Valero Beats Earnings Forecasts, Doesn’t Act Like a Refining Stock

Pick a refiner, any refiner, and there’s a good chance it’s lagging the S&P 500′s 24% gain this year. HollyFrontier (HFC), for one, has lost 3.8% in 2013, while Tesoro (TSO) has gained just 7.1% and Marathon Petroleum (MPC) has advanced about 13%.

Bloomberg News

Not Valero Energy (VLO). It’s gained a whopping 29% in 2013, helped by its 2% rise to $40.24 today after releasing earnings that met analyst forecasts. MarketWatch has the details:

Valero Energy reported a profit of $312 million, or 57 cents a share, compared with a profit of $674 million, or $1.21 a share, a year earlier. The year-earlier period included a noncash asset impairment loss of $341 million and severance expense of $41 million. Excluding those items, per-share earnings for the year-ago period were $1.90.

Revenue rose 4.1% to $36.14 billion.

Analysts polled by Thomson Reuters were recently forecasting earnings of 41 cents a share on revenue of $29.76 billion.

Oppenheimer’s Fadel Gheit and Robert Du Boff look ahead to 2014:

Gasoline margins started weak, but distillate margins remain strong. VLO is benefiting from widening North American light sweet crude discounts to Brent, especially WTI in Mid-Continent, LLS on the GC, and sour crudes also on GC. Valero has cost advantages due to its substantial capability to process discounted crude.

Can Valero keep rewarding investors?

5 Favorite Stocks of Mega-Millionaires

By Hal M. Bundrick

NEW YORK (MainStreet) It is an elite group of 220 mega-millionaires from all walks of life: executives, inventors and business owners from young CEOs in their early 30s, to retired execs in their 80s.

Collectively managing $20 billion in assets, they are strictly vetted for membership into this private club, and after signing a confidentiality agreement, pay $30,000 in annual dues to share investment ideas. With exclusive access to the biggest names and the brightest minds in the financial world, they are known as Tiger 21 and this is how they invest.

It is not a conservative bunch. According to an annual survey of Tiger 21 investment preferences, on average only 7% say they favor fixed income for their portfolios, mainly in municipal bonds, with a fairly equal mix between individual bonds and managed portfolios. And Tiger 21 members are fully invested, with an average of only 2% of their portfolios held in cash. These mega millionaires are full-on in the stock market. Equity investments are a favorite of 41% of the membership, up 2% from last year and fully 10% higher than in 2011. Financials (22%), technology (20%) and consumer (12%) equities are the most popular sectors with this elite group, and half prefer buying individual stocks over hedge funds and mutual funds, each of which account for just 14% of holdings. Exchange-traded funds and index funds are gaining favor with these ultra wealthy investors, with 21% claiming passive investing as a preference. "It is not surprising that public equities are among the most favored investments," said Michael Sonnenfeldt, founder and chairman of Tiger 21. "What is more telling is how members gain exposure to equities. We have seen ETFs gain popularity among members in recent years as evidenced by the first ETF appearing in the top five picks in last year's survey and a second appearing in the top five picks in this year's survey." The five favorite stocks of Tiger 21 investors are Berkshire Hathaway (BRK-A) Apple (AAPL) iShares MSCI EAFE Index Fund (EFA) Qualcomm (QCOM) SPDR S&P 500 (SPY) More of these high net worth individuals are choosing private equity investments, with 17% saying it is a favored investment strategy this year, through funds as well as via direct investments. "The real story here is the growth in members' involvement with private companies, which is driving their exposure to private equity," Sonnenfeldt says. "Members are spending more time backing start ups, sitting on boards and getting involved with private companies because that is where they created their own wealth and they know it can be an engine of growth in their portfolio." Hedge funds are losing their appeal with this moneyed crowd. Only 17% claim alternative investments as a favorite. That's down two percentage points from last year's survey, and is a full 5% below its 2011 ranking. Real estate ranks as the fourth favorite investment for the group but has the second largest allocation (21%). "This represents an example of members' faith in real estate's long term value proposition, even though it doesn't register as high when members are considering what they are most 'excited' about," says Sonnenfeldt. Commodity trading is preferred by only a very few, with just 1% saying it was a favored investment. No Tiger 21 member mentioned currency trading as a preferred strategy. --Written by Hal M. Bundrick for MainStreet

GM Narrows Gap on Global Sales Crown

General Motors headquarters in Detroit. Photo Credit: General Motors Company.

It's been a solid year for Detroit's Big Three automakers in the U.S and each has gained market share at the expensive of their Japanese rivals Toyota (NYSE: TM  ) and Honda. Ford (NYSE: F  ) was the big winner halfway through the year; it increased U.S. market share from 15.7% to 16.5%. That doesn't seem like a big jump, but a fraction of a percentage is a big deal in the auto industry and Ford's gain was the most of any full-line automaker. When we look at global sales though, there's a different winner for the first half of 2013.

GM gains on Toyota
Toyota still ranks No. 1 in global sales for the first half of 2013, having sold 4.91 million units which is 1.2% fewer than last year. General Motors (NYSE: GM  ) came in just under its global rival at 4.85 million vehicles sold, and managed to top Toyota in quarterly sales for the first time in over a year. Part of the reason is that domestic automakers are surging in the U.S. market, whereas Toyota's sales declined 8.4% in its home market Japan – and that looks to continue.

"The decline in Japan will continue," said Jun Nokuo, an analyst with researcher R.L. Polk & Co. in Tokyo., according to Automotive News. "It is an aging society and the population is shrinking. At the same time, the popularity of cars is declining because public transportation is easy to use."

Another reason for Toyota's small slip in global sales was its territorial dispute in China that led to several quarters of drastic sales declines. Demand for Toyota's vehicles in China has been slow to recover, and last quarter its sales failed to climb even a full percentage point. GM, Volkswagen, and even Ford have all taken advantage of the Japanese decline in China and have witnessed their sales increase by double digits last quarter.

Some forget that this is a new development and GM held the global sales crown for seven decades before Toyota took the top spot in 2008. Since the recession, GM has been more focused on fixing the direction and financial stability of the company; it has watched almost helplessly as its vehicle portfolio became the oldest in the industry. This is the exact point in time where GM begins to change that with plans for the biggest refresh in company history – refreshing, redesigning, or replacing 90% of its vehicles by 2016 – which it hopes will help boost sales again.

Bottom line
Ford and GM battled through the recession, one taking a bailout to wipe debt from its books and one leveraging its blue oval namesake for a large loan to restructure on its own. Regardless of your feelings about how each company weathered the financial crisis, both have emerged much more stable and successful companies. Detroit is producing vehicles that people want to buy and that are available in smaller, popular, and more fuel-efficient segments.

I think that's why GM and Ford will continue to regain decades of lost market share in the U.S. and better expand globally. With GM's large head start over Ford internationally, it is the only domestic automaker with a chance to top Toyota anytime soon. I think it's very possible we'll witness GM break 10 million in global sales by 2015 – the first automaker to ever accomplish that feat. Now if GM can just take a page out of Ford's book and create a leaner operation, consolidate platforms, and improve economies of scale, then it could return to be the most dominant global automaker. Ultimately, both Ford and GM represent valuable investments as we watch the automotive industry rebound globally, even if Toyota holds the sales crown currently.

Investing in the automaker that wins globally will bring you large portfolio gains. That will largely be decided by the Chinese automotive market -- the world's biggest and fastest growing. A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market", names two global giants poised to reap big gains that could drive big rewards for investors. You can read this report right now for free -- just click here for instant access.

Bombardier Delays First Flight of CSeries Plane

TORONTO (AP) -- Bombardier has delayed again the first test flight of its much-touted CSeries single-aisle airliner.

The world's third-largest maker of civilian commercial aircraft had been aiming for the first flight by the end of July, but said Wednesday it will occur "in the coming weeks" without giving a target date. The plane was originally scheduled to fly by the end of 2012 and was delayed again last month. Bombardier said highly technical last steps are taking more time than initially anticipated to validate the overall systems and ongoing software integration.

"While the process has taken more time than we had expected, we are pleased with the results and are very comfortable taking more time to ensure the required integration is finalized and the CSeries aircraft is cleared for its first flight," said Mike Arcamone, President, Bombardier Commercial Aircraft.

The Montreal-based company has said it hopes to capture half the global market of the 100-to-149-seat planes, and has marketed the plane as being 20 percent more fuel-efficient than the comparable Airbus A320 and Boeing 737 family of aircraft.

Bombardier has received 388 commitments for two versions of the aircraft, including 177 firm orders.

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Why Fairchild Semi Shares Fell

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of power chip specialist Fairchild Semiconductor (NYSE: FCS  ) sank 10% today after its quarterly results and outlook missed Wall Street expectations.

So what: The stock has rebounded nicely over the past few months, but today's second-quarter miss -- EPS of $0.43-$0.45 versus previous guidance of $0.49-$0.54 -- coupled with downbeat guidance for the current quarter reignites worries over the headwinds facing management. Specifically, weak PC demand continues to weigh on sales amid the booming growth of tablets, forcing analysts to recalibrate their valuation estimates.

Now what: Management now sees third-quarter revenue of $355 million-$370 million, well below Wall Street's view of $388.2 million. "Mobile sales are expected to increase in the third quarter due largely to one major customer and continued growth from our Chinese customers," said Chairman and CEO Mark Thompson. "Our guidance reflects some conservatism given how difficult it has been for our customers to forecast actual mobile demand." With the stock now off about 20% from its 52-week highs and trading at a forward P/E of about 12, much of that uncertainty might already be baked into the valuation.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

401(k) Savers Go Deeper in Debt

By Hal M. Bundrick

NEW YORK (MainStreet) � One step forward, two steps back. While Americans are saving more for retirement, many are also going even deeper into debt. The treadmill is starting to run in reverse. Over 60% of workers participating in an employer sponsored retirement plan accumulated more debt than they contributed to their retirement savings between 2010 and 2011, according to research conducted by HelloWallet.com.

The study looked at data from the Federal Reserve and the U.S. Census Bureau and found that one in five participants in 401(k) retirement plans particularly added more credit card debt to their family balance sheet than they contributed to retirement savings.

"Through retirement plans and social security taxes, the average 401(k) participant now contributes over 11% of their paycheck to retirement savings every month, yet the typical worker near retirement has only about 2 years of replacement income saved," says HelloWallet founder and CEO Matt Fellowes. "The growth in household debt is one big reason why retirement readiness is so stubbornly low." The research also revealed that monthly debt payments for households nearing retirement increased by 69% between 1992 and 2010, and now totals $0.22 for every $1.00 earned by 401(k) plan participants close to retiring. Retirement plan participants who accumulate debt faster than retirement savings, called "debt savers" in the study, have 50% less of their annual income saved for retirement compared to participants who contribute more to their retirement funds than they accumulate in debt. That translates into two years of replacement income saved, compared to four years for non-debt savers. Participants who are mounting debt faster than retirement savings are typically over 40 years old, college educated, earn more than $50,000, and don't have adequate emergency savings. Nearly half (47%) are in the highest income quartile. About 44% of "debt savers" earn more than $91,000. And the tendency to acquire more debt than retirement savings does not seem to correlate with poor economic conditions, according to the research. "While there is no question about the fundamental value and importance of the 401(k), our research finds that it is just one piece of the puzzle," said Fellowes. "Until we work on improving all components of retirement readiness, it will be very hard for employers to fundamentally move the needle." --Written by Hal M. Bundrick for MainStreet

Hot Warren Buffett Stocks To Own For 2014

I group my equity investments into three main categories:

Compounders: These are Warren Buffett "forever" stocks, or franchise businesses with durable competitive advantages that I'm willing to hold for a long time as long as the business continues to compound cash flow, dividends, and intrinsic value.

Cheap and Good: These are stocks that are not as high quality as the compounders, but are still above average businesses producing good returns on capital but are for some reason selling at a cheap price, often because of some temporary problem. These stocks are often Joel Greenblatt style Magic Formula stocks.

Cheap Assets: These are stocks that give you the opportunity to buy $1 worth of assets at a discount. Net-nets, stocks below tangible book, or stocks with hidden asset values fall into this group. Often times the businesses in this group have problems, but the market is offering you the assets for less than the value on the books, and you get the upside potential of the business improving without paying anything for it.

Hot Warren Buffett Stocks To Own For 2014: Schawk Inc.(SGK)

Schawk, Inc., together with its subsidiaries, provides graphic services and solutions in the Americas, Europe, and the Asia Pacific. The company?s graphic services encompasses a range of creative and executional service offerings, including traditional premedia business services, as well as digital photography, color retouching, large format digital printing, and sales and promotional samples under the Schawk brand name; and digital three-dimensional modeling of prototypes or existing packages for its consumer products clients. Its brand and package strategy and design services include brand consulting and creative design for packaging applications to consumer products companies, food and beverage retailers, and mass merchandisers under the Brandimage and Anthem brands. The company also offers digital promotion and advertising services to the digital communications markets under the Untitled and Real Branding brand names. In addition, it provides software products, such a s graphic lifecycle content management systems comprising digital asset management, workflow management, online proofing, and intelligence performance management modules; and support services, which include implementation, on-site management, validation for regulated environments, and support and training for the marketing services departments of consumer products, pharmaceutical/life sciences, and retail companies. The company serves direct purchasers of graphic services, including end-use consumer product manufacturers of food, beverage, non-food and beverage, and pharmaceutical products; groceries, pharmacies, department, and mass merchant retailers; converters; and advertising agencies. Schawk, Inc. was founded in 1953 and is headquartered in Des Plaines, Illinois.

Advisors' Opinion:

• [By Seth Jayson]

  There's no foolproof way to know the future for Schawk (NYSE: SGK  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

Hot Warren Buffett Stocks To Own For 2014: Federal Signal Corporation(FSS)

Federal Signal Corporation designs and manufactures a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers worldwide. The company operates in three segments: Safety and Security Systems, Fire Rescue, and Environmental Solutions. The Safety and Security Systems segment offers various systems for automated license plate recognition, campus and community alerting, emergency vehicles, first responder interoperable communications, industrial communications and command, municipal networked security, vehicle classification, parking revenue, and access control. This segment also provides products, such as lightbars and sirens, public warning sirens, and public safety software. The Fire Rescue segment offers articulated and telescopic aerial platforms for rescue, fire fighting, and maintenance purposes. This segment sells its products to municipal and industrial fire services, civil defense authorities, rental companies, elect ric utilities and industrial customers. The Environmental Solutions segment provides various self-propelled street cleaning vehicles, vacuum loader vehicles, municipal catch basin/sewer cleaning vacuum trucks, and water blasting equipment. The company was founded in 1901 and is based in Oak Brook, Illinois.

Advisors' Opinion:

• [By Rich Smith]

  Oak Brook, Ill.-based Federal Signal (NYSE: FSS  ) will soon have a new chief financial officer, the company announced yesterday.

  On Friday, the diversified manufacturer named Brian S. Cooper�to replace interim CFO Braden Waverley on May 28. Waverly will remain acting CFO until Cooper joins the company next month. Cooper comes to Federal Signal by way of smaller telecommunications equipment maker Westell Technologies (NASDAQ: WSTL  ) , where he has served as CFO since 2009.

Top 5 Blue Chip Companies For 2014: KONAMI CORP NPV(KNM.L)

Konami Corporation develops, publishes, markets, and distributes video game software products for stationary and portable consoles, as well as for use on personal computers. It operates in four segments: Digital Entertainment, Gaming & Systems, Pachinko & Pachinko Slot Machines, and Health & Fitness. The Digital Entertainment segment offers video game software, social games for social networking services Web sites, content for mobile phones and token-operated games, online games, music and video package products, video games for amusement facilities, and card games, as well as electronic toys, figures, and character goods. This segment also builds computer systems related to online games, maintains and operates online servers, and purchases and distributes video game software for home use. The Gaming & Systems segment develops and sells content, hardware, and casino management systems for gaming machines for casinos. The Pachinko & Pachinko Slot Machines segment involves i n the production, manufacture and sale of pachinko slot machines and liquid crystal displays for pachinko machines. The Health & Fitness segment operates health and fitness clubs. As of March 31, 2011, this segment had a network of 208 directly operated health and fitness club facilities; and 152 sports facilities whose operations are outsourced to it. The company sells its products primarily in Japan, North America, Europe, Australia, and the rest of Asia. Konami Corporation was founded in 1969 and is headquartered in Tokyo, Japan.

Hot Warren Buffett Stocks To Own For 2014: Bank of Marin Bancorp(BMRC)

Bank of Marin Bancorp operates as the bank holding company for Bank of Marin that offers a range of commercial and retail banking products and services in California. It offers personal and business checking and savings accounts; time deposit alternatives comprising time certificates of deposit, individual retirement accounts, health savings accounts, and certificate of deposit account registry services; remote deposit capture, direct deposit of payroll, social security and pension checks, fraud prevention services, and image lockbox services; and valet deposit pick-up service. The company provides its deposit products and services primarily to individuals, merchants, small to medium sized businesses, not-for-profit organizations, and professionals. Its loan portfolio comprises commercial and retail lending programs that include commercial loans and lines of credit, construction financing, consumer loans, and home equity lines of credit. In addition, the company provides m erchant card services, credit cards, and business Visa programs; cash management services to business clients through a third party vendor; wealth management and trust services, such as customized investment portfolio management, financial planning, trust administration, estate settlement and custody services, and advice on charitable giving; and 401(k) plan services to small and medium businesses through a third party vendor. Further, it provides private banking services, including deposit services and loans; international banking services; and automated teller machine, Internet banking, and telephone banking services. As of April 25, 2011, Bank of Marin Bancorp operated 17 branch offices in Marin, San Francisco, Napa, and Sonoma counties. The company was founded in 1989 and is headquartered in Novato, California.

Hot Warren Buffett Stocks To Own For 2014: Saunders International Ltd(SND.AX)

Saunders International Limited designs, constructs, and maintains steel bulk liquid storage tanks and reservoirs in Australia. It constructs water reservoirs and petroleum tanks, as well as acid, bitumen, and chemical tanks. The company also offers facilities maintenance services, including risk based maintenance prioritizing, QA compliant inspection, decommissioning and recommissioning, in-house engineering analysis and workshop fabrication, mechanical repair, and preventative maintenance services. In addition, it provides steel fabrication services, which consists of rolling, pressing, abrasive blasting, and painting. The company offers its products to companies operating in petroleum, mining, mineral processing, manufacturing, water, and waste water sectors. Saunders International Limited was founded in 1951 and is headquartered in Condell Park, Australia.

Hot Warren Buffett Stocks To Own For 2014: Skyepharma(SKP.L)

SkyePharma PLC engages in the research and development, manufacture, and sale of prescription pharmaceutical products worldwide. It offers Pulmicort PMDI, a hydrofluoroalkane metered dose inhaler for the treatment of asthma; and Solaraze, a topical gel treatment for actinic keratosis. The company?s oral products consist of Sular, a calcium channel blocker antihypertensive therapy; Triglide, an oral fibrate that reduces elevated plasma concentrations of triglycerides; Lodotra, an anti-inflammatory drug for treating the pain and stiffness caused by rheumatoid arthritis; Paxil Controlled Release, a selective serotonin reuptake inhibitor antidepressant; Xatral OD/Uroxatral, a selective alpha-blocker for treating the urinary symptoms of benign prostatic hyperplasia; Coruno for the oral treatment of chronic angina pectoris; Madopar Dual Release, which is indicated for the oral treatment of various forms of the Parkinson disease; diclofenac-ratiopharm uno for pain and inflammati on treatment; ZYFLO CR, a leukotriene synthesis inhibitor oral anti-inflammatory asthma drug; and Requip XL, a once daily formulation for Parkinson?s disease. Its inhalation pipeline products include Flutiform, which completed Phase-III clinical trials for the treatment of asthma; and Flutiform that is in Phase-III clinical trials for the treatment of asthma. The company?s oral pipeline products comprise Lodotra, which is in Phase-III clinical trials for the treatment of rheumatoid arthritis; SKP-1041 that is in Phase-II clinical trials for the treatment of sleep maintenance; and SKP-1052, which is in Phase-I clinical trial for the treatment of diabetes. The company was founded in 1910 and is headquartered in London, the United Kingdom.

Hot Warren Buffett Stocks To Own For 2014: WesBanco Inc.(WSBC)

WesBanco, Inc. operates as a holding company for WesBanco Bank, Inc. that provides various financial products and services. It engages in generating deposits and originating loans. The company?s deposit products include interest bearing demand deposits, money market accounts, savings deposits, and certificate of deposits. Its loan portfolio comprises commercial real estate loans; commercial and industrial loans; residential real estate loans that consist of loans to purchase, construct, or refinance personal residences, including one-to-four family rental properties; home equity lines of credit; and consumer loans comprising of installment loans to finance purchases of automobiles, motorcycles, boats, and other recreational vehicles, and lines of credit. The company, through its other subsidiaries, also offers property, casualty, and life insurance, as well as benefit plan sales and administration for personal and commercial clients; and discount brokerage and asset manag ement services. In addition, it provides trust services and various investment products, including mutual funds, as well as engages in leasing commercial real estate properties. As of February 26, 2010, the company operated 114 branch locations and 138 automated teller machines in West Virginia, Ohio, and Pennsylvania. The company was founded in 1968 and is headquartered in Wheeling, West Virginia.

Advisors' Opinion:

• [By WWW.GURUFOCUS.COM]

  WesBanco Inc. (WSBC) operates as a holding company for WesBanco Bank Inc. that provides retail banking, corporate banking, personal and corporate trust services, and mortgage banking and insurance services. Aug. 22, the company increased its quarterly dividend 5.3% to $0.20 per share. The dividend is payable Oct. 1, 2013 to shareholders of record on Sept. 13, 2013. The yield based on the new payout is 2.6%.

Hot Warren Buffett Stocks To Own For 2014: Jack Henry & Associates Inc.(JKHY)

Jack Henry & Associates, Inc. (JHA) provides integrated computer systems and services for in-house and outsourced data processing to commercial banks, credit unions, and other financial institutions primarily in the United States. It engages in processing transactions, automating business processes, and managing information services. The company?s Jack Henry Banking brand provides integrated data processing systems to de novo or start-up institutions and mid-tier banks, as well as markets three core banking software systems, such as SilverLake, a robust IBM i-based system designed for commercial-focused banks; CIF 20/20, a parameter-driven and easy-to-use system; and Core Director, a Windows-based and client/server system that offers intuitive point-and-click operation. Its Symitar brand supports credit unions with information and transaction processing platforms that provide enterprise-wide automation. This brand?s solutions include Episys, a robust IBM p-based system p rimarily designed for credit unions; and Cruise, a Windows-based and client/server system for credit unions. The company?s ProfitStars brand provides specialized products and services that enhance the performance of financial service organizations and corporate entities. Its iPay Technologies brand operates as an electronic bill pay for banks and credit unions with turnkey, and configurable retail and small business electronic payment platforms. JHA also offers complementary solutions comprising business intelligence and bank management, retail and business banking, member and member business services, Internet banking and electronic funds transfer, risk management and protection, and item and document imaging solutions. In addition, it provides data conversion, software implementation, training, and support services, as well as sells hardware systems. The company has strategic relationship with IBM Corporation. JHA was founded in 1969 and is based in Monett, Missouri.

Advisors' Opinion:

• [By Jay Jenkins]

  For U.S. Bancorp, a fine of this magnitude is nothing more than a slap on the wrist. However, it is a harbinger for change in how regulators view third-party relationships. Banks will now have to think long and hard about outsourcing, even to reputable companies like Jack Henry and Associates (NASDAQ: JKHY  ) and Fiserv (NASDAQ: FISV  ) .�

• [By Seth Jayson]

  Margins matter. The more Jack Henry & Associates (Nasdaq: JKHY  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Jack Henry & Associates's competitive position could be.

Coutts Cutting Japan Stocks on Concern About Third Arrow

Coutts & Co., the wealth management unit of Royal Bank of Scotland Group Plc, is cutting holdings of Japanese shares on concern Prime Minister Shinzo Abe won't pass the structural reforms needed to boost the economy.

Coutts shifted from overweight to neutral on the best-performing developed-market equities on signs Abe will squander the early decisiveness of Bank of Japan Governor Haruhiko Kuroda, said Gary Dugan, chief investment officer for Asia and the Middle East. With a sales-tax increase approaching in April, Abe is failing to deliver on reform measures that would ease the burden of the levy, Dugan said.

"The 'third arrow' of Prime Minister Abe's recovery plan appears to be veering off target," Dugan said by phone from Singapore on Oct. 18. Coutts, the U.K. company founded in 1692, managed 33.1 billion pounds ($53.4 billion) of assets as of June 30. "On the government side, things are just slipping. The worry is that Japan is controlled by pressure groups."

Inflation accelerated and growth quickened after Kuroda's unprecedented decision in April (TPX) to double the monetary base of the world's third-largest economy. While the signs of progress drove the Topix index to an almost five-year high in May, equities have since slumped about 5 percent as investors wait for Abe's so-called "third arrow" of structural reform to make the economic recovery self-sustaining.

Sales Tax

Abe, grappling with a public debt more than twice gross domestic product, is implementing the previous government's plan to raise the sales tax to 8 percent from 5 percent, the first increase since 1997. He announced a 5 trillion yen ($51 billion) stimulus package on Oct. 1 to cushion the blow, which a Cabinet Office statement showed includes public-works spending and tax breaks for companies. Specific measures will be explained in early December, Abe said.

"A lot of people were expecting more detail," Dugan said. "And now we're hearing stories about political infighting and pressure groups are saying 'please don't touch this, please don't touch that'."

Abe may have to put off plans for significant deregulation of the labor market in special economic zones, including lifting restrictions on working hours for white-collar workers, the Nikkei newspaper reported on Oct. 18.

Japanese farmers, which benefit from tariffs to protect local agriculture, oppose trade-liberalization talks with the U.S.-led Trans Pacific Partnership group of nations. Rice has a tariff of 778 percent.

Backing Away

Abe may also be backing away from a pledge to require companies have outside directors on their boards, according to a draft document prepared by the Justice Ministry that was obtained yesterday. New rules will only require companies to justify the lack of outside directors, without forcing them to appoint any independent board members, it showed.

Coutts turned positive on Japanese shares a year ago as signs emerged that Abe may win power, Dugan said. The bank added to holdings around April as the BOJ said it will seek to drive inflation (JNCPIYOY) to 2 percent. Coutts remained "maximum overweight" until this month, when it started selling out of some Japanese equity funds on concern Abenomics was stalling, Dugan said.

The private bank is watching for Abe to restart nuclear reactors shut down after the March 2011 Fukushima nuclear meltdown, and cut corporate taxes, he said.

High Tax

Japanese businesses pay taxes of 35.6 percent, according to the finance ministry. The levies are the highest after the U.S. among Organization for Economic Cooperation and Development nations. Abe on Oct. 1 asked the ruling party to look into lowering the rate as soon as possible.

Such a step is the most crucial reform for the Japanese economy, according to Dugan. If Abe fails to do that by about December, Coutts will reduce Japanese investments even further until it holds less of the nation's equities than the benchmarks it tracks.

"The only way companies are going to give a big leap of faith and increase wages is if the government delivers on improving their cash flows by bringing down their energy bills and reducing their corporation tax," Dugan said. "Unless you get wage growth, you cannot get sustained improvement in the Japanese economy and you cannot reach the inflation targets."

Wages Slide

Regular wages for the nation's workers excluding overtime and bonuses fell 0.4 percent in August from a year earlier. The decline underscores that companies have yet to grow confident enough to start boosting salaries, even as they sit on what the BOJ calculated was 220 trillion yen in cash at the end of June.

Abe took office in December vowing to revive growth. Japan's economy expanded for three straight quarters through June, with output for the three months through September due to be reported next month.

"Buy my Abenomics," the Prime Minister said in a speech at the New York Stock Exchange on September 25. "The Japanese economy that now surrounds us is exceptionally good," he said.

Confidence among Japan's large manufacturers rose to the highest since the early stages of the global credit crisis in 2007, the quarterly Tankan index showed on Oct. 1.

"The market will hold up as long as economic data remains clear and it's got a bit of momentum at the moment," Dugan said. "But if we get more headlines that Abe fails to deliver on something else again, then in my mind I would say thank you very much, I'll just take more money out."

Top 5 High Tech Companies To Own In Right Now

When Citigroup (NYSE: C  ) turned in its first-quarter earnings report, the stock initially went wild. While things turned nasty shortly thereafter, it certainly wasn't because Citi had a disappointing report card. Indeed, the megabank knocked aside analysts' predictions on both earnings and revenue, giving CEO Michael Corbat a nice big pat on the back after a full quarter as the new kid on the block.

While Corbat deserves credit for some of the good news contained in that announcement, one area of Citi that was given special attention by former CEO Vikram Pandit -- investment banking -- truly shone, making the whole of the company look spiffier than it would have otherwise.

Decisions of the past are creating profits now
It was on Pandit's watch that Citigroup hired high-flying UBS investment banker Stephen Traber back in mid-2010. Trauber was well known for bolstering UBS' energy investment division, and brought along his own team when he joined Citi. Although Trauber noted that the move wasn't motivated by money, the pay package was to die for: A total compensation package that could reach $30 million over a three year period.

Top 5 High Tech Companies To Own In Right Now: Otter Tail Corporation(OTTR)

Otter Tail Corporation engages in electric and nonelectric operations in the United States and internationally. It operates in six segments: Electric, Plastics, Manufacturing, Health Services, Food Ingredient Processing, and Other Business Operations. The Electric segment includes the production, transmission, distribution, and sale of electric energy through coal, wind, hydro, natural gas, and oil in Minnesota, North Dakota, and South Dakota. As of December 31, 2009, it provided electricity to approximately 130,900 customers, including residential, industrial, commercial, and other customers. This segment also operates as a wholesale participant in the Midwest Independent Transmission System Operator markets. The Plastics segment involves in producing polyvinyl chloride (PVC) pipes. The Manufacturing segment engages in the production of wind towers; contract machining; metal parts stamping and fabrication; production of waterfront equipment; and material and handling tray s, and horticultural containers. The Health Services segment sells diagnostic medical equipment, patient monitoring equipment, and related supplies and accessories. This segment also provides equipment maintenance service and diagnostic imaging services; and involves in the rental of diagnostic medical imaging equipment to various medical institutions. The Food Ingredient Processing segment produces dehydrated potato products. The Other Business Operations segment engages in residential, commercial, and industrial electric contracting; fiber optic and electric distribution systems; water, wastewater, and HVAC systems construction; and transportation and energy services businesses. The company was formerly known as Otter Tail Holding Company and changed its name to Otter Tail Corporation in 2001. Otter Tail Corporation was founded in 1907 and is based in Fergus Falls, Minnesota.

Advisors' Opinion:

• [By Dividend]

  Otter Tail (OTTR) has a market capitalization of $1.13 billion. The company employs 2,286 people, generates revenue of $859.24 million and has a net income of $38.97 million. Otter Tail�� earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $142.22 million. The EBITDA margin is 16.55 percent (the operating margin is 8.02 percent and the net profit margin 4.54 percent).

Top 5 High Tech Companies To Own In Right Now: Advance Auto Parts Inc(AAP)

Advance Auto Parts, Inc., through its subsidiaries, operates as a retailer of automotive aftermarket parts, accessories, batteries, and maintenance items. It operates in two segments, Advance Auto Parts (AAP) and Autopart International (AI). The AAP segment operates stores, which primarily offer auto parts, including alternators, batteries, chassis parts, clutches, engines and engine parts, radiators, starters, transmissions, and water pumps; accessories comprising floor mats, mirrors, vent shades, MP3 and cell phone accessories, and seat and steering wheel covers; chemicals consisting of antifreeze, freon, fuel additives, and car washes and waxes; and oil and other automotive petroleum products. This segment also provides battery and wiper installation, battery charging, check engine light reading, electrical system testing, video clinics and project brochures, loaner tool programs, and oil and battery recycling services; and sells its products through online. The AI segm ent operates stores that offer replacement parts for domestic and imported cars, and light trucks to customers in northeast and mid-Atlantic regions, as well as to warehouse distributors and jobbers in North America. As of January 1, 2011, the company operated 3,369 AAP stores, including 3,343 stores located in the northeastern, southeastern, and Midwestern regions of the United States under the Advance Auto Parts and Advance Discount Auto Parts trade names; 26 stores situated in Puerto Rico and the Virgin Islands under the Advance Auto Parts and Western Auto trade names; and 194 stores under the Autopart International trade name in the United States. It serves do-it-yourself, do-it-for-me, or commercial customers. The company was founded in 1929 and is based in Roanoke, Virginia.

Advisors' Opinion:

• [By Ben Levisohn]

  Some individual stocks certainly did this week. Chipotle Mexican Grill (CMG) rose 19% to $509.74–a new all-time closing high–despite missing earnings forecasts. Strong same-store sales will do that. Baker Hughes (BHI), meanwhile, gained 11% to $55.55 after the oil-services company reported far stronger earnings than analysts had expected thanks to its business in the Middle East and Asia Pacific. Advance Auto Parts (AAP) gained 20% after purchasing a competitor and making itself the largest auto-parts supplier by revenue.

• [By Lauren Pollock]

  Among the companies with shares expected to actively trade in Wednesday’s session are Mattel Inc.(MAT), Stanley Black & Decker Inc.(SWK) and Advance Auto Parts Inc.(AAP)

• [By Dan Caplinger]

  What's interesting, though, is that historically, auto-parts makers are seen as relying on the lack of success among automakers. After all, new cars don't need parts nearly as often as older cars do, and when Ford and GM perform well, their customers don't have to rely as much on Genuine Parts or competitors AutoZone (NYSE: AZO  ) and Advance Auto Parts (NYSE: AAP  ) for replacements. Yet, even though Advance's 15% gain, and AutoZone's 20% rise year to date, aren't quite as substantial as Genuine Parts, they still signal a paradigm shift in the way investors look at the industry, perhaps recognizing that for every new car sold, there's usually a used car that gets traded in, and so good news for Ford and GM sales might actually translate into more business for the parts industry.

Best Medical Stocks To Own For 2014: Sonus Networks Inc.(SONS)

Sonus Networks, Inc. provides voice and multimedia infrastructure solutions. The company offers session border control (SBC), voice over Internet protocol (VoIP), and access and VoIP media gateway solutions that allow the delivery of voice and multimedia sessions over IP networks. Its products include GSX9000 Open Services Switch that enables voice traffic to be transported over packet networks; GSX4000 Open Services Switch; NBS9000 Network Border Switch that permits service providers to transform their time division multiplexing networks to IP; PSX Policy & Routing Server, which translates business policies into actual call control, routing, and service selection decisions; NBS5200 Network Border Switch that provides SBC functionality; and ASX Call Feature Server that provides local area calling and regulatory features for residential and enterprise markets. The company also offers Network Analytics Suite of performance management products, including NetScore network perf ormance analysis tool, NetAssure voice quality monitoring tool, and NetEng network audit and visualization engine that are used for the collection, monitoring, reporting, and notification of performance metrics. In addition, it provides professional consulting and services to support its IP communication solutions; and program management, network deployment design, softswitch and subscriber database design, network verification and audit, custom application and adaptor development, OSS and API integration, migration and upgrade, and managed services. The company serves long-distance and local exchange carriers, Internet service providers, wireless operators, cable operators, financial institutions, retailers, state and local governments, and multinational corporations. It sells its products primarily through a direct sales force in the United States, Europe, the Asia-Pacific, and the Middle East. Sonus Networks, Inc. was founded in 1997 and is headquartered in Westford, Mass achusetts.

Advisors' Opinion:

• [By Evan Niu, CFA]

  What: Shares of Sonus Networks (NASDAQ: SONS  ) have popped today by upwards of 17% after the company reported first-quarter earnings.

  So what: First quarter sales totaled $63.3 million, which turned into a non-GAAP net loss of $0.02 per share. Investors were expecting just $61.1 million up top and an adjusted loss of $0.03 per share, meaning the figures were a beat relative to consensus estimates. Session border controller, or SBC, revenue was up 77% to $30 million.

• [By Roberto Pedone]

  One networking player that's starting to move within range of triggering a big breakout trade is Sonus Networks (SONS), which provides networked solutions for communications service providers and enterprises in the U.S., Europe, the Middle East, Africa, and the Asia Pacific. This stock has been red hot so far in 2013, with shares up 104%.

  If you take a look at the chart for Sonus Networks, you'll notice that this stock has been trending sideways for the past month, with shares moving between $3.25 on the downside and $3.72 on the upside. Shares of SONS have been finding support over the last month each time the stock has pulled back to its 50-day moving average. This stock is now starting to trend a bit higher and move within range of triggering a breakout trade above the upper-end of its sideways consolidating chart pattern.

  Traders should now look for long-biased trades in SONS if it manages to break out above some near-term overhead resistance at $3.56 to $3.59 a share and then once it takes out its 52-week high at $3.72 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 2.50 million shares. If that breakout hits soon, then SONS will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $5 to $5.50 a share.

  Traders can look to buy SONS off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $3.33 to $3.25 a share, or right below more support at $3.10 a share. One could also buy SONS off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Top 5 High Tech Companies To Own In Right Now: Hooker Furniture Corporation(HOFT)

Hooker Furniture Corporation, together with its subsidiaries, designs, develops, imports, and markets residential wood, metal, and upholstered furniture products in North America. The company offers wood furniture products, including home entertainment, home office, accent, dining, bedroom, and bath furniture in the upper-medium price points sold under the Hooker Furniture brand, and sold at moderate price points under the Envision Lifestyle Collections by Hooker Furniture brand. It also provides youth bedroom furniture under the Opus Designs by Hooker brand; and motion and stationary leather furniture. In addition, the company offers various residential leather and fabric upholstered furniture under the Bradington-Young and Seven Seas upholstery brand; specializes in leather reclining and motion chairs, sofas, club chairs, and executive desk chairs; and offers upscale occasional chairs and other seating under the Sam Moore upholstery brand. It serves retailers of resident ial home furnishings, including independent furniture stores, specialty retailers, department stores, catalog and Internet merchants, interior designers, and national and regional retail chains. The company was founded in 1924 and is headquartered in Martinsville, Virginia.

Advisors' Opinion:

• [By Dividends4Life]

  Memberships and Peers: LEG is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers��Index and a Dividend Champion. The company's peer group includes: Hooker Furniture Corp. (HOFT) with a 2.4% yield, Flexsteel Industries Inc. (FLXS) with a 2.7% yield and Ethan Allen Interiors Inc. (ETH) with a 1.4% yield.

Top 5 High Tech Companies To Own In Right Now: Invensys(ISYS.L)

Invensys plc develops and applies technologies that enable the operation of manufacturing and energy-generating facilities, mainline and mass transit rail networks, and appliances worldwide. The company?s Invensys Operations Management division provides technology, software, and consulting services. Its services create and apply technologies to facilitate operation of industrial and commercial operations, such as oil refineries, fossil fuel and nuclear power plants, petrochemical works, and other manufacturing sites. This division offers Foxboro and Eurotherm recorders, and other equipment that measure and record plant information; distributed control systems, and Triconex, an automated safety system; SimSci-Esscor simulation software, which allows plant operators to simulate various scenarios for training purposes; and Avantis asset management software that schedules predictive maintenance. The company?s Invensys Rail division provides software-based signaling, communic ation, and control systems that facilitate operation of trains in mainline and mass transit networks. This division offers rail trackside and train-based monitoring products for the measurement of traffic in a rail network, identifying where trains are, and how fast they are going. Its European rail traffic management system, communication based train control, and train safety solutions control traffic on rail networks. The company?s Invensys Controls division designs, engineers, and manufactures products, components, systems, and services used in appliances, heating, air conditioning/cooling, and refrigeration products in a range of industries in residential and commercial markets. This division?s products within appliances or climate control systems various conditions comprising heat, humidity, and pressure. The company is based in London, the United Kingdom.

Mortgage Rate Run-Up Runs Out of Steam

Freddie Mac released its weekly update on national mortgage rates this morning, and it looks like the sharp price run-up of recent weeks is finally taking a breather.

Thirty-year fixed rate mortgages (FRM) edged down five basis points this week, falling to 3.93%, while 15-year FRMs showed a steeper six-basis-point drop to 3.04%. Among variable-rate products, 5/1 adjustable-rate mortgages held steady at 2.79%, while one-year ARMs slipped one basis point to 2.57%.

Commenting on today's news, Freddie Mac Chief Economist Frank Nothaft said market participants were cautious this week while awaiting the Federal Reserve's updated monetary policy announcement. "The Fed stated that economic growth has been expanding at a moderate pace and that labor market conditions have shown further improvement, although the unemployment rate remains elevated," Nothaft is quoted as saying. In conjunction with low inflation levels, Nothaft noted this all adds up to "the Fed will continue its bond-buying program at the current pace and maintain its highly accommodative monetary policy stance."

This in turn suggests interest rates will remain low, and appears to have curbed the spike in mortgage rates rising on fears of worse news.

link

Blackhawks vs. Bruins: Why Investors Should Care About the First Original Six Cup in 34 Years

For the first time in 34 years, two of the Original Six NHL teams will be facing off in the Stanley Cup Final. While Fool contributor Doug Ehrman cares as a lifelong fan of the Chicago Blackhawks, there are also at least three companies -- and their investors -- that should be excited as well. Comcast's (NASDAQ: CMCSA  ) NBC Sports will be carrying the event and reaping the rewards as fans in two major markets tune in for the action. Disney (NYSE: DIS  ) and Google (NASDAQ: GOOG  ) will also see some benefits.

In the following video, Doug discusses why each of these three companies may be excited to see these two teams facing off.

It's easy to forget that Walt Disney is more than just the House of Mouse -- it's also the owner of ESPN, for one thing. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney's allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch as well as the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today.

Falling in Love With Butane

Fall is always a welcome change of pace for most people after a long, hot summer. It brings relief not only from the temperatures, but at the gasoline pump as well. Pundits frequently notice this phenomenon during election years, and assume that vested interests are trying to manipulate prices to win elections. But there is a more straightforward explanation to what’s going on, and it can benefit consumers, LNG producers, and sometimes refiners.

Everyone knows that gasoline evaporates. What you may not know is that there are numerous recipes for gasoline, and depending on the ingredients the gasoline can evaporate at very different rates. And because gasoline vapors contribute to smog, the EPA seasonally regulates gasoline blends to minimize gasoline vapors.

The way the EPA regulates these vapors is by putting seasonal limits on the Reid vapor pressure (RVP). The RVP specification is based on a test that measures vapor pressure of the gasoline blend at 100 degrees F. Vapor pressure is a measure of the tendency to evaporate; the higher the vapor pressure the faster the evaporation rate. Normal atmospheric pressure is around 14.7 lbs per square inch (psi) at sea level. Substances with a vapor pressure higher than normal atmospheric pressure are gases, and those with a vapor pressure lower than normal atmospheric pressure are liquids.

But vapor pressure is also a function of temperature. Under normal atmospheric temperatures water is a liquid because its vapor pressure is below 14.7 psi. It still evaporates (i.e. it still has a vapor pressure), but very slowly. As water is heated, its vapor pressure increases, and as the boiling point of water is reached the vapor pressure of water reaches that of atmospheric pressure and the water becomes a gas (steam).

The same phenomenon applies to gasoline. As the temperature increases, the vapor pressure rises. Thus, in summer it is important to keep the ! RVP of gasoline at a lower level than in winter. The specific limit varies from state to state (and tends to be more restrictive in congested areas and warmer locations), but 7.8 psi is a common RVP limit in much of the US in the summer months. When a gasoline blender produces gasoline, it must be tested and it must be below the RVP limit for the month it is to be sold in.

In September, the RVP specifications begin to be phased back to cold weather blends which can have an RVP as high as 15 psi in some locations. This has a big effect on the cost of producing gasoline. The reason for this is butane.

Butane has an RVP of 52 psi, which means pure butane is a gas at normal pressures and temperatures. But it can be blended into gasoline, and its fractional contribution to the blend roughly determines its fractional contribution to the overall vapor pressure. As long as the total blend does not exceed normal atmospheric pressure (again, ~14.7 psi) butane can exist as a liquid in a gasoline blend.

But with a vapor pressure of 52 psi, butane can’t make a large contribution to summer blends where the vapor pressure limit is 7.8 psi. For example, if a gasoline blend contained 10 percent butane, its contribution to the vapor pressure limit is already 5.2 psi and you would still have 90 percent of the blend to go. It isn’t feasible to blend much butane into gasoline when the vapor pressure requirement is low. But when the limit increases by 5 or 7 psi, it becomes feasible to blend large quantities of butane.

Why do we care about blending butane? Because it is abundant and cheap. Butane can routinely trade at a $1/gallon discount to crude oil or gasoline. Butane is a component of natural gas liquids (NGLs), which are condensed out during natural gas processing. Given the huge expansion of natural gas production in the US, it should come as no surprise that NGL production is also on the rise. (Butane is also a byproduct of oil refining.)

Thus, butane lowers the cost of producing gasoline in the “winter” blends. Not only is it cheaper, but because butane can be blended at higher levels after Sept. 15, the gasoline supply increases. For example, in the summer a gasoline blend might only contain 2 percent butane. In the fall, that gasoline blend might contain 10 or 12 percent butane, which can reduce the cost of production by a dime a gallon — and further reduce the price because gasoline supplies have increased by 10 percent thanks to the inclusion of butane.

This transition takes place after the high demand summer driving season has passed. Hence, supplies increase and cost less to produce just as demand falls. This perfect storm takes place every fall, and will generally drive down the cost of gasoline for consumers.

Beyond consumers, this seasonal increase in butane demand is a temporary boon for NGL producers who have suffered from low prices in recent years. Refiners may also benefit, but this is a more complex dynamic. Their costs for producing gasoline are lower, but the increase in supplies also increases competition, which may force them to pass on all of the savings to consumers.

Sometimes other factors can trump seasonal trends. In 2005, another perfect storm called Hurricane Katrina caused more than enough problems to trump the normal season effect of falling prices. Occasionally hurricanes or geopolitical events will have a big enough effect on oil prices that the seasonal effect is diminished or eliminated.

But more often than not, falling leaves are accompanied by falling gasoline prices, and now you know why. Enjoy it while you can, though. Spring always brings an end to this perfect storm when the RVP specification steps back down on May 1 — increasing costs and decreasing supplies just in time for the start of the summer driving season.

 

The Qualcomm-Samsung Quandary

It is well known throughout the industry that Samsung (NASDAQOTH: SSNLF  ) , the world's second-most profitable smartphone vendor, designs its own system-on-chip products for use in its devices. Despite this, Samsung very often uses designs from other vendors depending on the requirements of a phone. In particular, Samsung uses Qualcomm (NASDAQ: QCOM  ) chips in many of its flagship devices, largely due to the fact that when it comes to cellular connectivity (and efficient, highly integrated smartphone apps processors) Qualcomm is king. However, while this certainly speaks volumes to the skill of Qualcomm's chip teams, there is a risk that I've alluded to in prior articles: Samsung's own in-house chip team(s).

Background on Samsung and ARM
While Qualcomm's chips feature all-Qualcomm IP from the applications processor to the graphics, Samsung's Exynos chips have largely consisted of off-the-shelf ARM (NASDAQ: ARMH  ) Cortex A-series CPUs with either ARM Mali GPUs or Imagination's PowerVR. Naturally, while off-the-shelf IP aimed at multiple different markets isn't quite going to be as optimal as custom-tailored IP, the IP that is available is, for the most part, quite good. Further, there's no reason that Samsung can't/won't develop its own custom IP if it needs something more fine-tuned for its need.

What has given Qualcomm an advantage is that its modems (baseband and RF) are simply the best in the industry, particularly in adopting new cellular standards ahead of the curve. Qualcomm has been shipping LTE for years now and embeds its third-generation LTE-Advanced modem in its latest Snapdragon 800 processor – while many of its competitors are still struggling to ship their first LTE solutions. Samsung does have its own cellular baseband efforts, but they're not quite in Qualcomm's league.

Qualcomm: A potential problem but with an interesting twist
A big potential problem for Qualcomm is that if Samsung is to get its cellular baseband efforts in order (and Samsung's RF transceiver supplier Silicon Motion seems to think that this will happen sooner or later – with Samsung's intent on "sooner"), then Qualcomm could lose a good chunk of chip sales fairly quickly.

Now, that being said, the relationship between Qualcomm and Samsung is a little bit more nuanced than it would seem on the surface. Would Samsung like to cut out the middle-man if possible and use all of its own components? Sure. But Qualcomm isn't an ordinary supplier to Samsung – it's also a foundry customer. For example, the LTE baseband found in the Apple A7 is Qualcomm designed but Samsung built. Further, it's not unreasonable to expect that a portion of Snapdragon apps processors (and discrete modems if included) that Samsung uses are actually built in Samsung's chip manufacturing facilities rather than at the world's leading foundry, Taiwan Semiconductor, which, interestingly enough, lists Qualcomm as its largest customer.

So, while Samsung probably isn't too thrilled to be paying Qualcomm's design margin, it is in many cases pocketing the foundry margins, which could be enough for Samsung to not be so gung-ho on simply cutting Qualcomm off – after all, a good foundry relationship allows Samsung to profit from Qualcomm components that go into non-Samsung devices, while at the same time Samsung's phones benefit from Qualcomm's design expertise. It's really a win-win.

So, maybe it's not all bad
While there is still risk that Samsung's chip teams produce silicon that's compelling enough to give Qualcomm the boot, there are a number of nuances to this relationship that will help to keep this relationship unusually strong. That is, beyond the fact that today, Qualcomm is still the clear leader in smartphone silicon – from apps processor to RF.

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eBay Drops on Weak Guidance

NEW YORK (TheStreet) -- eBay (EBAY) shares fell 4.6% to $51.06 in after-hours trading after the company posted earnings that missed Wall Street expectations.

The San Jose based e-commerce giant posted third-quarter earnings of 64 cents a share on $3.89 billion in revenue. Analysts surveyed by Thomson Reuters were looking for the company to earn 63 cents a share on $3.9 billion in sales.

The company noted Enabled Commerce Volume (ECV) grew 21% for the quarter, to $52 billion. Marketplaces saw a year-over-year revenue increase of 12% to $2 billion, adding 3.9 million active users during the quarter, ending the time frame with 124 million users.  Gross merchandise volume rose 13% to $18 billion.

PayPal, which has come under attack from upstarts like Square, saw a healthy 19% increase in revenue to $1.6 billion during the quarter.  The payments platform ended the quarter with 137 million accounts, up 5 million sequentially, and 17% year over year. Net total payment volume grew 25% to $44 billion.

Mobile commerce volume was exceptionally strong during the quarter, up 75% year-over-year, with downloads now exceeding 200 million. The company's mobile apps added 3.2 million new customers.

"We delivered strong third quarter results, with mobile driving a significant portion of our new user growth and continuing to transform how consumers shop and pay around the world," said John Donahoe, President and CEO, eBay in the press release. "Our scale and experience, the strength of our global commerce platforms, our technology assets and our mobile commerce capabilities strongly position us to be a leader in the commerce revolution under way. In the past 12 months we have enabled $200 billion of commerce volume, a 20 percent increase in a fairly lackluster macro environment. That growth demonstrates the strength of our core businesses and our power as a partner, not a competitor, to merchants, brands and retailers."

For the fourth-quarter, eBay e! xpects to earn between 79 cents and 81 cents per share, with sales between $4.5 billion and $4.6 billion.  Analysts surveyed expect eBay to earn 83 cents per share on $4.64 billion in revenue.

Shares of eBay closed the regular session higher, gaining 0.83% to finish at $53.52.

Written by Chris Ciaccia.

Hold the Champagne, Congress Is Just Getting Started

Stocks finished in the green for a third consecutive day on Monday as hope for a deal that would avert a debt default and reopen the government grew throughout the session.

Things started off a bit on the rocky side however as the DJIA was down more than 100 points two minutes after the opening bell. It turns out that the optimism which had pushed stocks up on Friday had quickly reversed after the politicians failed to make any substantive progress over the weekend.

And before investors could pour that first cup of coffee, there was a sea of red numbers scrolling wildly at the corner of Broad and Wall.

For those keeping score at home, the DJIA has advanced an eye-popping 825 points over the past week. The S&P 500 has moved up by 3.2 percent since last Wednesday's low and the NASDAQ closed out Monday's session just a whisker away from its highest close since the spring of 2000.

And speaking of new highs, both the Russell 2000 (small-caps) and the S&P 400 (mid-caps) indices finished Monday's session at fresh all-time highs. So, it will suffice to say that the fear of what might happen to the country should Congress do the unthinkable isn't sending investors underneath their desks at the present time.

"Hopium" Revisited

Despite all the fear mongering and the doom-and-gloom being espoused by the popular press, word that Senate Majority Leader Harry Reid was "optimistic that a deal would be reached this week" managed to turn traders' frowns upside down around mid-morning on Monday.

Then the reports that the White House was scheduled to meet with Congressional leaders Monday afternoon gave the dip buyers a reason to get busy again and for shorts to continue to cover. In short, the market once again appeared to be running on "hopium."

The Latest Plan

Since the deadline clock continues to tick and time is running out, here's the latest on the debt/budget drama... On Sunday, Senate leaders (Harry Reid and Mitch McConnell) began working on plan in response ! to talks breaking down between White House and House Republicans. It was more of the same as Obama rejected the House proposal that would have raised the debt ceiling for 6 weeks in exchange for immediate negotiations on 2014 spending levels and a long-term deficit reduction deal.

The President's rejection was not terribly surprising since the House bill would not have reopened the government and also restricted the Treasury from using "extraordinary measures" to extend the debt ceiling deadline. However, on Monday, Senate Majority Leader Reid said that he was optimistic about a deal that he and Senate Minority Leader McConnell had been working on.

Perhaps the most encouraging development was the cancellation of a meeting between Obama, Biden, Boehner, Reid, McConnell, and Pelosi. At first, the algos knocked stocks back Monday as the headline that the meeting was being cancelled hit the wires. However, within minutes the indices recovered when it was announced that the reason for the cancellation was the Senators were making progress and needed more time.

Reading The Fine Print

At this stage, the market assumes that Senators Reid and McConnell will be able to broker a deal to raise the debt ceiling and reopen the government. In addition, since the plan is expected to be bipartisan in nature and originates in the Senate, it is further assumed that Speaker Boehner will bring such a measure to a vote in the House - and that it will pass.

However, before the champagne corks start to fly and the celebration begins, investors should read the fine print.

According to reports, the current plan being worked on by Reid and McConnell will be another "kick the can" type of solution and would only provide enough funding for the government to operate until January 15, 2014. The problem is January 15 is also the date when the second round of automatic "sequestration cuts" from the 2011 Budget Control Act kicks in. As such, the "solution" to the current problem actually sets up anoth! er round ! of "sequester" battles.

And given that this Congress can't seem to agree on anything - ever - it would appear that the current mess is likely to stick around for at least a couple more months. So, in short... here we go again.

Mr. David Moenning is a full-time professional money manager and is the President and Chief Investment Strategist at Heritage Capital Management. He focuses on stock market risk management, stock analysis, stock trading, market news and research. Click here to claim a free copy of Dave's Special Report on changes in the current market.

Halloween spending seen cooling down this year

NEW YORK (CNNMoney) Consumers are spooked this Halloween -- and it's not just the ghosts, goblins, and ghouls.

Fewer people plan to celebrate the holiday this year, and those who are plan to spend less, according to one survey. Another predicted spending would increase over last year, but at a much slower pace.

The National Retail Federation estimated nearly $7 billion would be spent this year on costumes, candy and artificial cobwebs, about $1 billion less than last year. That translates to an average of about $4.79 less per Halloween reveler. It based those numbers on a survey of almost 5,300 adults.

Separately, IBISWorld projected Halloween spending would grow 3%, down from nearly 18% last season. It estimated the largest spending growth would be for decorations.

The holiday comes as people are generally uncertain or pessimistic about the economy. Consumer confidence dropped this month amid fiscal brinksmanship in Washington. Two-thirds think the U.S. economy is on the decline, according to Gallup survey data.

But despite this year's sluggish outlook, Halloween spending has been on a tear.

Spending has grown 55% since 2005. The only year-over-year drop was in the fall of 2009, when spending dropped about $1 billion from Halloween 2008, after the housing market collapse dealt the country a major blow.

  A Hyundai for the zombie apocalypse

It's not just kids getting in on the fun. According to the NRF, the $1.22 billion forecasted business in adult costumes outpaces the $1.04 billion spent on child costumes. And 13% of survey respondents plan to dress up their pets -- spending a combined $330 million to get Spot and Fluffy in on the act.

It's not all bad news for retailers. The NRF predicted November and December retail sales to grow nearly 4%. Customers will spend just over $600 billion this year, they forecasted.

Netflix tops S&P 500; Expedia sinks on downgrade

SAN FRANCISCO (MarketWatch) — Netflix Inc. shares were the biggest winners in the S&P 500 on Monday on a report that the video streaming company is in talks with major cable operators to add its video service to set-top boxes.

Expedia Inc. slumped in the wake of an analyst downgrade prompted by escalating competition.

Gainers • Government shutdown: Track the latest news out of Washington »
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Netflix (NFLX)  shares surged 7.8%. Netflix is negotiating with Comcast Corp. (CMCSA)  and Time Warner Cable Inc. (TWC)  to make its content available on set-top boxes via a Netflix app, according to reports. However, it's not clear how close they are to a deal, with some operators worried about Netflix using the app as a "Trojan Horse" to sell programs that compete with their own offerings, The Wall Street Journal said. Last month, Sweden's Com Hem and Britain's Virgin Media reached deals to allow Netflix to be accessed via Tivo set-top boxes, according to Reuters.

Western Digital Corp. (WDC)  rose 3.3% while its peer Seagate Technology Inc. (STX)   is 2.3% higher. Total addressable market, or potential revenue opportunity available, for Seagate and Western Digital is expected to have risen slightly in the third quarter from the previous quarter, according to Sherri Scribner, an analyst at Deutsche Bank.

"We remain positive on the group, driven by our long-standing view that robust data growth will be the key driver of demand and that industry consolidation will lead to more stable pricing and profitability. We are buyers of both STX and WDC," said Scribner in a report.

Vertex Pharmaceuticals Inc. (VRTX)  shares gained 3.9%. Geoff Meacham, an analyst at J.P. Morgan, said last week that he rates the drug maker's stock at overweight due to opportunities for the company in the cystic fibrosis area.

Click to Play U.S. trio awarded Nobel Prize for Economics

Eugene Fama, Lars Peter Hansen and Robert Shiller have won the Nobel Memorial Prize in Economic Sciences for their research into asset prices. Photo: Getty Images

Decliners

Expedia (EXPE)  shares skidded 6.2%. The stock was downgraded to hold from buy and its target price slashed to $51 from $66 by analyst Ross Sandler at Deutsche Bank. "[Expedia's] challenges in 2013 are fairly well documented, its brands are facing much more intense competition in the U.S. market and customer acquisition costs are inflating," said Sandler in his note.

Whirlpool Corp. (WHR) shed 6.5%. Shares of the home appliances company were pressured due to a report suggesting that appliance demand has slowed with shipments up 5% to 7% in September compared to double-digit growth in August, according to StreetInsider.com.

Homebuilders were among the worst laggards as investors became more jittery ahead of the looming deadline on Thursday for lifting the debt limit. D.R. Horton Inc. (DHI)  is off 2.1% while Lennar Corp. (LEN)  shed 1.5%. PulteGroup Inc. (PHM)  slid 0.7%.

Top Tickers Trending

$YHOO: Yahoo Inc. (YHOO)  shares fell 0.4%. The Internet company is scheduled to release quarterly results on Tuesday. Analysts surveyed by Thomson Reuters forecast Yahoo to report earnings of 33 cents a share in the third quarter.

$C: Citigroup Inc. (C)  shares were up 0.8%. Citi is on tap to report third-quarter earnings early Tuesday. Analysts project the bank to earn $1.04 a share on revenue of $18.62 billion.

$FB: Facebook Inc. (FB)  has bought start-up Onavo, which was founded in 2010. Onavo's Tel-Aviv office will remain open for business and will become Facebook's new Israeli office. Shares of Facebook bounced back from negative territory to rise 0.8%.

$STZ: Constellation Brands Inc. (STZ)  shares recovered to trade up 0.3%. The alcoholic beverages company, which owns beer brands including Corona and Modelo, notched its all-time closing high of $62.99 on Friday, according to FactSet.

$KLAC: KLA-Tencor Corp. (KLAC)  shares rose 1.9%. Analysts at J.P. Morgan on Monday initiated coverage of KLA-Tencor and Lam Research Corp. (LRCX)  at overweight.

"We recommend exposure to semiconductor capital equipment stocks as we believe the semiconductor manufacturing industry is transitioning through significant inflection points in technology over the next two to three years," said Harlan Sur at J.P. Morgan said in a report. However, Sur initiated Applied Materials Inc. (AMAT)  at neutral, noting that its valuation suggests limited upside potential. Lam gained 0.9% and Applied Materials rose 0.6%.

Gold and the Government Shutdown

MoneyShow's Jim Jubak discusses the reaction of gold prices to the government shutdown and what that may mean for the bottom in gold prices.

If you're an investor in gold or you trade gold, the government shutdown has had to be a disappointment to you. I mean, after all, if the US Government shuts down with a looming debt ceiling crisis and gold doesn't go up, what is it going to take to push gold up? One of the things that is happening here, I think, is you're seeing a reset of where the bottom might be. The consensus was that the bottom for gold was around $1200 an ounce.

Fitch came out, Fitch Ratings, one of the credit rating companies, came out and said, "Well, you know, given the fact that gold is not trading on commercial fundamentals or on actual demand, was trading as kind of a financial instrument, and given the fact that Central Bank seemed to be selling gold, or, at least, not accumulating it, maybe $1200 is not the bottom and we see a foundation at $1000."

They said the problem, of course, is that $1000, and the reason for that being a bottom is that, at $1000, a lot of gold companies are going to have trouble covering their costs and need to raise more money and they're probably going to get downgrades from Fitch and Moody's and S&P, so that's the environment that they see.

So, if you are looking at this and going, "Okay, where do I want to buy, because I like gold as a long-term hedge," what all this thinking has done is really to say, "Okay, $1200 is not the place you want to put in positions, maybe $1000, so positions like that, assumptions like that, predictions like that, tend to be self-fulfilling, since no one wants to buy at $1200 and then see that they could have bought better at a better price at $1000.

Right now, I think the question is wait and see. If current events, the debt ceiling crisis, Italy, whatever around the world, start to make gold look really attractive, I think you then have some possibility that you ought to buy gold now, but right now, since none of those things seem to be moving gold up in a concerted fashion, I think you ought to wait and see whether $1000 an ounce might be the new bottom for this part of the gold cycle.

This is Jim Jubak for the MoneyShow.com video network.

Potash Corp. Drops 2% as Buyers Wait Out Plunging Prices

This should have been a good day for the potash companies. China said growth during the first nine months of the year would be above 7.5%, and that’s helped send metal, mining and resource stocks heading higher.

Bloomberg

But on this day of all days, Potash Corp. of Saskatchewan (POT)–try saying that without starting to stutter–lowered its earnings forecast for the third quarter to 41 cents, down from its previous estimate of 45 to 60 cents. Analyst had been forecasting 48 cents, according to FactSet.

Raymond James analysts Steve Hansen and Daniel Chew explain the reason for the lower guidance:

Stemming from the recent BPC fall-out, POT's revised guidance reflects the acute market uncertainty and lingering turmoil battering global potash markets. Specifically, with potash prices moving sharply lower across most export regions, buyers seem intent on deferring purchases with the hope of securing lower prices and improved macro visibility in the future. Consistent with this view, we note that competing potash bellwethers Mosaic (MOS) and Agrium (AGU) both recently lowered their 2013 global shipment forecasts.

Potash has dropped 1.6% to $31.23 at 12:59 p.m., and its dragging down other potash companies with it. Mosaic has fallen 2.3% to $45.21, Intrepid Potash (IPI) has dipped 0.5% to $15.14 and CF Industries (CF) has declined 1.2% to $204.47. Agrium has buckled the weakness by gaining 0.6% to $82.85.

Facebook as a Successful Collegiate

NEW YORK (TheStreet) - Facebook (FB) probably went public too soon.

Now the company is more like a healthy teenager. The kind who goes to college on his parents' money, gets in trouble at frat parties, but who you just know is going to wind up selling insurance with a trophy wife and lots of friends down the road.

That seems to be Wall Street's view. Despite Facebook's small problems and missteps, investors are finally taking to the biggest initial public offering of 2012. The stock is up 85% year to date and opened today at around $49 a share, well above its IPO price of $38 a share. [Read: Wall Street Should Accept What Oracle Has Become]

The reason is that the company has learned how to create revenue and profits. Just like that teenager figures how to charge fellow students for a keg, or use his charm to make the school paper profitable, Facebook now has sustainable ad revenue and fat margins. Revenue rose over the first six months of this year from $1.45 billion to $1.81 billion, and operating margins are close to 33%. That doesn't all fly to the bottom line because Facebook is paying hefty taxes, $133 million on the first quarter's $353 million in income, $212 million on the second quarter's $545 million. [Read: Again, Apple Proves It's Smarter Than a Dumb Crowd] Maybe it just needs an introduction to Apple's (AAPL) accountant. It's easy to argue that Facebook is overpriced, looking at its current price-to-earnings multiple of 185. With a market cap of almost $120 billion, it's selling at almost 12 times the most optimistic view on 2013 revenue, $10 billion. But that's reasonable compared with Amazon's (AMZN). Cash flow is also accelerating, with more than $2 billion in operating cash during the second quarter alone, and positive changes in net cash over three of the last four quarters. [Read: 8 Signs You're Working for a Deadend Company] The big expenses now seem baked in, like Facebook's cloud-computing centers. Investing cash flow was a negative $7 billion last year, but has run at just negative $1.1 billion this year, which operations more than offset. Facebook's business model is also easier to understand now. It's a company that builds profitable cloud-computing applications and mobile apps, which it releases in a steady stream and usually monetizes with advertising.

Instagram is now getting ads, for instance. Yahoo (YHOO) would love to turn itself into Facebook, but hasn't figured out the internal growth trick yet.

Our Chris Ciaccia has looked at the coming Twitter IPO , and it's easy to conclude that Facebook's own S-1 made more sense. Facebook had more than 10 times Twitter's revenue when it went public, had three times as many users and was actually showing a profit.

Yes, Facebook still has the problems typical of the college years. A party advertised in England on the service drew 600 gatecrashers who trashed the place. Brazil is threatening to take the service down there if Facebook doesn't take some data down. Facebook is even building its own "dorm" for top employees, next to its headquarters, a 21st century company town so that the work and party never end. [Read: 10 Cheapest Beers in the NFL]

All this success is leading to the inevitable backlash, the type any popular jock or beauty queen might face from the nerds and less-popular kids. Buzzfeed now says that Snapchat is cooler, that it's taking on social aspects and that since its data gets automatically erased, it's a safer place to play. Maybe. Facebook was born into a youth culture, and created a new one from scratch. It's sort of like the late Dick Clark, but its American Bandstand has been on only for a few years. [Read: Kass: Shutdown Slowdown] And Clark, despite a youthful appearance that looked a little creepy as he aged, was actually a successful entrepreneur, the kind one could invest in with confidence. I was honored to meet Clark at a cable industry meeting in the 1990s and, whatever else you might think of him, he was really a noble man. For a role model, as he turns 30, CEO Mark Zuckerberg could do worse. At the time of publication, the author was long Yahoo and Apple. Follow @DanaBlankenhorn This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Dana Blankenhorn has been a business journalist since 1978, and a tech reporter since 1982. His specialty has been getting to the future ahead of the crowd, then leaving before success arrived. That meant covering the Internet in 1985, e-commerce in 1994, the Internet of Things in 2005, open source in 2005 and, since 2010, renewable energy. He has written for every medium from newspapers and magazines to Web sites, from books to blogs. He still seeks tomorrow from his Craftsman home in Atlanta.

5 Trades to Take From the Health Care Sector

BALTIMORE (Stockpickr) -- While Congress battles it out over Obamacare on Capitol Hill, tradable setups are popping up in health care stocks.

At the end of the day, all of the shenanigans that caused the government shutdown can be traced back to health care. But while most investors remain fixated on the headlines, some big trades are beginning to play out in that very sector. That shouldn't come as a huge surprise: With the broad market coming down to test its key long-term support level this month, we're reaching an area that's been a buying opportunity every time since last November.

So, if stocks bounce from here, then investors should expect a very good time to be long. That's why, today, we're taking a look at five tradable technical setups in the health care sector.

For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

So, without further ado, let's take a look at five technical setups worth trading now.

Theravance

First up is $4 billion biopharmaceutical firm Theravance (THRX). It's been one heck of a year already for THRX's shareholders. Since the calendar flipped over to January, shares of the firm have rallied more than 75%. But the setup forming in shares points to even higher ground for the final quarter of 2013.

That's because Theravance is currently forming an ascending triangle pattern, a bullish setup that's formed by a horizontal resistance level above shares at $42 and uptrending support to the downside. Basically, as Theravance bounces in between those two technical levels, it's getting squeezed closer and closer to a breakout above that $42 resistance level. When that happens, traders have a buy signal.

Whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Ascending triangles and other pattern names are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That $42 is a price where there has been an excess of supply of shares; in other words, it's a place where sellers have been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above it so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level.

Don't be early on this trade.

AstraZeneca

Things don't look quite so rosy over at big pharma firm AstraZeneca (AZN). Shares of the $64 billion pharma stock are up on the year, but only by around 8%, which means that the drugmaker is underperforming the S&P 500 by close to 10% in the last nine months. That's a serious miss.

But a double-top pattern in shares could spell more on the horizon. The double top is a bearish pattern that's formed by two swing highs that peter out around the same level. Between them, a breakdown level is formed that identifies the trigger for shorts. In this case, it comes into play right around $46.50. A drop through that $46.50 level means that it's time to unload shares or outright bet against them.

That doesn't mean that lower levels are a foregone conclusion at this point, though. For now, the long-term uptrend is still intact in AZN. But that doesn't mean that signals are conflicting here; by the time the breakdown level gets violated, the uptrend in AstraZeneca will have been long gone.

Edwards Lifesciences

You don't have to be an expert technical analyst to figure out what's going on in shares of Edwards Lifesciences (EW) -- a quick glance at the chart should be enough. Lucky for shareholders, this stock hasn't been living up to its ticker symbol. Since bottoming in May, EW has been bouncing higher in a textbook uptrending channel.

Edwards' channel gives traders a high-probability range for shares to trade within. And while there's really no bad time to buy a stock that's in an uptrend, the ideal time to jump in comes on a bounce off of trendline support. Buying off a support bounce makes sense for two big reasons: it's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong).

That also makes BCR a good cautionary tale of why it makes sense to buy uptrends after a support bounce, not in anticipation of one. A broken bullish setup is typically just as big of a red flag as an outright bearish one. That means that the sell signal in BCR triggered once shares closed below trendline support. While shares haven't moved a whole lot lower in the sessions since, that just means that there's still a lot of room below for shares to slip.

Momentum on this chart is a mirror image of the RSI line in Edwards Lifesciences: The uptrend gave way to a downtrend, and that is pushing the gauge into oversold territory. Don't make the common mistake with momentum: oversold doesn't mean that a stock is due to bounce. Stocks that go oversold are statistically more likely to keep moving oversold in the near term. Caveat emptor.

Aegerion Pharmaceuticals

We'll end on a high note with mid-cap pharma stock Aegerion Pharmaceuticals (AEGR).

After a jaw-dropping 263% rally since the start of the year, AEGR is actually showing signs of more upside to come. While that sounds implausible at first glance, it's important to remember that all 300% and 400% rallies were 263% rallied at some point along the way. The pattern in play in AEGR is an inverse head and shoulders setup with a neckline at $100.

The inverse head and shoulders pattern is a bullish setup that indicates exhaustion among sellers. After such a big move higher, it's pretty easy to see why sellers are getting worn out at this point. The pattern is formed by two swing lows that bottom out at approximately the same level (shoulders) separated by a deeper low (the head). The buy signal comes on a move through the neckline at $100. Even though AEGR's setup hasn't completely formed the right shoulder, consider any close through that $100 level a buy.

Round-number resistance levels, like the even $100 neckline in AEGR, aren't uncommon. Since they represent big milestones in investors' minds, they're more likely to be sticking points and order levels for traders than other numbers are. Keep an eye on that $100 price in October.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.