"The
seed of success cannot grow in the soil of doubt."
-- Christina Nikolov
Material Concerns
by
Christina Nikolov, Founder ChartWatchCentral
Stock/Ticker: Martin Marietta Materials (MLM)
Date: February 10, 2003
Opinion: Bullish
Current Price: $27.86
Target Price: $32.00, then possibly as high as $37.90
Commentary:
Since peaking on January 7, 2002, Martin Marietta (MLM) plunged more than 44% before finally settling into a sideways trading range. This four month consolidation resembles a double bottom, with strong support at the base of the formation ($27.30). Below that, the next level of significance is $25. (chart #1)If MLM attempts a rebound from this level, $32 to $34 could be difficult to surmount. Residing near $32 is the July 23, 2002 low and several peaks which occurred between October 2002 and January 2003 . Meanwhile, a ten-month downtrend and the 200-day moving average are perched near $34. (chart #1)
When it comes to fundamentals, the picture hasn't been very pretty. Even though the MLM managed to boost prices by 3% in 2002, Chairman and CEO Stephen Zelnak, Jr. noted that the reduction in production and the resultant under-absorption of fixed costs significantly affected margins.
Zelnak is cautious about the future. His concerns stem from the weak economy and potential for war. Meanwhile, Wall Street's prognosticators are pretty bearish as well. While we can't guarantee that this will be the final bottom, the very noticeable lack of bullishness is encouraging. After all, most bottoms form when they are least expected. And since the technicals tend to anticipate future fundamentals, the potential double bottom could mean a turnaround is on the horizon.
To profit from a potential rebound, we suggest the July 25 call (Symbol: MLMGE), which is currently offered at $4.20. If you are willing to take on more risk , the April 25 call (Symbol: MLMDE) will give you more bang for your buck if the shares appreciate short-term. The April calls are offered at $3.60.
Chart(s):
1) Martin Marietta (MLM) Fifteen Month Daily Chart
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Click the Chart for an Enlarged View
2) Martin Marietta (MLM) Five Month Daily Chart
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Click the Chart for an Enlarged View
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