NVLS

[David Randolph]

By Aude Lagorce
Last Update: 6:02 AM ET Dec 6, 2006

LONDON (MarketWatch) -- Goldman Sachs cut semiconductor maker Novellus Systems (NLVS : NLVS0.00, 0.00, 0.0%) to sell from neutral, saying it believes fundamentals are poised to be much worse than the market is currently anticipating, driven by NAND weakness that is already becoming apparent. The broker told clients it believes the recent M&A speculation around the stock is nothing short of irresponsible as it thinks it's "extremely unlikely that Novellus will be acquired at these valutions given the lack of synergies with potential byers."

Wow, this is interesting ! I never heard of any takeover rumors on NVLS, but now I heard them. Me and everybody else. Every Wall Street analyst has downgraded NVLS and yet the market continues to scream BUY !

Do you trust the word of a man or the $307 million of shares bought yesterday?

Follow the money.

Thank you Goldman

[David Randolph]

I read my initial analysis on NVLS, which says it is undervalued. Then I have 9 other guys saying it isn't. Who should I listen, my independently made fundamental analysis or the advice of others?

I need to have faith on my own judgement. I see the company buying back shares at a fast clip.

The market agrees with me, but these guys have quite an audience (I wonder about their trading performance, or analysis performance), not because they're very good, but because they work at a big firm.

As I see it, big firms are big because they got fat eating small fish. They don't care about credibility, because it's always a new shoal.

They can play the game of saying "sell" while they're buying and saying "buy" while they're selling forever, because they're taking money away from different people at different times and they don't publish any track record on their recommendations.

Have you paid for Goldman's advice? No you didn't, unless you sold NVLS shares.

I'll continue holding NVLS.

[tokyopua]

Goldman is a powerhouse, no doubt.  But recently they have been making some strange calls regarding tech IMO.  About a month ago they caused a massive selloff in the Nasdaq by stating that PC motherboard demand in Asia had "fallen off a cliff".  I mean, that was their exact languaging, "fallen off a cliff".  CNBC asked other market mavens, and nobody seemed to be aware about this abrupt change of fortune.

To me that is not professional language (i.e. they could have said "an abrupt, severe decline" and still gotten the meaning accross), but instead used something designed to get a reaction, fire up the imagination of those who hear it.  Which causes more panic in the amigdula, the primitive brain?

a.) Fallen off a cliff
b.) An abrupt, severe decline

Clearly the answer is "a.", as it conjures up imagery in the mind that denotes danger and then can be linked to a feeling of fear about losing ones money.  As we all know, fear moves the market faster than even greed does.

I study a realm of psychology called NLP (Neuro Linguistic Programming) and am constantly evaluating the use of language in media etc., that is why I noticed this.  I also take issue with a lot of what CNN reports recently, there is a clear biasing in their choice of words... 

Anyway, going on a tangent there, sorry, but the point is that I agree that often analysts as a group say "Buy" when you should sell, and "Sell" when you should buy.  Cramer is constantly lamenting this fact on his show.  And in addition, I question Goldman's motives in tech recently. 

[David Randolph]

Thanks for this great post Tokyopua, I wish I could write English like that

I also studied a bit of NLP, as it relates to trading. The theme shows up a few times on the "Market Wizards" books.

I'm curious, as I haven't seen any TV lately, what are you "reading" on CNN reports? Thanks.

As for NVLS, nothing new. The trend is up and I see fundamentals as attractive. I'll keep on holding it.

[David Randolph]

Despite those recent 9 downgrades on NVLS, the stock is holding ascending TL1 on close. The talk says "sell", but the money says "buy". Usually, money talks and bullshit walks.

If NVLS is able to close back above $33.25 you can take for a fact that it is going to $40 plus. Because it will demonstrate to every market participant with an open mind that those 9 powerhouse analysts are WRONG !

We'll see if I'm not the one to stay like ... time will tell, but I always follow my own judgement, so I'll continue holding NVLS.

[Melf Elf]

Anyway, going on a tangent there, sorry, but the point is that I agree that often analysts as a group say "Buy" when you should sell, and "Sell" when you should buy.  Cramer is constantly lamenting this fact on his show.  And in addition, I question Goldman's motives in tech recently. 

Tok,

Great post!  Applause.

I'm thinking that Goldman has been short, and that they've been getting hammered on the DOUBLE Short Squeeze breakout of November 13.

On October 8, NVLS gapped down, and broke below a Rising Channel (pattern in red).  The low of the channel was 26.05; NVLS found support at 26.13.

NVLS then went back inside the channel, formed a neckline (29.43...29.39) of a Bulish Inverse H&S (pattern in blue), put in the Right Shouder, then on November 13, had a DOUBLE breakout of both the Inverse H&S (Short Squeeze #1...S1 on the chart) AND the top of the Rising Channel (Short Squeeze #2...S2 on the chart).

Yeeks...murderous on the shorts, and with Goldman downgrading NVLS so vociferously, I suspect that they might have gotten their you-know-what caught in the squeeze.

Stifel Nicolaus' November 30 downgrade just above support didn't do them any good at all.  NVLS held well above the top of the Rising Channel, then rallied to a new high.

The Inverse H&S Target of 32.68 MADE.

The Rising Channel measured move of 33.47 also MADE, and more.  High is 34.75.

Short-term, Friday's low looks to be Data Point #4 of a Bear Flag.  NVLS finished with a Bullish Hammer on the day, but MACD has a negative divergence, and it went down through its signal line on Friday, so this pattern could break to the downside, and NVLS could sell off and look for support at the top of the Rising Channel, and possibly the Inverse H&S breakout.

Overall chart is bullish, though.

[Terliso]

Nice pick applause
NVLS could climb above 40 bucks easily
Nothing goes straight up but patience will pay off

I'd like to study Fundamental analysis too, David could you recommend me some good books for Fundamental Analysis? Thanks

Regards,
Alister

I recommend these 3 books on Fundamental Analysis:

Mastering Fundamental Analysis
Buffettology
One Up On Wall Street

Then, if you want to make your work easier and faster, I recommend you subscribe to Alphatrade's "Fundamentals" service.

If and when you have done this, let me know, there's more to it 

Thanks David... a lot of pages to read

I also think NVLS is in a bullish trend, I guess those downgrades are just bullshit...NVLS is been bullish since the end of July & still bullish...

If NVLS is able to close back above $33.25 you can take for a fact that it is going to $40 plus. Because it will demonstrate to every market participant with an open mind that those 9 powerhouse analysts are WRONG !

Yup, NVLS could hit above $40 before turning back down..

BTW, how did you get that smiley flushing down the toilet?

[David Randolph]

Hehe, check out this thread from SmartWrasse on the "Charts" board:

Emoticon Test

[tokyopua]

Thanks for this great post Tokyopua, I wish I could write English like that

I also studied a bit of NLP, as it relates to trading. The theme shows up a few times on the "Market Wizards" books.

I'm curious, as I haven't seen any TV lately, what are you "reading" on CNN reports? Thanks.

As for NVLS, nothing new. The trend is up and I see fundamentals as attractive. I'll keep on holding it.

Yes, NLP is great for the emotional side of trading, because part of it focuses on the idea of "states", i.e. the emotional states we all go through, and the idea that we have all the resources necessary to cause those states at will, instead of allowing them only to happen as the result of external circumstances.  So for example you are good at controling your state as a result of a good or bad trade.   You dont get irrationally excited by a great trade, or deeply depressed by a bad trade.

As for the CNN reports, I dont remember the exact details, but recently there was reporting on the incident where Kramer (from Seinfeld fame) was doing a standup commedy routine and went on a racial tirade and used "the n-word".  The facts were that he did indeed do that, but the report was using a lot of words describing it as "abonimable", etc.  For me, I would like to just hear the news itself as facts, then make a judgement myself about whether its good or bad through without it having to pass first through the filter of the reporters sensibilities.  Lou Dobbs has a whole hour full of this, but I guess that is what the general public prefers or else it wouldnt be on air... so I am apparently in the minority.

Anyway, all that aside, NVLS had a good day in the face of all the recent downgrades, up 2%, chart still bullish   :

[David Randolph]

Your post explains why I'm less and less interested on general TV news as time goes by. The news is presented in such a superficial way that it is more of an entertainment show than an informative one.

Well, for entertainment I prefer to watch a movie. Even better, I like to go to the playground with my kids. Usually people watch too much TV because they don't have the discipline to controll their lives. 

This could be a good debate, but I always lack the words when I get out of the stock market context, and anyway, this is NVLS's thread, so I should write something about it

Well, NVLS isn't boring in any way, in fact, I love this play of mine. All alone (well, some of you, like Terliso, agree with me since the beginning) against 9 investment powerhouses and guess what, NVLS is showing me a profit of 3.72%. This is the kind of play that brings me more confidence to trust my methods.

There's no way I'll let go of NVLS, because, if I'm right, they're wrong, and they have to pay the price !

(unless, of course, their mouth says one thing and their money (which is a lot), says another, which is entirely possible. If that's the case  the people that must pay a price are the ones that listened to Goldman's and others advice, instead of trusting their own analysis)

I forgot to mention Terliso's comments on learning Fundamental Analysis:

Thanks David... a lot of pages to read 

You don't like to read Terliso? I can assure you those are extremely interesting books. Anyway, I may try to write an article explaining the basics of fundamental analysis - just the basics, because that's all I know too. I feel I need to study just a bit more, but now that I know something about FA, it is a lot easier than I thought in my ignorance days. It's almost as easy as technical analysis

[Ramsburg]

Hey Randolph, Toky, etc!

This isn't the same guy that was bashing NVLS ?

http://www.youtube.com/v/iSoecK3u65Q

[422fwhp]

 

...what I would pay for some brutal honesty sometimes! 

LOL.

[David Randolph]

That video clip is awesome Ramsburg, thanks

NVLS was down a bit today, but recovered some ground after touching TL1 on the chart below.

I'll continue holding it.

[David Randolph]

This article explains fairly well what has been happening with NVLS:

Takeover Rumors Drive Up Novellus Shares

Everybody says "sell", "sell", "sell". But I see the company buying its own shares in the open market, as the share count has been reduced over the last three quarters.

Goldman receives money from NVLS every quarter and is a market maker of the stock. I don't think they would come out and bash the stock like they did if it wasn't on the company's request.

Maybe a takeover will indeed happen. Or maybe the company wants to buy back its shares at a cheap price. Either way, with some time, NVLS will trade higher.

I'll continue holding the stock, despite the slight break of TL1.

[David Randolph]

My fundamental reasoning helped me keeping NVLS, despite yesterday's break of the short term ascending trendline (TL1).

The stock came back above it today, rising 3.44%, so from now on I'll consider the dotted line as the significant ascending trendline (I'll delete the other on tomorrow's update).

I'll keep on holding NVLS.