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1. Upside for Pan American Silver
By Robert Moreno
3:50 p.m. EST
Pan American Silver
(PAAS:Nasdaq) is a silver-mining company that has trailed others in the space since March, including
(SLW:NYSE), but may be poised to gain ground. Pan American Silver has enjoyed a strong uptrend since November 2008, rising more than 150% from the low. This move from around $10 to near $26.50 is a 50% retracement of the drop from the March 2008 high of $44. The stock price tested this important level first in October and again in late November.
Volume has declined in the past month, which is common when areas of support or resistance are tested, but it is still decidedly to the buy side. The uptrend line on the chart runs parallel with the 43-week/200-day moving average and has held support several times. The relative-strength indicator is above the 50 center line, indicating that average gains have trended higher than average losses. A successful break above $26.50 would power a move to the 61.8% retracement level at $30.67, the next level of resistance. This is a chart with clearly delineated buy, stop and target points.
2. MELI downgrade
By Ken Shreve
1:24 p.m. EST
I wonder if there will ever be a time when analysts are friendly to high-multiple stocks like
raised valuation concerns. Earlier today, JP Morgan downgraded shares to neutral from outperform.
Before today's bloodbath, MELI had a forward PE of around 50, with earnings growth of 48% expected in 2010.
Yes, the stock has run a lot recently and was very extended going into today, but it's not that pricey from a valuation standpoint.
3. This Rally Is Not Without Precedent
By Robert Moreno
11:54 a.m. EST
The market marches on, and neither "bull" nor "bear" knows what to make of it. The concerns surrounding profit-taking and missing the boat multiply as the trend remains intact. Emotions cloud judgment and profits are sacrificed. It is time to take an objective look at a weekly chart of the S&P 500.
The 10-month bottoming process that we saw in late 2008 to early 2009 was very similar in time and formation to the 2002-2003 base. In this prior period, the market consolidated for about 10 months, then broke through resistance at 950 and trended nicely for another 10 months. In July last year, we broke out of a 10-month basing pattern at the 950 level and have since trended higher for only five months. This current breakout projects to the 61.8% retracement level of the March 2009 low to the October 2007 high at 1229 -- about another 7% from current levels.
This rally isn't without precedent, and the moving averages, technical indicators and volume measures support its advance, as do earnings prospects this season. This said, past performance is not a roadmap for the future, and some measured "concern" about your portfolio is prudent. The important thing is to give it the proper allocation in your methodology.
4. KB Home reports tomorrow
By Brian Gilmartin
11:47 a.m. EST
While KB Home's (KBH:NYSE) report normally would garner little in the way of extra attention, I'll write about it briefly for readers given the reaction last week to Lennar's (LEN:NYSE) report, which resulted in heavy upside volume for both Lennar and Ryland (RYL:NYSE), and a nice pop in Lennar. The analyst consensus is 49 cents a share for KB Homes, on a 16% increase in orders, and about 1,500 homes.
We don't own KB Homes (and likely won't), instead preferring to play housing through the SPDR S&P Homebuilders (XHB:NYSE), Toll Brothers (TOL:NYSE), and Home Depot (HD:NYSE). The recovery in housing will likely be a very long slog, but patient investors will be rewarded.
Position: Long XHB, TOL, HD
5. Takeover Battle brewing at SSTI
By Tim Melvin
11:43 a.m. EST
There is an interesting trade setting up over at Silicon Storage (SSTI:Nasdaq). The full-value committee of shareholders is opposing the attempted merger by key executives and Technology Resources Holdings at $2.10. The committee includes some noted activists as members, including micro-cap specialist Lloyd Miller and investment firm B. Riley. SST Full Value Committee members currently own a little more than 13% of the outstanding shares of the flash storage company. It now appears that Cerberus Capital might be interested in acquiring the company. The stock trades well over the $2.10 offer, so the market is anticipating a higher offer soon.
This article was written by a staff member of RealMoney.com.