The Option Investor Newsletter Tuesday 01-20-2004 Copyright 2004, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: Guidance? Futures Markets: Dollar Stalls Index Trader Wrap: A little bit of this and that Market Sentiment: Stronger Than Expected Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 01-20-2004 High Low Volume Advance/Decline DJIA 10528.66 - 71.90 10616.96 10519.49 2.28 bln 2026/1240 NASDAQ 2147.98 + 7.50 2149.85 2130.20 2.62 bln 2158/1144 S&P 100 563.75 - 0.97 565.95 562.55 Totals 4184/2384 S&P 500 1138.77 - 1.06 1142.93 1135.40 W5000 11131.32 + 15.30 11151.60 11082.78 RUS 2000 597.98 + 7.57 597.98 590.16 DJ TRANS 3020.00 - 16.30 3036.46 3006.03 VIX 15.21 + 0.21 16.13 15.09 VXO (VIX-O)14.91 - 0.36 15.83 14.91 VXN 20.49 + 0.25 22.13 20.26 Total Volume 5,234M Total UpVol 3,384M Total DnVol 1,802M 52wk Highs 1341 52wk Lows 12 TRIN 0.98 NAZTRIN 1.21 PUT/CALL 0.60 ************************************************************ Guidance? It was all about guidance as the bluest of blue chips began presenting their earnings. However, good news did not buy much in the way of investor appreciation as strong earners were pounded when good results fell short of overly optimistic expectations. Dow Chart Nasdaq Chart It was a slow day economically with the NAHB Housing Market Index the only regular hours report. The headline number at 68 was less than consensus at 69 and less than the 70 from both December and November. Slower sales continue to depress the market despite the optimistic outlooks by the builders. With the economy recovering, interest rates low and inventory levels still light the conditions are ripe for a spring sales explosion but the winter weather has put sales in the deep freeze. This would suggest a continued neutral rate decision by the Fed next week could be the green light for another run for the builders as investors buy the dip in advance of the spring thaw. The worst thing that could happen for the home builders would not be what you would expect. A surge in the 4Q GDP, due out next week, that would suggest the recovery is really catching fire could actually push real interest rates up despite a Fed on hold. Rising economies can support higher rates but those same rates could slow home sales. Seems contrary to common sense but that is real life. More buyers can afford homes in a roaring economy but they have to pay more for the privilege. MMM reported earnings with sales that reached an all time high. They beat estimates by a penny and the shares soared to an all time high of $86.20 before taking a significant hit of over -$5.00 for the day. Analysts found no fault with the earnings with margins at 20% and sales up +14% from last year. MMM also raised its guidance for the quarter and the year. Unfortunately that raised guidance was still at the low end of the consensus range. Expectations for an earnings blowout and improved guidance were just too high it appears. Dow component UTX reported earnings that beat the street by +3 cents on a +19% increase in 4Q sales and guided inline with prior estimates for 2004. UTX lost -2.70 in early trading. Several analysts suggested UTX was over valued at its current PE of 18 based on the lack of an upgrade in guidance. UTX is expected to earn between $5.00 to $5.30 for 2004. Analysts were disappointed UTX only beat by +3 cents given the weakness of the dollar. Guess they were looking for something more in the IBM/GE range of currency translation gains. Another Dow component, GM, posted very strong earnings of +$2.13 per share and profits of $1.01 billion. A strong performance by GMAC helped the automaker. They also posted a very strong outlook for 2004 and expects to take market share from competitors with new models. GM spent an average of $3,589 in incentives per car in December. GM also said its -$18 billion pension fund problem had been completely erased thanks to the market gains and a debt offering. This takes a very big negative away from the GM stock. GM was trading down on the news at the close. Citigroup announced profits that nearly doubled last years results and raised their dividend +14%. Citigroup posted earnings of $4.76 billion or 91 cents per share. Analysts had expected 90 cents. Strong growth in credit card revenue came from 145 million card accounts. Citigroup said volume was strong and they were looking to grow the business by acquisitions where possible. Nothing wrong with this report but C finished negative for the day. INTC closed in on its lows for the month near $32 and suggested investors were not excited about their record earnings last week. We know it sold off on the less than hoped for guidance and so far that selling has not slowed. Five Dow components, excellent earnings from all on strong sales improvements. Inline or better guidance for them all yet all the stock prices tanked. This suggests what we all feared that the buyers are saying great but not great enough. Investors were quick to take profits when there was not a short covering rush like we saw in Juniper last week. The only stock not seeing a sell the earnings result was IBM which three days after announcing mediocre results was up another +1.78 on Tuesday. The reason was an announcement they were adding +15,000 workers. While that sounds like a prelude to a wave of new jobs when the Non Farm Payrolls are released in two weeks it was not as positive as it seemed on the surface. Only 4500 of those jobs will be in the U.S. The remainder of those 15,000 jobs will be in India and China. They did reiterate that they were bullish on the IT market for 2004 and these hiring's would put IBM at the highest employment level (330,000) since 1991 high of 340,000. IBM will save $168 million a year by hiring those programmers overseas. IBM said a programmer with 3-5 years of experience will cost them $12.50 an hour in China where that same programmer in the states costs them $56 an hour including benefits. If this outsourcing continues unabated would you care to speculate on what a programmer in the states will be making five years from now? Way less than $56. I know programmers in Denver that were making enormous amounts of money five years ago that are working in Taco Bell now or have been unemployed for nearly a year because the IT job market has collapsed. IBM is using that cheap labor to mount an assault on MSFT. They announced on Monday they were launching a new program to help millions of customers migrate from Windows to Linux. Linux is the fastest growing operating system for servers in the world and IBM wants to keep it that way. Microsoft is going to stop supporting Windows-NT by the end of 2004 and IBM is charging ahead with a plan to capture those millions of users. Microsoft software has continued to get more expensive and IBM sees this as an opportunity to take market share. IBM will offer multiple upgrade paths and offer classes on how to migrate. They are making these tools available to their 90,000 partners worldwide as they begin their push. MSFT was up +30 cents on the news despite the announcement from the Justice Dept that MSFT had failed to fulfill a key part of the antitrust settlement. MSFT will announce earnings on Thursday and this could be a shift out of those already announced and into a coming announcer. Buy the rumor, sell the news. The markets surged to new highs at the open once again but the Dow was unable to hold those opening levels. The January rally has been fueled by near record amounts of cash flowing into the markets. According to TrimTabs $8.6 billion in new cash came into equity funds for the fist nine days of January. The small cap techs are by far the biggest recipient of the cash. The Russell led the major indexes all day as traders scrambled to find something worth buying with hopes of big gains in 2004. Goldman Sachs reported the results of a CIO survey just completed where 32% of managers expected their IT spending to rise in 2004. Of that 32% the expected rise in spending was only estimated to be +1.5%. This is very low and does not suggest the bullish investor sentiment has carried through to the IT sector. Less than 1/3 expect gains and those gains are expected to be very small. Still 58% of those surveyed expected spending to be flat with the 4Q and that is an implied increase since the 1Q is normally weak. Not exactly a strong reason to invest in techs that are up in many cases more than +100% from 2003 lows. Merrill released a study late last week suggesting that 2004 would actually see a decline in IT services and spending in consulting services. After the close we saw earnings from AMD, MOT, PMCS, SAMN and RFMD among others. Motorola beat estimates by +4 cents with a +17 cent headline number. Cell phone sales fell -3% because of delays in getting camera phones and other new products to market in quantity. The did see a +64% jump in orders during the quarter. Unfortunately the profit margin on their phones is only 4% compared to 20% for competitor Nokia. They raised guidance to 5-7 cents for Q1 and analysts were expecting +5 cents. MOT traded down slightly in after hours despite the good results. AMD blew the doors off with its first profit in more than two years on strong 4Q demand for memory and computer chips. AMD said the gains were seasonal and the 1Q would be flat to down. They still expect to post a profit for the 1Q but after that it becomes dicey again. They said flash memory had been strong in the 4Q but pricing pressure and demand would make it flat in the 1Q. This was the same guidance Intel gave on flash memory. AMD was up early on the news but traded down as the after hours session ended. RFMD took a hit in after hours after beating estimates by +3 cents but then guiding down for Q1. The company was still upbeat but a pause in demand will push estimated Q1 earnings down to only +2 to +4 cents. Analysts had been expecting +7 cents. PMCS beat the street by a penny and said they were still expecting a strong 2004. They did use the "if" word in their guidance saying "if current trends continue" but then that is always the implied scenario. PMCS traded down slightly after the announcement. SANM turned in a profit and reversed a prior loss but the street was not happy with the results. Guidance was inline with estimates but given the expectations for the sector analysts were hoping for more. The consensus after the guidance was that SANM was benefiting from a restocking cycle and not new orders for an increase in IT spending. David MacGregor, a research analyst for Longbow said he surveys three dozen or so board companies each month and he saw only a little evidence of inventory buildup from companies like SANM. Techs got a very late gift after the close. The Semi Book-to-Bill came in at 1.20 and a high not seen in many months. This would suggest a sharp increase in orders and more confirmation that the 4Q was strong. This is a December number but one that should negate any negatives from some of the earning questions tonight. The futures did not react to the B-t-B announcement but it does not come out until the after hours stock session closes so reaction is normally muted until the next day. After the flurry of tech earnings after the close the futures fell slightly. This could have been due to the less than stellar guidance from some or just fear of the president. The State of the Union speech tonight offers numerous chances for a few misplaced comments to tank various sectors depending on the initiatives mentioned. The drug and health care sector are a favorite with comments about lowering the cost of healthcare suggesting profits for those companies will be lower. The energy sector could be volatile should any sweeping suggestions appear. Oil hit $36 a barrel today so I expect that to be on the hit list somewhere. The speech tends to hit every possible campaign target so nothing is sacred. Getting out of the way in advance with your profits is not a bad idea. This is also a very high profile event where all the heads of government are gathered in one place. This would be a terrorists dream target although probably the toughest possible target considering the security. This could have provided even more reasons for taking some profits off the table. The markets were far stronger today than the closing indexes suggest. The Dow lost -71 based on drops in HON, UTX, MMM, CAT, INTC and several others. Gains in IBM failed to prevent the dip. The -$5 drop in MMM was a major drag on the index. However, that Dow drop was mostly based on those five stocks. It was not a broad based decline. The Nasdaq closed at a new high near 2150 and the Russell gained a whopping +7.57. The S&P was flat. However the internals tell the real story. Volume ended strong at 5.23 billion across all exchanges. Considering the almost complete lack of volume intraday this is amazing and could have been option related. The A/D line was nearly 2:1 in favor of advancers despite the negative indexes. The new 52-week highs hit a three month high at 1341. This was not a negative day. The only qualifier was the strange volume, which was very heavy at the open and the close and flat intraday. This suggests that volume was squaring of exercised option positions. The key will be the volume and direction on Wednesday. Earnings are appearing faster than popped corn in a hot skillet and there is plenty of reasons to trade. If the volume continues tomorrow and displays the same positive patterns then the outlook is good. Lately volume has been increasing almost daily but we are still stalled under 10600 on the Dow and 1161 on the S&P. The Nasdaq and Russell are in breakout mode and not looking back. Eventually the blue chips have to join the party or the party is going to fade. This is the week for it to happen and Microsoft's earnings on Thursday could be the pivotal point. The speech is about to start and the next 90 minutes will also be critical for the week. Let's hope the market likes it! Enter Passively, Exit Aggressively. Jim Brown Editor *************** FUTURES MARKETS *************** Dollar Stalls Jonathan Levinson A breakaway downside gap in the dollar coincided with an upside breakaway gap in gold, and pushes to new highs for equities. Equities reversed into negative territory while the CRB advanced, crude oil reached 36, and bonds retreated. 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. Chart of the US Dollar Index The US Dollar Index made a significant reversal, failing from a spike above 88 to trade below 87 as of this writing. The upper descending channel trendline was not tested on this bounce, and while the daily cycle upphase remains intact, today’s large drop bodes ill for dollar bulls. The CRB broke to new highs, led by natural gas, coffee, heating oil and crude oil futures, closing up 2.85 at 270.73. Gold rallied, silver advanced, and the HUI and XAU gained better than 4% and 3% respectively. Daily chart of February gold February gold broke above and held 412 for most of the session, closing +6.70 at 412.90. Just as the USD Index gapped and failed below the descending upper trendline, gold gapped and bounced from above its rising support line. The daily cycle downphase is still intact, and this strong move remains corrective within the daily cycle until the downphase aborts. Daily chart of the ten year note yield Bonds got sold modestly today, with the ten year note yield (TNX) gaining 4.3 basis points to finish up at 4.057%, a 1.07% gain in yield on the day. The daily cycle downphase is still intact, but I don’t expect it to survive another solid up day. As noted this morning in the Futures Monitor, the relationship we were tracking last week, of strong dollar-strong bonds-strong equities-weak metals played perfectly in reverse today. Equities remain the wildcard. Daily NQ candles The NQ managed to go net nowhere today, which was an awesome feat given the persistent weakness on the YM. Networkers were very strong again today, and while the YM was dragged down by weakness in MMM, the NQ had JNPR pulling it higher. The 20.50 point range left us with an almost perfect doji star, with equal indecision both above and below unchanged. The rising lower trendline was tested but did not break, the daily cycle oscillators continued to trend, and a 30 minute downphase ran its course and bounced on cue. 1545 is looking like steeply rising trendline support here, followed by 1515. No point discussing resistance, with 1563 today’s high, but an upside break out of this steeply rising channel would enter the realm of the surreal. For the day, NQ added 50 to close at 1553.50. 30 minute 20 day chart of the NQ That’s well and good, but a look at the 30 minute chart paints a picture of utter control and gruff, burly confidence. The 30 minute chart looks like a rock, ram tough and ready when you are. The 30 minute cycle downphase aborted early, never spending anytime anywhere near oversold extreme, and the upphase delivered nicely, complete with a small short covering tape-painting panic in the final half hour of the cash session. 1545-47 is the top of the consolidation zone and is now important support, with rising trendline support around 1550. To top it all off, Al Green’s All-Rally-All-The-Time Fed jacked in an amazing 14B in 2- day repos, and that huge an amount of money should be sufficient to prevent any real selling of equities tomorrow. Provided that no significantexternalities intervene (ie unwelcome comments in the State of the Union address tonight), the NQ looks like it wants to go higher. Daily ES candles The ES also closed flat on a doji star. The sideways 8 point range does not avail itself of much incisive analytical insight. Whether today’s lack of movement was due to the resetting of option positions in the wake of last week’s expiry of January options, we cannot know. Volatility was low, and was the put to call ratio, but in the end, little occurred. Support is at 1130, followed by 1118. For the day, ES dropped .50 to close at 1137.50. 20 day 30 minute chart of the ES ES broke out of a bear wedge this morning after a doji rejection of a new rally high, and engulfed Friday’s even narrower range. The close in unchanged territory averted the reversal signal printed on YM, and the market can go either way from here. The 30 minute cycle is pointed north, and a retest of 1542-3 looks imminent from here. The markets’ reaction to tonight’s speech is the wildcard, but then, 14B of the Fed’s money should mute even that. 150-tick ES with volume-by-price The short cycle oscillators are mixed here, but with the Keltner channels reflecting the upward bias implied by the 30 minute cycle upphase currently in progress. Daily YM candles YM dropped 65 points or .61% to close at 10512. It was the weakest link today, perhaps because blue chips are most popular with foreign investors and thus most sensitive to currency moves, or perhaps because heatmappers and momo traders were bailing out of the staid old YM and jumping onto the likes of JNPR, NT and JDSU. Either way, the YM renewed its commitment to the daily cycle downphase aborted on Friday, and came to rest on the lower rising trendline at the bottom of an ugly gravestone doji, marking a key outside reversal day from the morning euphoria of a new rally high. These key outside reversals have been in the habit of failing lately, and did so on a few occasions during autumn 2003. Nonetheless, the bullishness on the NQ today is shockingly absent from the YM, which is holding onto its uptrend by a thread here. A break below 10470 would imply a retest of 10340 support. 20 day 30 minute chart of the YM Whether the decline in the dollar was corrective or the start of the next blast to new lows will not be known until we see the 84.80 level tested again. At this rate, we could see that by Thursday. Until further notice, it appears that US-denominated bonds and equities are trading in lockstep with the dollar and inversely to hard commodities. With opex week now behind us, I am hoping to see an uptick in volatility and the return of wider ranges. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ******************** INDEX TRADER SUMMARY ******************** A little bit of this and that Traders returned from a 3-day weekend to see the major indices trade mixed. I can't argue that today's mixed trade was attributed to some "sell the news" on stocks that had made nice bullish runs ahead of earnings, and when earnings were released, bulls paid themselves in the form of profit taking. I thought the same thing as some traders and investors noted in today's session. Last night's Iowa caucus results showed Democratic Senator John Kerry beating former Vermont governor Howard Dean by a better than 2-to-1 margin. An overwhelming victory that may have some market participants thinking that President Bush's run for a second term might not be the cakewalk some have predicted if Mr. Dean were to win the Democratic nomination. Some market analysts and election watchers felt that should an "unelectable" Howard Dean win the Democratic top spot to run for President against incumbent George W. Bush, that a "more certain," or predictable economic policy be in place for another 4 years, with President Bush winning. John Kerry's Iowa caucus win now opens up what many see as a three-man race between John Kerry, John Edwards, and Howard Dean, where Howard Dean was viewed as the likely frontrunner to face President Bush in this fall's election. The most basic thought as it relates to this year's presidential election was that Mr. Dean's platform and President Bush's platform were about as different as oil and water. However, more similarities were found with Mr. Kerry's and Mr. Edward's platforms regarding economic policy as with President Bush's. Certainly there are differences, but Mr. Dean's platform is vastly different. If bulls were dealt any type of blow in the past 24-hours, I'd have to say it was the Iowa caucus results. Some fine tuning after last week's index and stock option expiration may have also taken place in today's trade. Late last week we saw the INDU, SPX, OEX and NDX see what I considered to be a rather "unnatural" trade, and despite some rather strong market internals, these indices that will hold heavy option- related interest traded lower, while the very broad NYSE Composite ($NYA.X) 6,599.48 +0.48% and NASDAQ Composite (COMPX) 2,147.98 +0.35% seemed to reflect today's internals. Considering the weighted nature of the INDU, SPX, OEX and NDX/QQQ, which can be influenced by option-related action, today's 1.28% gain in the smaller-cap Russell-2000 Index (RUT.X) 597.98, which tends to be less influenced by option-related action hints of some near-term unwinding of options. The Market Volatility Index (VIX.X) 15.21 +1.4% jumped to 16.13 intra-day, to then close at its lows the session, but up from Friday's 52-week closing low of 14.98. Some option traders said call buyers were abundant, and while this may be true, I would have thought the VIX.X would have fallen. A cursory check of the SPX option chain shows the March 1,125 call (SPTCE) most active at 8,556 contracts (OI=62,216) with the February 1,050 puts (SPQNJ) trading 6,875 (OI=34.579). Market Snapshot / Internals - 01/20/04 Close Large caps weighed on the major indices today as the INDU, SPX, OEX and QQQ all finished lower, despite positive A/D breadth at both the NYSE and NASDAQ. NASDAQ's 571 new 52-week highs is the largest number of new 52-weekers since I've been keeping nightly hand counts (01/21/03), and surpasses the 505 new highs found on September 3, 2003. Current 10-day average NH/NL ratio at the NYSE is 99.3% and 98.7% at the NASDAQ. The Oil Service Index (OSX.X) 100.30 +4.71%, AMEX Gold Bugs Index ($HUI.X) 229.73 +3.9%, Natural Gas Index (XNG.X) 227.09 +3.03%, North American Telecom (XTC.X) 642.74 +2.09% and Health Provider Index (RXh.X) 390.21 +2% were sectors posting gains greater than 2%, while the S&P Retail Index (RLX.X) 373.58 -1.00 % was the only equity index/sector I show falling 1% or more. Pivot Analysis Matrix - Please note that today's U.S. Dollar Index (dx00y) 86.63 -1.17% high/low/close was taken from my Qcharts daily snapshot bar. I was not able to see intra-day charts as many data feeds looked to be non-existent, which sometimes happens with Monday being a holiday. Some currency traders also made mention that the dollar was under selling pressure today as a result of "uncertainty" regarding the Iowa caucus. I've highlighted in PINK the INDU's daily low of 10,519.49 and closely matching trade at its WEEKLY Pivot of 10,523.08 and also the INDU's WEEKLY high last week of 10,600.74, which I would point out did not see trade at its MONTHLY R1 of 10,682.46 this month (January). What these two simple observations do is have us understanding/observing that the INDU is a lagging major index right now as it relates to levels in our matrix. The price-weighted INDU showed 4 of the 5 highest priced INDU components (PG $98.67 -0.33%, IBM $97.10 +1.86%, UTX $94.80 -2.76%, CAT $82.15 -2.36% and MMM $80.41 -5.93%) trading lower in today's trade, with MMM and UTX having reported quarterly earnings in today's trade. Both MMM and UTX traded 52-week highs on Friday, and today's selling certainly suggests some "sell the news" on a near-term basis. I wanted to quickly check both stock's point and figure chart bullish vertical counts to try and get a feel for "why" these stocks saw a more notable round of selling today. MMM's PnF chart shows a bullish vertical count of $95, which is currently in play unless the stock would generate a double-bottom sell signal at $75, while UTX has exceeded its bullish vertical count of $85, where first sign of weakness would be a double-bottom sell signal at $92.00. This cursory check of supply/demand for two of the more heavily price-weighted Dow components does hint that stocks are running into earnings, but seeing selling on profit taking once the fundamental analysis is proved correct, and gives some near-term focus to the INDU WEEKLY S1 and WEEKLY R1/MONTHLY R1 as formidable near-term support/resistance levels, with resistance looking more formidable at the 10,680 level. Tomorrow, Dow component JP Morgan (NYSE:JPM) $39.09 -0.45% is slated to report quarterly earnings with consensus of $0.77 per share on revenues of $8.131 billion. Dow Industrials (INDU) Chart - Daily Intervals While the INDU showed intra-day support at its WEEKLY Pivot, even a bull might want to see more of a pullback to give upside to a 10,680 target. The shorter-term 21-day SMA is rising near the WEEKLY S1 of 10,445, where MACD and Stochastic oscillators suggest a pullback is likely. I've tried to tie in MMM and traded near $77-$78 from its point and figure chart, where one of the INDU more heavily price-weighted components might pull back to, where a rebound back higher in MMM has the Dow firming around its WEEKLY S1 for a bounce back higher. S&P 500 Index (SPX.X) Chart - Daily Intervals Based on work we've done to develop a bullish or bearish bias for the markets, if not the S&P 500 with the e-mini futures (es04h) in recent months, I (Jeff Bailey) can't really be skewed from a bullish bias in the SPX unless we were to see a break below the 1,129 level in the SPX itself. Some of today's buy/sell program premium alerts, most of which were sell program premium alerts, came before the lunchtime hour, and this observation is what has me thinking that we saw some "unwinding" of short-term option expiration activity today. Just as we saw a lot of program trading late last week into index expiration eventually develop further gains from the SPX from the 1,125 level, I think today's sell program premiums found, had institutions unwinding some near-term hedges and selling back futures as index values and individual stocks may now have been delivered against prior-written calls that institutions had sold. E-mini S&P Futures (es04h) - Daily Intervals I showed this chart weeks ago, and it has been rather amazing how the futures market has seemed to trade the levels of blue and purple retracement we put together using the "fitted" retracement technique. I'm not trading futures, but use this chart to develop an overall trading bias with the thought that institutions will heavily use futures to hedge positions and offset any call and put writing activity. S&P 100 Index (OEX.X) Chart - Daily Intervals I looked at the OEX's top 10 weighted market cap stocks all day today, and they showed a very mixed trade by their close. GE +0.02%, MSFT +1.04%, XOM +0.93%, PFE -1.34%, C -0.42%, WMT - 0.99%, INTC -0.85%, CSCO -0.92%, AIG -1.01% and IBM +1.86%. (sorted by market cap) NASDAQ-100 Tracking Stock (QQQ) - Daily Interval Today's trade at $39.00 wasn't a "bad tick." I thought for sure it was after reviewing the QQQ this morning. NASDAQ hasn't updated short interest on the QQQ, SPY or DIA for January 15 dates, but the QQQ trade at WEEKLY R1 suggests shorts are quite jittery. $36.25 begins to look like formidable near-term support. Jeff Bailey ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** **************** MARKET SENTIMENT **************** Stronger Than Expected - J. Brown The major averages don't tell the whole story. The Dow Jones was strongly red on the session after components MMM and HON both took some big hits. Meanwhile the NASDAQ managed another new high closing at levels not seen in 30 months. The strong market internals underline the strength not shown in the closing prices. Advancers pushed past decliners 18 to 10 on the NYSE and 2 to 1 on the NASDAQ. Up volume was twice down volume on both exchanges. The selling was heaviest in the retail sector as the RLX dropped 1 percent after failing at the 380 level twice in the last three trading days. More sector indices were positive than negative and leading the way were the oil services stocks with the OSX up 4.7 percent. It's probably not a coincidence that crude oil futures rose 87 cents to $34.87 a barrel. The XAU gold & silver index also posted a strong bounce, up 2.44 percent as gold futures soared nearly $6 towards $413 an ounce. As expected many of the XAU components followed suit but it remains to be seen if this is a buy the dip opportunity or just an oversold bounce. The XNG natural gas index also produced a decent session with a 3 percent gain following El Paso corp. who jumped 15% after Barron's highlighted the stock over the weekend. Oddly enough the NWX networking index saw no profit taking after Friday's big surge due to Juniper Network's incredible earnings report. Of course we'll hear from Lucent tomorrow and Nortel Networks in a few days and investors are probably just waiting to hear what these to networking giants have to say about their Q1 guidance. Keep an eye on the DFI and DFX defense indices. General Dynamics leads off the defense sector's parade of earnings tomorrow and we'll continue to hear from the group over the next several sessions. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10616 52-week Low : 7416 Current : 10528 Moving Averages: (Simple) 10-dma: 10536 50-dma: 10086 200-dma: 9365 S&P 500 ($SPX) 52-week High: 1142 52-week Low : 788 Current : 1138 Moving Averages: (Simple) 10-dma: 1129 50-dma: 1081 200-dma: 1008 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 795 Current : 1552 Moving Averages: (Simple) 10-dma: 1530 50-dma: 1444 200-dma: 1302 ----------------------------------------------------------------- In spite of some market weakness earlier today the volatility indices remain near their lows. CBOE Market Volatility Index (VIX) = 15.21 +0.21 CBOE Mkt Volatility old VIX (VXO) = 14.95 -0.32 Nasdaq Volatility Index (VXN) = 20.49 +0.25 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.60 1,126,135 673,994 Equity Only 0.52 994,208 513,167 OEX 1.32 14,469 19,115 QQQ 4.75 24,131 114,718 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 77.9 + 0 Bull Confirmed NASDAQ-100 81.0 + 0 Bull Confirmed Dow Indust. 86.7 + 0 Bull Confirmed S&P 500 87.8 + 0 Bull Confirmed S&P 100 85.0 + 0 Bull Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-dma: 0.89 10-dma: 0.97 21-dma: 0.91 55-dma: 1.03 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals -NYSE- -NASDAQ- Advancers 1804 2082 Decliners 1078 1042 New Highs 344 442 New Lows 6 3 Up Volume 1475M 1684M Down Vol. 710M 859M Total Vol. 2197M 2561M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 01/13/04 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 We don't have much more to report on for commercial traders this week other than slightly increased positions on both sides of the fence. Small traders followed suit. Commercials Long Short Net % Of OI 12/16/03 448,103 460,670 12,567 1.4% 12/22/03 400,066 405,240 (5,174) (0.6%) 01/06/04 403,721 408,729 (5,008) (0.6%) 01/13/04 405,558 411,361 (5,803) (0.7%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 23,977 - 12/09/03 Small Traders Long Short Net % of OI 12/16/03 172,947 113,704 59,243 20.7% 12/22/03 147,537 81,596 65,941 28.8% 01/06/04 142,844 83,518 59,326 26.2 01/13/04 149,057 90,571 58,486 24.4% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 The e-minis are seeing more action than the full contracts represented above. Commercial traders added more than 20K contracts to both longs and shorts but they remain net bearish. Small traders were more enthusiastic with a large increase in long positions, outpacing the increase in short positions. Contrarians might view this as a bearish development. Commercials Long Short Net % Of OI 12/16/03 330,273 361,316 (31,043) (4.5%) 12/22/03 128,801 213,021 (84,220) (24.6%) 01/06/04 175,489 240,865 (65,376) (15.7%) 01/13/04 196,858 263,845 (66,987) (14.5%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 12/16/03 177,193 73,694 103,499 41.3% 12/22/03 125,248 43,482 81,766 48.5% 01/06/04 139,433 51,909 87,524 45.7% 01/13/04 191,241 62,711 128,530 50.6% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Ho-hum...commercial traders are still asleep at the wheel in the NDX futures. Meanwhile small traders have reduced their outstanding shorts. Commercials Long Short Net % of OI 12/16/03 61,343 73,153 (11,810) ( 8.8% 12/22/03 40,277 36,452 3,825 5.0% 01/06/04 42,892 37,801 5,091 6.3% 01/13/04 41,829 38,547 3,282 4.1% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 12/16/03 28,676 15,197 13,479 30.7% 12/22/03 22,656 14,544 8,112 21.8% 01/06/04 8,035 17,911 ( 9,876) (38.1%) 01/13/04 9,705 12,539 ( 2,834) (12.7%) Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL There isn't much to report in the DJ futures either. It looks like commercials are just shuffling money around but the net result was a slightly more bullish stance on the Dow. In mirror-like precision small traders have slowly become more bearihs. Commercials Long Short Net % of OI 12/16/03 23,509 13,880 9,629 25.8% 12/22/03 14,088 9,998 4,090 17.0% 01/06/04 15,697 9,497 6,200 24.6% 01/13/04 16,501 8,724 7,777 30.8% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 12/16/03 9,497 19,633 (10,136) (34.8%) 12/22/03 6,915 8,983 ( 2,068) (13.0%) 01/06/04 5,713 8,105 ( 2,392) (17.3%) 01/13/04 6,496 9,970 ( 3,474) (21.1%) Most bearish reading of the year: (10,136) - 12/16/03 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** 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 Tuesday 01-20-2004 Copyright 2004, All rights reserved. 2 of 3 Redistribution in any form strictly prohibited. In Section Two: Dropped Calls: GD Dropped Puts: DIA Call Play Updates: AMZN, APOL, DGX, ESRX, GILD, MBI, MWD, MXIM, STJ New Calls Plays: GENZ Put Play Updates: ADBE New Put Plays: None **************** PICKS WE DROPPED **************** When we drop a pick it doesn't mean we are recommending a sell on that play. Many dropped picks go on to be very profitable. We drop a pick because something happened to change its profile. News, price, direction, etc. We drop it because we don't want anyone else starting a new play at that time. We have hundreds of new readers with each issue who are unfamiliar with the previous history for that pick and we want them to look at any current pick as a valid play. CALLS: ***** General Dynamics - GD - close: 93.83 chg: +0.05 stop: 91.75 That's it! As previously discussed this play is closed. Traders bought the dip again as GD slipped toward the 92.65 mark intraday before a mild afternoon rally. That's fine with us as we get to close the play with a decent run ($5.05). GD announces earnings before the bell tomorrow and estimates are for $1.37 a share. Keep your ears open for their guidance. There are a number of defense-related stocks announcing this week and GD will set the tone for the industry. Picked on December 21 at $88.78 Change since picked: + 5.05 Earnings Date 01/21/04 (confirmed) Average Daily Volume: 1.0 million Chart = PUTS: ***** Diamonds Trust - DIA - cls: 105.46 chng: -0.66 stop: 106.25 As if the only goal was to thwart our bearish play, DIA surged higher this morning, taking out our stop with an early high of $106.40. That strength quickly faded, with the stock falling to close just off its low of the day and this could be the rollover we were anticipating. Unfortunately, with our stop tripped early this morning, we must watch from the sidelines. Aggressive traders willing to hold open positions still may see the play turn into a winner, but the $105 level will need to fail as support first and then more importantly we'll need to see a break of the 20-dma (currently $104.72) on a closing basis. If holding open positions, we'd suggest a revised stop at $106.50, just over this morning's high print. DIA still looks ripe for a significant fall, and if price action confirms that view, it is conceivable that the stock will find its way back onto our bearish play list in the very near future. Picked on January 8th at $104.69 Change since picked: +0.77 Earnings Date N/A Average Daily Volume = 5.90 mln Chart = ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ******************** PLAY UPDATES - CALLS ******************** Amazon.com - AMZN - close: 56.61 chg: +0.89 stop: 51.25 A 1.59% gain is certainly not a bad start to this holiday shortened-trading week. AMZN outpaced the NASDAQ and the INX Internet index and looks poised to tackle resistance at the 57.50 level soon. As we mentioned over the weekend time is running short for this particular AMZN play because earnings are fast approaching on Jan. 27th and we don't plan to hold over the event. Odds are too good that we'll see a "sell the news" reaction, which is exactly what happened to YHOO last week. There are no new significant news items and no change in our stop loss. Picked on January 14 at $55.01 Change since picked: + 1.60 Earnings Date 01/27/04 (confirmed) Average Daily Volume: 10 million Chart = --- Apollo Group - APOL - close: 75.10 change: +0.96 stop: 71.00*new* Education stocks refused to play the game of weakness found in most of the broad market on Tuesday and our APOL play surged to new all-time highs above $75. Volume wasn't anything to get excited about at roughly half the ADV, but we'll take this sort of price action any day of the week. With another breakout to new highs, the stock is definitely exhibiting strength and we'll play the trend as long as it lasts. APOL is up strongly over the past week, so momentum entries don't appear to be the best choice at this point. Instead, look for a pullback near former resistance in the $72.50-73.00 area - reinforced by the 10-dma ($72.65) - to provide entry opportunities. Raise stops to $71, which will be below the 20-dma ($70.69) by tomorrow. Picked on January 13th at $72.63 Change since picked: +2.47 Earnings Date 3/18/04 (unconfirmed) Average Daily Volume = 2.06 mln Chart = --- Quest Diagnostic - DGX - close: 77.55 chg: +0.74 stop: 74.50 *new* Wall Street appears willing to chase the recent strength in DGX as the stock added another 74 cents on top of last week's gains. There are no new headlines for the company but we do notice a 1.61% gain in the HMO healthcare index. At $77.50 this is not a bad level to consider taking some profits off the table. DGX could easily dip back toward the $75 mark before bouncing again and we only have a few days left before its earnings announcement on Jan. 27th. We are going to raise our stop loss to $74.50, which is just under the simple 10-dma (where DGX found support last week). Should DGX surprise us with a spike higher we will exit if shares hit the $79.95 mark. Picked on December 30 at $72.95 Change since picked: + 4.60 Earnings Date 01/27/03 (confirmed) Average Daily Volume: 836 thousand Chart = --- Express Scripts - ESRX - close: 67.94 change: -0.36 stop: 63.00 The first day out of the gate for our ESRX play was rather dull, with the stock pulling back fractionally, most likely pressured by the weakness in the rest of the market. Remember our ideal entry point is on a pullback near the $66 support level, so today's slight drop is a good start. The stock has been moving to new highs, then retracing to confirm slightly higher support and then repeating the process. So if the pattern continues, we should see a bit more pullback from Friday's new recent high and then a solid rebound from support. Both the 10-dma ($65.67) and the 20-dma ($65.65) are rising to reinforce support at $66, so that looks like a good place to enter on a rebound. Traders that would prefer to enter on strength will need to see a push through today's intraday high and break above $69 before playing. Such a move will have ESRX solidly into the July gap and bring the $72 level into play as the next logical target. Maintain stops at $63, which is below both the 50-dma ($63.53) and 200-dma ($63.14), with the former having just crossed above the latter. Picked on January 13th at $68.32 Change since picked: -0.38 Earnings Date 2/24/04 (confirmed) Average Daily Volume = 1.28 mln Chart = --- Gilead Sciences - GILD - cls: 63.55 chng: +0.16 stop: 60.50*new* Despite weakness in the broad market, the Biotechnology index (BTK.X) held firm on Tuesday and our GILD play eked out a fractional gain, inching closer to our expected breakout over $64. It looks like the stock is moving above the consolidation of the past couple weeks, but we'll need to see that breakout to be sure. In the meantime, intraday dips near the $62 level look good for continuation entries, with that support being reinforced by the 10-dma at $61.82. Traders wishing to enter on strength will want to wait for the breakout over $64 before playing, as that breakout should be the prelude to a run towards the $66 level (top of the September gap) and then perhaps a rise towards $68. Time is growing short on this successful Biotech play, as the company is set to report earnings on January 29th, giving us just a week until we'll need to exit. Note that we've slightly raised our stop to $60.50 tonight, which will be below the 20-dma ($60.30) by tomorrow and is right at solid support from the past couple weeks. Picked on December 21st at $59.40 Change since picked: +4.15 Earnings Date 1/29/04 (confirmed) Average Daily Volume = 3.74 mln Chart = --- MBIA Inc. - MBI - close: 63.07 chg: +0.15 stop: 59.00 Our new play in the insurance sector, MBI, is holding up pretty well. We had suggested a dip to the $61 level as a potential entry point but traders stepped in and bought today's low at 62.40 instead. If you're patient the 10-dma near $61 still looks like a good entry. The IUX insurance index lost ground today so we're encouraged by MBI's relative strength. No change to our stop loss. Picked on January 20 at $62.93 Change since picked: + 0.15 Earnings Date 02/03/04 (confirmed) Average Daily Volume: 572 thousand Chart = --- Morgan Stanley - MWD - close: 59.88 chg: -0.55 stop: 56.75 After the long weekend shares of MWD pulled back today in some mild profit taking. We're not happy to see it under perform the XBD broker-dealer index but this dip might offer another entry point for traders. There were a few headlines for MWD as well. One offered positive news that MWD made a profit of 760,000 euros in the sales of its 4.99 percent stake in Spanish power company Union Fenosa. Another news story reported that Federal regulators okayed a deal for MWD to buy 241 electricity contracts from Duke Energy Corp (DUK). Picked on January 15 at $59.81 Change since picked: + 0.07 Earnings Date 03/18/04 (unconfirmed) Average Daily Volume: 3.8 million Chart = --- Maxim Integrated - MXIM - cls: 54.74 chg: -0.64 stop: 51.45 The profit taking was a bit stronger in MXIM today, which dropped 1.15% but bounced from its lows of the session. Traders stepped in to buy the dip to the $54.00 region (53.81 was the low). That's exactly where we have been suggesting traders look to buy the dip (53.50 to 54.00). Hopefully we'll see some follow through tomorrow and MXIM can run back toward its highs near $56. Keep an ear or two open to listen for KLAC's earnings results tomorrow after the closing bell. Positive news from KLAC could lift the chip sector and MXIM with it. We are not going to raise our stop loss just yet but conservative traders might want to consider a stop in the 53.00-53.50 range. Picked on January 06 at $51.89 Change since picked: + 2.85 Earnings Date 02/05/04 (unconfirmed) Average Daily Volume: 5.4 million Chart = --- Saint Jude Medical - STJ - cls: 65.15 chg: +0.56 stop: 61.00 STJ offered investors more good news today with an announcement that they've introduced their Atlas+ HF implantable cardioverter defibrillator, the ICD that provides the highest energy output of any ICD on the market. This inspired shares of STJ to a new all- time high early in the session and its first close over the $65 mark, a potential round-number resistance point. It's a little interesting to note the trading pattern in STJ over the past two days. The stock shoots higher in the morning, slowly fades back most of the session and then surges higher again very late in the session (last 5 to 20 minutes). We've only got about five trading days left before STJ's earnings announcement, adjust your strategy accordingly. Picked on January 12 at $64.01 Change since picked: + 1.14 Earnings Date 01/28/04 (confirmed) Average Daily Volume: 1.4 million Chart = ************** NEW CALL PLAYS ************** Genzyme Corp. - GENZ - close: 53.00 change: -1.26 stop: 49.50 Company Description: Genzyme General, a division of Genzyme Corporation, is focused on developing innovative products and services to solve major unmet medical needs. GENZ has nearly 600 products and services on the market and a strong pipeline of therapeutic products for the treatment of rare genetic diseases. The Diagnostics business unit develops, markets and distributes in vitro diagnostic products and genetic testing services. With a solid, profitable revenue base, this research is intended to maintain the company’s high rate of earnings growth. Why we like it: Ever since being turned back from the $515 level in June, the Biotechnology index (BTK.X) has been struggling to get back over $500, significantly underperforming the rest of the Technology market. Last Friday, the BTK finally showed some signs of strength though, managing a close over $500, its first since April of 2002. Price action was nothing to get excited about on Tuesday, but it was encouraging to see the index hold its gains from last week. GENZ has been in a similar consolidation mode over the past several months, with critical support at the 200- dma being tested on several occasions in November and December. But things took a definite turn for the better last week, with the stock breaking out over $50 and then following that up with a breakout over $52 on Thursday, representing its best levels since January 2002. Continuing with the breakout, GENZ surged within spitting distance of the $55 resistance level on Friday before today's mild pullback. The recent breakout has been very constructive for the picture shown on the PnF chart, with the November Buy signal giving a vertical count of $64 and this latest rally leg giving a breakout over the descending bearish resistance line. It is interesting that $64 is exactly the site of the stock's all-time high from June of 2001 and that may indeed be a viable target. But it's a bit aggressive for the timeframe of our play and we'll set our sights a bit lower, looking for a rally up to major resistance at $60-61 Following the breakout over $52, it would make sense that GENZ would pull back to confirm that broken resistance as new support, so a dip and rebound from the $51-52 area would be the preferred entry. Strong support should be found near $50, with the 10-dma ($50.45) and 20-dma ($49.57) rising to reinforce that support. A dip near $50 would be a much more aggressive strategy but one that just might make sense, especially with risk so easy to control using our initial stop at $49. Momentum entries will need to wait for a breakout over $55 before playing, and should be confirmed by the BTK index taking out $515 resistance. Suggested Options: Shorter Term: The February $50 Call will offer short-term traders the best return on an immediate move, as it is in the money. Short term traders with a more aggressive stance will want to use the OTM February $55 call. Longer Term: Aggressive longer-term traders can use the April $55 Call, while the more conservative approach will be to use the May $50 strike. Our preferred option is the April $55 strike, which is just slightly out of the money and should provide sufficient time for the play to move in our favor. There are March strikes available, but since there is currently no open interest, our preference is for the April strikes. BUY CALL FEB-50 GZQ-BJ OI=1007 at $4.00 SL=2.50 BUY CALL FEB-55*GZQ-BK OI=1139 at $1.25 SL=0.60 BUY CALL APR-50 GZQ-DJ OI=1110 at $5.30 SL=3.25 BUY CALL APR-55 GZQ-DK OI=3510 at $2.55 SL=1.25 Annotated Chart of GENZ: Picked on January 20th at $53.00 Change since picked: +0.00 Earnings Date 2/19/04 (unconfirmed) Average Daily Volume = 2.85 mln Chart = ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ******************* PLAY UPDATES - PUTS ******************* Adobe Systems - ADBE - close: 38.50 change: +0.20 stop: 40.00 Bulls and bears alike are wondering what ADBE has up its sleeve, as the price action over the past couple weeks has been a bit on the inscrutable side. After recovering from the apparent breakdown under the 200-dma (now $37.44), the stock held its ground and then popped higher towards the end of last week. The past 2 days have seen price action thwarted near the confluence of the 20-dma ($38.89) and 30-dma ($38.93). This looks like a rollover getting started and it will be reassuring to have the 50-dma ($40.01) breaking below $40 tomorrow, helping to protect our stop. Right now, price is in the middle of its recent range, so it is tough to pick an entry here. Aggressive traders can consider entries on a failed bullish move below the 50-dma, but the more conservative (and we think prudent) strategy will be to wait for ADBE to break back under $38 and preferably back under the 200-dma. Once back under the 200-dma, we can look for potential support near $36 again and then a drop to the $34 area. Maintain stops at $40. Picked on January 11th at $37.12 Change since picked: +1.38 Earnings Date 3/11/04 (unconfirmed) Average Daily Volume = 3.24 mln Chart = ************* NEW PUT PLAYS ************* None ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ********** 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 Tuesday 01-20-2004 Copyright 2004, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Watch List: Earnings & State of the Union ********** WATCH LIST ********** Earnings & State of the Union ___________________________________________________________________ How to use this watch list: Readers can use the candidates below as a springboard for their own research. Many are in the process of breaking support or resistance or in the process of starting new trends or extending old ones. With your own due diligence these could be strong potential plays. ___________________________________________________________________ Aetna Inc - AET - close: 71.97 change: +2.07 WHAT TO WATCH: Healthcare stocks have been strong lately and the HMO index has hit new all time highs. Following the sector higher is AET. The government recently (last Friday) bumped up its Medicare rates by 10.6%, much higher than expected. Medicare affects 41 million elderly or disabled Americans and the current administration would like more of them to use private care HMO's. Tonight's State of the Union address might have some comments regarding healthcare and Medicare, which could influence AET's recent gains. Chart= --- KLA-Tencor - KLAC - close: 62.52 change: +0.42 WHAT TO WATCH: Unhampered by the mild weakness in the SOX today, shares of KLAC continued to drift higher. The breakout above $60 has taken some time to finally settle in just as KLAC approaches its earnings announcement on Jan. 22nd. Estimates are for 19 cents a share and from the looks of its relative strength investors are optimistic. Chart= --- Illinois Tool Works - ITW - close: 81.05 change: -3.48 WHAT TO WATCH: Ouch! ITW was sliced today with a 4% haircut on no news, at least not any company specific news. The pull back stopped short of its simple 50-dma, just north of the $80 mark. Volume was very heavy at 2.1 million shares. Bears can look for a breakdown under the $80 mark but watch for earnings near Jan. 29th. Estimates should be 91 cents a share. Chart= --- American Intl Group - AIG - close: 69.10 change: -0.71 WHAT TO WATCH: AIG may be tempting bears to short it with a little weakness and another failed rally at the $70 mark but traders should do so cautiously. The entire sector has been strong and AIG has earnings near Feb. 11th. We will note that AIG's overbought MACD indicator did produce a fresh sell signal today and bears might want to consider shorts under today's low of 68.64 with a short-term target of $65.00. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- MMM $80.41 -5.07 - Ouch! Sell the news is what is hitting MMM today. Shares plummeted after its early morning earnings report but stopped at support of $80. BAC $80.07 +1.05 - The banking sectors were up today and BAC enjoyed the move with a 1.32% gain of its own. A move over 80.50 and BAC may be a bullish play candidate, breaking its downtrend of lower highs. BEC $52.56 +1.00 - BEC has broken out to new highs with its 1.93% gain today but is approaching resistance from the Spring of 2002. ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ********** 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
Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.
Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.
To ensure you continue to receive email from Option Investor please add "firstname.lastname@example.org"
Option Investor Inc