revaluation of the company, based on its earning.    At this point, we aren't inclined to chase it aggressively but would rather play more on the dip side once it comes.   We think this play will last a while on our playlist, at least right till the next earning report.

TLEO,  bounced nicely after a case of profit taking late Friday.   If you are following these last 3 plays, you realize these were more than quick .75c trades yesterday as they've been mentioned for days now,  you had plenty of time to pick an entry!.  

If it wasn't for the 'growth' stock;), MSFT being a drag yesterday,  we'd have probably finished green!.

Solar Burn...

What is really funny about this market is that while a couple of big names that kept on going down every day, we have some names that are going the total opposite direction, which is up.   The Citi news may have very well kick started this week, but all the focus now is on Cisco's earning tomorrow night.  As oil price keeps going higher, so too are the names from solar sector.   This is really the kind of market where you are either in a lot of pain or a lot of joy.    What makes it tough though, however, is to maintain a balanced portfolio where you try to speculate on which sectors would move next.   As we have witnessed, many of the Asian names have been under pressure the last few days while some of the more expensive names on our watchlist  kept us in the game.       

First, the good ones...

FSLR/SPWR/GOOG/MA/BIDU/AAPL/RIMM,  basically, had we been trading nothing but the expensive tickers ($100+), we literally would've been making a killing in this market.    These aren't the names we are unfamiliar with.   In fact, pretty much all of these names are positions in our portfolio at one time or another.    You can say that these are some of the obvious leaders in the market and those are the ones we ought to be owning if we believe this market is going higher.   The point it, we gotta have some of these names in our portfolio.   We may not afford all of them with big sizes but these are the ones that are carrying this market higher.

Solars, JASO TSL SPWR FSLR ASTI, every time dollar gets dumped, and oil gets bid up, and then these guys zoom another 10% it seems.    Some of these names are releasing earnings next few days so we'd have a pretty good picture how traders would react to their report given the current valuation.

AIXG, a somewhat new name to these parts is this German ADR semiconductor/equipment maker bought up early in the morning after earning. It's 9mth eps.17c vs. (0.03), while revenues jumped nearly 50%.  This co' is thriving on the demand for LED units which is in a strong secular growth mode.  The order intake Q# and the resulting backlog was very good here.  In the last 3 Q it's order intake has gone from 40 to 50 to 70mln euros resulting the co' largest ever order backlog.   This stock trades overseas as well and takes it's open gap cue from its action over there.

GHM/DXPE, these two are couple of the recent earning plays that are being bid up quietly.   We definitely don't want to ignore these as they can creep 10% on a weekly basis.

Now the nervous ones...

STV/LFT/CISG/GA,  all these have one thing in common and they are recent Chinese IPOs.    Aren't we supposed to be up 25% by now by holding these?   Right now, we are as puzzled as many others as to why all of these names aren't getting any momentum to the upside.    It feels like in  20 more trading day, there won't be anything left in these stocks;).     At this point, we simply have to play the statistics and probability game.    Any of these would be considered longer term plays and we just have to play that way accordingly.    The quiet period is going to end soon enough for some of these names and earnings are coming up as well.    We are looking forward to those events as they can be the kind of positive catalyst that can drive these stocks.    The bottom line, these plays are still at the beginning.

Simply, you cannot hold one or a few of these IPO's, 'nervous ones' without balancing out your book by trading/ holding the 'good ones'.  That is missed opportunities day after day.

CSCO..the straw that broke the camels back?

..or is it really the last straw that broke the ' donkeys' back?.  Cause that's what this market is!...A wobbly donkey!.    We'll know soon enough, but this report/ outlook was not one that was expected and wanted.   This was not the 'water' the donkey/camel was in much dire need of yesterday after being pummeled by more of the subprime storm during the day.  This time from Morgan Stanley/AIG.. Of course, the USD played a big part too as did the talk of the Chinese putting their foreign exchange reserve into euros.  Hell, you got Brazilian models asking to be paid in Euros now.lol..who's..what's next in regards to the USD fallout.  Some intervention is needed here.  After loading up the markets back with all these subprime issues since summer, we've been able to still move thanks to the big techs earnings reports...RIMM, GOOG, AAPL, MSFT.  Now what might be a inconsequential seemingly in the grand scope of things, CSCO not giving a glowing outlook might cloud us even more.   There is a limit to everyone's endurance and everyone has a breaking point.  After literally trying to carry the market on its back, you have to wonder if the techs have had enough now.    Exhaustion might be here.    A breaking point might be reached, it is damn close with us.   What we said in the weekend chart note is we don't want a close under 1500SPX/ 13500 DJIA, well we got that as the market broke down these levels hard.  We are in a very cautious stance as seemingly nothing now can stimulate the market.   We will get the customary bounce very soon, but we'd look for that as an opportunity for the investor/ trader to sell some into and catch their breath.   Be selective if buying and go in smaller sizes.  Look for pockets of strength (eg. solars still?) and earning reports should still provide opportunities in individual stocks...eg...MA, we'd just not fall in love with too many of them and take profits sooner. 

When the subprime winds started to blow this summer, we suggested a potential switch into more Chinese and Russian (of the BRIC) stocks as this might be looked as a possible way out of what we were seeing and getting in US stocks.  This worked!.  The same concept might develop now if the techs can no longer carry the market and traders money looks elsewhere to park.  Considering all the new Chinese issues have been taken apart since the crazy run recently,  we'd not be surprised if the hedgies turn their attention on this group soon again to make some money off momentum.   Maybe it's just wishful thinking on our part, but if these guys are not meeting their goals again , they might as before and run these from the lows this time around.  It would be easy.  In the meantime, we still have the solars booming and today many names familar to DJIM, SPWR JASO etc.should benefit from darling.. FSLR report yesterday. 

earnings of $0.49 per share, excluding non-recurring items, .29c better than the Reuters Estimates consensus of $0.20; revenues rose 289.7% year/year to $159 mln vs the $120.7 mln consensus .See $480-485 mln, consensus is $412 mln, expect total production output of 200MW; planned start up costs are at the lower end of previous guidance range of $18-20 mln; 24-25% operating margin; taxrate for Q4 is 29-30%; CapEx for 2007 is $280 mln... Epcect $760-800 mln in revs in 2008, consensus is $699 mln; 1H08 revs will decline sequentially over Q4 in 2007 due to contractual price decline and foreign exchange rates;

YTEC also reported and looks good sequentially most importantly....beats by $0.06; gives outlook Reports Q3 (Sept) earnings of $0.18 per share, ex-items, 0.06 better than the Reuters Estimates consensus of $0.12. Revenues rose 44.0% sequentially, net income up 39% seq. and 51% YOY.   Co gives outlook saying, "We see Chinese banks continue to invest in IT infrastructure in order to further improve their operational efficiency and profitability, especially in our core service areas such as electronic customer service channels like web- banking and call centers, and risk management/performance solutions. We also see that small to medium sized banks are becoming more aggressive in IT investment as they prepare for public listing and increase their competitiveness in the industry. Since the acquisition of Easycon that was completed last quarter, we see great opportunity to penetrating this niche market, and we will expect greater contribution to our revenue and profit from the small and medium sized banks.

...kitchen sink

.."There is a limit to everyone's endurance and everyone has a breaking point.  After literally trying to carry the market on its back, you have to wonder if the techs have had enough now.    Exhaustion might be here...".    Oh Boy...was it ever!  All you have to do is look at the highs to lows numbers yesterday.   AAPL,20pts...BIDU...50pts...GOOG 58pts....ISRG 29pts...SPWR 28pts and then add just about everything else with a pulse on the NASD and you have a minus 100pt lunch.  There is nothing left for the market to do when the DJIA is down 220, add on the 360 day before, the SPX down another 25 and NASD 100 decline but to do a 'customary bounce' off a very oversold short term meltdown.  It was very technical on the SPX especially as it hit a FIB level of much interest.   We're glad a bounce occurred, but let's put it into perspective and that it was led by the Financials, the biggest problem out there.   A bottom in the financials?.  Maybe hard to believe it is...we don't know what we'll wake up to the next morning in regards to the subprime crunch at this point and Bernanke didn't exactly give much hope to everything else.    The problems didn't go away all of a sudden after lunch and the DJIA is still down around 400pts the last few days even if you take in the reversal.  Actually the close was nothing great either as stocks like GS sold off 4-5 pts into the close.    Simply,  our very cautious stance as of yesterday in premkt remains.  Our confidence was not built up by the reversal.    We also have the weekend ahead of us and we simply don't see a rush of people wanting to go long into the weekend.   Why get step in front of a potential weekend train that could unravel things again come Monday morning.   A nervousness of doing such might prevail, we'll most likely sit on our hands.   What's the hurry now to get back in the market, especially if you've been long recently?.  As we noted yesterday, look for possible pockets of strength and in the 1st half of the day the names noted FSLR, SPWR, JASO provided such, but at this point if you held through yesterday without taking some profits...we can only ask why?.  Why do you need to stress as the markets begin to tank.   Anyways, this group is feeding of each others earnings, which is good to see.   But, the possibility exists because of this piggyback action that when another reports great it could be priced in already.   Sometimes these are best to sell into early if exuberance is shown on small volume.   When the market reaches a boiling point as it did on the NASD yesterday, following up to the Financial stock slaughter, we throw out any preconceived notion we have a long term hold of anything.   Before things get any worse, we throw everything out including the kitchen sink.   We prefer to start fresh, we can always pick up anything we like long term again, most likely not too far off the price we sold at....but only after we see some of these stocks closing well and into the green.