Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Tuesday, August 22, 2006

NewMarket Corp. (NEU)

NewMarket Corp was up almost 9% on Monday at $62.98 on volume 260% larger than the 50-day average as it closed at a new 52-week high for the first time since May. I started to screen NEU in July on the daily screens and added it to the MSW Index on July 29, 2006 at $48.84. I have pasted my analysis below from the past several weeks while on the MSW index. As you can see, my ideal entry was a move above $53 where the stock filled the previous gap-down from early May. The setup was perfect and the breakout was text-book on heavier volume.




As I just noted, the breakout came earlier this month on heavier volume as featured on the daily and weekly screens. I don’t want to scare holders out of the stock but please remember that EZPW was up over 26% in a few short weeks and has now fallen back to even on the MSW Index. I warned to take profits in that stock and warned to never let a profit dip below 20% once it has surpassed 25% (especially in 2006). Place your hard stops in NEU so you can realize the gain if it starts to form a handle or consolidation. I wanted a new handle to form before looking for the next entry area at the new pivot disclosed this past weekend at $60.43. The stock triggered this new pivot point but did so without the handle I was looking for so I did not add new shares. I am actually looking to take profits and protect myself from any pull-back.

I still like the chances for a possible $60-$100 run later in the year (after October) but I am wary about the action in September (a historically weak month). Looking at the institutional holdings, I can see that 113 money managers (13F), 136 mutual funds and three other holders currently own shares in the company. During the latest reporting period; 45 money markets, 32 new mutual funds and 2 banks placed new positions while only 13 institutional investors sold out. This all sounds great but the number of shares sold was basically even with the number of shares bought even though new positions eclipsed sold-out positions. The top holder during the latest reporting period was Dimensional Fund Advisors with 698,190 shares, a 13F institution (money market).

Earnings per share have grown from $1.92 in 2004 to $2.45 in 2005 with slowing projections this year and next.



Analysis from MSW Index:
7/29/06

NEU- 48.84, The stock is holding the support area noted on the watch list from two weeks ago. The buy would be a move above $53 which serves as the gap-down area. Just as stocks pull back to fill gap-ups, they breakout to fill previous gap-downs. This is the #4 rated stock on the IBD 100 Index. Rating: Buy above $53

8/05/06:
NEU – 53.07, The stock broke above the gap-down buy area of $53 on Thursday buy dropped on Friday to close at the level. If $53 is held early next week, this will be the ideal short term entry area (right now). The decline on Friday came on volume less than Thursday's advance but it was slightly above the 50-day average. Rating: Buy above $53

8/7/06: (daily screen)
NEU – 57.50, the buy was a move above $53 as indicated on recent daily and weekly screens. The stock was up more than 8% today on volume 133% larger than the 50-d m.a. NewMarket was originally screened at $48.84 on July 29, 2006 for a current MSW gain of 18% (a total of 6 trading days)

8/12/06:
NEU – 56.40, The stock made the breakout from last week but did reverse near $60 on Wednesday. The strongest stock on the index at this time as it could become stronger with a move to new highs. I made a test buy last week but I didn't buy many shares. I will sell with a move below or near $50, otherwise, I will hold. I will look to add shares on a move to new highs. Rating: Buy was above $53, more shares can be purchased on a move to new highs

8/19/06:
NEU – 57.94, The stock has completed the four month cup shaped pattern and should develop a handle over the next couple of weeks. I encourage a handle to form for several weeks before the next advance into the possible $60-$100 run. Rating: I am a buyer if a nice downward sloping handle forms (the pivot point is now $60.43)

Piranha

3 Comments:

At 2:14 PM, Blogger maximillian said...

This stock has dropped $5 in two days. Is that normal,am I going to see a turn around here, real quick?

 
At 3:17 PM, Blogger Chris Perruna said...

max,
This is precisely why I said to lock in gains and provided EZPW as an example (2006 is not a friendly long term environment).

“Place your hard stops in NEU so you can realize the gain if it starts to form a handle or consolidation.”

The stock is consolidating like it should! I wanted it to form a handle and this is why I didn’t add additional shares at the latest breakout. When the consolidation is over, I will look to add shares.

 
At 6:19 PM, Anonymous Anonymous said...

Chris,

What is your opinion after Sept the 11 when NEU was down almost 10% on heavy volume? Is it forming a base to punch another 52 wk high or has the smart money moved on to another play?

 

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