Although equity markets have backed off a bit this morning, the primary trading theme this week appears to be one of consolidation. Last week, equity indices broke through key resistance levels such as 12,800 for the Dow Industrials (US30 CFD) and 1,900 for the NASDAQ 100 (NDAQ100 CFD). This week, indices have been holding just above these levels, which suggests that although investor support of equity prices may be increasing, investors don’t seem to have enough confidence to drive markets higher as of yet.

Tomorrow, two key announcements are due that may have a significant impact on sentiment, the initial U.S. GDP reading for Q1 2008 in the morning and the Federal Reserve interest rate decision due at 2:15 pm ET. Each of these scheduled releases has the potential to significantly change investor sentiment and could also signal the start of a shift in focus back to broad economic news from the individual company earnings releases that appear to have dominated investors’ attention for the last several sessions.

Crude oil has started to retreat this morning after failing to break through resistance at the $120/bbl level. It appears that some investors may be taking profits on indications that oil supplies from a key U.K. North Sea processing plant and pipeline may be about to come back on stream. Key support levels for oil to note include $115/bbl and then $109/bbl. Note that the natural gas price continues to hold above $11.00/mcf, which suggests that although some of the short-term speculative interest may come out over the next session or two, there appears to be ongoing underlying interest in energy commodities.  

Canadian share update: the iPhone cometh, Gildan gutted

Sentiment toward Rogers Communications (TSX: T.RCI, Bullboard) appears to have changed dramatically in recent weeks. In late March, Rogers broke out of a downtrend, and in recent weeks had been consolidating, with its former $40.00 resistance level becoming a new support level. Today, Rogers broke through resistance at $43.00 and it appears that a new upleg may have commenced where it could advance to test resistance closer to $50.00. This rally appears to have been sparked by a combination of Rogers’ latest earnings report and also the news that Rogers has reached a deal with Apple (NASDAQ: AAPL, Bullboard) to launch the iPhone in Canada later this year.

Gildan (TSX: T.GIL, Bullboard) collapsed this morning, dropping 27.4% and gapping through the key $30.00 support level. The activewear apparel producer slashed its EPS guidance for the March quarter to 35 cents from 42 cents and its EPS target for the F2008 year, which ends in September, to $1.45–$1.50 from $1.85–$1.90. Management blamed the shortfall on production difficulties at its textile facility in the Dominican Republic and discontinued product writedowns. In addition to ongoing production shortfalls, higher energy and freight costs are expected to impact results through Gildan’s peak summer selling season.

Higher energy prices appear to be working their way through to the bottom lines of energy producers. Petro-Canada (TSX: T.PCA, Bullboard) has advanced today after reporting Q1 F2008 EPS of $1.86, which came in well ahead of the $1.63 Street estimate, boosted by a 5.4% increase in production over year, a 48.2% increase in oil prices, and a 3.6% increase in natural gas prices.

Nexen (TSX: T.NXY, Bullboard), meanwhile, has climbed 1.2% after EPS of $1.19 beat the Street estimate of 99 cents by nearly 20%. Nexen indicated that production had increased by 12% over the year and announced that it is doubling its dividend to five cents per quarter.

WestJet (TSX: T.WJA, Bullboard) appears to have successfully retested support at $16.00 and seems to be catching a tailwind today, gaining 2.9%. Earlier today, WestJet announced that it earned 40 cents per share in Q1 F2008, up 73% over the year as revenue increased by 27.3% to $599.3 million, traffic increased by 19.1%, and load factor rose to 81.9%. Note the resistance levels for the higher end of the current trading channel appear in the $19.00 to $20.00 area. 

Finally, note that OPTI Canada (TSX: T.OPC, Bullboard) has surged 7.6% today on no news. It is possible that Total’s bid for Synenco (TSX: T.SYN, Bullboard) yesterday may have sparked takeover speculation among emerging companies with oil sands assets.  

In the coming weeks, Colin Cieszynski will be making a number of free presentations for accredited investors across Canada.

For more information on these and additional CMC Markets seminars, please go to CMC Markets Seminar Registration Page at http://www.cmcmarkets.ca/en/content/education/free_seminars.do

In the coming months, Colin Cieszynski will be presenting a series of free webinars on trading for accredited investors from coast to coast. 

For more information on these and additional CMC Markets seminars, please go to CMC Markets Seminar Registration Page at http://www.cmcmarkets.ca/en/content/education/free_seminars.do

This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision. 

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