11 Days to Quarter Close: What are you doing with your tech portfolio?

Eleven days until Q2 CY11 closes.  We should be entering the peak spending period of the calendar year.  Budgets are set and open for spending.  Half the year is done and CFOs have a good feel for business trends and will have given the green light to spending.  If anything is amiss, we are going to find out next week or the week after the long weekend as that would be the period for any pre announcements.  For a look into the 2H of 2011, we will need to wait until reporting companies give guidance during July reports.  For company executives, the next eleven days could be easy if the quarter is almost done or it is pressure time to close deals, ship products and make the numbers before customers disappear for the long weekend.

Since the RIMM pre-neg on April 28th, we have had series of disappointing numbers from technology companies.  I highlighted those earlier as well as here.  I thought I would walk through a few charts and look at the near term action in a few selected tech stocks and think about what I would do with this these stocks into the July print.  The stocks are: CSCO, JNPR, FFIV, RVBD, APKT, ADTN, AAPL, QCOM, GOOG, AKAM, MMI, GLW, BRCD, JDSU, MSFT, AMT, EQIX, AMZN, NFLX, T and VZ.  I will provide my quick take on each of these equities with a relevant chart.  These charts are directly out of my Stockcharts.com account and I will try to add some annotations.  I think charts are a reflection of sentiment and I do think that some indicators like Demarks and Ichimoku help determine where the stock is going to trade depending on the data.  I do not think equities trade because of the chart, but rather the chart helps indicate where it will trade based on the news or the print.

CSCO: It looks like my prediction on where CSCO stock was heading post Q3 results was spot on.  Now what should do with it?  The first point to consider is that CSCO will be affected by JNPR, CAVM, NETL results as well as some of the contract manufactures.  CSCO will report on August 10, after completing the full month of July and they will guide for Q1 and most likely Q2 of FY12.  That means CSCO is going to tell us how they think spending is going to hold up through January 2012.  Maybe the company will guide the full FY12.  I think the stock is increasingly looking like a place to hide around this $14 level.  It is hard to be bullish without getting a feel for the guidance in August.

JNPR: This a poster child chart of a stock that ran on better global macro and then fell off a cliff on macro getting worse.  The fall since June was from comments by sell side analysts and the CEO on a back end loaded quarter.  Maybe the JNPR team will be working hard over the next 11 days?  Stock is in a precarious position.  Right on the trend line off the MAR 09/JUL 10 lows.  JNPR is currently below all the MAs except the 600MA which it is within 83 cents of convergence.  Resistance is setup around $33.50-34.  Bullish analysts are freaking out with the collapse as I read one report in which the analyst was now using a 2014 multiple to justify his PT.  Please.  JNPR needs to meet and guide up on the July print or this stock is going to trade in the $26-32 range for the rest of the year.  The window to short is closed.  I would not own it until I see the numbers.

FFIV: Here is another stock needing a beat and raise in July.  The stock is precariously poised at a neutral position where the results are going to make the bulls or the bears a winner.  One up trend line has already been broken.  This is a great company and I have told the management team that on many occasions, but the expectations are very high.  One good characteristic this management team has is they do not hide crap.  If they are going to miss, the management team will make announcement early.  If I was on the leadership team and the numbers are going to be good or bad I would pre pos or pre neg.  That will decide the issue.

RVBD: Here is the FFIV chart twin.  The one difference I would say is the chart is looking far more ominous than the FFIV chart.  These guys need a serious beat and raise or the stock is back to the mid $20s.  This is another chart with too much risk for me.  Although the stock did run off the March 2009 bottom, it was really the 2H 2010 rally that pushed RVBD to levels it had never sniffed before.

APKT: I have been an APKT bull for long time.  This chart looks a bit like FFIV and RVBD, but the recent action and bounce off the upward trend line are all good indicators.  Product cycles are positive, large market growth potential, management team bullish at conferences.  I am buyer and still a buyer into the print.  I would say that a break of $60 and I am out until it settles, but I would be a buyer here at $62-63.

ADTN: The third brother to FFIV and RVBD.  When I first started blogging again I wrote about ADTN, which was on the eve of Q1 earnings.  It feels like the stock might have gotten ahead of itself in terms of CAPEX spending expectations.  ADTN is one of the first companies to report and I consider them to be a table setter for JNPR, CIEN, CSCO, TLAB and all the other stocks levered to service provider CAPEX.  One concern here is that CIEN just had their analyst day in NYC and they did not really call out booming SP CAPEX so that is a warning.  This stock feels like it finds it self range bound in the $30-36 range unless their business is seeing a good inflection from SPs.  They will give guidance for Q3 around 10:50 in the morning on July 13.

AAPL: If you are stock bell weather person then the chart of AAPL is concerning.  CNBC has teams of these people who talk about stock leadership.  I see very little wrong with AAPL’s business, but I would state that trading below the 200MA and showing some topping formation is very concerning.  It feels like a bunch of LOs are banking some profits and this stock could settle in the $250-275 range before making a run post August.  Just a feel at this point.

QCOM: I have been bullish on QCOM for awhile.  I also think QCOM is one of the ways you play real value and positive product cycles in the mobile device market which I generally think sucks.  As much as I like the stock, I am not a buyer at this level.  I am not a seller, I am just cautious and would buy a pull back or if the numbers reflect some serious growth I am happy to jump on the momentum train.  Footnote…I am using a 10 year weekly chart for QCOM as this has been a high drama stock over the past six years as I think a daily chart has too much noise.

GOOG: I have been wrong on GOOG and I have admitted it.  I still see significant value in the company and I am buyer under $500, but this is another stock that is alarming to people who watch market leadership stocks.  The GOOG chart is breaking down on many levels and I think it might see $435 before it sees $535 again.  Should the market get over the macro blues this stock will run although the tone and disclosure of the management team on the next call will be important as investors are still getting comfortable with the cadence and disclosure of the new leadership team.

AKAM: This is an ugly chart.  I would say that the July print is very important for AKAM.  When they blew up in 2008, it was the July print.  When it sold off in 2007, it was the July print.  In 2009 it sold off after the July print.  This stock is considered an indicator for the digital media transition and of late has been suffering from competitive concerns with LVLT and LLNW.  I think the evolving structure of the network has more to do with their challenges, but this is a fact missed by all the analysts who cover the stock as they look at CDN pricing as a leading trend.

MMI: This chart says stay away.  I continue to think that outside of AAPL and HTC, the way to play the mobile device market is through stocks like QCOM and GOOG.  Not RIMM, NOK or MMI.  If you want to be involved in MMI than you are making the assumption that a vertically integrated maker of smartphones has a better R&D team and product cycle than HTC, Samsung, LG, Huawei, Sony-Ericsson, etc.  Maybe.  Maybe not.

GLW: This chart just feels like convergence to the 600MA.  I would be willing to get long GLW, but the global macro trends suck and I do not think the average consumer is going to put 10 flat panels in their home.  I have two flat panels now and drops for the another 4 with no plans to buy  more, but we all need to buy a lot more panels and devices with Gorilla Glass to keep this stock above $20.  Feels like a $15-19 stock.  It will be levered to panel prices and global consumer spending.

BRCD: Stock got a boost when Paul Mansky of Canaccord Genuity said it was a likely take out target for DELL because DELL needs to acquire more real estate in the data center (DC).  I do think that BRCD owns prime real estate in the DC, but I am not sure it is real estate that anyone else but BRCD wants to own.  Stock is in an up channel after bottoming in mid-2010.  I just do not see it as an exciting growth stock with public spending in down period and the best that can be said is DELL, who has their own issues to sort out, should buy them.  I see no reason to own either way.  Product cycles need to improve to be interesting.

JDSU: Wow…did a number of people get excited after the Q4 print.  The recent FNSR report pushed it back down through the 50% Fibb level…I think the stock is going to find some support in the $12-15 range and that is where I would be a buyer.  It is a difficult company to model as it has three distinct businesses with very few synergies.  If networking and optical networking is booming the stock works and they are trying to expand into the commercial laser business as well.  Experienced investors with a long memory will always fret about inventory builds and annual price concessions.

MSFT: Similar to QCOM, I like to look at weekly on MSFT versus the daily.  The daily chart is signaling a near term breakdown and I would be careful about being long at this price level.  The weekly chart says the stock is at the bottom of the long term channel around $23 and would be a buy here.  A break of $23 on the weekly would a disaster so if you want be long, I would set stops at this level.  Barons had piece on MSFT over the weekend.

AMT: This looks like a place to hide to me.  Stock is resting near the highs with little threat to the business.  I would be long even at these levels.  In general I think the tower business is good business to be in as I think real estate is more defensible than a smart phone.  A better way to play the mobile device market is through companies that contribute a defensible element to the mobile device market.  I would put AMT in the bucket with AAPL, QCOM and GOOG.

EQIX: I am a contrarian on this stock as I do not think this is the way to play the cloud.  Perhaps I will write about that in detail later, but for now the chart is very worrisome and I would say the bulls and the bears on this stock are very opinionated and the stock could easily trade in the $60s from this level.  This is a stock for people who like to read 60 page quarterly filings and not for the faint of heart.

AMZN: The stock has been on a tremendous run an I think this is one of the best ways to play the cloud.  I think the stock collects itself around the $175 level before resuming a march higher in post August time frame.   Utility computing is a trend I want to be leveraged to and this is one smart company.  My prior blog post had a link to a video about AMZN which I think all cloud investors should watch.

NFLX: Wow…stock has been lights out since Feb 2010.  It looks like it is completing a higher low cycle and will go on another run.  I would be a buyer here looking for pop and if I got it, I would put a stop loss in around this $245 level where I would be a buyer.  Stream content to a multitude of devices over the internet is a big theme.

T:  T getting some serious love for a large cap in March when macro turned negative.  Hard to be an incremental buyer up here, but if it dips back into the mid to upper $20s it is a nice add.  If macro turns worse this equity will see inflows.  If it does pull back some more, it will be a nice hedge to buy against a macro blow up like Europe or US debt.  When they report on July 18, the CAPEX number is going to affect a lot of networking stocks.

VZ: Like T, a bit a defensive play but the stock got a run going on the iPhone launch.  It has recently fallen through the 150MA as well as upper support levels.  Too close to the 200MA for my interest.  I would wait for a better entry point or to see how the Vodafone dividend drama plays out.

If you want to be bullish and you think the marker trades higher into year end, then I have some good macro fodder for you.  The market has been strongly macro driven in 2011 with Japan, Europe, ISM and unemployment numbers driving the tape.  I had one large cap PM recently write to me in an email that “This market is brutal. Just brutal.”  Here is some bullish commentary from a Deutsche Bank note from Friday:

Given there are many similarities between 1980 and today from a geopolitcal perspective (Oil in 1980 was at $91 in today’s terms, the Soviet Union was invading Afghanistan / there was an uprising in Syria and inflation was on the upswing. The big difference?  Fed Funds was 9-20% in 1980 vs. 0-0.25% today), I looked back at the SPX500 performance in 1980 to see how the market performed from ISM peak to trough.  From February to the market lows in March, the market was down ~17% (2 months ahead of the ISM bottoming in May ’80).  But from the March market lows to 12/31/80, the market rallied 38% (see attached chart).  We are only down 7% from the YTD highs and believe it or not, the market is STILL up 1% YTD.”


* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private.  Just hover over the Gravatar image and click for email. **

One thought on “11 Days to Quarter Close: What are you doing with your tech portfolio?

  1. Pingback: Market Thoughts 08.21.11 « SIWDT

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