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New Semi Picks in the Tech Five & Dime

The Winners and Losers

These stocks have moved up or down by at least 20% since being put on the shelves:

  • RealNetworks (RNWK) is up 48.8% since Sept. 6. It gapped higher on Oct. 11 on a settlement agreement with Microsoft (MSFT) that included potential joint product and services cross marketing in music downloads and video streaming. Shares are still 54.6% undervalued. The weekly chart profile is positive, with the five-week modified moving average at $7.27 and a weekly risky level at $8.50.
  • Actuate (ACTU) is up 48.3% since Aug. 22. It gapped higher on Oct. 27 on better-than-expected quarterly earnings. Shares are still 52.5% undervalued and the weekly chart profile is positive but overbought. The five-week modified moving average is $2.88. It set a 52-week high of $3.91 on Monday.
  • Westell (WSTL) is up 22.8% since Sept. 21. It gapped higher on Oct. 20 following raised revenue guidance for its current quarter. Shares are 26.7% undervalued and the weekly chart profile is positive. It's trading between its five-week MMA at $4.36 and its 200-week simple moving average at $4.85. Since Westell is no longer at least 40% undervalued, I would only buy it on weakness to my quarterly value level at $3.56. I'd book profits on strength to my semiannual risky level of $5.69.
  • Ciena (CIEN) is up 22.3% since Aug. 22. This stock began to move sideways to up after Sept. 26. Shares are still 74.2% undervalued and the weekly chart profile is positive. It's trading between its five-week MMA at $2.47 and its 200-week SMA at $4.43.
  • Terayon (TERN) has fallen 30.3% since Sept. 7. Shares have declined on accounting issues and I wouldn't add to this position. The stock is 53.7% undervalued and I am watching to see if any new financial information hits my model to change this valuation. The weekly chart profile is negative with the five-week MMA at $2.85. If the stock rebounds to my monthly pivot at $3.18, I would consider reducing the position, and I'd sell shares on strength to my quarterly risky level at $4.16.
  • Skyworks (SWKS) is down 29.4% since Sept. 21. The company issued an earnings warning on Oct. 10, causing a downward price gap on Oct. 11. Shares are still 68.8% undervalued, as the limited Wall Street coverage didn't lower my 12-month forward EPS estimates to reduce valuation. The weekly chart profile is negative but oversold, with the five-week MMA at $5.65. I wouldn't add to this holding until and unless there is a sign that shares can stabilize within the realm of its 52-week low of $4.64.
  • No Longer in Stock

    I've taken these companies off the store shelves: Ditech Communications (DITC), Sonus Networks (SONS) and Tut Systems (TUTS). I wouldn't add to positions on these names; sell them on strength.

    Intellisync (SYNC), one of our biggest winners, will also leave the store. After the close on Wednesday, Nokia (NOK) announced that to compete with Research In Motion's BlackBerry, it's paying $430 million to buy Intellisync. Intellisync provides wireless email and data services, including software that synchronized Palm handheld devices with computers.

    The Tech Stock Five & Dime
    Company Name Date Posted Price At Close Price On 11/15/2005 % Gain /Loss Under Valued 12x3 Stoch Value Level Pivot Risky Level
    Computer Hardware
    Gateway (GTW:NYSE) 9/21/2005 $2.60 $3.04 16.92% 70.6% RM 2.80 Q 5.47 Q
    Immersion (IMMR:Nasdaq) 10/14/2005 $7.12 $6.24 -12.36% 67.7% OB 5.16 M 6.32 Q 10.44 Q
    SunMicro (SUNW:Nasdaq) 9/21/2005 $3.94 $3.68 -6.60% 3.4% DM 3.51 M 3.66 Q 5.14 Q
    Semiconductors & Electronics
    SkyWorks (SWKS:Nasdaq) 9/21/2005 $6.84 $4.84 -29.24% 68.8% OS 5.70 M 7.74 Q
    Software & Services
    Actuate Corp (ACTU:Nasdaq) 8/22/2005 $2.38 $3.53 48.32% 52.5% OB 2.14 Q 3.17 Q
    BEA Systems (BEAS:Nasdaq) 9/23/2005 $8.43 $9.25 9.73% 42.6% RM 8.40 Q
    Entrust (ENTU:Nasdaq) 9/21/2005 $5.51 $4.47 -18.87% 42.3% DM 3.76 Q 5.68 Q
    Extreme Networks (EXTR:Nasdaq) 10/14/2005 $4.38 $4.85 10.73% 74.4% RM 3.20 M 4.75 S 6.21 Q
    Interwoven (IWOV:Nasdaq) 9/6/2005 $8.40 $9.05 7.74% 69.1% OB 7.63 Q 10.17 Q
    Micromuse (MUSE:Nasdaq) 9/6/2005 $6.96 $7.38 6.03% 53.0% RM 6.84 M
    RealNetworks (RNWK:Nasdaq) 9/6/2005 $5.41 $8.05 48.80% 54.6% OB 5.61 M
    Sapient (SAPE:Nasdaq) 9/23/2005 $6.37 $5.98 -6.12% 39.1% RM 6.50 M 9.97Q
    Stellent (STEL:Nasdaq) 10/14/2005 $8.67 $9.79 12.92% 50.5% OB 7.85M 9.03 Q 11.20 Q
    Intellisync (SYNC:Nasdaq) 9/7/2005 $4.05 $5.54 36.79% 44.0% OB 4.62 M
    WebMethods (WEBM:Nasdaq) 9/23/2005 $6.45 $7.50 16.28% 40.6% RM 6.38 Q
    Telecommunications
    Ciena (CIEN:Nasdaq) 8/22/2005 $2.11 $2.58 22.27% 74.2% RM 2.13 Q
    Lucent Tech (LU:NYSE) 8/22/2005 $2.87 $2.72 -5.23% 56.2% DM 2.68 M 4.47 Q
    Terayon Comm (TERN:Nasdaq) 9/7/2005 $3.40 $2.37 -30.29% 53.7% DM 3.18 M 4.16 Q
    Tellabs (TLAB:Nasdaq) 9/21/2005 $9.50 $9.70 2.11% 40.6% RM 10.16 M 11.11 Q
    Westell (WSTL:Nasdaq) 9/21/2005 $3.64 $4.47 22.80% 26.7% RM 3.56 Q 5.69 S
    Source: Global Market Consultants

    Reading the Table

    To qualify to be added to the shelves of the Tech Stock Five & Dime, a stock needs to be at least 40% undervalued according to my model.

    12x3 weekly stoch: This is the 12x3 weekly slow stochastic reading. A stochastic is a measure of momentum on a scale of zero to 100. A reading of more than 80.0 is overbought (OB), and a reading below 20 is oversold (OS); RM indicates a rising reading, above 20 but below 80; and DM indicates a reading that is declining and below 80 but above 20. It's a sign that a stock has lost its momentum status when the stochastic falls below 80 after having been above it.

    Five-week MMA: The five-week modified moving average, calculated from a simple moving average updated each week by taking the prior sum, subtracting out the prior five-week MMA, adding in the latest weekly close and dividing by five. The MMA is slower than a simple moving average. It's considered a support or resistance (a positive if above, a negative if below).

    Value levels, risky levels and pivots: A value level is a price at which buyers should emerge on share-price weakness, while a risky level is a price at which sellers should reduce holdings on share-price gains. A pivot is a value or risky level that was violated during its time horizon, and which acts as a magnet during the remainder of that time horizon. These levels are calculated in weekly, monthly (M), quarterly (Q), semiannual and annual (A) time horizons, on the basis of the past nine closes in each time horizon. My theory is that the closes over a nine-year period are the summation of all bullish and bearish events for that market or specific stock.

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