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December 06, 2005
Elan, Doubling Up, Four Year Cycle, Gadget Boom and xBox
Ken Kam of Marketocracy is playing in the MSN Strategy Lab (click here). In his most recent update, he adds to his Elan (ELN) position and makes a great point about add-ons. First, he likes ELN because the FDA granted Tysabri priority review status. This means the FDA will complete its review in six months instead of 10 months. Ken thinks this is because the FDA knows that Tysabri fills a ”big unmet medical need”.
Bullbearinvestor.com highlighted ELN when the stock broke falling wedge resistance on 8-November. This breakout held and the stock surged on great volume a few days later. The stock has since consolidated and found support at 10. There is still a lot of risk, but the chart points to higher prices.
Ken first purchased ELN in early November and this is an add-on purchase at a higher price. He notes that some of his best trades come from second buys at higher prices. Once prices move higher, the market is telling you that you are right and it makes sense to add to your winners. In contrast, a losing position is telling you the opposite and it makes sense NOT to add. The prudent action is usually to close the position and move on.
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According to eBay president and CEO Meg Whitman, a staggering 40,000 Xbox 360 consoles have been sold on eBay. As reported by Dow Jones last night based upon a presentation at the CSFB Annual Technology Conference, the 40,000 unit figure has left pundits flabbergasted. If launch supply estimates from American Technology Research are accurate, that would mean that 10% of all Xbox 360 consoles sold in the US were either sold or resold through eBay. Simple amazing and this shows the power of Ebay.
Is this a buy-on-rumor and sell-on-news scenario? Notice how MSFT moved higher ahead of the launch and then traded flat. The stock broke falling wedge resistance with a surge on Thursday and this is bullish as long as 27.5 holds.
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Here is a second tier gold stock that is holding the gap. Like Gold itself, Bema Gold (BGO) has been moving higher the last few months and gaped up on high volume. Upside volume remains robust and the stock formed a flag. Watch for a move above 3.1 to signal a continuation higher. As a low priced gold stock, this issue carries above average risk.
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From Dow Jones: Gadget Boom Drives Up Demand for Chips - Worldwide sales of semiconductors rose 6.8% in October, bolstered by strong demand for consumer electronics, such as cell phones, MP3 players, digital cameras and personal computers. I think this is evident from the Semiconductor HOLDRS (SMH) chart, which broke out to new highs and is suddenly leading the Nasdaq. This little semiconductors are part of everything with a battery or electrical cord. The real growth is going to come from outside the computer world and this may explain Intel’s new partnership with Micron.
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From CBS MarketWatch (click here): Razr sharp: By bringing Silicon Valley zeal to a Midwest tech giant, Motorola Chief ExecutiveEd Zander has helped spark a major turnaround . in the company. For this and more, he’s the MarketWatch CEO of the Year for 2005. On the price chart, MOT formed an outside reversal last week and failed to move higher on Thursday. The stock declined on high volume the last two days and suddenly shows relative weakness.
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David Fuller of FullerMoney.com (click here) notes the following: History shows that the second year of a US presidential cycle (2006 in this instance) is the least rewarding on Wall Street. No coincidence or fluke, this ties in with the four-year presidential term. In the second year of the Fed's effort to clean out the Aegean Stables after fiscal excesses, US short-term interest rates often reach a peak. Repeated hikes in the Federal Funds Rate eventually create a headwind for the stock market, not least in the current cycle because rising rates will also slow house price appreciation and consumer spending. That's the bad news for 2006 but fortunately it eventually becomes good news.
Posted by Arthur B. Hill at December 6, 2005 09:17 AM