CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Major indexes moved little for the week, indicating the distribution we had on the S&P 500 and Nasdaq is minor.

The markets speak to us every day. It’s our job to listen.

Price and volume dominate our analysis.

Simply put, heavy selling volume coupled with big downside moves spells trouble. Smaller moves are less significant.

Everywhere we look analysts and writers are putting their complicated theories up for examination. Speculation on how private equity and interest rates will ultimately prove their forecasts right, whether they’re Bulls or Bears.

The laws of chance make geniuses for some, and suckers of others.

But when you’re trading professionally you need to learn to rely on your own analysis.

From our experience nothing has proven more consistent in trading stocks than analyzing price and volume. It let’s us know when conditions are good or bad.

Our strategy involves picking only the best stocks when things are good.

Things have been good for weeks. As trades appreciate to our profit targets we exit them.

Exactly where the market corrects is not for us to say.

We will continue to wave our Green Flag until price and volume tell us otherwise.

Technically speaking:

The Dow Industrial Average

($INDU), 0.5%, inches higher into new territory.

The S&P 500

($SPX), 0%, finishes the week unchanged after Thursday’s drop.

Nasdaq

($COMPQ), -0.4%, posts a modest loss on the heel’s of Thursday’s distribution after inching to a new high.

Russell 2000

($RUT), (out) %, also posts a loss after inching to a new high.

Volume indications lean to the Bears advantage this week. The Dow put in light-volume with no major indications. The S&P 500 made two distribution days and one accumulation day. The Nasdaq notched in a heavy distribution day with a couple modest accumulation days.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dolar Index ($DXC) rallies for the second week in a row yet remains below its 50-day MA.

The Gold & Silver Miners Index ($XAU) slips back to its 50 and 200-day averages which are flat-lined.

The Consumer Index ($CMR) hesitates to move higher.

The Cyclical Index ($CYC) inches to a new high.

The Technology Index ($DJUSTC) closes at its high.

The Semiconductor ($SOX) puts in a neutral performance, closing unchanged after poking out to a year-high.

The Software Index ($GSO) consolidates near its high.

Telecom Index ($XTC) closes at a new high.

The Banking Index ($BKX) declines modestly, still above its major averages, though well of its highs.

The Broker Dealer Index ($XBD) forms a cup-and-handle pattern.

The Retail Index ($RLX) consolidates on its 50-day MA.

The Healthcare Index ($HCX) declines sharply after hitting a new high.

Biotechnology Index ($BKX) pulls back modestly for the second week in a row,

Pharmaceutical Index ($DRG) declines sharply after hitting a new high.

The REIT Index ($DJR) consolidates under its 50-day MA.

The Transportation Index ($TRAN) forms a cup-and-handle pattern.

The Airline Index ($XAL) struggles in a downward trend below the major moving averages.

The Defense Index ($DFX) makes a new high.

The Energy Index ($IXE) posts a modest gain just under a new high.

What Was Important About Last Week

STOCKS:

• Nvidia (NVDA) reported Q1 (Apr) GAAP EPS of $0.33 per share, $0.03 better than the Reuters Estimates consensus of $0.30. Co reported non-GAAP EPS of $0.42 vs $0.39 First Call consensus. Revenues rose 23.8% year/year to $844.3 mln vs the $835.1 mln consensus.
• THQ Inc. (THQI) reported Q4 (Mar) earnings of $0.15 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.14. Revenues rose 16.2% year/year to $172.1 mln vs the $149.9 mln consensus.
• American International Group (AIG) reported Q1 (Mar) earnings of $1.68 per share, excluding non-recurring items, $0.13 better than the Reuters Estimates consensus of $1.55. Revenues rose 12.3% year/year to $30.64 bln.
• California Pizza Kitchen (CPKI) reported Q1 (Mar) earnings of $0.18 per share, in line with the Reuters Estimates consensus of $0.18. Revenues rose 15.2% year/year to $149.4 mln vs the $148.6 mln consensus.
• Whole Foods Market (WFMI) reported Q2 (Mar) earnings of $0.32 per share, $0.04 worse than the Reuters Estimates consensus of $0.36. Revenues rose 11.6% year/year to $1.46 bln vs the $1.49 bln consensus. For FY07, Whole Foods expects 13-17% revenue growth which computes to $6.34-6.56 bln vs. $6.56 bln consensus.
• Walt Disney Co. (DIS) reported Q2 (Mar) earnings of $0.44 per share, $0.07 better than the Reuters Estimates consensus of $0.37. Revenues rose 0.6% year/year to $8.07 bln vs the $8.11 bln consensus.
• Wynn Resorts (WYNN) reported Q1 (Mar) earnings of $0.67 per share, excluding non-recurring items, $0.13 better than the Reuters Estimates consensus of $0.54. Revenues rose 129.2% year/year to $635.3 mln vs the $553.7 mln consensus.
• Fluor (FLR) reported Q1 (Mar) earnings of $0.94 per share, $0.07 better than the Reuters Estimates consensus of $0.87. Revenues rose 0.5% year/year to $3.64 bln vs the $3.57 bln consensus. Co reaffirmed guidance for FY07, sees EPS of $3.50-3.80 vs. $3.90 consensus.

ECONOMY:

• The Producer Price Index (PPI) increased 0.7% in April versus a consensus expected gain of 0.6%. The PPI is up 3.2% in the past twelve months and has climbed at an annual rate of 12.8% in the past three months. All of the PPI increase in April was due to food and energy prices, which rose 0.4% and 3.4%, respectively.
• The core PPI was unchanged versus a consensus expected 0.2% gain. The core PPI is up 1.6% in the past year and up at an annual rate of 1.5% in the past three months.
• Consumer goods prices increased 0.9% in April and are up at an annual rate of 16.6% in the past three months.
• Capital equipment prices rose 0.1% and are up 1.8% in the past year.Core intermediate goods prices (ex-food and energy) increased 0.8% in March and are up 3.6% versus last year.
• Core crude prices increased 0.4%, are up at a 51.9% annual rate the past three months, and are up 19.0% versus a year ago.
• April retail sales declined 0.2% and were unchanged excluding autos, both worse than the consensus expected. However, retail sales were revised up noticeably for both February and March, putting the level of sales in April about where expected. Retail sales are up 3.2% from a year ago, 3.7% excluding autos.
• The largest gains in retail sales were at gas stations and grocery stores. Activity was weak for autos, building materials, clothing stores, and general merchandise stores (which includes department stores).Excluding autos, building materials, and gas, sales were unchanged in April but revised up for February (to 0.5% from 0.3%) and March (to 0.8% from 0.3%).
• The trade deficit in goods and services increased to $63.9 billion in March from a downwardly revised $57.9 billion in February. The consensus had expected a smaller increase to $60.0 billion.
• Exports increased $2.2 billion in March and are up 9.2% versus a year ago.Imports increased $8.2 billion in March and are up 6.9% versus a year ago. The increase in March was the largest on record, in dollar terms. Petroleum accounted for about half the increase in imports, mostly due to higher volume. By region, the change in the trade deficit was fairly widespread, with Europe, OPEC, Mexico, Africa, and Canada all widening their trade gaps with the US by at least $1 billion. The trade deficit with China shrunk by $1.2 billion.

What We’re Looking For This Week

Key earnings releases:

• MONDAY: Agilent Technologies Inc.
• TUESDAY: (A), Applied Materials (AMAT), DaimlerChrysler (DCX), Home Depot Inc (HD), The TJX Companies, Inc. (TJX)
• WEDNESDAY: Deere & Company (DE), Federated Department Stores Inc. (FD)
• THURSDAY: Intuit (INTU), Kohl’s (KSS), Marvell Technology Group Ltd. (MRVL), Nordstrom (JWN), Pioneer Drilling Company (PDC)
• FRIDAY: none

On the economic front we have potential market movers with:

• MONDAY: none
• TUESDAY: Core CPI, CPI, NY Empire State Index, Net Foreign Purchases
• WEDNESDAY: Housing Starts, Building Permits, Capacity Utilization, Industrial Production, Capacity Utilization, Crude Inventories
• THURSDAY: Initial Claims, Leading Indicators, Philadelphia Fed
• FRIDAY: Mich Sentiment-Prel.

The Following Sections Are On Our Home Site:

• The Growth Stock Landscape
• What We Like – What We Have
• This Week’s Scans: • SETUPS • BREAKOUTS • BASE BUILDING • SHORTS

This Week’s Word On Discipline:

“Opportunity is missed by most people because it is dressed in overalls and looks like work.” – Thomas A. Edison

CANSLIM SETUPS