Israel Stocks - Cellcom ( CEL )

On late May 2010, MSCI a leading provider of investment tools for investors globally, including asset managers, banks, hedge funds and pension funds, announced the reclassification of its MSCI Israel Index to the MSCI World Index, coming from the Emerging Markets Index.

With that classification is expected that Israel Stocks attract more institutional investor since the MSCI International Equity Indices are the most widely used global benchmarks in the industry and a number of funds and ETF include MSCI indexes in their investing.

The process at MSCI to reclassify the Israel Stocks started in July 2008, with MSCI analyzing and verifying that Israel complied with the following among other criteria:

The country Gross national Income per capita is 25% above the World Bank high income threshold for three consecutive years.
High securities liquidity of 20% or more than the calculated annualized traded value ratio.
Market accessibility criteria rated very high in the following:
Openness to foreign ownership
Ease of capital inflows / outflows
Efficiency of the operational framework
Stability of institutional framework


It is no surprise then that Israel stocks are outperforming the market as you can see in this graph showing the relative strength of the Israel market represented by the iShares MSCI Israel Cap Invest Mkt Index (EIS), measured against the benchmark S&P 500.

I started to look for dual traded Israelis Stocks and decided on Cellcom Israel Ltd. (CEL), a matured more or less monopoly with a 10% plus dividend yield.

Cellcom shows strong relative strength against the EIS Benchmark, meaning that EIS is set to outperform the markets and CEL is in line to do better than the EIS index.


CEL is not far from its ideal entry point around 28, target is at 32 for a quick 10% gain, consider closing your position below 27.75 for a 5% loss, that is a 2:1 risk / reward ratio.

Some Insider Interest and good looking charts.

First I would like the SP500 to cross over 1125 with good volume, along with that happening I would very much interested in trading long these two stocks.


CODI (Compass Holdings)
The Nasdaq site reports 140,252 net insiders shares bought in the last 3 months, also the site reports net institutional buying of 3,742,222 shares.

There is some resistance at 15.30, if the stock gets to break above that level with a more or less high volume there is a pretty chance of a significantly upside. Above that level there is no resistance in the last 3 years, meaning that everybody that holds the stock has a profit, so no one is in a rush to sell.


COT (Cott Corporation)

Nasdaq reports that insiders bought 647,500 shares in the last 3 months, the net institutional activity is 1,510,180 shares bought at this time. COT broke above 6.5 with remarkable volume and is trading above the weekly ema(30) that should act as support.

OVTI

I shorted OVTI yesterday basing my decision solely on technical reasons.

It will be very difficult for OVTI to overcome the 3 months distribution level.

Also I will be publishing a trade journal. OVTI shorted at 20.51 is the first trade.

For Next Week

Here are the closing prices of the indexes on August 31 and on September 3 and the percent increases in three days of trading.

Index, Closing Price 8/31, Closing Price 9/3, Percent Increase

Nasdaq, 2114.03 - 2233.75 - 5.66%
Russell, 2000 602.06 - 643.36 - 6.86%
Dow Jones, 10014.72 - 10447.93 - 4.33%
Nyse, 6704.15 - 7055.03 - 5.23%

S&P 500, 1049.33 - 1104.51 - 5.26%
Are these impressive gains the startup of a new uptrend in the markets or are they just a dead cat bounce on a market (S&P) that in a four month period (4/23 – 8/24) lost 13.6%.
Let’s look at the support and resistance level in the S&P 500 trying to get some insight on the market.

For the longs:The 1100 level should stand its ground next week, a close above 1110 would be most desirable. Trading between 1100 and 1070 is meaningless, in fact a minor pullback is expected after a 3 day 5+% gain. We’d like the SP to open above 1110 (less than half percent point over Friday close) and stay above 1110 for the day. Next important resistance is at 1130.

For the shorts:
1070 is an immediate support level for the index, an opening below Friday close and a closing below 1070 would be great. There is some minor resistance at 1040 but below that it may be a free fall.

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Other way to look at the indexes are the simple moving averages which have the inconvenience of being lagging indicators, but after they are aligned in the downside, it is very hard and it needs a lot of buying for a stock or index to reverse direction.

The major indexes are still under the wicked dark cross, this signal occurs when the 50-day moving average crosses below the 200-day moving average. For some traders this is the uber-bearish signal. The SP came to be under the cross on July 5 when it closed at 1022.58, since that day the SP had gain over 8%. Maybe that cross isn’t so evil after all.

Previous to the July 5 cross, the ma(50) crossed below the ma(200) on Dec/21/2007, closing the day at 1484.46. After that the SP went to a loss of more than 50% until March 2009 when it started recovering. The dark cross is a signal to be reckoned with.


It is possible to make money buying long on a general down market, also the markets sooner or later are going to recover, meanwhile be very careful with your longs.

One profitable trading set up is the alignment of the 10, 20 and 50 simple moving averages either up or down. This set up on 7/30 failed when it could not drive the index higher; it looks ready to try again.


For long take a look at TOWN and CSR.
For short UHAL looks interesting.

On Worth and Cramer

I read two articles on august 10 about the markets, and I would like to share some excerpts.

This one is from Bloomberg:
“Aug. 10 (Bloomberg) -- Stocks could go either way and anyone who claims to know their future is lying, according to Carter Worth, the third-ranked technical analyst in last year’s Institutional Investor survey.
A monthlong gain in the Standard & Poor’s 500 Index has left bulls and bears at a “a perfect standoff,” Oppenheimer & Co.’s Worth wrote in a note yesterday. It’s a “coin toss” as to whether the index will increase or retreat, he said.

Worth’s ambivalence highlights the challenge for investors as earnings rise at the fastest rate in 22 years even amid signs the economy is faltering. The S&P 500 rallied as much as 9.2 percent from its Dec. 31 close this year and dropped as much as 8.3 percent. It climbed 0.6 percent yesterday to 1,127.79, up 1.1 percent for 2010.

“This is the elegant, exquisite moment that you’ll see a handful of in your lifetime,” Worth said in an interview. “Anyone who says to you, ‘I know where it’s going,’ they’re lying to themselves and they’re lying to their clients.””

And the other article is from CNBC:
“ Cramer: ‘Fed Said Good Things-Buy’
cnbc.com | August 10, 2010 | 03:26 PM EDT
What’s the takeaway from Tuesday’s announcement from the Federal Reserve?

“They are not in the way.” Cramer said during Stop Trading!, meaning the central bank is doing whatever it can to promote an economic recovery.
The “Fed said good things,” Cramer said. “Buy””


Cramer and Worth are both outstanding personalities in the financial world, and both are in a way right, I more or less concur with Worth about the non-directional market, but after yesterday drop is coming close to become a bearish one.

This is my last post until after august 25 and I want to leave you with two trading ideas based on the ancient craft of point and figure chart interpretation.

Cymer Inc. (CYMI) and JDA software group Inc. (JDAS) are two companies in the technology sector and different industries, JDAS is a software company and CYMI is in the Semi-Conductor group.

On July 27 JDAS posted weaker-than-expected adjusted quarterly profit as operating expenses jumped 60 percent, but reported revenue that beat expectations.

The company earned 48 cents a share, excluding items, while total revenue rose 59 percent to $158.4 million.
Analysts on average were expecting earnings of 52 cents a share, excluding items, on revenue of $153.5 million, according to Thomson Reuters I/B/E/S.

At 12:25 PM EDT today JDAS is trading at 23 with a P/e of 90.20, it’s latest quarter figures set the following yearly results: Profit Margin 3.72%, return on assets 4.91%, return on equity 3.66% and current ratio 1.75.
Analysts estimate a 9.00% yearly growth for the following 5 years.

JDAS started a bearish formation when it traded at 24, breaking below a triple bottom formed at 25 with descending tops. Jdas stopped the down move at 22 reversing up to 25. Some traders like to short a bearish formation on the reversal move; others wait for a new breakdown. Price projections set the objective at 14.



On July 22, CYMI reported a 16% increase in revenue from the previous quarter, making this the sixth consecutive quarterly sales increase; also net income and EPS have been growing in the last 6 quarters. At 2:48 PM EDT today, CYMI is trading at 31.36 with a P/e of 15.75. With a 13.85% profit margin, ROA of 8.62% and ROE of 11.19%, some analyst would say that CYMI is a value stock.

With an estimate of 0.63 EPS for the next quarter, the forward P/e at today price is 13.81, combine that with analysts projections of an annualized growth of 19.73% for the next 5 years and you have a stock with a 0.70 PEG. Also adding to the good numbers, insiders lately have been buying the stock.

CYMI started a bullish formation when it traded at 34, almost immediately the stock reversed. Support is at 29, price objective is set at 48.


Good luck and remember short term is all about the market move, long term is about value.

Axcelis Technologies Inc. (ACLS), and the symmetrical triangle

It’s said that chartist are guilty of seeing continuation or reversal patterns in almost any chart. A formed pattern isn’t reason enough for trading a stock but it can give you a perspective of the future move of the stock.

ACLS went from 0.80 on November 4/09 to 2.50 on April 26/10 for an impressive triple in six months. Of course that uptrend wasn’t sustainable forever and the stock gave back part of its gains trading lower until the 1.40 level reached on July 6.

Since then ACLS started trending higher forming what may be a bullish symmetrical triangle, which most of the times is a continuation pattern. The symmetrical triangle constitutes a pause of the original trend after which the prior trend is resumed.
A valid triangle needs at least four reversal points, meaning each converging line must be touched two times minimum.


If ACLS closes decisively over the upper converging line (blue) the bullish continuation pattern is confirmed, that line will be support for that moment on. The target would be the height of the triangle plus the price at breakout.

This triangle is coming to and end in one or two weeks, if the bullish pattern is going to work the price must close over in the following days, if not, there is a high possibility that prices will continue to drift out to the apex and beyond or start a new downtrend.

Nucor and the price channels

Sometimes stock prices trend between two parallel lines forming what is known as a price channel.
When a channel is recognized it can be use for trading into the channel or you can wait for the breakout over the upper channel line in a downtrend to buy the stock.

On April 16 NUE ended an uptrend closing significantly below the lower channel line, the stock zigzag for a couple of weeks, and then started a downtrend between two well defined channel lines.

On July 20, Nucor closed at 39.82, 3.56% higher over the previous close and also broke over the down trending upper line. Measuring techniques put the price target an equal distance to the width of the channel, in this case 3.5 over the breakout price of 39. That results on a target of 42.50.

At yesterday closing price of 40.30, the target price of 42.5 gives us a 5.25% profit.

Or you could buy NUE September 40 calls at around 1.6, that would give you a profit over 50% if the stock reaches the 42.5 target before September 17.