Technical Outlook

A weblog about the markets, trading and technical analysis.

Wednesday, June 11, 2003

NYTimes- JetBlue Buying 100 Regional Jets: "The order was an unexpected move by JetBlue, the low-cost carrier based in Queens, because the company had always espoused the efficiencies of operating only one type of plane, the A320 from Airbus ... 'It'll all depend on how it's implemented,' said Robert W. Mann, an airline consultant in Port Washington, N.Y. He pointed out that some low-cost carriers, like People's Express, grew too rapidly and failed."

JBLU closed on Tuesday at 32.978, down 4.72%. JBLU had been on a tear since mid-March, jumping 61% from 23.15 to 37.34 last week. The biggest problem with yesterday's drop from a technical standpoint is that it broke the 3 month uptrend line. Not only did it break the line, it gapped and did so on high volume.

When I see a drop of this magnitude, it looks like an overreaction to the unexpected news. The overreaction will likely lead to a minor upward correction tomorrow or over the next few days. However, as a technical trader, discipline is important. While psychologically, one may want to hold on and see, if one was trading based on short-term trendlines, it would be prudent to sell because the line has now been broken. Some profit may be left on the table but by selling, you preserve what you have, prevent further loss and there is nothing stopping you from re-entering the market if the uptrend resumes.

Tuesday, June 10, 2003

LATimes- Microsoft, Yahoo, AOL and others plan music services: "The possible foray by major Internet players into online music downloads is testimony to the vision of Apple chief Steve Jobs, who debuted his music service April 28. But it also signals that the Cupertino, Calif.-based computer company's early lead may be short-lived ... Some Internet executives wonder whether Apple's iTunes store generates more profits by promoting the company's computers and portable music players than by selling songs."

It's hardly surprising that other companies are scrambling to copy Apple's model again. However, as with past events, Apple is at risk of innovating but having others reap the profits through their own versions. All of Apple's products (save the iPod) are tied to Apple's hardware and operating system. At this point, iTMS software is available on Macs only although a Windows version is in the works.

Releasing things on Macs only or Macs first is a good strategy if you want to attract people to your computing platform. However, AAPL needs to decide whether iTMS will be a potentially bigger business platform-free or whether it's worth more as a draw for people to buy Macs.

If AAPL is able to move quickly enough, the iTunes Music Store concept has the potential to break free of that and become something that is licensed by other parties. Imagine iTMS being the backbone for Amazon's own store or for AOL. Why would either of those companies want to team up rather than build their own? AAPL has figured it out already. They have the infrastructure set up. They can cut months out from their own development time, an important consideration especially since Microsoft is planning to develop their own music store as well. However, a question remains in whether or not AAPL's agreement with record labels allows them to sub-license their system.
Canadian insurer Manulife Financial Corp has been on an uptrend since the beginning of this year. Currently trading at 28.17. A crucial test will be the 30 level, reached in May '02. At that time, the resistance was high. MFC attempted to go past 30 a few times, failed and eventually fell to 18. If MFC fails to break through 30 this time, it will be a bad sign in terms of the uptrend. If it does break through, it will be interesting where it goes from there. The historic high for MFC is 32.188, a price reached on Dec 29, '00.
NYTimes has an article on how Steinway pianos are made by master craftsmen today. Steinway & Sons' is owned by the public company Steinway Musical Instruments.

LVB (the symbol stands for Ludwig van Beethoven) has gone up about 25% in the past two weeks. The one year downtrend has been broken. The next major test will be the high of 19.19 reached on Nov 4, '02.
There's a good daily column in the Washington Post called Filter which focuses on a certain topic each day and links to a bunch of articles in different papers about that topic. The latest article is on Oracle's hostile bid for PeopleSoft.