Stockscom Report for Sunday July 22 2007
Publisher: Colin Alexander
Editor: Ken Wilson (450-691-4617)
Subscriptions and Administration: Pierre Fichaud (toll-free: 866-487-9711)
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Second quarter report cards are starting
Market Synopsis
The only trading day that mattered this week was the last one Friday.
Led by the earnings reports from tech leaders, Google and Microsoft and
supported by a disappointing quarterly report card from construction machine
manufacturer, Caterpillar, stocks across the board tumbled on substantially
higher volumes. By week’s end, more concern was being expressed about the
vulnerability of the stock indexes just one day after the mandatory celebration
for having witnessed the first close on the Dow Jones above the 14,000 level.
Quarterly earnings reports are the key at this point, early on in the third
quarter. With extremely strong results from the past twelve months for
comparison, it is becoming difficult for companies to match these tremendous
expectations though to be fair, it is often the companies’ fault for having
raised expectations to unsupportable heights. Inflation in primary materials and
energy is exacerbating the problems of cost containment and restricting the
companies’ abilities to sustaining gross margins. Where demand is greater,
companies have the opportunity to pass on increased costs to their customers and
we see that especially in industries such as shipping.
Again this week, trading will be guided by the overall quarterly performance of
the blue-chip reporting firms belonging to either of the major indexes. Later in
the week, the release of the preliminary GDP for the second quarter will offer
analysts an early indication of the strength of the rebound that we’ve seen the
past three months occurring after the widespread weakness of the first quarter.
Technically Speaking
Stock indexes are divided between the action in broader indexes such as the
DJ-30 and S&P-500 and those of the tech sector. The broader indexes have seen a
greater weakness take hold and this is occurring even as new highs are being
made. As we mentioned last week, pricevolume relationships are under pressure
for even as prices edge higher, volumes have weakened considerably on the upside
putting the sustainability of many of these moves in doubt.
This weakness contrasts with the tech sector and when we speak of the tech
sector, we are naturally, referring to the Nasdaq twins. To a large degree, tech
shares have bucked the trend of these broader shares and strong upward moves in
price have been more closely aligned with strong increases in volumes signaling
more reliability and greater confidence levels associated to these moves.
The key question then is whether we should be concerned with the sharp fall in
equities that we saw on Friday. Clearly, there is reason to be cautious and we
have attempted to manage that caution with tighter stops on our recommendations.
But in the near term, we should expect to be plying rougher waters.
New Buy Recommendations (in order of preference):
Omnicell Inc. (OMCL) This stock leaped on Friday upon its release of an
excellent quarterly performance showing a rapid ramp-up in sales and a quickly
expanding backlog. Shares gapped higher and settled at a new 52-week high,
pennies ahead of the previous high close in April. On the weekly chart, the
breakout from resistance at the $22 level signaled a return to the upward slope
for the price bars.
New Short Sales
None.
Stock Positions to Sell/Exit:
We sold Lufkin after it was knocked down last week upon the release of its
lowered profit forecast for the year.
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 |
| 04/30/07
|
Allied Waste Ind. |
AW |
13.37 |
13.65 |
13.00 |
B |
| 06/11/07
|
Amer Sci & Eng |
ASEI |
56.25 |
58.06 |
54.80 |
B |
| 07/16/07
|
Chase Corp. |
CCF |
19.95 |
19.01 |
16.00 |
H |
| 06/25/07
|
Columbus McK. |
CMCO |
31.15 |
30.54 |
28.00 |
B |
| 05/29/07
|
Dycom Industries |
DY |
29.32 |
30.64 |
28.00 |
B |
| 06/11/07
|
Euroseas |
ESEA |
14.92 |
16.90 |
13.35 |
B+ |
| 07/09/07
|
Excel Maritime |
EXM |
28.52 |
37.42 |
30.00 |
B |
| 07/16/07
|
FreeSeas |
FREE |
9.08 |
9.20 |
7.70 |
B |
| 03/26/07
|
Fronteer Dev’t Grp |
FRG |
12.40 |
12.79 |
11.00 |
B |
| 11/13/06
|
Goodyear Tire |
GT |
18.00 |
34.95 |
31.00 |
B |
| 03/12/07
|
Grant Prideco |
GRP |
46.75 |
57.40 |
52.50 |
B |
| 07/09/07
|
Lufkin Industries |
LUFK |
67.80 |
65.45 |
|
SOLD |
| 04/30/07
|
Portfolio Rec. Ass. |
PRAA |
56.17 |
63.00 |
57.50 |
B |
| 07/02/07
|
Robbins & Myers |
RBN |
53.60 |
58.25 |
50.00 |
B |
| 07/09/07
|
Silver Wheaton |
SLW |
13.44 |
14.65 |
12.00 |
B |
| 07/02/07
|
SJW Corp. |
SJW |
33.45 |
31.12 |
30.00 |
H |
| 03/19/07
|
Tsakos Energy Nav |
TNP |
49.50 |
73.77 |
65.00 |
B |
| 03/26/07
|
Vasco Data Sec’y |
VDSI |
17.92 |
25.06 |
20.00 |
B |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price