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.

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.

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.

DJIM #49 2007

Tis the giving season and Tuesday afternoon,  we're gonna get some in the way of a FOMC rate cut.   Following Fridays data, a .25pt cut is the most likely outcome, but there are enough still in the .50pt camp.  One thing is for certain is the decision won't be unanimous as we'd all like and all eyes and ears will be fixed on the statement attached.  Unless there is a knockout grinch punch to the market in the language, we think the market will move forward and set it's course on continuing the recent rally into the holidays and New Year.   Basically,  just get this over with and lets move on the heels of last weeks bullish days as the indices finished near the weeks highs.  Last week many quality stocks continued to get out of their bases with many more bouncing off the 50MA with follow through days.   Also, recent quality earning stocks showed some life as quiet a few closely followed at DJIM broke to new highs during the week.    They include...

MA, ISRG, AAPL,  we have always preached set ups with NCH's in place or in sight.  The market started to provide these trading opportunities once again after a long lull as these leading stocks in the past regained their lofty positions.  That's the kind of action any growth investor or just any trader wants to see and trade. 

VIP, MBT, SIGM, WDC, PSEM are the other recent EPS stocks that reported very good numbers and are now being recognized and given spurts of buying leading to NCH's almost daily.   MBT and VIP have an overweight initiation out from Lehman this morning.

SOLARS, the picture was not so clear heading into Fridays trade, but as we noted there were a couple of buy upgrades on YGE and SPWR to possibly play a part ahead of the trading day.  These upgrades definitely fueled the solars up again as many had nice days, including JASO again and STP...FSLR ran up on rumors of a contract.  We've seen the firms 'lead' this sector forward before when they start with upgrades, initiations. We might have some of that starting up once again.

Our closely followed China stocks LFT, STV, WX, EJ, EDU snailed to a 2nd consecutive week of gains since we turned our focus back on them. The volatility seems to have been removed for the time being and we started to call this group of stocks a Mutual Fund as they creep slowly higher and higher.

After weeks of trying to find a decent play, the market has started to give us plays that fit our methodology, eg NCH's and we welcome it and will concentrate on the above sorts with the usual sector (solar, china, shippers) tossed in.  It is a time for all of us to look at the 52week high lists and find more names that might provide a good trade while they trade at these levels.  You will start to find many former DJIM site names thrown around in this crop of stocks as you do your nightly homework...BOOM FWLT FSTR GEF LIFC PTT RICK TXT VE WGOV etc.   You want to trade strength and get out of any bad habits you've found yourselves in trying to trade a corrective market, such as bounces etc.  This may really be the time once again,  if we clear tomorrows FOMC hurdle in one piece.