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January 05, 2006
Hook 'em, Cypress Gets Solar Heat, KFX is Pricey and Jetblu Trying to Breakout
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Hook ‘em Horns! It was a game for the ages with two great teams. Alas, there can be only one winner and Texas managed to get the ball last.
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From a press release today: JetBlue Airways Corporation reported today that its traffic in December increased 27.9 percent from December 2004, on a capacity increase of 26.6 percent.
The stock suffered on Tuesday from downgrades by Merrill and Raymond James and rebounded today with good traffic numbers. However, high fuel costs continue to bite into earnings. On the price chart, the stock formed a nice double bottom in 2005 and pierced resistance at the end of December. This resistance break failed and the stock moved back below 16. Upside volume was good during the surge and a close above 16 would validate the pattern. The upside target would be to around 20. It would be a good idea to keep an eye on oil as well. Broken resistance often turns into support and there could be a return to 16 after a breakout. This would offer a second chance to partake after a confirmed breakout.
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From Herb Greenberg at CBS MarketWatch: Getting the new year off on a high note: Cypress Semiconductor is getting a boost after a report from Lehman Brothers says it's worth $19 as a play on recently IPO'd Sunpower, a solar-cell maker majority owned by Cypress. I had a similar take two weeks ago in my subscription newsletter, Herb Greenberg's RealityCheck. The bullish argument outlined in the newsletter, in retrospect (and admittedly) in a somewhat pre-holiday clunky manner by yours truly, put Cypress at closer to $23. Lehman notes that Cypress is trading below its historical levels of 1.5 to 2-times sales. It's worse than that: As I noted in RealityCheck, subtracting its cash, the semiconductor "stub" of Cypress trades at less than one-times sales.
On the price chart, the stock formed a classic correction pattern in Nov-Dec and broke resistance with above average volume yesterday. The correction retraced 62% (Fibonacci) of the November surge and formed a falling flag (magenta trendlines). The move over the last six days broke the upper trendline and the mid December high. The first target is 17 and a break above 17 opens the door to 20.
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W.D. Crotty of the Motley Fool Reports (30-Dec): On a day when the major averages are taking a downward turn, clean fuel company KFX (AMEX: KFX) soared almost 11% on news that it has completed the first two production runs at its K-Fuel plant in Gillette, Wyo. K-Fuel is described by KFX as the "unleaded gasoline" equivalent for the coal-fired industry. The company takes low-grade coal, removes 80% of the moisture, increases the Btu (heat content) per pound by 30% to 40%, and reduces the mercury content (the stuff that is credited with fouling water around the world) by 70%. Sulfur dioxide and nitrogen oxides will also be reduced by 30%.
Cramer also recommended KFX on mad money and the price chart sports a bullish continuation pattern (ascending triangle). The stock surged above 15 early last year and then consolidated the last nine months. Notice that a higher low formed in November (green arrow) and this shows that buying pressure came in well above the prior low. Buyers just could wait. There is a lot of overhead supply around 18.5 though and this represents resistance. A break above 18.5 would confirm the pattern and project further strength towards the mid 20s. This is a pretty risky play as the company is loosing money and not projected to record any profits this year (2006). At the very least, way for the Cramer pop to wear off!
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Posted by Arthur B. Hill at January 5, 2006 11:43 AM