Find Leaders After News Pop
When good news boosts a sector, I hunt
for the leaders. Bullish analyst comments Wednesday lifted shares in
business-to-business software and service companies. A tour of the charts shows
not all B2Bs are created equal. Ariba and i2 Technologies are leading the pack.
Shares in B2B companies advanced
Wednesday on early signs of a strong third quarter for the industry and recent
regulatory clearance for various giant electronic marketplaces. Earlier in the
month, the European Commission cleared Myaircraft.com, an exchange for aerospace
parts, and the U.S. Federal Trade Commission cleared the Trade-Ranger energy and
petrochemical exchange.
In an interview with Reuters, Dresdner
Kleinwort Benson analyst David Garrity said Wednesday that he expects the FTC to
approve Covisint, an auto exchange set up by Big Three automakers General Motors
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PowerRating). A spokesman for the
government agency declined to comment.
What makes up a leader? Simply put, a
leading stock appreciates faster than its peers. Ariba
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are outperforming their B2B peers. But neither stock looks over-extended. Both
are completing correction-recovery patterns and recovering faster than most of
their peers from the recent bear market in tech stocks. To help you get a handle
on these two leaders, I’ve charted each with daily and weekly charts.
Another B2B player, PurchasePro.com
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caught attention by rallying 8 7/16 to 59 3/16 Wednesday on more than four times
normal volume. However, the stock’s performance off its correction lows is much
less impressive than that of Ariba or i2. PurchasePro is still trading well
below its mid level of around 91 a share. The mid level represents the point at
which a stock which has recently corrected has recouped half the maximum loss
from the pre-correction high to the post correction low. As an intermediate-term
trader, I avoid stocks priced below their mid levels on the assumption they face
heavy overhead supply.
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