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Friday, August 19, 2005

Notes about Trade-Ideas

I added Trade-Ideas container on the left sidebar, it brings you real time market alerts. There is some positive feedback on Trade-Ideas, so I wanted to try it out myself.

If you have tried it, please share your thoughts with others.

See also:
Trader Mike: Watchlist for August 16, 2005 (comments about Trade-Ideas)
My Trading Room: Trade-Ideas
My Trading Room: Prime Trading Setup:Intraday Example

Thursday, August 18, 2005

Update: Interview: Jim Rogers, co-founder of Quantum Fund

Two months ago I posted a link to an interview with Jim Roger's. Now, there's another interview taken place with him (I saw the links on Random Roger's blog) by Investment U.
Investment U: Should there be a hard landing in China, do you anticipate a major consolidation in commodities?

Jim Rogers: Yes, I do. Something’s going to cause consolidations in commodities. We always have consolidations in every bull market in history.

Again, I wish I were smart enough to tell you exactly what’s going to cause them, and the timing, but I’m not. It’s pretty obvious to me that if we suddenly see headlines in the Wall Street Journal of some kind of turmoil in China, that commodities would be having a correction, or would go into a correction. But that would be a chance to BUY commodities.

You know, in the ‘80s and ‘90s, we had some huge corrections in stocks.

Likewise, in ‘94 or any of the other corrections along the way in the bull market in stocks in the 1980s and ‘90s, you made a lot of money. So if you see those headlines, I urge you to buy all the commodities you can. Probably buy all the China you can, too; but certainly, buy all the commodities you can, too.

Investment U: Commodities seem so simple on that level - supply and demand... How does investing in commodities compare with stock investing in terms of the average investor?

Jim Rogers: It couldn't get any simpler. And if you start looking into commodities, you'll see that commodities are a lot simpler and easier to analyze than stocks.

For instance, natural gas is pretty dumb stuff. If there's too much gas, it's going to go down. If there's too little, it's going to go up.

Natural gas doesn't know who Alan Greenspan is, or care; it just cares about supply-and-demand. And once you've made that analysis, it's a lot easier to buy and sell natural gas than to start analyzing 300 natural gas companies around the world, where you have to worry about management and balance sheets and stock markets and unions and environmentalists and dozens of other things.

Investment U: And you believe commodities can be less risky than stocks, too?

Jim Rogers: Well, Enron was a natural gas company. Enron went to zero. Natural gas can never go to zero. It can go down, obviously, but it can never go to zero.
Read further:
Investment U: Jim Rogers on China's Currency Revaluation (Part 1)
Investment U: Jim Rogers: Hot on Commodities (Part 2)

See also:
Interview: Jim Rogers, co-founder of Quantum Fund

Google plans to sell $4 billion of stock

The most important news for today:
Google files to sell 14.2 million shares. GOOG is trading at 276.11 (-3.15%) in pre-market.
AP (Yahoo! Finance):
MOUNTAIN VIEW, Calif. (AP) -- Google Inc. said Thursday it has filed with the Securities and Exchange Commission for a proposed public offering of 14.2 million class A common shares.

Google shares, which have tripled since going public one year ago, closed Wednesday at $285.10 on the Nasdaq Stock Market, giving the offering an estimated value of $4 billion at that share price.
Read further:
Reuters (Yahoo! Finance): Google plans to sell $4 billion of stock
AP (Yahoo! Finance): Google Files to Sell 14.2 Million Shares

Wednesday, August 17, 2005

Stocks to Watch: ACAS

Intraday sell-off in ACAS. Fell more than 1.5 points in some minutes, recovering.

Daytrading: Where You Can Find High Velocity Moves In This Market

Where You Can Find High Velocity Moves In This Market
TradingMarkets.com
By Dave Floyd
August 16, 2005 1:30 PM ET
The high velocity moves that provide the most best day trades occur almost every day. But they are not easy to find by eyeballing charts. If you want to do this, you'll be looking for the 1 and 5-minute charts are in harmony as defined by the stochastics and a steep slope of the 20-period ema's etc.

The market was under pressure yet again this morning, presumably higher oil prices were the culprit – but frankly the reasons are not important. What was important was finding stocks that were strong relative to the market and playing those on any bounces in the S&P futures.
Read further:
TradingMarkets: Where You Can Find High Velocity Moves In This Market

Tuesday, August 16, 2005

Today's Earnings: HPQ

Hewlett-Packard Co (HPQ) is trading up more than 5% in after hours on positive earnings data:
EPS $0.36 vs $0.31 Reuters consensus.
Revenues $20.76 bln vs $20.46 bln Reuters consensus.
Gross margin 23.2% vs 23.5% Briefing.com consensus.
Q4 EPS guidance $0.44-0.47 vs $0.43 Reuters consensus.
Q4 revenue guidance $22.4-22.8 bln vs $22.70 bln Reuters consensus.
(Data from Briefing.com)

Raising Volatility

As Nasdaq has fell to new lows, implied volatility is raising. It was possible to buy QQQ September straddle with $1.45 earlier today, now you have to pay $1.70. CBOE Volatility Index (VIX) has spiked to 13.68. We will probably see raising VIX during the following days also.

Update 2: Analysis: NeuroMetrix Inc (NURO)

There are some very interesting facts in Neurometrix (NURO) Form 10-Q. I have picked up the most important parts from this filing.

Form 10-Q for NEUROMETRIX, INC.

11-Aug-2005
Quarterly Report
We believe the ease of use, accuracy and convenience provided by the NC-stat System position it to become a standard of care for the assessment of neuropathies at the point-of-service.

In the first six months of 2005, our revenues grew 102.8% from the same period in 2004, generating $14.9 million in revenues, of which 88.1% was attributable to sales of NC-stat biosensors. Our gross margin percentage in the first six months of 2005 was 73.7%.

We derive our revenues from the sale of NC-stat biosensors, monitors and docking stations directly to end users, which are generally physician practice groups.

We have experienced and are likely to continue to experience an increased focus from third-party payers regarding the reimbursement of nerve conduction studies performed using the NC-stat System and an increased focus from third-party payers regarding the professional requirements for performing nerve conduction studies in general. Widespread adoption of the NC-stat System by the medical community is unlikely to occur if physicians do not receive satisfactory reimbursement from third-party payers for procedures performed with the NC-stat System.

A successful market expansion will depend upon, in part, our targeting of primary care and specialty physicians who traditionally have not been targeted by companies selling equipment used to perform nerve conduction studies and our ability to alter physicians' practices relating to the diagnosis of neuropathies. In order to successfully implement this growth strategy, we have increased our sales force to 30 regional sales managers as of June 30, 2005 and plan to more modestly increase our sales force.

In March 2005, we entered into an education and development program agreement with Eli Lilly and Company ("Lilly").
Eli Lilly and Company (LLY) is one of the factors to focus on. The agreement with Eli Lilly helps to spread the knowledge about NC-stat system among the physicians.
Through this agreement, our Company and Lilly expect to conduct a broad series of up to 84 educational and development programs across the country during 2005 and 2006. The focus of each program is on educating physicians regarding the treatment and diagnosis of diabetic peripheral neuropathy ("DPN"), nerve conduction studies, our NC-stat System and its application in DPN. During the second quarter of 2005, the first series of programs were conducted as originally planned. Lilly has a significant presence in the diabetes market, including drugs targeted at DPN.

Since our inception in 1996, we have incurred losses every quarter. We incurred net losses of approximately $8.7 million in 2001, $4.8 million in 2002, $3.7 million in 2003, $4.3 million in 2004 and $0.6 million in the first six months of 2005. We do not know whether or when we will become profitable. As of June 30, 2005, we had an accumulated deficit of approximately $58.1 million. We have financed our operations through the public and private placement of equity securities and through debt facilities including a line of credit.

Our financial objective is to achieve and sustain profitable growth. Our efforts in 2005 will continue to focus primarily on expanding our sales and marketing for the NC-stat System and continuing our ongoing program of making enhancements and improvements to the NC-stat System, with the goal of increasing our market penetration.

During the first six months of 2005 we continued efforts on improvements to our biosensors, on the development of new biosensors and on the development of a third generation monitor and docking station. We are also in the early stages of designing a drug delivery system for the minimally invasive treatment of neuropathies by both primary care and specialist physicians. We believe that the accomplishment of these goals will have a positive impact on our progress toward the objective of achieving profitability.
Biosensor units used:
2005 (three months ended June 30): 173,100 (change: 112.4%)
2004 (three months ended June 30): 81,500

The revenues of diagnostic devices have increased 79.4% and revenues of biosensors 89.9%.
The [revenue] increase was primarily due to an increased customer base for our biosensors, increased frequency of testing by our customers and the introduction of new biosensors.

During the 12-month period ending June 30, 2005, a total of 2,696 customers used our NC-stat System compared to 1,924 customers for the same period ending June 30, 2004. This represents a 40.1% year-over-year increase in the number of customers that used our NC-stat System.

We expect revenues to continue to increase in 2005 as a result of the recent expansion of our sales force.

However, our revenues could be negatively impacted by a variety of factors, including the level of demand for nerve conduction studies, potential for changes in third-party reimbursement for nerve conduction studies, the overall economy and competitive factors. In addition, we may experience seasonality in the third quarter of 2005 due to fewer patient visits and fewer physician working days during the summer months.
This may lead to a correction in the price of NeuroMetrix shares after the 3Q earnings release. As the potential setback is due to the seasonality issues, it might give a good opportunity to go long in NURO at that point.
Gross Margin

Diagnostic device gross margin percentage was 73.0% and 65.8% for the three months ended June 30, 2005 and June 30, 2004, respectively.

The increase in the gross margin percentage in the second quarter of 2005 compared to the same period in 2004 is primarily attributable to an increase in the list price of our NC-stat System from $3,500 to $4,000 effective January 1, 2005.
It seems that NeuroMetrix has found a really nice niche, if they can afford to raise prices but still grow the customer base.
Biosensor gross margin percentage increased to 74.2% for the three months ended June 30, 2005 from 73.8% for the same period in 2004. The small increase in biosensor gross margin percentage is primarily due to manufacturing cost reductions.

We anticipate our overall gross margin percentage will remain relatively consistent for the remainder of 2005. However, if sales volumes do not increase, if the mix of sales shifts further toward lower margin biosensors, if pricing pressures increase or if the cost of biosensors and diagnostic devices through our third-party manufacturers increases, then gross margin may be negatively impacted in future quarters.

Research and Development

R&D expenses increased $187,600, or 22.3%, to $1.0 million for the three months ended June 30, 2005.

As a percentage of revenues, R&D expenses were 12.8% and 19.6% for the three months ended June 30, 2005 and June 30, 2004, respectively. The increase in expenses was primarily due to an increase of $129,000 in employee compensation and benefit costs resulting from the hiring of additional employees in our R&D department, an increase of $112,000 in outside consulting costs and an increase of $92,700 in clinical development costs. These increases are primarily related to efforts expended on the development of a third generation monitor and docking station and improvements to our existing biosensors and the development of new biosensors.

For the remainder of 2005, we expect our spending on R&D will increase due to the hiring of several additional employees to support product development efforts and due to increased clinical study costs. We expect R&D expenses, as a percentage of total revenues, to continue to decrease slightly.

Sales and Marketing

Sales and marketing expenses increased $1.2 million, or 54.5%, to $3.5 million for the three months ended June 30, 2005 from $2.3 million for the same period in 2004. As a percentage of revenues, sales and marketing expenses were 43.3% and 52.7% for the three months ended June 30, 2005 and June 30, 2004, respectively. The change in expenses was primarily due to an increase of $1.0 million in employee compensation and benefit costs. This increase is due to the expansion of the sales force.

General and Administrative

General and administrative expenses increased $492,100, or 41.5%, to $1.7 million for the three months ended June 30, 2005 from $1.2 million for the same period in 2004. As a percentage of revenues, general and administrative expenses were 20.8% and 27.6% for the three months ended June 30, 2005 and June 30, 2004, respectively.

Total general and administrative expenses, as a percentage of total revenues, may increase in the second half of 2005 due to costs incurred in connection with Sarbanes Oxley compliance efforts.
Overall conclusion: things seem to go very well for NeuroMetrix. The stock price is also reflecting it, raising sharply from $10 to $30 in 4 months, and from $15 to $30 in 2.5 months.

Read further:
Yahoo! Finance: Form 10-Q for NEUROMETRIX, INC.

See also:
Update: Analysis: NeuroMetrix Inc (NURO)
Update 5: Live Action: Long NeuroMetrix Inc (NURO)

Overstock (OSTK) Insider Buy

Patrick Byrne, the CEO of Overstock.com (OSTK) has purchased 20,000 OSTK shares yesterday. He has bought another 30,000 on August 11.

See also:
Mark Cuban shorting 10k of Overstock (OSTK) shares
Roberto's NasdaqTrader: Overstock Insider Buy

Monday, August 15, 2005

Mark Cuban shorting 10k of Overstock (OSTK) shares

Mark Cuban writes the following:
In the interest of disclosure, I am short 10k shares of OSTK. I want to be short more, however the stock is impossible to borrow, the puts are expensive and it’s hard to get any volume off and I don’t know how to Naked Short a stock. If you or anyone you know has naked shorted a stock, or knows how or where I can,I would be curious to find out how it’s done, so please feel free to add it as a comment below.
Read further:
The Mark Cuban weblog: Wall Street - Fact is stranger than fiction

Will September be the Cruelest Month?

The Big Picture referes to a Wall Street Journal's article:
The stock market doesn't always hit trouble in the fall, of course. But September long has been far and away the worst month for stocks.

And there is plenty to worry about this September: Oil is approaching $70 a barrel, the Federal Reserve is hard at work raising short-term interest rates, and September marks the quarter's end, when companies facing high analyst expectations may have to warn of profit disappointments.

Since 1900, September is the only month in which the Dow Jones Industrial Average has fallen more often than it has risen. The Dow industrials have fallen 1.2% in September, on average, making it the only month with an average decline of any significance.

More bull markets have ended in September than in any other month, according to Ned Davis Research of Venice, Fla.
Read further:
The Big Picture: Will September be the Cruelest Month?

Indices Testing First Level Support

CANSLIM Investing writes:
After a fairly abrubt, unorderly pull back off the highs in the first couple days, this latest consolidation is actually shaping up to look fairly healthy. Friday's big drop wasn't a major concern considering volume levels were below average and less than the day before.

You see the Nasdaq bouncing off the first level of support of the upward trend line on Friday around 2150. The Naz looks as though it will hold that level, but if not the area of previous resistance around 2100 becomes the next major level of support.
See the link below for charts (with trend lines and supports).
I agree that the next major support is 2100 for Nasdaq. I'm afraid that the 2150 support doesn't hold for long, because other indices (DIJA, S&P 500) don't have the same formation and I think Nasdaq will run with them to lower levels.

Read further:
CANSLIM Investing: Indices Testing First Level Support