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Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
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Technically Speaking
Looking at stock indexes, we continue to believe that the operative word here is “up” since that is simply the direction that prices are heading for the moment. As we mentioned last week, all the major large cap indexes are heading for Lindahl buy signals on the monthly charts, which is naturally strong support for our bullish stance on equities. The fact that there is a buy signal setting up on the monthly charts is a tremendous sign for stock investors who prefer the long side for the chances of a sudden abort in individual shares is drastically reduced, though as we saw in Biovail this past week, it isn’t a foolproof method.
The buying parade is still being led by the tech sector represented by the Nasdaq market. The ND Composite is flying higher than anytime since mid-2001 and though we aren’t counting on revisiting the heights of the year 2000, we still can enjoy the strong support that it offers especially since most of our recommendations lie in the tech sector. The weekly chart is also found to be interesting for clearly the compressing pennant formation and new break higher indicates that we will be advancing much further. The ND-100, the index composed of 100 of the largest traded shares on ND, is no longer the laggard that it was several months ago when it trailed gains on the larger Composite index. Similar to the Composite, the weekly chart has developed a definitive break from the previous consolidation that endured for over a year and a half.
Of the broader indexes, the S&P 500 attained a new high for 2005 on Friday finally taking out the high from August. This development advances the notion that this bullish activity is widespread and although the broader markets lag the tech sector in general, there remains a general consensus that the upward swing will be sustained. On the weekly chart, we see that the break from the one-year consolidation is less definitive but it is there nonetheless.
The Dow Jones Industrials is truly the laggard in these indexes and considering that GM had started the year at over $40, it is perhaps not too much of a stretch to understand why the DJ has yet to generate a new high for 2005. In order to mark a new high, it would need to reach the 11K level – a mere 230+ points above its current price.
Regardless of the price action in the indexes, the facts remain that not all sectors gain at the same rate, at the same time. And this time is no different. Many of the energy sector stocks are currently feeling the chill of much lower energy prices and many housing stocks are being pressured by the rise in interest rates and disinclination toward home purchases to give just two examples. But careful analyses can uncover those gems where buyers are heading to most often and will likely benefit far greater from price appreciation than the average stock.
New Buy Recommendations (in order of preference):
Broadcom Corp (BRCM) – This chipmaker specializing in broadband functionality is benefiting from solid chart action on all three levels: daily, weekly, and monthly. The gap in July on the daily marked a new level for the share price and it proceeded to consolidate within a relatively tight price range at that point. Now it is has begun to step out of that range with its move on Friday when it broke above the $48 level. At the same time, on the weekly chart, price broke above the high reached in 2004 and on the monthly chart, the high from 2002 is about to fall. Lastly, it was notable that on Nov 9 when they held their analyst day, price jumped over 7%.
Sigma Designs (SIGM) – Sigma is involved in digital media technologies and convergence of computer technologies into consumer electronics. The reason for the recommendation here is similar to the one for Broadcom inasmuch as the charts are similar. On the daily, Friday’s large gap higher on increasing volume pushing price to a new high for 2005 was the key. But also the weekly chart was equally notable for price reached a high not seen since very early in the year 2000.
American Science & Engineering (ASEI) – There are times when we feel the necessity to recommend a stock that we recently exited from. This is one of those times. ASEI gapped higher on Nov 9 upon the release of their quarterly results and after some consolidating action appears to have resolved itself to moving higher still. Though it has progressed rapidly and gained tremendously in dollar terms, the small float ensures that price will continue to move higher. Business continues to draw in customers for their security products and the last quarter’s net income was $0.93 proving that earnings are coming their way in this rapidly growing company.
Omnivision Technologies (OVTI) – This company makes chips for cell phones and is particularly known for its image sensor chips, which in laymen’s language is the chips used to take pictures for camera phones. Perhaps this is a turnaround story for the chart has been taken down hard over the past several months and looking at the monthly chart, we have the inclination that we might be jumping in too early. Nonetheless the monthly does have that one very large price bar in the current month that surpasses every month going back to the beginning of spring. On the daily chart, Thursday’s performance setting up Friday’s gap higher is instrumental in deciding on whether to recommend it. Friday’s move pushed price up to a level not seen since March and carried beyond two island tops in the period since. Furthermore on the weekly chart, the downward moving trendline was broken this week as it moved higher and this happened on increasing volume.
New Short Sales
None.
Stock Positions to Sell/Exit:
Akamai Technologies (AKAM) – We recommend selling AKAM only because its share price appears constrained by the decision at the beginning of the month to sell more shares and dilute the share capital. The chart remains favorable to a positive resolution of the current consolidation however we believe this dilution has delayed that inevitable break out by one or two quarters and there is simply no reason to tie up capital for that long.
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 |
|
|
Akamai Tech |
AKAM |
15.96 |
16.99 |
15.00 |
SELL |
|
|
Biovail |
BVF |
25.69 |
26.45 |
22.05 |
SOLD |
|
|
Birch Mtn Resour. |
BMD |
6.65 |
7.19 |
|
B+
|
|
|
Capstone Turbine |
CPST |
3.16 |
3.65 |
3.50 |
B
|
|
|
Plexus Corp |
PLXS |
20.15 |
20.30 |
|
B
|
|
|
Qualcomm |
QCOM |
44.83 |
45.93 |
|
B
|
|
|
Redback Networks |
RBAK |
11.78 |
13.24 |
|
B
|
|
|
Tom Online |
TOMO |
20.66 |
21.31 |
|
B+
|
|
|
Transcanada Corp |
TRP |
21.34 |
30.13 |
27.50 |
B |
|
|
Viasat Inc |
VSAT |
27.43 |
26.67 |
23.00 |
B
|
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price