It's the beginning of another interesting week after US stocks ended the week with their worst losses since early July. The declines were largely the product of mediocre economic news and a bad earnings report from Research In Motion that triggered a 17% loss in its stock price.
Well, though the market was down, it could have been worst. For the week, the Dow was off 1.6%, its first loss after two weeks of gains. The loss was the biggest since the week of June 29, when the blue chips fell 1.9%. The S&P 500 was off 2.2%, and the Nasdaq was down 2%. The losses were their worst since the week of July 6. I am slightly relieve that it is not as bad as I thought it will be, as the losses were modest compared with, say, the week of March 2, when the Dow fell 6.2%.
This week will see stocks facing some big challenges with some very important economic reports. One of the most important report will be on Oct. 2, the report on unemployment and nonfarm payrolls. In addition, automakers will report on September sales on Thursday, follow by beginning of third-quarter earnings season the following week.
It will be interesting to see the DOW testing the resistance of 10,000 this coming week, or drop below the support at 9600. On the S&P 500, the support levels are 1,040 and 980.
From the Technical Cycle Trend below, it seems that the US markets will be trading sideway with some downside potential.
Regardless, with earnings still lagging behind stock market growth, it would be prudent to trade in stocks with good fundamentals and technical indications for trading decisions.
Well, as usual on my research Sunday Night, these are the stocks that I have filtered for "Value" criteria of my unique system rules:
BHI (Baker Hughes Inc), CMTL (Comtech Telecommunication), GCO (Genesco Inc), OSG (Overseas Shipping Group) and FRX (Forest Lab Inc).
BHI has consistent operating cashflows and operating income for the last 3 years. However it may have some short term correction as the stock is currently testing it's upper bollinger resistence, with Cycletrends graph showing range movements. Though the candles look good, I will be waiting to buy on retraction and sell at resistance. Long term investment for this stock should be fine with the good fundamentals, and since the company supplies wellbore related products and technical services in the oil and natural gas industry worldwide, it should do well once economy starts picking up.
GCO is another company with consistent revenue for the last 3 years. However, I noticed it's operating cashflow last year where it recorded a large non-recurring inflow. Removing this one time item resulted a negative operating cashflow for last year. On the technical side, there seems to be short term limited upside. However I am cautious as the stock price is near its bollinger resistence. I am watching this stock closely since most analyst are calling for "Buy" and expected earning seems to be more positive.
Francies Cheng
BBus, MAppliedFinance
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