Trendline Charts

I longed FSII. I'm just looking for 8% or so because I'm chasing it and I'm going to use a mental stop loss if it breaks this trend line on any decent sell volume. Click on these pics to get a bigger image.



















EGMI's trend I drew up has held up as it has bounced nicely off it. It's really amazing how much information the market will give you if you look at it. On the first pull-back volume decreased on this stock until it bounced off trend line. Similar on this second pull-back where I drew the down arrows. This last time though all the sellers shook out in a crescendo and it made a bullish engulfing pattern.



















full disclosure:long FSII

Net-Net FSII Soaring

I first found this net-net at around $.60 and it was at a big discount to net current asset value. I put it on the stock watchlist Monday because it broke out of a triangular consolidation. It's slightly over NCAV of $28 million now at over $1 a share. Huge volume today.

full disclosure:no position at time of writing

Strong Stocks Watch List

The financial sector has bounced off an important technical level on light volume. XLF, the sector ETF printed a hammer Friday which could be bullish. Anyway, these are a handful of stocks that stood out to me technically and have some momo going for them for potential quick trades.

Financials

RAS flagged and bounced real well.

GNW same but trend line a little more defined.

HIG two hammers back to back off trend line. This chart looks the best out of these financials as far as technicals with the two hammers and clean trend line. Just needs volume to follow through again or a move over Fridays high.

TGIC seems due for a bounce.

Trying to hold uptrend. Last time it congested around trend line before run.

Nice consolidation. Looking for breakout.

Looks good on breakout.

Former deep value FSII continues to impress. Nice volume on this tech stock.

FRZ maybe good on breakout

breaking out

Should be a good watch list for some good moves if the runs continue.



full disclosure:no positions

Stock Market Analysis

My technical bull call from about a month or so ago on the major indices has been right on. Around Dow Jones 9,500 was some key resistance. Dow Jones 10,000 would take out some good resistance levels and about be confirmation of a technical bottom. It looks like this is going to be a struggle with these fairly valued valuations. I had no idea what the fundamentals and economics was going to look like a month ago or even four months ago. Fundamentals and valuations are powerful I feel and know to. It's a fact technicals can only go so far. Economic reality is a powerful slap in the face.

In that last link you can see how the overall stock market started breaking down technically when valuations were at historic levels in the tech bubble nine years ago. People were blinded by the "new age" of technology and valued stocks as if they could grow profits beyond the possible. Once the technicals matched the fundamental picture that was the time to take profits and get short.

If the economic data stays about the same going into the fourth quarter 2009 and 2010 and GDP adjusted for stimulus stays pretty crappy its an easy short in my opinion on overall fundys.

Valuations

S&P 500
Trailing PE
70.85
Forward
17.24

Naz
Trailing
43
Forward
20 !

Dow
Trailing
15
Forward
15


This is not just another little recession. The economy is not going to blast to new heights any time soon. Forward valuations look more like a regular old recession is about to end I feel. The consumer is different now. The consumer is saving more now and deleveraging the last 15-20 years of insanity. This could take some time I believe.

The question I have been asking myself is just how long can the government spending and low rates continue to have a positive effect on the economy without bankrupting us in the long-term if it is not to late already. Could the FED and government stimulus actually work? They certainly had an effect in the past. But just how bad is the recession/depression? It's not easily overcome right?

I think these valuations are getting to optimistic and we are about fairly valued here. There is the possibility that the run continues hoping for a big, real change and in that case I feel that 12,000 on Dow and 1,300 S&P are the easiest levels to get short on a solid technical signal. I'm still watching for a signal here for a short. A major wide ranging day where we see a 3-4% plunge would be a good signal. There isn't a spike top here like we had on the last tops over the last year. This action the past day is not looking like a major signal. A spike/wide ranging drop day and a gap down should be good technical analysis indicators going forward. Feel free anybody to comment on the economy and valuations and disagree with me. I like hearing all sides to things and I won't bite.

source on PE ratios

Nasdaq Top Forming

I'm really seeing strong bearish signals forming on the Nasdaq. I was going to mention in the previous post that Shanghai has had some major trouble lately to. This is also a small part of why I'm looking to get bearish here.

This trade to go short is looking better and better as I look at this chart coupled with valuations. I mentioned before I wanted to see a spike day. I hadn't looked at the Nasdaq percentage loss yet or the chart. Well, there is a decent spike day. In other words a volatile day. It isn't all that nasty a day actually but if you look at some other things I am seeing there is not a good chart here.

My red support line shows an internal trend line that touches support 4 times. The buyers and sellers in the market are comfortable with moving prices higher on that trend line. The chart has rising lows. This is bullish. However, it is right on trend line support again here with an ugly shooting star/gravestone candle. It was also a volatile day on strong volume.

The resistance trend line shows us that the Naz has been making higher highs to. This was bullish too. But, on that last push the market got the breakout but failed to hold the higher high and continue. You can see it in the chart below. The last time the momentum stalled was about 1,850 and it brought the drop below trend line support. The only drop below it. This last move here is different because it actually made a higher high but buyers immediately got shaken out.

This is also a potential double top forming that the arrows point to. I feel like confirmation of the top will be right around 1,900. I plan on getting short before hand though. The fundamentals for a short look good to. I am thinking I want to get a little broad market exposure short with the bear 3 X short Technology ETF (TYP) or another market ETF. I want to enter on any weakness and any break of trend line support. I think the risk reward is good here even if this isn't a major top and we just get another day or two of pull-back. If I swing something the next support level is my profit target. Right above that red confirmation line on the second chart. If we get a big gap down I'll probably be even more bearish.

I think I might start doing video and audio charts sometime soon. Keep an eye out for those. And if you get my posts RSS be sure and subscribe to the comments to. I have the widget for that on the right sidebar. There have been some good comments lately. Especially on the Vonage VG post.



full disclosure:no positions at time of writing

Stocks I'm Watching

I think the next couple days price action will be telling on net-net ADPT on whether or not it can push more. Back in May it double topped right at $3.00 and so far it has already held over that resistance level. Simple market mechanics at work here. Buyers who accumulated in the high 2.90s will be tempted to sell for break even here or new fundamental forces in the eyes of investors will propel the stock higher. People could be selling here and new buyers will come in anyway. There is just a better chance it will run if a couple possible sellers get shaken off and buyers show they can take the stock to higher levels. All this is not entirely significant though because the stock has resistance way higher to.

Electronic Game Card EGMI
With some hesitation because it trades on the OTC this EGMI I will say has very good fundamentals and valuation going for it. They grew sales 76% from 2007 to 2008. They grew earnings 81% in that same period. From reading some of the 10-k their product seems to be a hand-held electronic card that keeps track of winnings at casinos, bingo halls etc. The description was kind of vague to me but I think that is what it is. They have two patents in Europe and Japan and are working on one in the U.S. This card seems similar to me to the type of cards International Game Tech IGT developed to keep track of customers chips electronically in Casinos. It seems pretty interesting, "The shape of a pocket GameCard is flexible to clients’ needs but is currently approximately the size of a credit card, operated electronically by touch and incorporating a microchip and LCD screen showing numbers or icons."

Crunching Some Numbers
2010 EPS is expected to be $.20 going off of 1 analyst according to Yahoo Finance and Zacks.com. This is growth of 42% year over year. Here is what I like. The stock trades for $1.65 so the current years PE is only 12 and the forward is around 8! That is just totally out of whack with their growth rate of 42% for next year. A PEG of around .3. Over the next five years the expected growth rate in earnings is 35% per year.

If I'm conservative here and slap on a 30 PE multiple the stock is worth $4 this year and based on next years earnings growth worth $6 a share. This stock is at $1.65 right now. They've got a ton of cash. $9.6 mil in cash quarter end March with just $1.3 mil in total debt with none of that long-term.

As much as I take faith in SEC filings this is an OTC stock. I am very cautious and skeptical of anything on the OTC or Pink Sheets. My game plan if I even decide to trade this is to just catch a quick trade in it if it breaks out here or maybe buy a move off trend line support or a flag similar to my IFON trade.

















CHCI is a homebuilding stock that can be extremely volatile. If it runs again tomorrow it looks good for a quick trade but if it doesn't just a watch if even.















SUF is holding it's trend line nicely.















I think this could potentially turn into a bull flag here and the stock could continue higher. Rounding bottom formation. Price action at $1 might be key.

Net-Net Emerson Radio MSN In Play

(MSN) Emerson Radio popped 87% on top line growth of 26% year over year. Net income grew 300% year over year.

MSN is a perennial net-net. Pretty unexpected results and price action I'd imagine for a lot of people. There was some profit taking as the stock didn't hold the days highs very well. The amazing thing to me is home appliance sales were behind the boost for revenue growth. Home appliance sales? Isn't there a housing recession? Isn't the consumer almost dead? Huh.

They put up some pretty decent free cash flow the past couple quarters which is good. They have a good balance sheet with $23.6 mil in cash and quick liquidation value or net current asset value is $44 mil. I'd imagine at best the stock trades sideways for weeks or sells off big time here. That's without listening to what management had to say and a scenario where no analysts upgrade. I doubt there are even that many analysts if any though on the stock right now. Maybe something to keep an eye on and possibly, possibly enter on a pullback. Right now I think it is going to have a hard time holding above that gap.

Stocks For Short Watch

FRZ may have another day of run but this won't keep up for long. Short biased. NEPH is in stock pump newsletters. Even shows up on Yahoo finance. laugh. Short biased on major technical breakdown on big sell volume. Though NEPH doesn't have the look of pure manipulation this run could keep up for some days.

http://finance.yahoo.com/news/StockPreachercom-issues-pz-3972316092.html?x=0&.v=2
















full disclosure: no positions

Stocks Fighting The Bear

These are some stocks that had unusual buying volume yesterday during the sell-off.


A little break over resistance on a big volume spike for this one. Earnings were yesterday after the bell. Had a couple hammers off of trend line support. I like buying the day after a hammer on a trend line. I could be a little late with this one but like most of these in this post being patient and waiting for pull-back on trend line support is possible here.


















Longer time frame. Nice trend line.














Lots of volume back to back on airline penny stock MESA. PNCL another airline in play.














NANO last time volume spiked it sold off for a bit.




























Just pure momo. Hammer breakout.Hammer breakout.

















full disclosure: no positions

Special Situation Stock

I just stumbled upon this special situation Zareba Systems ZRBA. Looks like they are doing a reverse split and will cash out shareholders who hold fewer than 250 shares for $5.20. The stock closed at $3.60 Friday.

I just found this over at Mike Goode's ReaperTrades.com



full disclosure:No position. May take a position in future.