Wait Out The Wild Ones
Beware of wide and loose trading
action, even when dealing with shares in a leadership company. Take JDS Uniphase,
which Wednesday beat the Street thanks to strong sales growth.
JDS Uniphase
(
JDSU |
Quote |
Chart |
News |
PowerRating) is a leader
in one of the hottest tech niches — fiber-optic communications and networking. After
Wednesday’s close, the Ottawa, Canada-based company reported earnings of
14 cents a share in the fiscal fourth quarter vs. 6 cents a year ago and topping
analyst estimates averaging 12 cents, according to First Call/Thomson Financial.
Sales nearly doubled to $524 million.
The stock gained 5 3/4 to 135 15/16 on terrific volume. But note how that move,
while impressive, is less than prior recent gains on lesser, though heavy,
trading action (see black arrows). Also, the share price backed off an intraday
high of 140 1/2, failing to break above recent resistance (see red arrow).
Much of the volume stems from JDSU’s addition to the S&P 500 Index. Nevertheless, there’s a resulting battle between buyers and
sellers over this stock, and the huge volume levels indicate the struggle is
between institutional titans. This is a dicey area to play the breakout. Let the smoke clear. As an
intermediate term player, I would prefer to see the stock settle down on low
volume. If the trading range tightens near the old high, you’ll have a pivot
that leaves you less extended if you try to buy on a future breakout.
Amgen
(
AMGN |
Quote |
Chart |
News |
PowerRating) came out with
second-quarter earnings of 28 cents a share vs. 25 cents a year ago and a penny
of above expectations. The biotech giant reported higher revenue from sales of
its Epogen and Neupogen drugs.
The stock behaved bearishly ahead of
the news, slumping into its prior base and closing near the session low on
active trade.
