Hey all. Happy Monday from Michigan. I am spending the week working here in the beautiful state with some family and friends. So, on Friday we got involved with two new plays. The first I want to talk about was an Over Weekend Trade in Wonder Auto Technology Inc. (WATG). The company, on Yahoo Finance and Briefing’s Earnings Calender was slated to release earnings on Monday morning. Yet, there appears to be a lot of confusion about if this is actually happening. On some message boards, I read that the date was wrong. We will watch it closely in pre-market, and I will update on the situation. For now, we will probably want to exit this morning…
We also entered a Weekly Play in Kulicke and Soffa Industries (KLIC). This company looks poised to make a strong run upwards this week, and we are excited about them. We got involved at 6.65. We will hold for a 4-6% gain.
Today’s market is looking up in the early goings, but we will need to see some earnings and the ISM Manufacturing report before too much can be said…
Buy Pick of the Day: Health Net Inc. (HNT)
Analysis: This morning was a very good one for health care companies. Humana, Health South, and even LifePoint, to an extent, all reported relevant, positive earnings for my Buy Play for today. With Humana showing extremely positive earnings, reporting an EPS of 2.00 vs. the expected 1.67 and a revenue gain of just under 10%, health care companies across the board should be able to pull some gains that have not yet reported quarterly earnings. One such company is 
Health Net Inc. (HNT). What is also even more appealing for HNT is that in addition to the boost from earnings the company is slated to report earnings tomorrow morning and should get an even more significant bounce due to this.
Health Net is projected to report EPS at 0.55 vs. a year ago’s 0.49. The company, though, moving into earnings is definitely undervalued. On RSI, the stock is showing a 35 reading, which is well below the fair value at 50. Further, most stocks were overvalued at week’s end with readings above 50. Therefore, the 35 rating means the company has tons of upside that should start be funneled into today now that investors have some better readings on the health care plan stocks. The stock is oversold on stochastics, and it has narrowing bollinger bands, which signals that the stock could very well break out soon.
Humana further reiterates a tremendous trend health care insurance companies are showing. Since the start of July, eight health care insurance companies have reported, and there have been eight beats. If HNT cannot get excited and attract buyer interest over that sort of trend, then it never will.
With such an undervaluation and strong fundamentals on the short term at its side, HNT looks to be strong today. The stock has not moved in pre-market as of yet, but we have the range set for a pop of over 1% to start the day, and I would buy if it opened below 24. The stock has upside to its top bollinger band at 25.50, which gives it a 6-7% range to the upside.
Get in this morning with the strong news and take some short term gains.
Entry: We are looking to enter at 23.60 – 23.80.
Exit: We are looking to exit on a 2-3% gain.
Stop Loss: None
Short Sale of the Day: MannKind Corp. (MNKD)
Analysis: While the initial Monday morning looks to be strong with a super large opening for the Dow that has futures above a century, I still think we can find a short sale. MannKind Corp. (MNKD) is a pharmaceuticals company that is in 
the developmental stage for products that help diabetes and cancer. The company does not yet have a drug that has finished the pipeline, but they do sell bulk insulin that was acquired from Pfizer (PZE). The company has been operating at a loss like most pharmaceuticals that have yet gotten their drug approved, but the company continues to reduce its losses.
Today, the company furthered that reduction with its latest quarterly earnings. The company beat estimates by narrowing its losses more than expected. This positive news has helped send shares up in pre-market near 5%. Yet, the stock, moving into the report was already sitting overvalued and near its upper band. Now, the stock has surpassed its upper band with its movement this morning. The technical resistance is worrisome because in reality while losses are narrowing, the company is not making any money, and there is no news about when that will stop.
The market is poised to open very high this morning, but the question is whether that rally can garner much more strength, and even if it does, will MNKD be a part of a further run. The worrisome report to me is the ISM Manufacturing Index at 10 AM. I think this one could be very disappointing and send the market downwards. Either way, MNKD should face heavy resistance at the range we have set.
Get in this morning or wait till 10 AM to see the ISM report before making a move.
Entry: We are looking to enter at 7.28 – 7.38.
Exit: We are looking to exit for a 2-3% gain.
Stop Loss: None
Good Investing,
David Ristau
