Tech Talk for Friday February 23rd 2007

 

Inter-day Comments for Friday February 23rd

 

11:30 AM EST: Market Vectors Gold Miners ETF (Symbol: GDX) broke above resistance at $42.20 U.S. this morning and reached a new 10 month high. Next resistance is at $46.00 U.S., its all time high. GDX tracks a basket of international gold stocks and trades actively on U.S. exchanges. Next upside technical target based on today’s breakout is $49.20 U.S.. Strength today can be attributed to higher gold prices, favourable comments offered by analysts following release of better than expected fourth quarter results during the past two days and positive guidance offered yesterday and today by company executives. Following is a link to its chart:

http://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=1&mn=0&dy=0&id=p69136446093

 

10:05 AM EST: FP Trading Desk headline reads, “Goldman Sachs likes Procter and Gamble’s growth prospects, price target is U.S. $68.00”. Following is a link to its chart:

http://communities.canada.com/nationalpost/blogs/tradingdesk/archive/2007/02/23/goldman-sachs-likes-procter-gamble-s-growth-prospects-price-target-is-us-68.aspx

 

Technicals on Procter and Gamble are not encouraging. The stock formed resistance at $66.30 in mid January. Support is indicated at $63.68. Performance relative to the Dow Jones Industrial Average and S&P 500 Index turned lower in mid January. MACD and RSI are trending lower and recently rolled over from short term overbought levels. Following is a link to its chart.

http://stockcharts.com/h-sc/ui?s=pg&p=D&yr=0&mn=6&dy=0&id=p69136446093

 

9:55 AM EST:  FP Trading Desk headline reads, “ Suncor added to Goldman’s “Conviction Buy” List” Following is a link to the comment:

http://communities.canada.com/nationalpost/blogs/tradingdesk/archive/2007/02/23/suncor-added-to-goldman-s-conviction-buy-list.aspx

 

Suncor has interesting technical potential at current prices despite its recent underperformance relative to other major Canadian oil stocks. Intermediate trend remains upward. Support exists at $81.50. Resistance exists at $95.00. Daily RSI and MACD are recovering from slightly oversold levels. Following is a link to its chart:

http://stockcharts.com/h-sc/ui?s=SU.TO&p=D&yr=0&mn=6&dy=0&id=p69136446093

 

9:15 AM EST: Silver is a focus this morning. Prior to the opening, silver is up $0.22 to $14.47 U.S. per ounce and has broken resistance at $14.37 U.S. per ounce set in December. It is now testing a multi-year high set last May at $15.21 U.S. per ounce. Silver stocks such as Pan American Silver likely will open higher. Following is a link to charts on silver and Pan American Silver:

http://stockcharts.com/h-sc/ui?s=$SILVER&p=D&yr=1&mn=0&dy=0&id=p69136446093

http://stockcharts.com/h-sc/ui?s=paa.to&p=D&yr=1&mn=0&dy=0&id=p69136446093

 

Crude oil is up another $0.35 to $61.25 U.S. per barrel in overnight trading. U.S. energy Exchange Traded Funds are testing resistance levels and likely will break through them early this morning. Oil Service HOLDRS (OIH $$139.44) is testing resistance at $140.12. Energy SPYDRS (XLE $58.50) is testing resistance at $59.10. Following are links to their charts:

http://stockcharts.com/h-sc/ui?s=OIH&p=D&yr=0&mn=3&dy=0&id=p69136446093

http://stockcharts.com/h-sc/ui?s=xle&p=D&yr=0&mn=3&dy=0&id=p69136446093

 

Technical Action Yesterday

 

Technical action by S&P 500 stocks was bullish yesterday despite weakness in the Dow Industrials and S&P 500 Index. Ten stocks broke resistance and five stocks broke support.

 

S&P 500 stocks breaking resistance

 

Stock                           Symbol             Previous           New     News

                                                            Trend               Trend

Analog Devices            ADI                 Up                   Up     Higher than consensus Q1 EPS

Consolidated Energy     CNX                Down               Neutral Higher coal prices

Legg Mason                 LM                  Up                   Up

Linear Technologies      LLTC               Down               Up

Maxim                          MXIM             Up                   Up

Newmont Mining          NEM               Neutral             Up     Higher than consensus Q4 EPS

Omnicom                     OMC               Down               Up

Stryker                         SYK                Up                   Up

Windstream                  WIN                Up                   Up

Whole Foods               WFMI             Down               Up       Acquiring Wild Oats

 

S&P 500 stocks breaking support

 

Stock                           Symbol             Previous           New     News

                                                            Trend               Trend  

Coca Cola                    KO                  Up                   Down

Johnson & Johnson       JNJ                  Up                   Down

Patterson Dental           PDCO             Up                   Neutral

SanDisk                       SNDK             Down               Down

Sysco                           SYY                Down               Down

 

Technical action by TSX stocks also was bullish. Four stocks broke resistance (including two gold stocks and two bank stocks). One stock broke support.

 

TSX stocks breaking resistance

 

Stock                           Symbol             Previous           New     News  

                                                            Trend               Trend

Bank of Montreal         BMO               Up                   Up

Bema Gold                   BGO                Up                   Up

Kinross                        K                     Neutral             Up       Encouraging Q4 report

Toronto Dominion        TD                   Up                   Up     Better than consensus Q1 EPS

 

TSX stocks breaking support

 

Stock                           Symbol             Previous           New

                                                            Trend               Trend

Patheon                        PTI                  Up                   Down

 

Adrienne Toghraie’s Column

 

Dear Coach Adrienne,

 

I'm just starting out and am trying to learn as much as I can about the share market. I am looking to get my foot in the door however by investing a smallish amount initially. Could you please advise me whether I would be better off using a broker at $75 per trade to provide me with advice and conduct my trades while I'm starting out - or should I read as much as I can and conduct my own trades.

 

Begin the Begin

Dear Begin the Begin,

 

If you are serious about becoming a trader you should start by making your own choices for taking trades when the time is right.  Most brokers are not traders, so they are taking the same risk for you as you would now be taking yourself.  Collect resources by educating yourself, save enough money for your trading business and put together your business plan.  When you are earning a living as a trader then consider a good broker as well as having an account with an online firm that will give you the lowest price for your trades.  Brokers have a lot of good information that you are not always able to get on your own, but you should know what you are doing first before you pick one. 

 

Coach Adrienne

 

Adrienne Toghraie, Trader's Coach
WWW.TradingOnTarget.Com
100 Lavewood Lane
Cary, North Carolina 27518
Phone 919 851 8288  FAX 919 851 9979
Email: Adrienne@TradingOnTarget.com

ETF Update

WisdomTree is planning to launch six more ETFs today. Indices for these ETF are weighted on their price/earnings ratios. Additional information is available at www.wisdomtree.com . Following are available ETFs:

 

ETF                                                     Symbol            MER(%)

WisdomTree Earnings 500 Index          EPS                 0.28

WisdomTree Low P/E Index                EZY                 0.38

WisdomTree Midcap Earnings Index    EZM                0.38

WisdomTree Small Cap Earnings          EES                 0.38

WisdomTree Earnings Top 100            EEZ                 0.38

WisdomTree Earnings Index                 EXT                 0.38

 

 

Inter-day Comments for Thursday February 22nd

 

8:45 AM EST: ‘Tis the season for fourth quarter earnings reports by major gold producing companies. Four major producers reported earnings after the close. Three of the four companies reported higher than consensus results. Consensus for Barrick Gold was $0.48 U.S. versus $0.22 U.S. last year. Actual was $0.51 U.S. Consensus for Newmont Gold was $0.40 versus $0.16 last year. Actual was $0.48. Consensus for Agnico Eagle was $0.31 U.S. versus $0.13 U.S. per share last year. Actual was $0.32 U.S. Consensus for Kinross was $0.11 U.S. versus $(0.45) U.S. last year. Actual was $0.11 U.S.. Look for analysts to comment favourably on these reports. They also likely will raise earnings estimates for 2007 and boost price targets. Technicals for all four stocks continue to improve.

 

Update: Initial responses to reports were encouraging. Newmont Mining and Kinross broke resistance on the charts and established new trends on higher than average volume. Analysts raised earnings estimates and target prices on Newmont, Kinross and Agnico Eagle. The gold sector gave up part of its gains later in the day on a slight decline in the price of gold.

Chart courtesy of StockCharts.com                            www.stockcharts.com

Chart courtesy of StockCharts.com                             www.stockcharts.com

 

9:25 AM EST: The Gartman Letter recommended purchase of the Japanese market this morning. Gartman’s recommendation is to buy the iShares Exchange Traded Fund on Japan (Symbol: EWJ). Canadian investors are reminded that Claymore has just launched a Japan ETF that is hedged in Canadian Dollars. Symbol is CJP.

Chart courtesy of StockCharts.com                            www.stockcharts.com

 

The Gartman Letter also has recommended purchase of U.S. coal stocks following nice breakouts by the sector yesterday. Selected stocks include Peabody Coal (BTU), Arch Coal (ACI) and Massey Coal (MEE). Don’t forget Fording Coal Trust (FDG/UN.TO).

 

Update: Notice the increase in volume in the sector yesterday

All charts compliments of StockCharts.com           www.stockcharts.com

 

9:45 AM EST: The FP Trading Desk headline reads, “UBS raises target on Rona to $28”. Following is a link to the report:

http://communities.canada.com/nationalpost/blogs/tradingdesk/archive/2007/02/22/ubs-raises-price-target-on-rona-shares-to-28.aspx

 

The technicals on Rona are mixed. The stock has traded in a range between $19.41 and $24.73 during the past 18 months. The stock currently is testing the top of its trading range. MACD and RSI are overbought in the short term and are showing early signs of rolling over.

Chart courtesy of StockCharts.com                                  www.stockcharts.com

 

10:55 AM EST: Gasoline, distillate and crude oil prices have moved higher following release of the weekly U.S. energy inventory report. The main reason for strength was a greater than expected drawdown on gasoline and distillate inventories. Distillate inventories fell 5.0 million barrels. Consensus for unleaded gasoline was a drawdown of two million barrels. The actual drawdown was 3.1 million barrels. Gasoline prices are up another 3 cent to $1.74 per gallon, a gain of 30% since January 18th. Demand for gasoline is rising faster than anticipated at a time when refiners are closing operations temporarily for annual maintenance.  On the charts, gasoline has broken resistance at $1.71 per gallon to reach a six month high. ‘Tis the season for rising gasoline prices from February to May. U.S. equity markets responded to the weekly energy inventory report by moving slightly lower.

Chart courtesy of StockCharts.com

 

11:25 AM EST. Uranium stocks are moving higher today and for good reason: The price of Uranium jumped $10 to $85 U.S. per lb. last week. The price of uranium is posted weekly at www.uxc.com . Uranium stocks such as Cameco, sxr Uranium, Denison and UEX are exceptionally strong today.

 

Update: Last night, Jim Cramer recommended the uranium stocks. His focus was on Energy Metals Corp.

 

Notice the surge in volume in each of the following stocks. These stocks want to go higher.  

All charts courtesy of StockCharts.com               www.stockcharts.com

 

11:40 AM EST. Weakness in the Dow Jones Industrial Average this morning can be attributed partially to weakness in Johnson & Johnson. The stock broke a key support level this morning at $64.94 and completed a double top pattern on the charts. The breakdown occured just after the company released its 10K report late last night. Have analysts found something in this report that they do not like?

Chart courtesy of StockCharts.com                         www.stockcharts.com

 

Update: Not surprising, weakness in JNJ spilled into other pharmaceutical stocks (e.g. Merck). Pharmaceutical HOLDRs broke support and completed a double top pattern.

Chart courtesy of StockCharts.com                          www.stockcharts.com

 

 

 

 

 

Interesting Charts

 

Crude oil moved to a two month high yesterday. A widening crack spread (i.e. the spread between crude oil and refined product prices) will prompt crude oil prices to move higher.

Chart courtesy of StockCharts.com                  www.stockcharts.com

 

Semiconductor stocks rose sharply following release of Analog Devices’ first quarter results. Traders were impressed with positive guidance for the company’s fiscal second quarter. ADI claimed that orders began to pick up last month and that industry conditions finally are improving. The company forecast second quarter sales in a range between $640 million and $670 million. Consensus prior to the report was revenues of $661 million.

 

Tech Talk is skeptical. Other companies in the sector including Texas Instruments, Micron and SanDisk have offered negative guidance during the past two weeks.

 

Response by the SOX Index to the news from Analog Devices appears overblown given the significance of the news. Technically, the SOX Index has recovered to near the top of a six month trading range where resistance is likely to appear. Strength relative to the S&P 500 Index remains negative. RSI already is approaching a short term overbought level.

Chart courtesy of StockCharts.com                                       www.stockcharts.com

Chart courtesy of StockCharts.com                        www.stockcharts.com  

 

Tech Talk’s Weekly ETF Column at www.stockhouse.com

(released yesterday)

Taking Profits in the U.S. Semiconductor Sector

It’s time to take profits in Exchange Traded Funds in the U.S. semiconductor sector. Performance of the sector has been below average during the current period of seasonal strength. However, time for the seasonal play is running out. Meanwhile, technical and fundamental prospects have started to deteriorate. Profit taking candidates include:

  • Semiconductor HOLDRS (Symbol: SMH), by far the most actively traded ETF in the sector. It consists of 20 big cap semiconductor stocks and is heavily weighted in Intel, Texas Instruments and Applied Materials.
  • iShares Goldman Sachs Semiconductor fund (Symbol: IGW), the second most actively traded ETF in the sector. It tracks a more diversified portfolio with 57 holdings.
  • Dynamic Semiconductor fund (Symbol: PSI), the least actively traded, but lowest priced ETF in the sector.
  • Semiconductor SPDRs (Symbol: XSD), an equally weighted ETF that tracs a portfolio of 23 big cap holdings.

 

Seasonality

The period of seasonal strength for the Philadelphia Semiconductor (SOX) Index is from the end of September to the end of February. The Index has gained in eight of the past 10 periods. Average gain per period was 22.5%. In contrast, the Index has declined from the end of February to the end of September on six of the past ten occasions. Average loss per period was 12.9%. Seasonal demand for semiconductors tends to peak during the period of seasonal strength. Following is a chart showing entry and exit points for the Philadelphia Semiconductor (SOX) Index during the past six years.

 

Chart courtesy of StockCharts.com                                                               www.stockcharts.com

 

Technicals

 

Gains during the current period of seasonal strength have been muted. The Philadelphia Semiconductor Index is up only 6.9 % since the end of September. The Index has traded in a relatively tight six month trading range between 443.81 and 493.25 and is now testing the top of its range. Strength relative to the S&P 500 Index began to deteriorate in late November.

 

Fundamentals

 

Earnings by major companies in the sector are deteriorating. First quarter earnings per share on a year-over-year basis for 18 semiconductor companies in the S&P 500 Index are expected to decline an average (median) of 8.6%. Second quarter earnings are expected to ease an average of 8.1%. Consensus estimates for the second half of 2007 are more encouraging, but could be high considering guidance released with fourth quarter reports and considering warnings issued by several key companies in the industry during the past two weeks: Texas Instruments noted on the release of fourth quarter results that “Challenges continue in the first quarter as we operate in an environment where customers want lower levels of inventories”. National Semiconductor recently lowered its revenue outlook for the current quarter to a decline of 14-15% relative to its previous quarter sighting “lower than expected shipments into its distribution channel”, mainly due to lower demand from its Asia Pacific region. Micron warned two weeks ago about price softness for its DRAM and NAND flash chips. Last Friday SanDisk unveiled a number of cost-cutting measures to cushion itself against an oversupply of flash memory chips used in consumer electronic devices. Measures include plans to reduce its work force by 10% and a slash in prices of its flash memory cards. Intel and Advance Micro Devices are experiencing margin pressures after they cut prices on chips used in personal computers.

 

Weekly Bullish Percent Index Updates for U.S. Sectors

 

Bullish Percent Index moved to a new high for Consumer Staples and Materials sectors. They remain overbought, but have not shown signs of peaking.

 

Sectors that are advancing, but have reached intermediate overbought levels include Materials, Consumer Staples, Consumer Discretionary, Utilities, Industrials and Health Care.

 

Sectors that have rolled over from intermediate overbought levels include Information Technology, Telecom, Transportation and Financial Services.

 

Energy continues to recover from an intermediate oversold level.

 

Following are the charts:

 

All charts courtesy of StockCharts.com                www.stockcharts.com

 

 

Disclosure: Mr. Vialoux does not own securities mentioned in this report.

Disclaimer: Comments and opinions offered in this report are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.