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Stocks rebound for the week
Technically Speaking
Equities rebounded strongly last week finishing higher each session with the Dow Jones and S&P 500 leading the parade reaching levels not seen since May. The mere fact that these indexes traded higher for five consecutive days was noteworthy given the rarity of its occurrence. The Nasdaq markets, both the Composite and the ND-100, followed the broader markets higher but refrained from marking equivalent new highs, settling instead for levels not seen since late June or early July.
In the case of the “old” Dow Jones average, this rise exhibited remarkable strength as trading volumes increased each session of last week. This effort was not duplicated by the other markets however where volumes increased for the first three days of the week before settling back on the last two. Nevertheless on all markets, the August lows now appear to be the technical limits for retracement and these will be the key levels to watch and to be tested as we move into the autumn when most analysts would expect the 2006 lows to occur.
Interestingly, on charts for both the S&P and the DJ, a clear double-bottom is formed by the lows of June and July, which is something not visible in the tech sector as described by Nasdaq where July’s low is significantly below that of June. We have often considered that a tech-led rebound would be more reliable than a non-tech rebound because we live in a world that relies heavily on technology however with the collapse of the Nasdaq market since 2000, we may be witnessing a slow process of change or evolution where an assortment of other industries lead stock markets and the tech sector is left to follow.
New Buy Recommendations (in order of preference):
Nu Horizons Electronics (NUHC) – This semiconductor chip distributor has watched its sales and profits ramp up in the past few months mostly as a result of its major rival being swallowed by another causing worried customers to search out alternative suppliers in order not to be unduly affected by the increased concentration of distributors. The positive effects were immediately felt both on the bottom line of NUHC and in its stock price. Fri’s close was another new high for the year and was remarkable for the extraordinarily strong volume. Plus last week completed a Lindahl buy signal on the weekly chart. Its share price is now higher than it’s been since early 2001. Ideally, we’d like to enter the trade at a lower price however we are not sure that would be possible.
Brush Engineered (BW) – This stock missed closing at a new high for 2006 on Fri by two cents. Nevertheless, this week’s price action was informative as it confirmed last week’s powerful move higher and added emphasis to the Lindahl buy signal in place on the weekly chart. Clearly for BW, the $22 level has become the floor price for any retracement now.
New Short Sales
Caterpillar (CAT) – Similar to the price
action of US Steel (X), Caterpillar has been on a downtrend of late after
peaking earlier this year. With housing starts in the
Stock Positions to Sell/Exit:
We were exited from short positions in EBAY and RHAT this week as the latest rebound strengthened.
US Steel was boosted last week on brokerage upgrades as well as benefiting from the rebound in stock prices however we do still believe that the major direction remains down despite those actions. As a cautionary move, we apply a tight stop to prevent a greater loss.
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 |
|
07/03/06 |
Seabridge Gold |
SA |
12.11 |
12.64 |
11.00 |
B
|
Short Sales:
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
07/10/06 |
Ebay |
EBAY |
26.92 |
26.00 |
26.00 |
Covered |
|
07/10/06 |
Getty Images Inc |
GYI |
57.60 |
45.84 |
50.00 |
S
|
|
07/24/06 |
Red Hat Inc |
RHAT |
23.37 |
25.50 |
25.50 |
Covered |
|
08/13/06 |
US Steel Corp |
X |
57.08 |
60.27 |
62.00 |
S
|
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price