The Option Investor Newsletter Tuesday 02-10-2004 Copyright 2004, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: The Fed Man Cometh Futures Markets: Doji Day Index Trader Wrap: Light volume ahead of Greenspan's testimony Market Sentiment: Holding Pattern Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 02-10-2004 High Low Volume Advance/Decline DJIA 10613.85 + 34.80 10626.66 10559.26 1.75 bln 2111/1129 NASDAQ 2075.33 + 14.80 2075.33 2060.44 1.66 bln 1988/1192 S&P 100 566.35 + 2.63 567.18 563.07 Totals 4099/2321 S&P 500 1145.54 + 5.73 1147.02 1138.70 W5000 11181.46 + 64.70 11183.26 11108.16 RUS 2000 592.83 + 7.34 592.85 584.69 DJ TRANS 2921.86 + 18.20 2921.86 2887.96 VIX 15.94 - 0.45 16.76 15.84 VXO (VIX-O)15.55 - 0.22 16.09 15.32 VXN 24.50 - 0.71 25.44 24.28 Total Volume 3,713M Total UpVol 2,324M Total DnVol 1,328M Total Adv 4644 Total Dcl 2639 52wk Highs 628 52wk Lows 7 TRIN 1.14 NAZTRIN 0.86 PUT/CALL 0.72 ************************************************************ The Fed Man Cometh Investor positioning ahead of the Greenspan testimony tomorrow kept the markets in a tight range but it could not keep them from posting a decent gain for the day. The Dow closed back over 10600 and the Nasdaq surged to 2075. Not a bad day when you consider the fear some have of the Greenspan testimony. Dow Chart - Daily Nasdaq Chart - Daily The morning started off slow despite the Chain Store Sales for last week showing +1.8% growth. That was the strongest growth since December and about six times the average for the last five weeks at -0.3%. The year over year gains were +5.9% and the strongest growth since November. The cold weather is helping sell the remaining coats and sweaters and clearing the shelves for the spring wardrobe change. The ICSC raised its estimates for February to a range of +4.5% but it would still be below the +5.7% level for January. With the tax refunds beginning to flow soon the sales for late Feb and all of March should be very strong. The Richmond Fed Survey rose to 18 and up from 8 in December. This was the second highest level in the last year with the high being 20 last October. That October number was the result of the hot 3Q carry over that pulled the numbers back from negative territory. New Orders and Back Orders both improved although the long term outlook slipped slightly. New orders rose to 24 and the highest level since Jan-2003. Back orders rose to 7 and the highest level since June-2000. The employment component fell -8 points and back into negative territory. Future employment expectations fell to a four-month low. I guess the Richmond area did not benefit from any of those "found" jobs from last week. Inflation pressures increased with prices paid rising faster than prices received. Raw materials prices continue to climb across the board with energy prices spiking again today on news from OPEC. With commodity prices rising and prices received still falling due to excess capacity there is a profit squeeze in our future. Bottom line here is increased production and output but continued drop in hiring as manufacturers continue to try and lower employee costs. The news today was not earnings but fixation on what Greenspan might say on Wednesday. Opinions were plentiful and differing. The consensus was an optimistic outlook on the economy and nobody expects any problems there. The cloud over the market is the potential for any language that will suggest a rate hike in the near future. There is a growing concern that the Fed could raise rates preemptively this summer to avoid a later pre election hike. Earnings are still running in the +28% range for the 4Q and guidance has mostly been stronger than expected. If we did put in back to back quarters of strong earnings growth the Fed might feel the need to open the pressure relief valve slightly after the April earnings cycle. There is a meeting on May-4th and another two day meeting beginning on June 29th. This gives them three maybe four more employment reports to see if jobs are picking up before making a decision. IF they were going to hike the bond groupies are projecting a hike at the June meeting. The Fed funds futures are suggesting the rate will be hiked to 1.25% by August. There is no July meeting making the June meeting the target. Traders are hoping for a sign from Greenspan that nothing has changed and the Fed is planning on being patient at least until June. What they will probably get is nothing. Depending on Greenspan's mindset he will give them nothing but useless Greenspeak and leave them as confused as before. He has in the past taken advantage of a very few public appearances to "correct" the market's understanding of the Fed position with a well structured sentence or two. This is very rare occurrence but it does happen. What I would expect is a simple "economy growing slow but ramping up" context and a restatement of the "Fed can continue the current accommodative stance until capacity utilization and job creation improve". The bond bulls will interpret it in view of their outlook and go their merry way. Just in case Greenspan says something he did not mean to say or gets home to find the market interpreted it different than he expected then he gets a second chance to correct the statement on Thursday with a repeat appearance. The average change in the bond market when Greenspan gives his testimony is a full point. There are always fireworks in bonds when he speaks before Congress. The stock market is far less reactive but in this current mode we could be bond reactive. While it seems the market has come to a screeching halt while we wait for the master to speak that outlook is not true. We have had a very strong week in my opinion. The Dow jumped +140 points from its lows on Friday and the trend this week has continued upward. We did consolidate on Monday with a higher high but it was only a minor pullback at the close. That was corrected today with another higher high and a close over 10600. This was the highest close for February and we are nearing the 10650 resistance that gave us fits in January. Not a bad month so far for the Dow and February is historically the 3rd worst month of the year. The Nasdaq is not doing as good but is well off its lows. The close at 2075 was right at the month end resistance and about +63 points off the lows. This is great considering the rebound off the 50 dma but there are tougher levels above for the index. If the Nasdaq can get over the 2075 resistance it can then take aim at the very strong 2150 resistance level. The Nasdaq is dragging some heavy baggage along with its move. One piece of that baggage is Dell, which announces earnings on Thursday. While they are not expected to miss there is some worry that they could show the wear and tear of a major price war. Their major competitor HPQ while not a Nasdaq stock does not announce until the following Thursday. This sets up a great potential for an option play on HPQ which I will layout following this commentary. The Nasdaq will probably rejoice more over some good news from Dell than it will from any positive Greenspeak. Because of Dell's position as the second biggest PC maker they will impact all the component sectors with their market view. The Dow will also hear from a couple major components tomorrow. Disney and Coke will report earnings and there is much to speculate about. PIXR posted record earnings after their success with the Disney films. This would suggest Disney should also post better than expected earnings and this has been priced into the stock over the last couple days. KO has also seen a significant bounce after hitting the 50 dma last week. KO has been under fire from channel stuffing allegations that go back for several years. Coincidently KO said Japan results could be very strong and that is where the majority of the stuffing allegations were focused. Their earnings will be heavily scrutinized. Both stocks could find some profit takers on the announcement without any material upside surprise to provide a catalyst. While the Tuesday bounce was encouraging it did come on very low volume of only 3.7B shares compared to the 5B+ shares we were seeing on the last rally to this area. The internals remained very strong despite the lackluster volume. Advancers were nearly 2:1 over decliners and new highs rose to 628. This was more than twice the level we saw on the lows last week. The dip buyers are still alive and well. The market saw a major drop at 2:12 just as a rumor hit that the Washington Dulles Airport had been closed. That rumor knocked about -50 points off the Dow and the dip was immediately bought. The rumor did take some of the excitement away from the buyers and it was not until the last 30 min before they united to push it back over 10600 again. Assuming Greenspan does not attack the markets, the weak dollar, tax cuts or throws his support to Kerry for the election we should be in good shape. The Dow has a three day uptrend in place and the Nasdaq is poised to break out over 2075 resistance. We are only 93 points away from 10705 and the highs for the year on the Dow. The Nasdaq is only -88 points from its high of 2152. While this is positive I would not expect a sudden bullish ramp to new highs. We are simply trading at the high end of our range and we should continue to trend up once this week is over. We need to remember that February is the 3rd worst month of the year historically and is known for consolidations. This is exactly what we have been doing for the last nine days on the Dow and it may not be over despite the current uptrend. The Nasdaq saw more serious profit taking but despite the rebound could also till be vulnerable. Dell will be the key more than Greenspan but he is still a risk. The game plan should still be "buy the dip" until something changes. Personally I think there are quite a few traders hoping Greenspan takes aim at the markets just so they can get a better entry point. Dow 10475-10500, Nasdaq 2020-2050 support should hold on any minor verbal attack. I know my long positions would be perfectly happy to see a catapult spike back to 10700 tomorrow but I would also eagerly take advantage of any dip to add to those positions. Enter Passively, Exit Aggressively. Jim Brown Editor HPQ Earnings Play With Dell announcing earnings on Thursday and HPQ not announcing until the following Thursday we have an opportunity for a cheap speculative play. HPQ should react violently to any Dell news but they do not announce themselves for another week. This gives us two chances to profit from a HPQ option. HPQ is currently $24.11. The Feb-$25 call is only $.40 and the $22.50 put is only $.20. The odds are very good that Dell will say something positive given the PC sales in the 4Q. This should spike HPQ to the $25 level or higher as HPQ is really on fire and has a broader business model than Dell. What is good for Dell is also good for HPQ. With HPQ announcing a week later we could then see a ramp for HPQ on positive expectations for their earnings report. While I would be comfortable buying HPQ Feb-$25 calls at 40 cents each as a lottery play that may not fit the risk profile of every reader. Dell could say something negative and both get knocked for a big loss. Therefore, if you are a risk taker jump on the HPQ calls and hope Dell surprises to the upside. If you are conservative then buy the calls and the puts, currently 60 cents total and roll the dice. That puts you in the camp that does not care what the earnings are just as long as they send the stock into a directional frenzy. I am suggesting February options because of the timing involved. I do not want to speculate with the March options because they cost more and make an insurance strategy less appealing. If you are uncomfortable with selling your Feb options on expiration Friday then go with March. (Mar-25 calls = 65 cents, 22.50 puts = 50 cents) Regardless of which options you choose this is a speculative play and you can lose all or part of your investment if the stock remains between 22.50-25.00 prior to expiration. HPQ - Chart *************** FUTURES MARKETS *************** Doji Day Jonathan Levinson The US Dollar declined as equities raced first lower and then higher to finish just north of unchanged. Precious metals declined, and treasuries sold off, reversing yesterday's gains. 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 rose from its overnight lows to a high at 85.95 at 11AM, from which point it began a volatile grind lower to the 85.80 level. It finished below yesterday's close, so far respecting the daily cycle rollover that began last week. The CRB traded both sides of unchanged, finishing lower by .45 at 261.56, with strength in coffee, crude oil and heading oil futures. Daily chart of April gold Front month gold futures were up strongly today until they weren't, with a gap up at 11AM reversing into a cascade of selling that reversed the gains from a high of 411.10 to fractional negative territory at the day low of 406.80. It was a higher high and higher low for the day, with the Macd confirming the daily cycle bottom last week. 412-414 was good support on the way down, and it's predictably behaving as resistance from below, but provided that the apex of this corrective pennant between 397 and 402 is not violated, the daily cycle upphase will remain intact. For the day, April gold dropped .60 to close at 407.20, HUI lost .95% to close at 231.97 and XAU dropped .60% to close at 101.33. Daily chart of the ten year note yield The treasury market was busy today, with a large 3-year note auction generating a bid to cover ratio of 2.27 with a large contingent of bids from foreign central banks. Was Bernanke busy in Boca Raton at the G7 meeting with a Powerpoint projector presentation, pushing US treasuries with laser pointer in hand as he discussed the technical merits of bearish descending triangles and the one we've been tracking on the ten year note yield? Perhaps he was using the above chart? In any event, ten year notes declined today, with ten year note yields (TNX) gaining 3.7 bps to finish at 4.102%, a .91% move for the day. This was countertrend to the ongoing daily cycle downphase in progress since last week and failed at 4.12% resistance. Daily NQ candles Bullish? Bearish? It was difficult to tell as traders rejected first the lows, then the highs, then the flats, closing the NQ higher by 3 points at 1497 for a net gain of .30% on the day. The range was only slightly wider than yesterday but in both directions, with a low of 1490.50 and a high of 1506. The higher high gave bulls the first bullish cross on the 10-day stochastic, and it's looking like last Friday's dip to 1460 was the bottom of the downphase. If so, it bottomed at a higher low without ever testing the lower rising channel support line. Resistance remains at 1510-12, followed by 1518-20. Support is at 1490, followed by 1482 and 1460. 30 minute 20 day chart of the NQ The NQ sold off in the morning, continuing the 30 minute cycle downphase but without particular vigor or inspiration. The selling tired quickly, without the terminal burst of selling that usually marks the end of downphases. The upphase that followed ended even more abruptly with a small throwover above last week's downtrend resistance line that may or may not be a reverse head and shoulders neckline as discussed last night. The rollover that followed aborted the 30 minute cycle upphase from a lower oscillator high, leaving a steep bearish divergence. The picture would have been clearer to the downside if not for the end of session ramp job, but it appears to have been only a short cycle anomaly. Traders trying to make sense of this mess are best advised to watch range support and resistance, currently 1508-10 and 1490-92. Despite heavy resistance beginning just south of 1520, the reverse head and shoulders on this 30 minute timeframe coinciding with the daily cycle bullish cross above is a powerful bullish combination, if buyers can clear the neckline just overhead. On the other hand, the bearish divergence is not to be ignored, and if bears can break 1490, there's a good chance of a retest of 1477-82 support. Daily ES candles ES closed at a higher high despite the lower low in the morning, and left off with a bullish kiss (but not a cross) on the 10-day stochastic. It appears to be sealing the end of the long- awaited, utterly pathetic daily cycle downphase that was more of a shake than even a correction. With resistance up to 1149 from here, bulls will need to clear the current congestion zone in order to protect this early signal from a whipsaw, but the selling was so weak today that it's not difficult to imagine. Support below is at 1136. For the day, ES added 3.50 to close at 1143.50. 20 day 30 minute chart of the ES The same bearish divergence we see on NQ (and YM) is evident here on ES. The reverse head and shoulders interpretation is difficult to apply here because ES saw much less selling in the past 3 weeks than the NQ. Above 1149 are the rally highs to 1155, while the last week's support levels have blended to form a congestion zone all the way to 1122. The question for tomorrow will be whether there's anything behind this bearish oscillator divergence. With a daily cycle upphase trying to form, bears are running out of signals that they can afford to squander. 150-tick ES The last hour's buying left the short cycle oscillators near a peak. With the daily cycle trying to turn up, the 30 minute diverging lower and the short intraday cycles near or at top, direction tomorrow is up for grabs, but I'd guess for downside. Daily YM candles YM added 14 to close at 10585 despite the red candle printed by Prophetcharts for the day. Like the ES, it left off on a bullish kiss, and while a cross appears imminent, it hasn't printed yet. The daily cycle downphase has been every bit as weak here as it was on ES, if this is indeed the end. 20 day 30 minute chart of the YM The weaker dollar lined up with higher prices for equities but lower prices for bonds. This would look like very bad news for treasuries, but given the treasury auction, G7 meeting of the weekend and Greenspan's semi-annual address to Congress tomorrow, there's ample noise to distort the picture. The rise in yields today ran against the daily cycle downphase, and it looks corrective for now. With equities continuing to do their best to defy any trend however short in this unrelenting low-volatility environment, we're best to continue to follow the different cycles and watch support/resistance on those specific charts we're trading. Intermarket relationships remain iffy, particularly with central banks dominating an increasingly large portion of the news and the markets. The clearest moves recently have coincided with Fed comments, and those comments have been just the slightest bit cautionary. As the rally of 2003 lined up with assurances that the Fed would support bond prices / suppress rates, the very hint that rates might ever again rise has been sufficient to spark strong selling in bonds and equities together. Hopefully tomorrow will provide further clues. See you there! ************************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 ******************** Light volume ahead of Greenspan's testimony For the second-straight session, volume levels at both the New York Stock Exchange and NASDAQ came close to matching the lightest volumes of the year, which were found on January 2nd, when traders came stumbling back from New Year's celebrations. But traders will be sober tomorrow and listening closely as Fed Chairman Alan Greenspan begins his semiannual testimony on the state of the economy to Congress tomorrow. Most Washington watchers expect congressional leaders to probe Mr. Greenspan's brain not only on his views of the economy, with special focus on jobs growth, but the Treasury's view on the budget deficit and government spending, with job growth still showing very modest signs of recovery. Yesterday's and even today's light volumes strongly suggest traders were unwilling to get in front of Mr. Greenspan's testimony, where alternating buy/sell programs in the second-half of today's session seemed centered around the NASDAQ-100 Index (NDX.X) 1,500.29 +0.62% and its 1,500 level. Earlier today, in the 03:15 PM EST I made comment that a sell program premium alert may have been generated just after the NYSE Composite ($NYA.X) 6,677.04 +0.5% had traded a new 52-week high, but some observations made this evening after the close of trade has me thinking it was NASDAQ-100 1,500 and its MONTHLY Pivot of 1,503, which found some institutional focus, and may be an important level of near-term resistance, where traders like you and I might be able to use as a key level up to, during and after Mr. Greenspan's testimony, where trade either side of this level dictates broader-market trade. Market Snapshot / Internals - 02/10/04 Close The NYSE Composite ($NYA.X) is first to trade a new 52-week high after the recent pullback, but doing so intra-day by just more than 1 point would not be indicative of a full out bullish stampede. The smaller-cap Russell-2000 Index (RUT.X) 591.91 +1.25% posted today's largest percentage gain among the major indices, and was the only major indices to exceed its early afternoon highs and show bullish conviction to then close at its session highs. I wanted to quickly show some of this year's volume levels and NH/NL indications, where some early sign of renewed bullish leadership begins to show up, as both the 5-day and 10-day NH/NL average ratio's start to show some stability. Internals Since 01/02/04 - Volume and NYSE:NASDAQ NH/NL We know that stocks don't just trade a new 52-week high day after day after day, and the pullbacks in the major indices into last week had a gravitation effect on the number of new highs. We can see some slight improvement, or abating of decline in the 5 and 10-day average ratios of the NYSE and NASDAQ NH/NL indicators, which hints that some of the recent rebound for the major indices has seen a greater number of new highs, and fewer new lows. This action may begin to hint that the recent pullback for the major indices was corrective in nature, and perhaps attributed to profit taking, where some of that profit taking has started to run its course. In GREEN and RED boxes, I've highlighted the NH/NL columns of both the NYSE and NASDAQ, where the NYSE achieved a 52-week high on 01/22/04, it recent relative low on 01/29/04 and a new 52-week high today. The NASDAQ Composite achieved its most recent 52- week high on 01/26/04, while its recent relative low was found on 02/05/04, which was on Thursday. Shoot... I'm just now seeing that the NASDAQ's 5-day NH/NL average ratio would have crossed back above its 10-day NH/NL average ratio, and I should have colored that 95.3% green to reflect a near-term bullish crossover. Pivot Analysis Matrix - In PINK, I've highlighted today's high's in the both the NASDAQ- 100 Index (NDX.X) and its Tracking Stock (AMEX:QQQ) $37.18 +0.16%, where I think this afternoon's buy program was centered on the NASDAQ-100, which gave lift to the NASDAQ-100, but an offsetting, and rather powerful looking sell program was later seen, which hit the NDX/QQQ back lower from these levels. Both very close to their MONTHLY Pivots. This may be an important observation as the NDX/QQQ have been the recent lagging indices in our pivot matrix, and you know me, I like to monitor both ends of the snake/inchworm, where the NDX/QQQ currently represent the "tail." While the NYSE Composite showed some sign of trying to lead with a new 52-week high in today's session, it may well be the NASDAQ- 100 that needs to pull free as a sign these markets can move past the recent highs. NASDAQ-100 Index (NDX.X) Chart - Daily Intervals Tomorrow will be the first opportunity that Mr. Greenspan might be expected to address any further Fed thought on interest rates or the economy since Friday's release of January nonfarm payrolls, which showed the economy generated 112,000 new jobs, which was below economists' forecast of 165,000. The NDX and other major indices rallied on Friday, even though the nonfarm payroll data was weaker than forecasted. Some traders thought the level of job production, while still rather anemic, might have been a positive, as it would keep the Fed on hold for any type of raising of interest rates. A good test into Greenspan's testimony would be for the NASDAQ-100 to hold above the 1,478 level. NASDAQ-100 Index (NDX.X) Chart - 5-minute intervals The MONTHLY Pivot of 1,503.69 is notable resistance, and while volume levels were very light today, I'm noting the levels of trade where today's afternoon buy, then sell program premium alerts were generated, where I think NDX 1,500 is the point of contention, and perhaps major disagreement between bulls and bears. My thought process at tonight's close is that bulls are probably very cautious below the 1,504 level until a break higher is found, and while not shown on the above chart, it was a break above the 1,480 level on Friday, when the NDX sprinted quickly to our current WEEKLY Pivot, to then finish Friday's session at the 1,500.00 level. Dow Industrials (INDU) Chart - Daily Intervals Certainly the INDU is encountering some overhead supply, but I get the feel that the INDU is "looking back" at the NDX/QQQ to see if it is following the leader. S&P 500 Index (SPX.X) Chart - Daily Intervals The SPX is similar to the INDU in that it too looks to try and be leading for strength, but needs some "high octane" in its fuel, which can be provided from technology stocks, which largely comprise the NASDAQ-100 Index (NDX.X). I've pointed to the SPX's WEEKLY Pivot of 1,136.66, which is a level where on a knee-jerk negative reaction, we might prepare for NDX weakness back to 1,480. If NDX is weaker, then need to monitor a stronger SPX for strength above its WEEKLY Pivot. 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 **************** Holding Pattern - J. Brown The path of least resistance still appears to be up but the path may have grown a lot more rocky. Both the DJIA and the NASDAQ are up off their lows from last week but the buyers seem to be cautious, especially ahead of the Alan Greenspan's appearances this week. The last FOMC brought forth a change in language that the markets were not prepared for and now investors are apprehensive that he may say something else during his Wednesday or Thursday appearance before congress and the senate. On top of being fearful of what the Fed chairman might say we've had little economic news to drive stocks higher and earnings are almost over. Despite a lack of catalysts the Russell 2000 has seen a strong rebound in the last few days that has out performed the major averages. Also noteworthy is the bounce in the Dow Transport index. Traditional Dow theory suggests that we can't have a sustained market rally (bull market) unless the transports participate in it as well. Looking over the tech sector the Internet seem to be leading the way while the semiconductors have been digesting Friday's big gain. Meanwhile financial sectors have been churning sideways as investors continue to rotate money into drug and biotech stocks. The continued strength into drugs might be translated as a defensive posture by investors. Energy stocks have also been out performing with oil, oil services, utilities and natural gas all with three days of consecutive gains. Setting new highs are the insurance and defense indices while the RLX retail index has rallied straight to resistance. A strong round of earnings from the retailers could produce a breakout for the sector in general. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10701 52-week Low : 7416 Current : 10613 Moving Averages: (Simple) 10-dma: 10522 50-dma: 10341 200-dma: 9544 S&P 500 ($SPX) 52-week High: 1155 52-week Low : 788 Current : 1145 Moving Averages: (Simple) 10-dma: 1134 50-dma: 1108 200-dma: 1026 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 795 Current : 1500 Moving Averages: (Simple) 10-dma: 1487 50-dma: 1472 200-dma: 1335 ----------------------------------------------------------------- The stock market may not be galloping higher but investor confidence is still growing as evidenced by the declines in the volatility indices. CBOE Market Volatility Index (VIX) = 15.94 -0.45 CBOE Mkt Volatility old VIX (VXO) = 15.55 -0.22 Nasdaq Volatility Index (VXN) = 24.50 -0.71 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.72 712,657 510,672 Equity Only 0.62 608,761 377,773 OEX 1.21 19,476 23,563 QQQ 1.14 31,191 35,640 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 76.5 + 0 Bull Confirmed NASDAQ-100 70.0 + 0 Bear Alert Dow Indust. 86.7 + 0 Bull Confirmed S&P 500 87.6 + 0 Bull Confirmed S&P 100 88.0 + 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: 0.98 10-dma: 1.02 21-dma: 1.02 55-dma: 0.99 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 1875 1970 Decliners 969 1138 New Highs 372 182 New Lows 9 1 Up Volume 1021M 1025M Down Vol. 678M 540M Total Vol. 1711M 1644M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 02/03/04 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 Commercial traders can't seem to make up their mind. Currently, they're almost flat with a slight edge to the bears. Meanwhile the small traders have grown even less bearish. Commercials Long Short Net % Of OI 01/13/04 405,558 411,361 (5,803) (0.7%) 01/23/04 422,135 407,626 14,509 1.7% 01/27/04 417,089 410,930 6,159 0.7% 02/03/04 411,920 414,596 (2,676) (0.3%) 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 01/13/04 149,057 90,571 58,486 24.4% 01/23/04 141,107 100,090 41,017 17.0% 01/27/04 143,089 87,828 55,261 23.9% 02/03/04 141,465 81,926 59,539 26.7% 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 Commercials have become significantly more bearish by upping their short positions and closing some bullish ones. Small traders are still feeling optimistic. Commercials Long Short Net % Of OI 01/13/04 196,858 263,845 (66,987) (14.5%) 01/23/04 233,867 307,122 (73,255) (13.5%) 01/27/04 291,166 334,618 (43,452) ( 6.9%) 02/03/04 280,519 346,042 (65,523) (10.5%) 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 01/13/04 191,241 62,711 128,530 50.6% 01/23/04 187,270 57,196 130,074 53.2% 01/27/04 154,485 60,556 93,929 43.7% 02/03/04 133,293 55,476 77,817 41.2% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders in the NDX remain in limbo with very little movement over the last few weeks. In contrast small traders have become much more bearish. Commercials Long Short Net % of OI 01/13/04 41,829 38,547 3,282 4.1% 01/23/04 42,823 39,442 3,381 4.1% 01/27/04 43,704 40,951 2,753 3.3% 02/03/04 43,600 41,441 2,159 2.5% 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 01/13/04 9,705 12,539 (2,834) (12.7%) 01/23/04 9,180 11,371 (2,191) (10.7%) 01/27/04 10,137 10,715 ( 578) ( 2.8%) 02/03/04 8,907 13,729 (4,822) (21.3%) 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 The shuffling continues for commercial traders in the Dow. Small traders have become more bearish. Commercials Long Short Net % of OI 01/13/04 16,501 8,724 7,777 30.8% 01/23/04 16,403 9,252 7,151 27.9% 01/27/04 16,536 8,404 8,162 32.7% 02/03/04 17,765 9,619 8,146 29.7% 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 01/13/04 6,496 9,970 (3,474) (21.1%) 01/23/04 6,068 10,183 (4,115) (25.3%) 01/27/04 7,240 12,372 (5,132) (26.2%) 02/03/04 6,352 13,113 (6,761) (34.7%) 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. 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The Option Investor Newsletter Tuesday 02-10-2004 Copyright 2004, All rights reserved. 2 of 3 Redistribution in any form strictly prohibited. In Section Two: Dropped Calls: None Dropped Puts: None Call Play Updates: APOL, ABK, CDWC, DHR, DHI, GD, ESRX, IBM, IMDC, TEVA New Calls Plays: AHC, PD Put Play Updates: AVID, EASI 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: ***** None PUTS: ***** None ************************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 ******************** Apollo Group - APOL - close: 77.44 change: +1.41 stop: 71.00*new* Since Friday's breakout, volume in APOL has been downright anemic, with Tuesday's tally coming in at only about a third of the ADV. Given the light volume, it should come as no surprise that the price action has been rather muted as well, with the upside capped near $77.50, but no real sign of weakness either, as support is being found above $76. That leaves us in limbo right here, as an attractive entry point has yet to present itself. A pullback to the $75 or even $74 levels would make for a nice bargain entry point, but we need to wait for the rebound after that pullback before entry. On the upside, momentum traders should wait for a breakout over $77.75 before playing. With other education stocks like CECO, COCO and UOPX looking strong as well, we definitely have sector strength working in our favor. Stops can be raised slightly to $71, which is still below the 50-dma ($71.15). Picked on February 1st at $77.44 Change since picked: +0.00 Earnings Date 12/18/03 (confirmed) Average Daily Volume = 1.79 mln Chart = --- Ambac Financial Group - ABK - close: 76.20 chg: -0.60 stop: 71.99 Today marked the sixth day in a row that shares of ABK have consolidated sideways above the $76.00 level. While we're happy to see minor support at $76 hold up we're disappointed that ABK is not pacing the IUX insurance index, which has risen 7 out of the last 9 trading days. We would still a dip to $75.00 as an attractive entry point but we might wait to actually see the bounce before committing new capital. There are no new headlines for ABK and no change to our stop loss. Picked on February 1 at $74.77 Change since picked: + 1.43 Earnings Date 01/28/04 (confirmed) Average Daily Volume: 476 thousand Chart = --- CDW Corp. - CDWC - close: 69.13 change: +2.29 stop: 64.00 With the broad market spending the first two days of the week in a rather tight-range, low-volume consolidation, it is really no surprise that our new play on CDWC hasn't yet been able to get moving. Continuing to consolidate just below $70, the stock still looks like an appealing breakout candidate, and we'll just have to wait for price action to prove it to us. Our entry trigger remains at $70.25, as that will force the stock to exhibit solid strength before we're tempted into a position. Aggressive traders can enter on the initial breakout, while those employing a more cautious approach will need to wait for a subsequent pullback to test the $68-69 area as new support. Our stop remains at $64. Picked on February 8th at $69.13 Change since picked: +0.00 Earnings Date 1/21/04 (confirmed) Average Daily Volume = 1.38 mln Chart = --- Danaher Corp - DHR - close: 93.65 cls: -0.50 stop: 89.50 *new* Right on schedule! If you were waiting for a bounce from $93.00 in DHR you got it. Actually, the low today was 92.64 but as expected DHR bounced from this region. Its MACD indicator is still in a relatively fresh buy signal and the volume during the last two sessions of mild losses has been declining. If we're looking for a pull back in a bullish up trend we want to see lower volume in the profit taking and that's what we got. Given the bounce we still feel this looks like a good entry point but more conservative traders may want to consider waiting for DHR to trade above the $95 level. We're going to raise our stop loss to $89.50, which is about half a point below the 50-dma. Picked on January 30 at $91.01 Change since picked: + 2.64 Earnings Date 01/29/04 (confirmed) Average Daily Volume: 841 thousand Chart = --- D.R.Horton - DHI - close: 29.88 chg: -0.22 stop: 27.99 The market has been in a holding pattern as investors wait to hear from Greenspan in his appearance before congress this week. Everyone wants to know if he'll drop any hints about fed policy and interest rates. Investors have been flipping back and forth between concern over potentially higher rates and expectations that low rates are here to stay for the next several months if not the rest of the year. This indecision has seen the major indices trade relatively sideways and we're seeing the same action in the homebuilders and DHI is not exception. Actually, DHI has traded within a $1.00 range this week. We're still bullish and the very late afternoon bounce today looks tempting but more conservative types may want to wait for a move over Monday's high (30.58). Picked on February 08 at $30.00 Change since picked: - 0.12 Earnings Date 01/21/04 (confirmed) Average Daily Volume: 2.4 million Chart = --- General Dynamics - GD - close: 96.30 chg: -0.08 stop: 92.00 GD is a new call play we added over the weekend. In our comments we suggested that patient traders might want to look for a dip toward the $95.00 mark. GD provided just such a dip today. Actually, the low was $94.70 before the stock quickly bounced back above the $95 level. Driving the early morning volatility was investor reaction to comments from the CEO who was speaking at the SG Cowen Global Aerospace Technology conference. GD's CEO said that their full year earnings guidance looks strong and should meet previous expectations with net income rising sequentially quarter after quarter. The bad news is that GD's guidance was a little lighter than analysts' estimates for the first three quarters of the year. In spite of this news the reaction seemed to be mild. GD's CEO mentioned a strong backlog for several of its units and said its lighter-weight vehicles like the Stryker would outsell their heavier tanks. Investors may also have taken comfort in the CEO's comments that he and the board of directors were willing to consider extending his contract, which expires next year and that any successor would likely come from inside the company. The bounce today looks like a great entry point although we do note on GD's intraday chart a very short-term trend of lower highs. Readers might want to consider looking for GD to trade above the $96.50 mark now as a precaution. As an alternative to GD bullish traders should also take a look at Northrop Grumman (NOC). NOC has been very strong the last few days and a dip to $101 or $102 might be an attractive entry point. Picked on February 08 at $96.88 Change since picked: - 0.58 Earnings Date 01/21/04 (confirmed) Average Daily Volume: 1.0 million Chart = --- Express Scripts - ESRX - cls: 68.69 chng: -0.15 stop: 66.00*new* Our patience is certainly wearing thin with ESRX, as it continues to vacillate between support near $68 and resistance just over $70. hat said, the rebound off the 20-dma ($68.21) does look encouraging, as does the hint of an upturn in the daily oscillators. We were looking for a rebound off the $68 level for a viable pullback entry and the action from the first two days of the week certainly seems to have delivered that. The primary concern today though was the stock's inability to hold onto its intraday gains, giving back more than half of them by the closing bell. The best approach for entering the play continues to be targeting dips to the $68 area. Note that the 50-dma ($66.09) has now risen over $66, so we're raising our stop to that level tonight. Picked on January 13th at $68.32 Change since picked: +0.37 Earnings Date 2/24/04 (confirmed) Average Daily Volume = 1.03 mln Chart = --- Int'l Bus. Machines - IBM - cls: 98.94 chng: +0.24 stp: 96.50 So far, our IBM play has been rather disappointing, as the stock has shown no ability to get back over the $100 level since satisfying our entry trigger last week. That said, today's rebound from just above $98 was encouraging, especially since IBM was able to close near the top of the intraday range. Dips into the $98 area continue to look viable for new entries, although momentum traders will need to wait for a rally (preferably on stronger volume than we've seen the past two days) through the $100.50 level. With the 20-dma now moving above $97, our $96.50 stop should be well-protected unless something unforeseen crops up to spook the bulls. Picked on February 1st at $99.23 Change since picked: -0.29 Earnings Date 4/15/04 (unconfirmed) Average Daily Volume = 5.58 mln Chart = --- Inamed Corp - IMDC - close: 50.65 chg: -0.25 stop: 48.00 The picture isn't improving for shares of IMDC. The stock may be trading in a very narrow range the last two days but the trend seems to be lower. More aggressive players can still consider bounces from the $50.00 mark as entry points but we're growing more cautious on committing new capital in IMDC. If IMDC closed under the $50 mark we'll probably close the play, especially now that its technical oscillators are starting to roll over. Picked on February 01 at $51.54 Change since picked: - 0.89 Earnings Date 02/24/04 (unconfirmed) Average Daily Volume: 682 thousand Chart = --- Teva Pharmaceutical - TEVA - cls: 65.25 chng: +0.78 stop: 61.00 It isn't setting any speed records, but TEVA is making steady progress on a daily basis. After a tight-range consolidation near Friday's high yesterday, the stock pushed up to test its all-time high at $65.88 on Tuesday, before settling just off that level at a new all-time closing high. TEVA is still holding well above the 10-dma ($64.13) and a test of that level would make for a decent entry into the uptrend. Of course, we can't rule out a more significant pullback to confirm that $62-63 support area, and with the 20-dma now creeping over $62, that should be a good - albeit aggressive - entry point if we get it. Following the consolidation near the highs over the past week, breakout entries over $66 are starting to look more attractive, but make sure that volume is looking stronger before chasing the stock higher. Take note of the fact that TEVA is set to report earnings next Tuesday, so time is running out for the stock to make the move towards $70 that we're expecting. Maintain stops at $61 until we get that breakout. Picked on February 3rd at $64.66 Change since picked: +0.59 Earnings Date 2/17/04 (unconfirmed) Average Daily Volume = 2.63 mln Chart = ************** NEW CALL PLAYS ************** Amerada Hess Corp. - AHC - close: 59.53 change: +1.43 stop: 55.50 Company Description: Amerada Hess Corporation explores for, produces, purchases, transports and sells crude oil and natural gas. These exploration and production activities take place in the United States, United Kingdom, Norway, Denmark, Equatorial Guinea, Gabon, Indonesia, Thailand, Azerbaijan, Algeria, Malaysia, Colombia and other countries. The company also manufactures, purchases, transports, trades and markets refined petroleum and other energy products. It owns 50% of a refinery joint venture in the United States Virgin Islands, as well as another refining facility, terminals and retail gasoline stations located on the east coast of the United States. Why we like it: Energy stocks have been looking strong again and it is no great surprise, with the price of Crude Oil holding firm above $32. Adding to the bullish landscape was today's news out of the OPEC meeting that the cartel would be cutting production by 4% starting on April 1st. U.S. officials were expectedly displeased with the move, but investors cheered by propelling the Oil Services sector (OSX.X) to a 2.25% advance. The Oil index (OIX.X) advanced as well, although at a more moderate 0.76% pace. AHC really shone though, as its 2.46% gain propelled the stock through the $59 resistance level on strong volume. This is the best level for the stock since it dropped sharply in October of 2002. The PnF chart was already on a Buy signal with a vertical count of $72, but the most recent dip and rebound really solidified the bullish picture, as price found support at the former bearish resistance line near $56. A trade at $60 will be another PnF Buy and have the bullish case looking that much stronger. There's some mild resistance just below $62, but it looks like the near-term upside could extend to stronger resistance at $64 or even $66. Since we've already gotten the breakout, we don't need to use a trigger on the play. A pullback to the $58 level looks good for new entries, as does a breakout over today's high. Note how the recent dip found solid support near $56, bouncing twice off the 30-dma ($56.66). That average should continue to be strong support if we get a more substantial pullback, so we'll set our initial stop just below there at $55.50. Monitor the action in the OIX and OSX indices, as continued strength there will confirm the bullish prospects for AHC. Suggested Options: Shorter Term: The February $60 Call will offer short-term traders the best return on an immediate move, as it is currently at the money. But with February expiration less than 2 weeks away, the better choice appears to be the March $60 call Longer Term: Aggressive longer-term traders can use the March $60 Call, while traders looking for more insulation against time decay will want to use the May $60 strike. Our preferred option is the March $60 strike, which is at the money and should provide sufficient time for the play to move in our favor. ! Alert - February options expire in less than 2 weeks! BUY CALL FEB-55 AHC-BK OI=1779 at $4.70 SL=2.75 BUY CALL FEB-60 AHC-BL OI=1973 at $0.80 SL=0.40 BUY CALL MAR-60*AHC-CL OI= 391 at $1.65 SL=0.75 BUY CALL MAY-60 AHC-EL OI= 610 at $2.75 SL=1.40 Annotated Chart of AHC: Picked on February 10th at $59.53 Change since picked: +0.00 Earnings Date 1/28/04 (confirmed) Average Daily Volume = 1.05 mln Chart = --- Phelps Dodge - PD - close: 79.82 chg: +2.02 stop: 75.99 Company Description: Phelps Dodge Corp. is the world's second-largest producer of copper, a world leader in the production of molybdenum, the largest producer of molybdenum-based chemicals and continuous- cast copper rod, and among the leading producers of magnet wire and carbon black. The company and its two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries, employ more than 13,000 people in 27 countries. (source: company press release) Why We Like It: It's no secret that copper prices are high. A recovering economy here in the U.S. coupled with a growing global economy and heavy demand from China in addition to worker strikes and supply disruptions have sent copper to new 6 1/2 year highs ($1.14/lb). The increasing demand and the steady rise in price has lead Phelps to its first quarterly net profit since 2000. About two weeks ago PD reported Q4 earnings of 90 cents a share, which was 13 cents better than expected on revenues that soared more than 30% over the same period a year ago and well above consensus estimates. Demand has been so strong that PD increased its production plans for both 2004 and 2005. Analysts are also bullish on the stock. This morning Lehman Brothers raised PD from an "equal-weight" to an "over weight" and lifted their price target from $85 to $110. We also like the technical picture. PD has been consolidating under resistance at $80 for six weeks now and the last dip bounced off its rising 50-dma. Volume has been rising the last few sessions as well and its MACD just produced a new buy signal. This morning's upgrade news helped push PD above the $80 mark and that sparked a new buy signal on its P&F chart, which suggest a $97 price target. While all of this sounds great we are a little bit cautious with PD's inability to close above the $80 level. Therefore we're going to use a TRIGGER at $80.51 to open the play for us. Until then we'll be happy to watch. If we are triggered we'll use a stop loss at 75.99. More aggressive traders may want to hope for a dip and buy a bounce from the 77.50-78.00 levels. Suggested Options: We like the March and April strikes. If PD sees a dip the $75's would be a good play. We're going to suggest the March 80's. BUY CALL MAR 75 PD-CO OI=747 at $7.00 SL=4.75 BUY CALL MAR 80 PD-CP OI=934 at $3.90 SL=2.20 BUY CALL MAR 85 PD-CQ OI=328 at $1.75 SL=0.90 BUY CALL APR 75 PD-DO OI=735 at $8.10 SL=5.65 BUY CALL APR 80 PD-DP OI=704 at $5.00 SL=3.25 BUY CALL APR 85 PD-DQ OI=799 at $3.00 SL=1.65 Annotated Chart: Picked on February xx at $xx.xx Change since picked: + 0.00 Earnings Date 01/29/04 (confirmed) Average Daily Volume: 1.6 million 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 ******************* Avid Technology - AVID - close: 42.91 chg: +0.23 stop: 46.17 It was encouraging to see AVID trade lower yesterday and hit a new relative low this morning with a breakdown through the $42.00 level. Unfortunately, today's weakness didn't last. Traders should make a note of the stronger than average volume today. We want to see big volume on the declines but not on the bounces. The bounce late in Tuesday's session suggest AVID will continue to rebound tomorrow. We wouldn't be surprised to see it hit $44.00. Fortunately, AVID's 10-dma and 200-dma have converged just north of the $45.00 mark and together it should be a formidable line of resistance. If you're planning a new entry point consider a failed rally under $44.00. Picked on February 04 at $42.87 Change since picked: + 0.04 Earnings Date 01/29/04 (confirmed) Average Daily Volume: 612 thousand Chart = --- Eng. Support Sys. - EASI - cls: 47.96 chng: +2.21 stop: 50.00*new* As good as last week's breakdown under $48 looked, our EASI play is starting to cause us some indigestion. Friday's rebound took the stock right back to that $48 level and so far this week, the stock is looking rather bullish, creeping gradually higher and closing on a positive note on Tuesday right at the converged 10- dma ($48.80) and 100-dma ($48.85). While a rollover here could provide a solid entry point, price action doesn't indicate that is the likely near-term direction, especially with the oscillators having turned up in bullish fashion. We'd prefer to see price back under $48 and ideally under $47 before jumping into new positions. Due to our increasingly cautionary stance, we're lowering our stop to $50.00 tonight, which is above both yesterday's intraday high and the 20-dma ($49.84). Picked on February 1st at $50.00 Change since picked: -2.04 Earnings Date 3/09/04 (unconfirmed) Average Daily Volume = 387 K 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 02-10-2004 Copyright 2004, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Watch List: Definitely a mixed bag ********** WATCH LIST ********** Definitely a mixed bag ___________________________________________________________________ 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. ___________________________________________________________________ United Technology - UTX - close: 95.60 change: +0.73 WHAT TO WATCH: Conglomerate UTX has been consolidating sideways in a $5.00 range for almost two months now. Bulls might be tempted to buy the recent bounce but there has been no volume to back it up. We'd watch this stock for a move below the $92.50 level (which would produce a drop through its 50-dma) or a move above the $97.50 mark (new highs). Chart= --- QUALCOMM - QCOM - close: 58.09 change: +0.93 WHAT TO WATCH: Shares of QCOM have been consolidating for the last month and it appears that the recent base at $56 might hold. Technical oscillators are turning positive and a move over $59.00 may be an early entry point for QCOM's next leg up. Chart= --- Ingersoll-Rand - IR - close: 65.79 change: -0.67 WHAT TO WATCH: Concerns over interest rates and what the Fed chairman might say to congress this week has brought a new round of selling for many of the cyclical stocks. This has produced what appears to be a failed rally in a number of their charts and IR is one of them. The highs from Friday and Monday stalled at its 50-dma. Bulls will look at IR and see its strong trendline of support dating back months. This would indeed be an entry point to buy IR near support. Bears, of course, will be looking at the recent weakness and hoping for a breakdown through that trendline. We'd consider a decline under $64.00 as a bearish entry point. Bulls are better off waiting for a move over $67.50. Chart= --- American Intl Group - AIG - close: 73.50 change: +1.67 WHAT TO WATCH: The pre-earnings run up in AIG continued today with another new high on very strong volume of 8.6 million shares. The entire insurance group has been very strong and out performing the major averages. Now the question is whether or not AIG will beat the estimates of $1.04 a share tomorrow with its earnings report due out before the opening bell. Second, will investors sell the news? Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- AMGN $64.97 +0.75 - The BTK biotech index looks ready to run again and AMGN happens to be bouncing from its 200-dma. A move over $65.50 and this might be a play. SLB $63.46 +1.33 - Oil services stocks have been hot and SLB just broke out of a two week consolidation to hit new highs today. Use a tight stop if this fits your style of play. GCI $87.05 +0.86 - GCI has bounced several times now from the $84 level in the last two weeks and the most recent bounce has produced a fresh MACD buy signal. We'd watch it for a move over 87.50 and its 50-dma but be aware that $90 still looks like resistance. FCX $39.60 -0.09 - Keep an eye on FCX for a move over its 50-dma near $41.00. A breakout there could lead to a run toward early January resistance at $45.00. ************************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 ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
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