Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.40 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Lower High Forming?

Major global indexes are showing waning upside momentum and we believe near-term consolidation is likely. This is supported by the charts and the idea that consolidation makes sense following the massive gains off of the March lows. We also believe that the market is in a “wait-and-see” phase as it relates to states and countries re-opening. A resolution of this consolidation period above resistance (bullish) or below support (bearish) will tell us where the major global averages are headed next.

· Wedge/Uptrend Breakdowns. Last week we highlighted potential resistance at the top of the rising wedge patterns for the MSCI ACWI, ACWI ex-US, EM, and EAFE indexes (priced in USD). These indexes failed at those levels and wedge/uptrend breakdowns were confirmed on Friday. This tells us global equities exhibit waning upside momentum and that near-term consolidation is likely. This also leaves the door open for a deeper pullback, however there is no guarantee it will happen. We highlight levels we are watching that will tell us where the indexes are headed next... see below and page 2.

· Index Overviews. Last week's Int'l Compass theme focused on the fact that short-term bullish trends were clashing with long-term resistance levels for the MSCI ACWI, EURO STOXX 50, TOPIX, and Hang Seng. With short-term uptrends breaking down at long-term resistance it signals the momentum has flipped from bullish to neutral and it also raises the probability that this could be the start of a bigger correction. On the ACWI-US, $70 remains long-term resistance while shorter-term resistance is at $68.35. For support we are watching the $66-66.25 level followed by $64.75 and then $63.75. A break below $66 would confirm a lower high for global equities and would put the bears in the driver's seat... see chart below and page 3.

· Actionable Themes: Health Care, Technology, Consumer Staples, Additional Bottom-Up Ideas. While the major averages are stalling below major resistance and their direction is unclear, there are many individual stocks that continue to act well and that are offering fantastic entry points at current levels. Health Care and Technology remain our two favorite global Sectors, and they are outperforming across all major markets including the US, Europe, Japan, and China. Remain overweight/add exposure. Consumer Staples is another leadership Sector, particularly in the Asia/Pacific region. Lastly, we are also continuing to expand our recommendations to include bottom-up ideas within several other Sectors as the market goes through a bottoming process... see pages 4-6.
Underlyings
AstraZeneca Pharma India Limited

Astrazeneca Pharma India is engaged in the pharmaceuticals to produce bulk drugs or chemicals and formulations for the cardiac therapy, gynaecologicals, anaesthetics, pain control, anti infectives, respiratory, oncology and other therapeutics group-wise. Co.'s formulations include liquids, tablets and capsules, injectables, ointments and inhalation products. Co.'s primary products are meropenem, metroprolol and lignocaine.

AstraZeneca PLC ADS

China Marine Information Electronics (A)

CEC CoreCast and its subsidiaries are engaged in the development of technology, provision of consultation services and transfer of technology services; investment management; communication and system integration business; import and export of cargo, technology and proxy; manufacture and sale of integrated circuit, electronic materials and parts, instrument measuring appliances, machine complete products, electronic products and system, electronic special-purpose equipment, communication equipment, electronic computer and supporting facilities; development of network construction design and software; and undertake the electronic application system and communication construction.

Double Medical Technology (A)

Double Medical Technology Inc. Double Medical Technology Inc is a China-based company and mainly engaged in manufacture, development and sales of medical precious consumable. The main products of the Company include orthopedic trauma implant materials, spinal implant materials and nerve surgical implant materials. Also, the Company manufactures surgical instruments. The Company distributes its products in domestic and overseas markets.

Enerplus Corporation

Enerplus is engaged in acquiring, exploiting and operating crude oil and natural gas assets for the benefit of Co. As of Dec 31 2010, Co.'s net proved reserves of light and medium oil, heavy oil, natural gas liquids, natural gas and shale gas amounted to 68,508,000 barrels, 23,963,000 barrels, 6,019,000 barrels, 473,896,000,000 cubic feet and 41,815,000,000 cubic feet, respectively.

Formosa Sumco Technology

Formosa Sumco Technology is engaged in the manufacture, sale, import and export of silicon wafers for semiconductor industries.

Hikma Pharmaceuticals Plc

Hikma Pharmaceuticals is a pharmaceutical company engaged in developing, manufacturing, and marketing a range of branded and non-branded generic pharmaceutical products across the U.S., the Middle East and North Africa, and Europe. Co.'s business segments are: Injectables, which sells specialized generic injectable products, including sterile liquid, powder, lyophilized and cytotoxic products; Generics, which sells non-injectable generic products that include amoxicillin, buprenorphine, butalbital, acetaminophen and caffeine, colchicine, and fluticasone; and Branded products, which sells branded generics and in-licensed products including Amoclan®, Blopress®, Omnicef®, Prograf® and Suprax®.

Hundsun Technologies Inc. Class A

Hundsun Electronics is engaged in the technology development, provision of consultation and services, and transfer of technical know-how of computer software; the computer systems integration; the design, contract, and installation of automation control engineering; the sale of computers and parts; the manufacture and sale of electronic equipments, communication equipments, computer hardware and external instrumentation; the lease of houses; and the import and export businesses. Through its subsidiaries, Co. is also engaged in the provision of economic information consultation services. Co. develops and sells its products to be used in securities, finance and transportation industries.

Jiangsu Nhwa Pharmaceutical (A)

Jiangsu Nhwa Pharmaceutical Co., LTD is a China-based company principally engaged in the production and sales of pharmaceutical preparations. The Company offers its pharmaceutical products under four categories, which consist of anesthetic medicines, including midazolam injections and etomidate fat emulsion pharmaceutical preparations injections; psychiatric medicines, including risperidone tablets and others; neurological medicines, including gabapentin capsules and others; bulk drugs, including fenofibrate and miconazole nitrate. The Company is also engaged in the pharmaceuticals trading business. Through its subsidiaries, the Company is also engaged in the Internet medical businesses. The Company distributes its products within domestic market and to overseas markets.

Kushim

iStudy is engaged in the creation and sale of software products. Co. has three main businesses. iLearning segment creates and sells educational software "iStudy "and provide a learning environment online. "iStudy" covers contents for database, operating systems, network application and language studies and is designed for IT engineers seeking information technology (IT)-related qualification. Learning segment provides engineering training courses and training support services primarily for IBM Japan, Ltd and Oracle Corp. Co. provides temporaty staffing services.

Lasertec Corp.

Lasertec is mainly engaged in the development, manufacture, and sale of semiconductor-related products and other products, as well as the provision of services for its products. Co.'s principal products include systems related to defect inspection/measurement of mask, mask blanks and wafer; systems related to defect inspection of large size photomask and PV cell conversion efficiency distribution measurement system; and systems related to microscope based on confocal optics. Along with its subsidiaries, Co. offers its products and services in Japan as well as in North America, Europe, and Asia regions.

Mercari Inc.

Orion Oyj Class B

Orion and its subsidiaries develop and manufacture pharmaceuticals, active pharmaceutical ingredients and diagnostic tests that are marketed globally. Co. and its subsidiaries have two segments: Pharmaceuticals and Diagnostics. The Pharmaceuticals business develops, manufactures and markets pharmaceuticals and active pharmaceutical ingredients. The Pharmaceuticals business portfolio includes Co.'s Stalevo® (carbidopa, levodopa and entacapone) and Comtess®/Comtan® (entacapone) Parkinson's drugs. The Diagnostics business develops, manufactures and markets diagnostic tests.

Pfizer

Pfizer is engaged in manufacturing and trading of bulk drugs, formulations and animal health care products, including rendering of marketing services; and conducting clinical trials and undertaking comprehensive data management for new drug development. Co.'s principal products are B group vitamins (B-Complex) with vitamin C; doxycycline tablets; and other antibiotics.

Roche Holding AG ADS

Sectra AB B

Secunet Security Networks AG

Secunet Security Networks provides consulting services, products and solutions in the field of information technology (IT) security. Co. operates in two business units: Public Sector, which supports authorities in Germany and abroad in areas relating to eGovernment and IT security, including biometric solutions and electronic ID documents, the electronic healthcare card, security validation and secure web solutions; and Business Sector, which focuses on security issues affecting industrial companies and provides identity management systems, mass signature solutions for electronic invoicing, public infrastructures and network security, as well as IT security for automotive manufacturers.

Technology One

Technology One is engaged in the development, marketing, sales, implementation and support of enterprise business software solutions. Co.'s segments are: Sales and Marketing, which is involved in the sales of license fees and customer support; Consulting, which is involved in the implementation, consulting services and custom software development services for large scale, purpose built applications; Research & Development, which is involved in research development and support; Cloud, which is involved in the delivery of cloud hosting services; and Corporate, which is involved in the aggregation of the corporate services functions' costs and revenue, and corporately-funded projects.

Venustech Group Inc. Class A

Venustech Group Inc., formerly Beijing Venustech Inc., is a China-based company, principally engaged in the research and development, manufacture and distribution of information and network security products, as well as the provision of security services. The Company's security products include security gateway, security monitoring and data security and platforms. The Company also provides security services and tools, and hardware among others. Its products are applied in government, telecommunication, finance, education, electric power, transportation and petrochemical industries, among others. The Company distributes mainly in domestic markets.

Wiwynn Corp.

Wiwynn Corp is a Taiwan-based company mainly engaged in the research, development, design, manufacture, testing and distribution of servers for cloud services and Hyperscale Data Centers. The Company's products mainly include computers and peripheral equipment, data storage media, electrical equipment and audio-visual electronic products, information software and others. The Company mainly distributes its products in Taiwan, Americas, Europe, Asia and other regions.

Zhangzhou Pientzehuang Pharmaceutical Co. Ltd. Class A

Zhangzhou Pientzehuang Pharmaceutical is engaged in the manufacture of pastille, tablets, granule, capsule, ointment, syrup, tincture, decoct ointment, and pill; the manufacture and sale of Pientzehuang royal jelly capsule and Liyan Buccal tablets; the import of production necessary auxiliary materials equipment and related technology; undertaking of China and foreign countries joint ventures and cooperation in production; undertaking the processing of materials, sample and assembling parts supplied by clients; and develop compensation trading. Co. primarily provides Pienzehuang series products for pain-inhibition, anti-inflammation and detoxification and curing hepatitis.

Provider
Vermilion Research
Vermilion Research

Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.

Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.

Analysts
Dave Nicoski

Ross LaDuke

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