Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Adam Lashinsky, senior writer for Fortune magazine; and Gary Kaltbaum, senior market technician for TradingMarkets.com.
Trading Pit
Crash! If history is any guide, that's the market's MO in October. When the Dow dives, it’s often in this month.
In fact the three top percentage losses for a day all happened in October. And five out of the worst ten days in Dow history, all occurred in this month.
Gary K thinks there is a better than 50% chance we’ll have a one-day crash this month even though a lot of stocks have already crashed. But he also believes the market can bottom and stop a leg of this bear market because it has already happened 9 times in October.
Gary B. also said the market could crash in October. He charted the Dow’s performance back to 2000 and drew a downtrend line from its lows. He thinks if the Dow continues its downward move, it’s headed to 6,500.
Scott sees the market heading lower. He said it’s been painful, but the trend is down, and there will be a time when there are no buyers. He thinks it will take time for trend to go up, but the Dow will bottom at 7,000.
Tobin said there is just more and more bad news for the market, and it’s getting worse. He thinks things are getting set up for a crash, in part because the individual investor will start selling after seeing such poor performance in their 401k’s.
Adam warned that if the market does crash, investors should not expect it to race back up.
Stock X-Change
Scott, Toby, and Gary K. all came to pick stocks that will be an October surprise and head higher.
Scott said Ahold (AHO) will keep investors from a red October because it is cheap and has a 4% yield. Scott dubbed the company as the biggest company you’ve never heard of. But that didn’t matter to Gary K. and Toby, who both do not like the stock.
Toby thinks Eon Labs (ELAB) will be successful in October because it has new drugs coming out and is growing while the economy is performing so poorly. Scott and Gary K. like the way the stock has been performing, but said they’d both wait because the company has been public less than a year.
Gary K. chose PETsMART (PETM) as his October surprise. He said the market has been blasted, but stock hasn’t gone down. Also its earnings and revenues have gone up, it’s opening a lot of new stores, and Gary believes its success is breeding more success. Toby likes the stock, but Scott said if the market tanks, this will too.
Chartman
Gary B. and Adam returned to determine if two stocks that went up when the market went down would still headed higher.
No question the last quarter was a rough one-the worst for Wall Street since 1987. But not all stocks lost. In fact Amylin Pharmaceuticals (AMLN) was up 52% from July through September.
Gary likes Amylin's chart because it recently broke through a downtrend it’s been in since 2000. He advised to buy it now, and thinks Amylin’s headed to $25. (The stock closed at $15.80 on Friday.)
Adam is not as optimistic on the stock because the company has no sales and is too highly valued. Also, Amylin’s deal with Johnson & Johnson (JNJ) fell apart and its deal with Eli Lilly could go away too.
Another stock that soared when everything else was tanking: Take-Two Interactive Software (TTWO). Up 41% while the Dow dropped 18%.
Gary said there’s more gains to come for Take-Two. He likes that the stock just broke to a new high and said to stay long the stock unless it closes below $26. (Take-Two closed at $27.95 on Friday.)
Adam had a different take on Take-Two. He said investors who short stocks love this one. He thinks the company does not have enough research and development. And on top of all that, the SEC is investigating the company.
Predictions
Scott: Take the money and run with Petrobras (PBR)!
Gary B: Trucking stocks deliver 20% gains
Tobin: Guidant (GDT) gets jolt from "defib" biz; up 25%
Adam: IPO controversy hits Morgan Stanley (MWD)
Gary K: By early 2003 Intel (INTC) down 30%; Nasdaq down 15%
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