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Underachiever Gets Rewarded

  • June 19, 2001
  • Goran Yordanoff


Yesterday, Oracle Corp.
(
ORCL |
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News |
PowerRating) said net income for the quarter ending May 31 was
$854.9 million, or 15 cents a diluted share, compared with $4.91 billion, or
82 cents a share a year earlier.  This nearly 83% drop in fiscal
fourth-quarter income edged analysts’ lowered earnings expectations by a
penny a share. In addition, the company “hopes” that the worst is over
and
its worst quarter “may” be behind them.  Other than that, there
was no
forward guidance given.

Solestica
(
SLR |
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News |
PowerRating), on the other hand, provided more bad news for the EMS sector
by missing their quarterly number and warning for the future.  American
Airlines
(
AMR |
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News |
PowerRating), which probably serves as a better indicator of the state of
the economy than Oracle does, warned for the entire year and stated that they
“do not see a near term recovery in demand” and as such, see
continuing
downside pressures.

The story of the day, however, will be ORCL, as the Nasdaq needed desperately
to springboard a reflex rally off of something after seven straight sessions
of declines.  Is ORCL really the reason for the huge pre-market party? 
Of
course not, the market was technically very oversold, and this is just a
reason to run it up for a bit. I certainly expect a resumption of the rally
that created the May 22 highs, but I don’t think it is hear quite yet. My
work is showing me that a little more work on the downside may need to take
place before the Nasdaq is ready to launch a full-scale, broad based assault
on the May 22 highs. Today’s action will be important to watch indeed, as we
will need to observe if the institutions fade the big gap open. 
Interestingly, the Nikkei was up over 150 points at its highs during
the overnight session, but ended up closing down almost 100 points. Be on
the
lookout for what Kevin Haggerty so accurately terms as “fleecing of the the
retail” on this gap up opening. 

Stocks to watch today?  Anything with a high Beta will be up big at the
open. Don’t chase. Be disciplined and open your mind up to the fact that any
scenario can materialize here.  In our opinion, there will be time to get
long very soon for a nice move back up near the May highs….we don’t think
this is it.

Goran