Sunday, January 31, 2010

Fannie and Freddie man up, push worst loans back to banks

I don't typically comment on financials or real estate that much these days but I this weekend I saw an article in the Wall Street Journal and it made me smile.

Fannie Mae (FNM) and Freddie Mac (FRE) have been buying and guaranteeing mortgages in greater and greater numbers during the course of the real estate implosion. Their basic operation is to securitize mortgage loans originated by private lenders in the primary mortgage market into mortgage-backed securities, which are bought and sold in the secondary mortgage market. They have been nearly like a lender of last resort as banks have worked overtime to get mortgages off their balance sheets.

As you may know, when the real estate bubble burst and homeowners began to default, Fannie and Freddie increasingly came under pressure and needed a bailout to the tune of about $100 billion. These government sponsored enterprises are now essentially owned by taxpayers.

As a card-carrying taxpayer, then, I was pleased to read the article in the Journal that discussed how Fannie and Freddie are combing through the billions of dollars of mortgages they have taken on over the last few years and looking for those that exhibit "underwriting flaws." These "flaws," I suspect, mean that the loans are crap, originated without proper documentation and probably little hope of repayment. When they identify loans of this dubious quality, they are forcing the banks to buy them back.

As a percentage of loans outstanding, loans in this category don't amount to a big proportion (a total of only about $7 billion in the first nine months of 2009); nevertheless, as a taxpayer it feels good to see the sleaziest bankers being forced to take back some of their own garbage. The article says that Bank of America (proud owner of Countrywide Financial) and JPMorgan Chase (buyer of Washington Mutual) are likely to be the biggest losers.

If you enjoy seeing the big banks squirm, you may also appreciate the fact that many other holders of mortgage-backed securities are also kicking the junk loans back and demanding the banks repurchase them.

As they say, what comes around, goes around.

(Hat tip to BNSpired for the image)



Stock market outlook - always darkest before the dawn

Outside of the stock market, it was actually a pretty decent week. Here are some of the better things that happened:

  • Ben Bernanke was re-appointed and, contrary perhaps to how many bloggers felt, investors were relieved
  • 4th quarter GDP did indeed come in very strong, at 5.7%
  • Chicago PMI beat expectations and that was notable because the employment component finally showed outright growth instead of slowing decline
  • Continued good earnings reports from bellwethers like Amazon and Microsoft
  • Consumer sentiment increased according to the University of Michigan survey
  • The Fed kept interest rates steady and language in their policy statement indicated they would continue to do so for some time to come.
  • The Durable Goods report for December showed gains in new orders, rising for the first time since September
  • Weekly jobless claims declined
Naturally, not everything was coming up roses. Here are some things that disappointed:
  • Housing still stinks as reports on new home sales and existing home sales continued at weak levels
  • The Durable Goods report may have been positive but it missed analyst expectations
  • Weekly jobless claims declined but not as much as anticipated and this followed two weeks of increases
  • International concern over the finances of major countries grew, with the sovereign debt of Greece still in the headlines and then Standard & Poor commenting that it "no longer classifies the United Kingdom among the most stable and low-risk banking systems globally."

Investors continued to take a "sell the news" attitude toward company earnings this week. Nothing was good enough to generate broad-based buying. It was even worse in the tech sector - the introduction of the iPad from Apple, good earnings from Apple, Microsoft, SanDisk, VMWare, Texas Instruments, Cypress Semiconductor and others - all any of it led to was selling.

So we continue to navigate an economic environment that is not great but for the most part is getting better. What should stocks do in such a situation? It can argued that they should not go straight up. And thus, we find ourselves in the middle of a pullback.

Just how bad the pullback is will be discussed below. The following charts are derived from data collected during our Alert HQ process and they provide a high-level look at a couple of the indicators we track across the whole market.

The view from Alert HQ --

Let's start with our moving average analysis.

SPY versus the market, Moving Average Analysis, 01-29-2010

For this first chart we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 7000 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY).

For the second week in a row, the yellow line has plunged, signifying that the number of stocks above their 50-DMA is declining precipitously. Only 39% of the stocks and ETFs we scan are above this important moving average. Crossovers to the downside have increased rapidly this week, as well. Now only 60% of stocks still have their 20-DMA above their 50-DMA. This shows how fast stocks have fallen - their moving averages are barely able to keep up with the change in direction. Though not shown on the charts, fully 71% of stocks and ETFs have fallen below their 20-DMA.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.

SPY versus the market, Trend Analysis, 01-29-2010

This chart shows a crossover of its own. The number of stocks in strong up-trends has fallen well below the number of stocks in strong down-trends. Even though Aroon tends to be a slow moving, lagging indicator, you can see how rapidly these numbers have changed over the last few weeks and it demonstrates how broad-based and severe the declines have been each week.

Interpreting the charts --

Using the charts to look at what has already transpired, we can see that we are in the midst of a significant pullback and that this pullback is not limited to just a few sectors. The numbers suggest every sector is under pressure.

Looking forward, though, is always the fun part. I'm going to go out on a limb here and make a prediction: this pullback doesn't have too much farther to go.

All the indications on the charts above suggest this market will soon approach the oversold levels from which we have generally bounced back. The yellow lines on both charts are reaching lows from which stocks stocks begin to recover. And similarly, the red line in the Trending Analysis chart will soon be reaching a high enough level from which it can be expected to recede.

In other words, markets seldom get to a point where every single stock is performing horribly. Usually we just have to get to a point where most of them are performing poorly before we get a bounce back.  And if the economy is trending toward improvement, the expectation for a bounce back is that much stronger. If it's always darkest before the dawn, I think glimmers of light may be just over the horizon.

Is this analysis supported by any standard technical analysis? Let's look at a chart of the Total Market VIPERs ETF (VTI) which I use to represent the overall market and corresponds more or less with the population of stocks that I scan.

Chart of VTI, 01-29-2010

The chart, based on daily data, shows the support levels and the trend line that I believe are currently in play. You can see that VTI has already fallen below the green trend line. It is sitting right on the first blue support line and is just a couple of bucks away from the next lower blue support line.

The chart also demonstrates how bearish both Aroon and MACD are at the moment. Note, however, that Williams %R, the indicator at the top of the chart, shows VTI to be about as oversold as it has been in months. This doesn't mean that the market will immediately begin to recover but it does suggest that further damage may be limited.

Conclusion --

So we have a haltingly improving economy, decent enough earnings, though many companies are still being helped by cost cutting, and decent forward guidance from management though many are still cautious. And yet, all we see are stocks falling.

The question is - where is the equilibrium point for stocks? If stocks were really priced for perfection before this pullback, where should they be now that earnings and management expectations are clearer? That's an answer that only the market can provide.

Later this week we will see the Nonfarm Payrolls Report. The timing and importance of this market moving-report is liable to be the catalyst that will determine whether the pullback continues or whether it has run its course. Stay tuned...



Saturday, January 30, 2010

Weekend Winners and Losers - Alert HQ BUY and SELL signals for January 29, 2010

This is the usual quick post announcing that the weekend's stock signals are now available at Alert HQ.

Today we have the following stock picks and signals:

  • Based on daily data, we have 3 Alert HQ BUY signals and 496 SELL signals
  • Based on weekly data, we have 4 Alert HQ BUY signal and 148 SELL signals
  • We have 130 Bollinger Band Breakouts based on daily data and 159 Breakouts based on weekly data.
  • We have 818 Cash Flow Kings
  • 47 Swing Signals -- 39 BUY signals and 8 SELL Signals
  • 142 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 31 stocks that are new additions to the list and 26 that fell off the previous list.
  • 236 Trend Busters based on daily data of which 31 are BUY signals. We also have 476 Trend Busters based on weekly data.
  • 155 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We also have 51 Gap Signals based on weekly data.
The view from Alert HQ --

Well, today it's losers as far as the eye can see.

Major averages declined for the third week in a row. In the first part of the week, stocks held the previous week's lows but the selling took over again on Thursday and Friday. Techs and small-caps got the worst of it as investors apparently don't believe the mostly positive guidance companies have been providing during this earnings season. Even a beat in Q4 2009 GDP couldn't fire up this market.

I have been relying on the fact that long-term trends remained up. Based on daily data, though, this weekend's Alert HQ shows dozens of sector ETFs breaking below up-trends. There appears to be no where to hide and the market's slide is taking on an ominous tone. The overall market, which I track via VTI, the Total Market VIPERS ETF, is off its 2010 peak more than 6%. It looks like we are on the way to a 10% correction.

This seems to be a good time to step aside and wait to see if this decline has run its course. If you're looking for strong stocks that are weathering this storm, however, take a look at our Trend Leaders list. Our Swing Signals list keeps offering up BUY signals as some stocks are actually benefiting from earnings reports even as the overall market sinks. Take a look today - if you have "dry powder," you may find some good candidates for when it's time to get back in this market.

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.

Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Thursday, January 28, 2010

Alert HQ signals for Thursday, Jan 28, 2010

This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

  • 59 Swing Signals -- 53 BUY signals and 5 SELL Signals plus one Strong BUY.
  • 137 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 55 stocks that are new additions to the list and 71 that fell off the previous list.
  • 82 Trend Busters of which 8 are BUY signals and 74 are SELL signals.
  • 155 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 72 are bearish gaps and 83 are bullish gaps.
The view from Alert HQ --

Well, it looked like stocks were consolidating but major averages took another step down today. Accordingly, Alert HQ is swimming in SELL signals and the Trend Leaders list shrinks even further.

Once again, as we saw on Tuesday, the Swing Trading Signals are showing a real divergence from the rest of our signals. The Swing Signals is a good-sized list today and the overwhelming majority are BUY signals. There's even a Strong BUY in the mix.

Ordinarily, I would be looking for the market to turn up when the Swing Signals are in rally mode. lately, however, it seems the market goes down on good news, bad news or mixed news. That makes it hard to go out on a limb and declare a rally is in the offing. Nevertheless, the Swing Signals show that there are always some stocks bucking the trend. Check them out if you're willing to swim against the tide.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.


Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Tuesday, January 26, 2010

Glimmers of hope at last? -- Alert HQ signals for Tuesday, Jan 26, 2010



This post is announcing that Tuesday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:
  • 64 Swing Signals -- 49 BUY signals and 14 SELL Signals plus 1 Strong BUY.
  • 153 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 35 stocks that are new additions to the list and 176 that fell off the previous list.
  • 158 Trend Busters of which 27 are BUY signals and 101 are SELL signals.
  • 134 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 69 are bearish gaps and 65 are bullish gaps.
The view from Alert HQ --

Major averages tried to close positive today but gave up in the last half hour. That makes four losses out of the last five days. For a week now Alert HQ has been generating tons of SELL signals and the Trend Leaders list has been steadily shrinking

Today, the Alert HQ signals have registered plenty more bearishness. The Trend Busters list has exploded with stocks that have broken below upward sloping trend lines. The Trend Leaders list has hit a new low. 

Glimmers of hope?

What was hidden by all the weakness is the fact that a slew of stocks are actually turning back up. Our Swing Signals list has provided a welcome surprise: 49 BUY signals and 1 Strong BUY and only 14 SELL signals. There are lots of tech stocks represented, as they should be (see the post "Tech sector earnings scorecard - Time to get bullish on tech?"). And there were no inverse ETFs on the list which is also something that is encouraging.

The Swing Signals tend to be highly responsive, leading indicators in comparison to the other signals we present here. If we see the Swing Signals start perking up, you can assume stocks are hitting bottom and getting ready to rally. Today I see glimmers of hope...

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.





Monday, January 25, 2010

Tech sector earnings scorecard - Time to get bullish on tech?


Stocks have been struggling lately, to put it mildly, but earnings season has been pretty decent. Stock prices in the tech sector has been especially weak but I don't believe tech deserves the cold shoulder. Here's why.

I've been keeping track of some of the tech bellwethers as well as some of the smaller players.All in all, the results of this earnings season have been pretty positive.

The following table is our tech scorecard. Results include a good selection of tech stocks that have reported this month right up through Monday, Jan 25. 40 out of 47 companies on our list have beat earnings expectations thus far in this earnings season. That's 85%, which to mind is pretty good.

There has been some grumbling among investors that topline growth has been lacking. This scorecard shows that 31 out of 47 companies have shown year-over-year growth in revenues. Not spectacular but not bad; it's about two thirds of companies reporting thus far and that's a decent percentage.

In any case, here is our tech scorecard thus far. We've identified which ones beat earnings expectations and which ones had topline revenue growth.

Name
Symbol
Earnings Beat?
Topline Growth?
Guidance
Infosys
INFY
Beat
Yes
Upside
EXFO
EXFO
Miss
No
Upside
Linear Tech
LLTC
Beat
Yes
Upside
Xyratex
XRTX
Miss
No
Upside
Intel
INTC
Beat
Yes
In-line
ADTRAN
ADTN
Beat
Yes

Cree
CREE
Beat
Yes
Upside
IBM
IBM
Beat
Yes
Upside
Supertex
SUPX
Beat
No

Wipro
WIT
Beat
Yes

ASML Holding
ASML
Beat
Yes

iGATE
IGTE
Miss
Yes

Amdocs
DOX
Beat
No
Mixed
eBay
EBAY
Beat
Yes
Mixed
F5 Networks
FFIV
Beat
Yes
Upside
Logitech Intl SA
LOGI
Beat
No

NVE Corp
NVEC
Beat
Yes

Plexus
PLXS
Beat
No
Upside
Seagate Tech
STX
Beat
Yes
Upside
Skyworks
SWKS
Beat
Yes
Upside
Xilinx
XLNX
Beat
Yes
Upside
Amphenol
APH
Beat
Yes
Upside
Fairchild Semi
FCS
Beat
Yes
Upside
Affiliated Computer
ACS
Beat
Yes

Xerox
XRX
Beat
No
Upside
California Micro
CAMD
Beat
Yes

Advanced Micro
AMD
Beat
Yes

Digi Intl
DGII
Beat
Yes
In-line
Elec For Imaging
EFII
Beat
No

Emulex
ELX
Beat
No
Mixed
Google
GOOG
Beat
Yes
Upside
Intl Game Tech
IGT
Beat
No

Microsemi
MSCC
Beat
No
Mixed
NetScout Systems
NTCT
Beat
No
In-line
Synaptics
SYNA
Beat
No
Mixed
Western Digital
WDC
Beat
Yes

LM Ericsson
ERIC
Miss
No

Apple
AAPL
Beat
Yes
Upside
Atheros Communications
ATHR
Beat
Yes

JDA Software
JDAS
Miss
Yes

Mindspeed
MSPD
Beat
Yes
Upside
PLX Tech
PLXT
Beat
Yes
Upside
Texas Instruments
TXN
Beat
Yes
Upside
VMware
VMW
Beat
Yes
Upside
Volterra Semi
VLTR
Beat
Yes

Zoran
ZRAN
Beat
Yes
Upside

Since earnings reports are backwards looking, I've included forward guidance. Out of 46 stocks in the list, there are 29 that have provided guidance that I was able to include. Out of that 29, fully 21 have provided upside guidance, and the rest have provided mixed or in-line guidance.

So with 85% of tech stocks beating earnings expectations and 66% reporting year-over-year growth in revenues the tech sector is looking pretty good from the point of view of fundamentals. Given how hard tech stocks have fallen, I'm thinking this is getting to be a pretty good entry point for those looking to invest in the tech sector (ETFs IYW, XLK and ROM are pretty good candidates). And with a significant number of stocks providing positive forward guidance, the risk at this point seems to be somewhat diminished.

The next few weeks will feature plenty more earnings reports so stay tuned for updates to the tech scorecard.

Disclosure: no positions in stocks mentioned in this post though I am currently long ROM



Sunday, January 24, 2010

This market will recover sooner rather than later - but in the meantime, run for cover

As I mentioned in yesterday's Alert HQ post, SELL signals dominate after a week in which stocks slid sharply. Here are the reasons most commonly given for the decline in stock prices:

  • China's central bank is restricting lending at some (though not all) banks. 
  • President Obama has proposed outlawing banks that take deposits from engaging in proprietary trading  
  • Some members of Congress have announced that they have withdrawn support for re-appointing Fed Chairman Ben Bernanke
Are these good reasons for the markets to tank? I don't think so.

This leads me to think that the market is falling just because it has gone too long without a correction. Which implies that this rough patch will run its course and the up-trend will continue.

Here's why I think the market will recover sooner rather than later:
  • China's central bank is restricting lending at some (though not all) banks. -- This is a good thing! Don't we want China to prevent excess liquidity from contributing to another bubble? Of course, we do!
  • President Obama has proposed outlawing banks that take deposits from engaging in proprietary trading -- So what? This means half a dozen "too big to fail" banks, the ones that took the global economy to the brink of destruction, will see their profits reduced. There are probably 1200 banks in the U.S. that will be totally unaffected by this proposal if it ever becomes law, which is doubtful, anyway.
  • Some members of Congress have announced that they have withdrawn support for re-appointing Fed Chairman Ben Bernanke -- it's interesting that so many bloggers are calling for Bernanke's head but when that circumstance begins to seem possible, investors vote emphatically "No!" According to the administration and even some Republicans, though, Ben is still expected to win re-appointment. So this is probably a non-issue.
  • Earnings season is going rather well -- According to Briefing.com, "roughly 60 S&P 500 companies reported their results this week, with 47 posting upside results." That's a beat rate of almost 80% and that's pretty darn good.  And it should make it harder for bears to say that the S&P 500 is over-valued at current levels
  • Company forecasts are reasonably positive -- though many company management teams are still sounding notes of caution, nearly all are indicating the worst is over and many are looking forward to growth again. Unfortunately, few are talking about ramping up hiring at this point.
  • Economic reports are mixed to good -- OK, not every regional survey or every industry is hitting on all cylinders but, except maybe for new home builders and certain auto makers, the general trend is positive. Certainly the employment situation is still troublesome at this time but continued economic improvement will in time lead to gains in employment. After a recession of the severity we have just experienced, you can't expect the recovery to be straight up in all industry sectors and all segments of the economy.
My take is that we are seeing more of a technical move in stock prices rather than a situation where investors are shocked at a decline in fundamentals. To me this implies this pullback, though it might lead to the kind of 10% decline that is characterized as a correction, will not be especially deep nor particularly long in duration.

So if this pullback is primarily technical in nature, let's examine some of the technical underpinnings of this market. The following charts are derived from data collected during our Alert HQ process and they provide a high-level look at a couple of the indicators we track across the whole market.

The view from Alert HQ --

Let's start with our moving average analysis.




For this first chart we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 7000 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY). You can see that yellow line that tracks the number of stocks above their 50-DMA has plunged below the magenta line that tracks the number of cross-overs. This kind of action is generally followed by further weakness until the magenta line traces out a more distinct decline. This suggests investors could be in for more pain.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.




This chart shows a nasty situation developing. The number of stocks in downtrends (the red line) was about as low as it has been in the last two years. It's no surprise then, that the direction of least resistance for this indicator is up. Similarly, the number of stocks in up-trends had reached a high level, though not an extreme level, so it is not shocking to see the indicator drop.

Given that we tracked these indicators across pretty much the entire market, let's do a little technical analysis on the Vanguard Total Market VIPERs ETF (VTI)



You can see that the ETF has already fallen through two support levels as designated by the blue and green horizontal lines. VTI has also fallen below its lower Bollinger Band and its 50-day moving average. MACD has broken in a bearish direction and Aroon has, too. All told, the damage has been pretty severe and it has occurred in quite a short time.

You can also see that we are pretty close to the next support level (the orange horizontal line) and the trend line (the magenta line). A move below where these two lines intersect, in the $55 area, could easily see the ETF fall to the $51 to $52 range. And that would give us a full-blown correction.

Conclusion --

Technical analysis suggests this market has further to fall though we could easily see a little bounce early this week. On the other hand, the fundamentals still support a bullish outlook.

So, while Mr. Market works his way through this pullback, it is prudent for investors to just step aside or run for cover. On the other hand, I would NOT short this market.

In my opinion, given that the long-term trend in stock prices and fundamentals are both positive, the best idea is to keep some powder dry. The BUY signals could be back next week!



Saturday, January 23, 2010

Weekend Winners and Losers - Alert HQ BUY and SELL signals for January 22, 2010

This is the usual quick post announcing that the weekend's stock signals are now available at Alert HQ. This is the first one for 2010.

Today we have the following stock picks and signals:

  • Based on daily data, we have 6 Alert HQ BUY signals and 237 SELL signals
  • Based on weekly data, we have 2 Alert HQ BUY signal and 35 SELL signals
  • We have 201 Bollinger Band Breakouts based on daily data and 120 Breakouts based on weekly data.
  • We have 796 Cash Flow Kings
  • 43 Swing Signals -- 9 BUY signals and 34 SELL Signals
  • 292 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 10 stocks that are new additions to the list and 80 that fell off the previous list.
  • 130 Trend Busters based on daily data of which 28 are BUY signals. We also have 92 Trend Busters based on weekly data.
  • 141 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We also have 58 Gap Signals based on weekly data.
The view from Alert HQ --

Well, the emphasis this weekend is on SELL signals. And no wonder. Major averages fell between 3% and 4%. No sectors were spared as everything went down. The only hopeful sign is that small-caps, as personified by the Russell 2000, performed better than other market segments. That is probably because they are less exposed to China (signs of tightening of lending in china caused emerging market stocks to sell off) and they are less exposed to tough rules to reign in large banks that were proposed by Obama this week.

Our Alert HQ signals are very negative today. They are so negative that a contrarian would say a rally is due. Be that as it may, for now we have a portrait of a market in trouble. As you may remember, we scan roughly 7000 stocks and ETFs to identify our BUY and SELL signals. Over 1000 stocks have fallen below their 50-DMA compared to last week. About 1700 have fallen below their 20-DMA this week so that nearly 2/3 of all stocks are now below their 20-DMA. I suspect lots of stops have been hit.

So, we have a falling market despite mostly good earnings reports. That seems to be what is driving what BUY signals we are able to offer this weekend. For example, Digi International (DGII) joined our Trend Leaders list based on a nice earnings beat. On the other hand, Google (GOOG) also beat handily and the stock fell. Those stocks that bucked the trend this week and managed to show gains deserve a look. Check them out now at Alert HQ!

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.

Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Thursday, January 21, 2010

Are we sufficiently oversold yet? - Alert HQ signals for Thursday, Jan 21, 2010

This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

  • 39 Swing Signals -- 10 BUY signals and 29 SELL Signals.
  • 362 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 74 stocks that are new additions to the list and 251 that fell off the previous list.
  • 97 Trend Busters of which 25 are BUY signals and 72 are SELL signals.
  • 162 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 76 are bearish gaps and 86 are bullish gaps.
The view from Alert HQ --

Ouch!

What else can you say about the last two days? Stocks down more than 1% for two days in row. And certain sectors down far more, emerging markets and tech, for example.

Our Alert HQ signals are as bearish as they have been in months. The Trend Leaders list is significantly whittled down. SELL signals are outnumbering BUY signals two or three to one. Those few stocks with BUY signals, like Altera, are notable for swimming against the tide.

Stock market performance has certainly been horrible these last two days and if you look at certain indicators, it appears the market is just barely getting into over-sold territory. Here is a chart of the Vanguard Total Market VIPERS ETF (VTI).



You can see that Williams %R has already fallen into the over-sold area but it looks like there is further downside to come. The Slow Stochastics suggest the downturn is just getting going. MACD is also bearish right now. All we can do at this point is hope the 50-day moving average holds.

Even as earnings reports come out pretty decent, stocks have been falling. It appears that some kind of pullback will have to fully play out before we can expect markets to resume their up-trends. Let's hope it's just a pullback and not a full-fledged correction.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.


Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.





Wednesday, January 20, 2010

Ten stocks with strong charts and reasonable valuations

I ran a simple screen against my database today and came up with ten companies. The screen looks for stocks with a reasonable valuation but also charts that are strongly trending up. Here are the criteria:

  • PE between 0 and 20
  • PEG between 0 and 1.3
  • Price-to-Sales less than 2
  • Debt-to-Equity less than 1
  • New addition to the most recent Trend Leaders list - this requires that Aroon, MACD and Wilder's DMI are all bullish
Here is the list of ten stocks that made the grade:

Symbol
Name
CHOP
China Gerui Advanced Materials Group Limited
HSIC
Henry Schein, Inc.
ALGT
Allegiant Travel Company
WBD
WIMM-BILL-DANN FOODS OJSC ADS'S (EACH REP ONE SHARE OF C/S)
HQS
HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
CAB
CABELA'S INCORPORATED
ACN
ACCENTURE LTD.
AFG
AMERICAN FINANCIAL GROUP
JOSB
Jos. A. Bank Clothiers, Inc.
RRGB
Red Robin Gourmet Burgers, Inc.

With so much attention focused on healthcare stocks lately, it's worth taking a deeper look at one of the stock picks on the list: Henry Schein, Inc.

Henry Schien is a distributor of healthcare products and services primarily to office-based healthcare practitioners in the North American and European markets. The company operates through two segments, Healthcare Distribution and Technology. The Healthcare Distribution segment provides all kinds of consumables including pharmaceuticals and diagnostic materials as well as dental equipment, X-ray equipment, etc. to dentist and doctors offices. The Technology segment offers software and related products that primarily include practice-management software systems for dental and medical practitioners and animal health clinics; and financial services and continuing education services for practitioners.

The company has over half a million customers and is the largest company serving the market of small dental, medical and animal health practitioners.It has expanded beyond North America and Europe into the People's Republic of China, Saudi Arabia, and the United Arab Emirates.

Henry Schein is $5 billion company. Financially, by virtue of being on this screen, it maintains reasonable valuation (PE of 17, PEG of 1.18, Price-to-Sales of 0.8, very little debt) and has been able to show steady earnings growth. Click around on the chart below. Quarterly results are a little erratic but in general, annual earnings have been on a nice up-trend. 2009, though, a year that has been so tough for many companies, looks to be a bit disappointing.


Explore more HSIC Data on Wikinvest

In any case, the company will be reporting fourth quarter earnings soon and investors will be looking for continued sequential improvement. In the most recently reported quarter, international sales grew about 8% though domestic sales were slightly negative. The Technology segment turned in 5% growth and, though it is significantly smaller than the Healthcare Distribution segment, the company benefits from gross margins over 70% in the Technology segment.

The company's stock price has been quite strong up until the last week or so. Here is the chart:



You can see that all three of the trending indicators we screen for are currently bullish. Unfortunately, investors appear to be getting cold feet as we approach the earnings report.

In any case, we have a company that is by no means expensive and has the opportunity to benefit from the surge in healthcare stocks. The company is well positioned to benefit from several trends in the industry. Management is projecting increasing consolidation in its niche and, as the largest company in its sector, they believe they will be able to acquire smaller players that will allow Henry Schein to expand its footprint and market share. Trends toward cost containment will favor the company as it is big enough to achieve economies of scale that are unavailable to smaller competitors. As with most healthcare companies, they point to the aging population as a source of increasing revenue. On the other hand it is hard to predict what the unintended consequences of government-driven healthcare reform could be for the company.

In summary, it appears we have a conservative company at a reasonable valuation with a strong stock chart whose price is faltering slightly prior to an earnings report.  This seems the perfect candidate for a watch list. Even if the company beats earnings expectations, it looks like investors will have an opportunity to catch the stock at a lower entry point.

Disclosure: no positions in any stocks mentioned



Tuesday, January 19, 2010

Alert HQ signals for Tuesday, Jan 19, 2010





This post is announcing that Tuesday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:
  • 34 Swing Signals -- 21 BUY signals and 13 SELL Signals.
  • 541 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 92 stocks that are new additions to the list and 200 that fell off the previous list.
  • 19 Trend Busters of which 13 are BUY signals and 6 are SELL signals.
  • 191 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 86 are bearish gaps and 105 are bullish gaps.
The view from Alert HQ --

Stocks rebounded today after Friday's sell-off and some new highs were attained, just barely. Essentially though, despite the gyrations, major averages have been more or less in a range for the last week or so.

What is encouraging, however, is seeing a mild resurgence of bullishness in our Alert HQ signals. The number of signals is not high but at least we are seeing more BUY signals than SELL signals again. We also see more stocks and ETFs being added to the Trend Leaders list than we see falling off the list.

Things are always crazy during earnings season but it's still worth while to keep an eye on the BUY signals. If this market starts breaking out again, you'll want to have a few good candidates on your watch list.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.


Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Sunday, January 17, 2010

Double Dip, New Normal? - Jeremy Siegel doesn't buy it


It seems gloom sells better than optimism so the financial blogosphere is rampant with stories predicting a double dip recession. In addition, it seems the phrase of the year is "new normal" which has been attributed to PIMCO's Bill Gross. The phrase is a snappy description of his prediction for below-par market returns for years to come.

I recently read an interview with Wharton professor Jeremy Siegel and he has quite a different opinion. You may remember him as the author of  "Stocks for the Long Run" and numerous other books. He is also interviewed and quoted liberally in many financial publications including the Wall Street Journal and at sites like the TheStreet.com

Here are Mr. Siegel's reasons for optimism:

PE Ratios --

Mr. Siegel points out that consensus forecasts are around $70 a share on the S&P 500. He thinks it might even be higher. The long-run average PE is roughly 15. Fifteen times 70 is 1,050. Friday, the S&P 500 closed at 1136. That's about 8% over the $1050 level so we are more or less in the ballpark of fair value.

Mr. Siegel  goes on discuss research of his which shows that when interest rates and inflation are as low as they are now, the average post-World War II PE ratio has been 18 to 20. As long as we don't get a sharp increase in interest rates, the fair valuation of the stock market should be higher than what we see today.

A second very important factor mentioned in the interview is that 2010 is just one year out from the most severe recession in the post-war period. Mr. Siegel says earnings this year will be nowhere near what he would consider normal. If we go back in history, he says, we have usually matched, if not surpassed, the previous peak in earnings after four years or so. In 2007, the S&P 500 had earnings of $92 a share. That won't be hit in 2010. It might not even be hit in 2011. But history tells us that by 2012, we should be in the $90 range or even above. So, if you apply normal ratios -- 15 or 16, let's say -- to $90 a share, you still end up considerably higher than we are today, roughly 200 points above recent levels.

Interest Rates and Inflation --

One of the caveats mentioned in the preceding section is interest rates. Mr. Siegel doesn't expect rates to stay as low as they are now (who does?) but he doesn't expect them to hit double digits or even high single digits because he thnks inflation will remain under control. His prediction is for inflation to be under control this year and probably into 2011. However, he expects we will have an "upward tilt" to inflation, which means a longer-run trend into the 2%-to-4% range of inflation rather than zero to two

In a shot at the doom-and-gloomers, he comments: "The scaremongers, who worry that the ton of money the Fed created to fight off the crisis is going to fuel the next [period of] inflation, are wrong." He contends that Bernanke has been a good enough economist to provide the liquidity necessary to prevent a repeat of the Great Depression and he will also be a good enough economist to raise interest rates to whatever level is necessary if inflation starts running into the mid-single digits or higher. In fact, he expects the Fed to raise rates sooner rather than later, which he thinks is liable to spark a correction in stocks. As investors realize, however, that rates were increased because the economy was doing well, stocks will resume their up-trend.

What could go wrong --

Siegel admits there are factors that could upend his optimistic projections. One of his main fears is that commodity prices could get out of hand. If, for example, oil got back up $100 a barrel, it would "put a dent" in the recovery though he believes it would not derail the recovery. He feels commodities are fully priced at the moment but we know that can easily change as the recovery gains steam.

Then there is the issue of regulation. He says he doesn't agree with everything coming out of Washington but he says he hasn't heard anything yet that is really going to "squelch the recovery."

Finally, there is the U.S. deficit. Siegel feels that two-thirds of the deficit is a direct result of the recession. As the recession wanes, he says: "tax revenues will bounce back. Some spending will decline -- unemployment insurance, etc. We will move to a more manageable deficit as a result of the economic recovery." He points out that the huge liabilities of Medicare and Social Security were there before the recession and they didn't prevent the economy from booming; therefore, his opinion is that they won't prevent the economy from recovering today. He agrees with those who say we can't continue to run a deficit as big as it is today but he is optimistic that as tax revenues increase with the upswing in economic activity, the deficit will be whittled down naturally.

Conclusion --

You may or may not agree with Jeremy Siegel but he has earned his reputation and his opinions should be accepted as at least one of the more well-reasoned and well-researched viewpoints among the cacophony of opinions on the web. His outlook is rather sanguine and, as a result, his investment direction leans heavily toward stocks.

He believes the rate issues discussed above will make this a bad year for bonds. On the other hand, his belief in the recovery suggests this will be a good year for stocks. And he's not afraid to take a fairly aggressive position on stocks. He feels emerging markets will remain strong and that EFA (Europe, the Far East and Australasia) will be attractive. He believes U.S. stocks should also be part of the portfolio and should include small and mid-caps.

So here we have another vote for better times ahead in the stock market and the economy. I sure hope Jeremy Siegel is right.

Source: Jeremy Siegel on 2010: Good for Stocks, Bad for Bonds -- and Why Interest Rates Will Go Up



After a mixed week, caution may be the best short-term strategy

Earnings season kicked off this week and investors were in a sour mood.

Alcoa (AA) started things off with a miss and that set an ugly tone. JPMorgan Chase (JPM) beat earnings expectations but came in light on revenues, increased loan loss reserves and posted declining results in some business areas that had previously been on fire. Investors took the opportunity to bail on the stock and this put pressure on the rest of the financial sector. If JPMorgan Chase is considered the best run bank in the U.S., what does that say about the others, like Citi?

Intel (INTC) reported on Thursday after the close and they couldn't have done better, beating expectations on the top line and the bottom line and providing positive forward guidance. Investors, however, would have none of it and the stock sold off hard as did the rest of the semiconductor sector.

After Friday's doom and gloom, the TradeRadar weekend Alert HQ signals took a decidedly bearish tone. Looking at the indicators we track across the whole market, however, there may be a different conclusion.

The view from Alert HQ --

Charts of some of the statistics we track at Alert HQ are presented below.



For this first chart we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 7000 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY). Despite the awful market action on Friday, you can see from this chart that very little damage was done to the overall market. Yes, the number of stocks above their 50-day moving average declined a little but the number of stocks whose 20-day moving average is above their 50-day moving average actually increased! And SPY has barely wobbled in its strong up-trend.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.



This chart shows a similar situation: very little effect from last Friday's sell-off. Using Aroon analysis to count the number of stocks in strong up-trends and down-trends, we get another indication of the strength of the overall market. This week's results show the market to be in pretty healthy shape though it might soon be approaching an over-bought state.

Conclusion --

Though earnings season brought some unease to market participants, stocks as a whole held up pretty well. It appears that there is less patience for the "less bad" kind of earnings report, witness the 11% plunge in Alcoa's stock price, and a fair amount of "sell the news" attitude as we saw with Intel.

Where stocks go next will be function mostly of earnings reports but we do have some important economic reports that could move the market this week. We'll see building permits and housing starts, the Producer Price Index, the weekly initial and continuing jobless claims, the Conference Board's index of leading indicators and the Philadelphia Fed's manufacturing index.

As for those pesky earnings, a bevy of bellwether companies will be reporting this week including Citigroup, ADTRAN and Cree (both companies I have written about), IBM, Wipro, Bank of America, Morgan Stanley, Wells Fargo, eBay, Goldman Sachs, Taiwan Semiconductor, AMD, Google, GE and many more. In other words, we should get a good read on the financial and tech sectors this week.

This week could be make or break for this market. Underlying strength is so far intact but worrisome signs have cropped up at Alert HQ. This is a divergence that suggests "caution" may be the best short-term strategy. A bad week for earnings reports could deal a serious blow to stocks but a good week could see us notching new highs again. It's always surprising and dangerous investing during earnings season, so be careful and be sure to double-check your stops.



Saturday, January 16, 2010

Weekend Winners and Losers - Alert HQ BUY and SELL signals for January 15, 2010

This is the usual quick post announcing that the weekend's stock signals are now available at Alert HQ. This is the first one for 2010.

Today we have the following stock picks and signals:

  • Based on daily data, we have 9 Alert HQ BUY signals and 96 SELL signals
  • Based on weekly data, we have 3 Alert HQ BUY signal and 8 SELL signals
  • We have 83 Bollinger Band Breakouts based on daily data and 213 Breakouts based on weekly data.
  • We have 776 Cash Flow Kings
  • 49 Swing Signals -- 13 BUY signals and 36 SELL Signals
  • 513 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 68 stocks that are new additions to the list and 137 that fell off the previous list.
  • 32 Trend Busters based on daily data of which 19 are BUY signals. We also have 48 Trend Busters based on weekly data.
  • 198 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We also have 64 Gap Signals based on weekly data.
The view from Alert HQ --

After struggling to a new high on Monday, stocks experienced mini-meltdowns on Tuesday and Friday. Especially notable was the "sell the news" flavor of Friday's action where a stellar earnings report from Intel the day before failed to generate a rally and, with stocks falling across the board, semiconductors were among the worst performers.

It's no surprise then that the Alert HQ signals should take on a bearish tone. We saw Tuesday's signals reflecting weakness, Thursday's signals a slight return to bullishness and today signals an outright capitulation.

On nearly all of our lists, we see SELL signals greatly outnumbering BUY signals. Fewer stocks are joining the Trend Leaders list while larger numbers are falling off the list. Our early indicator, the Swing Trading Signals list is showing a big majority of SELL signals. When this occurs, it often happens that the overall market comes in for a period of weakness.

So it looks likely that stocks will continue downward and begin to test support levels. And then again, it's earnings season, so anything can happen. So best to keep an eye on our signals and look for a quick turnaround on the Swing Signals list to guide you.

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.


Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Thursday, January 14, 2010

Alert HQ signals for Thursday, Jan 14, 2010

This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

  • 30 Swing Signals -- 15 BUY signals and 15 SELL Signals.
  • 582 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 142 stocks that are new additions to the list and 179 that fell off the previous list.
  • 41 Trend Busters of which 35 are BUY signals and 6 are SELL signals.
  • 208 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 84 are bearish gaps and 124 are bullish gaps.
The view from Alert HQ --

Economic reports were not particularly good today but stocks managed to eke out a modest advance anyway. The jobless numbers and the retail sales figures released today were both worse than expected though not bad enough to cause a rout in the markets. Major averages started the day in negative territory and gradually worked their way to fractional gains.

Today, it was tech that led the way and the NASDAQ outpaced the S&P 500 and the Dow. There was much anticipation for Intel's earnings report which was released after the close. Thankfully, the company handily beat expectations; on the top line, bottom line and margins. Further bolstering the case for tech, SAP also came through with a good report.

So it was with some surprise that I looked through today's lists of BUY signals and didn't see all that many tech stocks. Be that as it may, at least we had a good selection of BUY signals. After the dismal results on Tuesday, it was good to see our Alert HQ signals looking a bit more promising tonight.

Our Swing Trading Signals are evenly split between BUY signals and SELL signals. That's a big improvement from Tuesday when SELL signals outnumbered BUY signals 5 to 1. Trend Busters continue to show BUY signals to be in a large majority. And there are a lot more bullish gaps on the Gap Analysis list than bearish gaps.

Not everything is coming up roses, however. There is weakness creeping into the Trend Leaders list which decreased in size and shows more stocks falling off the list than were added to the list.

In general, our signals show that markets may not be exhibiting exceptional strength but they are certainly not signaling a correction. It is also clear that the trend remains UP. So browse our lists for a few BUY signals!

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.


Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Tuesday, January 12, 2010

Alert HQ signals for Tuesday, Jan 12, 2010



This post is announcing that Tuesday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:
  • 66 Swing Signals -- 11 BUY signals and 55 SELL Signals.
  • 619 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 149 stocks that are new additions to the list and 200 that fell off the previous list.
  • 29 Trend Busters of which 22 are BUY signals and 7 are SELL signals.
  • 211 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 82 are bearish gaps and 129 are bullish gaps.
The view from Alert HQ --

Pretty inauspicious start to earnings season today!

Alcoa missed Wall Street expectations when they reported last night and that was enough to start a steady erosion in stocks today. And after weeks of consistent bullishness, our Alert HQ signals have been turned on their heads.

What we are seeing is SELL signals outnumbering BUY signals on three out of four of the lists above. To add insult to injury, most of the BUY signals on the Swing Trading list are inverse ETFs. Finally, though the Trend Leaders list is still reasonably sizable, the number of stocks dropping off the list exceeded the number that were added.

All in all, there is not much good to say about the behavior of stocks today. Still, it's not the end of the world. Here is the chart of the Total Market Vipers ETF (VTI).



The Good - The Slow Stochastics and MACD have both been marching upward along with stocks over the last month or so. This lack of divergence has been bullish. Now, both indicators have turned down but neither has quite given a SELL signal yet though both are close.

The Bad - With the bearishness in the Alert HQ signals, it is reasonable to assume that further weakness is in store.

The Ugly - And if there is going to be further weakness, there's quite a way to go before VTI, for example, gets down to a serious support level or its 50-day moving average. So be prepared to see profits dwindle.

As a result, investors should not be running for the exits yet but caution should surely be uppermost in our minds.

As we move into earnings season, craziness and volatility can be expected. Today semiconductors got killed but they could easily rally again after Intel reports on Thursday. So hold on for a bumpy ride!

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.


Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Monday, January 11, 2010

Iron Mountain breaking out - should you invest?

If you are a regular user of stock charts, sometimes you see a textbook pattern develop. That seems to be what is happening with Iron Mountain (IRM).

The stock showed up on this weekend's Trend Busters list (http://trade-radar.com/AlertHQ/trendbusters.html) as a BUY signal. In other words, it looks the stock has been in a down-trend and has suddenly turned up. Here is the chart:



Iron Mountain has been in a prolonged down-trend since the end of August (see the blue downward sloping line). It is amazing how perfectly the stock tracked that blue trend line all the way down. This makes the recent upside breakout that much more impressive.

Other aspects of technical analysis suggest the move may have legs. MACD has decisively turned up. The stock closed above its 50-day moving average today, a day when tech stocks were under pressure. The Aroon UP indicator has shot from nearly zero up to 100.

I've also showed the Slow Stochastics which shot up from over-sold to over-bought in the last few days. For those with a more short-term focus, this suggests the stock might pause and drop back a bit, perhaps affording a cheaper entry point.

The Background --

So what does Iron Mountain do? The company is a leading provider of data backup and archiving services. In other words, if you have boxes of data records that you need to keep for legal reasons, Iron Mountain will pick them up and store them for you. If you use tapes, for example, to back up the file servers or database servers in your data center, Iron Mountain will pick up the tapes and store them for you in the event you have a problem and need to restore the data. Beyond simple storage, the company offers further services including records management, data protection and recovery, and information destruction.

Iron Mountain operates in North America, Europe, Latin America, and Asia Pacific. It serves financial, commercial, legal, banking, healthcare, accounting, insurance, entertainment, and government organizations. The company has been in business since 1951.

The Financials --

Iron Mountain is a $4.95 billion company which means the company is considered a mid-cap. More importantly, is it cheap or expensive?

Valuation indicators show the stock to close to value territory. The Price-to-Sales ratio of 1.64, Price-to-Book of 2.4 and the Enterprise Value/EBITDA ratio of 9.243 are all quite reasonable. The forward PE of 22 is not too bad for a tech stock.

On the other hand, a PEG of 1.79 is a bit high. The real problem with Iron Mountain, however, is related to debt. The Debt-to-Equity ratio of 1.61 is a bit high and the $3.1 billion dollars of debt the company carries is more than three times EBITDA which leaves the TradeRadar Survivability indicator flashing "caution."  The Interest Coverage ratio for the most recent reported quarter is only 2.38; typically, a value below 2.5 is considered to be a warning sign. The chart below this has been a problem for some time now:


Explore more IRM Data on Wikinvest

On the positive side, the company's cash flow yield is solid and the year-over-year quarterly earnings growth of 281% shows the company is building some momentum coming out of this recession. It's most recent quarter was actually pretty good and suffers in comparison only to the quarter before when the company had record net income and record net margin. The following chart shows the last five quarters:


Explore more IRM Data on Wikinvest

Click on this chart to look at the last 10 quarters and you will see that revenues have only dipped slightly; the company has not suffered as badly as many other companies did during this recession.

The Outlook --

Iron Mountain's quarter ended in December so they are due to report sometime this month or next. The current breakout, then, is probably based on high expectations for the upcoming earnings report. Sequential revenues have been rising for the last two quarters and net income has also been doing well so the expectations are probably well founded.

The company is an industry leader in its niche with only one major publicly-traded competitor, Cintas (CTAS). And it's a good niche to be in. The last two decades have seen an explosion in the amount of data generated by corporations and that trend has not abated. Furthermore, regulatory rules regarding maintaining critical data for years has increased the need for corporations to put all that data somewhere. Both of these factors mean good times for these companies should continue.

So Iron Mountain looks very good from a technical analysis point of view and the potential earnings growth is solid. The only question is whether the company can continue to grow net income strongly enough to keep the high level of debt from swamping the company. Given that the company has survived the recession despite all that debt, the answer is that Iron Mountain will probably be alright.

Disclosure: no positions




Saturday, January 9, 2010

Weekend Winners and Losers - Alert HQ BUY and SELL signals for January 8, 2010

This is the usual quick post announcing that the weekend's stock signals are now available at Alert HQ. This is the first one for 2010.

Today we have the following stock picks and signals:

  • Based on daily data, we have 37 Alert HQ BUY signals and 32 SELL signals
  • Based on weekly data, we have 5 Alert HQ BUY signal and 5 SELL signals
  • We have 191 Bollinger Band Breakouts based on daily data and 337 Breakouts based on weekly data.
  • We have 774 Cash Flow Kings
  • 23 Swing Signals -- 15 BUY signals and 6 SELL Signals plus one Strong BUY and one Strong SELL.
  • 672 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 104 stocks that are new additions to the list and 63 that fell off the previous list.
  • 37 Trend Busters based on daily data of which 34 are BUY signals. We also have 38 Trend Busters based on weekly data.
  • 186 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We also have 57 Gap Signals based on weekly data.
The view from Alert HQ --

The S&P 500 and the Russell 2000 managed to outdo the NASDAQ this week, a turnaround from we had seen at the end of December. It is welcome to see the other averages catching up with the NASDAQ which was the first one to break out to higher levels last month. This week's solid gains, despite a disappointment in the Nonfarm Payrolls Report, kept the bullish tone intact in our Alert HQ signals.

In almost all our lists of signals and stock picks, BUY signals outnumber SELL signals. The lone holdout is the list of Alert HQ reversal signals based on weekly data. We also continue to see the list of Trend Leaders grow which shows more stocks are getting locked into solid up-trends.

All in all, it was a decent week in the markets and our signals do not yet show stocks to be severely over-bought. Browse our lists of free stock picks and see which stocks and ETFs are showing strength.

Using our signals --

Visit Alert HQ to view or download your free lists of stock alerts. The alerts based on weekly data show those stocks that have exhibited some good follow-through after a recent trend reversal. If you want to be early in identifying the newest trend reversals, the lists based on daily data are for you.

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you have no faith in technical analysis, the Cash Flow Kings may be just what you are looking for. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas. See them all at Alert HQ.

Remember, we also provide our latest updated Swing Signals, Trend Leaders, Gaps and Trend Busters on Tuesday and Thursday nights.

Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Thursday, January 7, 2010

Alert HQ signals for Thursday, Jan 7, 2010



This post is announcing that Thursday's Swing Signals, Trend Leaders, Trend Busters and Gap Signals are now available at Alert HQ. All are based on daily data.

Today we have the following:

  • 25 Swing Signals -- 13 BUY signals and 12 SELL Signals.
  • 631 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 191 stocks that are new additions to the list and 145 that fell off the previous list.
  • 43 Trend Busters of which 36 are BUY signals and 7 are SELL signals.
  • 187 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. 65 are bearish gaps and 122 are bullish gaps.
The view from Alert HQ --

Another day of markets muddling through. The NASDAQ came up with another minor loss while the Dow and the S&P 500 managed minor gains. With this kind of inconclusive behavior I'm  surprised to see such a bullish tone to our Alert HQ signals today.

Though our Swing Trading Signals are again noncommittal, nearly evenly split between BUY signals and SELL signals, the other signals are still leaning bullish. The Trend Leaders list has continued growing, including a total of 631 stocks and ETFs today, the highest it's been in weeks. The Trend Busters list continues to feature many more BUY signals than SELL signals and the Gap Analysis list shows more bullish gaps than bearish gaps,

Though major market averages seem to be struggling a bit, the broad market continues to produce stocks with BUY signals. As long as that continues, I can't see markets falling in a worrisome way. So take a look at our BUY signals, you're bound to find a few that suit your investment objectives.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals or Gap Signals may provide some good trading ideas.

Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Wednesday, January 6, 2010

SEMI offers wildly optimistic forecast for semi equipment sector -- best opportunity may lie in one sub-sector

SEMI, global industry association serving the manufacturing supply chains for the microelectronic, display and photovoltaic industries, recently released their forecast for semiconductor equipment sales for 2010 and 2011. The results are optimistic, indeed.

Here is the money quote:

The forecast indicates that, following a 31 percent decline in 2008, the equipment sector will post another significant decline of approximately 46 percent in 2009. SEMI expects the market to grow approximately 53 percent in 2010 to US$24.5 billion and to further increase about 28 percent in 2011 to US$31.2 billion.
Here is a chart that plots these growth rates with 2007 considered to be 100%



Despite the torrid growth rates forecast by SEMI, you can see that even by 2011, semiconductor equipment sales will not be up to the level of 2007. Talk about an industry downturn!

Another interesting aspect of the forecast is the following table that breaks things down by equipment segment.

Forecast by Equipment Segment


2008 Actual
2009
2010
2011
Equipment Type
$B
$B
%
$B
%
$B
%
Wafer Processing
22.03
11.95
-45.8
18.37
53.7
23.55
28.2
Assembly & Packaging
2.04
1.36
-33.3
1.95
43.0
2.38
22.2
Test
3.45
1.57
-54.5
2.54
61.5
3.27
28.8
Other
2.00
1.14
-42.9
1.63
43.2
2.02
23.6
Total Equipment
29.52
16.03
-45.7
24.49
52.8
31.22
27.5


Note the yellow highlight. This shows that the segment with the largest projected growth is Test Equipment. SEMI is looking for over 60% growth in this area.

How to play it --

The list of publicly traded semiconductor test equipment companies is not particularly large. I'll list several here:
  • Advantest (ATE)
  • Amkor (AMKR)
  • LTX-Credence (LTXC)
  • Teradyne (TER)
  • Verigy (VRGY)
All of these companies have been doing well lately. Here I try to squeeze them all into one chart:



With these stocks, the whole story is what may transpire in the future. Everyone of them is coming off a money-losing year. Amkor at least has positive Enterprise Value/EBITDA ratio, while the others do not. In general, the financials for these companies are a mess after two years of the bottom falling out of the industry.

There are some analysts who say that the SEMI forecast is way too optimistic. EETimes says that SEMI has admitted there are no brand new foundries planned for 2010. EETimes is quite bearish on the semiconductor equipment sector despite several large contract manufacturers spending significant sums on new equipment in 2009. For example, TSMC spent $4.5 billion on new equipment in 2009, but then again, what's their budget for 2010?

So if chip vendors don't ramp up demand for manufacturing equipment as much as SEMI expects, there is still potential in the test equipment sector. Test equipment is less expensive and can help to increase yields and efficiency and reduce waste - all things that help to improve margins.

I myself like Verigy because one of their specialties is testing system-on-a-chip semiconductors. This is a growing area as more and more OEMs look for further integration in order to offer increased functionality at lower prices. The market seems to like Verigy, too, as their chart shows them as top performer among the five stocks listed here.

Add these stocks to your watchlist and look for first quarter earnings results. Let's see if that forecast is playing out as SEMI predicts.

Disclosure: no positions

Source: Worldwide Semiconductor Equipment Sales to Grow 53 Percent in 2010




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Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.




 
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