3 social media stocks upgraded
Meanwhile, 2 Dow components and another important stock in the tech sector are downgraded.
When the U.S. equities markets opened after Memorial Day, stocks gapped higher due to commitments by central banks around the world to continue their quantitative easing programs.
The rally stalled shortly after 10 a.m. following a positive reaction to the Conference Board's reading on consumer confidence came in at 76.2, the highest level since the 2008/2009 recession ended. Even with a five-year high for confidence this reading remains below neutral range of 90 to 110 last seen in 2007 before the recession began. A 76.2 reading actually should be interpreted as consumers being less depressed. The major equity averages then stalled shy of their all-time and multi-year highs and drifted lower for the remainder of Tuesday's session.
On Wednesday the theme song changed to "What a Difference a Day Makes" as Treasury yields spiked higher with the 30-year bond yield rising to a 52-week high at 3.37%. With rising yields bond traders chimed in with the thought that the bond market was beginning to factor in an early end to the quantitative easing measures in the U.S.
With stocks higher on Tuesday and with a higher 30-year bond yield the ValuEngine Valuation Warning intensified to a new high for the year. ValuEngine shows that 73.8% of all stocks are overvalued with 36.9% overvalued by 20% or more. Only 10.8% of all stocks are undervalued by 20% or more.
In this environment ValuEngine upgraded three Internet services stocks also known as social media stocks. ValuEngine also downgraded two Dow components and another important stock in the computer and technology sector. The is 17% overvalued with the Internet services industry 20% overvalued.
OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.
VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.
Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.
Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.
Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.
Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.
Risky Level: Price at which to enter a GTC limit order to sell on strength.
I view AOL (AOL) ($34.15) as the first social media stock with that memorable "you got mail" message when you open your AOL application. This morning the stock has been upgraded to "buy" from "hold" with the stock ending Wednesday below its 200-day simple moving average (SMA) at $35.08. The weekly chart profile stays negative on a close this week below the five-week modified moving average (MMA) at $36.96. My quarterly value level is $32.88 with a monthly risky level at $37.44.
Facebook (FB) ($23.32) has been upgraded to "buy" from "hold" with the stock breaking below its 200-day SMA at $25.02 on Friday. The weekly chart profile stays negative on a close this week below the five-week MMA at $25.82. The Sept. 4, 2012 low is $17.55 with a weekly risky level at $27.14.
Linkedin (LNKD) ($168.02) has been upgraded to buy from hold with the stock well above its 200-day SMA at $136.20. The weekly chart profile stays negative on a close this week below the five-week MMA at $173.95. My weekly risky level is $179.54.
Dow component Hewlett Packard (HPQ) ($25.24) has been downgraded to hold from buy with the stock setting a new 2013 high at $25.33 on Wednesday, well above its 200-day SMA at $17.65. The weekly chart profile stays positive on a close this week above the five-week MMA at $22.21. My weekly value level is $19.32 with a semiannual pivot at $24.31 and semiannual risky level at $27.33.
Dow component Procter & Gamble (PG) ($78.90) has been downgraded to hold from buy with the stock setting a double top at $82.54 on April 24 and at $82.35 on May 24. The weekly chart profile shifts to negative on a close this week below the five-week MMA at $79.15. My annual value level is $75.13 with an annual pivot at $78.73 and weekly risky level at $82.40.
Wireless Equipment company Qualcomm (QCOM) ($64.11) has been downgraded to hold from buy and the stock held its 200-day SMA at $63.55 on Wednesday. The weekly chart profile shifts to negative on a close this week below the five-week MMA at $64.68. My weekly risky level is $62.13 with an annual pivot at $64.58 and quarterly risky level at $65.63.
At the time of publication the author held no positions in any of the stocks mentioned.
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Some investment advisers are entertaining that possibility, especially in light of Monday's triple-digit loss in the Dow.
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