Much of the rally in tech stocks has taken place with the absence of one of the generals, which helped start the bull market here, and we are of course talking about Apple (AAPL). With the latest headlines surrounding who does and does not own Apple shares and the 20% rally in the shares we think that the Nasdaq could very well see a bump up as it breaks through resistance, which it has been stuck at recently. The "Chart of the Day" has a chart of the Nasdaq 100, which Apple will have a larger impact upon, and the recent action on the chart highlights the difficulty we have had to the upside in the last few weeks. Apple could change that and help push other indexes higher.
Chart of the Day:
Source: Yahoo Finance
We have economic news due out today, and it is as follows:
- Initial Claims (8:30 a.m. ET): 339k
- Continuing Claims (8:30 a.m. ET): 3000k
- CPI (8:30 a.m. ET): 0.2%
- Core CPI (8:30 a.m. ET): 0.2%
- Empire Manufacturing (8:30 a.m. ET): 6.0
- Net Long-Term TIC Flows (9:00 a.m. ET): N/A
- Industrial Production (9:15 a.m. ET): 0.4%
- Capacity Utilization (9:15 a.m. ET): 78.0%
- Philadelphia Fed (10:00 a.m. ET): 10.0
- NAHB Housing Market Index (10:00 a.m. ET): 57
- Natural Gas Inventories (10:30 a.m. ET): N/A
Asian markets finished mostly lower today:
- All Ordinaries -- down 0.08%
- Shanghai Composite -- down 0.87%
- Nikkei 225 -- up 2.12%
- NZSE 50 -- up 0.13%
- Seoul Composite -- CLOSED
In Europe, markets are lower this morning:
- CAC 40 -- down 0.38%
- DAX -- down 0.57%
- FTSE 100 -- down 0.72%
- OSE -- down 0.27%
Yesterday we heard and read a bunch of nonsense talk about momentum stocks potentially being dead with the price action in Cree (CREE) being used as the data to back up the assumption. We think that a bad mistake to make at this point and would even argue that after the disappointing earnings report that Cree might be a buy now rather than a sell. Yes meeting numbers moving forward is going to be tougher as the comps are going to be from this past year when business was growing quickly, but LEDs are gaining market share and every store we go to these days and see lighting has a decent portion of inventory dedicated to LEDs. The shelf space is also usually prime and the best way to play the entire space is Cree. It is a market leader with the best technology and most competitive prices. We are not bearish yet.
Now one momentum stock we are considering advising to sell as it was only a trade is Tesla (TSLA) if it finds itself unable to rise above $140/share today and stay there. The stock has had a bit of a pullback over the past few sessions, and although it is well within the normal range of a pullback we would rather book profits than continue to say to be long as the pullback reaches more normalized levels, which are well below $140/share. There are other safer places to park this capital if the trade is over and with the rapid price appreciation the gains might very well be better elsewhere at this point anyways.
Fusion-IO (FIO) hit a new all-time low in trading yesterday as a handful of analysts downgraded the company's shares following the company's disappointing quarterly results and disappointing forward guidance for the next quarter. It was probably to be expected with the new CEO but still bad news overall. Especially when it appears to us that the storage space is being revolutionized by smaller companies but the bigger companies are quickly able to adapt to the new standards and fend them off or are able to drag their feet as the smaller names create self-inflicted wounds (which is really the case here). These 'turnaround' stories have been traps for investors in the sector recently and even we were caught in one so forgive us for not being too eager to jump on this "opportunity" as one reader described it to us. We would be happier sitting on the sideline and not having to worry about a turnaround or the big fish eating our lunch, and we think readers would appreciate this too.
This is an ugly chart to begin with, but it gets uglier when one looks at what the stock market has done over the past year performance-wise and what has gone at Fusion-IO.
Source: Yahoo Finance
One bright spot in tech yesterday was Brocade Communications (BRCD), which hit a 3-year high after their quarterly results exceeded expectations. It was a solid beat on the bottom line as EPS estimates were beat by $0.07 and even with sales down 3% the company still surpassed those estimates too. Top line growth is a concern here, especially when the top line decreases, but as these companies continue to increase margins we think that they are getting into fighting shape for when the real build out takes place and then investors will see tremendous benefits. The news from Cisco last night is a bit concerning however, but we continue to think that the world economy is improving and the latest data from China and Europe seems to back up our thinking. With the bump up in guidance provided by the company for next quarter this seems like a decent play if one were looking to gain some tech exposure right now.
Brocade shareholders saw a breakout yesterday, which propelled the company's stock to multi-year highs. This could very well be a name to watch moving forward.
Source: Yahoo Finance
MannKind (MNKD) is a speculative stock right now, but they do possess what could be a game changer for those who have diabetes with their inhaled insulin drug. The company rose over 10% after the company reported that the drug showed in a trial that it was effective. One hurdle has now been crossed and this sets investors up for potential gains as the company signs up a partner who will give them an upfront cash payment and milestone payments as the drug progresses through the FDA's phased trials and potential approval. We want to stress that this is a highly speculative stock, but it does appear that news flow could pick up and that could provide the next leg higher for shares.