Hi Lou,
Can you shed some light on TRI? Ever since they announced the Reuters acquisition the stock has struggled. I own it and want to exit, but it is in registered and has no tax loss efficiency. It also has a low beta. Help!

I was thinking of gradually switching it into a higher beta name like Cameco, which is down about the same amount. Would this be too risky?

Harry

Hey Harry,

Thanks for the assignment.  When Thomson Reuters Corp.(TRI TSX) was formed some four years ago when they merged there was lots of promise. Unfortunately the deal got done at a market top and the competition stepped up to the challenge presented by the new behemoth.

In 2007 TRI controlled 36 % of the desktops using financial data systems while Bloomberg had a 25% share of market. Today the two are running neck a neck with TRI at 31.4% and Bloomberg 30.8%. Not quite the outcome everyone in management of the merged organizations had anticipated.

An examination of the charts will provide better insight into how you might proceed.

The three year chart depicts a stock that came off a rock hard bottom and had a great ride from March of 2009 until March of 2011. But the advance stalled and it has been a trail of tears for investors who failed to realize that the good times were over.

The first sign of trouble surfaced in May of 2011 when the uptrend line was breached. The second sign that it would have been prudent to book some profits was when the death cross formed in June. Finally when the stock failed to hold support at $37.00 there was nothing left but the crying.

The  MACD and RSI on the six month chart both signalled weakness in mid November of 2011 when the shares sold off from $30.00 down to $27.00.  Currently there is support at $27.00 and the MACD and RSI look to be turning up.

With new management set to be taking over in the new year and a reorganization designed to speed up decision making it would be worth waiting before selling. In addition the dividend yield is 4.6% which is very attractive in today’s environment.

As far a selling TRI to buy Cameco these are two totally different businesses with completely different risk profiles. One is in the business of providing information to professionals the other takes on the risk of developing uranium deposits. I am not sure there is a valid comparison that can be made.

Make it a profitable day and happy capitalism!

Hi Lou,

You do a great job. If you ever get a chance to comment on Intertainment Media (INT) I would appreciate it.

Your commentary is always so thorough.

Thank you
Carl

Hi Carl,

Intertainment Media Inc. ( INT TSXV) has  four operating divisions. Ortsbo.com is their language translation platform which has gotten some media attention due to live demonstrations they have produced with Gene Simmons and Paul Stanley of Kiss fame and Canadian NBA All Star Steve Nash. They also have itiBiti a private label social media platform designed for global brands, plus Ad Taffy a technology that creates an instant call to action for online advertisers.The fourth unit is  Magnum Printing which  provides fine printing services.

What is observable is that the volume on the stock has thinned out considerably over the last month. The average daily volume over the last three months has been 11.9 million shares. Over the last thirty days the volume has exceeded the average on only seven days and only twice in the last twenty three days. We must have volume if we expect a stock to move higher

The charts will provide some guidance on what might be in store for this ambitious micro cap.

The three year chart illustrates the excitement that came into the stock in 2011. Prior to this year the shares were essentially flat but interest in Ortsbo.com helped move the stock to $0.50 by the end of January. In early February the company reported an offer from a U.S. based private equity firm to take Ortsbo.com public as a separate company. The news sent the stock on a quick run to $1.00

The RSI and MACD both signalled that the stock was overbought at those levels and it subsequently pulled back to just below $0.50 by mid March. The shares then made another advance taking it to a spike high near $3.25. in mid April. Once again the momentum indicators signalled that the stock was overbought and selling pressure came into the market taking it to its current level of $0.65.

The six month chart provides a closeup of  the action in INT since February. At this point the best case scenario would be for the stock to build a base at these levels.Currently there are no signals suggesting  that the stock will move higher If it breaks below these levels there is support at $0.50.

INT provides another example of taking profits when they are available. A stock that runs from a low of $0.125 to $3.25 in less than five months has done some heavy lifting. The question that needs to be answered is can it move the bar again?

Make it a profitable day and Happy Capitalism!

VMW – VMware

Susan

Hi Susan,

VMware Inc. (VMW NYSE) has been on the move since it recovered from the late 2008 lows where it traded below $20.00. Some of the recent advance has been fueled by the company’s exposure to the excitement surrounding cloud computing.

The last time I ran the charts for VMW was in April of 2010 in a special feature for globeinvestor.com. Back then it looked like the shares might pull back but that the advance still had legs. After testing support on the 50 day moving average the uptrend continued. Here’s a link to the analysis from last year.

http://www.theglobeandmail.com/globe-investor/e-zines/trade-by-numbers/three-technology-picks-to-light-your-way/article1525265/print/

Lets review the charts to get a new perspective on the stock.

The three year chart delineates the sweet run that VMW has enjoyed from the late 2008 lows. The continuous test of support along the 50 day moving average signalled that investors were willing to buy on the dips and take the stock higher.

The advance  through 2009 and 2010 was supported by earnings that beat the street three out of four quarters for the period Q3 2009 to Q3 2010. However that streak was broken in January of 2011 when Q4 earnings missed forecast.

The next quarterly report for Q2 2011 is scheduled to be released on July 19, 2011. Make sure to put that date on you action calendar.

The six month chart provides a close up of the selling that came into the stock in January of 2011 ahead of  Q4 earnings which missed the forecast. Which is another example of guys in the know, knowing what to watch. The RSI and MACD both signalled a change in momentum to the downside as the shares breached the uptrend line. The pull back took the stock from $97.50 to $75.00 by mid March. A contraction of 23.07%.

VMW did recover from the mid March lows but once again met resistance at $97.50. Currently the shares seem to be range bound with resistance at $97.50 and support at $92.50. Neither of the indicators are suggesting a break out of the range. The next flex point we know of is the release of Q2 in July, until then its a game of wait and see.

Make it a profitable day and Happy Capitalism!

Je voudrais savoir YLO que vas t’il faire durant les prochains mois et durant l’année merci pour la réponse

Andre

Bonjour Andre,

I first posted on what is now Yellow Media Inc. (YLO TSX) on June 12, 2009 when it was still an income trust. At the time it was noted that the market for the directory business had to be called into question. Since then I have examined the case twice and both times it didn’t seem to offer great prospects. The last analysis on February 25, 2011 outlined that the shares were testing support at $5.50 and could challenge $5.00. Subsequently it melted through $5.00 and has been trading below $4.00.

Lets study the charts and see if there is a bottom developing.

The three year chart tells the tale of what happens to a stock that fails to hold onto a long term support level. For YLO support at $5.00 was its life line. Once that was breached the stock had no support until the $3.75 level, and not much there either.

The six month chart paints an ugly portrait for investors that were enticed to chase the dividend. On February 25, 2011 the yield was 11%. Currently the yield is 17%, which looks unsustainable.

The stock is clearly in a downtrend and moves to the upside in March, April, and May have met with resistance and failed to reverse the trend. There have been efforts to reassure investors by management, debt ratings agencies and analysts that cover the company, but all those attempts have been met by increased selling.

I have not liked the prospects for YLO for the last two years given that the ink on paper directories business that had been the foundation of the enterprise  has been facing increased competition from online sources. The hope back in 2009 was that the company could successfully transition to the digital domain and remain viable. Its not clear that they have met those goals.

In addition YLO sold their Trader Corporation assets in March of 2011 for $745 million inorder to pay down their debt and maintain the investment grade rating on their bonds. Recently there have been concerns that the deal might not close. The company has also seen some changes in management and insider selling which, given the circumstances, did little to boost confidence.

I would avoid chasing the dividend and look for better prospects.

Happy Capitalism!

Bonjour !

Pourriez-vous commenter sur ses 2 titres (bourse de toronto):

Noveko international : EKO
Technologie D-box : DBO

Merci beaucoup
Manon

Bonjour Manon,

Merci pour l’allocation! If I had to chose between Noveko International Inc. ( EKO TSX) and D-Box Technologies (DBO TSX) I would have to take DBO. EKO had a huge spike in late March to early April of 2011 but it has not been able to hold on to its gains. DBO on the other hand has held onto its uptrend line. Lets consult the charts for a clear picture of what has been in the mix.

The three year chart for EKO depicts the long downtrend that the shares have been struggling with since November of 2009 when it hit resistance at $3.00. The spike up from the $0.30 lows in March of 2011  to the $1.00 range by early April was encouraging but not sustained.

The six month chart provides a number of patterns that call for profit taking when they are recognized. The RSI and MACD both signalled a shift in momentum from frenzied buying to steady profit taking as the stock retreated to $0.52. In addition a double top formed in April suggesting that the advance was over.

Currently neither the RSI nor the MACD are indicating a pending uptrend.

The three year chart for DBO illustrates a stock that has support along its uptrend line and has tested but not breached its 200 day moving average. There is resistance at $0.75 which it hasn’t been able to breakthrough but there does appear to be an ascending triangle forming. An ascending triangle suggests, but doesn’t guarantee, that a break above $0.75 is developing.

The six month chart for DBO  underlines the value of the MACD as a signal generator. In mid March of 2011 it indicated a buy at $0.50 and by mid April that it was time to sell at $0.70. Currently the MACD looks to be setting up for another buy signal.

Both of these stocks are microcap plays which by their very nature suggests a higher risk profile so please conduct your due diligence to make sure it meets your investor profile.

HAPPY CAPITALISM!

Hi Lou,

I was wondering if you could have a look at wavx for me.

Thanks
Eric

Hi Eric,

Wave Systems Corp. ( WAVX NASDAQ) provides software for hardware based digital security and has seen its revenues increase substantially over the last year. But keep in mind that its total sales for all of 2010 were about $27 million. Yes they were up 38% from the year earlier and yes its cause for celebration, but keep in mind that in the world of computer security it is a very small piece of the pie.

The charts will give us a better understanding of what may be in store for WAVX.

The three year chart tells the tale of a stock that spiked to a fifty two week high in January of 2011 and has been giving up ground ever since. The RSI and MACD both signalled a shift in momentum from buying to selling which led the stock down from the $5.00 level to its current trading range near $3.00.

What you should also make note of is that WAVX has been testing support along its 200 day moving average since March of 2011. Clearly it has to catch a bounce off of these levels or it runs the risk of retesting support at $2.50.

The six month chart provides a closer look at the recent action in WAVX. The January 2011 signal from the MACD to hit the silk was fairly emphatic as was the RSI moving out of overbought territory. The downtrend line is now in place and none of the signal generators are suggesting a shift in momentum towards buying.

I am not sure what attracted you to this small cap player in the digital security business. It is currently  not generating a profit and is actively spending more on research and development as well as sales activities.  For the moment I don’t see much to get excited about. If you like something about the prospects of the company put it on your watch list for a break to the upside. Otherwise you might be well advised to look for a better prospect.

Happy Capitalism!

Hi Lou

What’s with Yellow Media? Will it survive long term?

Ben

Hi Ben,

I have filed posts on Yellow Media Inc. (YLO TSX) twice. First on June 12, 2009 for Irwin, and the last time on January 26, 2010 for Nazir. Over the last two years the value of the units and now the shares, since the conversion from the trust structure,the price of the shares have been mostly flat on a buy and hold basis. On June 12. 2009 the units traded at $5.43 while on January 26, 2010 the units traded for $5.30. On February 24, 2011 it closed at $5.58.

There have been trading opportunities over that time frame and not to be ignored is the generous dividend paid to investors. Currently the dividend yield is 11.7%. which allows you to get paid to ride out the risk associated with the transition from the print edition of its publications to the digital versions.  The charts will provide some guidance going forward.

The three year chart illustrates the two most profitable trades. The first that ran fromFebruary 2010 at a low of $5.25 to the peak high of $7.00 in April of 2010. The second that began in August of 2010 from the low of just over $5.00 to  the high of $6.40 in November of 2010. On a percentage basis quite attractive returns.

The six month chart depicts the resistance at $6.40 and the selling that has come into the stock since early December of 2010. The break below $6.00 in February of 2011 came as YLO reported a Q4 loss on close to $30 million in charges related to its conversion from a trust to a corporation. The $30 million hit has had some scratching their heads given that in most cases the legal and accounting fees related to a conversion have usually come in at $1 million. A complicated financial structure was offered as the reason for the additional expense.

At this point it looks like YLO is on its way to testing support at $5.50. Neither the RSI or the MACD are signalling a change in momentum to the upside. Below that there is support at $5.00. Same story different year. The caution with YLO is the sanctity of the dividend. If anything happens to the dividend, it happens worse to shareholders.

MAKE IT A MASSIVE WEEKEND AND HAPPY CAPITALISM!

Hello Lou,

I purchased GOOG:US on Jan 21st 2011 at US$638.38. Since then, the stock has been GOING down and I don’t understand why.

I had purchased some AAPL:US shares and saw they were doing well. I did  some research and a lot of analysts and close friends were saying technology is booming (I’m talking about Android). Also part of it is that I thought they were going to acquire Groupon and maybe Facebook…So I looked at the GOOG’s trend and saw they were doing pretty good.

 That was the main reason I bought the shares but I still don’t understand why it would go down so fast. Could it be because of the recent change in the Management? Is it because of the protest that’s going in the Middle East?

Should I hold it hoping it will go back up or should I sell?

Thank you in advance for reading my email

Sincerely

William

Hi William,

Great question!  Here are some of the factors in play when it comes to Google, Inc. ( GOOG NASDAQ). The first thing that I can see is that information technology stocks enjoy a period of seasonal strength that runs from early October to mid January. Your entry point on January 21 is a classic case of arriving at the party late and having to cover the bill!  Another factor that is evident is the resistance at $640.00 that has been in play since 2007. 

From my vantage point the factors that contributed to the sell off are seasonality and resistance.The basic tenet of  of technical analysis is that in the price there is much knowledge. The price of the stock incorporates all the factors in play making it the best indicator of trend, support, and resistance. The charts always provide information not revealed in the news stream.

The three year chart illustrates the seasonality when we look at the sweet spot in both 2010 and 2009. What seasonality expert Brooke Thackray extols is that of you are going to invest in a stock you are best to do so when probability is in your favor.

The chart also depicts the resistance at $640.00. Each attempt to breakthrough has failed and its something to keep in mind when taking a position in a stock. What is also evident is that there is support at $600.00.

The six month chart provides a good view of other indicators that you should be aware of when considering buying a stock. The MACD and RSI both signalled a buy in early September of 2010 that saw GOOG move from $460.00 to $640.00 by early November for a 39% return.  Truly a sweet fall treat!

The MACD and RSI then signalled a pullback from the November highs to $560.00. In early December there was another buy signal that saw the stock move from $560.00 back to $640.00. If you look closely at your entry point on January 21 you can see that both momentum indicators were suggesting a pullback.

You asked if you should hold or sell. Usually that question is a request to confirm a desire to sell. I always advise investors that if they are uncertain as to how to proceed find safety in cash. Then when the trend is more visible you can make another decision. The best outcome that I can see at this point is a range bound trading pattern between $600.00 and $640.00.

Happy Capitalism!

Is it time to buy SNDK or wait for further downside?

Gunda

Hi Gunda,

Great question. SanDisk Corp.( SNDK NASDAQ) has been very generous for investors who caught the scent and tracked it down earlier. When I examined SNDK back in April of 2010 in an exclusive article I wrote for globeinvestor.com’s Trade by Numbers feature it was clear that the stock had more in the tank In fact it ran another 38% when it topped out in June of this year. Not bad but SNDK generated a nine bagger from the lows of  November of 2008. Now that’s sweet! However that was then, this is now, and the uptrend line has been broken.

The three year chart is a perfect example of a beautiful, wealth creating uptrend. Look how often SNDK tested support along the 50 day moving average and the uptrend line. That’s a sign of strong investor appetite for the stock. The golden cross that formed in May of 2009 confirmed that a lot of the risk had been taken off the table.

Having said that, the chart indicates that the uptrend is broken and SNDK has fallen below the 50 day moving average and is testing support on the 200 day moving average. Both put a caution flag on the track.

Why the pull back? There was long term resistance at $50. Investors who rode the rocket to that level decided that they would start to book profits and enjoy the fruits of their decision.

The six month chart depicts the most recent action. SNDK has caught a bounce off the $34.00 level where it has support and has now regained a hold above its 200 day moving average. The RSI and MACD both signaled a shift in momentum to the upside but there is resistance at $40 which will provide a real test of investor sentiment.

The last two candlesticks on this chart are a concern. The first stick is a doji that indicated that the market was unsure of direction followed by a dark stick that would suggest that selling pressure will follow.

I often think of my capital as a fine thoroughbred. When my steed has won all three races in the Triple Crown would it make sense to schedule the champion in a $10,000 claiming race or put it in the barn for a well earned rest? I think this horse is has done well by its owners and its time to go back to the auction for another yearling.

 Here is a link to the April  “Trade by Numbers” feature at globeinvestor.com

http://www.theglobeandmail.com/globe-investor/e-zines/trade-by-numbers/three-technology-picks-to-light-your-way/article1525265/

Happy Capitalism!