Tech Talk for Tuesday February 5th 2008

 

Pre-opening Comments for Tuesday February 5th

 

9:10 AM EST: U.S. equity markets are lower in pre-opening trade. Weakness was accentuated when the January ISM Services Index was released at 8:55 AM EST. Consensus was 52.3 versus 53.0 in December implying continuing growth but at a slower pace. Actual was 41.9 implying no growth and a significant decline is services. Dow Industrial futures are down over 130 points in pre-opening trade.

 

The U.S. Dollar is higher in overnight trading. Commodities priced in U.S. Dollars (e.g. gold, silver, crude oil) moved lower.

 

Husky Energy reported blow out fourth quarter earnings. Consensus was $0.91 versus $0.64 per share. Actual was $1.26 per share. Husky has an improving technical profile. The stock recently bounced from support near $38.50 and currently is testing its 50 and 200 day moving averages. Short term momentum indicators are recovering from oversold levels.

Chart courtesy of StockCharts.com                      www.stockcharts.com

 

Technical Action Yesterday

 

Technical action by S&P 500 stocks was quietly bullish yesterday. Three S&P 500 stocks broke resistance. None broke support.

 

S&P 500 stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Burlington Northern      BNI                 Neutral             Up

Nabors                         NBR                Down               Neutral

UST                             UST                 Down               Neutral

 

Technical action by TSX stocks was bullish. Six TSX stocks broke resistance and one stock broke support. Energy stocks dominated the list of stocks breaking resistance.

 

TSX stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Compton Petroleum      CMT                Up                   Up

Ensign                          ESI                  Down               Neutral

Fortis                           FTS                 Up                   Up

Highpine O & G           HPX                Up                   Up

NuVista                        NVA                Neutral             Up

Teck Cominco              TEK.B             Down               Neutral

 

TSX stocks breaking support

 

Stock                           Symbol            Previous          New    

                                                            Trend              Trend

Empire                         EMP.A            Down               Down

 

Pre-opening Comments for Monday February 4th

 

9:15 AM EST: Equity markets are quiet this morning. Individual stocks were influenced by fourth quarter reports released overnight and by changes in analyst opinions. American Express, Discovery and Capital One are lower in overnight trade after UBS downgraded the credit card sector. Airline stocks are higher after Morgan Stanley upgraded the sector. Clorox, Archer Daniel Midland and Humana are trading higher after reporting higher than consensus fourth quarter results. Wendy’s, Wachovia and Wells Fargo are trading lower on analyst downgrades.

 

Bank of Nova Scotia is trading higher on news of additional purchases of banks in the Caribbean. On the charts, BNS recently showed technical signs of bottoming. Short term momentum indicators are recovering from oversold levels.

 

Chart courtesy of StockCharts.com                             www.stockcharts.com

 

Magna International is trading lower in overnight trading after a media report out of Russia indicated that Magna’s recently announced $2 billion deal with a Russian billionaire may be aborted.

 

Chinese related stocks are sharply higher in overnight trading after rumors circulated about a fiscal stimulus by the Chinese government following recent winter storms. The Shanghai Index rose 8.3% last night. The possibility of a fiscal stimulus is bullish for North American companies that sell products to China (e.g. base metal companies).

 

Tech Talk comments released on the FP Trading Desk site yesterday

 (Available at http://www.financialpost.com/trading_desk/index.html )

 

12:10 PM EST: FP Trading Desk headline reads, “Still bullish on Teck Cominco despite lower production forecast”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/02/04/still-bullish-on-teck-cominco-despite-lower-production-forecast.aspx

 

Teck Cominco has an improving technical profile. This morning the stock broke above resistance at $36.48. Its trend changed from downward to neutral. MACD is recovering from a short term oversold level. Strength relative to the TSX Composite Index turned positive early in January. On balance volume data shows that the stock is being accumulated. The stock has a history of moving higher from January to May.

Chart courtesy of StockCharts.com                     www.stockcharts.com

 

FP Trading Desk headlines reads, “Alcoa may be after Rio Tinto’s aluminum assets”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/02/04/alcoa-may-be-after-rio-tinto-s-aluminum-assets.aspx

 

Alcoa has an improving technical profile. This morning the stock moved above its 50 day moving average. A MACD buy signal was recorded last Thursday. Strength relative to the S&P 500 Index turned positive early in January. On balance volume data shows that the stock is being accumulated.

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

Interesting Charts

 

Since January 23rd the energy sector has led the Canadian equity market on the upside. The TSX Energy Index has advanced 12.1% from its low.

 

Chart courtesy of StockCharts.com                      www.stockcharts.com

 

Oil service stocks on both sides of the border led the advance in the energy sector yesterday.  In Canada, Calfrac was the biggest gainer with an advance of over 15%. Stocks breaking resistance included Ensign and Nabors

 

Chart courtesy of StockCharts.com                           www.stockcharts.com

 

 

Chart courtesy of StockCharts.com                              www.stockcharts.com

Oil Service HOLDRs have lagged the energy sector, but are showing technical signs of playing “catch up”. Short term momentum indicators have bottomed and trying to recover. MACD could record a buy signal as early as today.

Chart courtesy of StockCharts.com                      www.stockcharts.com

 

The oil service sector has a period of seasonal strength from the end of November to the end of May. However, the seasonal “sweet spot” is from the end of January to the end of May. The trade has been profitable in 8 of the past 10 periods. Average gain per period was 13.3%. History is repeating itself.

 

Fundamentals support the recommendation. Demand for oil services outside of North America continues to grow, particularly demand for offshore rigs and related services. Rig rates continue to rise. Rising crude oil prices and recovering natural gas prices are the catalyst. Recent technical action by Canadian oil service companies suggest that the Canadian industry is starting to revive after a difficult two year period. 

 

ETF Update

 

Claymore announced that trading on the AMEX in several of its specialty ETFs is to be discontinued on February 20th due to lack of investor interest. They represent less than 2% of the value of trading in Claymore’s ETFs. Discontinued ETFs include the following:

 

BJR 50 Leaders

BJR Leaders Mid-Cap Value

LGA Green

KLD Sudan Free Large Cap Core

Clear Mid-Cap Growth

Zacks Growth & Income

IndexQ Small Cap Value

Roboco Developed World Equity

Clear Global Vaccine Index

 

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.