One New Speculative Long Position And One Long I Am Adding To My Existing Position

June 25, 2007

As I have said over and over, keep all longs either small or not at all. Neither one of these two longs are perfect. What is nice about both is that they both have great risk/reward ratios, with the stocks so close to their 50 day moving averages.

new speculative long position: WTT

WTT is bouncing right off the 50 day moving average and breaking out past the late May and June resistance, on very strong volume. This breakout and bounce is very pretty with it making new six-week highs. This chart is very nice with all the green to max green BOP during the Nov-Dec and April-June periods, the heavy accumulation with low volume pullbacks since November, the moneystream hitting new highs, and the BOP expanding to a higher green on today’s move. What is negative about this chart is that BOP did not stay green or max green during the current base this stock is breaking out of and the RS line is lagging new highs despite the price being close. The fundamentals are nothing to get excited about at all, with EPS no longer growing after gains of 100% and 67% the previous two quarters to the most recent one, sales slowing with only 2% growth the most recent quarter, ROE of only 6%, and debt of 9%. Fund ownership has gone from 10 to 11 the past four quarters and management owns 28% of the stock. So there is some interest. However, if you are a new emotional inexperienced investor, I recommend not going long this stock or keeping it very small. It might be worth a small poke due to how little risk there is in the chart. Cut your loss with a close below the 50 day moving average, if the stock does not move higher immediately.

adding to existing speculative long position: FDP

FDP is bouncing right off the 50 day moving average, on very strong volume. This chart is very pretty this year, with green BOP in February and March, max green BOP during the base in May, and max green BOP on yesterday’s bounce and today’s follow through. There are very few flaws I can find in this chart in 2007. However, the fundamentals are full of them. Sales has not increased for the past four quarters, EPS has just now turned around with a 200% gain after five quarters of negative growth and/or losses, ROE is only 1%, and it has a 46% debt load. Therefore, I would not load up on this one. But perhaps this very beautiful pattern, since late April, has shown up due to earnings estimates. 07 and 08 YOY earnings estimates are for a 999% and 14% increase respectively. Cut your first loss with a close below the 50 day moving average and your final loss with a close below the 22.53 level, if the stock does not move higher immediately.

Last 5 posts in Free Archives Longs

Posted by Joshua Hayes | Filed Under Free Archives Longs 

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