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.

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

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.

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.

A new day with different drama....

One way or the other, it's not so easy to take advantage of this headline driven market.    Extreme emotion leads to extreme volatility and we have just witnessed two of the most volatile trading days.     Now that the Fed thing is over, we can move on and focus on events that'll shape up the rest of the year.   The big picture is that we are still in a much better shape than a month ago.   Regardless how you judge Fed's recent decision, Fed is doing something to help out the credit crunch by addressing the liquidity issues.    That to us, this the encouragement this market needs, but we have to see if it's enough.  Financial stocks are just weighing in on this market, day in and day out too much.    Soon we will get some good insights off reports from LEH and GS.   Hopefully, these two would provide the kind of certainty this market needs to get some stability from the sector.

Solar plays,  basically you just can't go through a trading day without playing these it seems.   Crude broke $90 signalling a possible technical recovery and that should bode well for the solar group again.   LDK has been active the last couple of days and think this one needs to catch up to others in terms of valuation in light of the recent development and therefore might have more leg room.  SOLF is also becoming one of our favourite to trade along with STP JASO and FSLR.  Again, remember we noted the upgrades seen recently as a possible prelude to their action as we've seen in the past.   At least, 2 more are out this morning, including one on FSLR with a $300+ target.

GXDX, this is a biotech co. similar to WX and it's based in U.S noted in the forum Oct 31.   It came out with an eps report tonight and we think it's a very good report that showed a tremendous growth rate.    The issue size was only 5 million shares.    This one also doesn't trade a lot so the volatility can be high when it comes to trading.    Knowing what they just reported, we are putting this one on our active playlist and will add incrementally when opportunity comes.  There hasn't been many good eps report from small caps lately, so this is definitely refreshing.  It will be interesting to see if there is interest in this kind of play from the market.

Turned out the prudent thing to do yesterday was to sell the gap and not just consider it as we noted in yesterdays pre trading note. The swings are wild and you have to your trading hat on or lose all or most of your gains as the market digests the rate cut and the follow up liquidity plan.   It may take a few more days and it's best we wait it out to see a trend emerge.   Again.. .."what we need to see is the indices recover and hold 13500 on the DJIA and 2700 on the NASD to start thinking of accumulating positions of substance".  This would be a start!

..some calmness

Seems many gurus are writing off the market saying this latest liquidity plan is just for the big boyz to get out higher and fry us all.  Hell, many have predicting doom since summer or years for different crisis situations, but we just keep playing along with many of you as we have done so for 3-4-5 years.   We love conspiracy theories , but we don't trade them unless they are ours and we won't give up now thinking this market can trade up still.   Maybe , we are too simple and too simple in our methodology... We/You are not giving our neighbour a loan and they won't give us one and so the banks have the same situation.   They don't trust each other and so the liquidity plan comes to fruition.   Simple...  someone steps in and helps both sides.   We are in favor of this intervention and think this will help soothe out things eventually.   It's a start.   The last time anything close to this being done  on such a worldly scale was after 9-11.  That puts things into perspective in more than one sense.   The severity of it all now and the ability to fight back is there as we've seen before.    Day by day things will clear... if the market can't hold a13500 DJIA or NASD 2700 close in the short term, we'd start to worry more from a technical standpoint.   But...until then we are ready to jump on Santa's sleigh and go for a ride with a few of his helpers.     Well, the DJIA did hold 13500 (barely) and the NASD is still some 30 pts away, but we all know what 30 points is like and that's a half day of a run these days.    The way RIMM, AAPL BIDU performed makes it even more plausible soon and therefore an opportunity to strike these names up again will come.   We are encouraged by today's action, the lows of Wednesday were hardly touched on the indices and we worked higher into the close.  A little grit and determination was seen today and everything held together after yesterdays big intraday slide.  ' If ' we get a manipulated CPI number premarket, we could have an added ingredient for a move starting for next week.   We are getting to the biggest time of the year for manipulation as the volume will soon start to dry up.  This is the time for all the manipulators to step forward..big and small and boost year end totals on all boards.    Surely, a BIG lot(s) will be there to help out the market.  You help us out with liquidity....we'll help up you in other ways, guys!.. told you we love conspiracy theories, we just like'em on the bull side.

LRN,   K12, how cool a name is that!;).  Anything/anybody to help the kids from Kindergarten to grade 12 surf online other than us is a great concept!.  Okay, so its a little more than that as LRN offers a 'real' curriculum of educational services, lessons.    A virtual public skool alternative to supplement the kids education.  A recent educational IPO, APEI serving the military/law enforcement had a big run since it IPO'd as we noted with LRN today in the $22's.  It had nice full day trading to the $25's and we were trading/taking positions throughout the day.  A 6mln float makes it attractive to boot.

MELI, a long standing citizen here and a recent alert this week at $45 was making some people very happy last night as it traded to $58 AH's off Cramer.  It's only a recap if you are not trading it this week as it's held its ground near highs through all the volatility we've seen.  We have always liked to sell to an incoming herd from another source.

MA,  another long term play here and again highlighted a few times this week hit a NCH with a $224 close with a converted touchdown and field goal day..10pts. No yellow flags with this machine.

Solars, we highlighted this bunch into the trading day and it was really the only 'group' action going with FSLR, ESLR leading the way off the upgrades mentioned in the morning.  JASO, SOLF, YGE all held green as well and if we keep seeing this group up, STP, SPWR will join the ranks again.

MBT, VIP, after making NCH's recently they have tested 9ema and seem ready to resume if the market gives them a chance.   The telecom sector has been one of the leaders on bad days in the market and with Russia's political picture clearing up it should bode well for these ADR's soon enough.  These have always held up during the rocky days of November.    ROS,  a secondary play on the above when we started coverage back who knows when is a clear beneficiary as its practically a 'state owned co'.  The other two offer volume and so we'd continue playing with them.

RICK, so this is where all the bankers are striking up liquidity plans these days!..No wonder they have no $$$$.  This one just keeps on doing a slow dance up.

GXDX,  no big surprise the traders didn't show up the day after EPS.  We've outlined numerous times recently that small/ float EPS plays are not getting the love immediately as we have been used to in the past. The chasers are still not there as we saw today and since this stock had a very nice pre earnings run, its really not surprising to see profit taking come in.  Keep it up there on your potential playlist.  A pullback always balances your risk/reward out.

Oh yeah, RIGL,  wait till phase 3 comes out, it will go to $100..;).  The beauty of this action is there's crazy foolish money out there still to play feverishly and we like that.   Along with interest seen in the IPO LRN,  it gives us more hope in the coming weeks for plays as there is a willingness to put money to work.  It's sporadic now and sometimes doesn't last too long , but that could all change as spreads widen in more names when the volume starts to dry up into the New Year.

Santa showed up...

The so called Christmas rally or the Santa Claus rally has been something of a mixed bag in the past.   There were years we just wished the Christmas season would last longer and there was last year which we all would like to forget.   This year, Santa is back to give us traders something to remember as of now.    This of course, is probably due to the fact that we had a very very tough fourth quarter coming into the Christmas holiday.     All of the problems we have had to endure as traders during the last while, from credit crunch, housing bubble and recession worry are being put behind this last few days of the year.    Put it this way, we won't deal with it until the new year.    It is about time that we can end this year in a rather peaceful way.

If it's peace you want, then you are glad to know that major indices have held up well and many big cap stocks have either inched up or stayed unchanged, in a non volatile way.    If you are like us who like to take advantage of this opportunistic time, then the only thing you'd be doing on a boxing day is buying and selling hot stocks online.     People, if you are serious in trading like us, then you would've tied yourself to your chair during the last few trading days.     These past few trading days have produced some of the best action since early October.    And if you were hurt by the downturn in the late November period, then now is the perfect time to get some respect back from this market.

Basically we are about half way over this holiday trading and we'd imagine most traders would be back in force after Jan 1st.    This gives us another 2 1/2 holiday trading days to do our thing.     Right now, we are playing stuff that are currently in play.    It is crucial that we stick to that theme for the next few days.

Solars, 2007 is the year of the solars and we think we'll carry some good momentum into the new year as well.    Today's action seemed to be spreading all over the smaller and less established solar players which include SOLF CSIQ CSUN ESLR CTDC etc., while the bigger names seemed to pause to catch some breath, with the exception of FSLR.      Yup, we are playing just about every single one of those smaller names today and we'd continue to play until the momentum stops.    Keep in mind, many if not most of those less established solar names are still not proven in terms of earning track record.    When some of these names reverse, it is crucial that you don't buy the dip thinking all solars are created equal and have awesome earnings growth.     Buying dips on plays like FSLR STP JASO SPWR... have good probability that they will come back in a hurry.   Buying dips on the smaller ones may get you into a situation that you'd lose another 30% before even seeing an uptick.   Bottom line, you have to know what you are playing distinguish the type of plays among solar names.

MELI, then there's this one!   If you cashed out last time after Cramer's mention, then today's the day to get it back.    We alerted early in the morning that it looked promising but we did not imagine it'd pull a move anywhere close to 20% today.    This one, unfortunately we have to agree with Cramer for once, has the marking of being a monster.     Yes, it can definitely go into triple digit based on what we have seen with other similar type of stocks.

Bottom line, there's no need to go nuts with all of the hot plays out there and just trade the ones you are most comfortable with.   Stay focused and stay clear headed, and we may just finish this year on a high note.