CC: worth a look

CC:

Holiday Season upon us again.... Plenty of excitement in the gaming and electronic industry. Not my favorite area to follow but an attractive extreme always catches my attention. Here is CC, looking oversold and even down 2% following my am observation. But, chart is attractive and many have plenty of fundamental data points.

While stocks remains beaten up at these levels worth taking a shot. Looking at an exit for near-term traders at $23.40 upside potential closer to $26.

I do acknowledge reading the following : Circuit City has been holding meetings with the Street recently in which it is warning that average selling prices for flat-panel televisions are falling faster than the company had expected.

Despite those facts or presumed facts – I like the risk/reward. Closer to risk at current levels than reward – for those that see my point.

Nature of trade: Low conviction relative to gold’s/ metals, semi’s and other tech.

Next quest: Sustainable Media company.

- Turkey - Week - 2006

Actionable Long Ideas: DD, QCOM, PALM, AV, MRVL, AMD; and recently GLW, FLSH and SNDK.

Outlook: From a Long-term standpoint, wise to seek bargains in late 1990’s theme of technology, telecom and media. (TMT) Although, a strong run since July’s low, there are investment opportunities. A rotation out of energy and into TMT – is a call I am watching for in 2007. Macro picture is unclear with steady complacency, relatively low volatility and clear message from the FED. Important to stay humble in recent run and potential continuing run

Key Themes:

• Favoring tech versus other groups in the market SOX VS OSX.
• Specific areas in Tech: Semi’s and Disk Drives .Continue to favor SNDK and FLSH as top names in that group.
• Healthcare timely investment to consider especially in small cap. Despite post election noise, a worthwhile early one should explore .
• Shorts to consider due to high p/s – and extended charts Focusing on financials as 2007 short candidates: CFFN: S&L name w/ P/S, Also follow up on mortgage shorts for names like ACF and CNO. Earlier in the year, continued to address the fundamental call of sub-prime lenders as overvalued themes.
• Media long-term bets and investments to consider given cycle opportunities emerging in the sector.

Recap of stock calls.

Posted JBLU long - $9 based on inverse oil play and turned out to be a profitable call. Although, I sold early with a $10-12 target, market momentum continues to pick up steam.

GG: at $21 level on oversold commodity related theme worked as well. Plenty of vilotility but got ahead of the game here.

CVS: Around $30 remains a value bet but no major stock moment but use opportunities to add. Overreaction on headline news w/ solid foundation and critical support levels.

My weekend Read’s :

http://www.aaii.com/commentary/articles/200608_stockstrategies.cfm

According to O’Shaughnessy, his new Small-Cap Growth and Value screen focuses on “cheap stocks on the mend.” The first criterion is an inflation-adjusted market capitalization between $200 million and $2 billion. O’Shaughnessy uses an average annual inflation rate of 3%, meaning that going forward he would increase the market capitalization criterion by 3% each year.

The additional criteria are:

• Price-to-sales ratio less than 1.5;
• Earnings higher than the previous year;
• Above-average three- and six-month price appreciation.

SNDK

SNDK: Remains attractive with the rest of names in the diskdirves group. Other name also inculdes FLSH.

Key support level with exit level at $45
A potential upside move closer to $55 ...

Worth noteing is the stregth of DDX: Amex Disk Drive Index remains above 50/200 day mva. with solid performance.

From SeekingAlpha.com
http://ce.seekingalpha.com/article/19748

The explosive growth in the use of digital cameras and MP3 players combined with the demise of the floppy drive has been a boom for companies that make flash cards and Universal Serial Bus [USB] drives. Milpitas, California based SanDisk (SNDK) makes flash memory cards for digital cameras, MP3 players, the Cruzer line of USB drives and gaming cards for use in Sony's PlayStation Portable [PSP].

So what attracted me to this well known company that I felt was overvalued just a few months ago? While the stock has retreated from a high of almost $80 in January to the current $48.10, the company has released an exciting new line of MP3 players, acquired a key competitor and is well positioned to benefit from the launch of Microsoft's new operating system Windows Vista in 2007.

GLW: Corning

GLW: Appealing pattern of near-term consolidation following a significant sell off since may highs and failure in recent attempted recovery.

Oversold conditions offer an attractive risk/reward with defined exit levels.

Similar behavior is exhibited in other technology names like AMD and SNDK.

Clearly, three tech names are in different groups and fundamentals suggest stock specific stories to justify recent declines. Regardless, I view these names as quality, high-beta tech names that are neglected by the street.

Market appears satisfied with current levels but thinking ahead suggests that current levels should offer a recovery bounce within trading range. And a pending profit taking in big winners like CSCO and ORCL can lead to rotation into non-extended names. Rather long bottoming tech names than short leadership at today's level.
Given an upward sector bias in technology combined with current extreme mispricing - like this bet!

Commodity related names on the watch list VLO, PEIX and CCJ.

Mkt Thoughts: Post Election 2006

Mkt Thoughts:

I continue to favour commodity related stocks as gold remains an attractive bet at current levels. Many Technology names are worth a look especially in dissecting the better relative values in the market place.

Despite, extended charts of broad indices, the general market does not fully describe the emerging themes across various sectors.

Looking to make bets in ADM and PEIX – as a neglected corn themes. A macro structure in place but recently neglected value following May’s decline.

Concerned about market compliancy at these levels given the positive and uniform upside moves in most areas in the marketplace. OSX watched closely here as commodity related names take a pause.

Financials: Banks have retraced from overbought levels and would trim on shorts with a wait- and –see approach. Brokers continue to work and suggest an early short but a tough lesson learned before and a great rule not to call tops in the marketplace.

Consumer: Stock-specific for the most part….weakness in homebuilders remains a concern but not a fresh ideas and Media is a group of high interest.

Healthcare: Pharmacuticals responding to post-election speculation but a downside move can offer for early recovery and watching for overreaction of sellers.

Finally, looking for semi’s to recover here and lead a charge in technology. Despite bearish street sentiment risk/reward remains positive.

Semi -

MRVL and AMD: Consolidating at current levels -

Two semi names that offer attractive charts. I see these names on the watchlist since the mispricing is not clearly defined. In additon, market condition might not defend this call. But a tiemly place to add




AMD: looks attractive at current levels...Closer to $20 range ....Looking for an upside move closer to $24.

Investments -

Longer term charts provide valuable perspective on the state of Large Cap Technology. Areas of interest : DELL, IBM, QCOM, and YHOO. Charts of these names demonstrate a consistent behavior of oversold patterns.

Since technology is an emerging sector, even a market correction should not amplify the risk on these names.
Financials: Continuing on a negative bias in the sector, Banks remain area of concern. Examples include : WB, WFC and BK. Other areas in financials don't present definitive messages. Taking an early interest in SLM and MMC as potential longs.

In Basic Materials, DD, DOW, AA, NEM. Oversold and offer attractive timely entry.

These extremes are rather appealing in Technology and Materials.

Continue to favor gold here - very glad the commodity is working along w/ GG - a personal favorite name.
Election noise might cause turbulence but I do like SLM on the long side.

Few ideas to consider:
Banks : PNC - long at attractive levels, Short CMA closer to 200 day, with weak momentumCOF: short failed resistance at 80 short closer to 77.SLM: holding $48 attractive bottoming level.Staples: CBP - attractive entry point for an investable idea TSN: closer to $14 worth a look.Healthcare: CAH at 64. SEPR and IMCL - extreme levels opening up long opportunities.Consumer: DG, FL -long at these levels, HD - part of home related overdone extreme for late year rally.Media: An emerging theme w/ following names appearing to turn: gmst, emms, siri, xmsrTechnology: stx, brcm, altr, adi mxim, mu mrvl, cien, tlab, wdc, and elnk.Short: perIndustrials: swft, yrcw,Bm: aa- of course additional gold on pullbacks.

Homebuilders -

Although not a big fan of mortgage lenders - there is an equity oppertunity in homebuilders.

HGX Homebuilder Index remains attractive based on the bottoming action in the group. Following support level 210 followed by 200.

Analyst on the street remain net/negative on estimates in this group. Certainly, contrarians have placed their bets since July. Moving the index from its lows.


Although, a call that might not be way ahead of the street, current levels still offer attractive upside potential.

Clearly aware that value guys have recognized these oversold condition even in mid- Summer.
Check out the following Analyst ranking on the street:
Buy/hold analyst rating on the street: Still net/negative -allowing for a recovery bounce as a trade.
TOL 5/7
PHM 4/9
HOV 3/6
KBH 3/8

mkt view--

I would also note if a shift in feds message from thr previous meeting than it might have a loud effect - I am sure monday/tuesday- many will shuffle in/out poistions and attempt to decipher beyond fed's action. While equities await for clarity from the 3/5 of companies yet to report earnings.

Based on recent upward move - any confusing or tone change should lead to a favorable oppertunity to short equities and long bond price. (Near-term trade)

What is the current tone that led this revival in markets and defeat on shorts? It is assumed to be soft- landing and low oil and end of geopolotical turbulance. All led to recovery from summer rally and rejected talks of four year cycle.

But steady rides and trends need more substance to justify these overbought levels. A prolonged run from here appeases shorts

QCOM-

Worth a closer look at these levels - attempting to bottom with attractive risk/reward.

QCOM Remains attractive - looking at the following trading ranges.

GG (gold play via equity)

GG: gold is oversold following a commodity decline – GG –several stock specific news drove stock lower

20.35- October 4^th lows remain a key trading support .

Looking for recovery both in Gold and GG – an equity play based on macro extreme. At the same time a high beta play in a overdone negative name.

Since May correction, and following a heavy correction, there is a solid trading opportunity here –with defined exit.

CVS- overdone -

CVS: Overdone on the sell side following a mega news announcement by Wal Mart entry to pharmacy business. Mispricing created here as price declines are too oversold and pending recovery with support around 30 level followed by 28. Look for recovery in a solid Large Cap name – looking for bearish expectation to moderated and recover from extremes.

Also, given the defensive theme of this stock – looking for stability around current trading range.

Valuation seems positive: (good investment entry point)

The trailing p/e is a very reasonable 19.95 (imho), with a forward p/e of 16.57 (as estimated for fye 31-Dec-07). With quick growth estimated, the stock appears to be an excellent value with a PEG (5 yr expected) estimated at 0.62.

PALM- (trade revisited)

PALM: Bouncing off strong support around $14. Apparent buyers when stock trades $12-14 range -- a level that has offered buying opportunity. This is exhibited in the weekly chart coinciding with a bottoming momentum.
Above $14, stock remains attractive given recent correction and heavy sell-off from April highs of $24. Despite broad technology rally and competitors RIMM exceptional upside move - PALM clearly lagged the sector but showing a bottoming signal.
Street appears too bearish on this name. -And there is opportunity from what appears to be over pessimism. 7 buys/ 8 holds/ 2 sells -
Company has : No debt and $4.82 excess cash, and upcoming buyback of $250mil.
Extreme oversold reading in the weekly data presents an attractive opportunity a long position.

Avaya: Worth a look

Although, CSCO –gets the front cover and positive mention on Barrons; I have noticed AV on the positive momentum list.

In the same article the following was mentioned on AV.

Sticking to the discipline: Positive weekly momentum and a breakout from recent range make this name attractive.

Building momentum given the fundamental action on this group. Not fresh or timely idea as a trade here but actionable on pullbacks.

Worth adding to a watch list. postive above $10- use as exit....but for longer-term investors actionable.

All this said , same goes for csco - the leader in the group.

DD: attractive basing pattern

DD: Since 2000 stock trades in a narrow range between $50-40.

Aattractive consolidation pattern: suggesting a favorable odds for a pending breakout above $50. An upside move above $50 can trigger upside momentum.

Longer-term bet and might carry an opportunity cost of capital. A set up for an attractive reward given an emerging cyclical theme. (Chemicals and other large cap basic materials/industrials).

Near-term entry point: after a run up from $40-44--- not timely but at early stages of recovery. Not a trade but a 3-6 months play with an exit at $40.

fundamentals outlook: lower raw material costs and higher average prices will offset softening demand, and also thinks the stock is modestly undervalued. **JP Morgan comments**

I also like this name because of a value like approach and nice to have those names in the portfolio in an uncertain / less trending market.

Beta short / Long VIX

Chart Explanation:
Blue: Beta index (OSX, SOX, HUI and XBD)

Black: VIX Index:

Takeaway: Since 2003 as volatility declined; beta related themes appreciated.
Further Thoughts:
Equally weighted beta index suggests that oil services, brokers and gold stocks have all contributed to significant upside move. These groups have outperformed other areas in the marketplace. But leadership will be challenged.
We are at key junction as volatility remains oversold and due for recovery. Chart suggest in the upcoming months shorting beta themes might be worthwhile. OSX has shown recent declines tied with Oil weakness in the past few weeks. Brokers have had a sharp run up and benefited greatly in the low interest rate environment. Earnings were positive, but not sure if higher expectations await. Plus various strategies in the marketplace might be too crowded with similar tactics in minimizing risk. Therefore, beta index glory days of outperformance are worth a sharp look. As liquidity is drained out of the marketplace with rising rates from central banks, beta strategies risk or at least the game might change. Any change leads to uncertainty - not to be confused with general risk. Uncertainty caused turbulence which can result in a rising VIX - As commodity related themes reshuffle their outlook and hedge funds restructure their strategies – this can cause a shift in the market place.

Trim / short - Bank holdings - Oct 3, 2006

BKX Index: Showing signs of slowing with peaking momentum at these levels.

Strong run since Oct 2005 -(given new fed announcment)

Use Sep 29 highs as resitance level -of 114.

Vulnerable area in the market place - and usually has served as a good gaudge for broader market direction.

Stock specific area worth a note here as we start october -

Revisiting lenders short…..AHM (American Home Mortgage Investment Corp)

Revisiting lenders short…..AHM (American Home Mortgage Investment Corp)

AP STORY READS LIKES THIS:

The long-expected first sign of cracks in the mortgage loan market may have surfaced this week, as the Mortgage Bankers Association issued their quarterly report on home loan foreclosures.

MBA said Wednesday that loans entering foreclosure during the second quarter rose 29 percent from the first quarter. While analysts have long anticipated an uptick in mortgage defaults, Merrill Lynch analyst Kenneth Bruce said this report may mark the beginning of an era of weaker credit.

Lets make it actionable:

Revisiting the fundamental short on credit lenders as highlighted several times. A short which materialized heavily on HRB’s earnings announcements last month.

NOW….actionable trade with an attractive risk/reward enables us to short AHM.
Assuming that the recent rally in September is not sustainable.

AHM – stock has run up recently from $30-35 range – as October begins, here is a shorting opportunity given the overbought momentum levels. Timely entry point, in a fundamental biased call.

Looking for an attractive risk/reward trade here along with macro declines heading into earnings season. Also, a rising yield can help the case with further econ #’s pending especially this Friday. – Worthwhile, to get ahead of the trade despite attempted recovery.

Other names in that space also worth a consideration but at this point recommending short on AHM – trim candidate for long-term investors. (FED, BKUNA, CFC )

Additional industry perspective:

"This is the first sign of meaningful weakening in the prime mortgage space," Bruce wrote in a note to clients Thursday. "A downturn in credit may be just around the corner."

What does this mean for mortgage lenders? If consumers start defaulting on mortgages, investors who buy mortgages in the secondary market through loan-backed bonds will lose their appetite for risky loans. Mortgage lenders will then either make less profit when they sell their loans through securitizations or be stuck with portfolios of undesirable loans.

MKT THOUGHTS 9-27-2006

Looking at the BKX index - Approaching -May 8th highs - a full recovery from the equity sell-off.
May critical resistance level, given BKX weakness has been an indication for the broader market.
It works key barometer of the market given the dominance of financials in the S&P 500.

Technology :focused on three shorts that offer beta: AMD, NVDA and WFR.- A near-term trade.

Decline in commodities markets has fueled a return back to bonds sparking this near-term rally. A defensive rotation that compiled staples and healthcare to move higher. Nickel for some reason has survived the storm.