Technical Outlook

A weblog about the markets, trading and technical analysis.

Wednesday, June 04, 2003

From MTV News- Apple looks to sign independent labels to iTunes Music Store: "Apple has invited hundreds of indie label representatives to a private presentation on Thursday at the computer giant's Cupertino, California, campus to discuss hopping onboard and adding their content to the more than 200,000 songs already available through the service."

This is good news but the contribution to the bottom line will probably be minimal. Practically all the "popular" artists are signed to the major labels. While undoubtedly bands on indie labels have their fans, they remain a niche audience. After signing the indie labels, Apple could look to foreign expansion. Perhaps set up a Spanish or Chinese or Japanese music store. They could also go the route of mp3.com and allow anyone to publish and sell music through their system. However, as mp3.com has shown, people remain interested mainly in the big name artists.

On another note, The Register reports that Amazon is interested in licensing the iTunes Music Store. The most interesting tidbit of information from that article is that Apple currently pays 65 cents of the 99 cent song price to record companies.
More on Disney: DIS closed Wednesday at 20.73, +4.91% on the day. DIS has now broken above the high of 20.24 reached on Dec 02, '02. DIS is now at an 11 month high.

TheStreet.com reports that analysts are split on the prospects of DIS: "Fulcrum analyst Richard Greenfield initiated coverage of Disney with a sell rating and $16 price target, saying the shares are overvalued after the fast success of the U.S-led war in Iraq. Going forward, the analyst said he believes margins will decline to 12% from 14.3%, and that full-year earnings will only grow 9%, compared with expectations of 25% to 35% ... Meanwhile, Credit Suisse analyst William Drewry couldn't have disagreed more, saying Disney will have 'the best-performing stock in the media/entertainment group over the next 12 months.' He raised his target price to $27 from $23, based on his estimate of the company's 2003 earnings before interest, taxes, depreciation and amortization of $3.8 billion."

Tuesday, June 03, 2003

NYTimes- Martha Stewart Expecting Federal Indictment on Criminal Charges: "Martha Stewart, who has been under investigation by the Justice Department for more than a year for her sale of shares in ImClone Systems in late 2001, is expected to be indicted on criminal charges 'in the near future,' her company said today. An indictment could come as early as this week."

MSO dropped 15% to 9.52 on heavy volume on Tuesday. Overreaction or buying opportunity? The P/E ratio is listed at a staggering 112. Is that accurate? Common sense and a look at the chart would indicate that it would be more prudent to sell or wait for more information at this point. Upon the actual indictment, MSO is likely to drop again and upon a conviction (if indeed she is found guilty), there is liable to be yet another drop, especially if jail time is required.

Monday, June 02, 2003

Whoa. "Keanu Reeves has shown his generosity by giving away £50 million of his earnings from the Matrix sequels. The 38-year-old decided to hand over the money to the unsung heroes of the sci-fi blockbusters - the costume and special effects teams ... His gift to the Matrix series' 29 behind-the-scenes whiz-kids will see each of them receiving £1.75 million." From Hello Magazine via boingboing.net.
More on Disney: DIS closed at 20.07 on Monday, up 2.14% on the day. The one day chart shows that for today at least, there was a clear level of support at the 20 level. As I wrote on May 31, the 20 level is big. Next to watch is breaking above 20.24, the high reached on Dec 02, '02. Next major test would be at the $25 mark.

Roger Ebert gives "Finding Nemo" 4 stars (out of 4). Of all the movie critics out there, Ebert writes the best reviews but I tend not to read his reviews until after I've seen the movie as they often contain spoilers.

"Finding Nemo" was no. 1 at the box office this weekend with 70.6 million. "The Matrix Reloaded" was 4th with a "paltry" $15 million: "The blockbuster debut of 'Finding Nemo' is even more impressive considering many tickets sales for the family-themed movie were discounted for children or matinee shows ... The $70 million represents a lot more tickets for that G-rated film than for an R-rated film, where all the tickets reflect an adult admission price."

10:22am ET- DIS 20.00 +1.78%
Just checked out the Bloomberg US financial news page on their site. They redid the site with a lot of Flash navigation. The look is cleaner and simpler. However, the annoying animated ads now stand out. Perhaps that's exactly what they want. The site seems rather sparse on content compared to before the redesign. The page I pointed to had only 5 financial news stories! Somebody there is definitely asleep at the wheel.

Sunday, June 01, 2003

LATimes- Halliburton Going Strong Amid Clamor: "The world's second-largest oil services company, Hallliburton was the No. 6 performer on the S&P 500 last year, and its shares this year have risen 24% on the New York Stock Exchange, closing Friday at $23.87, not far from its 52-week high of $24.67."

HAL has been on an uptrend since July 02. If you draw the uptrend line under the lows reached on Jul/23/02 and Oct/9/02, HAL has remained above the line apart from two brief dips below in April. HAL has also recovered completely from the huge one day drop on Dec/07/01 when it went from 20.84 to 10.94. The next test for HAL would probably be around the 28-29 level. If one were to buy now, the selling point and an indication of trend reversal would be the breaking of the uptrend line. Given the two recent brief dips in April one might want to delay selling until the stock goes below the trendline for two or more consecutive days. From a business point of view, why wouldn't HAL go up in price? The executive branch of government is friendly to their interests and a newly "liberated" Iraq provides many contract opportunities.
LATimes- Broad Rally Gives Wall St. New Hope: "Pado is a Wall Street 'technician' — someone who studies the action of the market itself, such as share price trends and trading volume, to look for clues about the next big move. Many chart-watchers, he said, are focused on the 9,000 mark for the Dow, which would be a 1.7% rise from Friday's closing level. The Dow has neared that level three times since July, only to fall back each time."
WashPost- Traits of Happy Stocks: "All happy stocks are pretty much alike, while unhappy stocks lose their value for all sorts of reasons ... What do happy stocks have in common? Moats. ... A moat keeps the enemy at bay. It can be a great brand name or a special way of doing business or a series of patents. In short, a moat is an attractive profit-making asset that other businesses can't easily copy ... One way to tell whether a company has a moat is to look at its profit margins compared with those of its competitors. "

An interesting but flawed article. One example cited of a company with a "moat" is Coca-Cola and yet the author admits that lately, its stock has been "a dud". So, if it's a "happy stock" and it has a moat and yet it is not performing, isn't his theory incorrect? The author believes in buying companies based solely on whether or not they are good companies:

"When you buy a stock, you become a partner in a business. It's the business that counts, not the numbers you see every day in the stock pages, not the lines on analysts' charts. Your task is to find good businesses at good prices."

We do not need to rely solely either on fundamental or technical analysis. We can combine the best of both methods. We can use fundamental analysis to identify good companies, companies in good businesses "worth" investing in. Once we have identified a good business, how do we determine what is a good price? Technical analysis can help. By analyzing the price trend, we can determine what the trend is and this what is the most opportune time to buy or sell.

Even for an example such as Coca Cola, we could keep a watch and invest only when the charts show us that it is headed in a positive direction. In fact, a look at the chart of KO indicates that now might be a very opportune time to buy! The 9 month downtrend of KO was broken earlier this month. In fact, a breakaway gap (attributed to a Morgan Stanley analyst upgrading his rating) occured on high volume on May 7 to start the uptrend. A very bullish sign. Breakaway gaps usually indicate a significant move ahead so now would definitely be a good time to invest. KO last closed at 45.57, +2.13% on the day.