The market is looking quite sluggish on Monday with minimal gains coming in futures. There is no major economic data, no reporting companies this morning, and only one earnings report this evening. Not a lot of big news is out, and the market is in what I like to call a "show me what you got" mode. Those stocks and companies that are sitting on bullish news should fair well. Others that have been hit by recent downgrades or are overvalued will most likely see pullbacks.
We have two new plays to start the week. Today, we will also get a Play of the Week and continue to build the $5 virtual portfolio.
Buy Pick of the Day: Trina Solar Inc. (TSL)
Analysis: Its a big day for solar companies it appears this morning. The biggest story is coming out of LDK Solar (LDK), who has increased in share price by 10% this morning. The company announced that it will have a wafer capacity of 2.6 GW in 2011, which will continue the company’s reign as the solar company with the largest production capacity. Additionally, Canadian Solar (CSIQ) announced that they have a new CFO and have reiterated their financial outlook. The news comes after Canadian has had repetitive problems with financial reports being skewed and a lawsuit over the company’s finances. Finally, Suntech Power (STP) is getting a nice boost after .png)
announcing they were starting production today in the USA.
With a number of positive solar stories breaking today, one company that could benefit from a sector move higher is Trina Solar. One of the leaders in the industry, as far as cost per MW produced, Trina does not have any big news breaking this morning, but several companies in the sector are already hitting over 3% gains or more in pre-market trading. Trina, however, is around 1% to 1.5%. Over the past two weeks, the company has seen its share price drop 5%, and it sitting with some actual room for growth to the upside.
With the sector looking up, it should take TSL higher with it. The market, as a whole, does not look like its going to explode higher today; however, it also does not look like it will make significant moves lower. The solar sector has some very positive stories out there this morning, and they will definitely help TSL. On the technical side, TSL has around 6% movement to the upper band. It is just slightly overvalued on RSI, but the company has seen its stochastics dip into the oversold area. The stochastics have flattened out and do not appear to be lower. What this means is TSL buyers have traded out, but a good start to today could bring them back into it.
We want to get in fairly early before this one moves. Watch for a levels alert before the open to hone in on a exact range.
Entry: We are looking to get involved fro 28.90 – 29.20.
Exit: Looking to gain 2-3% before exiting.
Stop Loss: 3% on bottom.
Short Sale of the Day: Fortune Brands Inc. (FO)
Analysis: One stock that is not showing its greatest cards this morning is Fortune Brands Inc. (FO). After a stellar Friday that saw the stock jump over 7.5%, Fortune Brands is both overvalued and received a downgrade this morning.
The stock made a big jump after it was announced that William Ackman’s hedge fund Pershing has become the lead investor in the company. This morning, however, Robert W. Baird downgraded the company to "Neutral" stating that the stock after its run up last week is fairly valued.
The stock’s large movement upwards allowed for the stock to move well outside its upper bollinger band and pull in an RSI rating of 78, which I seldom see. Anything above 60 is significant overvaluation. Above 70 is an automatic short sale. All technicals point to a topping point, and the stock should move down from there.
The stock does not trade in pre-market, so it is impossible to know where it will be at the open. I have put the range for a possible open down 1.5% or so. If it opens above the range, we want to pull the trigger. If it opens below, we will talk about getting involved at certain levels.
Stay tuned…
Entry: We are looking to enter at 54.50 – 54.90.
Exit: We are looking to cover after a 2-3% drop.
Stop Buy: 3% on top.
Good Investing,
David Ristau
