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I' – , J I Walston &Co. Inc. — MEMBERS NEW YORK StOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO rSwiherJad) OFFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM EDMUND W. TABELL August 15, 1956 I INSTITTUhTIeOrNe AiLs no c ange in our thinking that the market will remain for quite some time in a broad trading area bounded roughly by fifty points each side of the 490 level and that the action of individual groups and issues will be of much more importance than the action of the averages. The following analysis attempts to cover the technical action of over forty groups FAVORfBLE ACTION ;IR CONDITIONING. Relative strength improving and group average is close tq reaching a new high Since the 1954-1956 trading area. Carrier Corp. (59) appears to be an attractive issue in the group. – Relative strength has been in an uptrend since 1953 and still continues strong. However, the advance has been rapid and some consoli- dation appears needed before the long term advance is resumed. BUSINESS M..CHINES – Relative strength still is above average some consolidation appears needed. Royal McBee (31) has a favorable pattern. CEMENT – Very favorable long term patterns have been built up after a lengthy period of consolidation. All issues in the group are attractive, but especially like Alpha Portland (40) , General Portland (67), Marquette Cement (35) and Penn-Dixie (39) DRUG – This group continues to show favorable action although some in- dividuaTssues are slow. Bristol-Myers (37) has an outstandingly favorable technical pattern. Merck & Co. (33), Parke-Davis (50) and Pfizer (46) conti- nue to look attractive. ELECTRIC EQUIPMENT – While there-are a few weak situations in this group like Westinghouse and Robertshaw-Fulton, the balance of the group are showing good relative strength action. InclUded in the good acting section are Beckman Instruments (35), Emerson Electric (35), General Electric (64) and Sperry Rand (26) GAS – ThlS is an outstandingly attractive group. After three years of consolidation, the group appears to be breaking out on the upside. J.lmost al issues in the group appear attractive but Panhandle Eastern (97) and Norther Natural Gas (49) appear most attractive. f,S a more speculative issue, Chicag Corp. (27), has appeal. Mf.CHINERY – This group has had above average price action since 1953 and good relative strength continues. However, some consolidation appears needed in some issues after the sharp price advance. Blaw-Knox (38), Joy Mfg.(61), Link Belt (69), Mesta Machine (60) and Yale & Towne (32) still appear attractive for the longer term. MINING & SMELTING – Longer term prospects for this group are very fa- vorable, particularly in nickel and copper section. Lead and zinc pattern is less certain but could improve. issues with good technical patterns ar American Smelting (55), Anaconda (84 , Cerro-de-Pasco (74, Eagle-Picher Co. (42 ), International Nickel (109, Kennecott (136) and Magma Copper ( 120) . OILS – Favorable relative strength action continues. Some of the inter national oils may need some consolidation, however. There is good downside support in all issues and the longer term patterns are favorable. The most attractive issues at the moment include j,merada Corp. (118), A.tlantic Re- fining (46), Mission Corp. (45), Phillips Petroleum (55), Pure Oil (46), Richfield Oi.l (76)t Standard Oil of Indiana (64), Sunray-Midcontinent (29). PAPER – The rend has been upward in this group since late 1953 and there is no change in relative strength action. However, it is probable that some consolidation is needed for some time longer 'in order to build up new re-accumulation areas. Scott Paper (72) , which has held in a narrow trading area for over a year, appears attractive at around present levels. EQUIPMENT – The favorable trends which have been in effect for over a year still continue. Three of the more attractive issues are American Steel Foundries (49), General Railway Signal (87) and Westinghouse f..ir Brake (34 ) STEEL – Recent technical action has been very impressive and the steels have become one of the most interesting groups for intermediate and, longer term price appreciation. Most issues in the group appear attractive. My favorites include Allegheny Ludlum (46), Crucible Steel (59) and U.S. Steel (65). UTILITIES '- Price action may be slow but the slow uptrend still re- -mains in effect. Like parti-cularly companies in the northwest territory. – Th,s memo(ilndum is not to be conlltrued as an offer or SOIIClt1tIO of offers to buy or stll anv securitlu From time to lime & Co. or any pO!lrtner thNeof, may hve !In Interest In some or lilt! of the securities mentioned hlllrltln The foregOlnq mhHl,,1 has been prillpated bV ul S matter of Infotmallon only II IS baU1d upon Informaj'()n believed reliable but not necessarily complete, is not qUafolnfeed u 4CCUrlilie or final, and is noi ,nfellded to foreclose Independenf ,nquifY ..- , al -2- MIXED ACTION AIRCRAFT – Relative strength improving. Action of indivi- dual issues in the group very mixed.Believe best holdings for long appreciation are General D1namics (49) and North American Aviation (91). As a speculation, Glenn-Martin 33) has appeal. – Continue to hold in the year-old trading area. Timing will be of utmost importance in this group. Relative strength has not yet improved and further patience may be required but group has very interesting price apprecia- tion prospects.American Airlines (24), Eastern Airlines (54), Pan hmerican- World Airways (lb) and United Airlines (40) all have good potential patterns. AUTOMOBILE EQUIPMENT – A very mixed group with a combination of a few good and quite a few poor patterns. On the favorable side are Borg Warner (47) Federal MOBUl Bower (40), Thompson Products (64) and Timken Roller BearinR (84j. BOIL ING SUPFLIES – 1. few issues have favorable -patterns but there are also quite a number showing uncertain or unfavorable action. Best acting issues include Johns-Manville (54), Masonite Corp. (46), National Lead (120), U.S. Gypsum (73) and U. S. Plywood (47). CHEMICALS – Price action is quite mixed here. The sulphur group shows very poor action as do most of the agricultural chemicals. Most issues in the group, however, are static.Best acting issues include Columbian Carbon (53), Hooker Electrochemical (48), Pennsylvania Salt (60)and Union Carbide \129). American ctanamid Dow (77) have good longer term patterns but appear in need o consolidation.— COAL – Patterns are becoming a bit mixed in this group. Relative price action continues good but in many cases upside objectives have been reached and a rest appears needed. ELECTRONICS – All of the television issues show poor patterns with no sign of' any immediate change. On the other hand, the broadcasting companies like American Broadcasting-Paramount (31) and Columbia Broadcasting (30) con- tinue to show good action. The most outstanding issue in the group, .however, is Sylvania EJectric (54) with excellent relative strength action and a good general technical pattern. FOOD CHAINS – Only average price action indicated here. American Stores (54), Grand Onion (36), Kroger (51) and Safeway (57) appear most attractive. FOOD – Here again only average'action is expected. No issue appears out- standingly attractive except Stokely-Van Camp (22) as a speculation. GLASS CONTAINERS – Relative price action for most \If the group appears good,but in need 01' a resting period. Owens Illinois (80) still appears at- tractively priced and could higher. INVESTMENT COMPANIES – ;\s expected, these issues will follow the action of the general market. No issue particularly outstanding. RAILS – While patterns in this group are very mixed,there appears to be a minimum of downside risk in most situations.Best patterns are in northwest rails and coals. Among the attractive issues are Denver,Rio Grande (42) Great Northern (42), Illinois Central (63), Kansas City Southern (86), Louisville & Nashville (lOl),Norfolk & Western (70),Northern Pacific (41),Western Pac. (76). RETAIL Clli,IN – Relative strength in this group has been very disappoint- ing and there is no evidence of any immediate change. Best potentials appear in the department store group. Would avoid the variety chain stores whose patterns are unrfarmly unfavorable. – Some further time may be needed to consolidate after the sharp advances of the past several years,but the basic patterns of most issues remain favorable. Firestone (89) shows the best near term action. Hewitt-Robins (40) has a very attractive long term patter.n. SOAP & VEGETABLE IL – Recent action has been poor and casts considerable doubt on the ability of this group to make much headway. Vlould avoid until the pattern clarifies. SOFT DRINK – While the longer term patterns appear favorable, there are no indications of any immediate move and funds might be employed to better advantage in-other groups. SUG!',R – Recent relative strength patterns have shown improv;ement. I-Jould confine holdings to domestic beet sugar companies rather than off-shore companies. TIN CANS – Very mixed action in group with Continental Can advancing while rest of the group has remained static. Action of hmerican Can (45) could improve and stock appea-rs attractive at present levels. – Price action of this group has been poor for a long time but is slowly showing signs of improvement. Patience may be required but with yields attractive the group has merit for long term holding. The following groups continue to show unfavorable action and should be avoided ;'.UTOMOBILES, BAKING, BRASS, FARM MACHINERY, FERTILIZER, FINANCE COMANIES, GOLD, LIQUOR, MEAT PACKING, MOVIES, TEXTILE. EDMUND W. & CO. INC.