CANSLIM SETUPS

Where We Are:

Taking a look at the broader market:

Heavy distribution for the month leaves a bearish undertone for the market. But with a Follow Through Day in the books, and Telecoms hitting a new high, we can’t give in.

Keeping the bigger picture in mind, the first quarter ends with the S&P nearly flat for the year.

Looking out to April, the month tends to be the second strongest for the Dow.

Energy is poised to launch from a five-year base.

Lurking as a potential new leader, the Software Index trades above its major MA’s as it threatens to launch from a five month base.

Technically speaking:

The Dow Industrial Average

($INDU), -1%, shys from its 50-day MA.

The S&P 500

($SPX), -1.1%, consolidates below its 50-day MA.

Nasdaq

($COMPQ), -1.4%, consolidates below its 50-day MA.

Russell 2000

($RUT), -0.9%, shows relative strenght as it closes above its 50-day MA.

Volume indications tilt to the Bulls with a Follow Through Day in the books from two weeks ago. The Dow is mixed with one day apiece of accumulation and distribution. The S&P 500 posted one day of distribution. And the showed one day of distribution with two days of accumulation.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The U.S. Dollar Index consolidates near three-month lows.

The Gold and Silver Miners Index consolidates on its 50-day and 200-day MA’s.

The Dow Jones Commodity Index threatens to launch from a nin-month base.

The Cyclical Index shows modest relative strength over the Consumer Index.

The Technology Index struggles below its major moving averages.

The Semiconductor Index closes below its 50-day MA and above its 200-day MA.

The Banking Index finds support at its 200-day MA, though trades below its 50-day MA.

The Retail Index trades below its 50-day MA and above its 200-day MA.

The Pharmaceutical Index struggles below their major MA’s.

The Homebuilder Index trades just off none-month lows.

The Transportation Index trades below its 50-day MA and above its 200-day MA.

What Was Important About Last Week

STOCKS:

• Red Hat (RHT) reported Q4 (Feb) earnings of $0.15 per share, ex items, in line with the Reuters Estimates consensus of $0.15. Revenues rose 41.2% year/year to $111.1 mln vs the $112.6 mln consensus.
• Solectron (SLR) reported Q2 (Feb) earnings of $0.05 per share, in line with the Reuters Estimates consensus of $0.05. Revenues rose 16.1% year/year to $2.9 bln vs the $2.91 bln consensus.
• Cognos (COGN) reported Q4 (Feb) earnings of $0.74 per share, excluding non-recurring items, $0.09 better than the Reuters Estimates consensus of $0.65. Revenues rose 12.4% year/year to $284.5 mln vs the $278.1 mln consensus.
• Paychex (PAYX) reported Q3 (Feb) earnings of $0.35 per share, in-line with the Reuters Estimates consensus of $0.35. Revenues rose 12.7% year/year to $485.3 mln vs the $488.3 mln consensus.
• Accenture (ACN) reported Q2 (Feb) earnings of $0.47 per share, $0.05 better than the Reuters Estimates consensus of $0.42. Revenues rose 15.8% year/year to $4.75 bln vs the $4.68 bln consensus.

ECONOMY:

• Fed Chairman Bernanke said that rate cuts are unlikely any time soon, and that inflation remains the predominant concern. He also suggested that the impact from the problems in the subprime mortgage market would be contained.
• Real GDP growth for the fourth quarter was revised upward to a 2.5% annualized growth rate from a previously estimated 2.2%. The upward revision is attributable to a smaller decline in inventories and fewer imports than originally estimated. Excluding housing, real GDP growth expanded at a 3.7% annual rate.
• New orders for durable goods increased 2.5% in February, less than the consensus expected rise of 3.4%. New orders excluding transportation lost 0.1% versus a consensus expected gain of 1.8%. New orders are flat versus a year ago, up 0.8% excluding transportation.
• New single-family home sales declined 3.9% in February to an annual rate of 848,000, the lowest level in almost seven years. This was much weaker than the 990,000 rate expected by the consensus. Meanwhile, sales were revised down for November, December, and January.

What We’re Looking For This Week

Key earnings releases:

• MONDAY: none
• TUESDAY: none
• WEDNESDAY: Circuit City Stores Inc. (CC), Immucor (BLUD)
• THURSDAY: Constellation Brands, Inc. (STZ)
• FRIDAY: none

On the economic front we have potential market movers with:

• MONDAY: ISM Index
• TUESDAY: Auto Sales, Truck Sales
• WEDNESDAY: Factory Orders, ISM Services, Crude Inventories
• THURSDAY: Initial Claims,
• FRIDAY: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, Wholesale Inventories, Consumer Credit

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:

“No padlocks, bolts, or bars can secure a maiden better than her own reserve.” – Miguel de Cervantes

CANSLIM SETUPS