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  Eric Utley   4/15/02,  5:58:33 PM
Judging by Novellus' (NASDAQ:NVLS) evening trading, I'll be stopped out of the Semi Holdrs (AMEX:SMH) short in the morning. The stock is about $3.40 higher in the evening session, trading near its triple-top at $54. I normally don't give much credence to after hours trading, but in this case I think NVLS portends a big gap higher. The stock was fairly heavily shorted going into its number; a lot of April 50s traded today. I don't know how much of this evening's ramp is short covering as opposed to real buying. I'm guessing, in either case, that this report leads to the next ramp higher in the chips.

I'm not upset with what looks to be shaping as a loss tomorrow. The set-up that we saw in the SOX and SMH today is one that I'll take a hundred times again. The reason is simple: risk management. If you're wrong, like I was, you're out quickly. If you're right, you could be right very big. It's managing the small losses in between that differentiates a trader. Have a peaceful evening, we'll be back tomorrow.

 
 
  Leigh Stevens   4/15/02,  4:53:27 PM
General Electric (GE) has been active all day and talked about quite a bit by the media talking heads today. Of course, it has "bellwether" status, as, at least under Neutron Jack (Welsh) now departed from the CEO suite; i.e., it has been seen as a stock to watch to "confirm", sometimes lead, moves in the S&P. The stock price, killed by last week's revenue miss, declined for a third session. GE was off the most of any Dow stock (-5%) -- how the mightly have fallen, but so did the Trade Towers.

What seemed to help push GE lower today was a New York Times article questioning the sustainability of the conglomerate's earnings growth. You can check the story at www.nytimes.com -- you need to register & get user name & password, but it's free. And, unlike the paper itself, the mother of all newspapers, the web HAS cartoons, including my favorite Doonsbury -- at least it used to me one of my favs, but it seems to have lost its funny bone lately. Technically, GE has retraced more than 62% of last upswing & looks like it will do a roundtrip back to its Sept.lows in the 28.6 -30.4 area. Bring back Neutron Jack!

 
 
  Leigh Stevens   4/15/02,  4:39:31 PM
Texas Instuments (TXN) is due to report shortly and this will the first big chip maker to report. Mother Merrill said it expects TXN to report revenue of $1.8 billion and break-even bottom line results after the close. Their report went on to say that "We also expect to hear that order growth for the company was strong during the first quarter." Of course, everyone KIND of wonders if Merrill is just saying that and the same analyst is e-mailing his select client list and complaining about how their profit picture is still Micky Mouse. Stay tuned.

FLASH! > EPS was expected to be 0 and they actually were +.01. No big deal on the face of it. Technically, the stock looks like it hit support last week & is rebounding a bit.

More BIG tomorrow, Intel Corp. (INTC) is due to report tomorrow. Consensus is for 15 cents. Last month INTC guided revenue estimates to between $6.6B & 6.9B - consensus is around 6.8B. Technically, chart looks fairly awful. best that can be said is that stock has completed a 50% retracement.

 
 
  Eric Utley   4/15/02,  3:56:26 PM
There's kind of an exciting battle brewing here in the SOX as we near the close of today's trading. I don't think that it's any coincidence that the SOX stopped Link where it did today. The same could be said for the Semi Holdrs (AMEX:SMH) at $44.50: Link

These types of positions are always fun. The way I see it, there's either a gap above the 575 level coming tomorrow, or a reversal from here and a test of short-term support, followed possibly by a breakdown. Novellus (NASDAQ:NVLS) reports tonight, and if you recall they guided higher a few months back. They could be the catalyst to induce the next leg of short covering in the chips (which is what I think we saw today) or the reversal.

 
 
  Eric Utley   4/15/02,  3:46:22 PM
Reader pointing out the battle in Cisco (NASDAQ:CSCO) at the $15 level. I don't see much from the technical standpoint, thinking it's more a psychological level than anything. Chambers is on CNBC tonight, and by the way they're billing it, the appearance sounds like a REG FD sort of event. It sounds like he'll be disclosing some pertinent info.

 
 
  Eric Utley   4/15/02,  3:28:21 PM
General Electric (NYSE:GE) reporting that it will reduce payroll by 7,000 this year...

 
 
  Mark Phillips   4/15/02,  3:09:01 PM
While it isn't a true second "inside day" like the one in IBM, there is an interesting setup on the daily chart of Goldman Sachs (NYSE:GS), which is currently featured on the OIN Put List.

Friday's action gave us an inside day, as price stayed well within that large red candle on Thursday, with a high of $84.10 and a low of $$81.24. The stock is weak again today and so far, trading has once again remained within Thursday's range. Pressure is building as the bulls and bears slug it out in this fairly narrow range and when it breaks, the move could be rather explosive.

Right now, the bears appear to have the upper hand and that will be confirmed with a trade below Thursday's low. In this market, it is easier to manage risk on a rollover from resistance than on a break of support, so I would currently favor entries near the $82.75 area where intraday resistance has been building for the past 2 days.

Regardless of which entry strategy you choose, stops should be set at $84.10. A move above that level would resolve the chart pattern in favor of the bulls.

 
 
  Eric Utley   4/15/02,  2:49:23 PM
A smart reader pointed out a second consecutive inside day in IBM (NYSE:IBM) today. The stock is fractionally lowr today, trading just above the $85 level. The second inside day reveals indecision on the part of traders: It's either a pause before a continuation of the short-term descending trend, or a reversal of short-term trend.

I think using IBM as a broader guide for technology is a way to use this stock's inside days as well. Its weakness today is peculiar in light of the out performance of the Nasdaq-100 (NDX.X), because NYSE listed stocks tend to trade more true than Nasdaq stocks. A breakdown in IBM below the $84.40 mark could increase bearish tech conviction, while a breakout above $87.96 could reduce bearish conviction, or increase bullish tech conviction.

 
 
  Eric Utley   4/15/02,  2:25:10 PM
Boy, this SOX doesn't want to breakdown today. Doesn't look good for my bearish bet...

 
 
  Leigh Stevens   4/15/02,  1:46:26 PM
I also turned tenatively bullish on the Semiconductor Index ($SOX.X) in my Index Sector wrap up at Link based on the SOX coming down, in a third "touch", to an up trendline dating from the Sept. lows. Now, there are two possibilities here of course - the Index can rebound from the trendline or fall through it. It looks to me like the Index can hold this support trendline, which is being bourne out somewhat today. However, before suggesting a trade in a represenative stock in this sector and/or in the SOX options, I suggested that we ought to see some further price action this week. Today's strength suggests that SOX recent lows was from an area of support & buying interest and the index will continue to rebound. SOX still needs to clear 582-582.5 to achieve a bullish break out ABOVE the current down trendline.

 
 
  Eric Utley   4/15/02,  1:43:29 PM
An intraday double-top at 570 in the SOX seems a bit too cute for me, but I'll take it. Still playing it tight...

 
 
  Leigh Stevens   4/15/02,  1:35:36 PM
Re Level 3 (LVLT) - over the weekend I suggested a play on the June 5 Calls for a limited upside objective -- this was one of several trading ideas I discussed in the Index Sector wrap up for week ending 4/12 and posted yesterday at Link The suggestion on LVLT is definitely a counter-trend trade as the stock's major and intermediate-term trend is clearly down -- only the minor trend is up right now. The trade is a represenative or "proxy" sector-play, based on the Telecoms Index ($XTC.X) having reached the low end of a broad downtrend channel -- the Index could fall through the low end of this channel, but previously when it fell to this line, there has been a trading rally from there. Eric, or others here, are not always immediately aware of my most current commentaries, nor am I of his. Also, from time to time, we come to different conclusions on the same stock, also depending on the time frame and objective being targeted in a trading idea.

 
 
  Eric Utley   4/15/02,  1:14:03 PM
A reader pointed out that Leigh had adopted a bullish bias on Level 3 (NASDAQ:LVLT) over the weekend in his Sector Trader piece, which obviously contradicted my earlier remarks. I apologize for any confusion that I may have caused readers, and I didn't mean to disagree with Leigh.

Leigh's style and approach are different from mine, so we're going to see different things in the same stocks. Which side you choose is probably dependent on which style you identify with more closely.

 
 
  Eric Utley   4/15/02,  1:08:27 PM
Quite the reversal taking place in the SOX since making my last observation. The 5 minute chart shows an intraday V-bottom, which caught me completely by surprise. The real test on this way back up is once again the 570 level.

In watching the tape, I can't discern if this rebound is short covering or selling exhaustion. In either case, keep your discipline about you.

 
 
  Eric Utley   4/15/02,  12:01:37 PM
Reading asking for opinion of Level 3 (NASDAQ:LVLT), which probably should have changed its name to Level 1.

The stock has spent the last several months building somewhat of a base Link , but it's still trading near its long-term bearish resistance line without yet really breaking above it.

I'm not interested in shorting a sub $5 stock, but I think it's the right sector to be bearish on. From a bullish perspective, I'd avoid the stock. There are so very many other places in the market that are easier to employ a bullish bias in. If you're thinking bottom fishing, I think you're better off spending the $4 per share on lottery tickets. The way I see, there's still $4 of downside risk in LVLT.

I have no problem changing my bias on a sector or stock, but I haven't seen any reason to shift from bearish to bullish on any telecom stock.

 
 
  Eric Utley   4/15/02,  11:50:45 AM
Dow Jones News Wires reporting that the FBI issued a warning for Washington D.C. banks that is credible. Reportedly, there's a bomb threat.

 
 
  Eric Utley   4/15/02,  11:42:13 AM
Bailey's been bearish on J.P. Morgan Chase (NYSE:JPM), which in my opinion, was smart. The banks are trading somewhat heavy, and Morgan is one of the heaviest. Plus it's at risk by what's going on with the brokers and Mr. Sptizer, the N.Y. AG.

Prudential -- a long time bear on JPM -- raised its rating from sell to hold, citing Morgan's strong fixed income business. That change in rating had some big short covering coming into the stock this morning. But JPM has since reversed, and is now trading at its day low, giving up more than $1.15 from its opening. The way this stock has responded to the Pru updgrade has me thinking that there's still a big seller here, and that the risk remains to the downside.

 
 
  Eric Utley   4/15/02,  11:33:49 AM
I received a good reader question concerning Providian (NYSE:PVN). Jim's been bullish on this one for a while, so I think it's worth a look.

PVN came out of a bullish triangle Link in early March with its rally above the $4.75 level. Before that, though, it generated a buy signal in January. That buy signal -- the first following the most recent sell signal -- generated a vertical count of $9.50.

If you already have some good gains in this stock, which is likely if you were in a few months back, then using the $9.50 level as an upside target makes sense. But that target shouldn't come without downside risk management. You need to have a stop in place somewhere along the recent ascending trend.

Also, play around with some retracement levels to find stop levels and upside targets. There's a lot of past pain in this stock (gaps) that needs to be retraced. Use different fits to find intelligent levels.

 
 
  Leigh Stevens   4/15/02,  11:33:34 AM
Support & Resistance - Indexes: Nasdaq Composite (COMP) - Support > 1724-1725, at recent prior intraday hourly lows; then, 1705-1707, at low end of hourly downtrend channel; Resistance > 1769-1770, at a cluster of recent hourly relative highs, an area previously had offered support; Nas 100 (NDX) -Support > 1322, at recent low; then, 1308, at low end of hourly downtrend channel; Resistance > 1364-1368; then, 1380; QQQ - Support > 32.90; then, 32.50-32.60, at lower downtrend channel boundary on hrly chart; Resistance > 34.00-34.30, then,35.00 at top end of currently hourly downtrend channel;

 
 
  Eric Utley   4/15/02,  11:26:25 AM
We're seeing nice moves lower in each of the Semi-related profiles. The SOX is currently trading at its day low. But it's far too early to declare victory with any of these positions.

What I like is that we got in near levels where risk was easy to manage. Now that we have a little bit of cooperation from the market, we can set tight stops and let the position work in our favor.

As for me, I went with the Semi Holdrs (AMEX:SMH) outright. Good luck.

 
 
  Leigh Stevens   4/15/02,  11:16:15 AM
Support & Resistance - Indexes: - I have some broad areas of support (& strategy ideas) on all the major indices in my weekly wrap up at Link A further update on DJIA - Support > 10,100; then, 10,000-10,050 at lower boundary of the current downtrend channel; Resistance > 10,200, what was previously support; S&P 500 (SPX) - Support > 1100-1102; then, 1097, at the lower end of the current hourly downtrend channel; Resistance > 1112 - 1115; S&P 100 (OEX) - Support > 545-546 area, at lower boundary of hourly downtrend channel - this is also the area of the lows made at the late-Feb/early Mch bottom; Resistance > 555 - 558;

 
 
  Leigh Stevens   4/15/02,  10:42:16 AM
Oil Market - Nearby crude futures are up about 50 cents; Hugo Chavaz, deposed President of Venezuela is back! I can't believe it - they should have let him go to Cuba!

The fall in crude prices on his fall was quite a bit more than the rebound today. Looks like oil is on a downward trend, on balance. However, Chavaz's hawkish stance on oil prices, brings back another wild card in this market. Right now, the state oil company there is back on line and will be again shipping oil, which brings more supply into the market -- which is why prices have not jumped all that much.

The Oil service index (OSX.X) is the top gaining sector today so far, up about 4%. The Oil Index (OIX.X) is also up, about 2%. The Natural Gas index (XNG.X) is up 1.7% right now.

 
 
  Eric Utley   4/15/02,  10:41:03 AM
The way that I'll most likely put on this trade is through the Semi Holdrs (AMEX:SMH) outright. If I were going to use the options, I'd go out to May contracts at the 45 strike. That's because if the SOX breaks the 550 short term support, I think it has downside over the intemediate-term to 500, so I'd want to be there with time to take advantage of the move.

 
 
  Eric Utley   4/15/02,  10:35:04 AM
Teradyne (NYSE:TER) is one stock that correlates pretty well with the SOX observations. Here's the view from the PnF chart: Link But what I'm really focusing on is the shorter term chart, using a 0.50 point box, which makes the chart look like this: Link The one problem is that TER reports tomorrow morning; Soundview was out this morning ahead of the release saying that bookings were coming in strong.

Micron (NYSE:MU) might be another way to put on the trade as the stock has assumed the weak sister role in the SOX. MU's been on a relative strength sell signal versus the SOX since March: Link

I also like the ease of risk management Link associated with Xilinx (NASDAQ:XLNX) on its 0.50 point box, but the story changes on the traditional chart: Link

Perhaps the Semi Holdrs (AMEX:SMH) is the best way to initiate this trade. Using the 0.50 point box for the SMH really reinforces the short term descending trend Link that is in place. Here's another example of easy risk management, while downside can be defined short-term at $43, or longer term to $36.50, which is the current vertical count on the 0.50 point.

 
 
  Eric Utley   4/15/02,  10:17:46 AM
The Semiconductor Index (SOX.X) is testing its bearish resistance line Link at 570. I think a very short-term bearish position can be tried here with the SOX at resistance. Upside risk is pretty easy to manage using a mental stop in the SOX at 575 or 580, depending on how much risk you want to take. But using a mental stop requires discipline; if you don't have it, don't try this trade. More to follow...

 
 
  Eric Utley   4/15/02,  10:00:38 AM
Dow component General Electric (NYSE:GE is under heavy selling again today. The stock is lower by about $1, the worst performing Dow component so far. I have retracement for this one at $31.25, where it looks to be headed in the short-term.

As an indicator, GE may portend further weakness for the broader market.

 
 
  Eric Utley   4/15/02,  9:50:26 AM
The one sector that sticks out to the downside this morning is the Housing ($DJUSHB) group. The index is now lower by 1.86 percent.

 
 
  Eric Utley   4/15/02,  9:49:42 AM
Aside from energy, the strenth is concentrated in the technology segment. The Semis (SOX.X) and Opticals (FOP.X) are leading higher, but I'm noticing the Software (GSO.X) shares slipping into negative territory.

 
 
  Eric Utley   4/15/02,  9:48:18 AM
Energy bounced back this morning after the sharp sell-off last week. Venezuela's president is apparantly back at the helm, which has crude rallying. The Oil Service (OSX.X) is better by 3.40 percent this a.m.

 
 
  Leigh Stevens   4/15/02,  9:34:55 AM
ON THIS DAY in 1912, the "unsinkable" Titanic SANK. The doomed ship was the largest in it's day. This sinking will always live in infamy and reminds us of what happened when NASDAQ went above 5,000 and hit a dose of reality after that. In honor of sinking spells, take a moment of silence today in rememberence of Internet bubble stocks that had no earnings, no business plan, and no prospects.

 
 
  Leigh Stevens   4/15/02,  9:26:26 AM
More on the economic calandar -- I forgot to mention that the Fed head (the wild & crazy Mr. Greenspan) will have some testimony day after tomorrow and leading indicators will be on Wed. The inflation number I mentioned is the CPI number due tomorrow. CSB came out with a positive report on Oracle (ORCL) and the stock is due a bit higher -- thank goodness. I own in my IRA, one of my underwater tech stocks.

 
 
  Eric Utley   4/15/02,  9:25:37 AM
FYI Jeff Bailey is on vacation again today. I'll be filling in again. Please send your questions to me. Thanks.

 
 
  Leigh Stevens   4/15/02,  9:21:03 AM
Citigroup (C) reported first quarter earnings that were short of expectations, whereas Bank of America (BAC) was above Q1 expectations -- thanks to low interest rates (not on my Visa!) and higher deposit levels. Eli Lilly (LLY) had profits that matched consensus estimates. Their orofits were under a year ago, du to a decline in Prozac sales as there is apparently some competition from generics in this category. Enough to drive drug makers to drink.

 
 
  Leigh Stevens   4/15/02,  9:14:49 AM
It's showtime! Good Morning & Happy Tax Day! -- I can't say I'm happy with the taxes I owe, due to receiving some royality income without withholding.

The market is due slightly higher this am. DJ futures are up about 21 pts., NAS futures + 8, S&P 500 up maybe 2 pts, etc. Nothing to write home about. Jeff Bailey is off today, in tomorrow.

A big batch of earnings announcements will hit this week, starting today -- also, economic reports, such as industrial production and capacity utilization figuresi and a check on retail inflation.

 
 

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