Tabell’s Market Letter – March 26, 1976

TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON. NEW JERSEY 08S40 DIYISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – March 26, 1976 The Dow-Jones Industrial Average again rallied midweek penetrating on the upside the 970- conJ'lrrrtihis1000 range which has contained the Dow for the past few weeks. The ability of the advance/decline . breacfthfiidex to move woUld'i-eep -inta-d the second leg-of'the 'oulCiilarketWhlCh coritfnuerno -' . ' indicate 1030-1080. We continue this week our review of industrial groups and stocks. All comments are based solely on technical factors and further information on individual issues is available on request. HOTEL-MOTEL. Relative action in this group has been sharply above average. In most cases higher objectives are readable and the stocks may be held or bought on weakness. Hilton Hotel (18) and Holiday Inn (17) both appear attractive from a technical point of view. INSURANCE. The rotation of leadership apparent in this market phase has signaled the insurance group as it appears to be in a position to participate on the upside. Recent breakouts of Continental Corp. (49) and Travelers Insurance (31) both indicating higher levels should be noted. Also, ability of Aetna Life (27) to reach 30 and NLT Corp. (20) to reach 22 would break these stocks out of base patterns on the upside also indicating higher levels. With improved relative strength this \grouP'Ppears to be an interesting buy- ing opportunity at current levels. MACHINERY-AGRICULTURE. Deere & Co. (13) by far the best acting in this group indicates a long-term upside objective of 72-86. The ability of International Harvester (27) to penetrate 31 would inrlicate higher levels. Current technical pattern is neutral and overhead supply is present. MACHINERY-COMPOSITE. Although the group relative strength remains above average, stock patterns in this group are diverse. Constructive patterns would include Babcock and Wilcox (28), Briggs & Stratton (55), Bucyrus-Erie (26), Caterpillar Tractor (82), Cooper Industries (63) and Gardner Denver (30). Those stocks that have not completed potential base patterns would include AMF (20), Chicago Pneumatic (34), Ex-Cell 0 Corp. (19) and Foster Wheeler (27). This latter group should be watched for improvement in relative strength-' – . – – . — — – , MACHINERY-SERVICE. A number of stocks in this area have had substantial price rises from their 1974 lows. However, with the exception of Dresser Industries (70), these stocks have shown short-term deterioration. These would include Baker International (47), Halliburton (152), McDermott (44) and Schlumberger (76). Would watch this area closely to see if these short-term downtrends are arrested. MOBILE HOME BUILDERS. After reaching their highs in 1972, this group experienced a severe price correction. Since then,the stocks having corrected, have met support and are in the process of building potential base patterns. Fleetwood Enterprises (20) recently broke out of its base pattern indicating an upside objective of 30-40. Skyline Homes (21) also has a strong technical pattern reflecting minimal downside risk at current levels. Ability to reach 27 would break out stock on the upside from a four-year consolidation period. OFFICE/BUSINESS EQUIPMENT. Burroughs Corporation (103) long-term technical pattern is neutral. Ability to reach 115 would signify a breakout on the upside indicating substantially higher levels. Strong support is present in the 100-90 area. SCM Corp. (16)breaks out at 19 indicating long-term upside potential of 37. Digital Equipment (173) and IBM (258) are both in major uptrends with support present under current levels. Would continue to hold. Digital Equipment indicates a 200 objective on the upside and IBM indicates a potential 300-340. Control Data (25), NCR Corporation (28) and Pitney Bowes (16) sho';-;;;utral relative strength and feel time will be needed to improve patterns. This also applies to Xerox Corporation (60). Although a support area in the high 50's seems logical, time will be needed to reverse its major downtrend. OILS. The lOIlgterlIl.relative strengthof the oil group continue.! be below vrage. In most cases, the individual components of this-group readhed their lows iii 1974 and since that time have been in the process of consolidation. The potential base patterns ,of Amerada Hess (20, Cities Service (44), Gulf Oil (25), Shell (54), Standard Oil of California (34) and Union Oil of California (46) appear attractive. PAPE Obviously one of the most outstanding groups, the papers continue to justify purchase on minor weakness. Would consider Crown Zellerbach (46) with an upside objective of 72-80, Mead (29) an upside objective of 45-60, Scott Paper (23) with an upside objective of 36 (overhead supply is present in the high 20-10w 30 area) and St. Regis Paper (46) with an upside projection of 60. Continue to think International Paper (72) and Union Camp (89) at these levels are hold candidates. Dow-Jones Industrials (1200 p.m.) 1004.09 S & P Compo (1200 p.m.) 103.00 Cujulative Index (3/25/76) 614.63 RJS/jb ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL No statement or expression of opinion or ony other matfer herein contamed IS, or IS to be deemed to be, dlrl!dly or indirectly, on offer or the sollcllotlOn of an offer to buy or sell any seC\JPty referred to or mcnlioned The matter IS presented merely for the COnVellenCE of the subscriber While 'e believe the sources of our mformo han to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mode herem Any action 10 be token by Ihc subSCriber should be based on hl5 own inVestigation and Informallon Janney Montgomery Scott, Inc, os 0 corporation, and Its off,eers or employees, may now have, or may loler tol-e, positions or trades In respect to any secufllles mentioned In thn or any future Issue, and such pOSition may be different from ony vIews now or hereafter expressed ' Ihll or any other Issue Janney Montgomery Scali, Inc. which IS regIstered WIth the SEC os on Investment adVisor, may gIVe adVICe to Its mvestment odv.wry and other customers Independently of ony statements mode In thiS or In any other Issue Further .nformOhon on ony security men honed herein 15 available on request