The Option Investor Newsletter Wednesday 05-14-2003 Copyright 2003, All rights reserved. 1 of 2 Redistribution in any form strictly prohibited. In Section One: Wrap: Light pullback Futures Wrap: The Wedge Index Trader Wrap: Choppy Trading Today Ahead of the End-of-Week Numbers Weekly Fund Family Profile: Purisima Funds Posted online for subscribers at http://www.OptionInvestor.com ******************************************************************* MARKET WRAP (view in courier font for table alignment) ******************************************************************* 05-14-2003 High Low Volume Advance/Decline DJIA 8648.52 - 30.73 8728.41 8608.31 1.71 bln 1595/1655 NASDAQ 1545.88 - 4.77 1549.94 1526.14 1.78 bln 1602/1542 S&P 100 473.98 - 1.43 478.56 471.94 Totals 3197/3197 S&P 500 939.28 - 3.02 947.29 935.24 RUS 2000 419.43 + 0.20 420.97 418.23 DJ TRANS 2457.62 - 19.28 2457.62 2455.94 VIX 22.76 + 0.73 23.23 22.26 VXN 33.14 + 0.30 34.23 32.72 TRIN 0.87 PUT/CALL 0.71 ******************************************************************* Light pullback Jonathan Levinson The usual inexplicable rally on bad economic news at the preopen shocked bulls and bears alike when it reversed at 9:45, driving the indices to their day lows before attempting a weak bounce that created a trading range for the remainder of the session. The losses were minimal, no more than a "shake", as Alan likes to put it, but losses nonetheless. Despite minimal losses, volume was respectable, with 1.71B shares traded on the NYSE and 1.78B shares on the Nasdaq. Daily Chart of the INDU Weekly Chart of the INDU As discussed for weeks now, the current pattern is projecting to strong resistance at current levels, both for the INDU and the COMPX. A resolution is due at any time. The COMPX looks far more bullish than the INDU, but both indices are printing bearish formations on their daily charts, and look very toppy on that timeframe. Daily Chart of the COMPX Weekly Chart of the COMPX Equities shrugged off disappointing retail sales and import numbers at 8:30, with the Commerce Department reporting that retail sales fell 0.1% in April following a revised 2.3% gain in March. Retail sales excluding automobiles fell -0.9% in April after rising a revised 1.5% in March. Expectations had been for retail sales to rise 0.4% and sales ex autos to rise 0.1%. The move was attributed to declining gasoline prices and weak sales at clothing and department stores which offset a surge in car buying in April. March import prices, excluding oil, were up 0.9%, but April brought a decline of -2.7%, the largest one month drop on record. April imports ex oil were down -0.9%. Immediately following the reports at 8:30, the US Dollar Index dipped, bonds rallied, and equity futures reached for their morning lows, but within minutes the slide was arrested, with equity futures actually bouncing to new highs and climbing until 9:45AM. The Energy Department reported drop in crude oil inventories of – 2.7 million barrels for the week ended May 9, surprising analysts yet again on their expectations of a 2M barrel rise. Stocks were down -12.5% from 284.5 million barrels at this time last year. Gasoline inventories rose by 800,000 barrels to 208.6M barrels in this past week, bringing supplies to levels 4% lower than at this time last year. June crude was up 67 cents to close at $29.17 per barrel. Chart of the US Dollar Index The US Dollar Index touched the 95.00 level overnight and failed again, and got hit after the 8:30AM data. It sunk to near 2 year lows against the yen but gained slightly against the euro, as US treasuries rallied, bringing the thirty year yield to 45 year lows, a new bear market low. Traders watched incredulous as equities treaded water, containing their losses in the face of recent bear market lows in the US Dollar Index and treasury yields, both representing substantially larger pools of money than equities. My thinking continues to be that the fed's recent proclamations of its intent to do whatever it deems necessary to avoid "dis"inflation has resulted in a flood of US dollars hitting the markets, either from foreign sellers or from the fed itself. Either way, this supply is diminishing the price of dollars while chasing US denominated assets, be they treasury bonds, equities, commodities, and even precious metals, all of which have been rallying simultaneously. Thinking a step further, one might wonder if the weaker dollar is not an excellent way to mitigate both the ballooning balance of trades deficit, as well as the national deficit. With an estimated 30% of US debt held by foreigners, and domestic savings at or near record lows, the devaluation of the US Dollar is an excellent way to reduce the real value of that debt while harming only the vast minority of Americans who are actually net savers. In light of Ben "The Terminator" Bernanke's statements about being able to print dollars out of thin air, it's no wonder that massive supplies of US Dollars are hitting the forex markets- if I owned US treasuries in a foreign land, I'd be dumping them too, which is no doubt the desired effect. But I digress. Treasuries finished the day off their highs but still well within breakout territory, with the TYX –10.6 basis points at 4.52%, TNX –8.6 basis points to 3.537% and the five year yield down 7.8 basis points to 2.49%. Daily chart of the thirty year yield Is there any fundamental or sentiment-based sign of this trend reversing? Apparently not, as this afternoon, Congressman Jim Saxton, R-N.J., vice chairman of the House-Senate Joint Economic Committee urged the fed to cut interest rates to hopefully firm up the economic "soft patch." He stated: "Given the lack of inflation, the fed should move soon to ease monetary policy and improve the economic outlook. By many measures, current domestic and international economic conditions still appear to be quite weak. Business investment during this expansion never fully recovered as many had expected, leaving the economy on a sub-par growth path. We still seem to be stuck in the 'soft patch' Chairman Greenspan described last November." Given all of the foregoing, it's no wonder that big moves have been occurring over past weeks and months in equities and bonds, and the financial press was all abuzz today about reports from brokers and market makers showing a spike in retail investor activity. For example, NITE reported a 10.6% increase in equity trade volume in April. This data helped the Broker Dealer Index ($XBD) outperform the broader market today. However, a spike in retail investor activity hardly looks like a long term bullish indication to me, except perhaps as may regard this current quarter's results of XBD components for the profits no doubt being accumulated. Just as J.P. Morgan reputedly saved his fortune from the Great Crash when observing that the market was being overplayed (upon receiving a stock tip from a shoeshine boy), the increase of speculative retail activity is generally associated more with market tops than with bottoms. Is there any sign of this trend reversing? Apparently not, as this afternoon, Congressman Jim Saxton, R-N.J., vice chairman of the House-Senate Joint Economic Committee urged the fed to cut interest rates to hopefully firm up the economic "soft patch." He stated: "Given the lack of inflation, the fed should move soon to ease monetary policy and improve the economic outlook. By many measures, current domestic and international economic conditions still appear to be quite weak. Business investment during this expansion never fully recovered as many had expected, leaving the economy on a sub-par growth path. We still seem to be stuck in the 'soft patch' Chairman Greenspan described last November." The soft patch manifested itself in this morning's data, but equity markets were surprising impervious to the news, if the Teflon Market's disinterest in dismal economic and fundamental news can still be considered "surprising". If the move higher in equities has been fueled by a massive supply of dollars hitting the bond and equity markets, then there's no fundamental reason why the rally has to end here. I personally believe that the top is close, if not already printed, but that's based on other technical and fundamental factors discussed in other articles and daily in the Market Monitor. The concerted inflation of the money supply, if my thinking here is correct, makes the bear in me very nervous indeed. In corporate news, Federated Stores (FD) reported Q1 profits down 44%, with fiscal first-quarter net income of $46 million, or 24 cents a share, down from 43 cents a share in the year-earlier period, and beating estimates of 15 cents a share. Patting itself on the back, the company attributed the better than expected results to lower than anticipated store closings and consolidation costs. Investors somehow bid the stock up in the morning on this news, though it did trade lower throughout the session to close negative. SIRI showed strength after reporting that the number of Q1 subscribers totaled 68,000, up 127% end-of-2002 figure. Net income for the Q1 was $51.9 million, or 16 cents per share, compared with a loss of $1.22 a share in Q1 2002. GTW announced in its annual report that the SEC was opening a criminal investigation into its accounting practices, on the heels of an investigation for accounting irregularities dating back to the end of 2000. CSC was up strongly today following its upside surprise announced yesterday after the bell, reporting Q1 earnings of $162.7 million or 93 cents per share, on revenue of $3.8B. The company had said that it sees "signs of demand stabilization in North America for consulting and systems integration services". KDE, of Pokemon fame, was up sharply after announcing Q1 earnings of $3 million, or 21 cents per share, up from $1.6 million, or 11 cents per share for Q1 2002. Despite RBC's and Smith Barney's recommendation to "sell it into strength", MOT was up over 10% on strong volume today as the company stated that it expects handset sales in India to exceed already explosive growth in the domestic mobile market over the next 2 years. After the bell, BEAS met expectations for earnings and revenue, with earnings of 7 cents. The stock was slightly lower as of this writing. INTU was trading strongly after announcing earnings of $1.05 vs. estimates of $1.02. CA was up as well, beating estimates by 2 cents with earnings of 8 cents per share. For tomorrow, we have the following data (from Yahoo.com): Briefing Expected Prior Forecast May 15 8:30 AM Business Inventories Mar - 0.3% 0.2% 0.6% May 15 8:30 AM Core PPI Apr - 0.0% -0.1% 0.7% May 15 8:30 AM Initial Claims 05/10 - 440K 430K 425K May 15 8:30 AM PPI Apr - -0.9% -0.7% 1.5% May 15 9:15 AM Capacity Utilization Apr - 74.5% 74.5% 74.8% May 15 9:15 AM Industrial Production Apr - -0.3% -0.4% -0.5% May 15 12:00 PM Philadelphia Fed May - -4.0 -4.0 -8.8 Given the April data we've seen so far this week, the anticipated pre-war, intra-war and post-war recoveries have yet to manifest themselves. The stage is set for a strong reaction to the plethora of reports due tomorrow morning. Given the narrowing of the ranges permitted by the converging trendlines on the chart patterns we've been watching in the index and futures wraps during the past weeks and months, tomorrow could well give us the anticipated break. Add to that the steady runup in the indices since last month with this being option expiration week for May contracts, and the stage is set for solid action heading into Friday. See you at the bell! ************ FUTURES WRAP ************ The Wedge Jonathan Levinson Daily Pivots (generated with a pivot algorithm and unverified): Figures rounded to the nearest point: R2 R1 Pivot S1 S2 DJIA 8781 8715 8661 8595 8541 COMPX 1561 1548 1537 1524 1513 ES03M 955 948 941 934 928 YM03M 8773 8711 8652 8590 8531 NQ03M 1177 1164 1153 1140 1128 The markets opened higher, pushed to their highs of the day, and then dropped from 9:45 until 11AM, after which they meandered higher in a narrow range to close just above the 38% retrace off their lows. Volatility was higher across the indices, but lightly so, with the VIX finishing +.73 at 22.76, the VXN up .30 to 33.14 and the QQV +.25 to close at 28.08. Volume was moderate on the NYSE and COMPX, with 1.77B and 1.78B shares traded respectively. The CRB Index added 1.08 to close at 241.59, led by platinum (+1.66%), lean hogs (+1,55%), sugar (+1.47%), cocoa (+1.44%), cotton (+1.35%), soybeans (+.78%), heating oil (+.12%), and crude (.07%). Gold closed at 352.50, touching a two month high intraday above 354/oz. The US Dollar Index failed at resistance at the 95.00 level last night, and failed at 94.60 support in the afternoon before attempting to retake that level at the end of the afternoon. This occurred against the backdrop of a breakout in treasuries discussed in greater detail in tonight's market wrap. 15 minute chart of the US Dollar Index Daily Chart of the QQQ Today's closing candle on the Qubes printed yet another picture of confusion, with the candle body trading between an upper and lower shadow. No damage was done to either of the bear wedge trendlines, as traders were forced to grind their teeth and trade what was a narrow, boring range through much of the session. The QQQ:QQV ratio pictured below, which I've been using to hopefully signal a trend change, dragged out what bears are hoping is a topping process by another day, as the 5 and 13 day SMA's converged ever closer in what could be a top. The stochastics remain in a downtrend, reversing yesterday's uptick, while the MacD remains on a sell. If this carries through, the QQQ will decline relative to its volatility or "fear" index, the QQV, signaling a reversal in the bullish trend that the QQQ has been printing since March. Chart of the QQQ:QQV ratio Daily chart of the NQ3M As noted with the QQQ, the daily NQ3M contract did no damage to either the upper or lower trendlines delineating the bear wedge. Other than the 9:45 drop featured in the 60 minute chart below, little else happened within what proved to be a narrow trading range. It remains a scalpers market for the time being. 60 minute chart of the NQ3M The secondary ascending trendline provided resistance throughout the afternoon following this morning's drop. The 10(5) stochastic relieved its oversold condition and posted a bullish cross but was unable to break that trendline during the day session. The stochastic portends higher prices heading into tomorrow. Daily chart of the ES Once again, the ascending wedge occupied yet another session, with the pullback from the upper trendline by this time routine. The daily 10(5) stochastic is signaling lower prices. Today's candle printed a bearish harami, and had the upper and lower trendlines not become elevated to the level of market institutions by this point in time, the print would appear more bearish than it actually does. Today could well have established that yesterday was a swing high fir this multimonth wave, but until the lower trendline gets decisively taken out, it will be impossible to know. 60 minute Chart of the ES Like the 60 minute NQ contract, today's 60 minute candles on the ES showed a violation of ascending trendline support early in the session, followed by an unsuccessful retest throughout the remainder of the session. The 10(5) stochastic is on a buy signal, and should serve to draw out or at least delay the declining cycle implied by the bearish cross on the daily stochastic in the previous chart. Daily Chart of the YM Will this wedge ever end? Even the stochastic looks bored, pinned ever higher as the wedge continues to extend. A break below 8600 will get bears excited at this point, a level which is growing ever closer. Again, we see the opposing cyclicality between the daily and hourly chart (below), with the hourly having begun its so far weak up cycle and the daily attempting to begin its downphase. Good traders wait for these cycles to get in gear either from oversold or overbought. Until the shorter cycle completes, it will be impossible to predict the strength of the hourly upphase, and whether it's sufficient to resist or reverse the daily downphase. 60 minute chart of the YM There's little to add, as we've all become familiar with what is becoming a tiresome, frustrating setup on the equity indices and futures. As the daily and weekly stochastics indicate, this rally and indeed, this entire phase of the market have grown long in the tooth. It appears to me that we're squinting at price action within a broadly forming top. Of course, I'll defer to the verdict of the upper trendline if it should get decisively violated. In any event, with tomorrow's full compliment of economic reports scheduled for the morning, we can hope for some excitement during tomorrow's session. ******************** INDEX TRADER SUMMARY ******************** Choppy Trading Today Ahead of the End-of-Week Numbers Today's trading proved to be choppy ahead of the important economic numbers to be released tomorrow and Friday. Jeff returns tomorrow morning from his vacation, just in time to deal with the impact of those numbers on market behavior and psychology. We all look forward to reading his input. A demonstration of the day's trading action with respect to pivot analysis can be found in an examination of the DJI's behavior surrounding pivot points Jonathan calculated for last night's Index Wrap. Today, the DJI opened at 8673.20, just below the daily pivot and just above the weekly R1. That first five-minute candle moved the DJI all the way above the daily R1 level to the day's high of 8728.10, but the next 11 five-minute candles saw the DJI plummet through the daily pivot, the weekly R1, the daily S1, and stop just short of the daily S2. Hitting the S2 bounced the DJI back up through S1, almost all the way back to the weekly R1, where it turned around and headed back to the daily S2. The DJI again bounced, headed up through S1 again, but once again stopped short of the weekly R1, posting a lower high and preventing the DJI from confirming a double-bottom pattern on the intraday chart. This time, S1 provided a bounce, but it didn't carry the DJI far, with the closing price ending at 8647.80. Whew! Trading on the Nasdaq and S&P's was much like that on the DJI, but for all that choppiness and testing of support levels, markets closed flat, barely dropping on the day. Here's a pivot analysis matrix for tomorrow, listing daily, weekly, and monthly numbers. The daily and weekly numbers were computed using Q-charts figures. As I mentioned this weekend, the monthly values are Jeff's, copied from his matrix since those monthly numbers have not changed since he left for vacation. Pivot Analysis Matrix As I did this weekend, I thought I'd begin by taking a look at market internals, then studying the OEX, and broadening the study to a brief discussion of the other indices. One study of market internals must include a look at the bullish percents. At the time this article was completed, Stockcharts.com had not yet updated the bullish percent charts for today, but yesterday's values showed the $BPOEX at 65, $BPINDU at 66.67, and $BPNDX at 79. While the $BPNDX had increased by 1 point, the other two levels had not been increased by the week's trading, nor had the values reversed into column's of O's. However, viewing the charts as line charts demonstrated that on both the $BPNDX and $BPOEX, the RSI and MACD are flattening, echoing the slight flattening seen in the value line. While this flattening is not conclusive evidence of an imminent downturn in the bullish percent values for the OEX, it does bear watching for bulls who want to manage risk and refine their plans for taking profits. Line Chart of the $BPOEX Other breadth measures include volume patterns. Today continued the recent pattern of new highs vastly outnumbering new lows. This weekend, I posted a chart of the $NYHLR, the NYSE New High/Low Ratio. That chart showed overbought levels on the weekly RSI. The weekly stochastics demonstrated bearish divergence with the ratio values. Although Stockcharts.com has also not updated this chart today, the chart does include the first two days of the week, and demonstrates that reversals have begun. The unannotated blue arrows pinpoint recent market tops, coinciding with tops in the $NYHLR. Weekly Chart of the $NYHLR As I mentioned in this weekend's wrap, I'm not accustomed to watching this measure in chart format, but I had been worried by the recent imbalance seen in new highs and new lows and worried that the imbalance might be a contrarian indicator. My study of the chart showed correlations with peaks in the $NYHLR and recent peaks in the markets, so the reversal signal shown above, if it continues to form during the week, also hints that the markets may be nearing a top. Two measures, then--bullish percents and reversal signals in the $NYHLR--warn bullish players that risk may be shifting onto their shoulders, allowing them to fine tune exit or profit-taking plans. A study of the OEX weekly chart shows that although the weekly oscillators have not yet begun to roll, the upward trend continues to lose strength. Weekly Chart of the OEX The rising wedge is probably moot because prices have now risen into the apex of this formation. However, I continue to include it on my charts because those lines have nevertheless provided resistance or bounce points on daily or hourly charts. This weekly OEX chart shows oscillators that are far into overbought territory, but not yet turning down. The 10-week still retains its bullish cross of the 30-week moving average. However, ADX continues its strong move down and now barely registers over 20, indicating that the OEX rally continues to lose strength as it approaches the top of the 385-487 trading band that has contained its movements since July of last year. ADX looks different on the daily OEX chart, as it did this weekend. Although buying pressure appears to be decreasing, selling pressure is not yet increasing and will probably require a move below 470 and perhaps below 465 before it does so. Daily OEX Chart As I mentioned this weekend, several factors on this chart led me to retain that rising wedge formation. Those factors included the RSI and 21(3)3 stochastics breaks below their supporting trendline, hinting at a break of the rising wedge, too. RSI and both intervals of stochastics depicted reside in or near overbought levels, with the RSI appearing to turn down and the fast lines of both stochastics hinging down. The RSI makes a pattern of lower highs while the OEX makes higher highs. These oscillators hint at impending weakness, but the signs are tentative as yet, and the ADX level tells us that rally trend may still be active. Oscillators do not give clear sell signals when a rally is active. The oscillators and chart formations on the OEX chart hint that the OEX might take yet one more run at 480 or even 487 if tomorrow's economic numbers do not swamp bullish sentiment. Hourly OEX Chart Hourly ADX shows that buying pressure still decreases, while selling pressure is not yet increasing, a trend seen across many charts. Today's action saw two possible chart formations setting up. One is a broadening formation, with a flat top just under 480 and with a broadening lower support line. The other is a potential bull-flag pattern. Both are marked on the chart. Each could be an accumulation pattern with a bullish tenor. The OEX ended the day with an attempt at an upside breakout of the bull- flag pattern. Although the doji that ended the day was just above the upper trendline of the potential bull-flag formation, I would not consider the breakout confirmed until a move over the 21-dma, since the OEX spend most of the afternoon trapped between that 21- dma and the 50-dma, just below its current position. Only extremely aggressive traders using risk capital only should consider buying an upside breakout of such a pattern anyway, with opex week upon us, strong resistance at 480, stronger resistance above that, and bullish percent levels creeping up. If there is an upside breakout, traders might consider waiting for tests of those next resistance levels at which point a bearish position might be a better bet. A breakout over OEX 480 might usher in a new wave of buying, but weekly candlestick patterns, growing bullish percent levels, and oscillator evidence hints that the 487 resistance might hold. Assuming that the OEX resistance and other index resistance holds and markets pull back, how deep can we expect the retracement to be? That depends. If we're still in a bear market, the retracement (down) will be in the direction of the primary trend (down). Anyone who has studied physics understands that a wave can be amplified when new impulses are synchronized with the wave's movements. A child will swing higher when the parent pushes the swing in rhythm with the child's pumping, but the child will slow if the two impulses are not in synchronization. However, according to another bit of traditional wisdom, this retracement might not be so deep. That's because the March-to- present movement has already retraced almost all of the December- to-March movement. The bigger a reaction movement is, the smaller the next retracement will be according to Martin Pring, author of several books on technical analysis. That would predict a retracement of the 38.2-50% magnitude rather than a deeper one. For the OEX, a 38.2% retracement of the current move would bring the OEX to the 449 level while a 50% retracement would take the index just below 440. Therefore, traders who elect to enter a bearish play near 480 or 487, or on a breakdown below a key support level should keep those levels in mind as possible targets, always watching the oscillators. Oscillators that move down quickly on minimal price movements may be signaling that consolidation or a light pullback is in store rather than a deeper pullback, even to the minimal 38.2% retracement level. The OEX would find support in roughly 5-point intervals all the way down to those levels, too. The 200-ema just above 460 would be a level that would require a guarding of any accumulated bearish profits. A study of other indices would not be complete without a mention of the $SOX (down 3.20 or .90%), the BIX (down 1.05 or .35%), or the $TRAN (down 19.28 or 0.78%). The SOX dipped below the key 350 level, all the way to 346.44, but managed to reclaim that level by the day's end, closing at 352.53. Daily MACD remains flat. RSI turns down while still remaining above the supporting line of RSI higher lows. ADX shows buying pressure decreasing while selling pressure is not yet increasing. Stochastics look toppy. The BIX remains within the recent consolidation range, but now clings to the bottom supporting line of its ascending recession channel. The last three daily candles have printed a large white candle, a doji, and then today's spinning top candle, all just below the important 296-297 resistance. Taken together, these might be given a bearish connotation, but they may signal nothing more than a continuation in the recent consolidation. This weekend, I included a weekly chart of the Dow Jones Transportation Index, showing that the $TRAN had printed a potential reversal signal at the 50% retracement of the March, 2002-to-March, 2003 move. The following chart shows what's happened this week. Dow Jones Transportation Index: This chart shows a flattening in the stochastics as the $TRAN turns down from that 50% retracement. ADX flattens, too, showing a weakening of the upward trend. A weakening in the $TRAN might portend a weakening in its sister index, the Dow Jones Industrials, too. Daily Chart of the DJI This daily chart shows a continued weakening in the ADX, with selling pressure and buying pressure both flattening as the DJI moves within an upward regression channel that's fast approaching Jim's resistance line near 8700 (not depicted). Oscillators do not give give evidence as to the immediacy or depth of any downturn. RSI and both stochastics depicted have flattened while prices continue to climb, indicating bearish divergence, but not indicating when a downturn might occur. As I mentioned this weekend and as others have mentioned, the DJI could fall just below 8500 and still preserve the bullish outlook. A deeper fall might damage investor sentiment and sent the DJI back toward 8100, where it would next find strong support or toward 8000 on a deeper pullback. To gain insight into the expected depth of a move, watch oscillator behavior as the DJI retraces. A move above 8700 might indicate that the DJI would see another leg up, first testing 8850 resistance and then the stronger resistance at 9000. Jonathan studies the NDX, QQQ, and COMPX and will cover these in his Market Wrap this evening and this article is becoming chart- heavy, so I'll touch only on the oscillator evidence on the NDX. While the NDX appears to have stalled under 1167 resistance, RSI, a leading indicator, turns down, and stochastics look rather like those on the OEX, with fast lines hinging but not yet in full bearish roll. Daily ADX shows a puzzling degree of strength in the trend, but buying pressure appears to be dipping while selling pressure remains minimal. A pullback to 1100 would still preserve the bullish cast of this chart, but a deeper pullback might damage investor sentiment. Watch oscillator evidence on any pullback to gauge whether overbought pressure will be thrown off by consolidation or a minor pullback, or will require a deeper pullback. Although this week has already seen the release of economic numbers, including this morning's worse-than-expected retail sales figures, the real effect will begin to be seen tomorrow morning. It's been my opinion that hourly charts show that another swing up can not be ruled out, and that it's probably too soon to predict how deep a pullback might be. Martin Pring's teachings advise that the pullback might be a minor one. If pullbacks deepen, however, along with a reversal in the bullish percents, the recent bullish sentiment might be damaged. That might bring in more sellers and affirm the continuation in the bear market. Linda Piazza ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************************** WEEKLY FUND FAMILY PROFILE ************************** Purisima Funds The Purisima Funds is a family of mutual funds managed by Fisher Investments, Inc. using modern improvements on the same concepts detailed in Harry Markowitz's 1952 paper, which defined "modern portfolio theory." Markowitz's paper, which later earned him a Nobel Prize, showed that by combining securities, which move at different times, you could tailor a portfolio that had low risk relative to expected return. According to the Purisima Funds' site (www.purisima.com), Fisher Investments, Inc., located in Woodside, California, manages over $9 billion for large institutions and high-net-worth individuals. The Purisima Funds, which includes one domestic, one foreign and one global fund, are geared to individual investors with $25,000 or more to invest initially. That's more than a lot of funds in the retail marketplace, but significantly less than the $500,000 needed to build a customized stock portfolio. The minimum initial investment to open an IRA account is $2,000. So, if you don't have $25,000 to open a regular account, you may wish to considering going the IRA account route. Purisima Funds are "no-load" funds and have current expense ratios ranging from 1.07% and 1.50%, reasonable relative to the Morningstar all funds average (1.44%). Kenneth Fisher, a 25-year industry veteran, is founder, chairman and chief investment officer of Fisher Investments, Inc., a firm that began as a sole proprietorship in 1978 and was incorporated under the name Fisher Investments, Inc. in 1986. Fisher manages the mutual funds investment program and is primarily responsible for the day-to-day management of the three fund portfolios. His biography states that he has written three books about the stock market, and has been a monthly columnist for Forbes (since 1974). Fund Overview Purisima Total Return Fund (PURIX), the firm's first mutual fund, began operations on October 28, 1996. It's described as a global fund, since it contains both domestic and foreign securities. It is offered to small investors as the "single best way" to manage their money since the fund is so broadly (globally) diversified. The fund's relative percentages of assets invested in equities, debt securities, and money markets are not fixed, and will vary depending on Kenneth Fisher's assessment of global economic and market conditions. As its name implies, the objective of Purisima Total Return Fund is to generate a high level of total return. In pursuit of this objective, Kenneth Fisher invests in a portfolio allocated among domestic and foreign stocks, government and corporate bonds, and short-term money market securities, as well as other equity-type securities that keep with the prospectus objective. At April 30, the fund had 99.1% of net assets invested in common stocks, with 36.9% invested in foreign stocks, per Morningstar's report. The fund currently lands in the large-cap growth style box, with 90% of assets invested in companies with giant- and large-cap market values. Through global diversification targeted at securities, this fund strives for the same high total return and reduced level of risk that many large investors seek to obtain from Fisher Investments. Currently, Purisima Total Return Fund holds Morningstar's highest 5-star rating for risk-adjusted performance relative to category. The relative percentages of assets invested in equity, fixed- income and money market securities are not fixed and will vary depending on the Adviser's assessment of global economic and market conditions. Purisima Pure American (PURUX) and Purisima Pure Foreign (PURFX) are designed to be pure plays on the U.S. stock market and non- U.S. equity markets. Purisima Pure American Fund contains U.S. common stocks that are believed to have appreciation potential, while Purisima Pure Foreign Fund is composed of foreign equity securities that Fisher believes represent the best investments. In seeking to find the best opportunities in the market, Fisher combines a rigorous quantitative screening process with intense qualitative research. Fisher's bottom-up investment style uses various proprietary tools and techniques. The Pure American Fund is aimed at investors that don't want to own any foreign stocks. According to Morningstar, this tiny $2 million U.S. only fund is categorized as a large-cap blend fund, but currently falls into the large-cap value style box based on its most recent portfolio. At $41.6 billion, the fund's median market capitalization is well into the "large-cap" range. Fund investors seeking yield may be attracted to the fund's 12-month yield of 1.59%. Dividends reinvested can enhance a fund's long term potential total return, while adding some income stability relative to U.S. stock funds where income isn't a consideration. The Pure Foreign Fund is ideal for investors who are comfortable building their own U.S. stock portfolio, but are not comfortable selecting foreign securities, yet want to globally diversify his or her investment portfolio. Similar to the Pure American Fund, Fisher invests in a basket of securities, which he believes will most likely appreciate. For the most part, that means stocks of companies domiciled abroad, but the portfolio may also invest in government/corporate debt securities, money market vehicles and other equity-type securities in pursuit of the fund's objective. In the next section, we see how well the three Purisima mutuals have performed relative to their Morningstar category peers and what their Morningstar risk and return ratings are. Fund Performance Purisima Total Return Fund owns the longest track record, so we will begin there. Per the Purisima Funds website, the Purisima Total Return Fund sports an inception-to-date annualized return of 5.8% through March 31, 2003. A $10k investment on October 31, 1996 would be valued at $14,341 on March 31 (compared to $10,252 if you had invested in the MSCI World Index). So, this fund has largely achieved its objective of generating total return, while controlling risk. According to Morningstar, the Total Return Fund carries a 5-star rating (highest) for risk-adjusted performance relative to peers. In relation to the average world stock manager, Fisher over time has produced above average returns with a below average level of risk. So, all in all, we believe fund has performed well versus similar funds under Fisher's direction, well enough to receive a Morningstar 5-star rating overall. On a year-to-date basis as of May 13, 2003, the Total Return Fund is up 7.9%, ranking in the top 15% of the Morningstar world stock category. Over the trailing 3-year period, the fund lost 5.8% on average a year, but that was considerably better than the average world stock fund, ranking in the category's 16th percentile. For the same period, the average world stock fund lost 13.1% per year on average. For the trailing 5-year period, Fisher produced an average annual of 1.7%, to rank in the top 14% of the world stock category. The average world stock fund lost an average of 3.4% a year over this same time period. While the fund isn't immune from volatility as its 6-month chart shows, over the long term Ken Fisher has gotten the job done, providing world stock investors with a solid return to risk tradeoff. Purisima Pure American Fund and Purisima Pure Foreign Fund do not sport 5-year track records, but their trailing 3-year returns and rankings are similar to the Purisima Total Return Fund. Both are rated 5 stars (highest) by Morningstar, but only for the trailing 3-year period. During that time, both funds limited their losses relative to category peers; similar to what Fisher was able to do with the Total Return Fund. On a year-to-date basis through May 13, the Pure American Fund is up 8.0%, ranking in the 23rd percentile (top quartile) within the large-blend category and beating the return of the S&P 500 target index (7.7%). The Pure Foreign Fund is up 3.1% this year for a 59th percentile ranking in the foreign stock fund category. It is rated 5 stars by Morningstar for trailing 3-year performance, but its YTD total return so far has slightly lagged the average foreign stock fund group. Conclusion While each of the Purisima stock funds has excelled in the past three years in terms of preserving capital relative to category peers, only one fund Purisima Total Return has been around long enough to judge over a full market cycle that includes both ups and downs. In that charge, Fisher has done a good job over the long term of building and preserving wealth for investors; that bodes well for the long-term prospects of the two Purisima pure stock funds. Mutual investors wanting to have their investment dollars managed by a leading institutional money manager have a suitable option here. For more information or to download a fund prospectus, go to the Purisima Funds website at www.purisima.com. Steve Wagner Editor, Mutual Investor email@example.com ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is $49.95. The quarterly price is $129.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "Contact Support" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Monday 05-14-2003 Copyright 2003, All rights reserved. 2 of 2 Redistribution in any form strictly prohibited. In Section Two: Stop Loss Updates: Note on KSS Dropped Calls: None Dropped Puts: None Play of the Day: Call - AMGN Premium-Selling Plays: Strategies & Position Selection Market Posture: Internets, Food, Paper and Drugs Updated on the site tonight: Market Posture: Still Waiting ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ***************** STOP-LOSS UPDATES ***************** KSS -- no change in stop loss but traders need to remember that Kohl's is supposed to announce its earnings AFTER the bell on Thursday. We're not willing to hold over the announcement and will close the play at Thursday's close. ************* DROPPED CALLS ************* None ************ DROPPED PUTS ************ None ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********************** PLAY OF THE DAY - CALL ********************** Amgen, Inc. - AMGN - close: 61.85 change: +0.35 stop: 58.75 -Company Description- The biggest of the Biotech big guns, AMGN makes and markets therapeutic products for hematology, oncology, bone and inflammatory disorders, as well as neuroendocrine and neurodegenerative diseases. Anti-anemia drug Epogen and immune system stimulator Neupogen account for about 95% of sales. Its Infergen has been commercialized as a treatment for hepatitis C, and Stemgen is approved for stem cell therapy in Australia, Canada, and New Zealand. The company has a strong pipeline of new drugs in various stages of development as well as research and marketing alliances with Hoffman-La-Roche and Johnson & Johnson. - Why We Like It (Sunday, May 11th)- Earlier this year, we successfully played AMGN to the upside, as the stock muscled through major resistance and moved up to test its multi-year descending trendline. After churning against that trendline for nearly a month, the stock showed its sector dominance, breaking free and really surging higher following its impressive earnings report on April 23rd. Not only did AMGN beat earnings estimates ($0.42 vs. $0.39 consensus), but guided significantly higher for the full year. That resulted in an upside explosion in the stock that sent it up near the $64 level and we've been looking for a favorable opportunity to play the upside once again. It looks like that opportunity is upon us, as AMGN found solid support just above $59 in the middle of last week, and rebounded smartly, pushing up to end the week right at the 20-dma ($61.28). The PnF chart continues to look impressive, as it hasn't given a Sell signal since last November. The bullish vertical count is $72, which means AMGN could still have some room to run to the upside. The recent bout of profit taking has pulled the daily Stochastics down into oversold territory and the bounce of the past couple days has them just turning up and emerging from oversold. Looking at the chart below, you can see how the strong the support looks just below where the stock bounced last week. horizontal resistance-turned support at $59 is backed up by the rising 50-dma at $58.90 and the ascending trendline from the September lows, currently at $58.60. Another pullback into the $59-60 area looks like a gift of an entry point into the play. With intraday support near the $60.40 level holding firm throughout most of the past two days, that looks like a more realistic level to target shoot new entries. Based on our experience earlier this year, the way AMGN tends to move is not conducive to momentum entries. Our best approach is to catch a dip back to support and then ride it up to the next near-term top and then harvest gains, looking to repeat the process again. So our first target on the upside will be a return to the recent highs near $64. Should the bulls get really frisky, a run to the $68-69 area is certainly a possibility, and if reached we'd be more than happy to exit the play up there, which was the site of major resistance throughout most of 2001. Because of the strong underlying support, we can place our stop at $58, with a high degree of confidence that it shouldn't be touched unless a serious bout of selling arises. - Play of the Day Comments - AMGN has been taking a breather the last two sessions and trade sideways giving smaller biotechs like MLNM and OSIP do the heavy lifting for the BTK biotech index. The latter two have released some good news that is bolstering the sector. We're suggesting AMGN as the play of the day for tomorrow for two reasons. If the market continues to pull back then a dip to $60.00 would look like a tempting entry point for new bullish plays. However, should the bulls wrest control back from the bears then a move over $62.00 in AMGN might spark a stronger move to the $65.00 level over the next few sessions. - Suggested Options - Shorter Term: The June 65 Call will offer short-term traders the best return on an immediate move, but this is a higher risk approach due to AMGN's slow-moving nature. Traders with less tolerance for risk will want to use the June 60 Call. Longer Term: Due to the slow and deliberate price action for which AMGN is known, traders looking to capitalize on a breakout move above $64 will want to look to the July 65 Call. This option is currently out of the money, but should provide sufficient time for the stock to move higher without time decay becoming a dominant factor over the short run. BUY CALL JUN-60 YAA-FL OI= 2979 at $3.40 SL=1.50 BUY CALL JUN-65 YAA-FM OI= 9831 at $0.95 SL=0.50 BUY CALL JUL-60 YAA-GL OI=41659 at $4.30 SL=2.50 BUY CALL JUL-65 YAA-GM OI=25916 at $1.80 SL=0.80 Annotated Chart of AMGN Picked on May 11th at $61.24 Change since picked: +0.00 Earnings Date 07/22/03 (unconfirmed) Average Daily Volume = 10.8 mln ************************Advertisement************************* "If you haven't traded options online – you haven't really traded options," claims author Larry Spears in his new compact guide book: "7 Steps to Success – Trading Options Online". Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********************************************* SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS ********************************************* Strategies & Position Selection By Ray Cummins The options market is unique because it offers a variety of ways to profit. ************** NEW POSITIONS There will be no "New Plays" today as the editor of this section is away from the market due to a medical emergency. However, we have decided to publish one of his most popular articles about conservative option trading techniques. *************** Strategies and Position Selection The options market is unique because it offers a variety of ways to profit. At the same time, the risk in some strategies can be substantial and as a trader, your primary goal must always be to maximize returns and preserve capital. The easiest way to achieve this objective is to become familiar with proven strategies and acquire the knowledge to implement and manage them correctly. Defining Your Approach The principal requirement for profitable trading is the ability to achieve acceptable returns and control risk effectively. A careful and deliberate approach to strategy selection is the first step in the process and, after the primary techniques have been identified, it is crucial to execute them with discipline and consistency. Discipline in option trading refers to one's ability to maintain self-control and implement a pre-determined plan. Indeed, one of the most difficult skills that traders must learn is the ability to overcome human (emotional) impulses. When "real" money is at stake, the influences of greed and fear (of loss) will attempt to sway your judgment, hindering a rational thought process. If you can not overcome these effects, the chances of success are slim. In fact, that is the main reason it is so important to utilize strategies that promote a mechanical approach to trading. These types of techniques offer little opportunity for indecision and generally provide more consistent returns as they are exposed to less risk than those strategies requiring a high level of maintenance. Using a proven trading system is one of the easiest ways to become successful in the market. A "plan of attack" helps novice traders learn the proper methods of money management and the correct use of technical analysis in identifying precise entry and exit points. Trading options in a systematic manner is far more likely to yield consistent profits than a scheme based on intuition, emotion or the trend of the day. The benefits to this approach are many but most importantly, you can eliminate the guesswork that comes from trying to manage an active position without realistic goals or loss limits. Traders who use predefined exit targets and "stop-loss" strategies have no doubt as to when and how to get out of a position if the underlying market moves against them. Potential risk is identified prior to beginning the trade, with a fixed limit on losses and a formula for taking profits. There are no trades initiated without a complete assessment of the capitalization necessary to carry out the entire strategy, even in the worst case scenario. A thorough study of the issue's historical price data is also used to provide objective goals for future movement, based on expected volatility and existing technical indications. With all of these elements properly evaluated and arranged, a trader can develop an effective plan that contains a suitable risk-reward outlook based on a range of appropriate strategies that are compatible with one's personal style and experience level. Choosing A Strategy A major stage in developing a practical method for participating in the market is to determine your comfort threshold and stress level. Think about the unique emotional effects of your trading activities and managing a complex portfolio. Are you ordinarily a cautious person or do you feel comfortable traveling at maximum speed? How will a specific type of trading affect you mentally? Can you handle the extreme pressure of day-trading options or are you happier with conservative, longer-term positions. After you have identified the appropriate trading attitude, it is important to decide what type of market activity is most amenable to your personal style. Some traders prefer strategies that profit from trending markets such as those characterized by a sustained advance or decline. Techniques that benefit from this type of movement include put or call buying and highly-leveraged spreads or combinations. Another tactic might be to focus on changes in volatility. Traders using this approach buy or sell "premium" in an attempt to profit from transitions in the market's character. Some utilize neutral-outlook positions such as calendar or ratio spreads when the technical indications for the underlying issue suggest a range-bound or static trend. Regardless of the method you prefer, each category of price action demands a unique type of trading system. The key to success is to specialize in a specific kind of market activity and utilize trading strategies that perform well in that particular environment. One of the most important steps in developing a profitable system is identifying the appropriate level of complexity when selecting trading techniques. The simplest approach is most often the best but every strategy has risk and it is impossible to classify any individual technique as the absolute perfect method. In most cases, there is more than one favorable technique for a given situation and even though each strategy has different attributes, the majority of strategies can be useful in a trader's arsenal at the proper time. The first step to achieving long-term success is to become completely knowledgeable of the mechanics of any technique you are using and construct a group of diverse candidates based on the correct market outlook. Of course, you must remember that the individual investment objectives are far more important than the merits of the technique itself. If a specific strategy is not suitable for you (or your trading style) then it should not be used, no matter how attractive it appears. In addition to selecting the proper trading techniques, you must also identify the appropriate time frame in which to enter and exit a particular market. Most investors are best suited to longer-term plays as they require less attention and are easier to manage for those who have full-time commitments to work or family. Traders who have the temperament and resources to follow the markets at all hours should consider short-term techniques that focus on intra-day data and momentum-based trends. In addition, using the appropriate strategy when the market exhibits a particular character is a fundamental step in developing the ability to trade in a disciplined manner. After you have identified the characteristics of the market and selected the correct technique to profit from future trends, the next task is to determine specific entry and exit points for the underlying instrument. In most cases, technical analysis should be used to ascertain the correct parameters for risk and reward. With this approach, a simple mechanism for money management is built into the initial position. Entry timing can be based on a number of different indicators and the criteria used to identify a trading opportunity is a personal choice. The great thing is, you don't have to open any position until you are satisfied with the probability of a profitable outcome. You can search through charts for the perfect pattern, perform extensive due-diligence, and wait for the best combination of technical indicators and favorable market conditions. With this approach, you forego any trade until the number of reasons to initiate a position becomes overwhelming. Remember, the market does not care whether you play along or sit on the sidelines and when your trading is devoid of a system, it's amazing how quickly a simple situation can become confused. Once you are committed (without a plan), you are living by the market's rules, not your own. Spreads & Combinations: A Conservative Alternative History suggests that the majority of derivatives traders use options to speculate on the directional movement of stocks. The appealing feature of option ownership is leverage with limited risk. If a trader correctly predicts the market direction and purchases the appropriate (call or put) option, he can expect to make a profit. Unfortunately, that technique has a relatively low probability of success. As almost every option trader quickly discovers, owning the correct position when the underlying market moves in the expected direction will not necessarily be profitable. The reason is, over short periods of time (while the trader is waiting for the option to rise in value), the position is at risk from a variety of unfavorable changes in the market. One method that experienced traders use to overcome this problem involves simple combination positions or "spreads." Spread trading offers a way to take advantage of premium disparities, while at the same time reducing the effects of short-term changes in a market's trend or character, so that a position can be held to maturity. Most successful option traders engage in some form of combination, position, or spread trading. The basic technique involves buying and selling simultaneous (but generally opposing) positions in different option series. The most common strategies are used to reduce the cost, and the risk, of a position while providing a higher probability of a limited return. More advanced methods of "spreading" are based on pricing disparities and volatility skews. Experienced traders know there is an identifiable relationship between various option series and when the relationship is priced incorrectly, they will buy the cheap position and sell the expensive position. The idea is that, all things being equal, the spread will achieve a profit as the prices of the individual components return to a linear relationship. The wonderful thing about option trading is its diversity. There are an incredible number of strategies available; one for every type of market trend, character and outlook. Positions involving combinations of calls and puts, with different strike prices and expiration months, along with index and futures options offer the astute trader a variety of ways to participate in the market. This assortment provides even the most conservative investor the ability to construct positions with an acceptable level of risk and reward in almost any situation. In addition, students of option pricing theory can identify combinations with potentially superior returns when the relationships between the options are theoretically skewed. While there is no "perfect" position, successful traders learn to maximize profits and hedge their risk in as many different ways as possible, limiting the effects of short-term volatility and market gyrations. Obviously, there is no way to completely eliminate risk but you can reduce it much more than that of a inexperienced trader who does not utilize all of the available strategies. Regardless of the type of financial issue or commodity, profitable trading strategies have a number of mutual traits. They have precisely defined principles, ease of execution and maintenance, and flexibility. However, the most important characteristic of any strategy used by conservative investors is asset preservation and in the options market, successful trading techniques are those which employ effective defensive measures. Fortunately, the ability to protect and conserve portfolio capital while achieving consistent returns is a fundamental quality of spread and combination plays. As a member of the OIN staff, one of my goals is to help our readers discover and utilize the most appropriate combination of trading strategies and provide them with candidates to profit from these techniques on a regular basis. Good Luck! ************** SEE DISCLAIMER - SECTION 1 ************** ************ MARKET WATCH ************ Internets, Food, Paper and Drugs Kimberly Clark - KMB - close: 49.96 change: +0.17 Shares of KMB have been in a $2.00 range since late April and all momentum from its early April rally is lost. Shares have come to a dead stop under its descending 200-dma and indicators are all leaning towards a bearish crossover. Bears could enter here with a clearly defined stop loss above the 200-dma or the $51.00 mark. Traders who prefer to enter positions on a breakdown can look for a move below the $49.00 level. Chart= --- OSI Pharmaceuticals - OSIP - close: 23.65 change: +2.47 OSIP announced its Q2 earnings today and the results beat analysts estimates for an 89 cent loss by 14 cents. The stock rocketed higher today, up 11.6%. Together OSIP and MLNM really gave the BTK biotech sector a boost. We'd keep an eye on OSIP for a pull back to the $22 level before evaluating any bullish plays. Chart= --- Brinker Intl. - EAT - close: 34.22 change: +1.27 Better known for its franchises Chili's, Macaroni Grill, On The Border, Maggiano's, Big Bowl Asian Kitchen and the Rockfish chain of restaurants, shares of EAT have shown great strength today and rallied 3.85% through resistance at $33.50 on strong volume. This is great news for shareholders but the stock has longer-term resistance at the $35.00 level. Could be one to watch. Chart= --- Inamed Corp - IMDC - close: 43.97 change: +1.08 Wow! Talk about your seller's remorse. OptionInvestor.com closed its call play on IMDC when shares rallied $5.00 from $35.00 to $40.00 and closed near the top of its channel. The stock paused for a couple of days and continued right on climbing. Bulls have to love the relative strength here but we would not advise chasing it. Chart= --- Sohu.com Inc - SOHU - close: 21.68 change: +1.68 Recent market strength has brought back memories of the bubble- like frenzy from three or four years ago. Fueling those nostalgic ruminations are three Chinese Internet stocks, SOHU and its rivals SINA and NTES. All three look terribly overbought and we all know that nothing goes up in a straight line for very long. SOHU has options and eventually this stock is going to see some profit taking. Just be careful and avoid picking a top. It can be hazardous to your financial health. Chart= =================================== RADAR SCREEN - more stocks to watch =================================== INTU $38.98 - We had INTU on the Monday watch list due to its up coming earnings announcement. Earnings are out and INTU turned in a 29% increase in profits and beat the estimates. Shares are trading higher in after hours to around $41.35. Recent resistance has been at $41.35 and its simple 50-dma is just a few cents above that. GDT $40.92 - Guidant was also on Monday's watch list for its strong breakout above the $40 level. Recent market weakness has seen GDT suffer some profit taking but shares have yet to pull back to $40.00. ************** MARKET POSTURE ************** Still Waiting To Read The Rest of The OptionInvestor.com Market Watch Click Here http://www.OptionInvestor.com/marketposture/mp_051403.asp ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "Contact Support" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
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