Not a bad reaction...

Well, it was expected that we'd be getting a poor reaction from the market.    What we really wanted to see is how much damage it can spill over to other stocks and sector.     For a good portion of the day, it looked as though we'd have an ugly one in the book.      In the end, especially during the last half an hour or so, things have turned around and we closed near the highs.  Pullbacks are seemingly short lived in this market this month again and a bounce at retrace/ or MAverages occured today....25pts off NASD low, about 95 off DJiA low etc.  So how do you interpret this?    We say "don't interpret this"!    There are analysts/fund managers who get paid millions of dollars to think their brain out to interpret this kind of action and be wrong.   For us, we can simply conclude that "it just didn't close as bad as we thought it would!"      So basically, we try to use a simple man's approach to this market and let those who manage billions to figure out the exact meaning of the market action.    Yes, we do worry about the change in market sentiment and the only way we are able to tell the change is from our watchlist of stocks.    Individual stocks, collectively, paint us a pretty good picture whether the overall market is healthy or not.     As long as we have opportunities to trade, and as long as the market isn't in a panic driving mode, we'd be actively looking for things to hunt onepiece at a time.

IBM reported tonight and the stock is up slightly in AH.    This is what makes this market particularly interesting.    We know that not all companies can deliver great results or expectations.    We also know that market cannot just sell off just because a couple of companies might be losing market share or are under margin pressure.  If you look at expectations of firms, most expectations were met and at least one upgraded one of them a few points.   So what do we have left?    How about those companies that don't have the margin pressure or those still in a strong growth phrase.    Like we said last night, we aren't saying this bull market is done at all.   We are speculating that a couple of disappointing reports from some heavy weights can change the trading sentiment of the entire market.    This is definitely a big if but we still have to keep it as a possibility now that we are in the middle of the earning season.     It was easier before this earning season started because the market was running on hope and optimistic expectation, now we have the sub-prime stuff re-visiting the market to mix in with the reports.  When the real thing hits the wire, it's just oh so hard to predict what money mangers' reaction is.

Bottom line, we stay sharp and play our game.    We'd try not to get caught up in a bad market vibe so we have to keep our eyes on the reaction of those heavyweights.    In the meantime, we actively hunt for stocks like AP to pull off a trade or two.

AP, this is not a stranger to us because we have played this one a couple of times before, though maybe not since  we started DJIM.    This one is also in a sector where it seems everybody is having good reports.    Again, it's very important whether people 'appreciate' its earnings or not.    There is no question that this stock was  being bid up today off their report, despite the weakness of the overall market.    We like this kind of action and we are putting it near the top of our trading list to trade this one higher. You cannot ignore the small float, the chart and these earnings...$1.02 vs .67, revenues up almost 18% to 88.74mln. To get a bigger picture see Q1 and read the companies comments in this report.  We like a EPS with some history and growth, we'd much prefer to trade a AP, PENX, LPHI than a company like DYII that hired more Dr's and all of a sudden become profitable. Couldn't management pull the same before, probably it is not that easy. 

VSR, we noted this one the other day, bought a piece today given its relative toughness to hang in there.    We are hoping that there's enough volatility from this market to give us some opportunities to add to this position at a reasonable price.

Solars, some of you may point out that the group is enjoying a good day given the weakness of the market.   We think the group was probably oversold the past couple of days and there's still alot of interest in playing this group.   A bounce is definitely inevitable, even on a day like today.  We spoke recently of wanting to see action from the firms continue.  We've had 2 more tgts on FSLR since of $140 and 145, we 've had LDK initiated with a $49 and today a $44 from CIBC today.  LDK was only trading 7pts above its IPO debut price and JASO had a positive clip out of IBD this morning.  We are hoping this is the support this sector needs to keep the dips from becoming a meltdown.   We are very clear on our position still.   Unless some positive catalyst that can take this group into another drive, more coverage, more contracts...we'd more than likely to shy away from this group unless for some intraday swing.  Of course...it is hard to not want a piece of the so called, 'next big thing',  just make sure you are not overloaded % wise in your book and think you have a decent price average to try to go forward with any of these. 

At first glance tonight, a few good EPS reports tonight from VMI, BMI to look over some more.

DJIM #30, 2007

If there's one thing the market has taught us in the past, it's that you have to always be prepared to face the surprises.    Out of all the companies that have reported last week, nobody expected an earnings miss from the growth behemoth Google.    Sure, some of you can argue that you saw it coming, and that sooner or later it'll happen to Google.    However, lets really be honest here, there was just no indication or any warning from the company or analysts that suggest a short fall was in order for Google's current quarter.     Well, it just made this situation very tricky for this market.   Of course, one company cannot bring down the whole market.  So, CAT helped.  A few of the well respected and cheered companies can certainly derail the market's bull pace, that's for sure.    So what we are going to be keeping an eye on the next little while, is to see if there's going to be a fundamental change in market participant's trading behaviour.    Usually a market participants sentiment would directly translate into his/her trading action.    Action, is what most of us are concerned about.     Well, we do this sort of mental checks often to keep us disciplined.    Before we commit lots of our capital and energy into this market, we have to make sure market's in a favourable environment where mistakes can turn out to be forgiving, not disastrous.   Now lets review some of the plays from last week....

DRYS/TBSI, this duo along with the rest of the shipping sector, has enjoyed one of the most profitable weeks in their lifetime.   It seems analysts are just jumping bandwagon with one upgrade after another.   Nobody wants to be left behind when the whole sector is hot and in play.   Of course, it does make them smart to act the "correct" way.     The difference between us and those analysts is that although we also jump on the bandwagon, but we only jump on because of the trading opportunities.    We can jump off just as quick too.    When dealing with a hot sector, we'd definitely separate the stock action from the companies' business.    Basically, even though one's business may be the excuse to explain the stock behaviour, but ultimately, we trade stock action, we don't trade a company's business.

Solars, this sector has seen some intensive selling for the first time in a while.   Sure, you can say it's just healthy consolidation and it's just a matter of time before they break up again.    For us, until they break do break out, we'd remain very cautious on any bounce attempt.    The only exception from the sector is LDK, which had some company specific news.   We'd keep an eye on that one to see if it warrants further trading opportunities.

AP/TXT, these are two new plays we've added to our watchlist/portfolio.   We are feeling very positive about their earnings and the way traders reacted to their earning.   It's definitely more important to get the right kind of reaction than number.   Again, you only profit from a good reaction, not an actual eps report.

Bottom line, we still have a large portion of stocks that have yet to report and we continue to look for that unlikely hero.    To us, the big companies provide the headline but the little ones provide our bottom line.    As long as the big companies stay in line for the most part, we should still go aggressively after those small ones with a favourable reaction to their earnings report.