The Long And Short Of It: RIMM, BRCM, INTC, LGF, GLD

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August 31, 2010 at 04:21 PM

BY Dennis Hobein - Contributor, Stock Traders Daily

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Market Recap

The stock market began the day on a weak note, with the Dow opening in the red, below the key 10,000 market. In early trade, market participants were anticipating another batch of weak economic data from the housing sector and The Chicago Purchasing Managers Index. However, participants were pleasantly surprised when the June Case Shiller Index came in better than expected at +4.23%, and the Chicago PMI was essentially inline at 56.7. The June Case Shiller Index figure should be taken with a grain of salt, though, as the data is dated; and the Chicago PMI number is still a rather sharp drop off from July’s 62.3. Shortly thereafter, investors and traders received another piece of better-than-expected data when the August consumer confidence figure came in at 53.5 versus 51.0 in July. Again, that number does not suggest consumers are feeling overly rosy about the economy in general, but the fact that it did not decline – as many had assumed it would - certainly provided a sense of relief.

The set of upside reports lifted the SPDR Dow Jones ETF (DIA) modestly into positive territory, where it spent most of the session until late in the day. But, stocks began to retreat when it was revealed that Fed officials have been discussing further stimulus steps to pump life back into the economy. This added to fears that the recovery is essentially running out of steam, which caused already jittery investors to head for the exits. In the end, the markets finished near the unchanged mark, with the Dow closing just above 10,000. It was a busy, see-saw day on Wall Street, generating several notable movers, which we highlight below.

Research in Motion Gets Cut

Handset maker RIMM had a rough day, closing lower by 6%, after research firm Bernstein cut its price target on the shares to $40 from $55.The firm attributed the slash in its target due to increased competitive pressures. Shares of RIMM have been under intense pressure since mid-August, and today’s move sent the stock below a key support level around the $48 mark. One issue dogging the stock is that reception for its much anticipated “Torch” handset has been met with lackluster interest. The general perception among consumers and investors alike is that the product gap between RIMM and AAPL is widening. With the stock now at its lowest level since April of last year, its P/E has dropped to a miniscule 9.4x. That does not necessarily mean it’s time to load up on RIMM, however, as fewer traders have been paying attention to valuation metrics recently. For investors looking for the optimal entry points on this stock, we have provided full technical analysis on the stock via our RIMM trading report, which is available now to all subscribers.

Broadcom Breaking Down

Another technology stock that took it on the chin today was semiconductor developer BRCM, which shed 6% on the session. The stock is being hit due to the likelihood that competitive pressures will heat up due to INTC’s acquisition of Infineon’s wireless business. With that purchase, INTC will now have ARM-based processors in its arsenal that are used by the likes of AAPL and Samsung. With the sell-off, shares of BRCM also violated a support level at the $32 area, and are now well below its 50-day moving average. For people interested in learning about what the next support levels are, and whether BRCM is a buy at these levels, we have developed a detailed trading report on the stock which is provided to subscribers of Stock Traders Daily.

Lions Gate Receives Higher Bid/Gold Trade Continues

On the positive side, shares of motion picture producer LGF soared 10% higher today following news that Carl Icahn and his affiliates increased their offer to $7.50 per share in cash from $6.50 per share. One boutique research firm commented that it still views the offer as inadequate, and believes that given the momentum at the box office, shares could fetch north of $15 by private equity in the next year or two. While not a stock, we also wanted to point out the relative strength of the SPDR Gold Shares ETF (GLD). The ETF has been on a steady trend higher since late July, up nearly 7% since then. The ascension in shares is a function of waning confidence in the equity markets, as well as the possibility for more stimulus which could erode the dollar’s value. With this sharp move higher, many investors and traders may question whether it is too late to jump in on GLD. For those interested in developing a proper trading strategy on GLD, a trading report is available for our subscribers, which as always, include crucial risk control tools.

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