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All,
I'm sure you've noticed that I'm sticking with stock watch, not stock
pick <G>. It looks like I was wrong on switching back toward larger cap
stocks. Friday, both CUBE and CPQ closed below my stop and I'll close those
positions Monday. I don't mind taking the profits in CUBE, but don't like
the quick loss in CPQ. However, it now looks like CPQ will head back to the
bottom of its intermediate term up trend channel at 56. I still like CPQ
and want to get back in, but will wait for it to test the bottom of the
intermediate term channel.
Looking at the indices, both the DJIA and the OEX broke through the
bottom of my up trend channels, while the NYA, SPX, RUT, and NASD are still
in their up trend channels. That indicates to me that my move back to the
larger caps was premature and also we are still in danger of an overall down
trend. I don't think that will happen but I've been wrong before and will
be wrong again <G>. Anyhow, the prudent thing to do here is to build up
some buying power and watch for a few days at least.
I did want to identify a strong stock in a strong group to test the
waters with if it looks like the up trend is going to continue. After
looking for strong industry groups, I finally decided on the oil drilling
group which has done good for quite a while and shows no sign of slowing
down. I then looked at some analyst stories and liked what I saw about
Rowan Companies (RDC). While RDC is in both offshore and land drilling as
well as heavy equipment manufacturing and transportation, the real story is
deep water drilling. The rates for deep water drilling are exploding and
RDC has most of the new capacity coming on line in the next few years.
Their earnings are already turning up with last quarters earnings being over
50% of the previous quarters and over double the quarterly earnings a year
ago. With a lock on deep water drilling, the earnings should accelerate
even more from here. RDC at 39.312 is slightly below mid channel of an
Intermediate Term Up Trend Channel (ITUTC) with the top at 45 and the bottom
at 35 1/2. There was a MetaStock RSquared, S/C,MFI system test buy signal
in late May and the stock has been moving up strongly ever since with only
one sideways move to the bottom of the channel in July and August followed
by another strong up move in September and August. In October, RDC did move
down and sideways to its current mid channel position. RSquared and S/C
indicate a strong trend in progress, but the money flow did drop in August
and September and has leveled off in October. The fundamentals are
excellent except for PSR which is at 5.06 and higher than I would like.
However, this is offset by the potential for large earnings gains. The
Debt/Equity is 0.48, there is over 30% insider ownership, and revenues have
been growing at over 20% per year. In a perfect world, I'd like further
movement towards the bottom of the channel before entering. However, I'll
also enter if it breaks out and the market looks like it is resuming its
upward move. I'll keep the email list posted.
I'll send a RDC.GIF chart to everyone on the email list. If you aren't
on the list and want on, just yell. The only obligation is participation in
this email forum.
Jim
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