The Option Investor Newsletter Monday 12-15-2003 Copyright 2003, All rights reserved. 1 of 2 Redistribution in any form strictly prohibited. In Section One: Wrap: One Green Cheese Lane Futures Wrap: Return to Reality Index Trader Wrap: Saddam and major indices end up in hole Posted online for subscribers at http://www.OptionInvestor.com ******************************************************************* MARKET WRAP (view in courier font for table alignment) ******************************************************************* 12-15-2003 High Low Volume Advance/Decline DJIA 10022.82 - 19.34 10139.63 10021.64 1.76 bln 1035/1808 NASDAQ 1918.26 - 30.74 1979.78 1918.26 1.78 bln 902/2196 S&P 100 530.47 - 1.31 536.53 530.42 Totals 1937/4004 S&P 500 1068.04 - 6.10 1082.79 1068.02 RUS 2000 535.25 - 12.34 553.38 535.25 DJ TRANS 2950.77 - 32.64 3010.74 2950.64 VIX 17.23 + 0.82 17.42 15.79 VXO 16.91 + 0.96 17.25 16.26 VXN 27.07 + 1.21 27.23 25.96 Total Volume 3,949M Total UpVol 1,102M Total DnVol 2,783M 52wk Highs 847 52wk Lows 36 TRIN 1.14 PUT/CALL 0.70 ******************************************************************* One Green Cheese Lane If your address is One Green Cheese Lane, The Moon then you may not know that US Military forces captured Saddam Hussein over the weekend. This of course made for a gap up this morning but not anywhere near the kind of gap I thought it would be. The SPX opened at 1077 a 3-point gap from Friday's close, immediately rushed to make a daily high of 1082 by 9:35ET and took the rest of the day off. By 3:00 ET the SPX had closed the gap and everyone expected a small reprieve from the selling. Unfortunately it didn't happen and SPX just continued to fall making a daily low of 1068 at the 4:00 close, a 14-point range. This is what some call a gap and crap. S&P 500 - 60-minute chart: Using some of Jeff Bailey's retracement techniques, I have anchored a retracement on the 60-minute chart from the November 21st lows at 1031 and fitted the 19.1% retracement, to the December 3rd and December 12th levels. Using this retracement, a normal 38.2% retracement would take the index back to 1064 and a 50% retracement, still within the range of a normal retracement, would take the index back to 1057. So although today looked bearish the SPX is not in any danger of entering bearish territory but a trade below the last swing low and the 61.2% retracement level (yellow line) would change my mind. When the DOW opened it also raced to make its daily highs of 10139 by 9:35 ET. It was sort of like these indexes wanted to get the daily highs out of the way early so they could get down to some serious selling. The DOW closed on its lows at 4:00ET at 10021 a 118 point range. DJIA - 60-minute chart: I have also anchored a fitted retracement on the DOW November 21st lows and fit the 19.1% retracement to the December 9th swing high which fits nicely with the 10000 level. As long as the DOW stays above the 38.2% retracement level and does not make a lower low I think the bulls are in control. For the OEX wrap I solicited Linda Piazza's help for there is no one the OIN staff that knows the OEX better than Linda. Here is her commentary. Late last week, the OEX began moving up from the midline of its rising regression channel, suggesting that it might rise toward the top of that channel, currently near 540. Monday's trading pattern questioned that assumption. Although the 535-536 resistance zone does not appear as strong as the 527-529 and 531- 533 zones on the monthly chart, it proved strong enough to turn back further OEX advances today. Monday's trading pattern produced an inverted umbrella sitting high above the previous candles on the daily chart, with such a candle sometimes serving as a reversal signal. With one notable exception on October 9, such candles on the OEX are almost universally followed by a decline. Prices pierced through the 533 resistance and the upper Bollinger band, but could not maintain that level and fell back, with the body forming below both. That shows market participants that bullish fervor wasn't strong enough to hold onto those levels. Such potential reversal signals must be confirmed, however. Tomorrow, traders will watch first for an open below that candle and then for a move down from there to confirm the reversal signal. Even then, they might be nervously aware that October 10 presented just such an opening, but that day's trading produced a spinning top that was followed by a climb rather than the expected decline. S&P 100 (OEX) - Daily chart: Daily oscillators do not offer convincing evidence of either a drop or a climb. MACD lines slant up, RSI tried to hook over, and 21(3)3 stochastics trend in territory indicating overbought conditions. MACD attempts to erase the bearish divergence that has troubled many technicians, with MACD lines moving higher than their position during the early November price highs. However, MACD has not yet eclipsed the MACD high achieved in September although prices have surmounted the September high, so it's possible to point out conflicting evidence. S&P 100 (OEX) - 60-minute chart: Thirty-minute and 60-minute oscillators hint that there's plenty more downside to go, and if daily oscillators turn down, too, the downside promised by that potential reversal signal may be realized. With inconclusive oscillators, October 9/10's example before us, and the known bullishness of the Santa rally season, we may not be able to count on that reversal signal being confirmed. Thank you Linda for a great analysis. One of the reasons I have been bearish lately is the weakening of the small cap stocks in comparison to the large caps. Last week I posted a chart in the Market Monitor of the $RUT.X (Russell 2000 small cap index), the $SPX.X and an indicator that measures the spread between the two. I would now like to spend some time discussing why my bearish outlook may have been wrong. The spread is a very simple formula (RUT + SPX) / SPX but a very good visual for how well the small caps are doing in relation to the large caps. Russell 2000 (RUT) - Daily chart: The top panel is the $RUT.X, middle panel $SPX.X and the bottom panel the spread. Within the red box I drew, the spread is flatlining demonstrating both indexes are falling or rising in tandem. But come March the spread moved above its 50MA and continued to rise, which indicates the small caps were outperforming. Then I noticed the possible H&S forming in the $RUT.X while the SPX was making new 52-week highs which caused the spread to take a plunge below its 50MA. All this lead me to believe it was bearish for market overall but that thinking may have been wrong and another scenario may be taking place. The Russell 2000 tracks US companies with a market capitalization of $1.2 billion or less and therefore more sensitive to an economic deceleration that higher interest rates could bring. Wall Street expects to see a quarter point interest rate hike by early next summer and although this is not a huge hike, it could mean the cyclical small caps that are more sensitive to interest rate hikes will no longer outperform the large caps. This is not bearish for the market as a whole but just a cyclical reshuffling that happens all the time. In other news Oracle (ORCL) topped Wall Street expectations by posting a 15% increase in net income on strong software-licensing revenue. It reported net income for its fiscal second quarter of $617 million, or 12 cents a share, compared with $535 million, or 10 cents a share, a year earlier. ORCL's results are closely watched for clues about the future of corporate information- technology spending. Wal-Mart Stores Inc. (WMT) weighed on the Dow as the nations largest retailer gave a not so rosy outlook for December sales as more people delayed holiday shopping or bought gift cards that do not immediately count toward revenue. WMT shares fell $1.76, or 3%, to $50.74. There were not a lot of sector winners today but the airline ($XAU.X) and utility ($UTIL) indexes were able to squeak out a 1.12% and 0.04% rise respectively. Sector losers were lead by the disk drive index ($DDX.X), the Semicondutor index ($SOX.X) and the Russell 2000 ($RUT.X) with 3.96%, 2.79% and 2.25% loses respectively. Moving onto market internals we saw the bears in control with declining issues outnumbering advancers by a 20 to 12 margin on the NYSE and by a 22 to 9 score on the Nasdaq exchange. The volume of stocks moving lower was 928 million shares on the Big Board and 1400 million shares on the Nasdaq, vs. higher volume of 515 million shares and 397 million shares, respectively. New highs to new lows painted a much healthier picture with NYSE new highs clocking in at 435 to new lows of 10 and on the NAZ new highs were 121 to 5 new lows. remember plan your trade and trade your plan. Jane Fox (with a little help from her friend Linda) ***************************** 2003 Year End Renewal Special ***************************** TOP 50 STOCKS for 2004 SPECIAL INVESTOR GUIDE What better bonus could we give you than the potential to double or triple your money in 2004? Each Option Investor analyst picked their favorite stocks for 2004 out of our universe of 4500 and applied their technical and analytical skills to deciding how best to profit from them. Some will be straight stock ownership, some long term calls or puts and some with various combinations of strategies. There are actually more than 50 stocks presented as there were so many profitable picks we added a few extra. As an additional bonus Jim has put together his TOP 20 LOTTERY PICKS FOR 2004 These are cheap options with great potential for achieving a profit of 200%, 300% or much more. Also included are options on stocks he feels are take over candidates in 2004. 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Do not miss out on these profitable opportunities! Click here to renew: https://secure.sungrp.com/04renewal/ We are not responsible for late delivery of the Special Investor Guide for renewals after December 20th. We will still send it Priority Mail but you will not receive it until three days after your subscription is received. ************ FUTURES WRAP ************ Return to Reality Jonathan Levinson The happy nonsense that has characterized equity trading of recent sessions came to screeching halt with the unceremonious failure of the Saddam Rally. Maxxed out indicators and the exhaustion of bullish bulls and frightened bears led the markets to spike up in response to a financial non-event overnight, and then collapse from the highs. Treasuries fell, equities fell, gold and silver advanced, and the US Dollar Index broke to a new bear market low. How many flagpole rallies, Fed and BoJ interventions, short squeezes and bull runs have been attributed to "Saddam catches" or kills? Well, that excuse is now gone. Of course, Osama is still reputedly at large, but the capture of Saddam removes one of the bulls more powerful and inexplicable arrows from their quiver. Daily Pivots (generated with a pivot algorithm and unverified): Note regarding pivot matrix: The support, pivot and resistance levels above are derived from the high, low and closing price levels by a simple mathematical formula. They are not intended to be predictive of market turning points or to serve as targets, but rather represent the range retracement levels as generated by the pivot algorithm. Do not think of them as market "calls" or predictions. Like any technically-derived indicator or price level, the pivot matrix values should be regarded as decision points at which to evaluate current market conditions. Visit us in the Futures Monitor for our realtime views of the various markets covered here. 10 minute chart of the US Dollar Index The US Dollar Index hesitated on the Saddam euphoria but quickly resumed its primary trend, which is down. A new low was printed at 88.30, and the weakness of the bounce suggests that there's more to come. The euro printed a record high against the dollar today, while the CRB dropped 1.60 to close at 260.84. Daily chart of February gold Gold sold off lightly on the Saddam news, never testing the lower rising wedge trendline. Its reversal brought he contract to a new closing high above 410, with upper rising trendline resistance holding back the advance. Both the HUI and XAU gained as well, recovering their earlier losses. While today's action, which saw precious metals advance against dollar, equity and treasury weakness, is as bullish as a goldbug could want, but so long as the daily bearish wedge remains intact, we will have to sleep with one eye open, attentive to the risk of a break below support at 404. Daily chart of the ten year note yield Treasuries declined today, with the ten year note yield gaining 3.3 bps to close at 4.275%. Lower pennant support held to the downside at 4.2%, and while the daily cycle oscillators continue to look bearish for the TNX, the picture should continue to be muddy until we see a decisive break of either the upper or lower pennant trendlines. Daily NQ candles Bears were in a panic on Sunday, and we may have seen their capitulation in overnight trading, with the NQ print at 1456. What followed was a glorious reaffirmation of the rules of supply and demand as the daily NQ printed the mother of all bearish engulfing candles for a key outside reversal. The NQ closed within a hair of its session low, and despite the sharp overnight spike, the daily cycle oscillators never deviated from their downphase. Support is at 1392, then 1380. Resistance is at 1400, followed by 1410. 30 minute 20 day chart of the NQ The selloff from the highs broke the NQ down from a rising expanding wedge, the famous Bulloney Bullhorn formation. The move spent most of the 30 minute cycle downphase, and while there is room to the downside from here, the bears are almost out of time for this cycle, and I expect to see a bounce from either the 1392 or 1380 support levels. The shape of the upphase to follow will determine the fate of the rally. I believe that last night's blowoff top was the terminal gasp, and a weak 30 minute cycle upphase from here will confirm it. A bounce from support to a lower high should open the way to lower lows below 1380. Daily ES candles The ES got slammed as well, sufficiently so to kick off a new daily cycle downphase, with the 10 day stochastic finally closing on a bearish cross. Support at 1060-64 was not tested, and I expect that to be the crucial level under the 30 minute cycle downphase below. The key reversal printed here as well portends more downside to come tomorrow, but the aging 30 minute cycle downphase could limit the downside fireworks from here. A bounce back above 1074 should be sufficient to negative the sell signals on the daily chart, and in that case we'll have to reevaluate the current analysis. 20 day 30 minute chart of the ES As on the NQ, the 30 minute cycle downphase for ES was growing long in the tooth at Monday's close. As much as I'd love to see it, the odds do not favor the 300 minute stochastics trending in oversold, and I expect a bounce from 1064 support, either tonight or in the early going tomorrow. Resistance on that bounce will come at 1068, followed by 1074 and 1077. 150-tick ES The short cycle oscillators were trending in oversold and looking for a bounce as of this writing, but the 30 minute cycle downphase should be good for another push lower, possibly at the open tomorrow. Daily YM candles The daily YM was, yet again, the most bullish of the indices, closing on a daily cycle bearish kiss verging on a cross. It was not a key outside reversal day by much, with the YM closing just 10 points below Friday's closing print, but well off the overnight high of 10166. 20 day 30 minute chart of the YM The selloff on the YM was relatively weaker than on the other equity contracts, but the damage was still unmistakable. Support should come between 9960-9990, and a weak short cycle upphase should confirm that we've seen the top of this rally. Resistance is now at 10015, 10030 and 10050. On Friday, I warned that technicals would be of secondary importance as the Dow 10K euphoria would attract non-technical traders. We should not yet discount that bid, but it obviously took a beating with today's selling. As well, it appears that the race is on to lock in rally gains ahead of the anticipated post- fiscal 2003 selling in January. I expect that we saw the Santa Claus rally last night, but if my resistance levels above are broken by this impending 30 minute cycle bounce, then I will reevaluate. See you tomorrow. ******************** INDEX TRADER SUMMARY ******************** Saddam and major indices end up in hole The Dow Industrials, S&P 500, S&P 100 jumped to new highs at the opening bell on this weekend's news that Saddam Hussein had been captured by U.S. forces in Iraq, but similar to Saddam himself, stocks finished in a hole, with the tech-heavy NASDAQ-100 Index being the first to tuck tail and run. I would argue vehemently that Saddam's capture was NOT "factored into the markets." If Saddam's arrest had been factored into the markets, then the Dow Industrials, S&P 500 Index and S&P 100 Index do NOT trade new 52-week highs. What I do think Saddam's arrest has done is removed one on point of speculation and replaced it with fact. The fact is that Saddam Hussein has now been arrested. What impact that has on markets is uncertain, but I do think it will have removed one item of SPECULATION, that has kept bears more jittery, and eager to cover. Take today's trade, and perhaps recent trade in the more volatile NASDAQ-100 Index (NDX.X) 1,396.82 -1.44%, which despite bullish news on the geopolitical front, failed again to make a new 52- week high. This morning I was rather eager to take profits in a QQQ bullish trade, and when looking to re-establish a bullish trade at what I felt would be the lower end of a daily range, where bulls might well have defended the session, that trade was then stopped out, and certainly has me rethinking that there is much bullish commitment to broader technology at this point. There was some comment today among market strategists that Saddam Hussein's arrest would have corporations willing to take on more risk with spending and hiring of workers, while this might make sense in coming months, the bullish side of me was certainly disappointed this afternoon when both the NASDAQ-100 Index and its Tracking Stock (AMEX:QQQ) $34.78 -1.3% failed to find daily support back that their monthly pivots. While option expiration "Max Pain" for the QQQ has been calculated as being $34.00 this option expiration, I find today's lack of bullishness and resumption of last week's weakness, a sign that investors and traders may not be overly willing to take on a higher degree of risk at what looks to be a higher range of resistance building at QQQ $36.00. While the narrower NASDAQ-100 failed to make a new high, the broader NASDAQ Composite (COMPX) 1,918.26 -1.57% was quick to tuck tail and run after coming close to re-testing the 2,000 level with a session high of 1,979.78. If there was one negative in today's session, it was the market's reaction to Wal-Mart's (NYSE:WMT) $50.74 -3.35% news that its same store stales for December were tracking to the lower end of its previously given 3%-5% range. Here is a fully corrected (based on final and corrected) tracking of today's hourly price action and internals. I'm not sure what happened today with some of the data vendors, but several checks at various market sites seemed to show constant error and then correction of data. While I make every attempt to check price quotes, there were some errors reported as fact in today's trade. Market Snapshot / Internals - 12/15/03 Close There was no improvement in today's A/D line at the 02:00 hour for the NYSE, and while not a good excuse, is one reason intra- day that I thought the NASDAQ-100 Tracking Stock (AMEX:QQQ) $34.78 -1.3% would find a bid back at its WEEKLY Pivot, where a swing trade bull could look for bullish entry, with a stop placed safely below the WEEKLY Pivot. While I do NOT make entry/exit decision solely based on internals, I inaccurately judged what I thought was an intra-day sign that internals at the NYSE were beginning to firm and turn higher, where that leadership or internal strengthening would later be found at the NASDAQ. Pivot Analysis Matrix Dow Industrials (INDU) Chart - Daily Intervals S&P 500 Index (SPX.X) Chart - Daily Intervals My bar chart on the SPX is missing a couple of bars, and there would not be the gap to 1,062.40 has show, but a break much below the WEEKLY Pivot does have the SPX vulnerable back to its WEEKLY S1 after a sharp jump higher. To be truthful, I didn't expect the SPX to trade its MONTHLY R2, even under the scenario of a Santa Claus rally. S&P 100 Index (OEX.X) Chart - Daily Intervals Any other day of the week, and today's trade at a correlative WEEKLY R1 and MONTHLY S2 would probably be considered normal profit taking from a nice bullish move higher. I disagree that Saddam Hussein being captured now provides the catalyst for a selloff. Still, the OEX looks overextended near-term, and pullback to 522 is what I feel should be a strong support level. NASDAQ-100 Tracking Stock (QQQ) Chart - Daily Interval It has been quite some time since the QQQ has rallied back above its shorter-term 21-day SMA and intermediate-term 50-day SMA to then turn back below so quickly. While Q's did try and find an intra-day bid at the MONTHLY Pivot of $35.11, when $35.00 bas broken, fell rather quickly below the WEEKLY pivot. While today's trade may be option expiration related with "max pain" at $34.00, QQQ never really could put together what felt like an overly bullish bid after the open. Jeff Bailey ------------------------------------------------------------ VOTED one of "Best Online Brokers" (4 stars)--Barron's optionsXpress's "order-entry screens...go far beyond... other online broker sites"--Barron's 8 different online tools for options pricing, strategy, and charting Access to options specialists via email, phone or live chat online Real-Time Buying Power, Account Balances or Cancels Go to http://www.optionsxpress.com/marketing.asp?source=oetics22 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ******************* 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. 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The Option Investor Newsletter Monday 12-15-2003 Copyright 2003, All rights reserved. 2 of 2 Redistribution in any form strictly prohibited. In Section Two: Stop Loss Updates: FD, KSS Dropped Calls: UTX Dropped Puts: None Play of the Day: Put - NSM Watch List: Brought to you by the letter "M" Market Posture: Close, but No Saddam ------------------------------------------------------------ optionsXpress has "...a lot of bang for the buck."--Barron's $1.50 /contract (10+ contracts) or $14.95 Min. No hidden fees Easy screens for spreads, collars, or covered calls! Contingent, Stop Loss, Trailing stop, or OCO 8 different online tools for options pricing, strategy, and charting Go to http://www.optionsxpress.com/marketing.asp?source=oetics25 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ***************** STOP-LOSS UPDATES ***************** FD - put Adjust from $47.51 down to $46.00 KSS - put Adjust from $46.75 down to $45.50 ************* DROPPED CALLS ************* United Tech. - UTX - cls: 91.55 chng: -0.05 stop: 89.75 After Friday's high-volume rally to new all-time highs, we rolled the dice and hoped for more follow-through this week, even though our target had been reached. The Saddam news over the weekend had the entire market looking strong at the open and UTX actually ran as high as $92.75 before running out of gas right at the top of its rising channel. After holding above $92 throughout the session, the selloff at the close fractured that intraday support. The daily candle looks like a pretty convincing reversal, as it came on strong volume and UTX ended at its low of the day. Rather than continue to tempt fate, we're going to close the play here for a nice gain. Aggressive traders that want to live dangerously can still hold onto open positions, but should maintain a tight stop just below Friday's intraday low. Picked on November 23rd at $83.90 Change since picked: +7.65 Earnings Date 1/15/04 (unconfirmed) Average Daily Volume = 1.84 mln ************ DROPPED PUTS ************ None ------------------------------------------------------------ Quit paying fees for limit orders or minimum equity No hidden fees for limit orders or balances $1.50 /contract (10+ contracts) or $14.95 minimum. Zero minimum deposit required to open an account Free streaming quotes Go to http://www.optionsxpress.com/marketing.asp?source=oetics24 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ********************* PLAY OF THE DAY - PUT ********************* National Semiconductor - NSM - cls: 38.00 chng: -1.57 stop: 42.00 Company Description: National Semiconductor Corporation designs, develops, manufactures and markets an array of semiconductor products, including a line of analog, mixed-signal and other integrated circuits (ICs). These products address a variety of markets and applications, including amplifiers, personal computers, power management, local and wide area networks (LANs and WANs), flat panel and cathode ray tube displays and imaging and wireless communications. The Company's operations are organized in five groups: the Analog Group, the Displays Group, the Information Appliance and Wireless Group, the Wired Communications Group and the Custom Solutions Group. Why we like it: Last week's plunge in the Semiconductor stocks was too good for the bulls to pass up and once again they bought the dip. The SOX rebounded from just above the key $475 support level and by week's end was resting just below the $500 level, which should now begin to act as resistance. Tuesday's convincing breakdown below $40 support and the 50-dma was another dip-buying entry for the bulls, but something seems amiss in the rebound. Rather than following through to the upside on Friday, NSM found stiff resistance at the 50-dma (now at $40.38) and the stock spent most of the day languishing below that critical level. There wasn't any follow- through to the downside, but the failure to move higher hints that perhaps this resistance level will hold. Helping to paint this bearish picture is the PnF chart, which issued a Sell signal on Tuesday with the intraday trade below $38. The vertical count now points to a downside target of $30, although that may be a bit far down for the purposes of our play. More realistically, NSM should first break the $36 level and then work its way down to a test of major support at $32. The best approach for new entries is to target a rollover from resistance near the 50-dma, as it allows us to tightly control risk with our $42 stop. Monitor the SOX for signs of weakness before playing. Why This is our Play of the Day After the news of Saddam's capture over the weekend, it looked like the markets were in for a strongly bullish session. Even Technology was going along for the ride, with the Semiconductor index (SOX.X) leading the parade, moving to an early high of $508. That opening surge was as good as it got though, as the SOX then proceeded to fall more than 25 points to close at its low of the day for a 2.8% loss. NSM followed that trajectory as well, rising to strong resistance just over $41 before tipping over and falling back for a nearly 4% loss on the day, also closing at its low of the day. That reversal from the highs was a gift of an entry point and it looks like we can expect more weakness to follow. Traders looking for a momentum entry just might get their wish tomorrow and can use a break below $37.60 (just under last Wednesday's intraday low) as their entry trigger. Once below that support, look for NSM to seek out next support at $36, enroute to our $32 downside target. If entering on weakness, look for a confirmation in the form of the SOX finally breaking strong support at $475. Maintain stops at $42 for now. Suggested Options: Aggressive short-term traders can use the January 35 Put, while those with a more conservative approach will want to use the January 40 put. Our preferred option is the January 40 strike, as it is currently in the money and provides ample time until expiration. While we've listed a December strike, it is not the preferred strike due to the proximity of December expiration. ! Alert - December options expire this week! BUY PUT DEC-40 NSM-XH OI=5275 at $2.30 SL=1.25 BUY PUT JAN-40*NSM-MH OI=2369 at $3.40 SL=1.75 BUY PUT JAN-35 NSM-MG OI=1283 at $1.15 SL=0.50 Annotated Chart of NSM: Picked on December 9th at $38.70 Change since picked: -0.70 Earnings Date 3/04/04 (unconfirmed) Average Daily Volume = 4.10 mln ------------------------------------------------------------ We got trailing stops! Trade online with trailing stops at optionsXpress, at no extra cost Trailing stops based on the option price or the stock price Also place Contingent, Stop Loss, and "One Cancels Other" orders $1.50 /contract (10+ contracts) or $14.95 Minimum--NO Hidden Fees! Go to http://www.optionsxpress.com/marketing.asp?source=oetics23 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ********** Watch List ********** Brought to you by the letter "M" MBT - Mobile Telsys - close: 74.79 change: -2.76 WHAT TO WATCH: This Russian mobile telecommunications stock may have seen its top. Shares peaked in early October near $87.50. Sine then it has been consolidating lower with new resistance at $84.00. It could be forming an ugly multi-week long bull flag pattern but that could just be a little overly optimistic. A test of the $70 level looks like a good bet. If $70 breaks down then the 200-dma near 62.50 might be the next target. Chart= --- Mohawk Industries - MHK - close: 68.40 change: -0.35 WHAT TO WATCH: Shares of carpet-maker MHK are just barely holding on to their current position above support at 67.50. The stock looks poised for a strong downward move after a big rounding top formed over the last three months. What makes us hesitate to short it is price support at $65 and potential technical support at its rising 200-dma just below $65. The weekly chart suggest it could see profit taking down toward the $62.50-64.00 region. Meanwhile the P&F chart is in a clear sell signal. Chart= --- Marvel Enterprises - MVL - close: 26.60 change: +0.04 WHAT TO WATCH: Keep an eye on MVL for a bounce from the $25.00 level, which is current support. The company has a couple of new movies coming out for 2004 and Spiderman 2, out this July, should be huge. Expectations for a blockbuster could easily drive the stock higher. If the markets pull back deep enough MVL might hit its 200-dma as it approves the 22.50 region. A bounce from either might work as well. Chart= --- Moody's Corp - MCO - close: 57.46 change: -0.72 WHAT TO WATCH: The credit-rating corp has been consolidating sideways in the $55-58.50 range for weeks now. Shares are building a slow but steady trend of higher lows and MCO might be getting close to an upside breakout. More conservative traders might do best waiting for a close over $60. Short-term today's candlestick looks like a bearish-engulfing pattern (not good). If the markets pull back some more look for support at $55. Chart= --- Martek Biosciences - MATK - close: 59.21 change: +0.44 WHAT TO WATCH: The BTK biotech index rolled over with the rest of the market today and MATK followed suit after rushing up through resistance at $60. Now the stock looks ready for another test of short-term support at $57.50. If that breaks then a test of stronger support at $55.00 is in order. Aggressive bears could short a break under $57.50 and target the top of the gap near 52.50 (or if the markets really pull back then the $50 mark). Bulls might want to wait and see if the 50-dma offers any strength to the stock. Chart= ************** MARKET POSTURE ************** Close, but No Saddam by - Nich Sheldon Wall Street opened in rally mode on news of Saddam's capture, but after reaching new 52-week highs the NASDAQ spearheaded a market- wide decline. Only three indexes managed to close in positive territory. However, only one of those indexes closed more than one percent higher. The XAU Gold and Silver Index tacked on 1.11 percent, and retested its simple 10-DMA. Traders should note that the index has been unable to break over its 10-DMA for the past two sessions. The DDX Disk Drive Index fell -3.96 percent on Monday. The index shot higher when the market opened but could not manage to get a foothold over the 10-DMA. Early morning strength pushed the SOX Semiconductor Index up and over the top of its 10 & 50-DMA. Yet, even though the index gained 12 points in the beginning of the session, it ended up losing -2.85 percent by the closing bell. The simple 10-DMA has served as strong resistance for the GHA GSTI Hardware index for the past month, and today was no different. The GHA folded under pressure once it reached its 10-DMA, dropping -2.61 percent and closing at 228.66. The XAL rebounded back to the top of its regression channel, but the move wasn't strong enough to break resistance at 62. The index's failed rally left it with a drop of 2.13%. ******************* 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. 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