A Trader's "Advantage"
12/10/2004 12:00 am EST
The Advantage Bulletin from Elliott Gue and Ivan Martchev is an exciting new weekly service, designed for more speculative-oriented traders. We wish them the very best with this new venture from the Personal Finance family. Here’s a sampling.
"JetBlue Airways (JBLU NASDAQ) is certainly the best US airline with a massive competitive advantage over legacy carriers and other discount airliners. The company is profitable, has a strong balance sheet, and doesn't have the huge pension liabilities and bloated cost structure that AMR, Delta, and United Airlines have. JetBlue is a quality airline stock. If oil drops below $40 a barrel, JetBlue won't rally as much as some of the borderline-bankrupt airline stocks, because it hasn't declined as much as the other airlines. Still, it's a less-volatile, less-risky trade. Technically, the stock is defining a broad trading range between 20 and 30, and the stock could rally to 30 or so as it appears a larger correction is unfolding in oil. The airline sector has been decimated because of rising oil prices and is in the midst of a relief rally on news of dropping oil prices. JBLU is a buy under 25 with a stop at 21.50.
"eMerge Interactive (EMRG NASDAQ) provides individual-animal tracking, food-safety, and supply procurement services to the beef production industry. Its technology is approved by the USDA. It's key to remember that eMerge is a small-cap development stage company. We note that 'mad cow scares' create interest in businesses such as this that directly benefit from food safety concerns. Since this is a very volatile trade, small position sizes are warranted with loose stops. The stock completely retraced the gains it had on the first mad cow case discovery in the US and subsequent approval of its technology by the USDA. Technically, it's not inconceivable that eMerge will run toward its 2004 high near 4. This is a very news-driven equity, so huge spikes may occur in a week or two, or you may have to wait three to six months. However, technicals (based on a weekly MACD buy signal) certainly favors the bulls here. Buy under $1.80 with a stop at 1.05.
"China Yuchai (CYD NYSE) is a Chinese manufacturing company that makes diesel engines used in medium-sized trucks, some automobiles, and in industrial machinery like generators. Making engines sounds like a boring, slow-growing old economy business. But in China, growth has been rapid. The stock has been sliding all year, however, in an economic slowdown prompted by aggressive action on the part of the Chinese government to slow the red-hot economy. But whether or not the economy slows next year, Yuchai has been performing very well lately from a fundamental perspective and could continue to run until more concrete evidence of a major growth slowdown emerges. Technically, when Yuchai rallies, volume seems to spike to several times the daily average. This suggests institutional buying. The stock has also rallied through its major moving averages, breaking the downtrend that's persisted all year. Buy for a three-to-four-month holding period. We are targeting 23. Set an initial stop at 14.92, trail the stop higher.
"Opsware (OPSW NASDAQ) is a data center software company. Its software can perform certain repetitive tasks on servers, allowing engineers to control many servers all around the world from a central location. Spending on this type of software has been firming up recently and some analysts believe it's a $5 billion business. Because it reduces the cost of running a network, most companies (of any size) are potential customers. The company also sells to the government. Opsware is run by former Netscape executive Marc Andreesen, who also started a Web hosting company, Loudcloud. This is a $600 million company with no debt. Analysts believe it will break into profitability next year. Technically, volume on the rallies has been very impressive. The stock broke through key resistance just under seven last week and looks primed for more gains. Buy under 7.50 for a three-to-four-month projected target of 10, a 40% gain. Set the initial stop at 5.95, and trail the stop higher as stock rallies.
"Tegal Corp. (TGAL NASDAQ) makes plasma etching systems that are used to make semiconductor wafers. Semiconductors produced in this way are used in many different types of consumer electronics products including PCs, cell phones, and radio frequency ID cards. Semiconductor stocks have had a rough run this year but are starting to move higher and we wouldn't be surprised to see the group play catch up with the NASDAQ over the next month or so. Warning: Tegal is a low-priced stock and can be very volatile. Be careful when entering and be sure to keep your position size relatively small. Technically, volume has been very impressive on recent rallies. Last week positive sentiment in the semiconductor sector helped the stock chew through resistance at 1.60. Buy under two for an estimated holding period of one-to-two months. We are targeting a move to three, or a 73% gain. Set your initial stop at 1.27, and trail the stop higher on rallies.
"Viisage (VISG NASDAQ) makes biometric ID equipment, primarily face-recognition systems for sale to US government agencies. These systems can be used to both verify the identity of a single person or to screen a crowd to try and identify specific persons. The government uses the technology at airports to look for known terrorists or to identify security threats. Homeland security spending is sure to rise on this technology. The company has also had some success outside the US. Pakistan recently signed a deal to buy the company's products as part of its passport and national ID system. Technically, Viisage was a big momentum name late last spring and ran up from three to above 13, before pulling back. A return to the old highs isn't out of the question. Buy under 8.50 for an estimated holding period of one-to-three months. Our target is 12, a 50% gain. Set an initial stop at 6.85, and trail the stop higher on rallies."
The key risk-on and off drivers today are the same – U.S. politics, global growth, other centr...