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Showing posts from April, 2008

NII Holdings bounces off bottom - can it keep up the momentum?

NII Holdings (NIHD) provides mobile telecommunications services in Latin American markets including Mexico, Brazil, Argentina, Peru and Chile.

NIHD was formed in 1996 as a subsidiary of Nextel Communications - now Sprint Nextel (S). The firm exports the Nextel brand to Latin America (in 2002 it sold its operations in the Philippines). Based on Motorola's (MOT) iDEN technology, the service supports domestic and international cellular phone, numeric and text messaging, 2-way radio (Push-to-Talk), and Internet access services from a single handset.

On April 4, the company announced that its first-quarter net profit rose 35% to $113.6 million, or 65 cents per share, from its year-ago profit of $84 million, or 47 cents per share. Analysts had predicted a profit of 63 cents per share. Operating revenue climbed 39% to $993.2 million as the company added 321,700 subscribers. Total customer base now exceeds 5 million.

Just prior to the earnings announcement, Wachovia Capital Markets came out …

Markets hang tough - bullish bias remains

Markets held steady this past week. Given the big finish on Friday of the previous week, the fact that stocks held their gains without succumbing to profit taking is an indication of wide participation and solid investor sentiment.

The bad news of the week consisted of record high oil prices, Microsoft (MSFT) coming out with lackluster earnings and guidance and Ambac (ABK) coming out with downright horrible earnings. The fact that investors did not let these items derail the current rally shows how much strength the rally still has.

This is not to say, however, that everything is sunshine and roses. The Alert HQ market scan process has provided some sobering information. Each week, using the Alert HQ software, we scan over 7200 stocks and ETFs to see how they are doing with respect to various technical indicators. The results are summarized in the chart below.


Moving average analysis -- overall, still bullish

The moving averages we test show a moderating of upward momentum is taking place…

Alert HQ for the week ending April 25, 2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ. Each week we scan over 7200 stocks and ETFs looking for fresh BUY and SELL signals. This week's results are now available.

Markets eked out fractional gains this week, buoyed by better than expected earnings from many companies reporting but tempered by lackluster results at Microsoft. Despite record oil prices, the major averages managed hold on the previous week's gains and build on them slightly.

The general continuation of a positive tone in the markets has resulted again in a good sized list of BUY signals this week, 22 in all. We only have one SELL signal.

Looking back --

Taking a look at the performance of last week's TradeRadar Alert List, here are some examples of BUY signals and the gains they generated in just five days:
An insurance company that received a buyout offer gained 42%A semiconductor equipment manufacturer gained 11%A medical device company gained 11%A little-kn…

SAFECO chart looks fishy

This past weekend, our Alert HQ market scan identified SAFECO Corp. (SAF) as a BUY. Since then, we heard that Liberty Mutual was making an offer to acquire SAFECO at a significant premium.

I cannot say that Alert HQ has the ability to identify buyout candidates. What I can say is that Alert HQ has the ability to identify stocks that are moving up significantly after a prolonged down-trend.

As can be seen in the chart below, SAF was moving up well in advance of the announcement.


So I am wondering why SAF was moving up so strongly. In the last quarter, the company had registered a drop in earnings and expectations, as with most financial companies, were not particularly bright. What was driving the recent stock price gain? Did some people know this buyout was on the way?

Just something I was wondering about...

More tips for using TradeRadar - timing counts

As I have discussed in the past, the TradeRadar analysis attempts to identify stocks that are undergoing reversals. Given my current bullish attitude, this means that we will be featuring stocks that have declined over the last six months or so and are now beginning to bounce off their lows and show some strength in their stock price.

One thing I have noticed about using the TradeRadar BUY signal is that the stock picks don't carve out a perfect V-shape when they undergo reversals. They tend to hit bottom, then move up fairly quickly, thus triggering the initial TradeRadar BUY signal. Then they tend to back off and go into a consolidation phase after which, if the reversal is meaningful, the stock moves up to new highs.

In this case, there is a good chance that a cheaper entry point can be obtained. Looking at the following chart of Allis Chalmers (ALY), for example, TradeRadar Alert HQ gave a BUY signal toward the end of February and I purchased the stock at $13.16. The stock soon …

What - no shorts?

For those who read this blog on a regular basis, you may notice that for the first time in months our trading portfolio contains no ultra short ETFs. Last week's market action caused them to hit stops with some profits booked and, unfortunately, some losses booked as well.

As discussed in this past weekend's post "Markets jump - stocks poised for more gains?", it looks to me like Mr. Market is trying to sound the "all clear." This is despite the fact that I still feel the economy has problems and that financial stocks, in particular, have a long way to go before they
really deserve the trust of investors. (Indeed, financials took it on the chin in today's trading) Nevertheless, if there is one thing I have learned while on my journey as a financial blogger it is that the market moves as it sees fit despite the economic backdrop or what the experts are saying about it. The famous quote "the market can remain irrational longer than you can remain liqui…

Markets jump - stocks poised for more gains?

Markets jumped this week on solid results from Intel (INTC), IBM, Google (GOOG) and Caterpiller (CAT). Even the financials helped by reporting earnings that were less bad than feared.

As a result, markets are more or less back up to the top of their recent trading range. Looking below at the chart of the S&P 500 SPDR ETF (SPY), you can see that the ETF is pressing up against the same old resistance level around $140. SPY has also moved up close to its top Bollinger Band, indicating the ETF is potentially over-bought. This latest advance has been on decent volume but one worrying aspect is that volume tends to be much higher on the major declines.

Looking at other technical indicators, though, the picture is relatively bullish. You can see that MACD and Aroon are both indicating up-trends in the making. The 20-day moving average has now crossed above the 50-day moving average, creating another bullish signal.


The big question, of course, is whether stocks can continue making gains. I …

Alert HQ for the week ending April 18, 2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ.

This past week the markets jumped on the basis of good earnings reports from Intel (INTC) and Google (GOOG). Despite awful reports from the financials, investors considered them better than they might have been. The improved sentiment sent stocks to the highest levels they have seen in months.

As a result of all the positive action in last week's market, most of the previous week's Alert HQ stock picks did quite well. This week we see another good group of 17 BUY signals on the alert list. In another sign of positive sentiment, there are no SELL signals this week.

Improvements made to the software this week now provide some important financial indicators for you to use in your analysis when deciding which stock pick may be best for you. We now capture market capitalization, PE ratio, price to sales ratio and the PEG ratio for all stocks. These indicators are, unfortunately, not availab…

Google beats expectations - why I'm not surprised

There has been widespread discussion in the blogosphere about the rate of growth of paid clicks beginning to fall off at Google (GOOG). This has been a major factor driving the stock's price lower.

After the close yesterday, Google reported profits increased 30% and revenue moved up 46% to $3.7 billion. The company reported net income of $1.31 billion, or $4.12 a share, compared with $1 billion, or $3.18 a share, a year earlier. The EPS figure was well above analyst estimates.

Paid click growth was 20 percent year-over-year, much stronger than the anemic growth rate comScore was estimating.

Another reason --

In this post, however, I want to look at a feature of Google's advertising methodology that is probably less well known to financial bloggers but certainly more well known to search engine optimization (SEO) experts.

AdWords is the system that serves up the text ads that are viewed along side search results. Advertisers associate their ads with keywords that appear in searches.…

Sallie Mae - throwing themselves at the mercy of the government

Earlier in the week I wrote a post listing some of the recent events taking place in the student loan industry. The title of the post, "Student loan industry imploding?", gives a flavor of the point of view of the post.

Since then, we have heard that Bank of America (BAC) will stop making private student loans and Citigroup's Student Loan Corp. (STU) has announced they are discontinuing federal loan consolidations and will scale back lending to students at schools where profitability is lacking.

Finally, Sallie Mae (SLM) reported earnings and held a conference call today. The company lost $104 million in its first quarter but somehow expects to stay on track for its full year target.

Problems faced by the company include the fact that financial and credit market turmoil have impacted Sallie's ability to obtains funds and forced the company to mark down various securities and derivatives.

What is unprecedented is Sallie's contention that they are losing money on all t…

Student loan industry imploding?

Here is a list of headlines coming from the student loan industry these days. This is just over the last six weeks or so but serves to provide a flavor for the turmoil students and especially lenders are going through.

Click on the story titles for the details.

Big US student loan guarantor files for bankruptcy

Student Loan Stir Hits First Marblehead

TERI, a guarantor that worked closely with First Marblehead, filed for bankruptcy. It has more than $1 billion of assets, and between $500,000,001 and $1 billion of liabilities. Ouch...

Sallie suspends combined federal loans

Sallie has decided to stop doing loan consolidations, even for federal loans, saying the business has become unprofitable. The credit crunch comes to former students now in repay...

Lenders Drop Out of Student Loan Market

Forty-six student lenders have stopped making federally guaranteed student loans, either temporarily or permanently. Recently enacted legislation that reduces profits, difficulties in doing securitizati…

Market internals converge - what does it mean?

Last week's market statistics led me to comment that it is hard to be a bear with market internals looking pretty good. I still had, and have, a few of the ProShares ultra short funds in my trading portfolio. This week's statistics as gathered by Alert HQ market scan show some weakness returning to stocks.

The week's numbers in review --

Each week, we scan about 7200 stocks and ETFs to generate our statistics and alert lists. This week, I am struck by the convergence of indicators right around the 3000 mark. Is it a coincidence or is there something meaningful here?


In the chart above, we see that this week the indicators are starting to diverge. Last week all the positive indicators were moving up in unison. This week we see the fastest moving indicators reflecting drooping stock prices earlier in the week and the more pronounced sell-off on Friday.

The number of stocks over their 20-day moving average dropped from 5000 to 3000. Yikes! This is the largest move, in either dire…

Alert HQ for the week ending April 11,2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ.

The week on Wall Street saw the markets begin to crumble after strong gains the previous week. Negative earnings surprises from Alcoa (AA) and General Electric (GE) accelerated the losses, especially on Friday.

The major averages closed the week just below their 50-day moving averages and the TradeRadar market statistics reflect a mixed picture now as some of the recent broad-based strength has weakened.

As a result, this week we have a more modest alert list of 19 BUY signals and 2 SELL signals.

Improvements made to the TradeRadar software this week provide more detailed information on the DMI determination for each stock on the alert list. My recent post "More tips for TradeRadar users" discussed using the indicators provided in the alert lists and recommended using StockCharts.com to view the indicators on a chart. StockCharts.com also provides great explanations of these indicators…

GE finally convinces investors that manufacturing is in trouble

This post is for those who appreciate a little irony.

I have written two recent posts about trouble in the manufacturing sector. The first one discussed the Fed's manufacturing report in mid-March and a couple of regional Fed surveys. The second post discussed the Durable Goods report released toward the end of March.

My position at the time was that all these economic reports supplied by the government indicated that industrial stocks were due for a fall.

Based on my outlook, I entered a small position in the ProShares UltraShort Industrials ETF (SIJ). My timing was horrible as the entire market immediately made a strong move up and left pretty much all the ultra short funds reeling. Eventually, SIJ hit a stop and the position was closed with a loss.

Today, General Electric (GE) reports an unexpected shortfall in earnings and industrial stocks and related ETFs plunged while SIJ jumped up 7.88%.

Irony #1: GE's reason for the decline in earnings: primarily problems in the financia…

More tips for TradeRadar users

As I continue to use the TradeRadar software to analyze many different stocks in various situations, I am getting a better feel for the strengths and weaknesses of the BUY and SELL signals. There are definitely a few nuances users should be aware of when trading based on the signals.

Beware of earnings announcements --

Let's use a BUY signals as an example. Things will work the same for a SELL signal except in reverse.

When a BUY signal is generated, it is the result of a clear downward trend being broken. The stock has made a bottom and begun moving up. The downtrend may have lasted six months, a year or even more. Given the fact that the stock has been in a bearish phase, there is a certain amount of risk in buying the stock. We often see false rallies within bearish trends and there is always the potential that a BUY signal is a trap.

This is why I always recommend that users of the software do some research to become comfortable with the stock generating the signal. It is always…

Google close to a Buy signal

It is somewhat mystifying to read financial blog posts about Google (GOOG) that imply the company does nothing but search advertising. Analysts obsess over Google's share of search traffic, their search ad click-through-rates, etc.

Though the search advertising business has undoubtedly been the largest driver of Google's business, the company has strong revenues from its AdSense product which is, in essence, a very loose ad network. Indeed, fully one third of Google's profits are derived from AdSense.

Another source of annoyance to me is the opinion that search advertising is the only valid online advertising model. Those who hold this view generally assume that display advertising is dead and banner ads are obsolete.

Google has now closed the deal to acquire DoubleClick. DoubleClick's business is focused on serving display ads on their own ad network. Did Google make a mistake? Hardly.

According to eMarketer, expenditures for search advertising are about twice as high as …

Cirrus Logic - overbought or room to run?

Cirrus Logic (CRUS) is a semiconductor manufacturer focused on mixed-signal and analog integrated circuits used in consumer and industrial markets. The company specializes in various audio/visual applications, DVD recorders/players, home theater systems, analog-to-digital and digital-to-analog converters, embedded microprocessors, etc.

Cirrus Logic was identified a couple of weeks ago in our Alert HQ market scan as a BUY. Since then it has gained well over 20%. Just take a look at the chart below.


There appear to be several recent drivers for the excellent stock performance.

An SEC investigation in the company's stock option practices was concluded with no recommendations for enforcement actions.

The company is closing a Chinese subsidiary, Caretta Integrated Circuits, thus removing a management distraction.

The stock was upgraded by an analyst at Thomas Weisel Partners. The call was based on a report that Wolfson Microelectronics, a competitor of Cirrus, wasn't selected by a major…

Hard to be a bear with market internals like these

Market internals just keep on improving, regardless of the news on the economic front. This week's statistics as gathered by the Alert HQ market scan shows stocks are clearly on the road to recovery.


Looking at the chart above, we see all the positive indicators are now moving in the same direction - up. For most of them, this is the highest they have been in the seven weeks since I starting collecting the data.

The number of stocks above their 20-day moving average has jumped to nearly 5000, well over half of the 7200 total stocks that were scanned for this report. Stocks above their 50-day moving average have jumped to nearly 4000, a big improvement over last week and an acceleration in this indicator that had previously been trending upward at a slower rate.

Aroon shows similar acceleration with the number of stocks exhibiting up-trends jumping from barely over 1000 up to 2500. The number of stocks exhibiting down-trends dropped from just under 2000 to just under 1000.

The number o…

Alert HQ for the week ending April 4, 2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ.

The week on Wall Street saw a huge rally and, despite day after day of bad economic news, stocks managed to hold almost all their gains. The major averages are now sitting on top of their 50-day moving averages and the TradeRadar market statistics reflect quite a bit of broad-based strength.

As a result, this week we have a big alert list of 64 BUY signals and no SELL signals!

Some work was done on the TradeRadar software this week to improve the DMI calculations. I would like to refer purchasers of the alert list to StockCharts.com to look up some of the recommended stocks and view their charts. StockCharts.com provides the ability to add to the charts a visual indication of all the technical analysis calculations we do except the proprietary TradeRadar signal and trendlines. Note that the DMI is called "Wilder's DMI (ADX)". They also provide Aroon and Chaiken Money Flow chart ov…

Does Littelfuse justify the recent run-up?

Littelfuse (LFUS) has showed up as a selection in our Alert HQ lists twice now. The first time was in February based on daily price performance data . Just recently it popped up in our scan based on weekly data.

LFUS exhibits a classic chart showing a prolonged decline culminating in a reversal to the upside. Why the reversal? What is driving this run-up in the stock's price?

Background --

Littelfuse, Inc. manufactures and sells circuit protection and electrical fuses for the electronic, automotive, and electrical markets in the Americas, Europe, and Asia-Pacific. It offers electronic circuit protection products, such as fuses and protectors, positive temperature coefficient resettable fuses, varistors, polymer electrostatic discharge suppressors, discrete transient voltage suppression (TVS) diodes, TVS diode arrays and protection thyristors, gas discharge tubes, power switching components, and fuseholders, blocks, and related accessories.

In the electronics market, the company suppli…

Writedowns + Contraction = Rally???

OK, so UBS writes off $19 billion and cans the chairman. The ISM survey shows continued contraction in manufacturing, specifically declines in new orders and increases in materials prices. Lehman says they have no liquidity problem but they feel it is worthwhile to dilute present shareholders by issuing preferred shares.

Last week this news would have sent the markets into a tailspin. This week it instigates a rally in stocks and the U.S. dollar as well.

So where does that leave us? Looking at the S&P 500, it seems everything is set for more gains. Today's action takes the index significantly above its downward sloping trendline and its 50-day moving average. Volume was good though not as heavy as bulls would have liked. We saw an accelerated rotation out of bonds and commodities and into the most beaten down sectors - financials, retailers and tech. Market sentiment is extremely positive - all news is good news.

What could hold us back? There is a resistance level in the 1390 ra…