Email : [email protected]
URL : http://www.otcjournal.com
To
OTC Journal Members:
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911 Anniversary
Ideas |
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This past August
30th we published an edition sharing some thoughts on market direction
for the remainder of the year. We stated we felt that after the August
relief rally, the market would sell off in advance of fears associated
with the anniversary of the Attack on America.
We also stated we felt there would
be a post 911 rally assuming there were no geopolitical terrorist
events to drive additional short term fears into the market.
The August relief rally on the NASDAQ
took us from 1200 back to 1430. We then pulled back to about 1250, a level
suggesting the lows were getting higher and establishing a short term uptrend.
We now believe, barring any international
crises, we are setting up for a Post 911 rally which will take the NASDAQ
back to about the 1480 level. Terrorist activities or war with Iraq would
derail this scenario.
In keeping with this day of remembrance
the OTC Journal is offering a couple of potential ideas for making
money in the market if this rally materializes. The American spirit and
our free enterprise system provide you with the right to risk your capital
as you see fit. We have the greatest market system in the world. It is
unstoppable by any outside force who tries to harm our way of life. Make
or lose money, it is your inalienable right to make your own choices as
a privileged citizen of the United States, the greatest country in the
history of mankind.
When trying to identify a few ideas
for the post 911 rally we liked Oracle (NASDAQ: ORCL), Hewlett
Packard (NYSE: HPQ), Affymetrix (NASDAQ: AFFX), and SanDisk (NASDAQ: SNDK).
You might have a look at each of these stocks. However, below are two we
have chosen to feature:
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Foundry
Networks (NASDAQ: FDRY) |
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Foundry Networks is viewed
as the one company which offers significant competition to Cisco Systems
in the networking and router industry.
The company enjoys annual sales of
about $300 million. It has $2.49 per share in cash, and made
$5.1
million in profits through the first six months of 2002.
As depicted in the chart, the stock
has been in a solid uptrend since the July 24th low. A break above $9.50
would offer conclusive evidence both the highs and the lows in the current
uptrend are going higher.
The MACD indicators we have provided
are technical measures of momentum. In the upper chart, the diminishing
red lines suggest the stock is about to break above the neutral line, setting
up for a scenario technicians like on the long side. In the lower section
the meeting of the two lines also suggest the stock is getting ready to
surge.
Should the NASDAQ bounce into the
1480 range, we believe Foundry could find its way into the $11
to $12 range with a possibility of $14 with some luck.
Traders with a short term time frame
should employ a stop loss of about $8.25, or whatever percentage
your risk tolerance is in the event the market turns against us.
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Millennium
Pharmaceuticals (NASDAQ: MLNM) |
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Any ideas for rebounding stocks have
to include a Biotech offering. Both the pharmaceutical and biotech indexes
have been destroyed in the Bear Market, and many stocks in these groups
should be poised for appreciation in an improving market environment.
We chose Millennium because
the stock sold off fairly sharply in sympathy with the pre 911 sell off,
suggesting the stock could bounce back nicely once the pressure comes off.
Millennium
is developing new drugs which can be custom tailored for maximum effectiveness
based on the patient's genetic make up. They are very involved in the new
genomics technologies.
Despite a 47% increase in
sales through the first six months of 2002 to the $160 million mark, this
company is losing money. However, the company boasts $6.72 per share
in cash, so they are well financed.
In an improving market the chart
suggests the stock could easily rebound into the middle of the range of
its last pullback, or about $13 per share. Should the NASDAQ find
its way to the 1470 level, this stock could potentially achieve roughly
the $16 level. A good stop loss on this stock would be the recent
low of $10.40, or whatever your risk tolerance allows.
As with Foundry, the momentum
indicators shown at the bottom of the charts are both turning positive,
suggesting a short term move to the upside is imminent.
We were fortunate enough
to provide two 30% profit trading ideas during the August rally: On
August 10th we gave you Flextronics and Nvidia, both
of which appreciated 30% over the ensuing three weeks.
Today's ideas could provide the same
returns. Some things to watch out for: The market could be derailed by
Greenspan's testimony before Congress on Thursday, Bush's speech to the
UN on Friday, war with Iraq, or terrorist events.
Please note that none of the above
risk factors has much to do with corporate performance. Should any of these
events result in downward pressure on stocks, we would view this as a good
buying opportunity.
It will still be some time before
a new bull market is established, but in the interim there is nothing wrong
with trying to make some money on the swings. Use caution- we are still
in an overall Bear Market. Valuation is still hotly debated, and fund managers
have itchy trigger fingers at the slightest negative sign.
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Of TradePortal.com
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