Editor's Note: Richard Suttmeier is a columnist for TheStreet.com whose Tech Trading Diary appears every Tuesday on TheStreet.com. He is also the author of TheStreet.com Technology Report newsletter.
You say that energy is now overvalued.Frontier Oil( FTO) went up over 100% in the past year. Is it now overvalued? -- Raj
Frontier, the crude oil refiner, is 3.3% overvalued with current 12-month EPS at $2.48, and forward 12-month estimated EPS of $1.97. The weekly chart pattern remains overbought, even with the recent decline off its 52-week high of $33.36. A close this week below its five-week modified moving average at $27.50, plus a quarterly pivot at $28.14, suggest a topping out pattern for the stock with risk to my annual pivot at $25.96.
A primer on pivots: When a stock trades above a risky level or below a value level, it becomes a "pivot" for the remainder of its term (weekly, monthly, quarterly, etc). The pivot then acts like a magnet, with prices drawn toward this level, so a pivot has a high probablity of being tested again during its time frame. This knowledge is key for trading a core position in a portfolio -- check out
for more on this issue.
HLTH is 18.8% overvalued with an overbought weekly chart profile. The stock is between semiannual pivots at $18.58 and $11.23, which I would consider a risky area at which to book profits.
CAT is 9.1% overvalued and above my monthly pivot at $51.34, which should be a magnet by the end of the month.
I notice that some of your second-half calls are for a marginal increase in share price (Teradyne (TER) - Get Report and Newport Corporation (NEWP) ) and some for a significant advance (Integrated Device Technology (IDTI) - Get Report and RSA Security( RSAS)). Can you explain the rational? Also, what are your thoughts on Cirrus Logic (CRUS) - Get Report and Pmc-Sierra (PMCS) ? -- Jeff
The price targets are based on my model that uses the past nine years of monthly closes. Some of the targets will be closer than others. I will add to positions on weakness as long as my fundamental models show the stocks undervalued enough to justify it. Each month there are new inputs, which could raise or lower the targets. Weekly value and risky levels are used to make shorter-term position adjustments. For more information, read my
CRUS -- 50.4% undervalued with an overbought weekly chart. Quarterly value level is $6.04 with a quarterly risky level at $7.62.
PMCS -- 73.5% undervalued with monthly pivots at $10.04 and $10.56. A weekly close under $10.04 signals a correction, whereas a breakout above $10.56 indicates potential upside to the 200-week simple moving average at $12.46.
The computer manufacturers that you see as having the most to gain (i.e., 32% undervalued) would be which companies? -- Jesse
I suggest signing up for a one-month trial of
newsletter. The model portfolio shows turnaround positions in
INTC, a member of my model portfolio, is 29.0% undervalued. Weakness held my monthly value level at $26.86.
KLAC -- 5.2% undervalued. Is above quarterly/monthly pivots at $49.38/$48.93 with a 52-week high at $51.56. Hold longs, do not add.
Can you give me your thoughts on Asyst Technologies( ASYT) and ESS Technology ( ESST)? -- Dan L.
ASYT -- 58.2% undervalued with a positive weekly chart profile. Monthly value level is $4.47 with the 52-week high at $7.98.
ESST -- 24.0% undervalued with a positive weekly chart profile. Monthly value level is $4.23 with the 52-week high at $9.11.
What do your models say about SanDisk (SNDK) . -- Glenn
SanDisk, which designs flash storage card products used in consumer electronics products such as digital cameras, is expected to report EPS of 32 cents per share. My model shows SNDK 15.0% undervalued with a positive weekly chart profile. My monthly value level is $27.51 with my annual risky level at $29.66.
What are your thoughts on Vitesse Semiconductor (VTSS) ? -- Elmo
It seems that many of the low-priced stocks are extremely undervalued. Vitesse's weekly chart profile is positive, but invest only what you can afford to lose.
FFIV -- When a stock declines and it had been undervalued, it becomes more undervalued -- now by 24%. Keep this in mind: my model incorporates the 12-month trailing EPS, and the 12-month forward estimated EPS, when IBES gets that data and sends it out. Remember that a stock becomes fundamentally more favorable at a lower price, but the charts deteriorate, and vice versa. This is what makes stock picking tough. But by combining the two disciplines, you can usually outperform.
Since April, GOOG has not had a daily close below its 21-day moving average, which is $298.72 today. If we get that close, fair value is $265.10.
Richard Suttmeier is president of Global Market Consultants, Ltd., chief market strategist for Joseph Stevens & Co., a full service brokerage firm located in Lower Manhattan, and the author of
newsletter. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. Early in his career, Suttmeier became the first U.S. Treasury Bond Trader at Bache. He later began the government bond division at L. F. Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the technicals of the U.S. capital markets. He also has been U.S. Treasury Strategist for Smith Barney and chief financial strategist for William R. Hough. Suttmeier holds a bachelor's degree from the Georgia Institute of Technology and a master's degree from Polytechnic University. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback --
to send him an email.