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December 16, 2005
Oracle Sales Rise, Lennar Beats, Program Trading and A China Rebound
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Therese Poletti of Mercury News reports: Oracle, the world's second-largest software developer, reported a 19 percent jump in fiscal second quarter revenues, but a 2 percent drop in net income due to acquisition costs and stock options expenses.The Redwood City business software giant said its customers running PeopleSoft products are renewing support contracts at a higher rate than when PeopleSoft was a stand-alone company. Oracle completed its acquisition of PeopleSoft in January.
I find this report more encouraging than the report fro HPQ, which reported higher earnings without a significant rise in revenue. ORCL is growing revenue and the costs mentioned look temporary. However, the stock still has its “technical” work cut out. ORCL gapped lower in September and never recovered from this gap. The stock has been stuck in a range with resistance at 13.1. A move above 13.1 would turn this chart bullish and I would stay out as long as it trades below this level.
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Dow Jones reports: Lennar Corp.'s (LEN) fiscal fourth-quarter net rose 53%, boosted by higher home deliveries The homebuilder also reaffirmed its fiscal 2006 earnings guidance of $9.25 a share, which is lower than the average analyst estimate Lennar's fiscal fourth-quarter income rose to $581.2 million, or $3.54 a share, from $379.7 million, or $2.29, a year earlier. Results were higher than Wall Street's average estimate of $3.34 a share, according to a survey of 16 analysts by Thomson First Call Revenue for the quarter ended Nov. 30, rose 42% to $5.03 billion from $3.55 billion a year earlier, higher than Wall Street's average estimate of $4.96 billion.
Don’t count the home-builders out too soon. The whole world is turning bearish on this group and yet they still seem to delivery at earnings time. Sure, it will stop one day, but tops can take a while to form. Lennar (LEN) bounced off the Aug-03 trendline and broke resistance at 60 with a strong move over the last week. The big trend is up and this breakout is simply a continuation of that trend.
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The Wall Street Journal Reports: Program trading in the week ended Dec. 9 accounted for 57.9%, or an average of 968 million shares daily, of New York Stock Exchange volume. Brokerage firms executed an additional 675.5 million daily shares of program trading away from the NYSE, with 1.4% of the overall total on foreign markets. Program trading is the simultaneous purchase or sale of at least 15 different stocks with a total value of $1 million or more.
Do you think these program trading platforms are based on fundamentals? I cannot speak for all, but my guess is that most of these algorithms are not based on fundamentals and have more to do with technical analysis. With more than 50% of the trading driven by program trading (non-fundamentals), traders ignore technical analysis at their own risk. This goes for investors as well.
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Jim Jubak of MSNMonday reports: Global growth means a risky 2006 global economy. China and India are likely to grow faster than expected in 2006. If that overheats the global economy, look for commodity and oil prices to spike.
On the price chart, the Shanghai Composite shows lots of support around 1000 and started to firm over the last seven months. A break above the September high would be bullish.
Posted by Arthur B. Hill at December 16, 2005 06:21 AM