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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum
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To: Jenna who wrote (774)1/6/2001 9:45:52 PM
From: t2  Read Replies (1) of 6445
 
Many of the smaller fibre optic players may be ready for takeovers. That would push the entire sector higher if any rumors or actual takeovers are reported. I am refering to stocks like NUFO.
IMHO, the demand for optical components is not being hit by the slowdown and if this is a consistent theme when we get earnings from SDLI/GLW/JDSU, the downward pressure may be over and the stocks may be able to rally as "safe plays".

Optical is actually my favorite sector for a rebound if the Nasdaq hits bottom.
However, I have a hard time calling this a bottom for the market as people discover there is better risk/reward in other areas such as financials. Other sectors are also underowned. The last 2 years have seen individual investors rushing to tech only investing. As the money gets diversified, we could still see outflows from tech even if the market as a whole (S and P 500) goes up. The new diversification theme is probably something that has been hurting techs and may continue to do so.
Lots of cross-currents.

Do you monitor short interest in these stocks from month to month? I have noticed that short interest has been increasing.
Also note that as the Nasdaq heads down, positions in such stocks seem to be going down. I don't know where they will bottom but they appear to be risky heading into earnings, which are mostly in the last 2 weeks of the month--at least JDSU/SDLI/GLW report then--to the best of my knowledge.

The wireless stocks (such as PCS, AWE) that had large short interest have made gains of 10% to 20% last week. Also stocks like AMZN might be great longs (believe it not) due to short interest of 30% of float. The possibility of short covering rallies could cause people to cover their positions soon. What do you think about internet shorting? I am leaning long for some of these.

BTW--biotechs look like the best shorts to me.
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