Saturday, September 13, 2008

READER'S REQUEST - Alberto Culver (ACV)

"Wooten” requested that I analyze Alberto Culver Co. (ACV), so here it is.

Want me to analyze a particular stock or sector? Well, let me know!

Alberto Culver Co. (ACV) is a great find from “Wooten” and a potentially great long position the sooner a trader gets in. The reasons: 1) ACV broke through $28.50 resistance twice, signaling that traders are still holding, and additional traders are buying, 2) ACV continues its uptrend without a break, highly likely to signal the end of 7+ month neutral range-bound trading, and my favorite…3) ACV formed a rising three method pattern.

This particular pattern is one of my top three patterns to look for when entering into a long position and the failure rate is extremely low (I can’t remember off the top of my head when it last failed on me). A rising three pattern is seen below:

First, a full while candle, or up day closing at or near its highs, must be needed. Second, a series of narrow consolidation down days are needed, typically 2-5 days, and in ACV’s case, three. These pullback days must not close lower than the open of the first full white candle. Third, another full white candle must appear which must close above the first full white candle. ACV has done exactly that.

The reasoning is that the narrow range (usually a few pennies) is being observed by both bulls and bears to determine if the breakout would hold. Once it is realized that the bears do not have control, the bulls step in a finish them off. This is same as the typical flag pattern that you see after large breakouts to the upside.
I like
ACV at this point and I may consider adding a position of my own.

Friday, September 12, 2008


The Materials Sector (XLB) may bounce and meet resistance at around $39. Regardless, the materials are in a confirmed downtrend and must see a capitulation before a strong rally occurs. As hedge funds continue to sell off their holdings, expect continued downward pressure.

The Health Care Sector (XLV) has been doing quite well and is now in a correction. I expect a successful test of support at $32; otherwise, the rally is over. Notice how the correction is highly irregular and formed on huge volume on the down days, a bearish sign.

Consumer Staples (XLP) is the best performing sector yet. In recessionary times, the staples will outperform the general market. The continuation gap suggests that the staples have much more room to the upside. The sector has major support to drop back to, if needed, against the 50-day and 200-day MA’s.

The Consumer Discretionary sector (XLY) is performing tremendously well along side the staples. This is surprising since the sector represents non-essential consumer spending. Currently, the sector is trading in a neutral range and needs to break away from the 200-day MA in the next several days. Otherwise, this will mark the 5th rally attempt, and flash a warning signal of an impending breakdown.

The Energy sector (XLE) has broken down along with the materials sector. The small bounce should continue, but not for long as the trend remains downward. There is major resistance at $70 and also notice the increasing volume. Capitulation should arrive shortly.

Have the Financial Sector (XLF) found a bottom? All I can say is it’s a short-term one. A clean break above $23 is considered a buy, but it must occur soon. The churning at the 50-day MA marks numerous rally attempts to continue an uptrend. Note the increasing volume.

The Industrial sector (XLI) is another group that hedge funds are dumping hand over fist. Expect a bounce from $33, possibly forming a double bottom. A failure at this level will mark the beginning of another primary down leg.

The NASDAQ rally is over, and the Technology sector (XLK) is fighting for its life (yes, the markets have a life of their own, right?) to maintain support at $21.50. If this breaks, there will tremendous downside risk as the downward trend continues. Notice how the technology sector is making lower highs, a bearish sign.

The Utilities sector (XLU) resembles the breakdown in the materials sector. The current consolidation is most likely forecasting a sharp downward continuation. Note the increasing volume on the breakdown.

Thursday, September 11, 2008


Republic Airways (RJET) broke out on one of my favorite patterns where the white candle slightly exceeds the high of the previous white candle. RJET broke out from $11 resistance, but on lower volume. Also notice that RJET is forming a higher low, a bullish sign. The further decline in oil will fuel this one to new short-term highs. I’ll add this to my watch tomorrow.

The price of refineries typically has an inverse relationship with the price of oil, but I don’t understand why Frontier Oil (FTO) would move up 12.7% today on no apparent news. My guess is that Hurricane Ike is heading toward Houston, home of the Texans, but also a lot of refineries. The breakout may be a false one, but FTO did break above the 50-day MA. Wait for confirmation tomorrow as well as updates from the National Hurricane Center.

Oil, at the time of this writing, is sitting at $100.96 on the NYMEX. The Amex Oil Index (XOI) was up 2% today and added fuel for Sunoco (SUN), which by the way, has no refineries in the area. After completing a descending triangle, SUN broke to the upside on high volume. Typically, these formations break to the downside. There is resistance at $48, but the major area lies at the 200-day MA at $50.25.

As oil prices continue to drop, automakers such as General Motors (GM) will jump in response. In addition, news that automakers may receive $25 billion in low-interest loans helped GM to breakout. The proposal is still being discussed in Congress. GM was forming higher lows and consolidated at the 50-day MA without any breakdown. GM should hit $15 in a few days, meeting resistance at the previous short-term high.

Allergan (AGN) gapped up and maintained momentum throughout the day after the company released studies showing that Botox may treat headaches. Umm…I don’t know about you, but I’ll stick to my aspirin. AGN will be asking the FDA for approval next year. Meanwhile, it looks like AGN is heading higher. This stock has the tendency to breakout after month long consolidations, but typically the breakouts are stronger the longer a stock consolidates. While the headache treating Botox may be promising, the clean break through the 200-day MA is a promise.

No surprise that Merrill Lynch (MER) got taken down along with Lehman (LEH) today. I would say that after Lehman, Merrill is the weakest firm, given the atrocious losses they reported over the past... (how long has it been?). Remember the $8.5 billion offering (at the $22.50 level) in July 29th? Investors may be wondering what they were thinking. After forming a descending triangle, MER made the typical move by gapping down on strong volume. There’s no sense in going long MER. Shorts should consider waiting for a dead cat, using the gap as resistance.

Sunrise Senior Living (SRZ) reported a loss of $0.63 per share vs. earnings of $0.15 per share a year ago. This company is full of trouble. Remember back in March when SRZ had to restate earnings from 1996-2005 which effectively reduced earnings by $173 million? SRZ also reported a loss for Q1, too, of $49.9 million. This is something investors shouldn’t touch, and the price action showed it. In the past two days, SRZ fell from $21 to below $16 today. Two warnings would have prevented this loss: 1) yesterday’s break in the trend, 2) break in the 50-day MA. This stock was toast before today even came. Who says technical analysis doesn’t work?

Kenexa (KNA) popped 26.4% today after the company announced that they lowered revenue expectations to $54 - $56 million from $57 - $59 million and income expectations to $10.3 - $10.6 million from $11.4 - $11.8 million. But that’s not all, 10 analysts came out today issuing reports on KNXA! This stock was toast in the morning.

  • FBR – Reiterated “Market Perform”, reduced target price to $19 from $25
  • Brean Murray, Carrat & Co. – Reiterated “Buy”, reduced target price to $23 from $25
  • Jefferies & Co. – Reiterated “Buy”, reduced target price to $22 from $27
  • Wedbush Morgan – Reiterated “Hold”, reduced target price to $19 from $21
  • RBC Capital Markets – Reiterated “Sector Perform”, reduced target price to $18 from $21
  • Maxim Group – Reiterated “Buy”, reduced target price to $26 from $30
  • Credit Suisse – Downgraded to “Neutral” from “Outperform”
  • KeyBanc Capital Markets – Downgraded to “Underweight” from “Hold”, target price $15
  • Lazard Capital Markets – Downgraded to “Hold” from “Buy”
  • Susquehanna Financial – UPGRADED to “Neutral” from “Negative”

Two things surprise me the most (not!): 1) Only one upgraded the stock out of nine, 2) how the heck do most of them reduce their target prices without downgrading their rating? This is some serious herding behavior and terribly confusing if you ask me.


Fossil (FOSL) appears is trading in a range on declining volume. Short-term support is at $28 and long-term resistance is at $31. It appears that FOSL is forming a symmetrical triangle within a larger neutral range. A breakout at $32 is considered bullish and a continuation of an uptrend and a breakdown under $28 is considered bearish and signals a reversal. Both actions should accompany high volume. The most obvious characteristic of neutral range-bound trading is between the 50-day MA (blue line) and 200-day MA (red line).

The S&P Retail Index ($RLX) is still in a confirmed uptrend without any major breaks. There is strong resistance at 425 and the index may consolidate for several weeks. The retail sector is currently outperforming the S&P as a whole and is demonstrating strong leadership. Notice how FOSL is slightly divergent from the index? If the retail index breaks above resistance and continues to move up, there’s a high likelihood that FOSL will breakout to the upside almost immediately so watch out for it.

Wednesday, September 10, 2008


There’s only one stock that met my breakout criteria for today, and that’s Eddie Bauer Holdings (EBHI). This is a nice rounded consolidation play that gradually broke out on higher volume on the preceding days. The continuation gap in the beginning of August lived up to its name and EBHI made a new 9-month high. The next level of resistance is at the $9.40 area back in Aug-Oct 2007. It looks like EHBI will make higher highs from this point on.

Washington Mutual (WM) hit a 17-year low! Goodness, and it looks like its going lower. Shares are down 29.7% today on 213.8 million shares, nearly 3x the average daily volume. If big house Lehman (LEH) is having major trouble finding capital, then Washington Mutual will have a field day trying to find it. It now costs $4.3 million + $500K per annum to insure $10 million in WM debt for five-years, up from $3.2 yesterday. That translates into a possible 85% chance that WM will default within five-years, according to investors. Don’t expect any type of quick bounce on WM as the selling momentum is clearly increasing from the past 2 days. Long positions should be entirely avoided, and I don’t have to remind you how quickly fear precedes panic.

Raser Technologies (RZ) dropped 13.5% today, mostly likely contributed by forced liquidation/margin calls from institutions. Management did reaffirm their outlook, but the stock has broken may support at $7. Once a break like this occurs, it is very difficult for a stock to climb back out.

Las Vegas Sands (LVS) dropped along with Wynn Resorts (WYNN) and other casinos on a report issued by the Nevada Gaming Control Board stating that casinos earned (or won) a 13% decrease in revenue vs. a year ago. The results were even worse for Strip casinos, down 14.7% to $519.2 million. Don’t people gamble more, not less, during recessionary times? LVS formed a descending triangle and broke support at $40. The next major level is at its July lows at $30.

I’m not sure what happened to Griffon (GFF) today, but traders eagerly dumped the stock (down 8.3%). After forming a breakaway gap from consolidation, GFF was unable to find support at the 50-day MA and continued downward to break the 200-day MA. I’m not sure who’s still holding, but they might want to think about it. The next area of support is at $8.50-$8.75, and it’s a strong one. Selling momentum should subside and consolidate in the $8.75-$9.50 area; otherwise, GFF has no chance.

GFI Group (GFIG), an investment broker (no surprise), dropped 24.4% today on news that the company was unable to reach a deal with Tullett Predon (TLPR: UK), a broker in London. Tullet’s stock isn’t doing too well either. They’re down about 25% from their high in February to 382.75. Although the entire space within a gap is considered support, if there’s a major violation within that empty space on huge selling volume, then that’s a clear warning sign. Today just happened to continue what wasn’t finished. Expect a bounce from the $7 level in the near-term.

Photon Dynamics (PHTN) is awaiting closing clearance from the Committee on foreign Investment. This follows the announced acquisition by Orbotech for $290 million. Today’s action seems unusual to me. The announcement wasn’t announced until after 2:30PM, but the stock broke down starting at 11:45PM. Either way, PHTN did hit a low of $10.74 but was able to sharply regain some lost ground. The gap from the Orbotech is entirely filled.

Goldman Sachs downgraded Calamos Asset Management (CLMS) to “Sell” from “Neutral” and adding the firm to Goldman’s Americas conviction sell list. Shares dropped nearly 12% and looks like it formed a breakaway gap, cutting through both the 200-day and 50-day MA’s. Expect continued downside for CLMS.

Melco (MPEL) was a stock I shorted a while ago back in June, but I never expected it to hit $5. MPEL is down 11.3% today due to a likely drop in revenue from A-Max’s VIP level (A-Max is a partner with Melco). The money that high rollers are betting dropped 18% to $33 billion in August from $40 billion in July. Analysts aren’t worried about the drop, but investors are. Who should you trust? Well, Jefferies & Co. reiterated their “Buy” rating and price target to $18 and JPMorgan reiterated their “Overweight” rating. MPEL looks like it’s going down even further.

Cavium Networks (CAVM) took a 10% hit today on something that didn’t come from any news. It appears to be the systematic sell-off continuation since 3 days ago. CAVM dropped below their Feb-March levels and have hit a brand new low since its IPO in March 2007. There are no more support levels remaining at this point.

Tuesday, September 9, 2008

READER’S REQUEST: First State Bancorp. (FSNM)

The way I analyze a particular trade is to analyze the index, industry, and the particular stock at the same time to look for any divergences. It can be called a top-down approach, but Iook at all three at the same time.

FSNM is listed on the NASDAQ, and the index has entirely broken down. As I mentioned in my newsletters, volume has gotten weaker and weaker for the past 4 weeks for every index, and a failure was the highest likely outcome.

The XLF is currently trading in a neutral range and holds key support at $20 and resistance at $23. Yesterday, a bearish gap up occurred and formed a hanging man. An area gap has the high possibility of closing within 5 days (90%+ probability). The only positive to note is that the 50-day MA is moving up and has acted as support 2 days ago at $20.80. Keep in mind that today marked a high volume reversal.

FSNM is performing slightly better while keeping its uptrend intact. FSNM made a higher low, finding support at $5.40. However, the stock remains in a neutral range as with other financials. The warning sign comes with the price-volume divergence as the volume has been extremely low on the rallies.

I wouldn’t recommend any trade unless there is a clear indication that a breakout or a breakdown is imminent. If FSNM makes a higher low above $5.50, it is considered bullish. For the brave, high-risk traders, this range-bound trading is a perfect opportunity for short-term swing traders.


There aren’t any notable breakouts on volume greater than 500K today. You can’t expect too many of these on a -280 point day.

Lehman Brothers (LEH) was the star of today’s financial media. I won’t comment on rumors since there are conflicting reports from numerous sources. To add fuel to the fire, S&P stated that they may cut LEH’s “A” long-term credit rating. LEH closed at $7.79, down 45%. The only possible support level remaining for LEH is at 1999 levels.

Pep Boys (PBY) reported Q2 earnings yesterday after-hours of $0.10 per share ($0.11 from continuing ops incl. $2.2 million tax benefit) or $5.4 million vs. $0.08 per share or $4.2 million a year ago. Revenue declined 10% to $500 million from $552.1 million a year ago. Analysts were expecting $0.7 per share on $515.3 million in revenue. Same-stores dropped 7.5%. It’s no surprise that more and more people are delaying maintenance and simply have little need for non-essential auto products. PBY negated 2-months of gains in a single day (down 25% today). I expect continued selling of smaller magnitude, and afterwards, a small bounce up to the $7.50 level.

C&D Technologies (CHP) reported Q2 earnings yesterday after-hours of $0.05 per share or $1.2 million vs. a loss of $0.12 per share or -$3.1 million. Analysts were expecting earnings of $0.12 per share, widely missing expectations. CHP cut through $7.25 and $6 support today as well as the 200-day MA. Expect some churning in the $6.50 area as the downtrend continues.

Terra Industries (TRA) is a fellow agricultural chemicals/fertilizer stocks in the same group as POT and AGU. There’s this headline that says “As Fertilizer Prices Stay High, Potash is the Pro’s favorite”. Wrong, they’ll soon find out that a confirmed downtrend cannot end without systematic capitulation. TRA is a stock only fit for swing trading due to its range-bound characteristics. TRA broke through several support levels and is approaching major support at $34. Traders should expect a nice sized bounce for the short-term.

Time Warner Telecom (TWTC) got crushed today after both Citigroup and Merriman Curhan Ford downgraded the stock to “Hold” from “Buy”. We all know that any downgrade from “Buy” is a “Sell” and investors weren’t fooled. TWTC gapped down, but formed a hollow red candle, signaling that buyers have bought at the lows, but sold off TWTC’s high. Expect a dead cat bounce on this one.

Canadian Solar (CSIQ) dropped along with the entire industry due to a potential decline in selling prices and solar panel oversupply. The entire energy industry is in a downtrend, and solar is no exception. CSIQ will approach the teens very quickly. The downtrend is in a mature phase and capitulation is likely to come within 2-3 weeks.

The same goes for the coal sector. It is still early in the downtrend for James River Coal (JRCC) and the other coal stocks. It is highly likely that JRCC will approach the teens within one month. I will consider shorting JRCC at $25-$30 if there’s a pullback to the 200-day MA resistance.


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Monday, September 8, 2008



  • In Play: Fannie Mae (FNM), Freddie Mac (FRE)
  • In Play: Hurricane Ike
  • Market Commentary: S&P 500, NASDAQ
  • After Earnings Review: HRB, HOV, JOSB, BTH
  • This Week’s Watch: Economic Reports & Notable Earnings Releases


UPDATE: The New York Stock Exchange (NYSE) announced that the common and related preferred stock of Fannie Mae and Freddie Mac will be halted news dissemination during the pre-market and available to all markets for trading at 9:30am (EST) on the morning of Monday, Sept. 8, 2008 due to U.S. federal regulators action related to Fannie Mae and Freddie Mac. After consultation with the FHFA, Treasury and the Securities and Exchange Commission, we feel that this decision will allow investors to digest the news that has been disseminated over the weekend, to interpret the news and the analysis that will be generated on Monday morning and to evaluate the resulting aggregate supply and demand. All markets will be free to trade both FNM and FRE as of 9:30am (EST), Monday, Sept. 8, 2008.

UPDATE: Standard & Poor's and Fitch Ratings on Sunday cut the ratings on preferred stock of troubled housing finance companies Fannie Mae and Freddie Mac to junk status after dividends were eliminated in a takeover by the U.S. government. The preferred stock ratings dropped to "C" from "BBB-minus," according to the S&P statement. It was the second cut by S&P in less than two weeks.

After-Hours Action: On Friday, September 5, FNM fell 21.9% to $5.50 and FRE fell 20.8% to $4.04.

Over the weekend, The U.S. Treasury announced a bailout plan for Fannie Mae (FNM) and Freddie Mac (FRE) that is supposed to meet three objectives: market stability, mortgage availability, and “taxpayer protection”. The conservatorship will not eliminate common stockholders (as of Sunday evening), and will place preferred holders second in case of complete loss. Common and preferred dividends have been eliminated, effectively immediately. The Treasury has also agreed to temporarily purchase GSE mortgage-backed securities. New investments by the Treasury will begin later this month. CEO Daniel Mudd of FNM and CEO Richard Syron of FRE have been replaced by Herb Allison (FNM), former vice chairman of Merrill Lynch and David Moffett (FRE), former vice chairman of US Bancorp.

Under the plan, the Treasury will purchase $5 billion of mortgage-backed securities for both FNM and FRE. In addition, the Treasury will receive $1 billion in new senior preferred stock with a 10% coupon from both firms as “compensation” for providing support. The Treasury will also receive warrants representing 79.9% ownership in both firms. The Treasury does not expect to exercise the warrants since the exercise cost is less than $1 per share. For both firms, if liabilities exceed assets on their balance sheets, the Treasury will inject new capital following each earnings report and the first round could be as soon as within 60 days of the September 30th report.

Here’s my take (and the views of many others) on the situation: If the warrants are exercised at the full 79.9%, then the value of the common stock for both firms could be wiped out. Since the preferred holders come in second under this plan, they’ll take a massive hit if loses continue their momentum, not to mention the elimination of dividends (which could make them nearly worthless now). The message that the government is sending is that even though they announced that they won’t bailout additional firms after Bear Sterns, they just bailed out not one, but two, at the same time. This leads you to believe that although the Treasury is taking steps to building confidence in the market, investors should be aware that all public statements made by government officials are prepared and designed to exhibit confidence, regardless of how bad the news really is.

The largest shareholders of FNM and FRE. Mutual fund Dodge & Cox owns approximately 69.4 million shares in FNM and Legg Mason Capital Management owns 79 million shares in FRE. In addition, the top 5 major holders in both firms total well over 200 million shares. FNM currently has 1.07 billion shares outstanding. FRE currently has 647 million shares outstanding.

In addition, numerous broker-dealers, have taken large positions in preferred stock. JP Morgan recently reported that its $1.2 billion investment in FNM and FRE preferred shares lost 50% of its value now at $600 million. Hedge funds, such as William Ackman’s Pershing Square Capital Management, has greatly benefited from shorting shares earlier this year. I have a copy of Mr. Ackman’s July 2008 plan to “Save Fannie and Freddie” in PowerPoint and will be happy to distribute if e-mailed:

In Asian trading, at the time of this writing, the Nikkei 225 jumped 3.4%. The Korean Kospi jumped 5.4%. Hong Kong’s Hang Seng jumped 4%. Singapore’s Straits Times jumped 3.9%. Australia’s ASX 200 jumped 3.9%. Taiwan’s Stock Market is up 5.6%. All mainland Chinese indices were down. Currently, all European indices are up 2-4% on the news. The consensus is that the world has agreed positively with the Treasury’s plan for a bailout.

U.S. futures (at the time of writing) are up 2-2.5%. The Dow futures are up 227 points, up 2.02%, the S&P 500 futures are up 31 points, up 2.5%, and the NASDAQ futures are up 34.25, up 1.94%.

I expect massive selling on the morning hours for both stocks from institutions, forced liquidation/margin calls from long hedge funds, and retail selling all across the board. There is a distinct possibility that FNM and FRE could be halted during trading hours due to the possible inability for the NYSE specialist to balance the large number of orders at the open since pre-market trading has been halted by the NYSE. Expect considerable volatility throughout the day for both FNM and FRE. If shares fall below $1, especially for FRE, the NYSE will most likely halt the stock. However, that also runs the risk of the Treasury exercising its warrants. Long or short positions should not be placed until the “dust” clears and the Treasury releases more details on the new plan.

I expect the major indices to hold their gains for the short-term due to the fact that most of the uncertainty surrounding both FNM and FRE has been solved and traders see the sign as news that the housing recovery may soon be in place. The reality is that the housing recovery will not come quickly and I expect the recovery to remain at a very slow place and to continue into all of 2009 as excess supply remains yet to be neutralized. If a sell-off does occur in the major indices and forms a bearish gap up, then the rally is effectively over.

Pay attention to more news that is expected to be released during pre-market hours.


Hurricane Ike is projected to hit the Gulf of Mexico on Wednesday, currently with sustained winds of 120 mph. NYMEX crude oil is currently up nearly $2 to $108.20, at the time of this writing. Expect volatile trading in oil and natural gas for the entire week.

Keep an eye on this one:

MARKET COMMENTARY -- INDU 11,628.06, COMP 2,414.71, SPX 1,292.20, RUT 737.60

My outlook on this week’s market is entirely unknown and even though a breakdown occurred due to the negative employment situation (unemployment rose to 6.1%), the future outlook is uncertain. Therefore, I have no opinion whatsoever. The breakdown can be easily negated if buying momentum is sustained throughout the day today. As mentioned, a bearish gap up, with a large intra-day sell off, will be considered a continuation of a new primary downtrend. Otherwise, the rally will still be intact, regardless of the previous employment situation report.

I won’t be profiling the DJIA this time since the chart is very similar to the S&P 500. As you can see, the rally in both indices have broken down, more so with the NASDAQ. The volume trend remains the same where the volume on down days still exceeds the volume on up days. Make no mistake; we are still in a bear market, regardless of the potential 3-4% move today.

This is the first (of many) times where I will state no opinion on the likelihood of a week’s market outlook. No one will know what will happen at this point but today will set the tone for the rest of the week and will either confirm a downtrend or confirm a one-day reversal back to the upside, keeping the rally intact. There’s no sense or point in trying to predict the direction for this week.


For complete analysis on the profiled companies, please visit:

H&R Block (HRB) – On Wednesday, September 3 after-hours, H&R Block Inc. (HRB) reported a Q1 ‘09 loss of $0.41 per share or $132.7 million on $339.6 million in revenue vs. a loss of $0.93 per share or $302.6 million on $381.2 million in revenue a year ago. Analysts expected a loss of $0.35 per share on $378.3 - $381.2 million in revenue, missing both earnings estimates and revenue targets. Tax Services increased 7.7% to $75.3 million vs. $69.9 million a year ago. Shares were down about 3.5% after-hours and the previous session’s close marked the highest that HRB’s stock traded at since November 23, 2005 when it hit $26.66.

Technically, HRB broke out and has drifted up ever since. I expect some consolidation in this area. Support is at $24.10.

Hovnanian Enterprises (HOV) – On Wednesday, September 3 after-hours, Hovnanian Enterprises (HOV) reported a Q3 ’08 loss of $2.67 per share or $202.5 million on $716.5 million in revenue vs. a loss of $1.27 per share or $80.5 million on $1.1 billion in revenue a year ago. Excluding pre-tax land charges of $11.7 million, the loss would amount to $87.7 million. Analysts were expecting a loss of $1.57 per share on $703 million in revenue. Shares were down $0.65 or 8.4% to $7.10 in after-hours trading and should gap down today.

Technically, shares have declined ever since HOV hit its high on 7/20/2005 at $73.40. Shares now sit at 2002 levels when the housing market began to pick up. For the long-term, HOV is a buy for investors who wish to hold for at least two years. HOV appears to have stabilized and is forming a multi-month/year rounded-out bottom. For the short and intermediate-term, HOV will most likely trade in a neutral-range for many months to come.

Jos. A. Bank (JOSB) – On Wednesday, September 3 intra-day, Jos. A Bank Clothiers (JOSB) reported Q2 earnings of $0.48 per share or $89 million on $152.7 million in revenue vs. $0.44 per share or $8.2 million on $134.3 million in revenue a year ago. Analysts were expecting $0.45 - $0.46 per share on $147.4 million in revenue, beating both earnings and revenue estimates. Share broke out at 2PM, up $2.93 or 11%, to close at $28.69 on 2.2 million shares.

Technically, JOSB has been trading in a neutral-bound range of $20-$31 for 10 months. JOSB is making higher lows, bullish. In addition, the breakout intra-day when earnings were announced penetrated the $29 resistance level and is continuing to head higher. The next level of resistance within one-year is at $31.50. JOSB should have no problem reaching that level in the short-term.

Disclosure: The author holds a short-term long position in JOSB.

Blyth (BTH) –On Thursday, September 4 pre-market, Blyth Inc. (BTH) reported Q2 earnings of $0.08 per share or $3 million on $236.8 million in revenue vs. earnings of $0.08 per share or $3.2 million on $234.9 million in revenue a year ago. Excluding items, BTH earned $0.09 per share vs. $0.16 per share a year ago. Analysts were expecting $0.15 per share before items, on $236.7 million in revenue, widely missing expectations. Shares gapped down opening at $13.74, declined sharply, but recovered during the day to close at $12.07, down $3.81 or 24%, on 937,000 shares traded (3x the average daily volume).

Technically, BTH formed an ascending triangle following the 25-day MA, which is usually bullish, however, BTH formed a breakaway gap and is testing support at $11.80. BTH also cut through the 50-day MA and will act as resistance if a dead cat bounce occurs. Risk/reward does not favor either long or short positions at this time. Shorts should look for a weak pullback and longs should wait until BTH shows signs of bottoming out and higher lows.


  • FNM and FRE, the entire financial sector
  • Hurricane Ike, Crude Oil, Natural Gas, Exploration/Drilling/Refining industries

Economic Reports: Mon. (Consumer Credit - 3PM), Tues. (Pending Home Sales – 10AM, IBD/TIPP Economic Optimism, ICSC-UBS Weekly Retail Sales – 7:45AM, Wholesale Trade – 10AM), Wed. (Weekly MBA Mortgage Applications – 7AM, Weekly EIA Energy Inventory – 10:35AM), Thurs. (Trade Balance – 8:30AM, Import & Export Price Index – 8:30AM, Initial Jobless Claims – 9AM, Treasury Budget – 2AM), Fri. (PPI – 8:30AM, Advanced Retail Sales – 8:30AM, University of Michigan Consumer Confidence – 10AM, Business Inventories – 10AM).

Noteworthy Expected Earnings: Mon. (none), Tues. (PBY - B, JWA – D/2:30PM, KFY - D, PAY – D/1:30PM, SHFL - A, OXM - A, AVAV - A), Wed. (STEI – D/10:00AM), Thurs. (CPB - D, KKD - A, PNY – D/2:30PM), Fri. (none).
Key: B – Before Market Open, D – During/Intra-day, A- After-hours.