Sunday, February 17, 2008

A Dozen Doubles

Well, some say we are in a bear market, who knows for sure? In my opinion the markets are in the process of making a significant low, it is a process not a point. A general glance at individual stock charts is sobering, most have been in stiff downtrends for over a year, that’s when the "bear market" happened though people seem to be noticing it just now, how odd.

It seems to me that prices have declined enough to create opportunities. I made a few mods to my charting program so it would draw a horizontal line at a double from today’s closing price and took a look at a lot of charts. Generally I was looking for situations where the stock price could double by just returning to a previous support/resistance level and not necessarily a new high, something achievable without a rampantly bullish market. The following dozen stocks are ones I have been watching. There are obviously a lot of others I missed because I am not aware of them, I'm always open to new ideas.

NASDAQ:HOTT – Hot Topic Inc
Market Cap: $252.36M
Shares Out: 43.59M
HOTT - Yahoo Profile
"Teen specialty retailer Hot Topic Inc. on Wednesday backed its fourth-quarter profit guidance after posting a January same-store decrease that wasn't as bad as Wall Street expected.[AP]

NYSE:CHS – Chico’s FAS Inc
Market Cap: $1.77B
Shares Out: 176.15M
CHS - Yahoo Profile

NASDAQ:DROOY – DRDGold Limited ADS (South Africa)
Market Cap: $407M
Shares Out: 37.61M
DROOY - Yahoo Profile
One of the oldest miners around DRD has had its share of bad luck, poor management and lousy stock performance. While the SA mines are old and expensive to operate, with the current gold price hovering in the $900 area, DRD stands to finally turn a profit ($0.50??)in 2008. The stock reverse split 1/10 in 2007 and the smaller float makes the shares zippy for trading.

Market Cap: $906.62M
Shares Out: 236.72M
GSS - Yahoo Profile
Golden Star digs up the glittery stuff.

NASDAQ:SIMG – Silicon Image Inc.
Market Cap: $375.61M
Shares Out: 84.22M
Total Cash Per Share (mrq): $2.965
SIMG - Yahoo Profile
Silicon Image, Inc. is a global leader in driving the architecture and semiconductor implementation for the secure storage, distribution and presentation of high-definition content in the consumer electronics, personal computing, and mobile device markets.

NYSE:RT – Ruby Tuesday, Inc.
Market Cap: $399.22M
Shares Out: 51.71M
Worrisome: Total Debt: $591.74M
RT - Yahoo Profile
Ruby Tuesday, Inc., operates casual dining restaurants under the Ruby Tuesday brand name in the United States and internationally. As of June 5, 2007, the company owned and operated 680 restaurants; franchise partnerships operated 154 restaurants; and traditional franchisees operated 45 domestic and 54 international restaurants. The high level of debt may be a problem if sales fall enough to impair the debt service. On the other hand, insiders have been buying.

Market Cap: $957.10M
Shares Out: 56.23M
SOLF - Yahoo Profile
SOLF has a large short interest, I think this is primarily held as a hedge against the recently issued convertible [at $19.13] bonds. The company is experiencing very rapid revenue growth and is a potential big winner. Volatile ;-)

NASDAQ:DSTI – Daystar Technologies
Market Cap: $119.11M
Shares Out: 32.46M
DSTI - Yahoo Profile
The company develops a thin-film solar cell based upon the copper-indium-gallium-selenide semiconductor material system, known as CIGS. Its products include TerraFoil, a metal foil solar cell…

NASDAQ:EGLS – Electroglas Inc.
Market Cap: $46.64M
Shares Out: 26.35M
EGLS - Yahoo Profile
Electroglas, Inc. supplies semiconductor manufacturing equipment and software to the semiconductor industry worldwide. The company offers automated wafer probing equipment and related network software to manage information.

NASDAQ:EGLT – Eagle Test Systems Inc.
Market Cap: $275.46M
Shares Out: 22.97M
EGLT - Yahoo Profile
Eagle Test Systems, Inc. designs, manufactures, sells, and services automated test equipment for the semiconductor industry.
"Microchip testing company Eagle Test Systems Inc. said late Tuesday it expects fiscal second-quarter profit between 17 cents per share and 24 cents per share on revenue between $30 million and $34 million"[AP] EPS should be around a buck a share.

NASDAQ:VLNC – Valence Technology Inc.
Market Cap: $291.03M
Shares Out: 113.68M
VLNC - Yahoo Profile
Valence Technology, Inc., engages in the commercialization of phosphate-based lithium-ion rechargeable battery technology, known as Saphion.

Market Cap: $236.22M
Shares Out: 60.41M
DYAX - Yahoo Profile
Dyax Corp., a biopharmaceutical company, engages in the discovery, development, and commercialization of biotherapeutics for oncology and inflammatory indications. It uses drug discovery technology, known as phage display, to identify antibody, small protein, and peptide compounds for clinical development.
Dyax Corp. has sold Sanofi-Aventis SA rights to develop antibody drugs for a potential $500 million in license fees and milestone payments.

Some other issues which I didn't include because the charts didn't quite look ready were: MOSY, JDSU, RFMD, and NTWK. Also I decided not to include issues from the financial sector, although IMB, ABK and MBI look like they could easily double if they don't go belly up first.

Disclaimer: I trade the 10 minute chart, holding for two to five days max. I may have a long or short trading position in any of these issues at any time. I am currently holding a small long term position in DROOY.

Sunday, February 10, 2008

NYSE McClellan Oscillator - 2/8/08

There's not a whole lot to say here, the MCO is at a point of indecision near the zero line, it (and the markets) could go either way :-) As that great sage said, "the markets will fluctuate."

From the bullish point of view, it would probably be better if the next short term move was down. This could complete a retest of the recent lows and IF the 10% component of the MCO stays above -500, everything would be hunky-dory.

If we see a rally next week it could take the MCO back into overbought territory. The outcome of this would depend again on the 10% MCO component: if the 10% index goes above +500 it is a bullish indication the market will continue moving higher after any overbought correction. This may not occur at this point and after a stab higher the markets could pull back to retest the lows.

The Summation Index at the bottom of the chart is an intermediate term timing indicator. The summation index is the sum of the area under the MCO indicator, ir rises when the MCO is positive and declines when the MCO is negative. Since it is a sum, when it is above the zero line, it indicates that the markets, (as measured by the A/D issues) are have a positive bias and are rising when viewed from an intermediate term perspective. When the Summation index is below zero, the general trend is down. While the Summation Index is currently above the zero line and rising (because the MCO is positive) it is not really a clear indication for the intermediate term. The Summation Index could easily turn negative here in a period of a few days.

In short, this is a traders market.I do feel it is a reasonable buying opportunity for selected issues where one has done the proper due diligence and can stomach the possibility of short term price volatility

Thursday, February 7, 2008

NYSE:BID Sotheby's - Buy, Sell or Hold?

Southby's, milking the art craze for all it's worth but its stock is getting knocked around a bit in the process. The chart looks a bit daunting after a nasty four month decline which trimmed a cool 40% off the recent high price of $61.40. I suppose we could ask ourselves, "Is the party over, is the art market going bust like it did in 1990's?"

Sotheby's, NYSE:BID Weekly Geometry

For a moment, it did look like that might be the case, but the central banks now seem to be falling all over themselves to lower interest rates. Of course, the charge was kicked off by Generous Ben of the FED and it appears like everyone else wants to get in on the party. So, what does this have to do with art? My hunch is that fine art and collectables (that other junk Sotheby's auctions) is being seen as a store of value, like gold but more fun to own.

The weekly chart for BID looks like a lot of other stock charts which were trashed in the recent decline. Volatility reigns and brown pants are back in fashion on wall street. So what are we going to do, curl up in a ball and wait for it to feel safe again?
Some of that money sloshing around is going to find its way back into the stock market (actually quite a lot of money will end up there) and some of it will slop back into the art market.

So I say, Sotheby's stock is forming a bottom right here in the mid-thirties. A move above $38 would reestablish the upward trend and suggest a retrace back to the old highs at sixty dollars. One little issue, the bottom is not quite complete timewise. I've marked on the chart what I think the MACD must do to confirm a bottom, this upward curl will take about four chart bars, four weeks. So there is no reason to chase the stock, but if one is interested in buying paper that appreciates instead of fine art itself, BID might be a decent choice

@ $28-$32 STOP: @ $26 Target: $60-$80

At the time of this post, I have no position, Long or Short in BID.