Periodicals Wrap-Up for Thursday, July 17th
WALL STREET JOURNAL: The Wall Street Journal reported that it is the Bush Administration versus Democrats versus Republicans to decide the strategy to stabilize Fannie Mae (FNM) and Freddie Mac (FRE). The Administration’s plan would let the Treasury Department advance a credit line and the opportunity for the government to buy equity in either firm. A package is expected to pass but not before the political and economic ramifications are battled out. Democrats and Treasury want it to be a part of a housing rescue plan; Republications oppose it…The Clinton Foundation, headed by former President Clinton, believes it has a pricing agreement in place that it expects will make malaria drugs affordable and available to millions of poor people worldwide, the Wall Street Journal reported…FINANCIAL TIMES: The Financial Times reported that UBS (UBS) and Liechtenstein’s LGT Group will today be accused by U.S. Congressional investigators of using the “cloak of bank secrecy laws” to help American clients evade billions of dollars in taxes…GLOBES: Globes reported that Teva Pharmaceutical (TEVA) is talks to acquire Barr Pharmaceuticals (BRL). The price tag is said to be between $7B and $7.5B…
Fannie, Freddie stabilization has become a game of political chicken-WSJ
Its the Bush Administration versus Democrats versus Republicans to decide the strategy to stabilize Fannie Mae (FNM) and Freddie Mac (FRE), reports the Wall Street Journal. The Administration’s plan would let the Treasury Department advance a credit line and the opportunity for the government to buy equity in either firm. A package is expected to pass but not before the political and economic ramifications are battled out. Democrats and Treasury want it to be a part of a housing rescue plan; Republications oppose it. The final plan will be shaped in the coming days.
Chinese give Citigroup approval to offer debit cards-WSJ
Citigroup (C) has received Chinese regulatory approval to offer debit cards to its customers there, reports the Wall Street Journal. Foreign banks previously were only allowed to offer credit cards in deals with local partners.
Apple is now number three in U.S. PC sales-AppleInsider
Apple’s (AAPL) share of the U.S. PC market reached 8.5% in Q2, allowing it to overtake Acer to become the number three PC seller in America, according to data compiled by market research firm Gartner. Mac sales jumped more than 38% to almost 1.4M units in the U.S. during Q2.
U.S. reportedly intends to send diplomats to Iran-Guardian
The U.S. plans to station diplomats in Iran for the first time in 30 years, according to The Guardian. America intends to announce next month that it will launch a U.S. interests section in Iran, the newspaper reports. An interests section is usually opened as a preliminary step before launching a full embassy.
Amazon to introduce new online store of TV shows and movies-NY Times
The New York Times reports that Amazon.com (AMZN) is planning to today introduce Amazon Video on Demand, a new online store of TV shows and movies. Customers will be able to watch movies and TV shows immediately after ordering them, which is different from Internet video stores such as Apple’s (AAPL) iTunes, which requires the user to download the entire file to the hard drive before watching. Amazon, which is pursuing an Internet pipeline to the TV, has struck a deal with Sony (SNE) to place its Internet video store on Sony’s Bravia line of TVs. Amazon Video on Demand will be accessible beginning today to a limited number of customers and will open widely to other users later this summer.
Markets look to open higher but can it be sustained?
Stocks continue to trade higher in the pre-market as better than expected earnings reports and falling oil prices are moving the markets higher. Yesterday, the banking sector received a positive surprise with a positive earnings report form Wells Fargo (WFC), and today investors are optimistic after a better than expected report form J.P. Morgan (JPM). But overlooked yesterday was the CPI number which showed inflation rising at an annualized rate of 11%. Had the markets not been oversold already that news probably would have knocked the markets lower. Investors chose to focus on good news. They seem poised to do the same today but with such a massive move yesterday it may be difficult to see a follow through.
Oceaneering-OII initiated with a Buy, target $84@STFL
Stifel is positive on OII’s leverage to deepwater well completion activity.
WFC: 2Q EPS above consensus but were below the firm’s estimate@BARD
Given the strong move in the stock yesterday and with outsized exposure to consumers who are struggling, along with an incrementally higher risk balance sheet (home equity), BARD does not see much upside to the stock. 2008/09 EPS estimates were increased while $25 price target and Outperform rating were maintained.
Brokers: Moves to Resistance
As a measure of how deep price losses have been in two of the brokers we will look at this morning, Merrill Lynch (MER) and Lehman (LEH), neither stock has as yet made it through downtrend resistance on a daily time frame. For MER that level is $29 and for LEH $18.20. Depending on what we hear from MER this morning, the trade will either be up and through $29 or back down into the current bearish downtrend. Weekly downtrend resistance for MER is a great distance away at $36.85. On a positive surprise that might easily become an upside objective. LEH is likely to be pushed or pulled along with MER as fairly or unfairly the two stocks have traded with high relative correlation. Daily uptrend resistance is $18.20 with weekly uptrend resistance at $27.50. Downside objectives may easily be of the same magnitude down from the daily resistance levels if the news is worse than already expected.
Solar: Spain Solar Cap of 300WM is worst case scenario@CSTI
Spain’s General Secretary of Energy have presented their proposal that will establish the country�s new solar feed-in-tariff policy for 2009. Collins Stewart says the proposal contains a cap of 300MW, the indication that surfaced in late-June and led to a sharp sell off in solar stocks. Collins believes the 300MW level in the proposal is in the worst case scenario, as the Spanish industry trade groups were lobbying for a cap of 480MW.
SunPower-SPWR reports Q2 EPS 61c vs. consensus of 51c
Reports Q2 revenue $382.8M vs. consensus of $343.09M. Sees FY08 EPS $2.26-$2.36 vs. consensus of $2.17, sees FY08 revenue $1.39B-$1.44B vs. consensus of $1.36B. Sees FY09 EPS of at least $3.50 vs. consensus of $3.41, sees FY09 revenue $2B-$2.B vs. consensus of $1.94B. Sees Q3 EPS 53c-57c vs. consensus of 57c, sees Q3 revenue $340M-$355M vs. consensus of $346.86M.
Crude Oil-$CL: Support and Resistance
Crude took another beating today on more bearish than expected inventory numbers. The proxy on a daily basis for the uptrend in place since the breakout from the $100 level this year is the 50-day moving average, last at $132.98. Today that level was pierced briefly with price rebounding. Approaches to the line and bounces have during this uptrend led to even higher prices. It remains to be seen if that is the going to be the case this time around. On a weekly basis the 30-week moving average has been the uptrend line proxy. We are a very long way from that area which is at $114.02. If that were to break then indeed the long-term uptrend in Crude would be in very serious question. Rather than watching every tick, these two moving averages can serves as the important downside support levels for their respective time frames. Resistance is now at $135.14, $135.49.
MA volatility Up into EPS and addition to S&P 500 and 100 Index
MA is recently trading at $274 in pre-open trading, above its close of $271.20. MA is expected to report Q2 EPS on July 31. MA will be added to the S&P 100 as of the close of trading on July 17, GM will be deleted. MA will be added to the S&P 500 as of the close of trading on July 17, ACE will be deleted. MA July call option implied volatility is at 54; puts are at 64, above its 26-week average of 45 according to Track Data, indicating larger price movement.
Research in Motion-RIMM checks bullish, Q2 estimates raised@ADAM
Canaccord’s mid-quarter channel checks with leading global handset carriers and partners were very positive. The firm said RIMM’s device shipments and activations are about 20-30% ahead of plan for June and July up to the 14th for all carriers. At AT&T, June came in at 20% above May and July is tracking. The firm added that AAPL’s iPhone 3G is not impacting Blackberry sales adversely. The firm raised Q2 estimate to 92c/$2.67B from 89c/$2.62B. Shares are Buy rated.
eBay-EBAY: Believe quarter is not as bad as it appears@BOFA
Banc of America believes their turnaround thesis remains intact and they reiterate a Buy rating.
RIMM: Trading Down to 50-Week Moving Average
The shares did pierce the 50-week moving average ($109.15) in trade yesterday and bounced along with the broader tape Wednesday to close above that level. In the after market the shares are edging back toward that area. This is important as the 50-week moving average has been the uptrend support line proxy now for nearly two years. Yesterday was the first time it had been broken. A breakdown below this level on a sustained basis would suggest the current long-term uptrend is over. Support levels to watch as potential downside objectives on a breakdown below the 50-week moving average are at $107.61, $105.01, $103.35, $101.38, $99.49, $98.00, $96.05, $93.36, $91.73. Resistance is at $113.36.
EBAY: Continue to see value in shares@PIPR
Piper believes that while growth decelerated in EBAY’s core marketplace business in Q2, the company’s strong free cash flow characteristics and healthy growth from Paypal and Skype business make for an attractive stock for long-term value investors. The firm lowered their target to $32 from $35 but maintain a Buy rating.
Suntech Power-STP initiated with an Overweight, target $46@HSBC
HSBC cites valuation and secured raw material contracts for its Overweight rating.
PNC Financial-PNC reports Q2 EPS $1.45 vs. consensus of $1.16
Reports Q2 revenue $2.04B vs. consensus of $1.85B.
JP Morgan Chase-JPM reports Q2 EPS 54c vs. consensus of 44c
Reports Q2 revenue $18.39B vs. consensus of $16.55B.
JP Morgan Chase-JPM CEO Dimon continues to see weak economic environment
JP Morgan Chase-JPM CEO Dimon expects capital markets to remain under stress
Renewable Technologies: Thoughts from Intersolar U.S. Conference@PACS
Pacific Crest’s checks indicate that First Solar (FSLR) has been shipping from its new factory in Malaysia since early June, which they believe demonstrates the factory and products have been qualified and certified. Pacific Crest thinks Applied Materials (AMAT) had a strong presentation and believes Italy could be the next Spain, in term of megawatts installed.
BIIB: Believe strong Q2 is priced in at current levels@JEFF
Jefferies believes the stock is already pricing in strong Q2 results and reiterates a Hold rating on shares.
LDK Solar-LDK initiated with a Buy@GABE
After speaking with LDK’s CFO and following its analyst meeting, Gabelli believes the company is poised to be the largest global wafer solar manufacturer, by virtue of its competitive cost structure, margin expansion opportunities, scalability, and internal polysilicon plants. The firm thinks the stock can appreciate and has limited downside risk.
Jim Cramer’s “Mad Money”
According to Cramer, there were three causes for the Dow to soar 276 points. The first was Wells Fargo (WFC), which not only reported a better-than-expected results, but also raised its dividend. Cramer said this showed investors that not all banks are in trouble. The second cause was oil prices, which don’t seem to be able to break the $150 a barrel level. “This means consumers won’t see gas over $5 a gallon,” he said. Finally, Cramer credited Intel (INTC) for part of the market’s rally with its surprisingly good quarterly results. For a permanent bull market, he said the country needs the creation of a resolution mortgage trust to bail out the financial sector. The next step would be to scrap ethanol. The final step is to emphasize natural gas. With gas 50% cheaper than oil, it’s the cleanest, safest and most abundant fuel alternative. CSX (CSX) and its incumbent CEO Michael Ward has been in a battle with hedge fund TCI over control of the company’s board. Cramer said it now appears that TCI has the upper hand, and he’s not happy with the outcome. Despite the proxy fight, Cramer said he still likes the company’s fundamentals. CSX is a long-time favorite of Cramer. It is currently up 186% since it was first mentioned on March 22, 2005. Ward said business is strong at CSX, and that housing does not take up as big a portion of the company’s portfolio as it did previously. He said the volume of coal shipments has not declined at CSX. Ward said regardless of the outcome with TCI, he’ll remain focused on creating shareholder value. Cramer said he’s sticking with Ward and CSX. Next, Cramer spoke with the president and CEO of VF Corp (VFC), Eric Wiseman. Wiseman said VF remains strong because of its diversified portfolio of brands and its global reach. He highlighted several of the company’s recent acquisitions as evidence of the company’s successful strategy. Cramer called Wiseman a hear of retail. SUDDEN DEATH: (Bullish) AMSC; SU. (Bearish) ABK. LIGHTNING ROUND: (Bullish) CCL; GPRO; TC; MDU; YUM; WES. (Bearish) RIO; DPZ; GU.
Fast Money Position Recap- First Moves: Guy likes SLB, Pete likes NVS, Jeff and Karen likes MSFT.
Macke Owns (GS), (MSFT), (USO), (WMT); Adami Owns (C), (AGU), (GS), (INTC), (NUE), (BTU), (MSFT); Najarian Owns (AAPL), (NOK), (TSO), (XLF), (GS); Najarian Owns (ANR) Puts; Najarian Owns (CSCO) Calls, (PRU) Calls, (SLB) Calls, (UYG) Calls, (YHOO) Calls; (WLT) Calls; Finerman Owns (GS); Finerman’s Firm Owns (MSFT), (NOK), (SUN), (TSO), (TWX), (VLO), (AXP), (M); Finerman’s Firm Owns (TGT) Calls; Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm Is Long SPX Index Puts; Finerman’s Firm Is Short (IJR), (MDY), (SPY), (IWM).
What a bounce yesterday, biggest day in 3 months and biggest bank rally in 20 years. JPM earnings are now pushing the brokers higher. SPWR beat and raised. The market is starting on the right foot and is trying to have some follow through. The strong market move yesterday could limit gains today but yesterday did feel different as the downside momentum really slowed and gave way to a big rally led by the financials. The shorting the financials trade had become increasingly crowded and became even more accentuated on option expiration week.
Did Paulson and the PPT get it right this time and took some power from the shorts? Too early to tell but I think they may have hit that nerve by limiting short sales on FNM and FRE and possibly giving Paulson a blank check to buy stock in them if needed. The brokers could be on the limiting short sale list as well and that would definitely take steam from the short parade. The combination of no uptick rule and non enforcement of the short sale rule gave shorts way too much leverage to institute fear in investors. For now the fire has been put out and it will only be a matter of time to see if another emerges. I will be looking at financials, tech and those reporting earnings in the next week. I will be confirming market moves with the internals and TRINs, to verify the buying.
This week is the 35th anniversary of Enter the Dragon and the passing of Bruce Lee and the launch of the Bruce Lee Museum in Seattle. I have always believed to have strong personal connection with this Great and look forward to celebrating his life and works this weekend. Here is my sister’s article as an editor for International Examiner on Bruce Lee.
Pick plays with a high probability of success, run technicals through support and resistance levels, plan the trade and trade the plan, have focus and patience. Great Luck and Great Trading.
OPTIONDRAGON CNBC CONTEST PORTFOLIO UPDATE:
We just surpassed the $2 million mark in our portfolio by going all in on some so far high flying names…throughout the contest we are not allowed to sell during intraday and can only sell at the closing price of the issues. If that intraday restriction was removed we would have been easily #1, no joke. We only have a couple days left in the contest so we are going to do our best and win it regardless or at least be in the Top 10. So in 10 weeks, we took TWO portfolios from $1 million to $2 million. As Vince Lombardi once said, “We didn’t lose, we just ran out of time”.
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