November 8th, 2012

AAPL Gets a Cold, the Market Gets …..?

I searched this blog to see what I may have written about AAPL over the years and found that there have been 15 individual posts since 2006, many comparing AAPL and GOOG (search other terms by using the search button in the lower left panel).

But situation is dramatically different today than it’s been at any previous time [haven't people gotten into a lot of trouble when they claim "this time it's different"?]:

  • Jobs is no longer the creative or leadership head of the company,
  • the company now has competition for its products (e.g., Samsung) and its services (iTunes vs. Pandora, Spotify and Amazon)
  •  the stock became the largest capitalized stock in the world and held a dominant role in all market indexes
  • the stock is considered “overbought” being a large position in nearly every mutual, pension and hedge fund,
  • finally, some blowback is now being heard and felt about the product introduction rate and design [note: the discontent with the connection format change and the mapping service disappointment].

So, I’d like to toss my stock chartist’s view of the “bear market” that has captured the AAPL driving it down 18% over the past two months.  Has the stock hit bottom and is it poised for a turn around (a large Wall Street firm recently called on CNBC for AAPL to more than double over the next year)?  Double it might but in the near-term it’s setting up for another 25% decline below what might be consider the neckline of an emerging head-and-shoulder top all the way down to 390 (nearly 30% from current levels).

Supporting this negative view is the long-term negative divergence existing between the trends between the two price peaks in 2012 and the comparable peaks in the OBV volume trend.  OBV indicates the relative volume between buyers (closes higher) and sellers (closes down).  In other words, as AAPL churned higher it was on less volume than those days when it closed lower.

Unfortunately, AAPL represents a large component of the major indexes so “when AAPL sneezes, the market gets a cold”.  Let’s hope that cold doesn’t turn into pneumonia.

December 20th, 2011

ORCL turns into Scrooge

ORCL (Oracle) could turn out to be Ebenezer Scrooge in the midst of all the joy brought on by today’s 3% move higher.  Just before Christmas, today’s market renewed the Bull’s hopes for a more positive 2012 than the year we’re completing.  If ORCL is typical, many stocks look like they spent this year’s flat market to form some really huge, compelling and emerging patterns.

What makes ORCL today’s Scrooge is that it fell 9% to 26.54 in after-hours trading.  According to Business Insider, “The company just blew its latest quarter: earnings came in at $0.54 per share (non-GAAP) on $8.79 billion in revenue. Wall Street was expecting $0.57 on $9.23 billion.”  What a difference 3 pennies can make!  It almost doesn’t matter what the company says, according to the Herd on Wall Street, “this looks a lot like a company milking its existing cash cows without signing up a lot of new customers or building new high growth businesses.”

The chart clearly shows an emerging change in Wall Street’s perception of ORCL:
The stock climbed in a clear, yet not-so-neat ascending channel since it touched bottom at the end of the Tech Bubble Crash in 2002.  However, this year was one of the few instances when a recent high was lower than the previous one making for a descending resistance trendline.  Interestingly, the after-hours close of 26.54 almost exactly touched a horizontal supporting trendline stretching back to early 2010.  (One can also easily argue that the supporting trendline slopes slightly downward making the prospective low at around 24.)  Let’s zoom in for a closer look:
It’s too early to tell whether the congestion this past year will be a consolidation pattern (e.g., a wedge) or a reversal (e.g., a double top) but what is certain is that it could be some time before ORCL again approaches the 30-35 area.  Unfortunately for the market, ORCL isn’t a unique case or exception.  As a matter of fact, it’s unfortunately all too common (see, for example, AMZN, ARUN, RHT, TIBX).

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September 7th, 2008

Industry Groups on the Move: Tech Still But Few Compelling Charts

Sometimes, a stock selection tool just doesn’t seem to work. This time it’s the IBD Industry Groups on the Move (in the interest of full disclosure, this is a scan I “invented” and is not endorsed or designed by IBD). I first described how I use weekly changes in IBD’s Industry Group rankings to highlight Groups that may contain future top stocks in February 2007 but since then it frequently led me to jump on to stocks in select industries too early.

The following table summarizes recent postings derived from scanning the Groups on the Move:

All in all, it’s not too bad average. The Industry Groups have declined an average 1.29% from the date of the blog posting to Friday while the S&P has declined 8.50% over the comparable periods. With the exception of the most recent Technology Group scan or August 10, each of the scan results were better (or not as bad) as the S&P 500 over the same period.

But as this Bear Market wears on, the Groups on the Move seem to be churning and not spilling out any stocks with compelling (meaning ready to be bought) charts. There are a number of stocks whose charts have great potential but there are still base building and won’t be ready for significant upside moves for several weeks or months. And they may be base building only because they’ve fallen so far that falling any further would be equivalent to hanging up a “going out of business” sign. For these, waiting is still more prudent than trying to jump on board and catch the first few percentages.

The Industry Groups increasing most in ranking since April 25 are still tech-related. I still can’t find many stocks that look like they’re about to make significant breakouts as I scroll through the charts of these Groups. The few exceptions include:

  • QSII (Quality Systems): Computer Sftwr-Medical
  • ATHN (Athenahealth): Computer Sftwr-Medical
  • HLTH (Hlth Corp): Computer Sftwr-Medical
  • MDAS (Medassets): Computer Sftwr-Medical
  • ELON (Echelon Corp): Computer-Networking
  • AOC (Aon Corp): Insurance-Brokers
  • MMC (Marsh & McLennan): Insurance-Brokers
  • LPHI (Life Partner Holdings): Insurance-Brokers

August 10th, 2008

Technology Industry Groups Advance in Rank

I haven’t discussed and am somewhat hesitant doing so now, Industry Groups that advancing in rank. My concern is appearing to have boarded the “we-have-hit-the-bottom” bandwagon. I don’t think we have, we’re far from it and, when we do, it will take some time before we see a major, sustained move up. But accepting the risk, this weeks rankings show some interesting movement that I’d like to share in case you’re seeking some short run trading opportunities. Understand, the market trumps industry group. Until the Market Timing Indicator flashes a clear green light, you may soon look to cash in as the market again turns south.

But something significant has happened. Twenty-four of the 197 IBD Industry Groups moved up more than 80 positions in the ranking and nearly half were computer software and hardware related. Furthermore, these groups are now among the top 50 Industry Groups. With those caveats, here are the Industry Groups that have increase 50 positions or more in rankings:

The rankings are highly dependent on relative strength (movement relative to the S&P 500) so, as on a second cautionary note, it should be pointed out that these jumps may may be more reflective of weakness throughout the market than underlying fundamental strength in tech related industries.

These groups include around 265 different stocks but, I have to say, they represent a motley crew. I looked at all the stocks and it was difficult picking any that had charts that meet any of my criteria: approaching new highs, building a base, etc. Almost all of them look like they have a huge headwind in the form of an overhang of supply to absorb before being able to advance.

Having said that, here are some stocks in these groups that you might want to consider. The Security Software firms seem to be the best poised to continue advancing:

  • ECLP (Eclipsys)
  • JNPR (Juniper)
  • ANSS (Ansys)
  • PMTC (Parametric)
  • DASTY (Dessault)
  • MFE (McAfee)
  • CHKP (Checkpoint)
  • SYMC (Symantec)

July 29th, 2008

Homebuilders and Computers-Software Industry Groups

I’ve been asked several times whether I still believe that homebuilders might be on the mend and whether any of them would be good long-term investments. Actually, I first wrote about that on March 15, when the S&P 500 began its last recovery attempt (emphasis added here):

When it comes to the stock market, the health of the market trumps rising industry group ranking so it’s these stocks should not be bought now. If you were to do a Google search of this blog for “homebuilders” you’d see I wrote negatively about the group over 6 times in 2005-6. But times and valuations have changed. Homebuilders are down over 60% from their 2005 peaks. So when the market signals that it has stopped declining, perhaps the devastated homebuilders, may be one of the groups first to respond.

It takes a long time for bases to be built and many of the stocks in the group, rather than building houses are now building bases. I’ll be watching this and screening individual homebuilders for good base patterns and, later, for breakouts.

The answer now is that 1) the market isn’t yet ready and 2) the industry isn’t ready. The stocks of some of the larger homebuilders look as if they’re still working on base-building but they’re nowhere near an upside breakout (nor do those it look like a downside break is eminent either). So the clear answer is that any purchase right now would still be highly risky.

Also, I mentioned in a later entry (July 15) that the health care Industry Groups may be early out of the gate on a bottom turnaround. As a matter of fact, two of the eight stocks mentioned there recently received acquisitions proposals at prices substantially above the July 15 price. The remaining six still look like timely purchases now.

But another area that appears to be developing as a fertile ground for buying opportunities are the various Software-related Industry Groups. I don’t have time to include graphs tonight but I recommend that you scan the stock charts for these companies and not how well they’re holding up in the current negative environment. Many are actually approaching their recent previous highs. I’ll try to get back to doing a more in depth analysis of some of them soon but here are the names for now:

  • PEGA
  • TSYS
  • CYBS
  • NTCT
  • IWOV
  • NUAN
  • ADBE
  • SPSS
  • QSFT
  • NTWK
  • SYNT