Friday, November 19, 2010

"...Cree Hits a Three-Month High" (CREE)

In Tuesday's post, "Cree Catches a Bid on Morgan Keegan Note (CREE)" we noted:
The stock is stuck between $52-56. Last $55.48 up $1.53 on a day the NASDAQ is down over 1%.
There's no need to chase....
Yesterday the stock broke decisively to the upside. The actual move was only $1.39, to $57.68 but for the chartmeisters it was important.

Click to enlarge

Chart via Minyanvile.
Here's the headline story from
...On Thursday, Cree hit a three-month high share price, as the market rebound caught up to the recent reversal of Cree sentiment in the direction of renewed optimism.

The three-month high share price that Cree hit on Thursday is notable because the past three-month period included a major inflection point for stocks linked to the LED sector. On August 18, Cree shares were trading at $59.72. It was all downhill from there as various industry reports, analyst reports and news headlines trumpeted the glut in the LCD flat panel TV market. Cree shares bottomed out between $48 and $49. 

Notably, exactly three months to the day of August 18, Cree shares are finally back in the range of $58. Not that the battle doesn't remain an uphill one for Cree. After all, go back a few weeks previous to August 18th, and Cree was above $71 a share.

Morgan Keegan helped buoy Cree shares this week by moving back to a buy on the LED stock, with its analyst Harsh Kumar arguing that the recent dual headwinds of a glut in the TV market and a slowdown in China's street lamp orders aren't going to be prolonged drags on Cree shares. 

When sentiment turns to the positive for a stock in a momentum sector like Cree's LED segment of the market, it's good time to check in with the more bearishly inclined for a reality check. Is it time to get set for the next shorting opportunity, or are shorts going to be running to cover after Cree's next earnings report?

Long-time Cree bear Hans Mosesmann of Raymond James says that the attitude may indeed be more positive about Cree, and it might be true that the inventory glut in the TV market will only last another quarter and some kind of recovery take shape in the first quarter 2011. He also noted that with the Chinese street-lamp market picking up again with province-by-province new standards being put in place, Cree is set to win its share of new orders. However, all headwinds considered, the long-term structural issues for Cree haven't changed....MORE