Archive for March, 2005|Monthly archive page
Welcome to this week’s edition of The Growth Stock Report!
The holiday shortened week brought more selling to the picture, and we’ve seen some price action that indicates it might only get uglier.
Keep it in perspective that stock market tops are often a process that can take months to play out. There is nothing wrong with doing nothing with your portfolio.
As the great trader Jesse Livermore (who is presumed by many to be the subject of Edwin Lefevere’s “Reminiscences of a Stock Operator”) supposedly said:
“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that?”
Our current position:
In this week’s edition you will find:
- Where We Are
- What We Like
- What Was Important About Last Week
- What We Are Watching For This Week
- This Week’s Scans
- A Word On Discipline
Taking a look at the overall markets:
Long-term trend lines are in play. When long-term trendlines are broken it is usually a sign that bigger things are going on in the markets.
Where could things turn around?
Our answer is – How would we know? These levels are next in line to the downside:
We have Dow support at 10,380 area where a long-term trendline would be tested. And S&P 500 support around 1,170, which is also parked at critical trendline. Nasdaq support is found around 1,974 where it will come into a confluence of levels and a key long term trendline as well.
Key chart action:
Charts courtesy of Stockcharts.com.
The Semiconductor Index ($SOX) posted a modest gain for the week.
The Banking Sector ($BKX) had a heavy sell-off for the week after breaking a longer term trendline.
The Broker Dealer Index (XBD) remains within a trading range.
The Internet Sector ($IIX) broke its long term trendline.
Energy (IXE) put in a modest rally for the week.
Volume indications continue to illustrate an environment of institutional selling.
Leadership: The top 10 industry groups from the 6 month RS screen are:
- CONSUMER SERVICES
- TEXTILE MANUFACTURING
- HEALTH CARE PLANS
- GROCERY STORES
- INTERNET INFO PROVIDER
- RUBBER PLASTICS
- LONG-TERM CARE FACILIT
- INVESTMNT BROKERAGE-RE
New Highs: The number of New Lows perked up for the week as New Highs tapered off.
We continue to see nothing worth buying at this time.
We are seeing some things that are encouraging as new highs were made with AFFX, CMTL, GPN, HANS, LCAV, PNRA.
Energy is in pullback mode. As long as we continue to see our positions from this sector hold up we’ll stick it out. We want to see volume dry up to indicate selling pressure is exhausted.
Healthcare and Drug stocks have held up well in recent selling. From a technical perspective we believe there is potential here, though are not going to make any commitments just yet.
Action from our open positions:
KCS – KCS Energy fell apart on us and we’re out of it. We were able to nab a 20% gain on half a position so no complaints here.
STO – Statoil succumbed to selling pressure for the week though is still technically alive. This one came within a shade of our 20% profit target and we recommended ringing the cas register in anticipation of selling. We want this one to stay above its 50-day moving average of 16.77.
XTO – XTO energy slid south like the rest of the energy stocks, and we’re still in it after taking a 20% profit with half a position.
MUSA – Metals U.S.A. has been consolidating. We still like it despite not having hit a profit target. We’ll exit half a position if it reaches our buy point of , and perhaps hold on to our other half if it stays above a 2% loss mark of 18.72. Any sever weakness from the metals sector will force us out before any loss is registered. After STLD’s knock out last week remain very cautious of the sector.
PMTI – Palomar Medical technologies is vulnerable to further selling. This is now considered by us an aggressive long, or in other words don’t be surprised to lose on this one. BUT, if it can stage a turn around around its 50-day moving average its upside could be stellar. A re-entry into the position may come in play going forward – it’s hard to say.
- The Federal Open Market Committee raised its target for the federal funds rate, by a quarter of a point to 2.75%. It was the seventh such increase since last June.
- The Bureau of Labor Statistics said its consumer price index rose 0.4% in February, beating economists’ estimates.
- Internet company Yahoo! (YHOO) said it intends to spend up to $3 billion on its own outstanding stock. At its current price the purchase would buy around 97 million shares.
- General Electric (GE), raised its first-quarter profit estimate to between 37 cents and 38 cents a share, previous estimates were for 36-to-37 cents. GE is the largest U.S. company.
- Defense contractor Northrop Grumman (NOC) raised its full-year earnings forecast to between $3.60 and $3.75 a share. Previous estimate were between $3.45 and $3.60 a share.
- Entertainment giant Sony(SNE) released its PlayStation Portable. The handheld device plays games, movies and music and can display digital photos, be connected to a computer, or communicate with other PSPs wirelessly. The product sells for $249 retail.
- Shareholders approved Kmart’s (KMRT) $12.3 billion merger with Sears (S), to create the third-biggest U.S. retailer behind Wal-Mart (WMT) and Home Depot (HD).
- New-home sales rose 9.4% for February to a seasonally adjusted annual rate of 1.226 million. This is the biggest gain in more than four years, and reverses a steep decline for January. Despite rising interest rates, the housing market has not showed signs of a decline.
- Unemployment claims rose to 324,000 last week, to make it the third straight week above the 320,000.
- Mutual fund group Pax World Funds, a fund specializing in only socially responsible companies, sold $23.4 million worth of Starbucks (SBUX) shares because of the marketing of a coffee-flavored liqueur with Jim Beam. The fund liked Starbucks using “fair-trade” coffee, though drew the line when it came to booze.
- Blockbuster (BBI), the No.1 movie-rental chain, failed to close a hostile tender offer for Hollywood (HLYW) which is the No. 2 chain by revenue. The offer’s deadline passed Thursday, ending its bid.
Key earnings releases:
- MONDAY: none
- TUESDAY: Biogen (BGEN), Genzyme (GENZ), Apollo Group (APOL)
- WEDNESDAY: Best Buy Inc. (BBY), Circuit City Stores (CC), Health Management Assoc. (HMA), Veritas (VRTS)
- THURSDAY: Aetna Inc. (AET), Citigroup Inc. (C), Merck & Co. (MRK), Redhat Inc. (RHAT)
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: none
- TUESDAY: Consumer Confidence
- WEDNESDAY: GDP (Q4f, 2004)
- THURSDAY: Factory Orders, Jobless Claims, NAPM Chicago
- FRIDAY: Construction Spending, Consumer Sentiment, Emloyment Situation, Motor Vehicle Sales, ISM Mfg. Index
SOON TO BE UPDATED!
SETUPS: AMHC, ARO, ISSC, OMM, OSG, RAH, REM, TNP
BASES: ALDN, EXP, LSCP, MTLM, RRGB, THX
This Week’s Word On Discipline:
“No evil propensity of the human heart is so powerful that it may not be subdued by discipline.” — Seneca
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