Skip to main content

Posts

Showing posts from February, 2008

Allis-Chalmers Energy starting to look good here

In tinkering with my Alert HQ software, I came across Allis-Chalmers Energy (ALY). The stock has been on a straight path downward since last July but is now starting to rally. It exhibits the characteristics that make the software identify the company as a BUY.


Background --

The following is from the company's web site:

"Allis-Chalmers Energy Inc., is a Houston based multi-faceted oilfield services company. We provide services and equipment to oil and natural gas exploration and production companies, domestically in Texas, Louisiana, New Mexico, Colorado, Oklahoma, Mississippi, Utah, Wyoming, Arkansas, Alabama, West Virginia, offshore in the Gulf of Mexico, and internationally primarily in Argentina and Mexico.

The Company operates in six sectors of the oil and natural gas service industry: rental tools; international drilling; directional drilling services; casing and tubing services; compressed air drilling services; international drilling; and production services. Providing hi…

Yahoo tries to innovate, Microsoft does what it always does

Yahoo, even in its present state as a punching bag for pundits, is able to innovate and is working to deliver on its promise to open its platform to developers and users. Microsoft, on the other hand, seems stuck in the 90's.

Witness recent announcements from the two companies.

Microsoft --

Microsoft announced their Interoperability Principles. This basically said that they will provide documentation to allow third-party developers to create applications that interact with core Microsoft applications. Microsoft pledges not to sue as long as the applications are non-commercial. How kind of them! They're really getting behind the open source movement, aren't they? Why would any developer try to use Microsoft's horrifically complex and non-standard document and communication formats unless they expect to make a buck from the effort? Microsoft will, of course, be happy to grant a license for a nominal fee...

This seems to be a grudging gesture, a minimal effort to comply with …

Semiconductor equipment industry continues contraction

I saw the following reported on Barron's Tech Trader blog today:

"Bookings for North American semiconductor equipment companies in January totaled 1.12 billion in January, down 2.8% sequentially from December, according to SEMI, the industry trade group. The book-to-bill ratio for the month was 0.89, indicating shipments exceeded bookings. A ratio above 1 is typically considered bullish."

In following the link in the Tech Trader post and exploring the SEMI web site I came across a download of historical book-to-bill data. The following charts illustrate the situation in the semiconductor equipment sector. It's not pretty.

In this first chart, we see the book-to-bill ratio has been hitting lower highs for years and hasn't made a significant move above 1.0 since June of 2006.


In the second chart, we see that both billings and bookings have been declining since June 2007. The dollar value of billings (ie: revenues) have dropped 28% since the most recent peak in June 200…

Market statistics show a glimmer of hope

On a weekly basis I scan all the stocks and ETFs on the NYSE, NASDAQ and AMEX, over 7000 securities in all.

In addition to looking for individual buy and sell signals (see Alert HQ) I have started to capture some overall statistics for the market as a whole.

For the most part, stocks are not in such great shape. Here are some numbers on the moving averages that we calculate:
42% of stocks are above their 20-day exponential moving average while 58% are below their 20-day EMA36% are above their 50-day exponential moving average while 64% are below their 50-day EMAThe 20-day EMA has crossed above the 50-day EMA for 33% of the stocks we tested while 67% have seen a negative crossover.On the plus side, the Aroon indicators that we calculate show recent strong up-trends for 27% of the stocks we tested and recent strong down-trends for only 17%. The remainder are either not displaying a trend at all or are only exhibiting weaker trends.

The good news

With Aroon(up) signals outnumbering Aroon(down…

Alert HQ for the week ending 2-22-2008

The latest lists of stock alerts are up and available at Alert HQ.

It was a messy week on Wall Street and the result can be seen in this week's alerts. A mere eleven BUY signals and only one SELL signal.

On the buy side, it is hard to say there is a trend but we do see a couple of energy-related companies, a couple of tech companies and a uranium company.

Interestingly, this week's lone sell signal continues last week's trend: it's a bond fund.


Enhanced alert process rolled out this week

The TradeRadar signal process is all about trend reversal. To enhance our alert accuracy, I have added several new tests, the results of which are also recorded for each stock in the alert file. Before I get into them, I would like to review the current data that is provided in the alert list.

As can be expected, I provide the stock symbol, name, the exchange on which it trades, the last price and the signal strength of the TradeRadar signal. I have also been indicating whether a stock's…

Why I sold DBO

Oil hit $100 a barrel on Tuesday. My response was to sell my position in the PowerShares DB Oil Fund (DBO).

This ETF has been in a trading range since November 2007. It has recently been threatening to fall out of this range with many speculators worried about declining demand due to high prices and a weakening U.S. economy. These worries seem to have been manifesting themselves in a string of weekly petroleum inventory reports showing a build in supplies rather than a drawdown.

During the last week or so the ETF seemed to take off as crude prices suddenly began to rise. As it looked like crude was going to hit $100 again I tightened my stop. On Tuesday, we did see $100 and as the price of DBO backed off a bit at the end of the day, the stop was hit.

Having sold DBO at $36.30, I am comfortable that I pulled the trigger at an appropriate time. As the ETF finally moved a bit above the top of its trading range, the technical response was an expectation that we would now see a big move up. C…

HP stands nearly alone

In an update to yesterday's post about Hewlett Packard's (HPQ) excellent performance not necessarily being an indicator that the entire tech sector would do well, I wanted to comment on yesterday's market action.

In a day marked with bad news on the financial, housing and inflation fronts, the technology sector managed to rally 1.7%, largely due to HP. Was this positive attitude warranted?

As an anecdotal survey of the state of tech yesterday, one can always use as a proxy the posts on the Tech Trader Daily blog at Barron's. Here is what yesterday looked like on one of the best tech blogs:

The following stocks reported poor earnings, weak guidance or both: Tekelec, Novatel, Verigy, MEMC, Analog Devices, DealerTrack, Veraz, Garmin, Limelight, ComCast, Verizon, AT&T, Qwest, Sprint, Sharper Image, 3Com

The following companies provided good earnings, good guidance or both: Local.com, Synopsys, BIDZ

That's 16 companies on the negative side and 3 companies on the positive…

China ETF stuck in channel or about to break out?

The iShares FTSE/Xinhua China 25 Index ETF (FXI) has been in a downtrend for months. In the last month or so it has bounced off a support level in the $140 area several times. The ETF has finally begun to turn up. On Tuesday it came right up against its downward sloping trend line. On Wednesday it fell back within the channel (see chart below).


Are we seeing merely technical trading or are there fundamental developments in the Chinese economy that will drive the ETF one way or the other?

In reviewing some of the recent news out of China there are a couple of developments that are worth discussing.

Inflation

China's consumer price index was reported up 7.1% in January, the highest since September 1996 and well above December's 6.5%. This was partially due to the severe winter storms that disrupted economic activity, caused crop damage and generally brought parts of the country to a standstill. Some analysts that this high level will not last and that China will see a moderation in …

What do HP's earnings say about the state of tech?

Hewlett Packard (HPQ) just reported earnings that were excellent by any measure.

The company reported earnings of $2.1 billion, or 80 cents a share, on revenue of $28.5 billion, up 13 percent a year ago. Excluding charges, HP had earnings of 86 cents a share. This easily beat Wall Street estimates that were looking for earnings of 81 cents.

Analyst estimates for the entire tech sector are quite optimistic. According to Bespoke, tech earnings are expected to grow 9.3% in the first quarter of 2008, 16.3% in the second quarter and 13.2% in the third quarter.

So, does HP confirm the optimism? Or is tech still toxic, as Cramer now says?

Looking a little deeper into HP's numbers, we see the following breakdown as provided in the 8-K:

Revenue in the Americas grew 8% on a year-over-year basis to $11.2 billion. Revenue grew 15% in Europe, the Middle East and Africa to $12.3 billion. Revenue grew 22% in Asia Pacific to $4.9 billion. When adjusted for the effects of currency, revenue in the Ameri…

Alert HQ for the week ending 2-15-08

The latest lists of stock alerts are up and available at Alert HQ.

It was another volatile week on Wall Street. The large-cap indexes, the Dow and the S&P 500, managed to end the week with decent 1.4% gains while the NASDAQ and the Russell 2000 just barely poked their noses into the plus column.

I'll provide my comments on both this week's alerts and alerts from weeks past.

Comments on past alerts --

The list from the week ending Feb 1, 2008 had a number of BUY signals for financial stocks. This was during the time when financials were enjoying a nice bounce. Since that time, many of them have been knocked back down.

As it has been earnings season, we have seen a number of stocks flash a BUY signal only to be crushed when earnings fail to meet investor expectations. This is always the risk when picking stocks during earnings season or, as some call it, "the silly season".

Lesson learned: be very careful about initiating positions in the time immediately prior to an ear…

Volt Information Sciences - overlooked small-cap

Back on January 27 when I rolled out the first Alert HQ list of stock picks, one of the stocks on the list was Volt Information Sciences (VOL).

The stock closed at $17.45 on the Friday just prior to running the analysis. It is now at $19.10, up almost 9.5%. It was up over 2% today.

So what's up with VOL? It peaked at about $40 just over a year ago and had been carving out a ragged down hill trend since then. It hit its low point on December 4th and shortly afterward gapped up on an earnings report.

Background --

The company has four lines of business:
Staffing Services - includes temporary/contract personnel employment, consulting, outsourcing and turnkey project management
Telephone Directory services - publishes independent telephone directories, as well as provides telephone directory production, commercial printing, database management, sales, and marketing services; and licenses directory production and contract management software systems to directory publishers and others.
Telecom…

Yahoo board does the right thing

There are many financial bloggers who think that Yahoo should be happy to have a somewhat generous buyout offer from Microsoft. Certainly it gives Yahoo's suffering shareholders something to be happy about.

It was reported this weekend that Yahoo's board has rejected Microsoft's offer, contending that it undervalues the company. Maybe, maybe not.

As I have written before, this is an ill-conceived merger. It is marked by duplication and overlap of functions and features. There is no special synergy, just a trust that scale will make a difference, bigger is better and some costs can be wrung out of the overall organization. I have written more on this in a previous post ("Microsoft and Yahoo - bigger may not be better").

If Yahoo were to merge with Amazon or eBay, one could say that something new and powerful was being developed. Dominant e-commerce combined with a dominant portal might be an interesting concept where some synergies may indeed be found. The synergies …

Weekly Market Update and Alert HQ for week ending Feb 8, 2008

The latest lists of stock alerts are up and available at Alert HQ.

After nearly two weeks of a rising market, stocks dropped again this week. The prior week's strong gains essentially evaporated. This volatility is playing havoc with our indicators. As a result, this week's alert list has only 30 BUY signals and 1 SELL signal.

It is difficult to generalize about the stocks in this week's list. We see a sprinkling of tech and small banks and a few drug/medical stocks. Big names are lacking and it seems to be mostly small-cap stocks.

Weekly Market Update

The trigger for the week's sell-off was the ISM services report. This report generally doesn't cause much concern for investors but this time was different. The report, for the first time in five years, showed a significant and unexpected contraction of activity in the service sector. Stocks plunged in response.

The remainder of the week was bad but could have been worse. After the close on Wednesday, Cisco Systems (CSCO)…

Merrill Lynch sentiment indicators - no bottom yet

Markets have gyrated this year, but overall the outcome has been a significant move lower. The major averages are down double digits from their 2007 peaks and are currently located somewhere between correction and bear market territory.

Investors are in a quandary. Is it a recession or not? Are stocks cheap or not? Have we seen the bottom yet? Can we call a bottom back on January 22? If we are near the bottom, shouldn't we all be buying stocks like crazy?

Merrill Lynch has assembled several indicators to help determine when it is advisable to get in or get out of the markets or at least overweight or underweight equities.

Yes, it is an acknowledgement that there are investors who are interested in market timing. Market timing is a concept that always leads to controversy but many of us try to do it anyway so I believe it is worthwhile to present Merrill's indicators and discuss their current opinion on the state of market sentiment.

As things currently stand in the market, every t…

Microsoft and Yahoo - bigger may not be better

I can't resist putting in my two cents on the Microsoft bid for Yahoo.

My take is that it helps neither company. Here's why.

Microsoft has assembled a huge Internet presence. They have done it in a very workman-like way.

They decided the web was important so they started, and eventually won, the browser wars. The misconception on Microsoft's part was that browsers were important when in actuality it was the Internet itself that was important. The ability to be a player that could take advantage of the Internet's reach, its content, its ability to extend communication and community globally turned out to be much more valuable than controlling the on-ramp to the web. The browser was another piece of desktop software, something Microsoft was very good at developing, but the browser meant little in terms of signaling that Microsoft really understood the web.

Content is king, or is it?

Since the browser wars Microsoft has determined that they needed to expand their web presence.…

Alert HQ for week ending 2-1-2008 -- BUY signals predominate

We've been busy at the TradeRadar Stock Alert Headquarters this morning. The latest alert lists are now up and available at Alert HQ. We have 243 BUY signals this week for just $2.99

What a difference a week makes! Last week, when I published the first list of TradeRadar alerts, we had SELL signals outnumber BUY signals by two to one. After performing this week's scan on all the stocks and ETFs on the AMEX, NYSE and NASDAQ we see the situation very much reversed.

This week we did things a little differently. Last week we required a moving average crossover of the 20-day and 50-day moving averages. This week, and going forward, we will require that the last closing price be above the 50-day moving average. For each stock on the alert list, however, we now provide an indicator of whether there has been a moving average crossover in confirmation of the TradeRadar signal or not. This new approach catches stocks earlier in their breakouts but filters out small moves that may not be s…

Inside Alert HQ - how we generate signals

For those who are interested in the details of how the TradeRadar Alert HQ software generates its lists of picks, this post will try to explain it in a way that is easily understandable by all.

The basic TradeRadar signal --

The proprietary TradeRadar signal analyzes price data to determine if a stock has reached a minimum price level and has then started a move upward that is significant enough to be considered a BUY signal. The mathematical properties of the TradeRadar approach cause a spike to be displayed on a chart if the signal is strong enough. For a SELL signal, things work just the opposite: a peak price level is looked for and falling prices may then cause the signal to be generated.

The software checks the strength of the signal and also determines if it is a clear signal. The signal strength is a very important indicator of whether the signal is significant or not. The Signal-to-Noise ratio is calculated to measure how sloppy or well-formed the signal looks. Both of these mea…