Voyant International Corp. (VOYT), which had been fairly quiet over the last few weeks, made up for lost time today. In a pretty long and detailed letter from CEO Dana Waldman, investors were updated on, well, pretty much everything the company had going on. We’ll post a link to the letter below, but we want to hit a few highlights to whet your appetite…

• The white space radio contract we heard about last year? Those are now being delivered. Many (including us) were beginning to wonder if that deal would ever bear fruit, but as it turns out, it’s quietly been bearing fruit for a while.
• Voyant Digital Media is being shelved for the time being. This is the movie, television, and entertainment arm of the company. Suspending the operation is no big deal, as it was not driving revenue at the moment anyway. These resources are better off being devoted to something else.
• The potential acquisition we’ve only heard whispers about is not going to happen…. at least not right now anyway. I think this deal was pretty close to being done, but a few too many hurdles popped up. That’s not a bad thing though - it’s always a good decision to not enter a partnership that will cost more than it contributes. Voyant is moving on to the next potential deal (though we never actually knew what this potential acquisition was).

There’s more to the letter than that (with a lot more detail), but I wanted to make sure you knew it was important enough to invest a little time in. The update is exclusively available at the Voyant website.
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Not a big surprise here. InterDigital, Inc. (IDCC) had been testing a support line at $31.40 since early February, and the bears were slowly but surely overwhelming the bulls. The last line of defense was $31.40, which the bulls defended valiantly. With Thursday’s marketwide decimation though, the stock just didn’t have a chance. IDCC broke under support, and fell all the way back to my next potential support area… the 50 day moving average line at $28.75. InterDigital opened above that line today, dipped under it for a brief time, and is now back above it again.

All in all, it’s a fairly routine pullback for IDCC. Speculators may want to slide into a long position here; safety-conscious traders may wish for any rebound to prove itself. Both groups still need to be alert for a close under the 50 day line though, which could be a bearish omen.

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Today is an important day. A real important for the Dow Jones Industrial Average, to be precise. After a disastrous Tuesday and an indecisive Wednesday, we’re still at a pivotal point…. and still asking the question “Just how bad can it get?”

The Dow came within 30 points of a multi-year low yesterday. It hit 7479 on Wednesday, which nearly eclipsed the November 21st low of 7449. The blue chip index didn’t close there, but it closed low enough to merit concern. I thought that might be enough to constitute a double-bottom and a follow-up rebound, but so far this second bottom really hasn’t shaped up as a ‘bottom’.

On the other hand, the patient may have at least stabilized.

I like the way the market stopped its bleeding. That’s about all I can say at this point, but it’s an important step if - and that’s a big if - stocks are going to rebound. My biggest fear is that the patient could go into cardiac arrest again.

For the Dow Jones Industrials, a move under 7449 could do a good job of convincing a whole slew of people to get out of the market. Where that selloff stops is anyone guess. I’ve heard ‘reasonable valuations’ that put the Dow somewhere between 6000 and 6500. I don’t know how anybody could actually come to that conclusion, but the estimate itself could be enough of a reason to make it happen… a self-fulfilling prophecy.

Anyway, as I’ve said about nine-billion times over the last four months, how you end the day is the only thing that matters. I’ve seen (and so have you) the market unwind huge losses in the last half hour of trading. Having no losses to overcome today, we could see this market start a recovery later this session, despite the fact that it’s not all that compelling as of right now.

Let’s chat again about 4:00 p.m. EST.

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Time to dust off the discussion about InterDigital, Inc. (IDCC) and its support at $31.40. We thought we had left the question behind late last week when IDCC pushed off that support level and was en route to breaking above the ceiling at $33.69. Funny thing though…. not only was the ceiling never broken, but the floor is being pressured again. InterDigital, Inc. closed at $31.47 yesterday. The selling volume is slightly on the rise too. Point being, IDCC is still on the verge of a minor breakdown.

And I want to stress ‘minor’. I still have a modest expectation that the 50 day moving average line at $28.55 will be a reversal point if the bears take enough hold now to actually crack support at $31.47. In fact, I think I’d be a buyer if the 50 day line is successfully retested.

Why so confident about this support line? Because that’s also where you’ll find not one but two key Fibonacci retracement lines. The more potential support levels there are at a certain spot, the more apt it is to hold up as support. (On the chart below, one set of Fib lines is red, and the other is green.)

I just wanted to let you know what to expect, primarily because I don’t want current IDCC owners to over-react (i.e. dump ‘em indiscriminately) just because the stock gives up a little ground.

Are you a current or potential InterDigital, Inc. (NASDAQ:IDCC) owner? Then you need to stay in touch with this chart, whether you’re in for the long haul or just in for a quick trade. Be sure to register for our free newsletter to receive all of our ongoing updates on InterDigital.

The much-discussed support level of $17.75 for Agilent Technologies (NYSE:A) buckled yesterday, thanks to some rather nasty earnings news. The stock closed at $16.05, but hit a low of $15.87 on Wednesday. The catalyst was poor earnings… a 47% decline in profit, to be exact. The stock sank 9%.

The ’strictly disciplined’ trader would probably shed the stock based on the breakdown. On the other hand, not that we’re not disciplined, but traders also need to see the bigger picture.

Right now, the bigger picture is simply that the size - perhaps 100% - of the selloff has more to do with broad fear and unfair perceptions. Sometimes that’s enough of a problem to drive stocks lower, so even errant selling is a force you have to respect. However, we also have to question the longevity of this particular selling effort.

Besides, the bulk of the damage has already been done (instantaneously, in fact). So, what’s left to lose?

The bullish arguments are not one but two bearish gaps from Tuesday and Wednesday that need to be closed, and Wednesday’s ‘hammer’ shaped bar… a frequent sign of a bottom being made. The volume spike may also be a hint of a pivot. The point is, from a risk-versus-reward perspective, Agilent is worth sticking with at least until we get a better exit point.

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Talk about things turning ugly quickly. The iShares S&P US Preferred Stock Index Fund (PFF) trade was never all that healthy, but this poor ETF took an absolute beating between Tuesday and Wednesday. PFF’s 8% plunge on Wednesday left the stock at its lowest close ever, and the intra-day low of 19.40 was pretty darn close to being a record too.

And that’s the challenge here… a new low has not been hit. In fact, it looks like there’s support around 19.40. A low of 19.00 was made on October 10th, and we saw a lot of 19.98 on November 21st. Too see 19.40 hit on Wednesday doesn’t mean much, as we’ve been in these dire straits before, and the bears couldn’t drive the Preferred Stock Index Fund any lower. The same may be in store this time around.

Do you dump it, or hold out? Good question. From a risk/reward perspective it makes sense to stick with it and see what happens (i.e. we can’t lose a whole lot more than we already have). And, if the 19-ish area really is the support it looks like it is, the odds of a bounce from here are at least better than average.

On the flipside, being stubborn is not the same as being confident. If the 19 area fails (and it will, if the overall market doesn’t overcome the current wave of selling), then bail out. The market’s very oversold though, so the odds of a near-term rebound are decent.

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Honestly, I am not entirely surprised about how deep the knife cut the U.S. market today. Remember, the American stock exchanges were closed on Monday in observance of President’s Day, so they had to “catch up” with two very bad days from overseas markets. It took - literally - about a half an hour to do that though. With the deed now being done, I’m not against at least discussing the possibility that the worst is over, and that we’re poised for a rebound. I mean, it’s not very often you see the S&P 500 SPDR Trust (SPY) plunge 5% in less than thirty minutes. Perhaps it’s too unusual to persist. The key is the intra-day action… can we end the day with stocks rallying back, even if they close in the red?

Just to be realistic, the market and all the index ETFs like the SPYders do a pretty good job at bouncing back from plunges as long as those plunges are (1) unmerited, and (2) not excessively deep. Today’s plunge is unmerited. However, a quick 5% drop right at the open is huge. In fact, it may be big enough to keep any potential buyers away for the the rest of the day. That’s the risk we’re running now.

As for how long this dip can keep buyers at buy, it could be far more than a day. That’s something you have to judge on a day-by-day basis. I’m just saying don’t be shocked if the entire week has been soured by this rough start.

So, we’re now forced into plan B… what to do now that the S&P 500’s support at 800 has been broken (which we mentioned in yesterday’s newsletter). Today’s low of 789.91 (so far) doesn’t bode bullishly. In fact, it’s a bearish omen I’m taking at face value. Therefore, my ‘plan’ is to at the very least not enter any new long trades. I may not enter any short trades yet, but I’m not going to enter any new bullish positions until the S&P 500 works its way above 800 again. For the S&P 500 SPYders ETF, that line in the sand is 80.85.

We also now have to turn our attention to 741 as support for the S&P 500… a scary thought, considering a move under this level would also mean a move to new multi-decade lows. If that support is broken - and stays broken for more than a couple of days - I think we’d be crazy not to entertain the addition of some bearish, short, or put option trades.

Here’s the rub… economically speaking, we’re actually in better shape now than we were two months ago. Oh, the country’s in debt up to its ears, but we knew that was coming. However, at least the debt-creating stimulus is on the way, and we’re seeing glimmers of hope for the economy. Retail sales were up in January, and real estate prices (by some measures anyway) are starting to stabilize. The overall numbers are still ugly, but they’re not in a precipitous tumble.

Anyway, don’t over-react to today. You can react... just don’t panic. If you’re weaker positions are in jeopardy, shed ‘em. If you’re stronger positions are still holding up reasonably well, hang on to ‘em. More than anything though (for right now anyway), let’s just see if the intra-day charts give us a reason to be encouraged later in the day. Defense is merited in the meantime in case they don’t.

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Sometimes you just have to say goodbye. Take our coverage of Cogent Inc. (COGT) for instance. We’ve been watching Cogent off and on for several months, and though the company has been consistently profitable during that time (a period when very few companies were profitable to any degree), the stock just hasn’t responded. In fact, the stock is now back to where it was in early 2008. Lots of volatility, but no net progress.

We still like the company, and any company with a market cap of only $960 million that’s sitting on more than $400 million in cash is impressive. But, we just can’t devote time and resources to this idea … not when there are other stock trading ideas out there that are actually going to move.

If things change in the future we’re certainly willing to revive the company’s profile, and start trading the stock again. For now though, we’ve got to focus on other stocks. We’re putting Cogent on the shelf to make room for fresh trading ideas.

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The ICU Medical Inc. (ICUI) short trade has served its purpose for us, acting as a hedge against our long position in its competitor Edward Lifesciences (EW), and really as a hedge against all of our long trades. Now we just don’t need or want this particular hedge anymore. So, we’re going to remove this short trade from our long list of open trades.

Some traders would argue that ICUI’s third encounter with resistance around $35.00 would be a reason to stay in; if that resistance is as strong as it looks, then the stock is presently poised to move lower again.

That’s a valid point too. However, since the stock has started to define a ceiling at $35.00, it’s also made a long string of higher lows … a subtle bullish hint. Persistence breaks resistance, so they say, which is why we’re getting out here.

It’s not that we’re sure ICUI is going to break above $35.00 - the resistance line may indeed hold up. It’s just that we don’t need to take the risk. There’s not enough of a reward at stake, even if ICUI falls. There are far better uses (higher risk/reward ratios) for this capital, so we’ll seek those hedges out instead. We suggest you cover any open short positions in ICU Medical Inc.

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This may not have anything directly to do with small caps, but it’s got a lot do with something very near and dear to all of us … making money in the stock market. So, be advised there’s an emerging bull trend in metal and mining stocks. In fact, the leading industry from the large cap (S&P 500) world over the last two weeks is metal and mining, mostly led by Rio Tinto PLC (NYSE:RTP) and Freeport McMoRan Copper & Gold (NYSE:FCX). Based on our view of the shape of the chart and the current momentum, more of the same could be on the way.

The chart of the S&P 500 Metals and Mining Index is what first grabbed our attention; it was appearing at the top of the performance rankings for just about every time near-term time frame (3 month, 1 month, 6 week, 2 week, etc.) To see that kind of consistent-but-measured progress is usually an omen of a healthy - and possibly prolonged - move.

Though it’s been choppy, the rally off of December’s low has also been big (about 80%). Yet, the compelling part about this chart is that we’re still nowhere near the highs hit in the middle of last year - there’s lots of room for recovery. The fact that the MACD buy signal has been renewed is just a simple hint that the uptrend is in full swing again.

Higher highs? Higher lows? Renewed momentum? We’re not going to argue with the obvious. If the S&P 500 Metals and Mining Index can crack the ceiling at 189, I can see this group really starting to fly.

On that note, take a look at the percentage change chart of this group’s stocks. Rio Tinto PLC (RTP) and Freeport McMoRan Copper & Gold (FCX) are up 37% and 32%, respectively, for the last month. Neither seems to be slowing down either.

Between an industry on the verge of a breakout and a couple of its stocks that are accelerating, I think there could be a decent trade in there somewhere.

Do your own due diligence, as always. At the same time though, don’t forget that stocks can still rise even without a great underlying reason. This is strictly a momentum-spotting exercise. (There may well be a fundamental reason for the recovery effort; I just don’t know if there is.) 

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