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Love on the high seas

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Royal Caribbean Cruises (NYSE:RCL) has agreed to merge to with P&O Princess (NYSE:POC) to create the world's largest cruise ship operator, carrying a market value of $6 billion. P&O Princess said it would own 50.7 percent of the merged company, while Royal Caribbean (RCL) will hold 49.3 per cent of the merged company. P&O said it expected operational synergies of $100m a year through the merger. It said the combined company would have annual revenues of around $5 billion (RCL=$3.13 billion + POC=$2.45 billion). Royal Caribbean shares closed Monday at $15.01, but traded as high as $17.60 during this morning's session. Shares of P&O Princess are surging higher by $3.20 (+17%) to $21.20. The deal is contingent on regulatory and shareholder approval and scheduled to be finalized in the second quarter of 2002.

Technology sees selling

Technology stocks are under some selling pressure today in what looks to be some profit taking ahead of the Thanksgiving holiday. Last year, stocks found selling in the day's just prior to the Thanksgiving weekend, but found gains the trade-shortened Friday and Monday following the weekend. This is a rather common occurrence that takes place as the more senior traders handling the bulk of institutional orders take on a "sell bias" as they're clearing out their trades, just before they take off for a 4 day weekend. Often times, we see the market begin to get a "buy side" bias from the more "junior traders" late Wednesday when the senior traders head out early for the weekend.

Bulls should be patient here. Start putting together some lists of stocks that look like they might be prone to a 5%-10% pullback into support and keep an eye on them Wednesday afternoon. Volume will most likely drift off after lunch time on Wednesday and may begin getting the "buy side" influence into the close.

Bearish traders can try and take advantage of this type of action today, with short-term trades in mind. Right now I'm trying to concentrate on a bigger, more liquid semiconductor stock like Intel (NASDAQ:INTC). This correlates with some of the bullish percent data we've talked about recently from Dorsey/Wright and Associates and their bullish percent data showing the sector as "overbought" at 71%. Last week I set up a trading scenario based on the point and figure chart of Intel (INTC) and we have yet to see any further charting action in the point/figure chart for that stock, but there's still some decent trading to the downside near-term.

Intel Chart - 60-minute interval

Last week we took a look at the "bigger picture" and the point/figure chart of Intel (NASDAQ:INTC) to try and get the institutional perspective. A 3-box reversal back into a column of O's would have the stock needing to trade $28. We can take that "vision" and put it to work on a bar chart with retracement overlaid. If INTC is going to trade $28, then we can set some tests and correlate some levels. First test on the 60-minute chart would be a break of the rising 50-pd MA at $29.81, then a break of 19.1% retracement of $29.40. If that should occur, we could then envision a decline near the rising 200-pd MA (currently at $26.53) and very close to a 3-box reversal of $27.

Jeff Bailey
Senior Market Technician
Option Investor

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