RealTime IT News

Dell Adds To The Good Feeling

Dell Computer reaffirmed guidance this morning, giving another boost to the tech sector after Cisco reaffirmed guidance yesterday.

Traders ignored one of the biggest jumps ever in unemployment claims and bid stocks and futures higher in the premarket. The jump in jobless claims suggests that the unemployment rate will hit 5% or higher tomorrow.

But Dell's reaffirmation of 15-16 cent earnings for the quarter that ends this month, after Cisco's reaffirmation yesterday, is good news for tech investors. Business at least doesn't seem to be getting any worse for some companies, although for some leaders, like EMC and Sun , there has been anecdotal evidence that business continues to deteriorate.

At two times sales and about 32 times January 2002 estimates, Dell is certainly much cheaper than Cisco , which trades at 5 times sales and 77 times July 2002 estimates. And with the new Windows XP/Pentium IV combination showing early promise, Dell is likely entering a better product cycle than Cisco.

Dell broke out of a nice symmetrical triangle yesterday, with upside potential to about 22 (see chart below). The stock hit that this morning, and may need to pullback or consolidate before further gains. The 22-23 area also poses some strong resistance.

Another nice breakout yesterday was Juniper , which broke out of a 4-point symmetrical triangle, with upside potential to about 16 (see chart below). At about 25 times earnings, Juniper is pretty attractively priced compared to Cisco.

But as we said last night, the market is very overbought on a short-term basis and right at resistance; a good place to look for a pullback. A close at the highs today for the Dow and S&P would suggest that the market has further to run. And the S&P remains bound by a bearish rising wedge (see chart below), which normally resolves to the downside.

However, yesterday was a very solid follow-through day for the major indexes, the best yet. It was no doubt aided by short-covering on the Nasdaq, but any pullback at this point may be modest.