These Two Stocks Have A Shot At Breakouts
Market
Trend: Up
Market Outlook: Bullish (Navarro),
Bearish (Aloyan)
Sector Watch: Telecom, Internet
(+), Metals, Mining (-)
David’s Pick:
(
VERT |
Quote |
Chart |
News |
PowerRating)
Peter’s Picks:
(
AIRN |
Quote |
Chart |
News |
PowerRating),
(
CORV |
Quote |
Chart |
News |
PowerRating)
Navarro’s Broad Market Outlook:
Cruising
The economy is hitting now on all cylinders, and the only thing that is going
to slow it (and the market) down is going to be some kind of geopolitical event
related to terrorism, the war in Iraq, the non-containment of the outbreak of
SARS in China, or some more remote event such as trouble in North Korea. Focus
on your stock picking now, and enjoy the bull while it lasts.
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The
Week’s Macro Data Market Movers: A Very Short Week
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It’s MLK day and the
markets are closed on Monday. Later in the week, we get barely a peep from the
economic data. The only really vulnerable sector on news will be housing. Check
out the Wednesday report. Otherwise, more earnings news plus the results from
the Iowa primary will come out. With Kerry coming on strong, that’s bad
news for the Bushites but good news for the bond market. A big Dean win from
the grass roots might spike Wall Street’s volatility meter for a bit.
Sector Watch
Up: The
Broad Markets — led by the strength in the Telecom, and Internet sectors.
Down: Metals
& Mining, and Energy sectors.
David’s Pick:
Long Verticalnet Inc.
(
VERT |
Quote |
Chart |
News |
PowerRating)
I have been hard-pressed lately to find any beaten-down “tech†stocks
that haven’t already been bid up to the moon. Enter Verticalnet Inc. This
supply chain management software carnage from the “dot bomb†bubble
has been undergoing some major restructuring on the balance sheet and the management,
and settling legal issues and listing requirements. This is a very speculative
stock, but given the current frenzy, and the fact that the technicals caught
my eye, this is appears to be attractive on a reward-to-risk basis. The stock
is coming off of a long 18-month base, and broke out of a flag formation on
Friday on big volume. The caveat is that this stock has done this twice before
in 2002, and 2003 and failed both times. The key will be if this stock can finally
continue to breakout, consolidate, and move higher. I must disclose that I bought
shares last Thursday at $1.67. The stock closed Friday at $2.17 on Friday (up
24% on Friday with over 5x average volume).
Peter’s Picks:
Airspan
(
AIRN |
Quote |
Chart |
News |
PowerRating)) and Corvis
(
CORV |
Quote |
Chart |
News |
PowerRating)
Here’s two plays that I have held for a while now that are approaching
52-week highs and have a shot at breakouts. Note that I usually like to get
in such stocks well before they reach this point. That’s because playing
breakouts can be very risky — if a stock starts a breakout and fails,
it can fall all the way into the cellar.
In these cases, I like AIRN because it is a pure wireless play — a niche
player that sells equipment that helps telecommunications providers and users
and ISPs to cut costs. As for CORV, it’s a pure play in the all-optical
communications space. HIGH RISK!
Aloyan’s Technical Take: Bear With Me (Again)
All three major indices continued their relentless move to the upside, as if
invincible, escaping any meaningful correction. The market breadth, momentum,
and sentiment are extremely bullish. This type of action reminds me very much
of the blow-off move from 1999-2000 which also came off of the 4-year cycle
bottom in 1998. This action that is taking place confirms my assumption that
the stock market is no longer subscribed to as a place of investment, but rather
a gambling hall!
A look at Friday’s price action reveals that of the 100 stocks that make
up the hot-performing Nasdaq 100 NDX index (and QQQs), 48 outperformed the index.
Of those 48, 69% of them have no earnings or carry a P/E in greater than 50.
To top it off, the top-performing stock of the Nasdaq 100 was Juniper
Networks which carries a P/E of roughly 300, while the worst-performing
stock was Fiserv, which carries
a P/E of 24! Anyone who can try to substantiate this as having any fundamental
substance, and not as something other than pure speculation and short covering,
should: 1) be sent back to remedial school, and 2) then become employed by CNBC.
What’s even more comical is that Greenspan may shortly have to do an encore
of his “irrational exuberance†speech of just a few years back.
My second assumption has also been confirmed — that market participants haven’t
learned a thing. Aided by advances in technology making market participation
a mouse click away, they have brought an influx of ignorant capital flows, hence
making logical analysis of the U.S. equity markets has become an exercise in
futility in times like these!
I continue to re-iterate that this is a time to be defensive, and not to get
sucked into this frenzy, as the sheep will be slaughtered. Further, don’t
try to stop this herd of sheep by putting on a large short position at this
time; wait for exhaustion to set in. Be patient, hold on to your shekels, and
wait to buy some good quality “tech stocks†at much lower prices.
You should have also started building positions in sectors which are currently
experiencing some distribution, yet have real earnings and pay out dividends,
like Drugs with a company like
(
BMY |
Quote |
Chart |
News |
PowerRating), and Grocery Stores with a company
like
(
ABS |
Quote |
Chart |
News |
PowerRating).
*Although the trend is currently bullish, I must stay Neutral in the short-term,
as an abrupt correction can occur at any time in this kind of market environment;
couple this with the fact that my longer-term view remains bearish due to the
many fundamental problems that I have put forth in previous columns, and that
must be corrected to end this bear market.
Bottom line:
My shorter-term view is Neutral, and my longer-term view remains Bearish. I
continue to believe this is no more than an impressive secular bear market rally,
which will come to an end.
We enter this week: Neutral .
DJ-30
The Dow finished the week
up 142 points at 10601. The daily chart below shows the uptrend in price action
is still intact; prices broke back over their multi-year downtrend resistance
line. OBV (On Balance Volume) has been confirming the upward price action. The
MACD is below the zero line, but Stochastics are turned up and are back above
80. Support is at: the 10600 area, 10543, 10353, 9921, 9800 area, 9700 area,
9600 area, 9500 area, 9353, 9277, 9219, 9127, 9077, the 9000 area, and 8855.
Resistance is at: 11100.
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S&P
500
The S&P 500 finished the trading week up 18 points at 1140. The daily chart
below shows that the uptrend in prices remains intact, and broken out of their
“ascending wedge†formation. OBV (On Balance Volume) has been confirming
the upward price action. The MACD is above the zero line, and Stochastics remain
above 80. Support is around: 1132, 1120, 1107, 1091, 1072, 1059, 1050 area,
1040, 1030, 1020, 1015, 1010, 996, 984, 974, 965, 956, 927, and the 900 area.
Resistance is at: 1174.
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Nasdaq
Composite Technicals
The Nasdaq Composite closed the week up 54 points at 2140. The daily chart below
shows prices are continuing their move back up towards the upper end of the
price channel. OBV (On Balance Volume) is above its regression line, confirming
the upward price move. The MACD is above the zero line, but downward sloping
and Stochastics are turned up and remain above 80. Support targets are: 2120,
the 2100 area, 2059, the 2000 area, 1978, 1950, 1900, 1921, 1883, 1866, 1843,
1800 area, 1787, 1750 area, 1700, 1661, 1600, 1550, 1521, 1501, 1449, the 1400
area, and 1359. Resistance on the Nasdaq is at: 2169, the 2200 area, and the
2300 area.
If you
have a favorite macroplay or stock you would like us to consider in this column,
send an e-mail to peter@peternavarro.com or go directly to https://www.peternavarro.com.
We’d love to hear from you.