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1:05pm (EST)
We mentioned in our Weekly Wrap that the bulls could test the upper end of the recent trading range and they got a couple of golden nuggets this morning to fuel the rally. If you missed the charts from Sunday afternoon, check them out again and you will see how close the bulls are pushing resistance. The one thing we want you to take away from the Weekly Wrap is this:
“We have been seeing 1% moves in a choppy market but now we are starting to see 2%-3% moves, and on a weekly basis, 4%-5% swings. This is telling us something and it could mean we are going to see even bigger price swings in the weeks and months ahead.”
As far as today’s action, sales of new homes jumped last month although it was the second-weakest month on record. New home sales rose to 330,000 in June from May’s revised reading of 267,000, which was nearly a 25% increase. Sales for April and March were also revised downward but the news was better-than-expected.
In corporate news, FedEx (FDX, $83.12, up $4.16) gave the bulls a boost after raising its earnings forecast for the quarter and rest of the year. The company said they were seeing more volume than anticipated in the current quarter and lifted their range to $1.05-$1.25 from a prior range $0.85-$1.05. For the full year, FedEx estimated earnings of $4.60-$5.20 a share, up from a prior view of $4.40-$5.
FedEx looks cheap at these levels and its 52-week high is $97.75. However, we would like to see more volume here in the U.S. before jumping on the bandwagon. We played FedEx earlier this year on the way up and at some point late this year or early next, FedEx will be a $100 stock. We just don’t think today’s news will propel it to new highs over the near-term.
Biotech has gotten hot again and there are a number of names on the move as M&A rumors pick up. Genzyme (GENZ, $66.83, up $4.31) is up another 7% today, adding to Friday’s breakout move from $54 to $62, on takeover chatter. There is speculation that Sanofi Aventis (SNY, $29.61, up $0.26) is looking to acquire Genzyme and there are others that could join the race to get this prized jewel.
As we head to press, the Dow is enjoying a 60 point pop, or 0.6%, and is at 10,484. The S&P 500 is up 9 points, or 0.8%, and is at 1,111. Meanwhile, the Nasdaq is showing a 16 point pop, or 0.7%, and was last seen trading 2,285.
We are watching the 1,110 level on the S&P 500 as a sign to see if the bulls will push 1,125. There are layers of technical resistance from here on up and the bears are still holding the fort down but this clears the way for a test higher.
As volatility picks up, we should get the break we are looking for and we are ready to pounce. While it may appear the bulls are ready to ride the rocket ship again, we remain cautious to the downside. However, we have both call and put options on our Watch List so we will be ready either way. Subscribers, check for the important updates in the Members Area.
M&A News Doesn’t Excite Market
Monday, August 30th, 2010
12:45pm (EST)
It’s been a slow day of trading although the bears took an early stab at stocks and pushed the market lower at the open. The bulls have battled back somewhat but they didn’t seem too inspired despite a flurry of merger and acquisition (M&A) news today. The lack of follow-through from Friday’s big push isn’t a good sign to start the week and the bulls will face major resistance levels if they do mount a rally today.
In corporate news, Intel (INTC, $18.07, down $0.30) said it was buying Infineon Technologies AG’s wireless-solutions business for nearly $1.4 billion in cash. This wasn’t a huge deal for Intel, which warned of lower revenue growth for the current quarter, but it was a smart one. The deal with Infineon will bolster Intel’s internet business and allow the company to offer a full range of wireless options, including 3G, Wi-Fi and Wi-Max.
3M (MMM, $80.29, down $0.71) stepped-up to the plate and offered Cogent (COGT, $10.72, up $1.81) $10.50 a share to do a deal. Shares are up 20% and Wall Street is valuing the marriage at $1 billion. 3M is in love with Cogent’s toys which capture electronic fingerprint and palm print images that can then be used to encode prints into searchable files. This allow cross-referencing and companies or agencies can then compare a set of prints to a database.
And finally, in a deal that looks like the ante may have to be raised, Genzyme (GENZ, $70.10, up $2.48) is up 4% after rejecting Sanofi-Aventis (SNY, $29.03, up $0.11) proposal to acquire them for $69 a share in cash. Genzyme has an impressive drug in its pipeline and could be holding out for $80-$85 a share. They think they have something special with Campath, a multiple sclerosis drug that is in the experimental stages, and Genzyme wants a bigger premium to account for potential sales.
As we head to press, the Dow is down 68 points, or 0.7%, and is at 10,082. We mentioned in our Weekly Wrap that resistance would come in at 10,200 and the low for the day has been 10,071.
The S&P is lower by 7 points, or 0.7%, and is at 1,057. The index continues to have trouble with the 1,070 level and a break below 1,040 will not be good for the bulls. The S&P has traded to a low of 1,056 today.
The Nasdaq is once again leading the way to the downside as the index is off by 16 points, or 0.8%, to 2,137. Tech has traded to a high of 2,154 and the 2,150 level continues to act as strong resistance. Support is at 2,100 and then 2,050.
We have updated all of our current trades and we have spent much of the morning looking for new trades this week. There are a few we like, but we want to do more research before adding them to our Watch List which is already exploding with possible plays were are eyeballing. Subscribers, check the Members Area for the updates.
Tags: 3M, GENZ, INTC, option picks, SNY, stock options trading
Posted in Market Commentary, Mergers and Acquisitions | Comments Off