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This Could Be the Buying Opportunity of the Year

By Jeff Clark
Thursday, July 12, 2007

Keep your eyes on Motorola today.
 
After the close of trading yesterday, Motorola (MOT) announced that its cell phone unit wouldn't turn a profit until at least 2008. The company also announced that it would be posting a loss of 2-4 cents per share for the second quarter. Wall Street analysts were looking for a profit of 2-4 cents.
 
No matter how you spin it, this is bad news for Motorola. And it will be interesting to see how the stock responds.
 
Motorola shares are already down about 30% from their highs reached last November. The company is struggling to turn around its cell phone business. And, even though MOT warned last February that the first half of 2007 would be "rocky," CEO Ed Zander preached optimism and virtually promised blue skies ahead.
 
Zander's words were strong enough to persuade shareholders to reject activist investor Carl Icahn's bid for a board seat just two months ago. That vote probably wouldn't be quite the same if it were held today.
 
Motorola's earnings warning is definitely bad news for the company. But it may not be bad news for the stock.
 
As you can see from the following chart, the stock is already quite depressed...
 
It's quite possible that this bad news is already factored into the stock price.
 
MOT shares lost 25 cents in aftermarket trading following the earnings announcement. But the stock was up 33 cents during regular trading. So the earnings warning didn't even knock MOT into the red for the day. And this could lead to a very profitable trade.
 
Here's what I mean...
 
There are very few certainties in the stock market. But one trade that almost always turns a profit is to buy stocks that act well in the face of bad news.
 
Common sense dictates that when a company announces bad news, then the share price should suffer. When that doesn't happen, then it's a pretty good indication that the stock is already "sold out." The sellers are exhausted, and just a little bit of buying interest can spark a rally in the stock.
 
I don't know if that will turn out to be the case with Motorola. But I'll be watching it closely today. If the stock can manage to hold above $17.50, then it will probably be sharply higher over the next few months.
 
Best regards and good trading,
 
Jeff Clark




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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
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Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
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52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%