Wednesday Morning Coffee with TradingMarkets

  • February 20, 2008
  • David Penn

Good Morning!

Hewlett-Packard Up Nearly 5% After Hours on Earnings Beat… Crude Oil Tops $100… Obama, McCain Win Wisconsin… Garmin’s $1 Billion Quarter… Traders Prefer Commodity Currencies Over Yen… Profits Up, Guidance Down at NutriSystem… Sharper Image Files for Bankruptcy… Housing Starts Expected Near 1991 Low… January CPI and FOMC Minutes Due Today.

Asian stocks down… European stocks down… Greenbacks moving higher against the Euro, British pound… And the futures are trending lower in the hour before the bell.

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TradingMarkets 5 Business Stories You Need to Know

Hewlett-Packard Beats, Raises Guidance – New York Times

Quarterly net income gains of 38% helped Hewlett-Packard defy analyst estimates, and the guidance provided for the current quarter and year also buoyed hopes for a turnaround in technology spending. Hewlett-Packard is a stock with an average PowerRating in an industry with few better alternatives. There are, however, members of the Diversified Computer Systems industry that investors would do well to outright avoid. Get those names at PowerRatings.net.

Crude Oil Hits Record – Wall Street Journal

Despite warnings of waning demand, crude oil topped $100 a barrel yesterday. Rising oil inventories and concerns of an economic slowdown were not enough to stem the effect of speculative capital still pouring into the oil market. Our PowerRatings reveal oil and gas pipeline companies to be among the stocks that are more likely than the average stock to be higher in a year’s time.

Toward a Softer Yen – Bloomberg

Speculation that increased demand for commodities will lead to greater demand for currrencies from so-called “commodity countries” such as Canada and Australia has led to some traders selling the Japanese yen.

NutriSystem’s 2008 Forecast Disappoints – Reuters

Quarterly profits beat estimates but focus was on the guidance for 2008, which was less positive than analysts had hoped for. Traders punished the stock severely in after hours trading, driving the stock down by 25%. Our Long Term Power Ratings highlighted NutriSystem as a stock for investors to avoid back in December, and little in the stock’s behavior has changed our analysis of the stock’s likelihood to disappoint investors in a year’s time.

Garmin Sets Sales Record – KansasCity.com

Sales of the company’s popular navigation systems topped $1 billion in the fourth quarter, topping last year’s mark by 99% and handily beating Wall Street analyst expectations. Record sales notwithstanding, Garmin has a particularly low PowerRating, marking the stock as one for investors to avoid if they are looking for stocks that are more likely than the average stock to be higher in one year.

For more stories as they happen, go to our Breaking News section.

TradingMarkets 7 Stocks You Need to Know for Today

Here are 7 stocks for traders for today from TradingMarkets.com:

For a list of today’s highest PowerRating stocks, click here.

TradingMarkets 5 Top PowerRatings Stocks for Today

Company
 Symbol PowerRatings
Old Dominion Freight Line ODFL 9
WesBanco WSBC 8
Onyx Pharmaceuticals ONXX 8
Yahoo! YHOO 8
Ryder System R 8

» View More Stocks

TradingMarkets Tracking the Wizards

Stocks, Oversold Bounces and the 200-day Moving Average – The Big Picture

Since 2000, there have been four instances when the percentage of stocks above their 200-day moving average was less than 25%. On three of those previous occassions, the market rallied more than 23% over the next 30-60 days. Stocks are so far up less than 8% since the fourth and most recent instance that began in late January.

Soros Sells Countrywide, Verizon, Yahoo – Reuters

SEC filings reveal that Soros Fund Management has sold all of its Countrywide shares, while reducing its exposure in both Verizon and Yahoo. We don’t know if the man who broke the Bank of England is a PowerRatings subscriber, but two out of three sells are stocks our PowerRatings tagged as more likely than the average stock to be lower in a year’s time. The third stock, however, is the kind of high PowerRating stock that investors should be looking for. Find out which is which at PowerRatings.net.

Up or Down? TradingMarkets New Trading Contest – TradingMarkets

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TradingMarkets Playbook

Yesterday morning before the open in Tuesday Morning Coffee with TradingMarkets, we warned that the combination of soaring pre-market futures and a surprisingly high ratio of overbought to oversold stocks meant that the before-the-bell strength was to be taken with a grain of salt. While conventional wisdom since then has blamed record crude oil prices, the fact of the matter is that stocks themselves warned us that they were overextended to the upside for the time being.

Today, in the wake of yesterday’s failure to close near the intraday highs, we are still seeing a number of overbought stocks. The number of overbought stocks with 2-period RSI values above 98, for example, dwarfs the number of oversold stocks with 2-period RSI values below 2.
We can see similarly high overbought to oversold ratios in other key indicators. Clearly, the low-hanging fruit for traders lies in weak stocks that are experiencing temporary strength. On the long side, strong stocks may have further to pullback.

Technically, the markets are walking on a tightrope between consolidating the modest gains from the first half of February and falling into a test of the January lows. Any resumption of strong selling in the near term is more likely to result in the latter rather than the former.

David Penn is Senior Editor at TradingMarkets.com.

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