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Tickers in this Article: AAPL, AMZN, MHP, NYSE:JW-A, PSO, SCHL
Recently, there has been a lot of focus on the eBook industry after Apple (Nasdaq:AAPL) released its highly anticipated tablet (iPad), which will compete directly with's (Nasdaq:AMZN) eBook reader, the Kindle. Along with adding the new iPad hardware platform into the eBook reader mix, Apple is also introducing the iBookstore. This introduction has several implications for the industry, especially when coupled with Apple's wildly successful foray into the mobile application space following the release of the iPhone.

One indirect impact is that the introduction of an alternate marketplace is providing publishers with some leverage against Amazon. Amazon has had the leverage to enforce its pricing plan on publishers due to the lack of viable alternatives available to them. While much of the focus has been on Amazon, this is a good development for the publishers as well, and their stocks are quietly revealing this as they trade near 52-week highs.

The McGraw-Hill Companies (NYSE:MHP), for instance, quietly cleared a base in early December. It didn't follow through at all, drifting lower as it consolidated near the breakout area. While technically it fell back into the base, it never showed urgent selling and eventually found support at the 50-day moving average. It had a sharp bounce from there and gapped above the entire base in late-day trading on the Apple announcement. It has been forming a bull flag at this level, and could mount a strong rally if it clears that flag.


While John Wiley & Sons (NYSE:JW-A) has a different looking chart, it is also showing a good deal of relative strength against the markets. JW-A had been rising steadily through the latter part of 2009 before settling into a consolidation in mid-December. It has been trading sideways and narrowing down to a very tight range. The rising 50-day moving average is just underneath the stock and could provide support on near-term weakness. JW-A may be close to breaking the established range, and could present a good opportunity in the near future.


Pearson plc (NYSE:PSO) is a thinly traded publisher that has a very similar pattern to JW-A. It also rallied through the second half of 2009 before settling into a consolidation that has carried over into 2010. The levels to watch here are the recent highs near $15 and the lows near $13.50-$14.


Scholastic Corporation (Nasdaq:SCHL) is another publisher that is close to a 52-week high. It cleared a base in December and tacked on a few points before also settling into a consolidation. While the price action has been relatively lackluster, SCHL has also refused to give up much of its gains. One important level to watch is $31.50 for a resumption of the prior breakout. It's a little trickier to gauge a breakdown level, and SCHL should have fairly strong support in the broad range of $26-$28.

Bottom Line
It will be interesting to see how these stocks hold up if the markets continue to weaken. They have been holding up very well in light of the recent weakness, and appear to be waiting for a catalyst to push them higher. Each of these stocks is trading near a 52-week high and each is still healthy from a technical perspective. If the markets stabilize and push higher again, these stocks will almost certainly join in the rally.

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At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.

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