Soda analogy time. Let’s say for sake of easy hypothetical argument that Coca-Cola (KO) and Pepsi (PEP) are going about their everyday business and bam- a story with much documentation proves that sustained drinking of soda can cause cancer. Not bloody likely, but go with me. Shares of KO and PEP would both fall dramatically in all likelihood. Now let’s do a different one. Let’s say that 100% of KO’s business was in the United States and 100% of PEP’s business was located in Japan. Which stock do you think would have performed better amid the recent horrible natural disaster in Japan? I bring this up because although these are extreme examples, many real ones occur in real trading life on a daily basis in which people simply hemorrhage money. Yesterday was a prime example. There was a story yesterday regarding the leader of the rare earths- Molycorp (MCP). MCP announced it acquired a controlling stake in AS Silmet which would allow the company to establish a presence in Europe as well as double its near-term rare earth oxide production capacity. MCP rallied all day in a steady ascending climb in which it closed ahead around 13%. Shares of its competitors notched up as well with stocks like REE up about 5% and AVL 4%. All day I heard of people wondering why the others weren’t rallying. Well, this one was a simple matter of paying attention to the story. It’s a slight positive for the group that entities such as MCP are making inroads in places such as Europe, but in the end, it’s only truly good for MCP in the immediate-term. Thus, if you’re looking to do sector plays, it’s a must to realize that every stock move is not the same nor are there necessarily reasons for an entire sector to move on any given day.
Markets overnight were generally lower throughout the world with Tokyo down 1% and the European bourses off 0.3% to 0.6% across the board. Oil is down about ¾%, gold is up slightly, and the dollar is a bit stronger. The two main cogs have been reports that radiation from the Japanese nuclear plants is leaking into the Pacific Ocean while Portugal’s debt was downgraded to near junk. This combats positive buzz from the TXN for NSM deal. Also, AAPL’s percentage of the NASDAQ 100 will go down. All of this will lead to a very choppy day albeit likely in a narrow range. The focus will likely be on the semis, the Chinese ADR’s, steels, and relative strength and weakness plays.
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
MCP- closed near a high after acquiring a controlling stake in an Estonian company
TCK- closed near a high after a deal was struck to end a strike at its Elkview operation
GLNG- closed near a high
VHC- closed near a high
BIDU- closed near a high
CF- closed near a high
AXU- closed near a high
AG- closed near a high
DAC- closed near a high
SOHU- closed near a high
VTUS- closed near a high
QCOR- boosted earnings estimates
CBST- formed generic Cubicin deal with TEVA
NSM- to be acquired by TXN for $25/share in cash; every major semiconductor is worth monitoring including but not limited to ADI, MU, AMD, STM, NXPI, INTC, AMAT, ALTR, BRCM, CRUS, KLAC, LLTC, LRCX, MRVL, NVDA, NVLS, SNDK, TER, XLNX
SCHN- decent earnings
DMND- merging PG’s Pringles business into the company
VHC- awarded new patent and filed papers seeking litigation against other entities that potentially infringe the patent
Bad-The following stocks have bad news and/or a weak technical pattern
GD- closed near a low after a Gulfstream G650 (one of its planes) crashed yesterday morning during performance tests
DGW- closed near a low after a negative report from Muddy Waters; CFO resigned after the close
MED- closed near a low
GS- closed near a low
FSLR- closed near a low
AIG- closed near a low
RVSN- closed near a low after warning on its earnings outlook
KYN- share offering
LEDS- warned on earnings
LAYN- poor earnings
AAPL- weighting in NASDAQ-100 to be reduced from 20.49% to 12.33% effective May 2
KBH- terrible earnings
Earnings:
TUES APR 5 BEFORE
KBH
TUES APR 5 AFTER
None today
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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