The Option Investor Newsletter Tuesday 02-17-2004 Copyright 2004, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: Home In The Range Futures Markets: Triple tops and bottoms Index Trader Wrap: Market Sentiment: Another Broad-Based Rally Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 02-17-2004 High Low Volume Advance/Decline DJIA 10714.88 + 87.00 10735.25 10628.74 1.82 bln 2379/ 888 NASDAQ 2080.35 + 26.80 2084.72 2068.01 1.64 bln 2067/1125 S&P 100 571.24 + 5.32 572.28 565.92 Totals 4446/2013 S&P 500 1156.99 + 11.18 1158.98 1145.81 W5000 11284.06 +110.10 11298.52 11174.00 RUS 2000 594.48 + 9.34 594.48 585.14 DJ TRANS 2920.74 + 4.20 2926.70 2896.59 VIX 15.40 - 0.18 15.96 15.32 VXO (VIX-O)15.56 - 0.07 16.15 15.24 VXN 23.87 - 0.27 25.40 23.66 Total Volume 3,728M Total UpVol 2,787M Total DnVol 896M Total Adv 4992 Total Dcl 2329 52wk Highs 746 52wk Lows 9 TRIN 0.65 NAZTRIN 0.66 PUT/CALL 0.88 ************************************************************ Home In The Range Positive events in the chip sector and takeover speculation sent the indexes back to the top of their recent ranges. The coming option expiration probably helped with the futures up substantially before the cash markets opened for trading. For a month known for consolidations February is not following the historical trend. Dow Chart - Daily Nasdaq Chart - Daily The morning started strong with the NY Empire State Survey at 42.1 and well above consensus of 39.5. This was a record high for this survey and suggests on the surface that the health of the manufacturing sector in New York is robust. However, New Orders were flat at 34.9 and shipments fell sharply to 26.6 from 41.4. The decrease in shipments came from only 17% of the respondents but it was enough to knock the number back to the October level. 57% of the respondents still expect growth over the next six months. Prices paid rose to 33.6 from 27.9 and the employment component fell to 16.5 from 24.5. This shows that while the overall outlook is good there are still some cracks in the foundation. The big drop in the employment component does not bode well for an increase in the various jobs reports in the coming months. Industrial Production rose +0.8% in January and slightly over the consensus estimates. December's numbers were revised lower and knocked production back to +0.0% for the December period. Capacity Utilization finally moved back over 76% after nearly a year at lower levels. All the major components were either flat or rose in January. The bad news? Utility output rose +5.2% due to the cold weather and contributed strongly to the production gains. Since utility output is not normally a job creator or indications of a positive consumer trend the impact is really negative. The majority of news sources that report on this economic number will not likely disclose this impact. That means 99.9% of traders will only see the headline number and assume it was good news when in reality it is questionable. The Housing Market Index fell again to 65 and the lowest level since last July. All components fell with present conditions falling to 72 from 76. The six-month outlook fell from 76 to 73 and the potential traffic numbers fell from 51 to 46. The drop in traffic below 50 indicates the majority of builders are reporting fewer lookers. On the surface this would look negative but I feel the weather is the main contributing factor. We have had a very cold January with multiple blizzards and those conditions do not prompt many buyers to cruise the suburbs looking for an open house. With interest rates still low I expect these numbers to rise dramatically when warmer weather appears. Microsoft learned today that the EU had refused to accept their proposed antitrust settlement. Microsoft had offered to include a CD with competitors software with each Windows system released and the EU said it was not enough. Since the competition is only a download away today it remains to be seen what the EU wants. If you want to use Real Networks instead of Windows Media Player it only takes a couple minutes to download the software now but you actually have to decide you want to try it and go look up the website. If MSFT included a CD with every Windows system it might actually gain some impulse customers Real Networks might never have had. Evidently the EU wants Microsoft to include the software in the installation much like AOL is now. That way on every new installation you would have a couple more icons to move to the recycle bin once your system was running. John Deere reported blowout earnings for the last quarter and soared +3.00 in regular trading. Earnings more than doubled over the same period last year. The blamed the gains on low interest rates, tax cuts and strong demand for agriculture products around the globe. DE reported +68 cents per share compared to analyst's estimates of only 52 cents. Caterpillar also reported a +11% growth in sales over the last 90 days with a +27% gain in North America. On a smaller scale Toro announced that they now expect to earn between 34 - 36 cents per share compared to previous guidance of 15 - 20 cents. It appears there is a revival underway in the outdoor equipment sector that spans all price ranges. Amazon said it was full of hot air and the cost of that air was rising. AMZN uses plastic bags of air as packing material in their shipments. These air pillows are produced with natural gas and the spike in gas rates had pushed the cost of the air bags up by +40%. The stock lost another -85 cents and closed right on its 200 dma at 45.53. AMZN has been riding the line for the last ten trading sessions and was trying to rebound until the increased cost news hit the airwaves. Also making news was a drop of -7% in the shares owned by Bezos. He now claims ownership of only 26% of AMZN shares. Raising some vacation money Jeff? Wal-Mart rose +1.20 on news that same store sales came in at the high end of its 3% - 5% growth estimate for February. The news came only two days before WMT is scheduled to report earnings. WMT said its average ticket was up and sales were in its high profit categories of apparel, pharmacy and Valentine's items. Intel made several announcements today including upgrading its Xeon server chips to 64-bit technology. The announcements at its developer conference were aimed to gain support for its 64-bit product and delay acceptance of the AMD chip. Microsoft also made press releases about the progress of the Windows-XP64 product. CEO Craig Barrett said plans for product development and release were right on schedule. He also said they were seeing "sustained growth in processor sales" that indicated to them a continuing IT recovery. Twice during the speeches the comments provided a spike in the market. INTC rose +67 cents but did not get very far away from the $30 price magnet that has been tough to escape for the last two weeks. After the bell BRCM announced it was holding a conference call on Wednesday to discuss a substantial improvement in their business outlook. The stock jumped +$3 in after hours trading. The call will be at 1:45 Pacific time. No further details were given and a spokesman would not say what period would be discussed. Month, quarter, year? It makes a big difference and no clues were available. CSCO announced a new video over IP solution for corporate accounts. This Video-OIP solution will run $200 per user and is expected to take the Voice-OIP application to the next level. CSCO also announced that expensing employee stock options would have knocked -43% off its most recent earnings if forced to account for them in regular earnings. Earnings would have been 6 cents instead of a dime. AT&T Wireless (AWE) finally got a bid it was happy with at $15, all cash, from Cingular Wireless. This will propel the SBC/BLS joint venture to the lead in the U.S. wireless race with 46 mil customers. The deal will still have to be approved by the government but is not expected to be denied. The baby bells see wireless growth as the only way to compensate for the drop in their traditional wireline business. In other takeover news Disney declined the Comcast offer as too cheap. Comcast said they did not want to pay more and the companies are at a standoff. If another bidder does not appear and Disney stock drops once the speculation cools then Comcast will probably revive their offer. Until then it is a waiting game. The Bureau of Labor Statistics cancelled the PPI release that was scheduled for Thursday citing "unexpected difficulties" in data conversion. They have not announced when the PPI will be rescheduled. It took me several minutes to access the BLS website where the notice was posted with a continuous message of "too many people accessing the website at this time". Evidently quite a few people were interested in the sudden cancellation. The markets gapped open Tuesday and never looked back. The Dow came within 11 points of its two year high made last week at 10746. The index was very strong despite weakness in DIS, SBC and IBM. If the entire market was up to the Dow there would be little doubt we were going higher. However, the Nasdaq stalled against the upper resistance range at 2085 that held it back last week. The Nasdaq had a good day at +26 points but it just seemed to be filled with tension that it could break at any moment. The two strongest indexes for the day were still the SOX and the Russell. While neither are close to their highs they led the other indexes once again with the Russell closing near the high of the day. Make no mistake this was a very bullish day. Advancers beat decliners 5:2 and up volume beat down volume 3:1. The only negative was light volume overall. All the indexes ended near the top of their recent range and there was no major selling at the close. The only negative after the close was an earnings miss by Agilent. They missed earnings by a penny. NTAP beat by a penny, PLAB beat by five cents, NTES beat by +4 cents and SIMG by a penny. The various futures are mixed but not showing any indications of selling before tomorrow. For us to move up from here the Nasdaq has to break the 2085 resistance. Once that level is behind us the Dow could move to a new high. This may sound like overt bullishness but the supporting internals are very strong. Remember this is normally a consolidation month. ANY forward progress should be looked upon thankfully. The BRCM announcement after the close along with several positive tech earnings should keep the pressure on the bears and leave the bulls in control. The potential problems are the pickup in economic reports the rest of the week and the AMAT earnings tomorrow after the close. Nobody is expecting any bad news from AMAT but you can never be too careful. Initial support for the Nasdaq is 2065 but it could easily drift lower if we run out of excitement. Initial support for the Dow is 10680 and then 10600 but we are at the top of the range. We could easily drift lower for sometime and still be in an up trend. Should we move up from here a move over 10750 should generate additional short covering and attract those earnings run buyers off the sidelines. The Nasdaq pattern worries me. We currently have a lower high in progress with the Nasdaq struggling to break 2085. Should this resistance hold we could easily retest the 50 dma at 2034 or even horizontal support at 2000. We need to break the 2085 resistance quickly and strongly to banish thoughts of a retest and bring buyers back into the market. There were several comments today suggesting this rally was option related. It could be but I have nothing to base that opinion on. The volume was light and normally option related rallies come on heavy volume. With expiration on Friday traders are running out of time to close positions. With the three-day weekend I would have expected most big players to have closed positions by last Friday rather than face the additional event risk of world markets being open while ours were closed. Wednesday will be a pivotal day. If the Dow can move higher it could easily set a new high and help drag the Nasdaq through its current resistance levels. Just remember that any pullback to the middle of its range (10600) is just consolidation and would be normal. I would also consider it another buying opportunity. It is too soon to expect the April earnings run to begin in earnest so take whatever gains the market gives us with gratitude. Enter Passively, Exit Aggressively. Jim Brown Editor *************** FUTURES MARKETS *************** Triple tops and bottoms Jonathan Levinson The binary dollar trade gave us another day of dollar weakness and equity/commodity strength, with the US Dollar Index testing multiyear lows while select equities and commodities try for new highs. Treasuries were unchanged for the day. 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 tested the bottom at 84.80 for the third time this year, and for the third time dollar bears couldn't keep it down. The bounce was weaker than the preceding two tries, however, and the test is far from over. Note the potential bullish divergence on the 10-day stochastic if the current low holds, with the potential for a much higher oscillator low against the current price low. In any event, the downtrend remains comfortably intact, 84.80 is the key level to watch, and the dollar is so far negative for the week. The CRB was up strongly for the day, adding 2.20 to close at 267.05, led by copper (+4.54% to 1.30), silver and sugar futures. Daily chart of April gold Gold and silver had a great day, with April gold adding 5.10 to close at 416.10, just below its high of 416.80, while silver rose 228 to close at 6.798, a 3.47% move. Gold posted a higher low and lower high against Friday's wide range, and was firm throughout the day. The daily cycle upphase continues to progress and support is below at 412-414, followed by 408. 418- 420 is next resistance before a retest of the rally highs. Daily chart of the ten year note yield Ten year treasuries managed to frustrate everyone today, with the ten year note yield (TNX) closing unchanged at 4.048% after trading both sides of unchanged. This occurred despite a whopping 10B overnight repo to replace the 3B expiring, and an additional 730M coupon pass delivered today. With a net 7.73B in new liquidity, the lack of movement in bonds is strange, and indicates that the Fed's dealers were either assisting equities today. Perhaps some of that money was used to make payment on the treasury auctions settling from last week. Either way, treasury yields put in their fourth consecutive higher low today, and while the daily cycle downphase on the TNX continues, it's acting tired. Daily NQ candles The NQ had a good day, adding 20 points to close at 1508 after trading as high as 1514 in the afternoon. It erased Friday's damage and redeemed the hesitant daily cycle upphase, with a higher low printed at 1487 just to remove any shred of doubt. 1480 is now rising trendline support, and while the picture looks considerably more bullish than it did on Friday, it's worth noting that the hunchback head and shoulders has yet to be violated. A break above 1520 would be the first step, but until the rally highs get exceed, this sloppy topping formation will remain viable. Resistance is at 1514, 1518-20, followed by 1530. Support below is at 1505, 1496, 1492, 1488 and 1480. 30 minute 20 day chart of the NQ The 30 minute cycle oscillators were more trouble than they were worth today, with the 300 minute stochastic spending longer in overbought territory than we've seen all month. A fairly convincing pullback off the high caused a sell signal on the stochastic from an intraday bearish divergence and left the Macd on a bearish kiss. Whether this is a throwover above the descending trendline or the first step of a retest of the rally highs, we can only guess. However, the daily cycle upphase delivered strength where there should have been weakness today. Any weakness tomorrow should kick off the 30 minute cycle downphase that was expected as of this morning, and in honor of the unexpected strength that lasted all day, bears should be looking for a break of 1500 support for first confirmation. Daily ES candles ES gained 10.75 to close at 1156.50. It bears a remarkable resemblance to the triple bottom action on the US Dollar Index above, but in reverse. Gold would look similar, but it's relatively further from its rally high than is the ES. That said, the ES engulfed Friday's sell, setting a higher low and higher high and reinvigorating the daily cycle upphase. Resistance is at 1158.75, today's high, and carries through to 1160. One would expect a short covering rally above that level, and anything more than a suddenly reversed spike above 1160 would set up the current 1158.75-1160 as strong support. Current support is 1152, followed by 1146-7. 20 day 30 minute chart of the ES The 30 minute ES looks like a breakout trying to happen, hindered only by the intraday overbought condition. Any failure of bears to break the rising support line currently at 1152 would set up a likely break of 1158.75-1160 on the following 30 minute cycle bounce. The Macd left off on a bearish kiss, reminding us why it's a bad idea to chase tops based on one indicator alone. The 300 minute stochastic spent the day telling us to expect downside, but the Macd took its time and has not yet confirmed it. 150-tick ES The short cycle ES shows a mixed picture because of the predominantly sideways drift, but the Keltner channels are in gear to the downside, with the broader envelope (proxy for the 30 minute cycle) and the narrower red channel (proxy for the short intraday cycle) both pointed lower. Given the confusion in the short cycle oscillators, I'm inclined to follow the 30 minute cycle here, and so long as today's highs don't get exceeded, that channel should continue to point south. Daily YM candles YM rose 80 to close at 10705, and continues to hold at last week's highs. The Dow transports diverged for much of the day in negative territory. Despite discussions of impending higher interest rates, there was no corresponding weakness in metals, equities or even the ten year note, and my thinking is that the recent weakness in the Trannies has more to do with the persistent high prices of crude futures than interest rates. If so, then the weakness in the Trans should eventually spread (as long as crude stays at or above current levels), because high oil leads to destructive cost-push inflation and ultimately, stagflation. 20 day 30 minute chart of the YM The binary dollar trade was alive and well again today, with dollar weakness corresponding to strength in everything else. This intermarket pattern should continue to guide our market view until it ceases to work. Theoretically, a continued declining dollar would lead to hyperinflationary increases in all other US asset classes, but as the Transports may be signaling, rallying commodities aren't necessary compatible with rallying equities. In the meantime, prudence dictates following the trend in whichever timeframe you're watching. For tomorrow, I'm expecting intraday weakness within the context of a daily cycle upphase- in other words, a corrective move lower that should find support at a higher low. 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 ******************** John Deere green Market participants bid stocks higher after manufacturing data from the regional New York State Empire indices as well as broader January industrial production data revealed continued growth at many of the nations factories. Enough growth was seen to have January capacity utilization rising to 76.2% from December's 75.6%, giving investors and/or the unemployed hope that the growing economy may indeed bare fruit in the form of more jobs in coming months. By session's end, all equity sectors were colored John Deere green, where even Joe Diffie may have been at a loss for lyrics after seeing heavy equipment maker Deere & Company (NYSE:DE) $67.00 +4.67% trade an all-time high in today's session after posting stronger-than-expected quarterly earnings as its easily recognizable farm equipment and earthmoving machinery found healthy demand from farmers and constructors alike. The AMEX Gold Bugs Index ($HUI.X) 242.03 +3.41% edged out the Airline Index ($XAL.X) 63.28 +3.26% for today's sector winner. While gold equities traded broadly higher with the U.S. Dollar Index (dx00y) 84.97 -0.58% showing dollar weakness, industrial metal stocks also performed admirably on the heels of today's manufacturing/industrial data with Dow component Alcoa (NYSE:AA) $37.75 +1.99% jumping $0.75 per share, while copper producer Phelps Dodge (NYSE:PD) $83.80 +2.35% gained $1.93. Palladium producers Stillwater Mining (NYSE:SWC) $13.99 +7.6% and North American Palladium (AMEX:PAL) $10.00 +7.99% rose to new 52-week highs, while Titanium Metals Corp. (NYSE:TIE) $77.91 +6.74% surged to all-time highs. Silver $6.78 +3.19% jumped $0.12 to trade multiyear highs, while Western Silver Corp. (AMEX:WTZ) $7.44 +14.28%, which has yet to report any revenues from current operations, surged to all-time highs. Financials also put in another strong session with the Securities Broker/Dealer Index ($XBD.X) 739.87 +2.28% closing at an all-time high as merger and acquisition activity along with more robust trading volumes continues to drive sector gains. Banking mergers had National City (NYSE:NCC) $34.56 -2.34% buying Provident Financial (NASDAQ:PFGI) $38.70 +11.11% for approximately $2.1 billion, while North Fork Bancorp (NYSE:NFB) $43.37 -0.86% is acquiring Greenpoint Financial (NYSE:GPT) $45.25 -3.37% for $6.3 billion, where the transaction will create the largest regional bank in the New York metro area and the 16th largest bank holding company in the nation. Market Snapshot / Internals - 02/17/04 Close A pickup in volume in today's last-hour of trade kept volumes respectable at both the NYSE and NASDAQ, where AT&T Wireless (NASDAQ:AWE) $13.78 +16.58 accounted for just over 10% of NASDAQ volume after agreeing to be acquired by Cingular for $15 per share, in a cash transaction valued at approximately $41 billion. Pivot Analysis Matrix - Friday's close found the major indices closing below this week's WEEKLY Pivot levels, but this morning's upbeat economic data had the major indices rising to trade their WEEKLY R1s intra-day. Applied Materials (NASDAQ:AMAT) $21.94 +0.78% reports quarterly EPS after tomorrow's close, and views from fundamental shops in recent days has been mixed, where forward guidance most likely dictates whether the SOX.X can break back above the correlative WEEKLY R1 and MONTHLY Pivot of 526. Semiconductor Index (SOX.X) Chart - Daily Interval According to Dorsey/Wright and Associates, the Semiconductor Sector Bullish % (BPSEMI) is "bear confirmed" at 69.47%, which has me more cautious from the bullish side as long as the SOX remains below the 531 level. Last week, Allen Steinkopf, an analyst at Federated Investors, said that Federated funds sold all their positions in semiconductor equipment names like AMAT, KLAC and ASML in January on thought that the equipment makers have come too far too fast and that valuations appear stretched. Today, Banc of America Securities said it thinks AMAT will report blowout quarterly earnings, but thinks a strong quarterly report is already factored into the stock. NASDAQ-100 Index (NDX.X) Chart - Daily Interval Both the NASDAQ-100 Index (NDX.X) and its Tracking Stock (AMEX:QQQ) $37.44 +1.35% gapped higher at the open. I would have to think bullish traders are going to be tentative into tomorrow evening's Applied Materials (AMAT) $21.94 +0.78% earnings where the NDX/QQQ will be susceptible to backfilling a portion of today's gap higher. MACD continues to waiver just above the zero level where it would appear that any type of resurgence in strength for the NDX comes above the 1,516 level, or QQQ $37.70. S&P 500 Index (SPX.X) Chart - Daily Interval The broader S&P 500 (SPX.X) just barely achieved a new 52-week high intra-day as Friday's declines and weaker than forecasted February Michigan sentiment survey was quickly erased by hard data in the form of today's January industrial production figures. I wouldn't try to argue that the Michigan sentiment data released on Friday wasn't a negative, but traders, and economists will often note that sentiment or consumer confidence is survey data, where those polled are giving anecdotal data, while Industrial production is based more on hard numbers, where some traders and economists give greater weight. S&P 100 Index (OEX.X) Chart - Daily Intervals Nine of the ten most heavily weighted OEX components saw gains in today's session. Of the top 5, only XOM managed a new 52-week high. A quick review of bar charts shows C looking as if it wants to challenge its recent 52-week high of $52.00, where GE and PFE look to stabilize after a more modest pullback. Meanwhile, Microsoft (NASDAQ:MSFT) $26.99 +1.5% moved back above its longer-term 200-day SMA after the European Commission told the company it didn't find MSFT's willingness to enclose CD-ROMS with competitors software a likely solution to anti-trust issues. Dow Industrials (INDU) Chart - Daily Intervals The INDU finds near-term resistance at/around the 10,730 level. MACD oscillator has edged above its Signal, and in an upward trend, a Dow break above 10,760 would easily see gains to the MONTHLY R2 of 10,857. IBM (NYSE:IBM) 99.37 -0.34% has been seeing higher lows in recent sessions, but has found willing sellers just below $100.50. With CAT $79.52 +2.71% showing some signs of recovery after a pullback from $85 to $75, look for further strength in IBM and some continued strength from CAT to provide upside catalysts for the INDU. 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 **************** Another Broad-Based Rally - J. Brown Investors returned from their long, three-day weekend feeling refreshed and in a buying mood. Helping set the tone were positive economic reports and a new round of merger announcements. The Dow Transports were probably the weakest sector of the market today due to one brokerage downgrading the truckers and another downgrading the railroads over concerns of a rising interest rate environment. Obviously, these two analysts are planning ahead since the Fed has stated it will remain patient before raising rates and many believe it could be 2005 before the FOMC raises rates as we wait for our economy to generate substantial job growth. State Street Bank issued a report on their investor confidence index. They claim investor confidence has fallen sharply since December and they interpret the drop as institutional investors becoming much more cautious although still focused on equities. The news certainly didn't affect traders today. The rally was very widespread with every major sector index closing in the green. The best performer today was the airline index (XAL), which gained 3.26%. This put the XAL above its 50-dma and poised for a run towards its January highs. The second best performer today was the XAU Gold & Silver index, which added 3%. This also happened to be a bullish breakout over its 50-dma. Boosting the group was a $5 gain in gold futures to $416 an ounce. Rounding out the top three sectors is the homebuilders. The DJUSHB home construction index added 2.36% to close over the 600 level for the first time since late December. Obviously investors are not concerned about interest rates rising or they wouldn't be pouring money into this industry. Granted a number of builders have stated that business is so good they would not expect any slow down even if interest rates did rise a bit. The last few weeks have seen the DFI defense sector and the IUX insurance sector as the leaders setting new highs on a regular basis. Noteworthy today was the new all-time closing high for the Defense sector over the 700 level. Plus, we have the XBD broker-dealer index hitting a new all-time high. The recent out break of mergers and speculation that we'll continue to see consolidation has sent these deal-makers strongly higher. Given the two bank mergers today we also note that the BKX and BIX are near their highs. As a matter of fact several of the leading sectors have been able to maintain their gains and today's rally sent them right back toward their recent peaks. The retailers have been doing well and should continue to do well as we hear more earnings news from the group this week. Healthcare and biotech are also near their highs. Plus the OIX oil index is poised for a breakout over the 330 level as crude oil prices creep towards the $35 a barrel. Overall it was a very bullish day. Advancing stocks crushed decliners 3-to-1 on the NYSE and 2-to-1 on the NASDAQ. Up volume was more than 3 times down volume on the NYSE and almost as strong on the NASDAQ. Tomorrow look for more strength in the techs, especially chip stocks, after Broadcom (BRCM) announced tonight plans to host a conference call after the bell on Wednesday to discuss its stronger business outlook. This sent the stock higher by more than 6% in after hours trading. Plus, we'll hear from Applied Materials (AMAT), the largest chip equipment maker in the world, as they report earnings after the close on Wednesday. Wall Street will also be digesting the latest housing starts and building permits tomorrow morning. Both reports are expected to show a slight dip from previous readings but still at historically high levels. On Thursday we'll have the PPI report, leading indicators, weekly jobless claims and the semi book-to- bill report. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10746 52-week Low : 7416 Current : 10714 Moving Averages: (Simple) 10-dma: 10603 50-dma: 10408 200-dma: 9588 S&P 500 ($SPX) 52-week High: 1158 52-week Low : 788 Current : 1156 Moving Averages: (Simple) 10-dma: 1143 50-dma: 1115 200-dma: 1031 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 795 Current : 1506 Moving Averages: (Simple) 10-dma: 1491 50-dma: 1478 200-dma: 1343 ----------------------------------------------------------------- I'm actually a bit surprised that the VXO didn't drop further today given the strong broad-based rally. The VIX and VXN also posted similar losses - mild and inside the recent trading range. CBOE Market Volatility Index (VIX) = 15.40 -0.18 CBOE Mkt Volatility old VIX (VXO) = 15.56 -0.07 Nasdaq Volatility Index (VXN) = 23.87 -0.27 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.88 830,958 730,243 Equity Only 0.81 691,467 561,932 OEX 1.29 32,917 42,510 QQQ 7.88 21,541 169,743 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 77.6 + 0 Bull Confirmed NASDAQ-100 70.0 + 1 Bear Alert Dow Indust. 86.7 + 0 Bull Confirmed S&P 500 88.2 + 0 Bull Confirmed S&P 100 89.0 + 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: 0.95 10-dma: 0.98 21-dma: 0.96 55-dma: 0.98 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 2146 2018 Decliners 723 1057 New Highs 373 239 New Lows 8 7 Up Volume 1365M 1122M Down Vol. 391M 399M Total Vol. 1777M 1568M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 02/10/04 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 No change for the Commercial traders. Small Traders have grown slightly more bullish. Commercials Long Short Net % Of OI 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%) 02/10/04 412,217 414,044 (1,827) (0.2%) 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 01/23/04 141,107 100,090 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% 02/10/04 143,496 80,362 63,134 28.2% 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 are starting to put some money to work and we're seeing another jump in contracts for both longs and shorts. Small traders have pared back their longs a bit and put some of that money on the short side. Commercials Long Short Net % Of OI 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%) 02/10/04 297,601 356,630 (59,029) ( 9.0%) 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 01/23/04 187,270 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% 02/10/04 110,480 58,428 52,052 30.8% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Not much change from the Commercial traders but they are a tiny bit more bullish here. Small Traders have significantly bumped up their long positions. Commercials Long Short Net % of OI 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% 02/10/04 44,406 40,439 3,967 4.7% 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 01/23/04 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%) 02/10/04 9,906 13,018 (3,112) (13.6%) 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 Not much change this week for Commercials. Small traders are slightly more bearish on the Dow. Commercials Long Short Net % of OI 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% 02/10/04 21,764 11,974 9,790 29.0% 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 01/23/04 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%) 02/10/04 6,267 14,220 (7,953) (38.8%) 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 02-17-2004 Copyright 2004, All rights reserved. 2 of 3 Redistribution in any form strictly prohibited. In Section Two: Dropped Calls: CDWC Dropped Puts: None Call Play Updates: AHC, APOL, ATH, DHR, DHI, GD, ESRX, IBM, PD, RNR New Calls Plays: BRL, QCOM, Put Play Updates: AVID, MMM, SINA 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: ***** CDW Corp. - CDWC - close: 68.22 change: +0.93 stop: 64.00 Despite giving all the appearances of a pending breakout when we began coverage just over a week ago, CDWC has definitely lost its way. The stock has been struggling below the $70 resistance level without a single push over that level since late January. Fortunately, we initiated the play with a trigger over the 1/27 intraday high and that trigger has never been satisfied. Rather than continue to wait, we're pulling the plug tonight in order to make room for more promising play candidates. Picked on February 8th at $69.13 Change since picked: -0.91 Earnings Date 1/21/04 (confirmed) Average Daily Volume = 1.34 mln Chart = 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 ******************** Amerada Hess Corp. - AHC - close: 60.79 change: +0.45 stop: 57.00 The past few sessions certainly haven't offered much in the way of price action on our bullish play on AHC, as the stock has consolidated near its highs and looks ready to make another bullish push. The past few day's sideways price action looks like it could be a bullish continuation flag and today's intraday slight move over $60.75 could be the beginning of a breakout from that pattern. That breakout should kick off a move up to the $65 area, mirroring the first leg of the rally from $56 to roughly $60.50. Recall that there's some resistance that may come into play near the $62 level, so momentum entries above $61 may run into some near resistance. So the better entry strategy may be to look for a pullback to support near $59 or possibly as low as $58 to give a continuation entry. Maintain stops at $57 for now. Picked on February 10th at $59.53 Change since picked: +1.26 Earnings Date 1/28/04 (confirmed) Average Daily Volume = 1.08 mln Chart = --- Apollo Group - APOL - close: 77.25 change: -0.12 stop: 73.50 Bullish enthusiasm seems to have waned a bit among APOL investors over the past few sessions and it looks like the stock is due for another orderly pullback to support before continuing its upward journey. Daily Stochastics are now clearly tipped over into a bearish descent and that adds weight to the continued profit taking thesis, at least for the next couple days. That reality has us turning our focus to looking for a pullback entry near support, which ideally should occur near $75, the site of the mid-January price high, as well as the 20-dma at $75.23. Should price action reverse back higher from current levels, then momentum traders will get their shot, with the likely action point being a breakout over the $80 level. For now, it looks like the higher odds approach is to wait for the rebound from support before playing. Maintain stops at $73.50. Picked on February 1st at $77.44 Change since picked: -0.19 Earnings Date 12/18/03 (confirmed) Average Daily Volume = 1.80 mln Chart = --- Anthem, Inc. - ATH - close: 83.98 change: -0.22 stop: 81.00 Friday's thrust higher was just enough to satisfy our entry trigger on ATH and when there was no bullish follow-through, the stock began drifting back down into its consolidation zone between $82-85. The bulk of today's price action was focused near the middle of that range, so it's hard to make a case for a high-odds entry point yet. A dip and rebound from the $82-83 area would still make for a very nice continuation entry, whereas momentum traders will want to see a strong breakout over $85.25 before jumping into the fray. Note how the 10-dma ($83.27) continues to provide closing support -- we're looking for that pattern to remain in place, producing a fresh breakout to new highs later this week. Since this leg of ATH's rally kicked off, the 20-dma ($81.83) hasn't been touched, so our $81 stop should be well protected. Picked on February 12th at $84.53 Change since picked: -0.55 Earnings Date 4/28/04 (unconfirmed) Average Daily Volume = 1.52 mln Chart = --- Danaher Corp - DHR - close: 93.87 cls: +1.43 stop: 89.85 Headlines continue to be scarce for DHR but the stock did bounce today. Unfortunately, it remains under resistance at the $95 level. More of a concern is the hint of a trend of lower highs easier to see on the hourly chart of DHR. Bullish traders may be better off waiting for DHR to clear the $95 level before initiating new positions. As mentioned in Sunday's update DHR's technicals are somewhat bearish so the bounce from its 50-dma (currently 90.60) is still a viable alternative. Picked on January 30 at $91.01 Change since picked: + 2.86 Earnings Date 01/29/04 (confirmed) Average Daily Volume: 841 thousand Chart = --- D.R.Horton - DHI - close: 31.38 chg: +0.93 stop: 27.99 Good news for homebuilders. The DJUSHB home construction index rose 2.36% to close over the 600 level for the first time since late December. Leading the way was DHI, which set a new high of its own, hitting $32.10 before slipping back into the afternoon's close. The entire group looks poised for additional gains and traders may want to consider buying any dip toward the $31 level in DHI. An alternative stock we'd consider in the homebuilder group is BZH with a target of $110. Picked on February 08 at $30.00 Change since picked: + 1.38 Earnings Date 01/21/04 (confirmed) Average Daily Volume: 2.4 million Chart = --- General Dynamics - GD - close: 96.55 chg: +0.61 stop: 92.00 The defense sector continues to march higher with today's new all-time high over the 700 level on the DFI.X. Meanwhile GD is still consolidating under the $97 level. Rival NOC also traded up today but it was defense issue Alliant Tech Systems (ATK), which really lead the group higher, with a new breakout over the $60 level. We do expect GD to rejoin the group in the journey higher soon but traders will probably do best to wait for GD to break over the $97 level before initiating new positions. Picked on February 08 at $96.88 Change since picked: - 0.33 Earnings Date 01/21/04 (confirmed) Average Daily Volume: 1.0 million Chart = --- Express Scripts - ESRX - cls: 71.90 chng: +1.32 stop: 68.00*new* Finally, our patience was rewarded. After its incessant range- bound trade in the $68-71 area for the past month, ESRX finally broke out on Tuesday, tacking on 1.87% at the close after briefly testing the $73 level early in the day. This certainly looks like the beginning of the next upward leg, which ought to propel price action up to our $75 price target, also the site of the double top from last summer. There were ample opportunities to establish positions just above $68 over the past two weeks and now that ESRX has broken out, that level should not be revisited. Raise stops to $68 tonight, which is just below the bottom of the recent consolidation, as well as the 30-dma ($68.01). A pullback and rebound from the $70.50-71.00 area now looks favorable for continuation entries, but we would not recommend breakout entries above today's high due to the proximity of our final target at $75. Picked on January 13th at $68.32 Change since picked: +3.58 Earnings Date 2/24/04 (confirmed) Average Daily Volume = 987 K Chart = --- Int'l Bus. Machines - IBM - cls: 99.37 chng: -0.34 stp: 97.50*new* There seems to be something peculiar going on with IBM, as the stock has still been unable to capitalize on the broad market strength to sustain a breakout over the $100 level. The stock continues consolidating in an ever-narrowing range, with resistance being found just over the century mark, while at the same time, the intraday lows are steadily moving higher as support continues to materialize near the 10-dma ($99.25) with backup support at the 20-dma (now rising to $98.98). Intraday dips near support can still be used for entry, while traders looking to enter on strength will want to wait for the breakout over $100.50 before playing. IBM really shouldn't be able to fall below the $98 level that has been untouched for over two weeks now, so we'll snug our stop up to $97.50 tonight. Picked on February 1st at $99.23 Change since picked: +0.14 Earnings Date 4/15/04 (unconfirmed) Average Daily Volume = 5.42 mln Chart = --- Phelps Dodge - PD - close: 83.80 chg: +1.93 stop: 78.00 Copper prices hit another new high today, which helped drive the 2.35% rebound in shares of PD. Patient traders may want to hope for a dip closer to the $80 level and buy a bounce there. However, there is no guarantee that PD will pull back that much after Friday's low at 81.30. We're going to keep a close eye on our stop loss. If PD provides another strong move higher we'll probably raise our stop to $79.99, but not yet. Picked on February 11 at $80.51 Change since picked: + 3.29 Earnings Date 01/29/04 (confirmed) Average Daily Volume: 1.6 million Chart = --- Renaissancere Ltd - RNR - close: 52.19 chg: +1.36 stop: 49.50 The IUX insurance group stretched to hit another new high today and RNR joined the rally with a 2.67% gain of its own. The rebound from Friday looked pretty bullish and its nice to see the follow through today on more than twice the average volume. We're going to leave our stop at 49.50 for now. Picked on February 15 at $50.83 Change since picked: + 1.36 Earnings Date 02/03/04 (confirmed) Average Daily Volume: 238 thousand Chart = ************** NEW CALL PLAYS ************** Barr Pharmaceuticals - BRL - close: 80.23 chg: +1.21 stop: 78.00 Company Description: Barr Laboratories, Inc. is a specialty pharmaceutical company engaged in developing, manufacturing and marketing generic and proprietary pharmaceuticals. With fiscal 2003 revenues of $903 million, the Company currently manufactures and distributes more than 100 pharmaceutical products in core therapeutic categories including oncology, female healthcare (including hormone replacement and oral contraceptives), cardiovascular, anti- infective and psychotherapeutics. The Company currently has facilities in six states – New Jersey, New York, Ohio, Pennsylvania, Virginia and Washington DC – and employs approximately 1,224 individuals. (source: company website) Why We Like It: Longer-term BRL has been a relatively strong performer, more than doubling from its November 2002 lows near $40. The journey higher hasn't been without its pull backs but these have allowed investors to time their entries. The January 2004 low near $70 was a test of previous resistance acting as support and investors used it as another entry point. More recently in February the stock gapped higher on Feb. 6th after a strong earnings report. BRL beat the estimates by 7 cents on revenues that rose almost 80% from the previous year and well above consensus. Furthermore the company reaffirmed their estimates for 20-25% earnings growth. Wall Street is actually very bullish on generic drug makers in general and believes the niche can generate 20% earnings growth for the next 3-to-5 years. What should excite fans of generic drug makers is the fact that over half the current "blockbuster" drugs will lose their patent protection by 2008. Short-term traders will note that BRL announced a 3-for-2 stock split last Friday. The split is expected to take effect on March 15th and this provides a great short-term catalyst for momentum traders. If you do your homework you will see news that the FDA has delayed its decision to allow "Plan B", a morning after pill, to be sold over the counter. BRL is buying Plan B from the Women's Capital Corp and expects to complete the sale by Feb. 20th. Neither Wall Street nor BRL seemed concerned over the FDA's decision to delay Plan B, which is not expected to hit very high sales numbers, although BRL is expected to more than double the current annual sales for the drug. We believe that BRL is almost done consolidating in the current $78-80.50 range but we will use a TRIGGER at $80.61 to open the play for us. Until BRL trades at or above this price we'll sit on the sidelines. More aggressive traders can try and time an entry on a test of the 10-dma currently near $78.40. Our first target is the $85 region. If we are triggered our stop loss will be $78.00. FYI: Point-and-figure chart fans will note that BRL has recently broken out above its bearish resistance and its vertical count suggests a price target of $97.00. Suggested Options: Short-term traders can choose from the March or May calls. Both months have plenty of open interest. Our favorites are the March 80s but the May 80s look good too. BUY CALL MAR 75 BRL-CO OI= 126 at $6.30 SL=4.00 BUY CALL MAR 80*BRL-CP OI= 745 at $2.80 SL=1.40 BUY CALL MAR 85 BRL-CQ OI= 356 at $0.95 SL= -- BUY CALL MAY 80 BRL-EP OI= 586 at $5.00 SL=3.00 BUY CALL MAY 85 BRL-EQ OI= 327 at $2.85 SL=1.50 Annotated Chart: Picked on February xx at $xx.xx <-- see trigger Change since picked: + 0.00 Earnings Date 02/05/04 (confirmed) Average Daily Volume: 730 thousand Chart = --- Qualcomm, Inc. - QCOM - close: 59.55 change: +1.86 stop: 56.00 Company Description: Based on its proprietary CDMA technology, QCOM is engaged in developing and delivering digital wireless communications services. The company's business areas include integrated CDMA chipsets and system software and technology licensing. QCOM owns patents that are essential to all of the CDMA wireless telecommunications standards that have been adopted or proposed for adoption by the worldwide standards-setting bodies. Currently, QCOM has licensed its CDMA patent portfolio to more than 80 telecommunications equipment manufacturers around the world. Why we like it: It has been a stellar year for QCOM investors, as the stock began its upward trajectory last May near $30 and worked steadily higher in an ascending channel until late December, when the stock broke out of that channel and then blasted higher in early January, reaching to just shy of $61 and then relaxing a bit into the earnings report on January 21st. With no nasty surprises, investors supported the stock after the report and it found support at the top of the 1/08 gap and the top of the broken channel near $56. Traders looking for a more substantial pullback in order to enter the bullish trend were left standing on the sidelines as the bullish action has been picking up steam again over the past week. Today's 3% advance puts QCOM just below $60 again and with daily MACD just starting to turn bullish again, it looks like a breakout move may be in the offing. The PnF chart confirms the bullish outlook with one Buy signal after another since the breakout over $40 last August. The current vertical count projects upside for the stock to the $67 level. That lines up nicely with what we can see on the long- term price chart, as the stock will find firm resistance in the $67-68 area, at the site of the highs from July and August of 2001. There is the potential for the stock to stumble a bit near the $62 level, resistance from the November/December highs from 2001, but we're betting that will be only a pausing point on the way to our $67 target. Of course, we want to make QCOM prove its bullish intentions before we step into the play, so we're going to use an entry target of $60.75, just over the early January highs. Momentum trades on the initial breakout look favorable, while more cautious traders can look for rejection at $62 and a subsequent pullback to confirm new support in the $59-60 area. Set stops initially at $56, at the bottom of the recent consolidation. Suggested Options: Shorter Term: The March $60 Call will offer short-term traders the best return on an immediate move, as it will be at the money when the play is triggered. Longer Term: Aggressive longer-term traders can use the March $65 Call, while the more conservative approach will be to use the April strikes due to the greater time until expiration. Our preferred option is the April $60 strike, which is at the money and should provide sufficient time for the play to move in our favor. BUY CALL MAR-60 AAO-CL OI=5502 at $2.10 SL=1.00 BUY CALL MAR-65 AAO-CM OI=3745 at $0.60 SL=0.30 BUY CALL APR-60*AAO-DL OI=9940 at $3.10 SL=1.50 BUY CALL APR-65 AAO-DM OI=4075 at $1.35 SL=0.60 Annotated Chart of QCOM: Picked on February 17th at $59.55 Change since picked: +0.00 Earnings Date 1/21/04 (confirmed) Average Daily Volume = 8.48 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 ******************* Avid Technology - AVID - close: 42.62 chg: +1.37 stop: 44.36*new* It's very tough to pick bearish plays in this environment. It may be even tougher to maintain them. We have the sneaking suspicion that AVID is trying to put in a bottom here. Its technical oscillators are starting to curve higher again. Normally, we expect that because the stock has been so short-term oversold. However, with the major indices like the DJIA and the S&P 500 near two-year highs we're feeling cautious. The 3.3% gain in AVID today doesn't help. We're going to lower our stop loss to $44.36, which is just above the high on Feb. 9th. More conservative traders can protect themselves with a stop loss at 43.40, just above the high on Feb. 11th. Picked on February 04 at $42.87 Change since picked: - 0.25 Earnings Date 01/29/04 (confirmed) Average Daily Volume: 612 thousand Chart = --- 3M Company - MMM - close: 80.32 change: +0.64 stop: 82.50 With the broad market starting off with a bullish surge this morning, MMM popped up above the $80 level at the open and then spent the bulk of the day consolidating in a very narrow range of less than a dollar. While it is a bit irritating that the nascent downward move from last Friday found no follow through, it was encouraging to see how the stock traded notably weaker than the major indices. MMM was unable to return to its first hour highs in the afternoon, even though the broad market broke out to trade and close above those first hour markers. We still like entries on a rollover below the $81 area or on a break under the 100-dma ($79.15), although the more conservative approach on a breakdown is still to wait for a trade at $77, generating that PnF Sell signal. Traders playing today's inside day setup can use a drop below Friday's intraday low ($79.68) as a trigger for entry into the play. Maintain stops at $82.50, just above the 50-dma ($82.12). Picked on February 15th at $79.68 Change since picked: +0.64 Earnings Date 1/20/04 (confirmed) Average Daily Volume = 2.77 mln Chart = --- Sina Corp - SINA - close: 40.56 change: +0.11 stop: 41.35 Hmm... we are triggered on our new aggressive put play but this Chinese Internet stock may prove too volatile for us. The stock broke through support at its simple 50-dma and its month-long price support at $39.35 this morning and hit $39.14 before quickly bouncing. Our trigger was $39.35 (or 39.34) so we're (hypothetically) in this play with a stop loss at $41.35. Unfortunately, the intraday rebound didn't stop and SINA closed back above its 50-dma and the $40.00 level. This is not a good sign and smells like a bear trap. Fortunately, SINA still has a trend of lower highs and its 10-dma (currently 41.82) is still putting pressure on the stock. The bad news (for us) is that our stop is a little tight at 41.35. We didn't want to risk that much and we may be stopped out tomorrow on another test of the 10-dma. More aggressive traders who can take the heat may want to adjust their stops to the $42.00 level. We are not suggesting any new bearish entries. Picked on February 17 at $39.35 Change since picked: + 1.21 Earnings Date 01/21/04 (confirmed) Average Daily Volume: 238 thousand 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 02-17004 Copyright 2004, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Watch List: Homes, Cars, Jewelry and more ********** WATCH LIST ********** Homes, Cars, Jewelry and more ___________________________________________________________________ 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. ___________________________________________________________________ Beazer Homes - BZH - close: 102.59 change: +1.78 WHAT TO WATCH: The homebuilders were pretty strong today as the DJUSHB home construction index added 2.36% to close above the 600 level for the first time since December. The entire group looks poised for additional gains and BZH could be a leader. The stock has broken above its 50-dma (last week) and the psychological $100 mark. Now there is some resistance near $103 and traders may want to consider a trigger above today's high at $103.25 but BZH looks like a bullish play with a short-term target at its December highs near $110. Chart= --- General Motors - GM - close: 49.48 change: +0.60 WHAT TO WATCH: General Motors still looks tempting as a long play if the current rebound can break above resistance at the $50.00 mark. The stock has failed there four days in a row. Granted it won't be an easy run if it does breakout because its 50-dma is still overhead. Bearish traders may want to look for a move under $48.50 as a potential trigger to ride a drop toward the $45 level. Chart= --- Infosys Technologies - INFY - close: 91.44 change: +2.44 WHAT TO WATCH: We've been looking for a bullish breakout over the $90 level and its 50-dma for days now. INFY finally delivered today and its MACD just produced a new buy signal. The rally today has also broken its short-term trend of lower highs. We'd consider this an entry point with a target of $101. Watch out for potential resistance near $96. Chart= --- Tiffany & Co - TIF - close: 41.00 change: +2.03 WHAT TO WATCH: Investors must be betting that Valentines day shopping was pretty strong this last week. Shares of TIF have soared 5.2% today after basing along the $38-39 level above its 200-dma for the last month. Volume was very strong today at 1.5 million shares and if TIF can break above its 50-dma it may be a play for a run toward its next resistance near $45. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- FRE $64.70 +0.33 - Freddie Mac looks like a potential play with a trigger over $65.00 and a target near $70.00. CAT $79.52 +2.10 - Fellow heavy machinery maker Deere & Co (DE) posted very strong earnings today and CAT joined in with a 2.7% rally of its own. We'd consider CAT a play over its 50-dma, target the $85 level. HAR $75.49 +1.99 - Harman closed right at resistance but still looks poised for a move toward the $80 mark, which is all-time resistance from January. MWD $60.59 +0.84 - We'd consider MWD a play with a trigger over $61.00. The entire broker-dealer sector is on fire and the rash of mergers is going to keep interest hot for the people who make it happen. ************************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
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 "email@example.com"
Option Investor Inc