It's time to focus on consumer devices, a segment that has started the year with a bang.
Consumers were wowed by the new gadgets demonstrated at the Consumer Electronics Show in Las Vegas.
On display at the gathering were giant plasma screens and tiny cell-phone screens.
The smaller gadgets are the more powerful draw, as they are rich with features and longer battery lives.
A major theme for many of the gadgets on show was the convergence of technologies for customized home networking, computing and entertainment.
This column is also a continuation of my December profiles of
10 Tech Buys and 10 Sells for Year-End and
Nine Tech Stocks to Sell.
In those columns, I set some guidelines to use for buying undervalued stocks on weakness and selling overvalued stocks on strength with specific moving averages, value levels, pivots and risky levels at which to take action.
The columns also included profiles of some lesser-known overvalued names where long-term investors would want to sell 25% to 50% of their positions.
For both, I suggested it would be time to review the names again in early 2006 -- and here we are.
In upcoming columns, I'll discuss Internet-related stocks, software stocks and stocks of chipmakers.
But let's start with those attention-getting gadgets.
begins its MacWorld convention Tuesday with shares having just made a fresh 52-week intraday high, $77.20. It may trade even higher than that this session in anticipation of CEO Steve Jobs revealing another cool gadget. The stock is rated a hold by ValuEngine, and according to my model, it's 29.0% overvalued, with fair value at $59.16. The weekly chart profile is overbought, with the five-week modified moving average at $69.92 as strong momentum continues.
Apple is scheduled to report quarterly earnings after the close on Jan. 18, and analyst consensus for EPS is 53 cents, according to First Call. Long-term investors should consider selling strength to my weekly risky level at $82.85, reducing the position to 50% of what it was on Dec. 1. Another way to protect gains would be to use a sell stop below my monthly value level at $72.59. I would add to an Apple long position on weakness to my annual value level at $51.86.
is rated a hold by ValuEngine and is 28.1% undervalued with fair value at $34.67. The weekly chart profile shows flat momentum, and the stock price is now between its five-week MMA at $24.57 and its 200-week simple moving average at $25.29. A close this week above $25.29 would be a sign of increasing momentum. Long-term investors should consider adding to this position on weakness to my monthly value level at $22.19, or on a weekly close above $25.29. The upside over the near term is to my weekly risky level at $26.59.
is rated a hold by ValuEngine and is 10.7% undervalued with fair value at $21.01. The weekly chart profile shows rising momentum, with the five-week MMA at $17.70. Long-term investors should consider adding to this position between my monthly pivot at $18.82 and my monthly value level at $18.23. Given recent brokerage upgrades by Citigroup last week and Prudential this morning, shares should have the momentum to trade up to my quarterly risky level at $20.61.
is rated a sell by ValuEngine and is 57.7% overvalued, with fair value at $17.83. The weekly chart profile shows rising momentum, with the five-week MMA at $27.04. Long-term investors should consider reducing this position on strength to my quarterly risky level at $29.32, which would be a position size 50% of what it was on Dec. 12. Another way to protect gains would be to place a sell stop below my quarterly pivot at $27.58, a point that would indicate risk to my quarterly value level at $25.67. A higher monthly risky level is at $31.65.
is rated a hold by ValuEngine and is 42.6% undervalued, with fair value at $23.92. The weekly chart profile is negative with the five-week MMA at $13.78. Long-term investors should consider adding to this position on weakness to my quarterly value level at $13.22. I expect to see a rebound to my monthly pivot at $14.08 with renewed momentum to my monthly risky level at $14.76.
received a downgrade this morning from Prudential that has shares trading lower. Long-term investors will want to add to their holdings as shares close in on the 52-week low at $19.65, for a rebound to the monthly pivot at $24.48 and risky level at $25.06. The stock is rated a hold by ValuEngine and is 39.3% undervalued with fair value at $36.31. The weekly chart profile is negative with the five-week MMA at $22.56. I expect to see a rebound to my monthly pivot and risky level at $24.48 and $25.06.
is rated a hold by ValuEngine and is 23.7% overvalued with fair value at $19.68. The weekly chart profile has rising momentum with the five-week modified moving average at $23.24. Long-term investors should consider reducing this position on strength to my monthly risky level at $27.36, which would make this holding 50% of what it was on Dec. 1. Another way to protect long-term gains is to consider placing a sell stop below my annual pivot at $23.10, because there is risk to my annual value level at $20.98. Monthly and quarterly pivots at $26.12, $24.12 and $24.26 suggest a reversal-oriented trade for Motorola in January and the first quarter. My semiannual value levels lag market levels at $17.33 and $14.10.
has made a new 52-week intraday high this session, reaching $77.11. SanDisk is rated a hold by ValuEngine and is 76.3% overvalued, with fair value at $41.95. The weekly chart profile shows rising momentum with the five-week MMA at $60.06. Long-term investors will want to hold remaining positions until a new risky level forms, which would be used to reduce positions to 50% of what was owned on Dec. 1. This name can be quite volatile; shares declined from $65.49 on Nov. 3 to $45.65 on Dec. 5. A semiannual value level at $51.30 has formed above this low. This month's pivot at $66.56 can be tested on any quick reversal. Just beware of the risk/reward, and don't add to this position now.
is rated a sell by ValuEngine, but is trading around its fair value at $6.55 as Howard Stern launched his radio show on the company's service. I suggested reducing this holding by up to 50%
on Dec. 8, citing the $7.40 to $8.32 range as the price zone within which to sell. Shares traded as high as $7.98 on Dec. 12. The weekly chart shows declining momentum with the five-week MMA at $6.86. Last week, Sirius shares held their 200-day simple moving average at $6.35, but if key support breaks, the next major moving average support is the 200-week SMA at $3.55. I show monthly and quarterly pivots at $7.17 and $7.81 with monthly resistance at $8.46.
The Metrics I Use
I evaluate the U.S. capital markets and profile all sectors, industries or specialty groups of companies. There are more than 6,000 stocks in my database.
Remember that when investing and trading in the U.S. capital markets and specific stocks, decisions should be made only after evaluating both fundamental and technical considerations. It is also equally important to have a discipline to manage risk/reward by having levels at which to buy on weakness and sell on strength. The way to do this is to enter limit orders to buy at a price below the market, or to sell at a price above the market.
Combining fundamentals and technicals is like trying to mix oil and water, but I believe it is necessary to do so, to the best or your ability. The levels at which to buy or sell can be used regardless of the fundamentals or technicals.
My discipline involves a three-pronged approach to measuring the risk/reward for trading or investing:
I use ValuEngine to define my fundamental ratings.
: Long-term investors should start a position now.
: Buy on weakness to a value level.
: Add to an existing position on weakness to a value level, and reduce an existing position on strength to a risky level.
: Reduce on strength to a risky level.
: Liquidate now as a source of funds.
Weekly Chart Momentum
This approach measures the technical strength of a stock.
: 12x3 weekly slow stochastic above 80 on a scale of zero to 100.
: 12x3 weekly slow stochastic rising above 20, but below 80.
: 12x3 weekly slow stochastic not rising or declining, but between 20 and 80.
: 12x3 weekly slow stochastic is declining below 80, but above 20.
: 12x3 weekly slow stochastic is below 20 on a scale of zero to 100.
Key Technical Levels
I identify these as a price at which to buy on weakness and at which to sell on strength.
Moving averages on daily charts
: The 21-day, 50-day and 200-day simple moving averages (SMAs).
Moving averages on weekly charts
: The five-week modified moving average (MMA) and the 200-week simple moving average (SMA).
Value levels and risky levels
: My model includes proprietary analytics that evaluate the past nine closes in several time horizons: weekly (W), monthly (M), quarterly (Q), semiannual (S) and annual (A).
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.