Here are a few ideas for trading opportunities presented by the bounce on Friday. As you might guess, I don't believe for a minute that the activity Friday was significant. Low volume, even on a per-hour basis, and few of the usual market pariticipants were even playing. So my contrarian bent screams "Fade it!". At the very least, a retest of prior lows should occur. Let me know what you think:
AMSC is a perennial favorite. Superconductor stocks are NOT a good idea in a bear market - all hope and hype at present. And the huge bounce Friday yields an excellent entry point.
JNPR also yielded a nice bounce Friday. I've been short off and on with this one, and I covered on the big drop early last week. I'm looking to re-enter, because the optical bubble is over. All that remains are the tears, lamentations, and margin calls. AT&T pulling in its horns on the cable modem expansion is yet another warning sign. But the recent bounce in JNPR provides a low-risk entry on a short/poot.
Speaking of AT&T, we should all think about what that order delay is saying. Does this say that AT&T is seeing cable modem penetration below expectations? Is that why BRCM is getting nailed so hard? Is there anyone else who will suffer as a result of below-trend cable modem growth that hasn't bought it already?
Might look at TQNT. That one has shown remarkable relative strength, which bothers me, but it is butting its head against a falling TL. Given prior activity in the stock, a failure to break the resistance could result in a serious tumble. And I have a personal problem with management that took on *debt* in the past year rather than issuing stock and paying down debt. They are a classic vulnerable company if sales or margins go away for a little while.
FCEL is another imagination stock that has rallied pretty good in the past couple days, and could be providing a low-risk entry.
ARBA, PPRO, and CMRC have all seen pretty good short-covering. I suspect that they haven't found the bottom yet, though. They are coming down off of insane valuations, and haven't quite met reality yet.
LNUX and RHAT are also perennial favorites. The Linux craze drove them to ridiculous valuations, and for some reason the market continues to display a memory for those valuations. Take RHAT, evaluate its business model, and tell me how a company with less than $100M revenue, slowing growth, and no margins or defensible market position warrants a $1.3B market capitalization. LNUX isn't as overvalued, but I doubt they are done on the downside just yet. They're just another box maker, ala DELL, CPQ, GTW.
And I'm keeping an eye on KREM. Unfortunately, very hard to borrow, but the fact that it couldn't get it up at all on the back of their "outstanding" earnings release has me very interested. Their recent breakout attempt has turned into more of a breakdown attempt, and failure of this recent activity to produce a double bottom could mean the end. This one was involved in a serious short squeeze, and most stocks involved in short squeezes become even better candidates once the squeeze has ended.
I know you are preparing for a bounce, but I still don't see the necessary ingredients for a lasting bounce. I'm expecting a significant bear market rally at the turn of the year, but I think it could come off much lower levels. So I'm still looking for lower-risk entries into short positions against still-overvalued securities that have clearly lost their momentum. Hopefully you and others will look over my shoulder on a few of these and let me know if I'm missing something.
Thanks,
BC
PS Naturally, I hold positions in the above securities. Won't tell ya what they are, but I'll give ya a hint: none of them involve going long. |
