Christmas Loves LCD’s II

GLW had been treading water for no apparent reason this past month, but my respite came as earnings were released today with numbers much better than expected. Corning gave very light expectations for this upcoming quarter, but investors were so impressed with management’s new understanding of seasonality, that the stock ended up over 10%.

With such a low bar set for earnings this quarter, another surprise to the upside is in order.

The chart of GLW looks better than when I first suggested it in December. The MACD is basically identical; however, the Slow STO is now at its midpoint rather than overbought as pointed out before. The 200DMA resistance at 22 is keeping investors from getting overly ambitious in a single day, but I believe we will get above it soon. Here is the previous chart, along with today's.

XWG gave back after-hours gains it achieved yesterday, and lost the battle of staying above 2.7. Technical indicators are getting dicey, so I will be watching it closely.
-Chris

Sell AMGN Today

We have done well again with this one, but I have to let it go after January’s quick Biotech run-up.

We are currently overbought on the RSI, at a resistance around 76, and have very little pressure in terms of cash flow coming in. I believe we could put its capital to good use elsewhere for the next month or so. If you bought AMGN when I suggested at 68.4, you would have an 11% gain. The stock is at 76.04 after-hours.

So where do we put our profits? We short sell Nike (NKE) of course.

As far as technicals go, Nike looks as though it’s been pulling to break 100 for the simple sake of saying it’s in the triple digits. Yesterday’s 2% loss confirmed that nobody is ready to buy Nike at $100. MACD looks negatively inverted, and a quick look at a 50% Fibonacci retracement says that Nike could fall below 90.

Five months of highs are rare and usually unsustainable for companies with as few growth prospects as Nike. Also, Philip Knight, one of the largest stockholders of Nike, has sold over one million of his four million shares just this month.

This is not a risky bet, worst case scenario is that the stock hits 101, and we quickly sell for a very small loss. Best case scenario, and a more likely one, is a quick 10% gain.

On other fronts, I’m seeing a 6.6% gain after-hours for XWG, so we could sell it out tomorrow depending on how the price action moves in the first hour of trading.

I hope this bodes well.
-Chris

Burning a Hole in My Portfolio

STP is hot, up over 10% in the past week, and why wouldn’t it be with news that Wal-Mart is looking to install solar panels on its stores. This, my friends, is HUGE news. I’m still positive on STP even at these high levels, as it will benefit even if Wal-Mart goes elsewhere for their panels.

Once the viability of Solar is proven by the world’s largest company, a revolution of sorts will likely follow. Can you honestly see other companies not adapting? Wal-Mart is not doing this to be eco-friendly; they want to save on the energy bill, while getting some good PR. Again, who wouldn’t?

You can’t look at the price of STP and say to yourself “I’ll wait for a pullback,” But it’s on a roll right now and momentum might make you miss out. Maybe it does pull back a few points and you can scold me for my insistency to get in now, But either way this stock will be above 45 by year end.

As explained in previous articles, STP has the lowest forward P/E for solar stocks, around 60, giving the stock room to run toward the norm for solar of 100. It also has the cheapest labor, giving high profit margins and extra cash to spend on research and development. Finally, with a 10 year contract for silicon, STP is ready for the future.

As a side note, I’m very happy with the way our stocks have been treating us. To track the performance on Whammies better, I created a simple spreadsheet and I will give a portfolio update at the end of each month.

Trade carefully.
-Chris

SanDisk & Updates

SanDisk (SNDK) is one of my favorite picks right now. It's a new year, which means new products. Good ones, which use flash memory.

1. 32 Gig Solid-State Drive (SSD)
While 32 Gigs isn't much, the benefits of a flash-based drive outweigh the small size, especially for business use. These drives will be available for laptops for an additional $600. Yes, it's expensive, but valuable. Here are the benefits:

• The drive consumes 40% the energy of a conventional hard drive, giving laptops 10% longer battery life.

• The speed of applications will be dramatically increased.
  "random read rate of 7,000 inputs/outputs per second (IOPS) for a 512 byte transfer, more than 100 times faster than most hard disk drives. Taking advantage of this performance, a laptop PC equipped with SanDisk SSD can boot Microsoft Windows Vista Enterprise in as little as 35 seconds. It also can achieve an average file access rate of 0.12 milliseconds, compared to 55 seconds and 19 milliseconds respectively for a laptop PC with a hard disk drive."

• No matter what speed processor or how much memory a computer has, it is limited by the speed of a hard drive when loading applications. The SanDisk SSD removes this limitation.

• Flash-based drives are much more reliable than conventional drives. Working as a computer technician, I have witnessed corrupt hard drives as being the most common problem people have with laptops. People will be willing to pay a premium for the security of knowing that their data will be safe. If consumers are willing to pay several hundreds of dollars for warranties, they will be willing to pay similar amounts to know that their information will be safe.

Although these drives are smaller than most laptop hard drives, you have to realize that most people (especially business users) will not fill 32 gigs worth of space. Most people pay for extra storage they will never use. College kids downloading DVDs will need more than 32 gigs, not people using computers for business use or the common user.

2. New MP3 Players
While everybody knows that Apple has a very solid grip on the portable audio market, we cannot forget that there are other players. SanDisk is able to produce MP3 players with similar features (minus iTunes) at a much lower cost, since they are the actual producers of the memory used. This vertical integration gives them an advantage in the market.

Sansa Express (pictured): This 1 gig music player has a screen, a built-in USB connector, is similar to size to the iPod Shuffle, and is only going to be $59. People who have less than 1 gig of music probably aren't committed to using solely iTunes as their music library, so the Sansa Express should be able to grab some good share in this market.

Their other MP3 players are also similar in size (although a bit bigger) to apple's models, but offer additional features at a much lower cost.

3. Flash USB drives & Memory Cards
This christmas season, flash USB drives were flying off the shelves. At the price they're at, everybody wants one. Many stores used SanDisk's USB drives as leader items to get people into the store during the holidays. This form of advertisement means that the retailers spent this money out of their own pockets.

4. The stock's valutaion
SanDisk got hit hard in the past year.
The PEG ratio, my favorite metric for measuring a stocks value, trades below 1 at 0.91.
The trailing P/E ratio is 24.5, compared to the industry average of 64.7.
Quarterly revenue growth (yoy) is 27.4% compared to the industry's lowly 8.50%
Operating margin is 19.4% compared to an industry 10%.

This company's ratios are clearly better than others in its industry, but it trades at a lower P/E. This isn't right.

Earnings come out January 30th. Watch for a rise going into earnings.
-Sam

Updates
01/08/07 SNDK @ 44.71. New bullish call.
10/31/06 EXP @ 40. Now @ 43 (7.5% Gain) Staying very bullish on this one. Great valuation and housing is coming back into a positive light.
10/15/06 DHIL @ 63. Now @ 87.19 (38% Gain) I recommend reducing. The CEO sold a bunch. It's risen very quickly, so it'd be best to take money off the table.

Updates on Current Stocks

Amidst the turmoil of Motorola, communication equipment maker, Wireless Xcessories Group, has taken a very modest loss of 4% as opposed to 10% for MOT. This should mean something to you knowing the beta on XWG is much higher.

Either the light volume is creating inefficiencies (as the two should trade alike) or XWG simply has better growth prospects, being a much smaller company. I’m betting on the latter. The stock is showing some resolve, as it touched its current strong support of 2.7 and bounded back up. I’m optimistic that we will have at least a 20% profit on XWG by December.

STP is climbing up to a resistance, so either flip it short term and allow it to come down around 50DMA support, or relax, grab an iced tea, and know that STP will be even higher in a few weeks.

TINY is not playing by the books, I thought it would stay above 200DMA support, but instead it’s dropped a full point. Charts don’t look hot anymore, but the news on TINY is reason enough for me to commit a cardinal sin, and keep a stock with an ugly chart.

ONXX is trading exactly as I hoped; it is now slowing down at resistance in the high $11 range. Expect some indecision at this level.

Finally, GLW is getting unpredictable, as each technical indicator is telling a different story than the rest. It may be too late by the time a winner allows for prediction of price change.
-Chris

Happy New Year Indeed

Before 2007 I sorted through some ugly charts of oil and metal stocks. I'm glad that I stayed out as both keep falling while drug stocks like AMGN and ONXX are doing well. Here's an article from The Street explaining why.

I obviously should have stayed short on Netflix rather than taking the quick profit, as the stock is starting to look like a shooting star.

Finally, STP took a 4% hit, allowing me a chance to get in. (I bought shares of STP for my personal portfolio today @ 32.63)
-Chris

Six Stocks for 2007

First are the two stocks I’m bringing over into the New Year, STP and GLW.

(All Daily charts are six month, All Weekly charts are two year)

STP is one of the hottest stocks I’ve seen in awhile. As mentioned in previous articles, alternative energy will stay hot through 2008 as elections will probably go to the Democrats and a new environmentally conscious congress will give bigger tax breaks and incentives to businesses for clean energy.

Charts show the 50DMA crossing the 200DMA to the upside, which normally coincides with positive stock movement. There is also a healthy amount of supports.

GLW has a strong support right below 18, and the MACD is perfectly inverted. If the trend continues downward, expect a large jump after touching support around 17.7.

We also see a trend on the slow stochastic of 15 day low streaks, then jumps in the stock; we are currently at the end of another streak. (I own shares of GLW in my personal portfolio)

When you watch a stock for long enough it becomes predictable. XWG is a stock that I have profited from on more than one occasion, and I believe it’s that time again. Daily charts show a moderate inverse correlation on the MACD, but more importantly, it’s about to cross the 0 line. Add some volatility with a 50DMA right above the stock, and presto! Similar story on the weekly chart with an even better negativity on the MACD, and a 200WMA right above the stock. XWG is a bit more risky, but we're all young at heart, so live a little. (I will buy shares of XWG when the market opens tomorrow, pending a pre-market run-up or run-down)

We missed out on TINY a few months back when it shot from 9.5 and eventually touched 15. TINY is back down at 12, and I’m willing to bet the recent pull back was just profit taking, nothing more. There is a fairly good trend on the daily slow STO, as annotated with arrows, and I’ve added a box on the weekly chart to show where the stock price should be if it was trending with the MACD (The stock is a bit ahead of itself in the downward direction). With a fair 200WMA support beneath it, I’m giving this one the green light.

ONXX is getting some bad coverage in the media, with their recently nixed Phase III drug, Nexavar. I think investors overly thrashed the stock. I don’t like the three year down trend, and far be it for me to pick a bottom, but we do have a candlestick connoisseur’s doji star, coupled with a solid positive MACD. I like the opportunity but will cut this one free if it keeps falling. (I own shares of ONXX in my personal portfolio)

It’s time to bring back AMGN since we let it slide back to 68, and it’s near a trend line and 200DMA support. If it breaks below its 200DMA @ 65.76, I will probably sell right away, so keep that in mind.

Two stocks I’m watching are HRAY and NVT, I’m not convinced on either of the two, but if anything develops I’ll have an update.
Lets have a great year.

-Chris

My Picks in 2006

Profit/Loss

RMD - 10% Gain
CHCI - 35% Gain
HAL - 11% Gain
HANS – 33% Gain
AMGN – 9% Gain
WTR – 11% Gain
CME – 0% Push
DXD – 16% Loss
NTDOY- 21% Gain
LZB – 12% Gain
NFLX – 12% Gain
SIRI – 12% Loss
STP – 13% Gain
GLW – 11% Loss


Average Profit/Loss: 9%
Average Loser: 13%
Average Gainer: 17%
Amount Correct: 71%

So, how am I supposed to calculate if I hit my goal of a 30% gain for the year? Well, I need to figure out the average turnover for each stock and multiply that by the average P/L for each stock, and I get a good estimation of what my picks brought in.

I don’t need to make the assumption of how many stocks were in my portfolio at any given time to account for the amount of money used, because there is always 100% investment at all times. I realize that this is not always true, but I need to simplify for obvious reasons.

(901 Cumulative Days Held) / (14 Stocks) = 64.36 Days Held on Average
(64.36 Average Days Held) / (155 Total Days Traded --I started late in July) = 2.4 Turnover Rate
(2.4 Turnover)*(9% Average Profit) = 21.6% Total Profit

Gain since July 28th (The start of this blog)
DJIA = 12%
S&P500 = 12%
My Picks = 21.6%

(155 Total Days Traded) / (360 Days per Year) = 2.32 Annualizing Factor
(2.32 Annualizing Factor) * (21.6% Total Profit) = 50.1% Annualized Gain

I wouldn’t have liked to sell GLW so soon, but I think it’s the only fair way to end the year. I will probably re-add it for a fresh start in 07’. There were a few areas where I could have improved, but overall I think I did well.

In my next post I will start my portfolio for 2007.
Happy New Year.
-Chris

One More Day

The trading year ends tomorrow and I'm left with STP, SIRI, and the recently added GLW to my picks. STP is sitting on a 15% gain, SIRI a 12% loss, and GLW a quick 11% loss. I will close all three positions out tomorrow and start fresh in 2007.

In my next post I will review my trades for 2006.
-Chris

Two Thumbs Down

Let go of Netflix shorts when markets re-open on Tuesday, 26th.

With four more days of trading until the new year, I'm rolling up my positions. I will re-evaluate my two stocks left and look for more, as I battle the idea that the market could finish at an all time high.

If you shorted Netflix when I suggested at 29.50 you would have a 12% gain. The stock is currently at 26.20 and sitting just above 200DMA support and 50WMA support.

I still think this is a stock to short, based on two simple facts:
1. Competitors are emerging from everywhere
2. Downloading is the future of rentals, not mailing

I would rather not lose money we've already made if NFLX gets a pop based on technicals. Bank the money and lets look forward to a great 2007.

Merry Christmas
-Chris

Ho Ho Hold on...

Every now and again charts just don't work-- if they did, everybody would use them. Even after Corning re-affirmed fourth-quarter guidance, it broke through support and decided it wanted to hang around in the 19's. Normally I drop a stock that breaks a strong support, but GLW does not have enough flaws to make me drop it.

Assume the analyst at UBS is right and there will be a weaker demand for LCD monitors and big screens. Wall street will not care when they release Q4 numbers in January, and see potential growth. Charts still look pretty on the MACD side, so I will give GLW a month to cooperate. RSI is getting low, Slow STO is below 20, I don't see more short term free fall to come.

As a side note, STP could be looking to start a Cup-and-Handle. Lets cross our fingers and hope that Christmas comes on time.

Good luck to all of you and be careful, the DJIA charts still look UGLY.
-Chris

*edit* I caught this article after hours today on NFLX, which is the reason they took a 2.5% drop when the market closed.

Christmas Loves LCD's

Buy Corning Incorporated (GLW). Not only does this holiday season look good for Liquid Crystal Displays, it also looks promising for a shortage in fiber-optics. Of course anybody who knows GLW could tell you that, but I have other reasons for suggesting the stock-- always technical.

Here on the daily chart one might suggest that GLW is below both 200 and 50 day resistances (mainly right below the 50). Although it could be a resistance for the stock, the plus side is that a stock close to a support/resistance invokes volatility. Add volatility to a stock that's crossing the zero line on its MACD, and you have a good possibility of a breakout upwards. I don't like the high SlowSTO, but perfect charts are hard to come by. Also, as annotated on the chart, there is a good support not too far away if the 50DMA buffers the stock.

Similar story on the weekly chart, a 50WMA resistance approaching while the MACD is ready to cross the zero line.

The risk/reward is excellent here, and I will be adding GLW to my personal portfolio tomorrow.

I hope you're all enjoying the holiday,
-Chris

Lazy Stocks Part II

Take profits on La-Z-Boy (LZB) and sit tight as I scour the market for another stock. I hate to leave only 3 stocks in the portfolio, but I'm pretty sure we can get back into LZB at a higher price. If you shorted La-Z-Boy when I suggested at 13.29 you would have a 12% gain. The stock is currently at 11.85 and nearing some moderate support from it's uncorrelated MACD. I've been a bit busy lately, but I expect to find a gem to add to the list soon.

Have a great weekend.
-Chris

Time to sell Nintendo and DXD

Take the good with the bad, and sell both positions today.

First off, Nintendo's hype is at its peak after its official launch ended today. I don't want to become victim of buy on the rumor sell on the news. Once we find out how great sales were with the initial launch, some investors may pull out. If you bought NTDOY when I suggested it at 23, you would have a 20.75% gain. The stock is currently at 27.75 with loads of momentum investors packed in. Sorry for the ugly Yahoo chart, but Stockcharts.com doesn't have ADR stocks listed.

Time to eat our loss on the UltraShort Dow30 (DXD). The Dow wont listen to reason and I don't have the time to sit on a position losing money. I'm throwing this sucker back in the pond and finding a better opportunity. If you bought DXD when I suggested at 69.5 you would have taken a 15.68% loss, as it now trades at 58.6. I still think we are overbought, but when so many people have money sitting on the sidelines and the market is the only place they want to put it, then your going to see a lot of people paying up for mediocrity.

Have a delicious Thanksgiving.
-Chris

Huge set of updates today!

I’ve been loaded with exams and essays, but I’ve done a good amount of stock research today to do some portfolio adjustments. First, lets start with the stocks I want you to let go of.

Amgen (AMGN) has finally got something to step in the way of it’s mojo. With the democrats taking control of the house and senate, all channels of communication are saying, “Drug companies will take a hit.” Well thank you for your self fulfilling prophecy. Amgen has been slowly sliding a bit, so its time to lock in the gains. I suggested Amgen at 66 and it’s time to sell now at 72.05. I will send this one off with a 9% gain.

Aqua America (WTR) took a major jump in October, and things have gotten a bit more unpredictable lately. For the short term investor I am suggesting to lock in gains. I would NOT sell this stock if I was a long term investor. Aqua America has much room to grow, and the sell I’m suggesting today is for the trader only. I suggested WTR at 21.70 and it now trades at 24.15. Lock in this 11% gain.

Chicago Mercantile Exchange (CME) looked horrible from chartist’s perspective and sadly it still does. I can’t hold onto a short if investors don’t agree, and that seems to be the case. I suggested shorting CME on a day when the stock had a 30 point jump. This means you could have shorted the stock at the top of its range and made a profit, or got in too early and lost. I will call this one a push, even though I did end up shorting myself at 517 and the stock is now at 502. For records sake this stock has been a break-even 0% gain.

Now onto the good stuff, I found a new short sell to add to the portfolio, Netflix (NFLX). I have been waiting patiently for this stock to get high enough, and it finally has. Its last earnings report was a good one, but this shouldn’t last. The whole concept around Netflix is great. For a monthly fee, you get to receive DVDs through the mail without late fees. Wonderful if it weren’t so easily outdated. Let me give a few examples of new and future technology that will steal Netflix audience:

1. Handhelds like PSP are selling their own special DVDs
2. Microsoft will start selling hi-def through Xbox Live
3. Amazon.com will start selling downloadable movies
4. Apple is starting iTV in 2007 to download movies
5. Blockbuster’s TotalAccess is similar to NFLX but allows returns directly to stores

Even if Netflix started selling downloadable movies, the question you have to ask is “Can Netflix compete with Sony, Microsoft, Apple, Amazon, and Blockbuster?” My answer is no, not a chance.

Competitors aside, the charts look bad. This two-year chart shows a major resistance at 30, along with a lower MACD. I will be short selling Netflix in my personal portfolio.
-Chris

Stay Put For Now

No trades today, the positions suggested are all set to win this winter; with the Democrats sweeping the elections, I’m staying with the DXD position to offset potential losses. Since my objective is to make a profitable portfolio, I don’t see a reason to add or drop any of my positions just yet since they are all doing fine (minus the DXD so far, which has been acting as an insurance stock). Happy trading, and good luck out there.

Checkout this article on the election and how it affects the market
-Chris

Things Cooling Off

Time to take another look at the Dow. Charts show some bearish news, as the MACD has pulled back to levels from the 1st of October. I annotated with a dotted line where the stock price should be at. I like the fact that the Dow broke its mid Bollinger band line (previously it's support). But I don't believe that we will fall below the 50DMA. Too many bullish nuts out there.

STP is for me. There is no way around it, solar power is undervalued. This is one of the only types of power that will never go out of style. Coal emissions will only get more strict, Nuclear Plants are not wanted near cities, populations keep growing. I don't see a more viable clean, efficient, renewable energy source anywhere. Long term players should stock up on STP at these levels. The stock is about a point above the long standing support around 23. This is no time to go soft on solar. I would stock up on Monday if I didn't already today.
-Chris

Eagle Materials

For the past few months I've had my eye on Eagle Materials (EXP). This company has taken a big hit down from its 52-week high. It has had a very pessimistic sentiment because of the decline of the housing bubble. Over the course of this stock's entire life, it has had great life. It wasn't until the past 9 months that it experienced a very large jump, which was followed by a similar decline.

EXP just released their earnings today, which were pretty close to being in line with expectations. More importantly, they gave guidance for FY '07. These numbers are above analysts expectations for the most part. This should bring a much needed increase in sentiment for the company. Already in after-hours trading, the stock is up 6%. This gives us an indicator on how the market views the earnings results.

EXP knows their business a lot better than any analyst could. Analysts will raise their estimates in the coming weeks in order to make it look like they know what they're doing. These raised estimates will give the stock even more momentum.

Positive earnings reports can have an effect on stocks for months to come. A market anomaly known as Post Earnings Announcement Drift (PEAD) often times occurs. PEAD is when a stock releases an earnings surprise and the stock proceeds to drift in the same direction for the next months to come. This should happen with EXP.

EXP has reached a low point where it has shown support. Heavy buying keeps it from falling below this level. Check out the latest insider transactions. They all show strength at these levels. At these levels, it makes me believe that there is more chance of upside than downside.

The valuation of this stock looks good as well
P/E: 10.38 for EXP , 13.78 for Industry
Qtrly Rev Growth (yoy): 26.9% for EXP , 15% for Industry
Operating Margins: 28.5% for EXP , 16.66% for Industry

Lower P/E, yet higher revenue growth year over year and high operating margins? Bargain.

Watch for the trend on this one to finally shift back to positive.
-Sam

Short-term Thoughts

Amgen (AMGN) is nearing resistances so I would be a seller around 80. If you are long term, keep the stock. I just think it will be bouncing around those levels for enough time that the short-term trader could put their money elsewhere for a bit.

Suntech Power (STP) is showing some positive developments, as it has gotten above its 50DMA and has formed an attractive flag pattern. I illustrated its previous flag also.

Aqua America (WTR) is nearing resistance at its 50WMA, but has good MACD movement about to cross the zero line. Earnings come out on November 1st; the stock could get pushed down, but since most earnings have been good this quarter, I'm sticking with it.

Finally, I'm glad Sirius (SIRI) decided not to break it's only support. It gained over 5 percent today, hopefully not just a knee jerk.
-Chris

Toxic Shock

After the Cameco screw up (CCJ), I have to advise selling Liberty Star Gold Corp (LBTS) which I suggested about a month ago for the risky investor. The disruption of uranium should allow a good price to take money off the table. Also the charts show some resistance ahead. If you bought when I suggested the stock at .62 you would have made 98% on your money.

I also suggested Glencairn Gold Corporation (GLE) at .58 and it is now at .51 and I would hold off on buying more if you picked it up. These two weren't added to the picks list since they are too risky for the average investor.
-Chris