Major Market Indices for June 25:
Dow -100.37 10504.22
Nasd 16.03 2050.87
S&P -6.75 1218.60
Rus2K -4.46 484.19
30YR 0.07 55.87
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Today's Trading Plays
* Possis Medical, Inc. (POSS), $11.97 (BUY LONG)
Possis Medical, Inc. is a developer, manufacturer and marketer of
medical devices. The Company's products include the AngioJet Rheolytic
Thrombectomy System, the Perma-Seal Graft, the Perma-Flow Coronary
Bypass Graft, and the ePTFE Synthetic Vascular Graft. The Company is
currently focused in the further development and marketing of the
AngioJet system. The Company markets this system to interventional
cardiologists, interventional radiologists, vascular surgeons, and
also to physician specialty groups, including vascular, cardiovascular
and thoracic surgeons in the United States and in other countries.
Trading Strategy:
Medical equipment stocks are one of the few sectors in the markets that
has maintained a bullish bias. POSS is one of the best looking stocks
in the entire group. The stock has been moving higher in a series of
"stairsteps", where the stock makes a sharp move up, then bases side-
ways for a week or two. The stock appears to be moving in another
of these sideways moves around the $12.00 level. I think we can
buy in here in anticipation of the next move up with I hope will be
good for 15% or so.
Buy Range: Buy at the open on Tuesday
Sell stop: $11.25
Target: $13.75
Average Daily Volume: 105,700 shares.
Monday's Volume: 101,800 shares.
* Integra LifeSciences Corp (IART), $19.50 (BUY LONG)
Integra LifeSciences Holdings Corporation develops, manufactures and
markets medical devices, implants and biomaterials. The Company's
operations consist of Integra NeuroSciences, which is a provider of
implants, devices and monitors used in neurosurgery, neurotrauma and
related critical care, and Integra LifeSciences, which develops and
manufactures a variety of medical products and devices, including
products based on the Company's proprietary tissue regeneration
technology that are used to treat soft tissue and orthopedic
conditions. The Company manufactures and markets a multi-line offering
of neurosurgical devices used for brain and spine injuries. The
Integra LifeSciences Division develops and manufactures tissue
regeneration products and surgical products that are primarily sold
outside of neurosurgery and neurotrauma. Many of the products of
Integra LifeSciences are built on the Company's expertise in
resorbable collagen products.
Trading Strategy:
Like POSS, IART is a strong stock in the medical equipment and supplies
sector. The stock has been forming a nice pennant type pattern that is
trending just above the 13 day EMA. Twice in the past few weeks the
stock has reached $20, only to be turned back. We'll SET A BUY STOP
ORDER AT $20.15 to buy in only after the stock has shown it can clear
the $20 level. Once it takes out that resistance, I think it can go
to $23.00 with little effort. Perhaps even more...
Buy range: Use a buy stop order to buy at $20.15. Avoid the stock
at lower levels.
Sell Stop: $18.75
Target: $23.00, short term. We may adjust this higher, depending on
volume, etc.
Average Daily Volume: 141,800 shares
Monday's Volume: 388,700 million shares
* Celestica, Inc. (NYSE:CLS), $44.27 (SELL SHORT)
Celestica, Inc. is a provider of electronics manufacturing services
(EMS) to original equipment manufacturers worldwide. Celestica
provides a wide variety of products and services to its customers,
including the manufacture, assembly and test of complex printed
circuit assemblies and the full system assembly of final products,
primarily on a build-to-order basis. Celestica's broad range of EMS
services includes design, component selection and procurement,
prototyping, product assurance, assembly, test, failure analysis,
full supply chain management, worldwide distribution and after-sales
support. Celestica complements its EMS services by providing memory
and power products to its customers.
Trading Strategy:
CLS is in the electronics equipment manufacturing sector which has been
weak lately in a series of earnings warnings and downgrades, most recently
in Sanmina (SANM). CLS has fallen out of a head and shoulders top pattern
and has rallied back up to its 13 day EMA where the stock formed a doji
pattern today. A doji forms when a stock opens and closes at nearly the
same level. It open marks the end of a short term move in a stock. In
this case, I'm hoping the doji marks the end of the bounce that the
stock experienced after falling below $40 recently. I like this
short sale because we can place a fairly tight stop loss buy at just
above the 13 day EMA, which is now acting as resistance.
Sell Short Range: Sell Short at the open on Tuesday.
Buy Stop: $46.25
Target: $35.00
Average Daily Volume: 2.9 million shares
Monday's Volume: 2.2 million shares
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Update of Current Positions
TEK (opened short on 6/15): TEK was down about 1/2% today on light
volume. No changes. Our target remains at $18.25 and our stop loss buy
at $25.75. HOLDING SHORT.
IPIC (opened long on 6/18): IPIC rallied intraday to trigger our
target price at $9.75. POSITION CLOSED FOR 16.7% GAIN.
IMNY (opened short on 6/19): IMNY was down about 6% today on the
heaviest volume in over a week. No changes. Our stop loss buy remains
at $18.25 and our target remains at $14.00. HOLDING SHORT.
WPI (opened long on 6/20): WPI pulled back slightly today on light
volume. No changes. Our target remains at $69.00 and our stop loss
sell remains at $60.00. HOLDING LONG.
MRVL (opened short on 6/20): MRVL was down another 2% today on very
light volume. Our short here is up over 16% so I'm MOVING THE STOP
LOSS SELL DOWN TO $20.60 TO PROTECT OUR GAINS. Our target remains at
$15.00. HOLDING SHORT.
NTEC (opened long on 6/21): NTEC was down fractionally on Monday on
very light volume. No changes. Our stop loss sell remains at $36.00
and our target remains at $45.00. HOLDING LONG
INRS (opened short on 6/22): INRS was down fractionally on the day
as volume picked up a bit. No changes. Our target remains at $26.00
and our stop loss buy remains at $35.00. HOLDING SHORT.
CSTR (opened long on 6/22): CSTR was down about 1% today on better
than average volume. No changes. Our target price here remains at
$23.00 and our stop loss sell remains at $18.75. HOLDING LONG.
MERQ (opened short on 6/22): MERQ dropped nearly 4% today adding to
our gains in this trade. Our target price here remains at
$41.00 BUT I'M MOVING DOWN THE STOP LOSS BUY TO PROTECT OUR GAINS.
STOP LOSS BUY RESET TO $57.60. HOLDING SHORT
CRGN (opened short on 6/22): CRGN dropped over 4% today. No changes.
Our stop loss buy remains at $40.00 and our target price
remains at $29.00. HOLDING SHORT
RSCR (opened long on 6/25): RSCR gapped up at the open to fill our
order at $7.25. The stock finished the day down slightly at $7.16.
No changes. Our target remains at $9.00 and our stop loss sell remains
at $6.50. HOLDING LONG
BRCD (opened short on 6/25): BRCD gapped up at the open to fill our
short sale at $38.19. The stock closed down over 3% on the day at
$36.04. No changes. Our stop loss buy remains at $40.50 and our target
remains at $25.00. HOLDING SHORT.
LRCX (opened short on 6/25): LRCX opened at $28.55 filling our short
sale order at that level. The stock closed 3 cents lower at $28.52.
No changes. Our stop loss buy remains at $30.00 and our target price
remains at $22.50. HOLDING SHORT.
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Today's Trading Tidbit
Using a Trading Oscillator
In technical analysis there are trending indicators and there are
oscillators. Trending indicators (like MACD and exponential moving
averages) indicate the overall trend that a stock is in. Depending
on what time frame you look at, the indicator may suggest a downtrend,
a bullish trend, or even a bullish rally in a downtrend.
Oscillators, unlike trending indicators, do not indicate the direction
or strength of the trend. Oscillating indicators (like the stochastic
and the Williams %) measure if a stock is "oversold" or "overbought".
The oscillator compares the current price of a stock to its trading
range in the recent past.
Oscillators are most useful for stocks or indices that are trading
sideways. Often a stock which is forming a base or a consolidation
area will change direction just as the stochastic reaches oversold
or overbought. Oscillators are great trading tools for stocks trading
in a range as well.
Oscillators can be used in conjunction with trending indicators to
offer a good entry point for overbought stocks in a downtrend (short)
or oversold stocks in an uptrend (long). A general rule is to look for
a stock in which one of the trending indicators (like MACD) is
positive. Watch the stock and wait for the oscillator to go into
oversold. Make your buy at this point. Its important to watch the
MACD however to make sure its not peaking or rolling over, if you use
this method.
One final note on oscillators. Don't try to use an oscillating
indicator by itself on a trending stock. Its a good way to get burned.
Stocks in a downtrend can remain technically "oversold" (according
to the stochastic) for literally weeks at a time. Stocks in a strong
uptrend can max out the stochastic into "overbought" territory
for weeks as well.
Oscillators are powerful technical tools. Like all technical
analysis, its only useful if applied in the proper situation.
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After-Hours Activity
Semiconductor stocks were trading mostly lower in the after hours
session after yet another communications chip maker warned that
earnings won't live up to expectations for the quarter. This time it
was Applied Micro Circuits (AMCC) which cut revenue projections nearly
in half and projected a loss of 4 to 6 cents a share for the quarter.
Analysts were looking for break even to 2 cents in profit. If that
news wasn't enough, the company issued this dire statement:
"Current business conditions continue to be very poor....
The magnitude of this downturn is greater than we or our customers
anticipated, and the progress in reducing excess inventory in the
channel appears to be slower than they originally thought."
AMCC was trading down about 8% on that news, while PMCS was off about
5% in sympathy. Also trading lower were VTSS, INTC, and XLNX as well.
In other news, Cheap Tickets (CTIX) was down over 37% after the company
issued an earnings warning in which it blamed a technology glitch
that effected online bookings and sales. OUCH!
In the positive corner were shares of Zixit Corp (ZIXI) which announced
that its "ZixMail" application plug-in is now available for Lotus Notes.
Apparently that news was enough to run the stock up over 20% in after
hours trading.
Shares of the Nasdaq 100 trading stock, QQQ were down about 0.5% in
after hours trading, pointing to a slightly negative opening for the
Nasdaq in the morning. Of course alot can change between now and then.
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Trading Outlook
The markets were mixed on Monday as the Dow Industrials and S&P 500
both closed solidly down while the Nasdaq managed to close up about
16 points on a late day rally which pulled the Nasdaq back from
a negative close.
The Dow Industrials were hurt by a broad round of selling that saw
24 of the 30 Industrials down on the day. On the positive side
were INTC, KO, MSFT, HWP, MO, and UTX. INTC was the strongest stock
on the Dow Industrials today as the chip sector rallied today after
a few days of closing lower. Hurting the Dow were GE, EK, HD and CAT,
all of which lost over 3% on the day. Dow financial stocks JPM, C,
and AXP were also down on the day. Its interesting to see the financials
pulling back with the Fed meeting only a day or two away. The Fed
rate cut is considered a "given", with the only question being its
size. Financials should, in theory, be helped by lower Fed funds
rates. Even so, the large banking and financial stocks appear to be
trending lower.
The Nasdaq's gains today came about largely as a result of strength
in the internet and internet related stocks. YHOO and Internet ad firm
DCLK were both up over 12% on comments from an analysts that the internet
ad market may be strengthening. Other internet and internet infrastructure
stocks rallied in sympathy, including CSCO, INKT, VRSN, EBAY, AMZN,
and RNWK. Despite today's rally, I'm not all that excited about buying
the internet stocks and I even considered adding the Internet Sector
Tracking stock (HHH) on our list as a short sale. The Internet Index
(IIX) appears to me to have formed a head and shoulder top pattern
and it would seem that tomorrow would be a good time to open a few
shorts in that sector. I do feel, however, that we're already
well represented on the short side with our current picks, so there's
no need to add any right now. My point is simply that I don't think the
rally in the internet stocks has much left in it.
The Nasdaq, while finishing up today, did manage to form a "doji"
pattern which may signal that the recent rally up from the 1950
area may be coming to an end. The doji forms when a stock or index
opens and closes at basically the same level. For the Nasdaq,
the opening today was at 2054 and the close was at 2050. The
downtrending 13 day EMA is providing resistance at 2075 and
this is the area the Nasdaq will need to breakthrough if its
going to continue to rally. In any case, the market does appear
to be setting up for a big move of some sort, probably after the
Fed meeting. Right now, I would think that the move will be to
the downside, but you never know when the Fed is involved.
In any case, we're still trading some breakout on the long side.
IPIC turned in a strong performance last week and today gaining nearly
17% for us on the long side. Shorts are working well also. The key
now is to remain flexible and to maintain discipline when it
comes to our stop losses and our target prices. Making money
in the current market is possible, but it does require discipline.
It'll be interesting to see what the market does with the AMCC
warning tomorrow. Will we gap down, then reverse to close higher
on the day? Or will the market simply shake off the news and
trade sideways? With the Fed meeting so close, I don't expect much
of a move one way or the other tomorrow. Of course the market has
a funny way of surprising us all.
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