Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
He's in the chorus! No but market should run for a few days.
FWIW Cramer said to buy the last hour as new money is coming in.
been buying all day Tea. Thanks for DRYS sold at 85.50 +15 from 2 days ago.Rotated into TBSI.
SNDK Barrons:
November 27, 2007, 1:10 pm
Sandisk Rises on Delayed Black Friday Rally; Can It Last?
Posted by Tiernan Ray
Shares of Sandisk (SNDK), which makes flash memory for portable electronics, and also sells those nifty USB flash drives people carry on keychains, are getting a lift today on what analyst Doug Freedman with American Technology Research calls a delayed Black Friday rally for the stock.
Sandisk’s flash memory, Freedman pointed out in a conversation this afternoon I had with him, is incorporated into several varieties of global positioning system (GPS) navigation devices. Those portable nav devices, or “PNDs,” as they’re known, did well on Friday, as Eric has noted. Moreover, more and more cell phones are gobbling up add-in flash memory cards to play music, which he thinks could be upside to sales volumes for Sandisk this quarter.
That could help Sandisk beat analysts’ numbers when it reports the December quarter results in mid-January.
Ah, but here’s the rub: Sandisk also beat its numbers this quarter a year ago, by 37%, and the stock nevertheless collapsed when the results came out in January. And back when the company reported blow-out numbers on October 18, the stock fell almost 20%. It’s all about the forecast, points out Freedman, so any rally now has to contend with the what Sandisk says about its business outlook come mid-January.
Freedman has a Buy rating on the shares, and he cites two reasons to be cautiously optimistic: for one thing, Sandisk shares are down over 40% in the last two years, which may give the stock a technical support level at today’s price. The shares are certainly cheaper than in past, trading at about 13x Freedman’s projection for $2.90 in earnings next year (excluding options expense.) And, too, he thinks average selling price declines this quarter may not be as bad as people think when the company reports in January, perhaps down only 40%. If they decline more than that, say 50%, the stock will be in trouble, he suggests.
The swing factor: the DRAM industry has to cut back on supply to stem drastic price declines, which Eric has written about. If that happens, perhaps this quarter or next, it means more chip-making capacity will be switched over to NAND flash memory production, boosting supply and hurting prices.
Freedman is projecting profit of 82 cents this quarter on sales of $1.44 billion, and he expects Sandisk may exceed that. His 12-month price target is $60.
Sandisk shares today are up 6.52% at $37.54.
DRYS picked up at 69.88
Tea, I read a lot because I don't have the time or smarts to do what you and others do. Just another opinion. Value to me although I understand information can be "toxic".
from Schaeffers:
Data from the International Securities Exchange, or ISE, also began to show signs that complacency may be breaking down. As I noted last week, the all- securities call/put ratio at the ISE hit 67.85 on Friday (November 16). Readings as low as this are pretty uncommon – counting this latest one, there have been 22 going back to the beginning of 2006. And many of these readings have occurred in clusters.
My colleagues, Bob Becks and Joseph W. Sunderman, took a look at the implications of a low ISEE call/put ratio (below 90). In their quantitative study, they eliminated signals that occurred within 20 days of the first signal, due to the tendency of these extremely low call/put ratios to occur in clusters. That leaves a total of seven unique signals. Ten trading days after these signals, the SPY has been positive 86% of the time with an average gain of 1.1%. Thirty days out, the SPY was positive 100% of the time, with the average return being 3.2%. The 90-days period following such a signal is really impressive. The SPY was in the black 100% of the time with an average return of 9.1%. Unless we're transitioning to a bear market, which I highly doubt, this study suggests that it's a good time to be long the market, no matter how gut-wrenching it may be on a day-to-day basis.
Another sign of growing concern among the options players can be seen in the 15-day moving average of the CBOE put/call open interest ratio. This indicator is climbing toward levels last seen in first and third quarters of 2007, when the market was hovering at its lows for the year. We may finally be seeing some capitulation among investors, adding another brick to the wall of worry this market can use to claw its way higher.
One dissenter to this growing crack in the complacent armor was the VIX, which was little changed even while the market moved defiantly into losing territory. In fact, the supposed "fear barometer" has shown little signs of alarm for a few weeks now, preferring instead to shuffle sideways. It has yet to make a significant move above the 30 level or come within sniffing distance of its mid-August peak.
However, the VIX action presents some very interesting possibilities. Its continued inability to move below the 32-week trendline is bearish, as we've pointed out before. But I wonder whether the fact that the November spike has fallen short of the August spike might actually be bullish in its implications, in the sense of a "non-confirmation" of the pullback, rather than the conventional view that this is a bearish indicator of complacency. This interpretation would only make sense if you felt the VIX represented smart money, an evolving conclusion that we at Schaeffer's have reached over the course of this year. Note that you could consider the VIX spike in the first quarter to be a non-confirmation relative to the spike in the second quarter of 2006, as it fell shy of the 2006 peak. The spike to higher VIX highs in August then "confirms" the bearish trend, and by that reasoning (assuming the VIX has, in fact, peaked) the current spike is another non-confirmation with bullish implications.
I do feel the bears are keeping a watchful eye on the Fed every step lower that the market takes – Citigroup's (C) break to new annual lows isn't helping matters for financials or for the market as a whole. The five-year yield continues to spiral to new lows, putting additional pressure on Bernanke and his cohorts. And despite the protestations of certain Fed officials earlier this month, the group will be forced to act if market conditions get much worse from here. The next policy meeting is scheduled for December 11; if we don't see a rate cut from that meeting (if not before), the market will be in for some severe disappointment, technical support notwithstanding. But the risk posed by a foolish and impotent Fed aside, I'll reiterate what I said last week:
"...I see the risk to the bullish case as a 'slow bleed'; the bearish risk would be more like 'an explosive rally to new highs,' and under this scenario I want to be a bull despite some short-term concerns..."
This week, we finish November with consumer-confidence numbers on Tuesday, and preliminary GDP data and new home sales on Thursday. On the earnings block, more retailers take the stage, such as Staples (SPLS) and Aeropostale (ARO). We'll have an early indication as to how successful retail sales for "Black Friday" and "Cyber Monday" were amid this time of consumer uncertainty. Additionally, several Fed officials will be speaking and will perhaps provide some clues to the bank's short-term plans. My suggestion to them would be: "If you don't have anything to say that implies a forthcoming rate cut, don't say it."
And now a few sectors of note...
Dissecting The Sectors
Sector
Metals
Bullish
Outlook: Southern Copper (PCU) and BHP Billiton (BHP) appear to be bottoming out around intermediate-term support – their 160-day and 80-day moving averages, respectively - while remaining propped against a wall of worry. Between the pair, there are just 4 "buy" ratings on Wall Street, and 9 "hold" ratings, leaving wide open the possibility for upgrades. Short interest is robust on PCU, at 7 times its average daily volume, and Schaeffer's put/call open interest ratio (SOIR) for both PCU and BHP reveals a preference for the put side. PCU currently shoulders a Schaeffer's put/call open interest ratio (SOIR) of 1.11; BHP boasts a SOIR of 1.07. Looking at gold, the $800 level was overcome once again in last week's trading, as investors moved back into the malleable metal. A sprint to $1,000 could be in the metal's future. Barrick Gold (ABX) is fresh from a retest of its 80-day moving average; Newmont Mining (NEM) continues to hug support at its 10-week moving average.
Sector
Small-Cap and Mid-Cap Momentum
Bullish
Outlook: The Schaeffer's put/call open interest ratio (SOIR) for the iShares Russell 2000 Index (IWM) exchange-traded fund (ETF) edged fractionally higher last week, hitting 1.88. In the front three-months series combined, puts are trouncing calls nearly two-to-one. As this pessimism unwinds, the small-cap-centric fund could be rewarded with some additional buying power. In the front-month December series, put open interest is notably heavy between the out-of-the-money 71 and 75 levels. Over the short term, these below-the-surface puts could serve as options-related structural support. From the small- and mid-cap arena, we continue to like Chipotle Mexican Grill (CMG), Sunpower (SPWR), and Priceline.com (PCLN). The short-interest ratios on all three stocks are robust, at 8.4, 6.9, and 8.4, respectively. The Russell 2000 Index (RUT), meanwhile, continues to hold atop its 32-month moving average, which has not been violated on a closing basis since May 2003. Meanwhile, the S&P 400 MidCap Index (MID) is trading atop its 20-month trendline, which could serve as a springboard to launch the index higher. Continue to focus on strong momentum, high-relative-strength names within the sector for the best profit potential.
Sector
Financials
Bearish
Outlook: Given everything that has happened in the financial arena of late – the latest being Citigroup's (C) trek into new-low territory - I'm guessing the sector will have to be hated a lot before rock bottom can be considered. And I don't think we've seen the type of overwhelming negative sentiment that would coincide with a bottom. Case in point: the Schaeffer's put/call open interest ratio (SOIR) for the Select Sector SPDR Financial Fund (XLF) remains new annual lows, coming in at 1.50 last Friday. Composite sector SOIR readings for savings-and-loan companies and for banks are indicative of speculator optimism as well, ranking in the 21st and 0 percentiles, respectively. We still continue to lack climactic volume typically registered at a market bottom. The XLF hit another new annual low last Wednesday, but volume is still below mid-August levels. Overall, if the financials in fact haven't bottomed yet, a major portion of market will continue to struggle.
Bernie Schaeffer with Beth Gaston Moon
Schaeffer's Investment Research's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. We call this Expectational Analysis®. Click here for details.
Discuss this commentary:
Add a new discussion topic related to this commentary Discussion Board Home Page
There are currently no discussions related to this commentary.
Email to a Friend Print Page Add RSS My Yahoo Del.icio.us
Rate This Market Observation
Not at all useful 1 2 3 4 5 Extremely useful
Previous Observation | Observation List | Next Observation
Recent Schaeffer's Commentary
11/23/2007 Option Activity Alert: Call Buyers Take a Shine to SunPower
11/23/2007 Trading Tools to Build Your Portfolio: Brinker International
11/21/2007 Stocks Slump on Soaring Oil Prices
11/21/2007 Option Activity Alert: Call Interest Heats Up on American Express
11/21/2007 The Early Edge: Countrywide, Credit Suisse, Deere, and Whole Foods
Other Recent Observations From Bernie Schaeffer:
11/19/2007 Monday Morning Outlook: Analyzing the Risks to the Bullish and Bearish Case
11/12/2007 Monday Morning Outlook: Short-Term Pain Before Long-Term Gains?
11/7/2007 November Option Advisor Commentary : A Tale of 3 Charts
11/5/2007 Monday Morning Outlook: Support Levels Hold Despite Market Pullback
10/29/2007 Monday Morning Outlook: Support and Sentiment Bode Well for Stocks
View the last 100 Market Observations
Search the Market Observation Archive
Search by: Word or phrase to search:
Ticker Symbol Commentary Author Exact Date of Commentary Exact Phrase in Commentary
Tea DRYS holding well. May join in soon. BG also holdig up well.
someone is buying the heck out of OXY.EOM
Watching and gulping as I bought oil stocks yesterday. Will they shoot them last? Hope they have 2-3 lives!
Thanks Tea! I loaded HES,OXY and APA. They could be leaders if we are going up.
What everyone knows.... I love it!
HES,OXY,APA on the way to new highs!
There is a growing shortage of oil which most don't get. They think it is speculators, but it really is different this time.
Oily oils are HES,APA,OXY
Oil indeed may be the new gold. HES,APA,OXY passing a nice stress test IMO.
My how oil "officials" are starting to change their tune.
http://online.wsj.com/article/SB119543677899797558.html?mod=hps_us_mostpop_viewed
They have to dance a little before they will admit to severe constraints.Long HES,APA,OXY.
No guarantees ever in life. Noticed an RSI divergence setting up on daily OEX. Thanks.
I see your base now. My .786 retrace is from Oct. high to Aug. low. Comes in at 661 OEX. You think little chance for this as a turning point?
Anyer
I see now you were using the March low to get the 670.
Tea, It appears 676 is the .62 retrace back to all time high in October per your OEX chart. Not 670. That is why I was favoring a move down to the .786 retrace of 661. Is this of any significance?
Tea, I like turkeys that will stick their neck out much better than a dead turkey! Thanks for the continuing perspective. Noticed HES and APA held well yesterday and started to reenter.
Thanks AJ. Not much of any bounce in overall mkt today. Lower tomorrow?
Went long DISH on buyout talk. Gulp!
Unfortunately I don't understand that but you guys are way ahead of me. What about climactic volume expectations? Seems we need some real fear and a VIX rise to get a low!
SPX 1415 is .786 fib and I show OEX .786 at 661.
The rest of the story not told at OPEC. The open microphone:
http://www.thebusiness.co.uk/news-and-analysis/358346/saudi-minister-warns-of-dollar-collapse.thtml
IMO the dollar will soon fall as the reserve currency; the social democracies will come to the same end point as the communist socialists did in China and Russia. The difference is that in the social democracies it takes longer for the state to take over.
Entitlements eventually bankrupt both socialist models.Consider that possibly that Russia and China learned and have now decided to improve the competitive model. A strong central government which embraces capitalism as the engine of growth yet denies the proliferation of entitlement programs could become the new model for international fitness. Couple that with the formation of sovereign wealth funds which invest for the future. Meanwhile the social democracies "invest" in an entitlement citizenry while spending everything and even borrowing to spend.
My prediction is a very powerful future for Russia and China.
Interesting too that Russia will open an energy exchange in St. Petersburgh Jan. 2008 which will trade Urals light in rubles. Russia actually produced more crude than Saudi Arabia last year.
Tea, You think we make new lows. I went to 80% cash and a few shorts. Nasty and wicked is the word for this.
Anyer
It could also mean that the fear is so high, the market goes much higher!
I heard "some" markets were closed.Looking at SIRF and ATHR to buy.
Thanks AJ, I see the divs. Maybe a morning star setup looking to form with the gap down depending on the close today.NDX
Sylvester looks like the sellers have been beaten out of SNDK. may join you. Is market open Monday?
Anyer
SPX 1451 is .618 fib August low to Oct high; should get a bounce of some kind.
Did not sell my APA,APC,NE,TLM. May be new leaders on a bounce as they refuse to buckle. HES also looks good.
AJ and LG any thoughts on these?
While I respect Ron Paul and subscribe to his views, he is not a socialist and is therefore unelectable. This country wants a bigger welfare state and will get it IMO.The corporations are leaving and many futurist types are considering the same.e.g. Panama is the new Florida.
Schaeffer's bullish take:
http://www.schaeffersresearch.com/commentary/observations.aspx?ID=20737
Buy TLM just broke out and Canadian oil.
Elephant fields are in death spiral and any oil field will become precious. Most traders don't understand this.
Chub, Buying USU volume reversal underway with contract news.
The Yuan and J Rogers
http://www.bloomberg.com/apps/news?pid=20601087&sid=amQBwDBSDvBE&refer=home
I am just generalizing as it seems to me a BP can go from 90 to 80 and still be in a situation where the averages trade higher.