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Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
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Technically Speaking
In a surprising reversal from last week, equities rebounded quite strongly to finish the week and the month largely higher. It has been seven years since September had a positive finish and except for a largely flat Nasdaq Composite, all the large cap indexes finished in positive territory including the Nasdaq 100. The solid finish for this month is perhaps questionable though since this also marked the end of the third quarter and funds were undoubtedly busy dressing up their funds for the last quarter of the year. However, a positive end to this month is something to recognize for there were two very large catastrophic hurricanes, whose cost still has not been determined, energy costs that have risen well beyond what was considered probable and consumer data that foretold weakness in the months ahead.
Of those last points, the energy issue is
arguably the most important and affects the other two disproportionately to
other costs. The cost of destruction in the
Despite this bad news, the charts of the stock indexes are not screaming to sell shares. They are, however, warning us to tread cautiously and confirming that this is truly a stock-picker’s market sometimes called “a market of stocks” as opposed to “a stock market”. A good case in point is the Nasdaq market and tech shares in general. Here we have evidence of a subtle change in market character with the largest capitalization stocks on Nasdaq, referred to as the Nasdaq-100, performing stronger of late while the Nasdaq Composite which is composed of all stocks traded on Nasdaq has underperformed the former to the point that the Nasdaq-100 was up by more than 20 points or 1.26% in September while the Composite index was flat.
Another example of the caution to be exercised going forward is the Dow Jones average. There are three averages of the DJ: the most quoted is the thirty Industrials but there are also the DJ Transports and the DJ Utilities. With energy costs continuing to rise, it is no surprise that the DJ Utilities have been steadily rising for several months. However, the Industrials and the Transports have etched out an ominous sign of oncoming weakness. Taking their respective weekly or monthly charts from late 2003, there is a head and shoulders pattern clearly forming and we are now potentially on the second shoulder about to slide. The neckline for the DJ-30 is located around 9850.
New Buy Recommendations:
Akamai Technologies (AKAM) – This stock has been trapped in a range of roughly $10-17 since the fourth quarter of 2003 but just in the past week it showed renewed signs of life and appears set to break out finally from this two-year consolidation. AKAM finished the week with three very strong up days on the daily thus complementing a similar three strong up weeks on the weekly chart. Friday’s close also reached a new high for 2005.
Gasco Energy (GSX) – This stock is perhaps a bit speculative but with natural gas on the rise, it seems likely to rise uncommonly fast. The signal to buy was actually Thursday’s completion of a Lindahl buy however it was emphasized even further with a similar Lindahl buy signal on the weekly chart, which was completed on Friday.
Cardiome Pharma (CRME) – Arguably this issue is also a bit speculative however as in the GSX, there are fundamental reasons to like this stock. On Friday, CRME announced Phase 3 results for a drug under development that would be used to stop irregular heart rhythm and these results achieved the desired endpoints. Despite the short history available, the daily chart has been strengthening since the beginning of July and the weekly has a Lindahl buy signal from last week. On Friday, the day of the announcement, the stock had a significant gap higher and demonstrated that the direction of least resistance was up.
New Short Sales
None.
Stock Positions to Sell/Exit:
None.
Portfolio Comments:
New stops have been added to the list while others have been modified. Those that have blanks, are being carried unstopped for now. Please see our complete list of stops in the table below.
List of Current Stock Recommendations:
Action Ratings. The following is the legend for designating immediate action
for our stock recommendations. The first is B, meaning the stock is timely
to buy but the case for doing so right here is not overwhelming. Either the
stock may have gotten ahead of itself and may be vulnerable to a retracement or
else the stock has been performing disappointingly but may simply be
regrouping. B+ and B++ indicate stocks for which there is a technical case
to buy now, with plusses adding weight according to how many there are, up
to a maximum of two. Stocks rated H are ones to hold, awaiting confirmation
to buy more or to sell. SELL, of course, means what it says. It seldom pays
to override this designation. In the case of stocks held short, the rating is S
where positions should be retained. S+ and S++ indicate stocks for which there
is a technical case to add to the positions with plusses adding weight similar
to long positions. The maximum number of plus signs is 2.
N.B. There are no longer restrictions on foreign stocks held in Canadian retirement savings accounts.
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
|
Am Sci & Eng Inc |
ASEI |
49.25 |
65.59 |
58.35 |
B
|
|
|
Autodesk Inc. |
ADSK |
40.22 |
46.44 |
|
B
|
|
|
Humana |
HUM |
36.30 |
47.88 |
42.50 |
B |
|
|
Nvidia |
NVDA |
30.05 |
34.28 |
|
B
|
|
|
Pacificare Health |
PHS |
62.60 |
79.78 |
75.00 |
B |
|
|
Precision Drilling |
PDS |
41.50 |
49.20 |
46.00 |
B |
|
|
Qualcomm |
QCOM |
42.48 |
44.75 |
|
B |
|
|
Transcanada Corp |
TRP |
21.34 |
30.55 |
27.50 |
B |
|
08/15/05 |
Websidestory |
WSSI |
16.74 |
17.72 |
|
B |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price