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1. Powerful Reversal in Manpower
4/21/2009 12:28 PM EDT
is one of the top gainers on the
today. The stock is up more than 15% on surging volume after beginning the session with an ugly gap-lower open.
The company released its weak first-quarter results this morning, which included a 32% decrease in revenue from the year-earlier period, sparking a sharp drop on the bell. Comments from the CEO regarding revenue stability over the last five weeks helped reverse the early weakness; the stock is now at new highs for the year. Volume is ramping as well and is already near double the daily average. By the close, today will be the heaviest positive day for MAN since last July.
Manpower's key reversal action today has left behind a solid base. Strong support is now in place between $35 and $37. The upper band of this support area includes the December and January highs as well as the previous highs of this month. A low-volume pullback to this support zone would be a low-risk buying opportunity. On the upside, I expect this breakout to carry MAN up to the area of its July lows just above $46.
2. Not All Ag Names Are Created Equal
4/21/2009 11:29 AM EDT
This morning, we got some disappointing news about slowing sales at
. There's been a softening of orders in new machinery/equipment tied to global infrastructure and agriculture, which has led the company to slash costs and forecasts.
Earlier this month, we heard a similar story from
, which has seen orders for agricultural equipment drop sharply.
You might be tempted to conclude that weak orders for agricultural machinery equates to a weak outlook for "ag" as an industry.
It doesn't. You just need to pick your spots.
My checks of farmer demand indicate that while uncertainty about the global economy remains a concern, farmers still need to grow their crops. To get the most from their crops, demand for nutrients, chemicals and fertilizer remains very high. Suppliers I've checked in with are very happy about orders for the coming season.
My two favorite nutrient/fertilizer plays here are
-- with trailing enterprise-value-to-EBITDA ratios of under 6 times and 4 times respectively. Both should see their stocks rise over the summer as results come in.
I also mentioned
( FEED) last week, a favorite Chinese small-cap of mine, selling pork in that market -- it's up about 20% since my mention last Thursday.
Ag makes sense. You just have to realize that not all in the space are created equal at this stage in the cycle.
4/21/2009 10:21 AM EDT
seems to be doing many things right, but most important, it seems to have credibility. The bank is saying that things are pretty much under control, not that things are real good. I still expect, because of this tough market, another test, but this one seems to be given the benefit of the doubt...
4. Morning Trade
4/21/2009 9:29 AM EDT
The bears finally had another day in the sun ... if they want it to continue, they need to push the emini through strong support at 822.50. A sustain trade under 822.50 greatly increases the likelihood of a trade back to (at least) the 800 area. A break of 822.50, and traders should be able to push the emini to (and through) moderate support at 816 and 811. Strong support comes in at 808.25 and 802.25 (the April 8 low). I would pay more attention to the support near 800...
The bulls had their rally stopped in a big way. If they want to bring traders back to their side, they need to hold the 822.50 area and push us above moderate resistance at 825. Above 825, and traders can grind us back toward strong resistance at 833.50. The bears need to lean on this area if they want to stay in control. A break of 833.50 sends us to moderate resistance at 837.50 and very strong resistance at 842.50. If we were to get a moonshot straight to 842.50, I would expect it to be faded.
5. Early Reads From This Morning's Earnings Reports
4/21/2009 7:53 AM EDT
Here are a few items to ponder as we start a very busy earnings day:
says the auto supply biz has bottomed (especially as auto inventories have been sharply whittled down), and the company expects to be back in the black for the rest of the year. For other auto parts "survivors" such as
, you'll probably hear similar sentiments.
, which has seen its stock in free fall for five years, posted a decent quarter, highlighted by improved stent market share, and it could actually be on the cusp of an equity turnaround (which actually might have begun after the early March capitulation). Net sales are expected to turn positive again in the current quarter -- excluding currency and divested lines.
saw a small pickup in demand late in the quarter and early this quarter. Oppenheimer is out talking about improving sales traffic at retailers in April. (Though the weekly chain-store reading just out was still negative).
, like so many firms this season, is missing top-line forecasts and beating the bottom-line, thanks to cost cuts.
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This article was written by a staff member of RealMoney.com.