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Technology Report Weekly Roundup

By Richard Suttmeier | 02/03/06 - 06:23 PM EST
Stocks in Focus: ALTR, CSCO, DELL, INTC, JNPR, PWAV, RSAS, SGTL, SYMC, TLAB, TWX, VRSN, XMSR

Tech stocks spent the week bobbing and weaving amid a new high for gold futures, higher interest rates, continued volatile energy prices and earnings hits and misses. But the Nasdaq survived the body blow on Tuesday of the first- ever earnings disappointment from Google (GOOG:Nasdaq) since it went public in August 2004, showing the resiliency of tech stocks as valuations become even more expensive.

The Nasdaq again traded like a yo-yo this week, within the wider range of 2332 and 2241 set in January. The Jan. 31 close of 2306 gives us a monthly pivot, or magnet level, at 2313 according to my model -- below the quarterly resistance at 2331. There is also a higher monthly resistance area for February at 2407. Although my model projects risk to the Nasdaq quarterly support at 2159 as long as strength this quarter continues to stall at or below 2313 -- which it did this week -- the monthly resistance at 2407 makes this "bust" scenario less likely. Of note in the model portfolio, Click Commerce (CKCM:Nasdaq) bucked Friday's down swing of the yo-yo and moved higher for the day, and both AT&T (T:NYSE) and Tellabs (TLAB:Nasdaq) tacked on gains as well on top of a strong week for each.

The Philadelphia Semiconductor Index (SOX) ended January at 539.11, which resulted in a new monthly pivot at 529.84 and a monthly risky level at 548.66, shy of the Jan. 27 high at 559.60 and the January 2004 high of 560.48. These overhead resistances reflect what my fundamental screens are projecting: that technology is no longer cheap. The SOX has been leading the market higher, but is showing wear and tear that may need repair. Friday's close at 528.77, just below 529.84, is a warning for additional weakness this month.

Tuesday's month-end closes provided new inputs to my model to calculate monthly value and risky levels, and pivots. To review, weakness to a value level offers a price at which to add to a position, while strength to a risky level gives a price at which to reduce a position. A pivot tends to act as a magnet for investors between value and risky levels.

The tech sector is the only sector now undervalued, at 2.9%, with computer manufacturers 9.1% undervalued vs. 11.3% last week, semiconductors 3.1% undervalued vs. 5.2% last week, and software 4.5% undervalued vs. 5.5% last week.

Every other sector is now overvalued with the following sectors more than 5% overvalued: basic industries by 20.0% vs. 19.6% last week, capital goods by 11.1% vs. 10.9%, consumer non-durables by 8.6% vs. 8.9%, energy by 20.1% vs. 16.7%, finance by 7.3% vs. 7.7%, public utilities by 8.6% vs. 9.1%, and transportation by 8.4% vs. 7.6% last week. The yield on the 30-year Treasury bond moved above 4.70 this week, the highest level for 2006, and remains a drag on valuations. Stocks are thus moving higher on momentum, not fundamentals.

Five companies in the model portfolio reported quarterly earnings this week with mixed results. On Monday, RSA Security (RSAS:Nasdaq) matched earnings expectations, and shares dipped on the news. But the stock rebounded to $15.40 on Tuesday, and I removed this holding from the portfolio for a gain of 26%.

We heard from three model portfolio members on Tuesday. Powerwave (PWAV:Nasdaq) met earnings expectations but sold off in after-hours trading, dropping from $14.61 to $13.62 before rebounding on Wednesday to $14.25. SigmaTel (SGTL:Nasdaq) beat earnings estimates, but a weaker-than- expected outlook disappointed investors; shares set a new 52-week low of $10.33 on Wednesday. Symantec (SYMC:Nasdaq) also posted disappointing earnings and guidance, and shares traded as low as $16.71, just above the Dec. 20 low of $16.32.

Better news came on Wednesday. Time Warner (TWX:NYSE) reported better-than-expected earnings before the market opened, and shares rebounded above $18 for the first time since Dec. 19.

In the model portfolio this week, I removed the RSA Security position and added 150 shares each of Dell (DELL:Nasdaq) and XM Satellite Radio (XMSR:Nasdaq).

The benchmark Technology SPDR (XLK:Amex) ended the week down 2.0%, while the S&P 500 lost 1.5%. Since its inception on April 4, 2005, the model portfolio is up 5.1% (including cash) vs. a gain of 10.0% for the XLK and 7.8% for the S&P 500. The model portfolio's closed positions are up 8.0%. To review my portfolio strategy, I am focusing predominantly on big-cap technology leaders, turnaround stories and emerging technologies within my focus industries of computer manufacturers, semiconductors and software. The model portfolio focuses on tech stocks that are at least 20% undervalued, and does not include overvalued stocks even though they are trading higher. (I cover momentum stocks in columns on RealMoney.)

Here are my trading strategies for the coming week:

-- Altera (ALTR:Nasdaq): Add 200 shares to the model portfolio on weakness to my quarterly value level at $17.04. Or, reduce this position by 200 shares on strength to my quarterly risky level at $21.68.

-- Click Commerce (CKCM:Nasdaq): Add 170 shares to the model portfolio on weakness to my quarterly value level at $23.53. Or, remove this position on strength to my monthly risky level at $35.75.

-- Cisco (CSCO:Nasdaq): Add 175 shares to the model portfolio on weakness to my monthly value level at $16.83. Or, reduce this position by 175 shares on strength to my quarterly risky level at $20.61.

-- Dell (DELL:Nasdaq): Add 150 shares to the model portfolio on weakness to my monthly value level at $26.81. Or, remove this position by 150 shares on strength to my monthly risky level at $34.27.

-- EMC (EMC:NYSE): Add 300 shares to the model portfolio on weakness to my monthly value level at $12.94. Or, reduce this position by 300 shares on strength to my monthly pivot at $14.03.

-- Intel (INTC:Nasdaq): Add 150 shares to the model portfolio on weakness to my semiannual value level at $19.66. Or, reduce this position by 150 shares on strength to my monthly risky level at $26.90.

-- Juniper Networks (JNPR:Nasdaq): Reduce this position by 200 shares on strength to my monthly pivot at $18.81.

-- Powerwave Tech (PWAV:Nasdaq): Add 300 shares to the model portfolio on weakness to my quarterly value level at $11.45. Or, remove this position on strength to my monthly pivot at $16.16.

-- SigmaTel (SGTL:Nasdaq): Add 200 shares to the model portfolio on weakness to my monthly value level at $9.27. Or, reduce this position by 200 shares on strength to the Dec. 2 high at $16.17.

-- Symantec (SYMC:Nasdaq): Reduce this position by 225 shares on strength to my annual pivot at $21.85.

-- AT&T (T:NYSE): Add 170 shares to the model portfolio on weakness to my monthly value level at $24.45.

-- Tellabs (TLAB:Nasdaq) Add 350 shares to the model portfolio on weakness to my quarterly pivot at $11.19.

-- Time Warner (TWX:NYSE): Reduce this position by 225 shares on strength to my quarterly risky level at $19.96.

-- VeriSign (VRSN:Nasdaq): Remove this position from the model portfolio on strength to the stocks fair value at $24.56, or on a sell stop below my monthly pivot at $22.88.

-- Xilinx (XLNX:Nasdaq): Add 150 shares to the model portfolio on weakness to my monthly value level at $26.68.

-- XM Satellite (XMSR:Nasdaq): Remove this position from the model portfolio on strength to my monthly pivot at $29.71. I still have semiannual value levels at $26.34 and $26.16, which I used Tuesday to build up this position in the model portfolio. The next major level is the 200-week simple moving average at $20.69 where I may consider adding to this position on weakness.

Short Positions

-- Nasdaq 100 Unit Trust (QQQQ:Nasdaq): Add 100 shares to this short position on strength to my monthly risky level at $44.00.

-- Semiconductor HOLDRs (SMH:Amex): Add 200 shares to this short position on strength to my monthly risky level at $41.23.

Now let's recap all of the portfolio holdings. But first, a quick review of the model portfolio rating system: Ones are stocks that are rated strong buy or buy, are at least 20% undervalued and should be bought right now. Twos are stocks that are rated hold or better, are undervalued by at least 20% and should be bought on a pullback in price. Threes are stocks that are rated hold or better, are undervalued by less than 20% and should be sold on strength in price. Fours are stocks that are rated sell or strong sell, are overvalued by at least 40% and should be sold on strength. Hedges are for exchange-traded funds, which do not have a rating from my model.

Changes to Ratings This Week: Time Warner (TWX:NYSE) moves from a TWO to a THREE, as does VeriSign (VRSN:Nasdaq) as these companies are now less than 20% undervalued. Xilinx (XLNX:Nasdaq) moves from a THREE to a TWO, as price weakness this week makes the company more than 20% undervalued.

ONES

Click Commerce (CKCM:Nasdaq, $28.74, 170 shares, 3.88% of the model portfolio): Click Commerce offers supply-chain management software that allows business partners worldwide to coordinate inventories, orders and other processing using the Internet. Management software helps corporations increase productivity, and firms will be opening their purse strings for these capabilities in 2006. Shares traded to a new 52-week high this week at $30.20 in anticipation of the company beating the fourth- quarter EPS estimate of 43 cents when it reports earnings on Feb. 16. The company has limited Wall Street research coverage, and with the software sector performing relatively well, a positive earnings surprise is more likely than not. Click Commerce is rated a buy and is 43.50% undervalued with fair value at $50.34. The weekly chart profile shows rising momentum with the five-week modified moving average (MMA) at $25.02. My price target is my new monthly risky level at $35.75. I also show a new monthly value level at $23.36 with quarterly pivots at $23.53 and $24.05.

AT&T (T:NYSE, $26.79, 170 shares, 3.62%): Ma Bell is the nation's largest telecom service provider, and it is experiencing strong growth in wireless, broadband and business services. On Tuesday, AT&T said it had underestimated the benefits from its merger with SBC, and now projects an annual savings of $1.2 billion by 2008. The merger is expected to add 30 cents a share to earnings in 2008 and will have a positive effect on 2007 earnings, more than a year ahead of previous forecasts. The weekly chart profile reflects this upbeat assessment with shares trading above their 200-week simple moving average (SMA) at $25.05 for the first time since 2001. Momentum is rising with the five-week MMA at $25.24, above the 200- week SMA at $25.05, which is another positive technical development. AT&T remains buy-rated and is 36.4% undervalued with the stock's fair value rising from $34.45 to $41.71, which is my new six-month price target. New monthly value levels are $24.45 and $22.52.

TWOS

Altera (ALTR:Nasdaq, $19.01, 400 shares, 6.04%): Altera's chips are used in routers and switches, and its chips for wireless applications are likely to be in high demand in 2006 as the upgrade cycle for wireless networks continues. On Wednesday, shares closed above their 200-day simple moving average at $19.95 for the first time since September. Altera is rated a hold and is 21.4% undervalued; my six-month price target is its fair value at $24.69. The weekly chart profile shows rising momentum with the five-week MMA at $19.18, above the 200-week SMA at $18.53. Quarterly, monthly and semiannual value levels are $17.04, $16.65 and $15.39, respectively. Monthly and quarterly pivots are at $18.73 and $18.78, and quarterly and annual risky levels are $21.68 and $27.87, respectively.

Dell (DELL:Nasdaq, $29.26, 150 shares, 3.49%): Dell makes servers, storage devices, workstations and printers in addition to PCs. The company also provides software and other information technology (IT) services to corporations, and offers consumer electronics products including flat-panel TVs and MP3 players. I initiated a 150-share position in the stock Tuesday. Analyst expectations are for Dell to report EPS of 41 cents on Feb. 16, and after its two consecutive bad quarters I believe results will show a recovery, given the relatively strong demand for consumer electronics and PCs during the holidays. Also, Dell may announce that its next generation of PCs will include chips made by Advanced Micro Devices (AMD:NYSE). This should be viewed as a positive development for Dell investors given Intel's recent alliance with Apple (AAPL:Nasdaq). Dell is rated a hold, and is 29.0% undervalued with fair value at $40.53. The weekly chart profile shows declining momentum, with the five-week modified moving average at $30.35 and the 200- week simple moving average at $32.93. I show a monthly value level at $26.81 with monthly and quarterly risky levels at $34.27 and $36.94. My six-month price target and semiannual risky level is $38.59.

EMC (EMC:NYSE, $13.31, 600 shares, 6.34%): EMC, the leader in storage solutions and full-service information technology (IT), should benefit from strong demand in 2006 as major corporations upgrade their data-storage systems and networks. On Monday, EMC announced that BT Global Services, a unit of British Telecommunications (BT:NYSE ADR), will use EMC's software to monitor the performance of its switching network, improving the efficiencies of its leading business customers. BT's services include IP telephony, voice-over-IP and content delivery. EMC is rated a hold, and is 39.2% undervalued with fair value at $21.89. My six-month price target is the stock's 52-week high at $15.09. The weekly chart profile shows declining momentum with the five-week MMA at $13.60, above the 200- week SMA at $11.16, which should hold in the event of a share-price decline. I show a monthly value level at $12.94 with quarterly pivots at $13.36 and $13.22, and a monthly pivot at $14.03.

Intel (INTC:Nasdaq, $20.74, 300 shares, 4.94%): Intel is the world's leading chipmaker, and my focus is on its developing relationship with Apple Computer (AAPL:Nasdaq) as the next generation of iMacs and notebooks will include Intel components. The company is also focusing on WiMax, duel-core processors for the Viiv platform for home networking, and a 45-nanometer manufacturing process that is projected to produce even smaller chips to lengthen battery life for mobile devices. However, production of chips using this technology is not slated to begin until 2007. Intel is rated a hold and is 23.5% undervalued, with both fair value and my six-month price target at $27.59, down from $29.79 last week. The weekly chart shows declining momentum with the five-week MMA and the 200-week SMA converged at $23.75 and $23.74. The five-week MMA is likely to decline below the 200-week SMA, which is a negative and should cap any near-term rebounds for share price. My semiannual value level is $19.66 with monthly and quarterly pivots at $22.19 and $23.41, respectively, and a new monthly risky level at $26.90.

Juniper Networks (JNPR:Nasdaq, $18.37, 875 shares, 12.77%): The gearmaker should benefit in 2006 as wireless networks and corporations upgrade their Internet protocol (IP) networks. Shares are trying to stabilize, following a price decline to $16.98 on Jan. 26 after a disappointing earnings report. Recent upgrades by Thomas Weisel Partners and Piper Jaffray may contribute to share price stability, and on Friday Juniper's shares gained almost 2% in a down market. Juniper is rated a hold and is 43.9% undervalued with fair value at $32.20. The weekly chart profile shows declining momentum with the five-week MMA at $20.71, the 200-week SMA at $18.05, and the December 2003 low at $16.36. I show a semiannual pivot at $17.75, a monthly pivot at $18.81 and my monthly risky level -- which is my six-month price target -- at $23.56.

Powerware Technologies (PWAV:Nasdaq, $14.09, 300 shares, 3.36%): Powerwave makes products for wireless networks, including repeaters and tower-mounted amplifiers that are used in cell-phone services. I expect the global growth in new high-speed networks to drive revenue in 2006. Powerwave reported EPS of 15 cents on Tuesday, in line with analyst estimates. However, shares slumped to $13.62 after hours, as the market was expecting a positive earnings surprise. Shares recovered to $14.25 on Wednesday. Powerwave's largest customer in the fourth quarter was Cingular Wireless, which is 60% owned by portfolio member AT&T (T:NYSE), and accounted for 23% of Powerwave's revenue. This is important as Cingular continues to upgrade networks to maintain its No. 1 status in the U.S. wireless market. Powerwave is rated a hold by ValuEngine, and is 42.1% undervalued with fair value at $24.33, which is my six-month price target. The weekly chart profile shows rising momentum with the five-week MMA at $13.35. My model shows quarterly value levels at $11.45 and $11.43, monthly pivots at $15.49 and $16.16, and annual risky levels at $26.51 and $27.34.

SigmaTel (SGTL:Nasdaq, $11.21, 400 shares, 3.56%): SigmaTel supplies chips to Windows Media-based players as well as to Apple's iPods. It appears that it's taking longer than expected for SigmaTel's latest chips for MP3 players to be adopted for Windows Media software. But that prospect should be viewed as a longer-term positive as I expect Microsoft to be a formidable competitor against Apple's iPod and iTunes. SigmaTel's chips are used in 65% of Windows-based MP3 players. SigmaTel reported disappointing earnings after the close on Tuesday, and shares dropped 15.7% on Wednesday, setting a new 52-week low of $10.33. Shares still fundamentally qualify for a long-term technology portfolio, so be patient. In fact, on Friday shares rebounded in a down market, gaining 6.8% to close at $11.21. SigmaTel is rated a hold and is 47.1% undervalued with fair value at $19.85, which is also my six-month price target. The weekly chart profile shows declining momentum with the five-week MMA at $13.16. I show a new monthly value level at $9.27.

Symantec (SYMC:Nasdaq, $16.72, 425 shares, 5.64%): Symantec is a leader in information security, offering software, hardware and services to protect IT infrastructures. On Monday, Symantec launched upgraded antivirus software to secure wireless devices that use Palm OS, Microsoft Windows Mobile and Pocket PC platforms. Such safeguards are needed to protect corporations against virus-infected downloads from the Web, email or Wi-Fi connections. But the big news for Symantec this week was its disappointing earnings report Tuesday afternoon, and shares traded as low as $16.71 on Wednesday, a 9% plunge. Symantec's net income was below expectations because of charges following its acquisition of software-maker Veritas. These charges should not be a recurring event, so I will be looking for a value level at which to add to the position. My last strategy for this stock was to reduce holdings at $19.50, which indicates that you can successfully trade around positions in the model portfolio while you wait for the stock to recover. Symantec is rated a hold and is 20.7% undervalued with fair value at $21.30, which is also my six-month price target. The weekly chart profile shows rising momentum with the five-week MMA at $18.23 and the 200-week SMA at $17.31. The 52-week low is $16.32, and monthly and annual pivots are $18.17 and $19.50, respectively. My annual risky level is $21.85, a monthly risky level is $22.83, and semiannual risky levels are $25.26 and $26.04.

Xilinx (XLNX:Nasdaq, $27.34, 150 shares, 3.26%): Xilinx makes chips that are used in consumer electronics devices and industrial applications, and its balanced business mix should lead to revenue growth in 2006. On Tuesday, Xilinx announced a new solution to help digital display designers enhance the quality of flat-panel displays, such as liquid crystal display (LCD) and plasma display panel (PDP) televisions, a product segment that's expected to see growing consumer demand in 2006. Xilinx is rated a hold and is 20.6% undervalued, with fair value at $34.79. The weekly chart profile shows rising momentum with the five- week MMA at $27.51 and the 200-week SMA at $28.55, which has provided a barrier to higher prices over the past five weeks. My monthly value levels are $26.68 and $25.94, and my six-month price target and quarterly risky level are $32.49.

XM Satellite Radio (XMSR:Nasdaq, $24.34, 150 shares, 2.90%): XM Satellite has more than 6 million subscribers for its satellite radio service, which offers 160 digital channels including 65 commercial-free music channels. The company's alliances with a number of automakers -- including General Motors, Honda, Toyota, Hyundai, Nissan, Porsche and Volkswagen/Audi -- will enable it to provide factory-installed XM satellite radio options on a total 140 vehicle models in 2006. So with the stock 28% undervalued, I initiated a 150-share position in XM on Tuesday. XM is rated a hold according to ValuEngine, and is now 34.7% undervalued with fair value at $37.27. The weekly chart profile shows oversold momentum with the five- week MMA at $27.68 and the 200-week SMA at $20.69. I show semiannual pivots at $26.34 and $26.16, and a monthly pivot at $29.71. The monthly risky level is $35.40, and quarterly risky level is $35.84, which is also my six- month price target. The date for XM's earnings report has not yet been announced, but Bloomberg estimates that it will be Feb. 10 and shows an expected EPS loss of 89 cents. I chose XM over Sirius because Sirius is rated a sell, and I do not show a value level at which to buy Sirius.

THREES

Cisco (CSCO:Nasdaq, $18.15, 600 shares, 8.65%): Cisco, the leading supplier of routers and switches, should benefit in 2006 as telecom upgrades continue. I also expect the networker's purchase of Scientific-Atlanta (SFA:NYSE) to generate new revenue streams as the merged company launches new products and services targeting home networking. There were a couple of notable items on Cisco this week. On Tuesday, Cisco, Intel and Oracle (ORCL:Nasdaq) announced the creation of a technology consortium to help medical groups and independent practice associations share patient records electronically. Their aim is to speed up the adoption of health information technology for the secure exchange of accurate, up-to-date patient information, which is critical in medical practice. Diversification into market segments like this and alignment with other tech giants should help Cisco increase revenue. On Wednesday, Cisco's Linksys division launched a new line of faster Ethernet switches that will help small businesses migrate to high-speed networking. Cisco is rated a hold and is 11.8% undervalued with fair value at $20.84, which is also my six-month price target. The weekly chart profile shows rising momentum with the five-week MMA at $18.29 and the 200-week SMA at $18.08. I show monthly and quarterly value levels at $16.83 and $14.39, with a monthly pivot at $19.14, and my quarterly risky level at $20.61. Cisco reports quarterly earnings on Feb. 7, and the consensus analyst estimate is for EPS of 25 cents.

Time Warner (TWX:NYSE, $18.40, 675 shares, 9.86%): Time Warner's quarterly earnings, reported in the premarket on Wednesday, beat the Street by 3 cents a share. Revenue of $11.9 billion climbed 7% year over year, and was driven by increases at the Filmed Entertainment, Cable, Networks and Publishing segments. AOL turned in a 5% rise in profits despite an 8% decrease in revenue. This earnings report should be a boost to CEO Dick Parsons in his efforts to prevent major shareholder Carl Icahn's attempts to replace Time Warner's board of directors. Time Warner is rated a hold and is 18.8% undervalued, with my six-month price target set at the stock's fair value of $22.45. The weekly chart profile shows rising momentum with the five-week MMA at $17.63; the 200-week SMA provides support at $16.18. My quarterly pivot is $16.97, with monthly pivots at $17.73 and $18.29, and a quarterly risky level at $19.96.

Tellabs (TLAB:Nasdaq, $13.52, 350 shares, 3.76%): Tellabs designs communications equipment for telecom service providers, including products to facilitate network access, voice quality and broadband data transmission for businesses and homes. Although it's been a quiet week news- wise, shares have been reaching new 52-week highs almost every day since Tellab's strong earnings report Jan. 26. The stock closed Friday at a new high of $13.52 -- a gain of $3 from the Jan. 25 close prior to its earnings report. My model shows Tellabs rated a buy, and 13.8% undervalued with fair value at $15.06, which is my six-month price target. The weekly chart profile is overbought with the five-week MMA at $11.66. I show quarterly value levels at $11.19 and $10.15, monthly pivots at $12.14 and $12.68, and an annual risky level at $21.56.

VeriSign (VRSN:Nasdaq, $23.29, 300 shares, 5.55%): VeriSign provides infrastructure services for Internet connectivity, and its focus on wireless broadband should spur revenue growth in 2006. The company was added to the S&P 500 on Tuesday, and shares traded as high as $24.14 this week. Otherwise, there was little news on the company. VeriSign is rated a hold and is only 4.0% undervalued with fair value at $24.56, which is my six- month price target. The weekly chart profile shows rising momentum with the five-week MMA at $22.47. My monthly value level is $15.22, with a monthly pivot at $22.88 and quarterly risky levels at $30.95 and $32.55.

HEDGES

Nasdaq 100 Unit Trust (QQQQ:Nasdaq, $40.92, (200) shares, 6.50%): I still project downside risk for the market in 2006, so I am maintaining this hedge. The weekly chart profile for the QQQQ shows declining momentum with the five-week MMA at $41.64, and today's close below that level is negative. My semiannual value level is $30.44, quarterly pivots are $39.64 and $42.72, and a monthly pivot is $41.77. My monthly risky level is $44.00, and my buy-stop to cover this short is $45.93.

Semiconductor HOLDRs (SMH:Amex, $37.10, (200) shares, 5.89%): This is another hedge on the possibility that chip stocks are due for a correction. The weekly chart profile for SMH shows declining momentum with the five-week MMA at $37.92, and today's close below that level is negative, indicating risk to the 200-week simple moving average at $33.09. My monthly pivot is $38.00 with a monthly risky level at $41.23. My buy-stop to cover this short position is $43.15.

A Primer on My Investing Metrics

To screen for new picks, I use a three-pronged approach and evaluate more than 6,000 stocks. The key to my approach is that all stocks are reviewed and profiled by the same methodology, which allows me to provide guidelines to help traders and investors make their own decisions. I do this by setting my screens to find new technology stocks rated a buy or strong buy that are trading above $10 per share and undervalued by at least 20%.

Fundamental Screens: I calculate a fair value for every stock, which is the price at which a stock can trade in a perfect world. Fair value is not a price target; it is based on a stock's past data and projections for the future, including the trailing 12-month EPS, the forward 12-month estimated EPS and the yield on the 30-year Treasury bond. How these data points are weighted is based on a historical analysis of the stock's price history along with 17 other variables that influence the calculation based on the stock's sector and industry group. These variables also provide a rating, based on a bell-shaped curve that's generated by my screen, using ValuEngine.com. The ratings are: strong buy, buy, hold, sell or strong sell. Most stocks are in the middle of the curve as a hold. Only 2% of stocks are rated a strong buy or strong sell by these measures.

Weekly Chart Profile: A stock with a positive profile has a weekly close above its five-week modified moving average (MMA) with a rising 12x3 weekly slow stochastic, which is a measure of momentum on a scale of zero to 100. A reading above 80 is overbought. A stock with a negative profile has a weekly close below its five-week MMA with a declining 12x3 weekly slow stochastic. A reading below 20 is oversold.

Value Levels, Risky Levels and Pivots: A value level is a price at which buyers should emerge on share-price weakness. 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 in its time horizon, acting as a magnet during the remainder of that time horizon. These levels are calculated in weekly, monthly, quarterly, semiannual and annual time horizons, based on 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. At the end of December, the closes will provide new monthly, quarterly, semiannual and annual value levels, risky levels and pivots, which will be important in measuring the risk/reward for shares in the first half of 2006.

Regards,

Richard Suttmeier

Stay Tuned for Monthly Report

The final edition will be sent out Wednesday morning.

02/28/06 - 12:39 PM EST
Making Adjustments
Stocks in Focus: CSCO, EMC, INTC, TWX

Booking profits in one position and trimming three others.

02/24/06 - 11:07 AM EST
Removing a Hedge
Stocks in Focus: SMH

Suttmeier's closing this protective position, which is no longer necessary.

02/23/06 - 10:11 AM EST
Technology Report Weekly Roundup
Stocks in Focus: CSCO, DELL, EMC, INTC, JNPR, QQQQ, SMH, SYMC, T, TWX, XMSR

The market's resilience continues as almost all sectors remain overvalued.

02/24/06 - 06:17 PM EST

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