Hi guys, here's another free issue, yet again, warning about ASND. I can be emailed for a free subscription: Curncboy@aol.com
6/3/97
The Horror, The Horror
Yesterday, "CALIFORNIA DEALS" (CD) spoke about the networking sector and troubles looming ahead. In particular we told you that short term profit taking in COMS, ASND, and XYLN might be wise. We also mentioned that certain market forces are pointing toward the annual summer doldrums. Indeed, today's Nasdaq performance can best be described as CRAPPY.
Problems seemed to be looming yesterday, when a stock we were praying for a strong close above the $23 range, pulled back in the last hour of trading. That stock was, of course, XYLN, and prompted us to issue a yellow flag on the stock. In fact, yellow flags were raised on all the networkers on a short term basis due to the announcement by CS after the bell. However, one stock in particular, caused noted attention.
That stock was Ascend Communications (Nasdaq:ASND), which closed down 4 13/16 to 50 5/16 on 8.25 million shares; average daily volume is 6.3 million shares. Our sources within the company were telling us that this quarter looked weak and we speculated that a pre-announcement would be made due to reasons stated in CD#2. Our short term price target was set at $46, but upon further review, we feel that if our source is correct, a pre-announcement could take us to the $35-40 range, perhaps testing the lows of last April. With a current PE of about 45, ASND is prime for one of those horrible falls that make our hearts sink. Just remember, the game can be played from both sides or you can sit by as a spectator; I find both quite fun. Sometimes it feels ok, just knowing what's could happen -- you don't always have to take a position.
The other stock reviewed was Octel Communications (Nasdaq: OCTL). We especially liked OCTL due to it's leadership in voice messaging solutions and the critical acclaim the Octel Unified Messenger was receiving. Ironically, hours after CD posted the intention to buy stock, H&Q raised it's rating on the stock from "hold" to "buy." Hopefully, the upgrade is one of many to come. OCTL ended up 7/16 to 21 1/8 on 2.15 million shares; average daily volume is about 500,000. This was also on a day that any and all other four letter tech stocks were down. We believe had the market not been so weak today, the stock could have gone much higher. A buying opportunity? We can't say -- only you can decide. We'll throw out the names as long as you remember to DO YOUR HOMEWORK. Based on the technical charts, the stock has a good potential to test it's 52 week high at $31.
Last, we would like to mention Zoran Corporation (Nasdaq:ZRAN). The stock was down a buck, to 20 1/2 on 348,000 shares; average daily volume is 164,000. Of particular note, were two things. First, ZRAN and its subsidiary CompCore Multimedia today announced the completion of a license to distribute DVD technology with copy protection implemented in software. The license was granted by Matsushita acting as the CSS interim licensing organization. Shipments of "SoftDVDT" are expected in Q3.
Sources are telling me that ZRAN products are being heavily pumped and the rumor is that ZRAN may get Toshiba or Hitatchi on board. The MarketMakers tried to entice us with their magic potion when the stock crossed the elusive $22 barrier. But as I have been saying, bullishness on ZRAN starts when the stock makes a strong close above $22 - 22 1/2. Otherwise, don't be fooled, this one is a tricky rascal.
As for new business:
Sadly enough C-Cube (Nasdaq:CUBE) chip seems to be getting very little attention at recent tech conferences. Why? I don't know. I am hearing about product delays from Aiwa and Samsung, but only time will tell. In addition, I have heard from several sources now that at the recent Las Vegas conference Divicom's performance was less than worthy of the exorbitant price CUBE payed and is paying. Apparently, DISH might have been lost, and certain programmers didn't find the Divicom product to meet up to expectations. In other words, don't be fooled yet by press releases on communcations. The Yellow Flag is up. If the rumors are true, look for CUBE to start retesting and breaking it's lows from several weeks ago. Nevertheless, I deviate, all eyes are indeed looking towards ZRAN. Oddly enough, I'm hearing that CUBE's VCD shipments might actually be a little better than the horrible expectations of the quarter. This might make up for the downfall in communications. If this happens, CUBE would probably be a dead money stock at around $17-19. As usual, all H-Y-P-E. Eventually, a stock that can't produce the earning's get's punished. Indeed the drop from $70 or even $40 seems punishing, but believe it or not, this stock has a higher PE now than before the recent earning's downgrades; basically, it ain't over. Markets are always efficient in the long run.
That's it for now folks. Alot of you have asked for my "stockpicks." All I can say is that it will never be that easy, there's no free lunch. The newsletter is a grassroots effort to finally empower the individual investor and to eventually combine subscriber's equity in a powerful grassroots effort. I am looking at stocks that people send to me and that fit my investment philosophies. If I like them, I'll post them, and possibly buy them for my personal account. Also, I am relaying alot of thoughts about stocks that others feel uncomfortable talking about. Indeed, the idea is catching on like wildfire as I cannot keep up with the numerous requests to sign on.
My goal is to have the letter come out twice a week, on Sunday and Wednesday, with random newsletters coming when needed.
In summary:
Yellow flag is up on the networkers in the short term. Red flag is up for ASND on speculation that a pre-announcement will be made; the stock closed below two key supports in one day, a horrible technical indicator. OCTL is looking good. One day after CD began covering the stock, H&Q starts "buy" rating. Stock was also up during the Nasdaq bloodbath. ZRAN still can't make the strong close above $22 - 22 1/2...so we're still waiting, but things are looking positive. Remember CD rule #3, "Don't play the hero." We like to wait for pure technical breakouts on the close. Being the first one at the party is never fun, especially if the party ends up being a bomb.
-CALIFORNIA DEALS |
