Sunday, July 31, 2011

Range-bound in an ugly market

Was it just a couple of weeks ago that the market was shooting upward and all was right with the world? Putting it mildly, it appears we've done a bit of an about-face.

It's regrettable but all those reversals and swing signals we identified recently that were screaming BUY! are now looking a little worse for wear. Before tossing in the towel, though, let's take a look at where we stand from the perspective of the overall stock market's performance. Our moving average and trending analysis charts should provide some useful insights.

The view from Alert HQ --

For those readers who are new to TradeRadar or who don't remember what this is all about, the data for the following charts is generated from our weekly Alert HQ process. We scan roughly 6200 stocks and ETFs each weekend and gather the statistics presented below.

In this first chart below we count the number of stocks above various exponential moving averages and count the number of moving average crossovers, as well. We then plot the results against a chart of the SPDR S&P 500 ETF (SPY).


After what I called a "melt-up rally" a couple of weeks ago, we have gone from roughly two thirds of all stocks above their 50-day exponential moving averages (EMA) right back down to only one third being above their 50-day EMA.

We also see the number of stocks whose 20-day EMA is above the 50-day EMA has started to decline again.

All in all, this chart seems to say that we're back to the bottom of the range we've been in for the last few months.

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.


I have shortened the timeline on this chart because it was just getting too messy. Instead of going all the way back to January of 2009, I now start the chart in March 2010. This makes it easier to see the cyclic nature of the trending numbers.

In particular, you can see how the number of stocks in bearish trends (red line) hit a significant peak in mid-June of this year. This was immediately followed by a steep rally that allowed the number of stocks in bullish trends (yellow line) to hit another significant peak in early July. This over-bought condition was quickly remedied as stocks began to sink on economic worries, sovereign debt fears and the debt limit crisis.

As you can see, there is room for stocks to sink still further before we hit the typical over-sold levels from which the next rally will be born. And that should take SPY right back down to the lows established in January, March and June in the $127 range.

Conclusion --

For better or worse, the black comedy playing out in Washington, also known as the debt limit negotiations, should come to a head this week, possibly even this weekend. The politicians will either fail to come to agreement or will end up passing a disappointing bill. Either way, it will probably  weigh on the market and we could see stocks fall to the expected lows discussed above.

The concern everyone has is whether stocks will fall right through the bottom of the range. I'm not fond of making outright predictions so let's call this an opinion. I have to think that earnings season wasn't so bad and there are still many voices (including various economists, Fed officials and certain company CEOs) calling for improved economic activity in the second half of the year. My expectation, therefore, is that stocks should bounce. How high? Perhaps you would like to venture an opinion on that...

Disclosure: none



Wednesday, July 27, 2011

Durable Goods for June -- tech keeps muddling along

The Durable Goods advanced report for June was just released and we can now see how tech in aggregate is performing. I have been of the opinion that tech is under-valued and this could help determine whether the sector deserves better or whether it tech stocks should remain in the doghouse.

I always focus on two particular measures: shipments and new orders.

Shipments --

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how June shipments looked for the overall tech sector:


This next chart shows just the sub-category of Computers and related products.


This chart is for the Information Technology Industry. Unfortunately, the numbers for this sector are not broken out in the advance report but I thought it might be interesting to see since I have never presented it before in one of my Durable Goods posts and IT is a part of the tech sector. Anyway, this chart only goes through May.

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New Orders --

This is the category that gets the most attention as it provides a glimpse of what might unfold in the future. Starting with the sector summary we see that there was actually a small improvement in new orders.

On the other hand, in the Computers and Related Products sub-sector there was a small month-over-month decrease. Note that the moving average has not yet turned down.

Looking at new orders for IT, there have been a couple of months of improvement. I sure wish we had the numbers for June.

Conclusion --

Shipments in the tech sector have indeed been weaker over the last few months. However, it is worth noting that the volatility in the shipment numbers is no greater than when the economy was at its peak. In other words, a clear, strong up-trend would be nice but the current slight down-trend in shipments may very well be only a sign of temporary weakness.

New orders are somewhat stronger than shipments which bodes well for next month. In addition, we are heading into the time of year when tech earnings tend to pick up.

In summary, tech shipments and new orders have been muddling along. While it is clear that there has been some definite weakness, it is also apparent that the bottom isn't falling out either. To me, it supports the thesis that we could soon see a rebound in the tech sector, hopefully by the end of this year. With stocks under pressure again, the buying opportunity might just be improving.

Disclosure: none



7 Profitable Tech Stocks with 50-DMA turning Bullish

Lately tech has been coming out of the doldrums. That's good news for tech investors and the market as a whole since tech is often the sector that leads the market out of a downturn.

Here is a list of seven tech stocks that are both profitable and whose 50-day exponential moving average (EMA) is just turning bullish. Note that this is the result of Tuesday's action (7/26).

Symbol Name Industry PE Ratio Price to Sales PEG Ratio Cash Flow Yield Enterprise Value to EBITDA
BRCM Broadcom Corporation Semiconductors 17.61 2.69 0.81 6.08% 15.33
ININ Interactive Intelligence Group, Inc. Computer Software: Prepackaged Software 43.36 3.77 1.37 2.79% 19.08
KFRC Kforce, Inc. Professional Services 26.3 0.57 0.52 (3.57%) 11.17
SFN SFN Group, Inc Professional Services 36.88 0.34 1.04 2.72% 10.16
SIMO Silicon Motion Technology Corporation Semiconductors 95.08 2.15 0.66 N/A 12.03
SSYS Stratasys, Inc. Computer peripheral equipment 56.6 6.38 1.8 -0.11% 25.46
YNDX Yandex N.V. Computer Software: Programming, Data Processing 76.17 23.17 1.83 4.99% 45.94

As someone who looks for some indication of value, this list seems to be tilted toward expensive, overvalued stocks. As they say, however, growth doesn't come cheap. Though PEs range from moderate to quite high for these stocks, the PEG ratios for most of them are fairly reasonable. One can argue whether PEG is ever a reliable or useful number as an indicator of growth, since it is based on analyst predictions, but that is a topic for another post.

It is best, therefore, to look at several valuation numbers in combination. For example, Broadcom certainly doesn't look cheap but on the whole it is not especially over-priced for a tech sector growth stock if the company can deliver even partially on the expectations set by the rather low PEG of 0.81. The company just reported earnings that beat expectations with improved margins and stronger cash flow. More importantly, management indicates that they expect double-digit growth in sales of chips for smartphones and tablet computers in the current quarter as more of its communications technology is used in popular consumer electronics, including Apple's iPhones and iPads, Android smartphones and the Nintendo Wii. The company is hedging its bets by focusing not only on high-end smartphones but also on lower-end Android phones, many of which are expected to be selling in China soon, still a big market for new technology. Further addressing the China market, the company now has chips tailored to Chinese networking standards that are making their appearance in broadband applications.

While Broadcom seems to be the star of this list, it is notable that there seems to be a small trend toward tech outsourcing here. Kforce and SFN Group (also known as Spherion) are both involved in supplying tech workers on a temp or contract basis. These businesses are both benefiting from employers reluctance to hire as the jobless recovery drags on.

Another interesting candidate here is Yandex. Missed getting in early on Google or Bidu? Though Yahoo says the company is based in the Netherlands, Yandex operates a Russian Internet search site from their headquarters in Moscow and they just went public in the U.S. in May of this year. The site is much more than just a search engine and offers a number of other Internet-based services and products including an online payment system analogous to PayPal as well as sites that are similar to LinkedIn and Flickr. Yandex is the most popular site in Russia and has a search market share in that country that is three times greater than Google's.

These stocks may not be for the faint of heart, especially as the market sags under the weight of the debt ceiling debate, but there are definitely a few interesting watch list candidates here.

Disclosure:  no positions in any stocks mentioned in this post



Wednesday, July 20, 2011

A fix for the Trade-Radar software is available now -- Download it right away!

You may know that Trade-Radar Stock Inspector uses financial data from Yahoo! Well, just this past weekend Yahoo! started having an intermittent problem transmitting some of the data that our software uses. You've probably noticed the effect: Stock Inspector just quits, blows up, goes away...

Download the fix right away!

We've built in a way to get around this problem and the new version of Trade-Radar Stock Inspector is now working as it should. Plus we've fixed a couple of minor bugs while we were at it.

Just go to this special download page and get the newest version now.

Some readers who are signed up for the Trade-Radar Software Users Group will be receiving an email with this same information. This update is so important I wanted to cover all possible channels to get the word out.

As always, this update is free for all users.



Monday, July 18, 2011

Trade-Radar is back on the air

Most of the issues we encountered over the weekend have been corrected now. Trade-Radar.com and TradingStockAlerts.com are both reflecting the latest data.

There are still some anomalies here and there that you will see in some of the reports and alert pages. In particular, Exchange, Market Cap, PEG, Price-to-Sales and sometimes even Price seem to be the fields that are randomly messed up.

The database in many cases was been corrected after the HTML pages were generated and deployed to the web sites. The results in the TradingStockAlerts.com Free Screener and Premium Screener should be much more correct.

Once again, I apologize for the delays and any inconvenience this may have caused. I will be working diligently to prevent a recurrence.



Sunday, July 17, 2011

Trade-Radar weekly data running late

We're running late at Trade-Radar.com and at TradingStockAlerts.com, too.

Usually we have our weekend screens and alerts available by sometime on Saturday morning. This weekend, however, I was out of town and just came back to find that the software hit some kind of glitch and aborted. The end result is that the web sites have not yet been updated with the latest info.

The process is running now and should be complete sometime this evening (East coast time).

I apologize for the delay and any inconvenience this may have caused.

Stay tuned. We should be back on the air soon.



Friday, July 15, 2011

From the doghouse to under-the-radar market leaders

In poking around through the various stock screens on my site I came across the following interesting situation. Let me take you through my journey...

I started out looking at the Sector and Style Scorecard here at Trade-Radar. I noticed there were two Consumer related ETFs in the top eight: the iShares Dow Jones U.S. Consumer Index Fund (IYC) and the iShares Dow Jones U.S. Consumer Goods Index Fund (IYK). Interesting factoid but so far no clear investment ideas.

I popped over to the Industry Inspector at sister site TradingStockAlerts.com and set up the screener to look for industries where more than 50% of the stocks in an industry were above their 50-day EMAs and had bullish MACD. This resulted in a modest sized list of industries. Toward the top were some of the industries that have been quite popular lately including Precious Metals and Pharmaceuticals. Down the list a ways, in the Consumer Services sector (and with a less than descriptive title) was the "Other Consumer Services" industry.

Taking a quick look at the charts (by hovering over the symbols in the list of companies making up the "Other Consumer Services" industry group) revealed that many of the stocks have been steadily moving higher; however, since there are 67 stocks in this particular industry, I realized I needed a better way to sift through them before deciding which ones might be worth putting on a watch list.

So I popped over to the Premium Stock Screener and selected the "Other Consumer Services" industry as one of the screener criteria. Then I started adding more criteria, trying to whittle the list down to something manageable. Looking for only those stocks above their 50-day EMA, bullish MACD, a bullish Trend Performance Score and ROE over 15% yielded the following list:

Symbol Name
APEI American Public Education, Inc.
APOL Apollo Group, Inc.
ASPS Altisource Portfolio Solutions S.A.
BPI Bridgepoint Education
CECO Career Education Corporation
CSTR Coinstar, Inc.
DV DeVry Inc.
EDU New Oriental Education & Technology Group, Inc.
ESI ITT Educational Services, Inc.
IT Gartner, Inc.
LINC Lincoln Educational Services Corporation
LOPE Grand Canyon Education, Inc.
NAUH National American University Holdings, Inc.
STNR Steiner Leisure Limited
STRA Strayer Education, Inc.
UTI Universal Technical Institute Inc

It was more than interesting to see that almost all of these companies are involved in the for-profit education sector. Barely a year ago these stocks were shunned. It looked like government regulation was about to cut them off from lucrative government backed student loans if the schools couldn't show that their graduates were actually able to obtain decent enough jobs to repay the loans. The schools cried that this would decimate their earnings potential and sent an army of lobbyists to Washington. The rules were watered down and now these stocks have quietly regained favor. As the market has swung suddenly from one extreme to another, these companies have for the most part put in solid, much less volatile performances.

A couple of other notes: not all of these stocks are for-profit education companies. Also on the list is Coinstar, owner of the ubiquitous Redbox DVD vending machines. There is Gartner, the technology sector analysis and consulting firm. Steiner Leisure, purveyors of spa products. Finally, there is Altisource Portfolio Solutions which provides services and software for the real estate industry.

By the way, you may be interested to know that Strayer pays a nearly 3% dividend.

In conclusion, if you are looking for stocks that have sidestepped some of the recent volatility and are quietly proceeding on nice bullish trends, the list above should provide some good material for your watch list.

Disclosure: no positions in any stocks mentioned in this post



Thursday, July 7, 2011

15 more value stocks breaking out

Here's another batch of interesting looking stocks that we found using the Premium Stock Screener at our sister site TradingStockAlerts.com

This is one of my favorite screens because it tends to highlight solid profitable companies that appear to be starting sustainable bullish moves. This screen starts out by looking for those stocks that I refer to as "Reasonable Value." In other words, they are profitable, PE is not too high, Price-to-Sales ratio is low and Enterprise Value to EBITDA ratio is also fairly low. We are also looking for low Debt-to-Equity ratios.

To these criteria we add a set of technical analysis indicators. The stocks need to be above their 50-day exponential moving average. They also need to have Trend Performance Scores that are only somewhat bullish but have just recently registered a strong improvement in Trend Performance Score. This combination of technical criteria tends to find those stocks that are just beginning to move so you will not find yourself in the position of chasing a stock.

So here's the list:

Symbol Name Sector Industry PE Ratio Price
to Sales
Enterprise
Value to EBITDA
ACM Aecom Technology Corporation Consumer Services Military/
Government/
Technical
13.16 0.45 9.18
APAC APAC Customer Services, Inc. Miscellaneous Business Services 12.65 0.85 4.64
BORN China New Borun Corporation Consumer Non-Durables Beverages (Production/
Distribution)
4.07 0.68 2.45
BRKS Brooks
Automation,
Inc.
Technology Industrial
Machinery/
Components
7.84 1.01 5.61
CMRG Casual Male Retail Group, Inc. Consumer Services Clothing/Shoe/
Accessory Stores
14.06 0.54 6.39
CPHI China Pharma Holdings, Inc. Consumer Durables Major
Pharmaceuticals
4.42 1.36 3.59
CVVT China Valves Technology, Inc. Capital Goods Metal Fabrications 2.92 0.66 1.71
GLDD Great Lakes Dredge & Dock
Corporation
Basic Industries Military/
Government/
Technical
12.11 0.49 4.58
GM General Motors
Company
Capital Goods Auto
Manufacturing
7.47 0.33 2.3
KEM Kemet Corporation Capital Goods Electrical Products 11.93 0.53 3.43
KND Kindred
Healthcare, Inc.
Health Care Hospital/Nursing Management 14.18 0.2 4.95
KSS Kohl's Corporation Consumer Services Department/
Specialty Retail Stores
13.88 0.79 5.48
ONP Orient Paper, Inc. Consumer Durables Containers/
Packaging
4.42 0.58 1.98
SXI Standex
International Corporation
Technology Industrial Machinery/
Components
12.17 0.65 7.31
VSH Vishay
Intertechnology, Inc.
Capital Goods Electrical Products 7.6 0.95 2.87

It is worth noting that eight of these stocks have Return-on-Equity over 20%. Of the remainder, only one has an ROE that is less than ten. High ROE is one of my favorite criteria for identifying growth stocks so it encouraging to see that almost all of these stocks have decent to very good ROE.

With the overall market showing strength lately and earnings season coming, some of these stocks will surely follow through on the bullish moves we see here today. Do some deeper research and add a few of these to your watchlist.

Disclosure: no positions in any stocks mentioned in this post



Monday, July 4, 2011

Weekly Market Update -- where did all the bears go?

Two months of pessimism almost completely erased in one week!

That's what a melt-up rally can do. When I wrote my last Weekly Market Update a couple of weeks ago I said that hints of a bottom were accumulating. I anticipated a basing process before a significant rally would take place. I guess I was too pessimistic myself. Let's see where we are now...

The view from Alert HQ --

For those readers who are new to TradeRadar or who don't remember what this is all about, the data for the following charts is generated from our weekly Alert HQ process. We scan roughly 6200 stocks and ETFs each weekend and gather the statistics presented below.

In this first chart below we count the number of stocks above various exponential moving averages and count the number of moving average crossovers, as well. We then plot the results against a chart of the SPDR S&P 500 ETF (SPY).


What is so surprising here is that we now see roughly two thirds of all stocks are now above their 50-day exponential moving averages (EMA). It was less than 1/3 just a couple of weeks ago.

We also see the number of stocks whose 20-day EMA is above the 50-day EMA has begun to decisively turn up but not explosively. This suggests this rally has room to run though it may not be a straight line up.

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.


It's a little hard to see at the right side of this chart, but the number of stocks that are showing bullish trends (the yellow line) has jumped up to roughly 35% of all the stocks we track. It was recently less than 1/6 of all stocks. Given that Aroon is a somewhat slow-changing indicator, the speed at which this has happened is surprising.

It is easier to see the red line on the right side of the chart which indicates that the number of stocks in well-defined bearish trends has now fallen drastically and could soon approach the typical cycle lows where it could bounce around a bit if the market continues to move higher.

Conclusion --

There are many people commenting on blogs who say this rally was just short-covering and that soon major averages will fall decisively below their 200-day moving averages.

I don't agree.

Though we are likely to see pullbacks along the way (next week's jobs and payroll data could be a downer and we still have the dramas in Greece and Washington continuing to play out against their respective deadlines), it looks to me like the market has started another bullish UP cycle. Furthermore, we have earnings season starting in a week or so. If companies are able to post halfway decent numbers despite the recent economic soft patch, investors could breathe a sigh of relief and continue to push stocks higher.

"Buy the dips" is an overused phrase but this may the time when it might actually pay to do so.

Disclosure: none




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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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