DJIM #42 2007

Here we are DJIM clan, the week we've been all anticipating as the tech giants start reporting...INTC, YHOO, EBAY, IBM, GOOG to give this market its course.  Somebody(s) wanted to start early Friday by showing that Thursday's beating was nothing but a mirage as noted in the last lines of the morning Journal.."Tech stuff this am..ORCL M & A news,   AAPL tgt raised by MS,     IBM estimates raised by JPM before next weeks report...as if yesterday's tech wreck didn't happen;)'.     This was was followed with Oppe' giving GOOG a $700 tag.     Aren't these guys off Fridays?.      Guess with a Blackberry you could shoot off a price tgt increase/ upgrade from anywhere these days.      Coincidence of all these coming out on what is usually a quiet Friday scene,  plus M & A activity tossed in?.       Doubt it, these firms are seemingly gonna do whatever they can to grease this market higher it seems,   maybe we're being set up for a final push into the end of '07..a push that could leave us all hiding in the bush for a while when this all ends.  lol.      Anyways...all we could do is take it one day at a time here and therefore we are all playing it smart....right?.     Without panicking on Thursday, we noted in the last half hour to let this market drain, "the market will still be there tomorrow and the noise will settle'.     We were asked by a few of you to give our interpretation of the steep and quick turnaround from the techs and that is what we did before the open the next day..     Well...it actually started with our AH Alert on BIDU and the BS surrounding the JPM report on it and the match it was on the box leading to the tech's fall.    Maybe the big boys wanted a fire sale just before earnings this week just to load up, maybe that's why the barrage of activity from them on these names premarket the next day.      If you weren't taking profits Thursday, well then you probably made up your paper losses by holding through the night.     Maybe you even added more as the bus got gased and you added to your positions into what turned out to be potentially a very profitable trading day.   Hell...just if you got on the BIDU bus once or twice it would have been nice.   We're not Cramer with a $500 push for BIDU late in the day, we don't care what is does today or tomorrow, all we try to do is give an early lead on a stock and maybe if you agree and see the ducks line up as they did with tech upgrades, then you will shadow us into the play.   Okay... We need to put last week behind us now as the EPS story starts to unfold,  but there are few quick stocks to note off the close last week...

CETV, looked sweet as it broke through the congestion noted at our $98 alert.     It had a nice afternoon as buying picked up and it closed at $104 mark.    You couldn't ask for a better chart on the daily and weekly leading up into earnings for this stock or any stock.   You might recall when the market was taking a beating, we discussed the potential of money flow into Chinese, Russian stocks, half of the BRIC.    On Friday, our GLDN reached another high off our last alert on it at $82 to $89's and it is taking the other Ruskies with it... VIP and MBT have reached new heights as well.      Another one followed here closely all the time because of its volatility and ability to shoot a moon shot intraday is WBD, the Russian dairy/beverage co.    It  had a beauty of a walk up Friday as you could see by the intraday chart.  This one could give it up just as quick always remember,  but the way it was ladder walked for 5 hours makes you wonder what's up.     It never trades so orderly.   Just like the Chinese stocks, we are continuing to favor this Euro flavor.

Speaking of the Asian stocks, if you look at the charts from this weekend, you'll see the potential resistance on the HANG at 29,000.   Have you seen the overnights?.    Unbelievable, these markets have no respect for any resistance, any potential top.  It just did a drive by and gave this 29,000 the finger!.  So what does mean?.  Well,   just potentially another day to trade our DJIM names.   There is a name that has crept up the last 2 days and has offered a whole lot of gain % potential.    If you didn't catch it Thursday, maybe you caught it on Friday and if it rides the train further off 2 consecutive volume days...well then we might get a 3rd day of opportunity.    Again, this HSWI falls into the speculative and does come with a warning, even though it looks to have some of the volatility subsiding and something might be cooking as its under accumulation it seems.   Icahn, making lots of headlines recently. EJ traded stupidly at first too.   Not saying its a EJ,  just how it traded in its first weeks when you had no clue which direction it would go on any given day.

EDU, a few nice points off the note on it in alerts Friday midday and going on the limb here at first glance over the report and saying this is a great report this morning!.   Still...remember let the market show you the way and if they agree with us, the bus will move and you will consider jumping on.   Why does this look good?.   Besides the headline numbers of beating by .12c  (91mln vs. a lofty 79c)55% growth YOY, 81 mln in revenues beats 72mln and is 42% growth YOY.   The kicker is a very nice 30% enrollment growth and 40%+ operating margins.      Sales growth of 42% and 30% enrollment means efficiency and power.    In our opinion, this is the barometer (enrollment)with operating/ gross margins that you judge this stock on!.   Hey, we went on the limb early with WBD recently off earnings and it payed off big quickly..lets try again.   Yes, this baby China was once $20 dollars here, she's all grown up and kicking on all cylinders.   Still...there is a CC to follow premkt.   Let the market show you the way.   It would be rude to have sell the news in this report, but who knows..lol. Good to have the Asian markets possibly lead this as well. 

We did a lot of selling into strength last week as we prepare to have cash readily available to barrel in on new plays arising from earnings reports. This is something we always preach here as we settle into another earnings season.   Have cash on hand!.   For some of you it might be a problem cause you've become infatuated with a big gainer such as DRYS, TBSI etc over the months.    Just remember, she can always dump you first from the lofty perch you have her sitting on.  There is a big derivative market here placing bets in the Shipping industry, you're with the Hedgies here big time and it will probably get more volatile as time passes.    At least consider lightening up some of your recent big winners into EPS season.    We've provided a look recently in the Journals as to the things to watch and be aware of when considering a headline EPS number.    We don't doubt the Shippers and stuff will be in play, but we have worked them over and over here and hopefully it is now time to discover some new blood and start from the bottom and watch them climb, just like we did with all the DJIM Shippers, China, even Russian plays.  We want the easy play and that usually starts with getting in on play before the herd comes marching in, sometimes it takes days or weeks...sometimes just a few minutes.

Cheers' mates!

DJIM 50, 2007

As the year winds down with this upcoming last full week of trading, we find ourselves at the crossroads here.    We are here because there's definitely two distinct possibility in front of us.    One possibility is that we roll over from the recent gain and try to test the November low and who knows what happens after that.   The other possibility is that we stop going down right about here and churn our way upwards, in an apparent and somewhat violent manner.

Lets talk about what happened in the past week first.    The action from past week is purely centered around Fed decision and we can understand how market participants feel after the decision.  They have a hangover.  In our opinion, unless Fed surprised us in the optimistic way, this market would get sold off regardless because  as we had come off such a good 2 week rally from the November low.     In terms of Fed's decision, in our opinion, they are doing the right thing even though it may not be "instant market friendly" kind of decision.     The bottom line with the Fed is that we have the Fed on our side still.    They aren't being ignorant contrary to many people's thought and they are simply being patient to help out the financial crisis.   This of course isn't being bought by everyone because many wanted that "magical potion" from Fed that can solve all of the problems once and for all.    Believe it or not, many if not most of the problems associated within the financial sector still need to be addressed and resolved by the companies involved themselves.   In other words, market needs to do the most to bail themselves out.    This is only healthy in the long run.

Too many people are too negative toward this market and too many shorts have piled onto the recent upward momentum in our opinion.    Basically, we believe that when you want to trade this market down, you definitely want to do it with good timing.   First of all, you want to go negative really hard at the beginning of the crisis and in a seasonally slow environment.    Right now, there's definitely no saying that we are at the end of the crisis but we are definitely far from the beginning of it.     People are fully aware what the problem is and measures are being put in place to correct the problem.   It does take time.    However, you don't want to go really short when things are being fixed, slowly but surely.  

So against all odds, we think the second possibility is that this market churns upwards has much better probability.    In order for this market to dive and take out the November low, you'd need some really disastrous news or the proof that we'd go into a real recession to do that.    Somehow we just don't think any of those two things is in the cards at this moment.    At least, not during the Christmas shopping season, we might add.

Earnings Earnings and Earnings!    What more confident catalyst you need other than earnings?    We have them coming up and the way this market has been setup, anything better than the lowest expectation can cause a good rally upside.   Of course, that also depends from company to company and sector to sector.     Last week we had LEH reporting and we have to say markets reaction has been very positive, despite the drop of all major indices.     In the coming week, we have GS reporting and this is considered best financial house there is.    Again, the way it sets up is that the shorts wanted to push it below $203, which is the recent low and knock it down for good.     If this stock is at $240, we say the odds of getting sold off is pretty high regardless the earning number.    In our opinion, the trade definitely calls for the upside when the number is released.     The next important report in the coming week is RIMM.    In our opinion, the recent 20% drop from the $122 area took away any bearish surprise.    It feels that shorts have pressed a bit too early going into this report on the heels of a couple of firms analysis of RIMM.    It is "unlikely" that RIMM would report a slowdown in its business and we can almost ensure a massive squeeze if it doesn't play out the way bearish camp wanted.     There are quite few other reports in the coming week which include  NKE FDX MS BSC BBY ACN JOYG GIS... quite a few different and important sectors.   This should provide us a good picture whether our economy is heading into a recession or not.     Again, we believe in our thesis that market rarely goes into a crash into an earning season.     Basically, we'd be much more nervous being short than long at this point.

Now some plays....

Solars, is it us or does it feel that most if not all solar stocks are being setup conspicuously on Friday?   Just look at some the chart setup from some of the popular names and we swear they are all setting up for a good run-up in the coming week.     By the way, they are being setup(in a very positive way) on a day that all indices dropped well over 1%.    This is simply amazing which tells us that people want to own these things at year end.   Basically we still have a bit over a week to window dress these names and it isn't a myth that the best stocks get owned at the end of the year to show them on your book.

STP/FSLR/JASO/LDK,  these are what we considered the favourite solar names to trade last week.    With the exception of LDK EPS Dec.19th, which we are still waiting for the audit report to cast away the cloud, a start today as (independent Audit out according to LDK concluded allegations incorrect), the other three are being setup superbly going into next week.  YGE, IBD #92 is also enjoying a nice trend change.

SOLF/CSIQ, these secondary solar plays are also setting up nicely, especially with SOLF.  The 9 ema has just caught up with SOLF and the next move might be big and will likely get this thing out of the recent trend.   With the entire solar sector heating up, we feel the move is very likely to be up than down.  ESLR had 2 nice days after Thursday premkt upgrade and follow up news.

Asian stocks, as seen in charts this weekend they took the week off after a 2 week recovery, following overnight numbers from HANG/SHANG they will most likely continue to be out of favor to start the week. 

LRN, 300k volume and a higher finish on day 2 of trading. If this thing had any volume Friday, it might be already looking at the high $20's.

MELI, this is the play you only can wish we'd all bought more of before Cramers mention.   On the other hand, this is no longer a strange name to traders and with its tighter float and story, anything is possible.    Basically, this one is better now with Cramers exposure than before which is largely an unknown stock to many.    The trading in this one is rather volatile so we'd continue to be inclined to buy on intraday dip and sell into strength.   It has worked beautifully in the past so there's no reason to change the strategy with this stock.  The trend is firmly to the upside since the break at $45.

RIMM, we've been buying some late in the week looking to hold up to the earning report and then play after its EPS is digested.    Again, in either case, if this company reports a good number or the market rallies, we'd be all over this beta name along with other heavy favourites like BIDU AAPL GOOG etc.

VIP, MBT..also seemingly against all odds these were green on Friday, closing around highs of day.  Another Russian stock, WBD pulled off another impressive Q with what looks like their best EPS number yet. Again as we 've seen too many times lately, nobody was interested in earnngs, this time because of CPI data headline.   Simply, you had pockets of strength to buy...the solars, the biotech, the russian stocks late in the week despite the volatility to the downside in the overall market.

Bottom line, this is the time where you have to be playing the most popular stocks.   We have seen it that the small caps aren't exactly working so you might as well join the crowd.   The more crowded it gets with a good mover, the better.    We can even see it with some of the recent story stocks from the biotech sector like RIGL SVNT BMRN etc.   You trade what others trade, when a stock is showing upside momentum that is.   Only then, you'd have a chance to outperform others.

..firmer

Despite what at times felt like a volatile day, it came on the expected diminishing holiday volume and therefore some intraday expected yo-yo swings occurred on the indices.  At the end, the action is firmer for the last 2 days and unless the down swings are on a bad headline with volume, it is best to stick it out with some positions and look forward to the XMAS shortened week and a possible rally of sorts.  A few things occuring the past few days are indicative of a whacked out market, this is best shown in the different reactions to GS strong earnings and MS's blow up.  But this could be good news.  Possibly the best thing is bad news from the financials may be getting priced in on some stocks and confidence is climbing that the firms are finally throwing everything out including the kitchen sink and coming clean.   Now only..if the market can shake the ugly numbers from BSC due out and we'll have a clearer picture as to where we are going.   It's confession time for all these boys.    We've attached the importance of earnings this week to possibly set or at least curtail the latest slide, last night Oracle reported a big quarter on all fronts. This includes getting it finally right on what is usually their very so-so Q year after year.  Is this a forward to what we may expect from more tech firms ahead or is it just a anomaly of sorts?.  It does bring a potential boost today to techs, but this might be short lived as RIMM reports AH.  Let's hope RIMM makes it back to back, other wise this Oracle number will be forgotten quickly.  In the meantime today,  FDX , BSC, ORCL can lead the way in 3 essential  areas to a very big day....let's wait and see.

LRN,  if you took your eye off K12 yesterday, you found a surprise on your next look as it probably jumped another $1 or more.  We said this might see high 20's if it just got some volume.  Guess what....it didn't need it as hit $30 and up almost 50% since we alerted the buy in the first hour of it's debut last week.  Only regret and you could blame the weak market last week is we didnt go crazy into it.             Ah..the great trader/investor motto...could've..should've..would've!.  lol..    A pullback would be great as its up 50% from its opening price, but it just might be getting discovered so its best to watch the volume as a pullback might not be so swift for your first entry or a re-entry.   We've taken most off the table and will look for the re-entry, in the meantime we dipped into APEI after it passed it's initiation day with a few nice buy targets.  You can only dip as this is trading lightly and has only a 4.5 mln float.   With all the messes out there lately, we think these educational online plays are under radar.   Actually, they are the perfect stocks for a holiday buying frenzy if the manipulators want to drive a stock or two higher next week as in years past.

WBD, another recent buy in alert after earnings. This followed what we outlined here the past week quite well, it did look right the day before at 121 in a market where nothing was looking right and it hurled $124 for another entry before ticking up to 130.  A nice run and it did hold up well, but as we've repeated over and over lately....take what a stock gives you and walk away. In this case it was more than enough.  We'll look for re-entry here as well.  The volume has not come in yet as it has in the past on runs and so we'll look for it with a break over yesterdays high levels.

MBT,  we've been spreading out our risk lately and this means using foreign ADR plays (VIP,WBD as well), in specific regions like Russia. MBT, looked very strong yesterday and it held its break of the recent channel top.  This one can move fast and we are eyeing it back to recent highs.

MA, really beaten up the last few days on the Euro ruling for months and months to come.  In the near term this should affect MA's profits as it does not cover the majority (over 90%)  of MA's volume. Ma should get back on track after all this noise is digested.

Solars,  LDK guided EPS in-line, a downgrade and what you might have is some pressure on solars.  We'd use any negative reaction spreading to take advantage of the dips in the usual suspects.  These plays are not going away by a longshot in the short term.

....no rush

The erratic trading continued most of the day as the market chewed on anything and everything.  Included was the expected Bear Stearns debacle, the FDX earnings and the ORCL strong report and a few Eco numbers.  Stir'em up and you get more of the same as far as the trading environment is concerned this week on lighter volume.  This means early firm action, a loss of momentum mid day and then a modest rally late in the day.  What you simply have is the financials finding a way to put a drag on the market and the half ass end of year rally the market wants.  You can see this loud and clear as the NASD/RUT were making new highs for the week while the DJIA/SPX lagged behind...but this should change as the natural thing to do is play catch up and close the gap, especially since RIMM will lead the NASD pack early on.  This could provide a better technical picture for the lagging indices come next week, even if the financials don't want to help out.  The premise here the past week was the importance of earnings coming out and being a catalyst.  This round of reports won't take us out of the cold in respect to the 'big picture' of where the market is going, but what it does is... give us all hope that is we will have something to look forward to in January as the official earnings season kicks off.  The reason is RIMM showed something we haven't seen in ages and that is a post earnings run, herd reaction and not the usual sell off.   Unfortunately, the report falls on quad witching Friday to cloud the picture.  Throw in the holiday trading aspect this Friday and we won't get a true feel for where RIMM is going just yet...up or down from today's action.   If you didn't flip it around AH's yesterday or are looking to sell early today, we'd then take a cautious stance today at this $120+ price.   This also holds true for other stocks as well, we are unlikely to chase new plays today unless a whole sector,  such as the Solars want to take the lead.  No Rush today, let's see how it all materializes later in the day.    In the meantime, we'll continue to trade and watch for further setups from what we have concentrated this week on and that is the WBD LRN VIP MBT etc. 

Let's hope the ORCL/RIMM reports start to get the talking heads in pre-earnings mode and have some attention turn away from the subprime mess and on to earnings.   This mess ain't going away for years and we need to move on. 

DJIM 51, 2007

The truth is, when calling for an overall market direction, technical analysis alone is just not enough.    This market has been volatile and it's been difficult calling a one way action for both the bulls and bears.    We have definitely been in a zigzagging mode during the past few weeks.  Since the late November rally, you can say we've been stuck in a pretty big trading range with some wild swings both ways.    Fortunately, we think we may be near a point where we can finally get some meaningful action going.  At this point we are getting what we wanted last week despite the market looking technically troubled at that stage.... .."...the only reasons not to abandon the market is the fact(s),  we are waiting for earnings, hopefully to spark the market, the seasonal factor to move the market up and the fact volume is low on this sell off, which also allows for opportunity for a sizeable swing(s) to the upside on the same low volume.    Let's add one more and that is the proverbial bounce possibility now. Santa has enough things in his sleigh to run over the Bears still, but he needs help from companies announcing earnings this week first.".......    We are not being the overly optimistic bulls as caution is still needed.  We are simply going to be watching events, especially earnings closely that may shape up the trading action for the next little while.     Friday's option expiration pop may seem a little suspicious,  but it can also be said that we could've very well gone the other way not really knowing the expectation the day before.    Fact is, the market rose in a very healthy percentage and now we have to deal with what the possible scenario that may lie ahead of us.

In our opinion, the market is ready to cheer for some good news.    We now know what this market is capable of when good news is put in front of it.   Basically there was couple of key events, an earning report from RIMM, a back to back with ORCL, and news of possible foreign cash infusion into MER.   Big techs had strong positive reaction and financials also traded well.     We have been saying this for a while that in order for this market to gain any upside momentum, we need companies to deliver earnings that show no slowdown in growth and no signs of recession.   Also, financials need to go up on headlines, good or bad ones, or at least stay steady on the bad stuff.   MS/ BSC trading firmed up despite the expected blow ups during the week.

The coming week is a short trading week and we have just 3 1/2 trading days to deal with.    While we can assume that many traders have taken the week off to spend time with the families, we believe some traders may be taking advantage of the light volume holiday week to push some stocks around.     We are looking at none other than the solar sector and any other stocks made the recent headline in a good way.  The ones that have made the recent 52 week high are also high on our trading list.

A rundown here with solar stocks that include STP FSLR JASO SOLF CSIQ, popular stocks include AAPL RIMM MA,  Russian stocks like MBT WBD VIP, and recent additions include RSTI LRN APEI are all on our top trading list.

We definitely had a pretty turbulent year but we can still end the year on a high note.   Stay with the best performing plays because those may be the ones to get us off to a good start in the new year. 

As we said above technical analysis is not enough, but with the DJIA and NASD closing at 13450 and 2691 respectively, we are getting more comfortable with the market.   Last week in weekend charts, we noted"..The DJIA /NASD are below our comfort levels of 13500 and 2700 respectively, but since volume is expected to whittle down in the coming days... anything is possible.  This includes big upside days that can easily get us to the levels noted and away from 13300....".   Anything was possible as Santa seems to have gased up and we should move over the above levels into the New Year.  Another possible positive technical scenario and a possible Bear stinger is the action in the small cap RUT, IWM as the down trendline from September might be busted shortly.  The Bears might have a lack of blueberries to fuel on if we cross here.  We are possibly entering the seasonal small cap outperformance of large caps into the month of January, this is probably coinciding perfectly with a break to be over the trendline noted. 

A Merry Christmas to our DJIM friends and your families!