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Stock Tiger Stalking Stocks™
For Monday July 23, 2007
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Dow -149.33 at 13851.08, Nasdaq
-32.44 at 2687.60, S&P
-18.98 at 1534.10 
GOOG and
CAT chilled the mood in the markets in Friday as both gave
lower than expected earrings reports. Some say the price of oil
also added to the pressure but that most of the time has the
opposite effect.
It was the first week in about
a month for the major indexes to close the week lower.
About the Friday market
briefing com says: "Before Caterpillar upset the apple cart,
market sentiment was already bearish as disappointing quarterly
reports from two tech bellwethers left investors again wondering if
the sector's growth prospects are overly optimistic. For just the
second time as a public company, Google missed analysts' expectations while the typically
dependable Microsoft broke a
long string of upside surprises with an inline Q4 report. When two
of the Nasdaq's three largest stocks by market cap post
disappointing results, it's easy to see why the tech-heavy Composite
faced such an uphill battle Friday."
Despite the market drop on
Friday there is not much technical damage in the charts but there
are sure signs that we are topping. The Dow and Nasdaq look better
than the Russell 2000 but we need to pay attention to the earnings
reactions as if they are like Friday than damage can come soon. For
many months each time we have seen a pullback it is followed by a
rally to new highs so it could continue as the bulls still have the
advantage but I think the longer term money now will be to the
downside even if it may take another 4-8 weeks to confirm it.
We still though have long picks
as even if the market drops, not every stock joins in for a while.
We will be looking for some short setups to add to our list.
The top and bottom sectors for the past week.
Only gold was up for the week in our look at the
major indexes.
The Dow is not broken
and we have seen it come back many times but it was very close to
our projections for a possible top. The RSI has negative divergence
and the stochastics may soon drop under 80. This has been one of the
strongest indexes so maybe not the one to short but one I like to
use the futures to short with. You can see the support should be
about 13690 and next the 50-day at 13500. A single Dow e-mini ties up about
$1800 per contract and as it pays $5 a point, a drop to the 50-day
would earn about $1500 or roughly a 80% gain. By using a 15-min
chart for entries and stops you can create some nice risk/reward
situations. If for example you short several contracts on a break of
support you can cover part of them as the trade goes in your favor
to lock in gains and then set a bit wider stops. I think at some
point in the next two months we may reach a long term top (we may
have now) and at that point a short could be left on for months or
longer. Some day the Dow will likely test the March low and that is
1858 points from here or for a single e-mini contract a pay our of
$9290 or a 400% gain. To make several stabs at shorting what may be
the top is not out of order as you can pick good entries each
time with tight stops. We are in earnings season so markets can be
volatile but I think there is significantly more downside than
upside ahead.
The Nasdaq may hold the
2670 but if not seems certain to at least test the 2634 and likely
the trend at 50-day EMA. It never got to our projected high so may
rally again to try it just a bit over its past high.
Just for interest - note how on the long term
NASI chart the MACD broke above the yellow trend lines on the
rallies in 2005 and in 2006 but not in 2007. This may also be a
negative divergence signal.
Increased volume on the sell offs on the S&P
500 is not a good sign but support is at the 50-day EMA and a
bit below at the trend line. If that breaks then expect a test of the
32% retrace and the June lows.
The weekly chart of the S&P 500 does not
yet show any damage and the RSI is still above 70.
The NYSE may have put in its high. It
has broken below 80 on stochastics and has had negative divergence
on the RSI for some time now. RSI made its high in June and the
chart continued higher showing a lack of strength on the move. It is
still not a broken chart as we have seen it come back several times
but it sure is a red caution flag to me.
The number of stocks on the NYSE that are now
trading over their 200-day average has also broken below support to
a level we have not seen since the 4th quarter last year.
The Russell 2000 has been the weakest of the major indexes
lately and never was able to make new highs in the
last months of rallies. This also has had negative divergence for
some time now. The Ultra Short ProShares inverse fund for this
index is TWM. It goes up about 200% of the % that the index goes
down.
Oil continues its move with the former high target as
shown and if it breaks higher, using a Fibonacci projection I get $85 as the
target if $80 is broken.
This shows the oil price adjusted to inflation.
This fund goes up when the US dollar does and
you see it broke support this week. A simple buy signal would be
using our usual stochastics that have worked well.
The dollar now at a new low. This
means that all products bought in the USA that come from outside the
USA will cost more and that equals inflation. It does make USA
products abroad more attractive of course so helps some companies
who export. The USA travel industry who caters to foreign visitors
is also helped as travel and hotel costs in America are more reasonable.
If this continues than companies in Europe and other places will
likely have lower sales and profits as their product will cost more
in the USA.
Gold a while back broke above its bull
flag and this week above a horizontal level.
On the weekly though we see that gold now is at resistance from two lines. A
break back over $700 would be significant as a sign it would then test it high
at $730
One way to short benefit from
the Dow going lower is to buy the inverse ETF - DXD. It gains
around 200% of the Dow's decline. On Friday the Dow was down 1% and
this was up 1.8% It may have put in its low but if held long term
would keep a stop under the $46 level. Resistance over head is the
$51.36 and the 200-day/trend line and later $62.00. If by Autumn we
are in a confirmed bear market the $74.00 target would be first
major target if $62 is broken.
Some long term stocks
PLTG is an oil/gas
company as you know from
our report They had an
announcement about their Texas joint venture oil property with
projections for the first 20 wells. Remember that
while this trades in light volume in the USA it trades about 800k on
the German XETRA exchange. The US price than will generally follow
the German price. The natural gas wells in Tennessee are
getting permitted now as may begin drilling in 30 days and the Texas
oil well drilling, as outlined in the Friday press release is to be
started this month. I know a lot of you bought after
our initial report and with these properties to begin their
drilling it seems a good place to build positions in this trading
range instead of wafting for the break out over $0.51. The 50-day
EMA is support and it keep moving up, as does the trend line so they
could act as a stop. I spoke with the company president this week
and for the Tennessee property when the drilling begins they plan to
open two wells a month and as we mentioned they each will add about
$20,000/month net but if one waits until that shows in the financial
report we expect the price will be much higher so seems better to
accumulate when it is where it is now near this support area. With
revenues then increasing significantly each month the oil/gas sector
seems a good one to be in even if the general markets enter a
decline.
NPWS - we were lucky
with our call to use the $0.65 - 50-day EMA as the stop after the
significant gains. Right now it does have an unattractive chart as
there was some big selling. If it however can build a base in here
as it seems to be doing it may set up again for a rally into the
release of the prototype scheduled for the next 2-3 weeks. Right now
after the big sell of it does have risk but a reversal could also
have good rewards. Remember at this stage it is not a buy-and-forget
stock but watch for renewed interest. Also watch the stochastics for
a turn up over 20 with increased buying volume. Jesup Lamont has
issued a research report available at www.otcstockreview.com
Jesup Lamont
Research Report
they have a price target of
$0.77. See the report.
NNRF dropped more last
week as short sellers continued to push on it and they must have
dislodged several who had stops or wanted to try to sell and buy
lower. The company is progressing well on all fronts and I do not
think this 2-weeks of short selling will change the longer term
price targets or timing of them in any way. I mean the if we had
expected the price to be at a certain level on December 1 that it
will likely still do that regardless of this latest pullback. The
company has so many important things going one now that over the
next several months we expect to see many significant developments.
This chart is one we looked at in the chat room when it was dropping
to see where buyer were likely to come in. So far they picked the
first level and that may be the bottom one. It all depends on how
aggressive the short sellers are in their attempt for short term
gains. Our original report in March was written before the
additional $100M in contracts to ATOLL and before the negotiations
in Germany for setting up the plant for FEECOM/BIECOM and
before the purchase of ROAR and the progress in the sales of its
Power Quality Protection Units from its totally
owned subsidiary Nucon-Rus and all the other areas that will add to
revenues. So if we forget about all the new projects and only use
those the old 12-month projections of revenue of $120 million and
profit of $22.2 for ATOLL and half to NNRF we
come out with a net of over $0.25. Giving a growth PE of even 20
means a price using the old figure is $5.00 which puts it over the
trend line. When we are back there we can start to add in the
projections from the other areas of revenues which will be much
larger. So right now we see a
100% gain just going back to the the trend. If it dips again and can
be purchased lower that will mean even a bigger gain later. Many
like to scale into a trade so they do not buy all at one time or
price. Watch the stochastics as a move back above 20 with good
volume is our typical buy signal for technical traders.
CYRX as you know at the
moment awaits the announcement of the move to the OTC and most a
news stream that can then follow. It seemed to have some stops
triggered this week and in the chat room we were buying as the ask
dropped to $0.90 at one point. This stock jumps so that was a good
buy as they can raise the ask 20-30 cents in a heartbeat so hard to
get once it starts running. This is still of course a
speculative play as they have yet to give any details about
financing and production ramp up, who will produce and how long will
it take, who will be the shipper if it will be an exclusive deal and
who are the final customers. With so many things to announce over
time it seems to us a good risk/reward situation. If you want to
wait for a trend break on heavy volume it would be over about $1.50.
PYR as you know is on a
long term list with revenues expected to be about $0.24 over the
year so on the next report we would like to see $0.02 - $0.04 as it
was not a full quarter of the new oil/gas wells. If earnings
are on target than this if way under priced. This stock is on the
Canadian TSX exchange (Venture) and right now trades in light volume
so good to accumulate when you can.
Our report last
updated July 10
CFPC had a conference call last week and
we mentioned some of the information on the
message board and
the recording of the call will be made available pretty soon.
The projection we gave in the original report still look good
and the company expects to add coffee from two additional
countries. It can easily sell all the coffee it can buy so the
real work is in buying the high quality coffee they sell and
they are progressing very well in this.
Economic calendar from briefing.com
Additions to watch list. You
know I am not a broker and show these as technical candidates. See
our disclaimer and do your own DD. On these we like to buy as close
to the buy price as possible with a tight stop under. It is good to
sell some the first day to lock in gains and then keep stops
accordingly to not let winners turn into losers.
After the talk of the market
being in
a topping pattern then why do we have so many longs and not shorts.
Well we had 28 break outs two weeks ago and only about 8 this week
but it is common if we have a huge week to have a light one after.
There are still a good number of long candidates so we will lean
that way a bit longer but will be watching to add short able charts
as well.
VVUS over $6.00
DSTI - solar has
been popular sector. This has top level at $7.55 and break of small
triangle at about $7.20
AZK over $4.03
SUG - only showing chart
as think there is a trade here - not sure on an entry - maybe over
$34.50 again as nice volume on Friday. This one for experienced
traders.
TSCM over $12.33
FST above $45.05
OXPS I would play it on
good volume back over $28.00
THI over $32.77
STLD above $49.00 - note
the $49.36 shadow high
APC over $55.00 and then
$55.82
HAL over $37.21
HTCH not on watch list as
was a chat room play. The 200-day may be resistance but watch for a
pullback and if on low volume may make for another long play.
Wasp on the
flower by Dean Bertoncelj - amazing design
Outside a cafe in Sochi.
That's a full lid for today - will see you all
during the week.
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