Option Investor
Printer friendly version
  Jeff Bailey   4/30/02,  4:07:07 PM
That isn't good just saw Oracle (ORCL) $10.04 -3.7% and new 52-week closing low. That's kind of ugly if you're a software bull. Not too many winning bulls in this one.

News was that Senior VP of Oracle product industries and Latin America sales, Sebastian Gunningham, decided to leave the company to take a position with a small software company based in Miami.

  Jeff Bailey   4/30/02,  3:59:27 PM
Applied Materials (AMAT) $24.27 +1.37% ... will make note today that stock rallied right to its 50-day MA at $25.21 and couldn't advance. Link and tie in with Semiconductor Index (SOX.X) rally to its 200-day MA. Link

Looks for bears to leverage off this and use to correlate. Conversely, bulls have potential setup for looking long on moves higher.

  Jeff Bailey   4/30/02,  3:51:53 PM
Into the close bulls are going to want to see the Dow Industrials (INDU) 9,939 +1.2% close above the 200-day MA. They couldn't pushthe 10,000 envelope and will most likely feel the day was wasted if they can't push a close above the 200-day. Link

  Jeff Bailey   4/30/02,  3:46:02 PM
Veritas (VRTS) $28.53 +0.88% ... Jeff, Any thoughts on VRTS? Getting close to OI recommended put stop price! thanks.

This one looks very similar to GSTI Software Index (GSO.X) from today's intraday update. Retracement from $49.90 to $17.76 has 38.2% as resistance at $30.04. Similarity found from regression channel and how stock sat right on lower end of regression channel for 1,2,3,4,5 day. Yep 5-days. Now you get a little broader market short covering and stock pops a bit, but not nearly what you saw in the GSO.X today.

Not sure where OI profiled this one as put, or what the subscriber holds, but if current month option, would look to take off the table on weakness near $27.

Reason I would be looking to take off the table is that stock exceeded bearish vertical count, so tough for me to think in terms of longer-term downside.

  Jeff Bailey   4/30/02,  3:33:26 PM

My opinion is that I think it will take one hell of a rally in the NASDAQ to get this stock going. $7.48 +3.47%? I would have thought up 15% with the NASDAQ-100 up 2.87%.

  Jeff Bailey   4/30/02,  3:30:30 PM
Wondered if you had any thought on HC ever breaking out further to the upside. It looks like it lost a little steam after that initial jump from the $16 - $16.50 area. Noticed a bunch of the HCEW (may 17.50) go off today. Do u think some one is writing calls agianst position? Would really appreciate your input.

Was looking at Hanover Compressor (NYSE:HC) $18.59 +1.75% last night. I've had retracement from $30.03 to $10.63 since first profile at/near $18. This has 38.2% at $18.04 (serving as support yesterday) and 50% at $20.33 (serving as resistance 04/04 and $16.39).

Near-term, I'm pleased to see the rebound today as the 50-day MA approaches from underneath. Looks for stock to trade sideway between $18.04 and $20.33 as MACD approaches the zero level. I'm looking for "next leg up" to 61.8% retracement of $22.61, which also correlates with 200-day MA. If institutions are accumulating, then current levels should be the place.

Natural gas prices are the key to drive compressor sales/leases and June Natural Gas futures (ng02m) as monthly highs of 3.77 +5.86%.

I looked at the call volume, and looks retail to me (smaller sized lots of 2, 6, 10, etc. nothing big like 1,000 size).

  Leigh Stevens   4/30/02,  3:13:39 PM
Index Update: The market has been behaving very predictably in a situation like this -- an oversold technical rally without much conviction. What is a bit surprising is the the "lead" being provided by the tech sector, Nasdaq. COMP, NDX and QQQ are consolidating on their 30-min charts -- the appearance of the pattern being traced out is a bull flag. This allows a measure for a "minimum" upside objectives in the Nas indexes, assuming there is an upside penetration of the top of the flag, which becomes the "breakout" point. The subsequent "swing objective" is activated by a move through the breakout point. The 3 swing objectives follow, followed in turn by the breakout point. Minimum obj assuming a move that pierces the upper "line" of the flag formation:

Nas Composite ($COMPX) > 1730 = "minimum" upside obj. assuming a near-term advance thru 1694; NDX: 1335 is min. obj. assuming an advance beyond 1290; QQQ: minimum obj > 33.2 assuming an advance thru 32.1

  Jeff Bailey   4/30/02,  2:46:55 PM
Semiconductor Index (SOX.X) 527.6 +2.11% .... traders note sector off best levels of the session. Looks to be some hesitancy at the still trending lower 200-day MA. Near-term, would have looked for this sector to have shown most power in "bull rally." Link

Retracement from 685 to 344 ahs 50% serving as support at 514, with "psychological" at 500. 61.8% at 555 near-term resistance. A bull without conviction most likely hesitant here, thus lack of follow through at 200-day MA.

  Jeff Bailey   4/30/02,  2:13:51 PM
Imclone (IMCL) aggressive bull looking for a bottom feeder might look long here short term and target $19.50. Stock held the $14.50 level and has tendancy to put together nice little bounces. Link

Would only consider 1/4 or 1/2 bullish and the May $17.50 calls (QCIEW) $0.95. Again, selling the $19.50 level on rebound, no questions asked.

According to Dorsey/Wright and Assoc. biotech sector is "oversold" and "bear confirmed" at 24.39%.

Thinking bears have brunt of risk in sector and IMCL has found buyers/rebound from current levels in the past.

  Jeff Bailey   4/30/02,  2:09:42 PM
NASDAQ-100 Breadth improving into the session. Currently have 12 down and 88 up. Benchmark against 10:47:18 of 18 down and 82 up. Largest gainers now show MLNM +8.9%, IMCL +9.07%, WCOM +8.09%, VRSN +8.5% and PSFT +8.13%.

  Jeff Bailey   4/30/02,  2:05:02 PM
Medtronic (MDT) $44.33 +0.06% ... Would appreciate your comments on this stock if time permits.

Very similar supply/demand as Cardinal Health (CAH), but bar chart a little more bearish as stock seems to trade back and forth of 200-day MA like it isn't even there.

I'm still bullish on MDT and risk/reward much the same as CAH longer-term.

Short-term trader most likely has stop under the 03/05/02 low of $43.38. Link

Point figure still bullish and above trend. Vertical count bullish to $76 and still intact, unless trade at $43, which would cancel this bullish count.

I've said before that "the first sell signal in the upward trend" is often times a buying opportunity. This may be tested in the MDT p/f chart.

Relative strength versus the S&P 500 still strong and would read "buy signal and column of X." Link

  Jeff Bailey   4/30/02,  1:53:32 PM
Tyco Intl. (TYC) $18.70 +9.7% ... Today's conference call has CFO saying previously given full year guidance was/is conservative; the guidance does not assume a strong improvement in margins, while factoring in "distraction" costs. Link

  Jeff Bailey   4/30/02,  1:43:31 PM
Biotech Traders will note that Biotech HOLDRS (BBH) 99.78 +1.76% and Biotech Index (BTK.X) 436 +4.02 has index outperforming HOLDRS. This is due to ICOS (NASDAQ:ICOS) $26.25 -32% being component of HOLDRS, but NOT a component of the BTK.X.

  Jeff Bailey   4/30/02,  1:38:09 PM
Treasury Watch 10-year YIELD ($TNX.X) 5.112% and up marginally. Not seeing a mad rush out of this bond today. MACD does give hint that bond may be poised for a move higher, but most likely takes a bolder move above the 5.2% level for most stock bears to feel some competition of cash perhaps rotating to stocks. Link

Note to subscriber.... yesterday I got an e-mail from a subscriber that felt the Treasury bonds were seeing some selling, but he didn't see any stock price action to the upside. That subscriber should perhaps make note of today's action, write it in his logbook. We've seen similar action before.

Today's Treasury action also hints that current stock market action is largely due to short covering. Bull trading technology long enters with short-term in mind and willing to cut on any weakness or when target is achieved.

  Jeff Bailey   4/30/02,  1:21:52 PM
Good morning, Jeff............ got stopped out of dyn this morning(100%) in 4 days...not too bad!...kicking myself for letting alot more go this morning!!!....(wishing I would have used the 15.55 stop you mentioned yest!)......and wouldn't you know it made a morning star this morning(just learned that from mark article last evening!!!)...hummmm, maybe a new way for me to protect more profit!!!!.....so, how do you feel about dyn now?.....are you moving on to better things?...or looking to re enter the trade later?

Good Trade! Don't frown on that type of gain.

With DYN at $17.23 +24%, and piercieng the $17.21 level (rolled down retracement from $32 to $8.07 gave us a lower 61.8% at $17.21), trader that has taken profit from $20 break sits hear and looks for MACD to round out and trend higher. Market may want to try and put together little rally for a couple of days. Then may trade a decline in DYN from the $20 if good setup or "inside day" type of action.

I'm also "thinking" about fine tuning my retracement a little. Wondering why stock found its low at $13.70 yesterday. Who's watching that level and why?

  Leigh Stevens   4/30/02,  1:00:19 PM
Subscriber QUESTION: "Hi, PSFT and KRON have been in negative territory most of day while SAP remains positive. what are your feelings short term for sap?"

RESPONSE: Short or longer term for SAP, Sap Aktiengesellschaft (a mouthful!) is similar. Stock was showing loss of upside momentum on its recent break below its 200-day moving average. SAP is now at low end of its multimonth trading range. Needs to hold above $31 and probably go sideways for a while, before it would likely get something going on the upside. Below 31, chart is bearish. Key resistance is 35. We may be looking at a re-test of lower support at 27.5. If so, new range for the stock may be 27-35.

  Leigh Stevens   4/30/02,  12:41:57 PM
Subscriber QUESTION: "What do you think of the June 40 put on NBR? Daily looks ready to rollover at 21 setting. Also, someone traded at block of 1000 XAUQM earlier today at .40 or .50. Would love to know if that was smart money getting out or buying in. Of course it could have been a put SALE...but hard to believe there's a lot of upside left on XAU with stochs pinned in overbought."

RESPONSE: The reverse of catching a falling "knive", to buying a stock that's falling sharply, is trying to short or buy puts on stock in strong uptrend like this one -- Nabors Industries (NBR), which is in the stong Oil Services sector ($OSX.X), also in a solid uptrend. Wait until the trend reverses for put plays. That said, would also note a bearish RSI and volume divergence, as these secondary indicators are not "confirming" the continued move higher. $49-50 is the top end of upside price channel. Break of up trendline would occur only if 42.3 was pierced.

XAU (Gold & Silver Index - $XAU.X) comment -- pretty much the same - strong MOmentum is key. Hard to predict when momentum will reverse. No technical negatives that I can see once nearby gold futures went to new highs. XAU is overbought, but this is not unusual in any market that has strong MO.

  Leigh Stevens   4/30/02,  12:18:50 PM
Subscriber Question: "From Feb to now there appears to be a head and shoulders top in the OEX. If it breaks below 544 or so would you agree?"

RESPONSE: It is not a "classic" H&S pattern, as the Head (H) is so far above the possible Shoulders (S). But someone else might say, yes, H&S top! Lets assume it is and that the break of possible neckline at 545 is significant to measure downside price target. If this pattern IS valid H&S, we should NOT regain or get back above 545 in OEX. And, a "minimum" downside objective would be from top of "head" at 595 minus neckline level at 545 = 50, subtracted from 545 = 495; 500 area is a longer range downside objective based on other things I see on the weekly chart per my Index Sector weekly commentary (4/28).

  Jeff Bailey   4/30/02,  12:02:45 PM
Can you give a hint as to what might be happening with CAH? Just not participating

Stock trading unchanged. Trade at $68 this morning tested April 5 low and bullish support from p/f chart. Vertical count is bullish to $89. From current levels, risking $1.80 to potentially make $21. Link

  Jeff Bailey   4/30/02,  11:55:09 AM
Jeff, Could you look at Qcom. I bout the june 30 puts when it was 32. It went to 29 and is now recovering. Any thought for the next 2 months?

Stock traded a new 52-week low yesterday. Obvious short-covering candidate. Point/figure is bearish with vertical count of $25. First sign of trouble for bear is trade at $41. Link

On bar chart, I have downward regression channel from the December highs. This has lower end of channel at/near $23.88, mid-point just above current levels at $31 (look for resistance or place a stop) and upper end at/near $38.

Trader should understand that QCOM is 1 of 100 stocks in the NASDAQ-100. With NASDAQ-100 Bullish % ($BPNDX) Link at "oversold" levels of 28%, bears need to be cautious in this part of the market. As such, would not want this trade to turn into loss and would have stop minimum of break even.

What you've done by at least short/put a weak stock in a weak sector is most likely given yourself the "chance" that the stock remains under distribution and not subject to additional bullish buying. You just have to "worry" about the shorts covering. If bulls were buying, then stock wouldn't have traded a 52-week low yesterday.

  Jeff Bailey   4/30/02,  11:45:12 AM
Could you please comment on the defence sector? Do you think it is a good place for a long to be in the next six to nine months? More specifically, what do you think of LLL as a long/call play?

While I "think" defense is good area for next 6-9 months, I will continue to test along the way. I see nothing in the newspapers or media form the Middle East to tell me differently. Govt. spending in sector has been rising.

For LLL $126 +3.2% ... stock continues to trade strong. I've "fit" a regression trend from the 09/17/01 lows and to the 10/08/01 highs. This regression channel currently has upper end at $130. That said, would continue to be bullish here, but for new bull to stock, only 1/2 position.

Point figure chart remains bullish longer-term and vertical count is bullish to $164. First sign of real trouble comes at $106, which would be spread-triple bottom sell. Link

  Jeff Bailey   4/30/02,  11:31:27 AM
could you take a look at expe. it gapped up about 5 days ago, was as high as 83(i shorted it then --puts) and now it is under 79, with daily stochastic and hr macd turning bearish. i think it should at least fill gap to around 72, but do u have any thouhgts since it has run awful far quick

Tough enough to short/put weak stocks and short/put strong stocks even tougher. Need a very weak market is my thinking to have this one turning back as demand is in control. For now, look for a pullback to the 50-day as a "gift" and be ready to close out (if it happens). Would consider this put play a lottery play. Link

Point figure chart has been bullish and has exceeded bullish vertical count of $67. I have stock as "internet" and according to Dorsey Wright and Assoc, sector is "bear confirmed" at 28%. Obviously, stock is not reflecting sector and most likely has bears in stock wishing they were not. Link

  Jeff Bailey   4/30/02,  10:47:18 AM
NASDAQ-100 Breadth is posititive with 82 up and 18 down.

Gainers are CEFT +7.3%, CTXS +5.47%, VRSN +4.8%, MXIM +4%, GILD +3.9%, IDTI +3.9%

Losers are ICOS -34%, SEPR -8%, WCOM -5.6%, CHTR -4.7%, ADLAE -4.7%, GMST -2.65%

  Jeff Bailey   4/30/02,  10:39:37 AM
Dow Breadth is positive with 23 up and 7 down. Gainers have BA +3.3% (aerospace/defense), CAT +2.5% (machinery), IP +2.29% (forest paper), JPM +2.4% (broker/dealer) and UTX +2.56% (aerospace/defense).

Losers are AA -1.2% (aluminum), MRK -1.04% (drug),

  Jeff Bailey   4/30/02,  10:31:58 AM
Kronos Software (KRON) $40.18 +0.92% ... stock finding some near-term resistance at 200-day MA, so bear still looking OK here. Link

GSTI Software Index (GSO.X) 131 +1.69% shows technical recovery from lower end of downward regression. This is "negative" for short in KRON right now as it hints that bears will be locking in some gains in sector. Question is will KRON be on their list or bulls still looking to sell?

Conversely, "fellow" stock SAP (SAP) $31.77 -0.71 showing negative DIVERGENCE to rally and sector, thus has me thinking some bulls looking to lighten up still. Link and this bodes well perhaps for KRON bear.

  Leigh Stevens   4/30/02,  10:31:36 AM
Index Update: DJX - late to the party here, has also broken out above the pivot or resistance point I highlighed earlier at 98.75-99. It now has the pattern of its brother (sister?) indexes, with a bullish minor chart breakout with crossover type buy "signals" on the hourly stochastics. The daily 14-day stochastics are now also on buy signals in the laggard Dow, as well as all the other indices.

  Jeff Bailey   4/30/02,  10:26:42 AM
Macromedia (MACR) $22.69 +1.97% ... stock we mentioned as bullish on Friday. Has been setting higher daily lows. I like still, but 1/2 positions currently to see if NASDAQ can build some bullish sponsorship instead of just bears covering. MACR appears to have both bull and bear's buying, thus I'm more bullish on the name. Link

Trader's target is $27.00 with stop under $21.00.

  Leigh Stevens   4/30/02,  10:24:30 AM
Bond Market Update - Yields on the 5 and 10-year notes fell enough early last week to cause a break below their daily chart up trendlines. Today, yields are climbing back, contining a rebound of the past 3 sessions. I don't see the rally lasting as the longer term pattern on the bond charts suggests that yields are on a downward course on balance. Falling yields should help the Market over the coming weeks and months, as some money shifts out of Treasuries and into equities.

  Leigh Stevens   4/30/02,  10:15:36 AM
Index Update: Spill over buying has come into the S&P 100 & 500, with the OEX achieving a minor break out above its hourly down trendline. Momentum oscillators are on a buy signal. Ditto, SPX. Well, I don't believe it either, but it was a no brainer to expect a rally at this juncture. Here it is, but the key will be to see what kind of MO it gets going. Initial short-covering is not enough. Some other bargain hunting type buying also has to appear.

  Leigh Stevens   4/30/02,  10:07:39 AM
Consumer confidence shows attitudes about the U.S. economy took a hit, according to the Conference Board that tallys these numbers. Sentiment about the economy fell to 107, from 111.5, while the "expectations" index dropped only slightly, to 110.0 from 110.2. Consumer confidence is showing great resiliance, which is probably what is keeping this little liftoff going in tech.

  Leigh Stevens   4/30/02,  10:02:41 AM
April Consumer Confidence index is released at 108.8, down from 110.7

  Leigh Stevens   4/30/02,  10:00:45 AM
Index Update - I started to say that OEX was also getting a little move going but I was looking at the wrong chart! Time for more coffee. The other related non-tech indices -- S&P 500 and DJIA -- continue in the same pattern of no real buying interest. No traction in these stocks, whereas the former tech darlings, led by an oversold dead cat bounce in the SEMI's (SOX), are the recepients of a little attention. It's unlikely that Nasdaq is going to do much without the S&P. More likely the continued drag on the S&P could keep a lid on the other groups, rather than Nasdaq pull up anything. Its like the comdedy when more and more people try to get on the lone helicopter that is trying to lift off -- no way is it going to get off the ground.

  Jeff Bailey   4/30/02,  9:58:23 AM
Micron Technology (MU) $25.40 -3.96% ... Received notice from the Hynix Semiconductor board of directors that it has declined not to accept the restructuring plan proposed by the Nynic Creditors' Council. As a result, the previously announced Memorandum of Understanding signed by Micron, Hynix and Hynix Creditors' Council representatives for the sale of Hynix's semiconductor memory operations to Micron did not become effective. Link

  Jeff Bailey   4/30/02,  9:52:11 AM
Dynegy (DYN) $14.66 +5.84% ... reported Q1 of $0.41 per share, in line with consensus. Revenues fell 37.3% to $8.89 billion versus the $10.29 billion consensus. Company expected to close today a new $900 million revolving credit facility, increasing its liquidity to $1.4 billion. DYN believes that this level of liquidity is sufficient to operate its business under any conceivable circumstance. Link

  Leigh Stevens   4/30/02,  9:51:06 AM
Index Update - Nas 100 and QQQ are moving above their hourly downtrend lines and the COMP is threatening to. Upside crossovers are ongoing in the short (5) and longer term (21) hourly stochastics. Of course, when these things get so oversold, almost a sideways move is enough to get these momentum oscillators moving up. Its the nature of the way they are constructed.

  Jeff Bailey   4/30/02,  9:48:17 AM
Idex Corp. (IEX) $35.92 -1.45% ... company reports it has priced 5 million share stock offering at $36.00. Link

  Jeff Bailey   4/30/02,  9:43:59 AM
Precisions Castparts (PCP) $33.80 +1.25% ... reports Q4 earnings of $0.93 per share, $0.22 better than consensus. Revenues rose 0.2% to $631.3 million versus the $604 million consensus. Link

  Leigh Stevens   4/30/02,  9:43:19 AM
Pivot points where the Indexes might get some minor MO going if they got ABOVE them are: SPX - 1070; OEX - 530; DJX - needing to climb above 98.75-99; COMP - 1665; NDX at 1250-1251, minor resistance that NDX hasn't surmounted in early trading; QQQ - pivotal near-term resistance is in 31.20 area, which has just deflected the Q's already in a very minor rally attempt.

  Jeff Bailey   4/30/02,  9:37:40 AM
PACCAR (PCAR) $71.87 +0.37% ... reported Q1 earnings of $0.61 per share, $0.05 better than consensus. Revenues fell 0.8% to $1.40 billion versus the $1.44 billion consensus. Link

  Jeff Bailey   4/30/02,  9:33:40 AM
Consumer Confidence and Chicago PMI are due out at 10:00 AM EST.

Consumer Confidence has economists looking for a reading of 108.7. Michigan Consumer Confidence was slightly lower than expected. With NASDAQ-Composite lower in recent weeks, would expect the same from today's Consumer Confidence.

Chicago PMI has economists looking for a reading of 55.0%.

  Leigh Stevens   4/30/02,  9:27:18 AM
Sentiment numbers from yesterday, in terms of put volume relative to call activity, is not encouring for a bottom. Selling pressure may be heavy, with 2 back to back days of the Arms Index or TRIN above 2.00, but that doesn't mean the option players were socking puts away to profit from more downside.

Daily call volume for Equities options on the CBOE was nearly 1 and a 1/2 times that of put volume, whereas typical of bottoms is closer to 1 to 1. The CBOE volatility Index (VIX) is on a roll however, as fear is taking hold. The VIX has moved sharply off its recent lows, under 20, closing yesterday at 26.11. At this rate it will be up in the 30 area soon, a level more commonly seen at tradable bottoms.

Excessive on the upside 2 years ago, excessive on the downside. Loss of faith in those nice pretty looking (usually bullish) research reports from the likes of Merrill Lynch, is not helping Main Street open its arms agin to Wall Street. Once burned, twice shy.

  Leigh Stevens   4/30/02,  9:10:52 AM
Good Morning! It's showtime! Hard to believe that the WorldCom CEO, Bernard Ebbers, who has just resigned, got a $366 million dollar loan from his compnay. A shocking turn of events says the talking head. Maybe he was doing his version of debt consolidation! Meanwhile the stock, most active yesterday, is going down to nothing. Ebbers is the poster child for Telecom excess, yes?

Market is due up a bit according to where the Index futures are trading. We're due for a rally, as I said last night, as we have reached some areas of temporary support and have gotten oversold in all time frames from daily to hourly. Someone asked me if something wasn't needed to spark any kind of a rebound here. Well, fear and greed works pretty well -- shorts are going to want to take some of this easy money and run and are going to run faster to exit if tech and such continue to have a dead cat bounce.

However, yes some spark of good news would help. The Market needs something here to go north even for a day or two. Maybe the Consumer Sentiment numbers will show that we're still confident, or not. Nasdaq ia down 21% year to date. How the mighty have fallen!


Market Monitor Archives