Option Investor
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  Jeff Bailey   5/7/02,  8:47:38 PM
Jeff, I am short AAPL at 24 and got a decent gain here. Would appreciate your views on holding/buying the position. Your PF feedback is just too good to ignore.

Apple Computer (AAPL) $22.47 -0.79% .... also noting that Dell (DELL) $22.33 -5.97% gave back some ground today.

Well... the p/f chart of AAPL is "bullish" compared to Dell and AAPL's p/f chart carries a bullish vertical count of $27.50. Link and stock trades above trend.

Now... CSCO reported earnings and didn't lay a "stink bomb" so AAPL edging up at $22.60. What's one to do?

I'm sorry I can't get to all who write/ask questions during the day. Trader still holding short, may want to look at selling the covered puts if this is within your trading discipline/comfort level. If you are looking for AAPL to edge lower to the bullish support trend of $22, then selling the May $22.50's for $0.65 may be an option.

However... if you played just as short-term trader, then snug a stop above today's high of $22.95 and scalp your $1.00 from $24. Hey... 4% isn't too bad! Give me 20 of those a quarter and I'll do fine.

  Jeff Bailey   5/7/02,  8:28:29 PM
Hi! How do you feel about FDC. Good for a split run?

First Data (FDC) $76.16 -0.31% ... stock will trade split adjusted on June 5th. Back in October, stock gave a triple-top buy signal at $59 and resulting verical count was $101, but stock reached the $90 level (did achieve Professor Davis' probability findings of 28.7% gain from $59) only to have recently generated a sell signal at $81 and now has bearish vertical count at $71. This "$71" ties in nicely with the bullish support trend. Link

I wouldn't argue all that much against a bull playing the stock against the 200-day MA of $75. I looked at the June $75's (FDCFO), but I think $4.40 a little to rich for my blood, most likely jacked up due to option volatility right now. However, the rounding 50-day MA would be my "achievable" target of $83.

We never know the future for certain, but I'd like to see the stock trade that $71 level, really take some price out of the stock, then look for the split run.

Dorsey/Wright has the stock classified as a "software" stock. Right now, this group is "bear confirmed" at 28%. I like for 1/2 position only in the $75's and then should the stock pull back to $71 might get an "inside day" or some consolidation to trade from and if stock begins to firm up and then begin to show signs move off that bottom, then round to full in the $75's and play to $83. Link

Right now, I'm concerned about risk to $71.

  Jim Brown   5/7/02,  7:56:11 PM
Swing Trade Recap What is this? Link

The only trade entered today was a short of the SPX at 1053 based on the 3:14 PM recommendation. The stop loss was 1059, just above the high of the day.

I avoided an obvoius short on the QQQ due to the low risk/reward ratio. With support at $28 and Cisco earnings due after the close I thought it better to wait for the next cycle to enter a trade on the QQQ. That turned out to be the right call since the CSCO bounce sent it back to $29.35 in after hours.

Setup for Wednesday

I am going to leave the stop on the SPX trade at 1059 which is 10 points away from where is closed. I doubt that lowering it would accomplish anything since it will probably gap open on Wednesday. While we had nearly a four point gain in the play at the close we could get stopped for a loss at the open.

I doubt any tech bounce will have legs and due to the anticipated gap it may be unplayable anyway. This means our next play could be a short on the QQQ from a higher level and another short when the SPX rolls over again. Without a Fed meeting anytime soon we are free to play what the market gives us.

I will update the possible plays again at 7:15 am. Remember, we are not always going to be in a trade and we will wait for the odds to be in our favor before initiating a trade. Patience makes profit!

  Jeff Bailey   5/7/02,  7:55:03 PM
I took your advice and bought some QQQ calls yesterday (I chose DEC 31 strike @2.90) to hedge my bearish tech positions. Sure glad I did after the Cisco results! But even if tech continues to tank and the calls end up down for awhile, I think it was a good suggestion to manage risk. And if the puts and calls both end up profitable (through more downside followed by a big rally), that will be a nice bonus. I think I'm starting to learn from you guys what trading is all about.

Good! Trading isn't about being "right all the time," but perhaps being right "at certain moments of time" or "most of the time." Now... to increase your learning experience, try to monitor at the end of each day how your portfolio of positions (bullish/bearish) performs. In the future, this may help you with "weighting" with a call option versus the underlying stocks short, etc. What you want to do is monitor the "efficiency" of this hedge.

December is a ways away. Do you perhaps understand how "buying time" really gives you some time to perhaps collect your thoughts, make some further observations?

To have a higher odds chance of making the most of a "hedge" a trader that is holding some longer-term bearish stocks that have really lacked institutional sponsorship should still see some relative performance from a hedge.

  Jeff Bailey   5/7/02,  4:59:45 PM
TMP Worldwide (TMPW) $23.31 +1.87% ... Reports Q1 net of $0.14 a share, in line with consensus, but lower than year-ago $0.22 a share. Total commissions and fees grew by 22.9% to $290.8 million (consensus was $303.63 million). Company expects to take a restructuring charge of approx. $75 million or $0.42 per share in Q2. Expexts Monster Europe to reach breakeven in 2002. For Q2, sees EPS of $0.14 and top-line at $294 million. Current consensus is $0.22 a share and $312. For full year, TMPW sees EPS of $0.90 and top line of $1.244 billion (consensus $1.09 and $1.29 billion). For 2003, sees results of $1.30 and $1.35 billion (consensus $1.48 and $1.47 billion).

  Jeff Bailey   5/7/02,  4:52:48 PM
QLogic (QLGC) $38.26 -8.9% ... stock trading up at $40.18 in after-hours trading. Reported Q4 pro forma EPS of $0.22, $0.02 better than consensus; revenues were $92.3 million versus consensus of $87.8 million.

  Leigh Stevens   5/7/02,  4:36:21 PM
Cisco (CSCO) earnings report: Cisco reported at 11 cents a share, better than the 9 cent consensus. Revenue was 4.82 Billion, which was in line with expectations. I think that the stock activity today was "telling" us that the numbers were going to at least be ok, as the stock closed slightly higher on the day.

Stock trading $13.99, up $0.91 (+6.9%) from close of $13.08.

  Jim Brown   5/7/02,  4:14:53 PM
Readers Questions:

Several readers have written to ask if I am going to specify options/strikes when giving trade signals in the Market Monitor. I am not going to pick strikes for these signals. We have thousands of readers and everyone likes to trade differently. Some like current month strikes at the money, some 20-30 points out of the money and some like to minimize time premium by going deep in the money. Others like to use that same variety and go 30-60 days out to minimize the intraday volatility.

Everytime we pick strikes on indexes we are swamped with email demanding a rationale for our selection. I would rather spend my time and effort picking accurate and profitable entry points instead of debating option strike preferences.

You, the reader know what type of option you like to buy and I will leave that individual decision up to you.

If you do not want to trade SPX options because of the higher dollar requirements you can still use the SPX triggers to play the OEX which has cheaper options. You can also play the AMEX:SPY (SPDRS) which are a basket of stocks that represent the S&P-500.

  Jeff Bailey   5/7/02,  4:06:27 PM
SPDRS - Based on the Standard & Poor's 500 Composite (AMEX:SPY) 105.05 -0.46% ... trades like a "mutual fund" in a way. Is the basket of 500 stocks that comprise the S&P 500. Link

  Leigh Stevens   5/7/02,  3:58:49 PM
Index Update: DJX has now drifted too low to suggest a bullish possible outcome short-term; instead, it looks like another downswing has started. Shorting up toward resistance in 99.5-100 area is my preferred put play, but so far DJX failed at first level of resistance (at hourly down trendline) at today's high just over 99.

  Jeff Bailey   5/7/02,  3:53:28 PM
NYSE Composite (NYA.X) 565.74 ... this is break of recent lows and looks defensive here. With retracement from $608.57 to $504.21 downside risk now 50% retracement at 556, which is pretty close to the February lows. Link

  Jeff Bailey   5/7/02,  3:51:41 PM
Jeff: NASDAQ-100 Market Volatility Index (VXN.X) 50.22 highest in about 6 months. Can you comment?

Yes, I've seen a lot of similarities in the VXN.X and the NASDAQ-100 Bullish %. Many feel the VXN.X when it gets "higher" is a good contrarian indicator as bulls finally get concerned over stock price declines and decide to do something about it (buy puts). Perhaps not a coincidence that the NASDAQ-100 Bullish % ($BPNDX) is at lowest level in 6-months?

Look at the VXN.X on the p/f chart at 2-box scale. Link and NASDAQ-100 Bullish % on 2% box Link

I don't like to be a "contrarian" just for the sake of being "contrarian." But perhaps both the VXN.X and NASDAQ-100 Bullish % are hinting at come more near-term "overdone" levels.

For the disciplined option trader that is not OVERLEVERAGING and buying some time in select calls, there is opportunity at hand. Hey, we've made some good money on the put side of things in some technology stocks, and stashed away some gains from bullishness in the HMO's and other areas. Doesn't hurt perhaps to pick away at some calls.

We should note however, that when VXN.X is on the rise, even the call premiums can get "too expensive" and may not have the a certain call option being worth the premium built in.

This is when it is so important for the options trader to make sure that a bullish trade in a stock/index has the potential upside or downside for the option to pay if the target is achieved.

  Leigh Stevens   5/7/02,  3:50:47 PM
LAST HOUR Index Update: DJX, COMP, NDX, QQQ - All rallies failed right at the hourly chart down trendlines, which turned out to reflect resistance accurately. Since that point, these indices have drifted back lower right along that trendline. They still look they are poised to go either way, rally or another dive. If there is going to be another move higher that leads to a good shorting/put buying opportunity, it won't be ahead of Cisco story. Tomorrow will tell the story, depending on whether tonight there is a spark from some positive Cisco numbers and spin or another earnings/guidance bomb.

  Jim Brown   5/7/02,  3:47:11 PM
Cisco is looming in our future. Cautious guidance from them with their earnings tonight can provide a speed boost to any downside move. Positive guidance could cancel the cautious "outlook still uncertain" comments from the Fed. Either way, the weakness in the Nasdaq today is fear of Cisco. I am cautious about shorting the QQQ here at 29 since they have strong support at 28. The risk/reward ratio does not favor that play in my mind. I would rather wait until after the Cisco earnings and anticipate a bounce at 28 or play any breakdown below that number after the news is out.

  Jim Brown   5/7/02,  3:39:49 PM
Swing Trade Entry Point Alert

We are now short the SPX when it hit 1053 at 3:35 PM. Our stop loss is 1059 until the close. Fasten your seatbelts, the journey has started!

  Jeff Bailey   5/7/02,  3:37:02 PM
Ciena (CIEN) $6.20 -6.91% .... Bears from May 1 profile as bearish on trade at $7.00 have same type of decisions to make in CIEN before the close. Do I risk the the 11.4% gain into CSCO's numbers, or lock in some gain?

For me, this can only be answered by trader's risk/reward profile and current account status. Can't feel all that bad with a 11% gain in just a week.

I do however think that CIEN has much more challenges ahead that CSCO might. May be several quarters until telecom spending shows any sign of pickup.

  Jim Brown   5/7/02,  3:14:33 PM
Swing Trade Entry Point Alert

It appears the rebound failed near the afternoon highs of 9920, 1592, 1058. Those levels are critical. If they are broken buyers will step in. However that is also where the shorts will try and prevent further progress. The final hour of trading typically can contain major direction changes and it appears the change is down.

If the current trend holds we will go short the SPX at 1053, just under the afternoon low and our stop loss will be 1059, just over the high of the day.

  Jim Brown   5/7/02,  2:47:20 PM
Swing Trade Signals

Total indecision! The markets are locked into a very narrow range and it appears everyone just went to lunch. Volume is very slow and everyone is holding their breath. This is actually slightly positive since the negative comments did not tank the markets. I smell a possible bounce here at 1055.

  Jim Brown   5/7/02,  2:37:38 PM
Swing Trade Signals

If the markets are going to bounce it should be right here. The S&P has intraday support in the 1052-1053 range and it appears to be holding. Still to early to call a bounce but until that support fails we are not going short either.

  Jeff Bailey   5/7/02,  2:35:04 PM
NYSE Composite (NYA.X) 567.25 -0.07% ... some feel this is "true market" and it is sinking to session lows. A break below $566 could trigger some alerts and bring some sellers to other area of the market.

  Jeff Bailey   5/7/02,  2:27:08 PM
Treasury watch Treasury YIELD have gone from mixed with the 10-year and 30-year higher earlier, to fractional red across the board. Hints of some buying in Treasuries and a little more defensive on a short-term basis.

  Jim Brown   5/7/02,  2:26:11 PM
Swing Trade Signals

The initial reaction to the announcement was muted but it appears to be trending to the downside now. We still want to give it a few minutes for all the pre-announcement positioning to wash out. There was no big spike to the upside indicating an abscence of fear by anyone still short and an abscence of hope by anyone considering buying stock.

Still no clear direction with the 1 min charts jumping all over the board.

  Jeff Bailey   5/7/02,  2:24:49 PM
Dow Industrials (INDU) 9,881 +0.74% ... selling down 37 points from FOMC announcement is first reaction. Still rather calm and seems to be rather "non event." As time passes, will get more information from the entire FOMC statement.

  Jeff Bailey   5/7/02,  2:17:47 PM
FOMC press release available at Link

  Jeff Bailey   5/7/02,  2:15:12 PM
FOMC decision is to leave Fed Funds rate at 1.75%.

Dow = 9,918 +1%

SPX = 1,058 +0.49%

NASD Comp. = 1,591 +0.8%

NASDAQ-100 = 1,173 +1.2%

Russell 2000 = 501.6 -0.26%

  Jeff Bailey   5/7/02,  2:13:20 PM
Trading is calm Major indexes at session highs ahead of interest rate decision.

  Leigh Stevens   5/7/02,  2:11:26 PM
Index Update - DJX, COMP, NDX and QQQ are at or poking through their hourly down trendlines. The buyers either have no fear or know something we don't -- they are poised to rally or, get slammed.

  Leigh Stevens   5/7/02,  2:08:11 PM
The Wall Street Journal has front page Enron "smoking gun" story. I loved this one, but am glad I was not a California resident cause they got the short end of this stick! WSJ reports that Enron strategies nicknamed internally as "Death Star, Get Shorty and Fat Boy" were trading ploys to manipulate California's power system into paying huge markups in the wholesale electricity market. The WSJ reporting was based on internal Enron documents that offer something in the way of "proof", that market manipulation was a major factor in sending wholesale energy prices soaring in 6 Western States in the 2000-2001 period. DUH! Hello! I can't believe that anyone that watched this thing unfold and knew something about the gunslingers at Enron, could have have thought OTHERWISE! Enron, Merrill Lynch, Arthur Anderson -- no wonder that investors think they are are not getting the whole story on their investments.

  Jeff Bailey   5/7/02,  2:03:26 PM
FOMC decison on interest rates due out in about 13-minutes.

  Jeff Bailey   5/7/02,  2:00:37 PM
El Paso (EP) $32.94 -6.3% ... Jeff: is action in WMB and EP mostly a case of guild by association with ENE and DYN?

Yesterday, EP disclosed that both operating cash flow before working capital changes and working capital changes were overstated by the inclusion of non-cash earnings. On a May 2nd conference call, company stated that working capital was approx. $1.1 billion and working capital usage totaled $1.2 billion. These numbers were based upon preliminary estimates that have been revised.

"News" form EP does appear to be "stock specific" so not thinking current price action is simply guilt by association. P/F chart is bearish and vertical count of $28 is negative. Link

For Williams Co. (WMB) $16.85 -8.96%, may be seeing some "guild by association" Link and looks somewhat similar to DYN p/f chart not long ago. Link

  Jim Brown   5/7/02,  1:59:50 PM
Swing Trade Signals

The intraday trade history shows a perfect roll over of every index beginning at 1:PM. The short covering has stopped and bears are beginning to take new positions in anticipation of a negative statement of some sort by the FED. Shorting the highs of the day always looks good in retrospect but not before a market moving event. We want to avoid trading just to trade and only trade when the odds are in our favor.

The Fed announcement is around 2:15 and is usually followed by a period of high volatility. That could be a spike up or down or both but the trend usually determines a direction within 30 minutes. We will wait for that direction before entering any positions.

  Jeff Bailey   5/7/02,  1:46:14 PM
Applied Materials (AMAT) $22.50 +1.71% ... short-term day trader in the stock may want to note 30-minute interval and how 50-pd MA served as resistance on 05/06/02 at $23.33 and then just last hour at $22.91. This becomes a hurdle for short-term bulls.

  Jeff Bailey   5/7/02,  1:29:51 PM
HMO Index (HMO.X) 601 -2.3% .... some decent downside action here today. Begin building a list of HMO stocks to be looking for bullish entry points on pullback. A decline over next couple of weeks to $550 area is good place. May see a 2-week rotation and some beaten down technology near-term. Will see later tonight as CSCO outlook going forward may be key.

  Leigh Stevens   5/7/02,  1:26:18 PM
Index Update: DJX, COMP, NDX and QQQ are either stopped at or are struggling to get through minor down trendlines on the hourly charts. These indices seem to want to go up, but buying power may be lacking ahead of any possible surprise from the Fed, and especially from Cisco's earnings. Sometimes these rallies are telling us that there is nothing negative that is going to fall out of the sky, other times they are just the effects of short-covering, technical buying and overconfidence due to being oversold.

  Leigh Stevens   5/7/02,  1:18:19 PM
Index Update: SPX and OEX: Reiterating the more significant reistance levels where these indices would offer an opportunity to short/buy puts, in case there is further upside progress: SPX > at 1063-1065; OEX > 525-527. DJX I mentioned earlier - 99.5 is key resistance, then 99.9 -- call it 100. A break out over 100, would be significant, especially if we were past these reports that everyone is focused on.

  Leigh Stevens   5/7/02,  1:05:14 PM
Index Update: DJX and NDX - Both are now trading slightly above their hourly down trendlines. More significant NDX resistance is at 1230, where I would short/buy puts.

  Jim Brown   5/7/02,  1:03:10 PM
Swing Trade Signals

We are still in hold mode until after the announcement. Should the Fed make positive comments about the economy this rebound could see another bounce but there is a good chance it will be met with a new wave of short selling. If it fails to hold going into he close we may open a short position at this higher level.

If the Fed says something negative or even goes so far as changing the bias back to a loosening status then the markets could implode. This indecision is the reason we are remaining flat until after the announcement.

On a further note we will wait until at least 30 min after the announcement for the volatility to settle before making the call.

Summary - We are still on hold awaiting the Fed announcement. Be patient!

  Leigh Stevens   5/7/02,  1:03:06 PM
Index Update: DJX - DJX is right at resistance inplied by its hourly downtrend line at 99. Stochastics on 5 & 21-hour basis are showing upside momentum or are on a buy "signal". Stay tuned. More significant overhead resistance on DJX comes in next at 99.5

  Leigh Stevens   5/7/02,  12:58:36 PM
Index Update: QQQ Q's have pierced, just barely, its hourly downtrend line at 29.15. Ability to hold above 29-29.15, would suggest a possible move to more significant overhead resistance at 30.6 where I would look to short/buy puts, if reached. We are now on an hourly buy "signal" in the Q's; that is, QQQ is showing some upside momentum based on the hourly trading; this, after getting into oversold territory -- this on both the 5 & 21 hour settings.

  Jeff Bailey   5/7/02,  12:48:03 PM
cien got down to 6.00 now its back to 6.42. what do you think? If long the QQQ or even AMAT, would continue to hold CIEN short. If trading CIEN just on its own and need some gains, then can take them. Stock hasn't been able to get above previous day's high for quite some time.

CSCO reports tonight.

  Jeff Bailey   5/7/02,  12:38:04 PM
Semiconductor Index (SOX.X) 475 +0.42% ... has reversed earlier losses and now in positive territory. Components all green with exception of LSI -0.36% and XLNX -1%. Gainers have INTC +4%, MU +3.59% and hey...looky there AMAT +3.3%.

  Jeff Bailey   5/7/02,  12:26:48 PM
Jeff: Photon Dynamics (PHTN) $39.09 -2.25% ... i love anomalies (my term for certain stocks i feel the market is way off in valuation) could you comment in market monitor on this one thanks

First.... "the market is NEVER wrong." It may be a little "slow" sometimes, but it is NEVER wrong.

Not sure if you think PHTN is a "value" or "overpriced," but the MARKET now thinks lower. Triple-bottom sell signal at $45 and break of trend is bearish. Vertical count is bearish to $30 (could grow if current column of O grows lower). Link

Dorsey/Wright and Associates has stock as a "semiconductor". According to Dorsey, Semiconductor sector is "bear confirmed" at 30.3%. Quite different than December's reading of 78%.

  Leigh Stevens   5/7/02,  12:25:38 PM
Index Update: Nasdaq potental support areas - Have spent last hour, redrawing their downtrend channels, which are revised from early update. COMP, NDX and QQQ got to or close to low end of my lower channel lines as redone: SPX at 1060; NDX in 1142 area; and, QQQ at its low of the day at 28.4. The fact that there has been a rebound right from these areas, suggest that these are the right areas to expect some rebound potential, or at least a show down in the downside momentum.

  Jeff Bailey   5/7/02,  12:18:39 PM
Microsoft (MSFT) $49.98 +2.8% ... this is key stock for QQQ trader and those playing the QQQ calls from this morning. Stock has sloooowly worked its way close to the September lows. Vertical count still bearish to $44. Needs a trad at $55 to get back on a buy signal. Link

  Jeff Bailey   5/7/02,  12:14:47 PM
Hi Jeff, I am looking at WDC Oct calls. Wouldn't you rather get OCT $5.00 at .80 than the OCT 7.50 AT .30. What are your thoughts?

I was looking for exposure to WDC with minimal capital with the thinking of "if stocks going to the bullish vertical count of $18.75, the the $5 or $7.50 didn't matter that much on the upside, but only the downside.

  Leigh Stevens   5/7/02,  12:03:56 PM
CBOE Volatility Index ($VIX.X) - The VIX took a big jump today as the index gapped up from its daily range yesterday. Monday's VIX high was 23.5, today's low so far is 24.3. The difference between yesterday's high and today's low being the price gap of course. The high on VIX today stands at 25.1. Historically, when this measure of market volatility gets up to the 27-28 area and higher, intermediate lows have happened shortly thereafter. For example, at the fall lows in the S&P, VIX spiked up to above 50, during the week that the market bottomed. The two weeks ahead of that bottom in the S&P 500 in the 945 area, VIX shot above 28, rising to 35 area and above. For several weeks after that same S&P bottom, VIX ranged in the 30-35 area, with some spikes above this. This gives us some idea that in terms of volatility, we ain't close to a "typical" bottom. However, VIX is on the rise.

  Leigh Stevens   5/7/02,  11:48:59 AM
Index Update: SPX & OEX - Ditto with comment with DJX - potential buyers are not going to step up to the plast ahead of Fed and Cisco announcements. However, there are still nervous longs around who may want to bail ahead of the same report. Look of hourly consolidations here also has a bit of the look of a flag ahead of another downswing. Low end of hourly channel lines gives me next downside targets to 1042-1040 in SPX, and 515 in the S&P 100. Support may develop in these areas from short-covering and technical buying. You know these technical types think they can figure out the market ahead of "news"! From the low end of these channels, if the indices get there, rallies could develop after the upcoming FMOC release.

  Jeff Bailey   5/7/02,  11:43:57 AM
Jeff, I took a half position in the Jan03 55's awhile back in IGT. Do you think I would be better of taking a second half in the Jan55's here, picking up a half in a different strike/expiration or just sticking with the half that I have?

I would do nothing with another position at this time. Would wait until (if it happens) the bullish support trend were broken, then look to round to full position. Link

Note... if the bullish support trend were broken, then the Bearish resistance trend would be taken from just above the red 3 and extended down at a 45-degree angle.

With stock above trend right now, not bad to have just 1/2 position. According to Dorsey/Wright and Associates, Gaming sector is bear correction at 66% right now.

  Jeff Bailey   5/7/02,  11:39:52 AM
Jeff: Jeff: I played your Nov 20 puts in OVER suggestion from May 1. Great trading idea. What's the downside target?

The bearish vertical count is still being built and reads ... well... $0.00 or N/A.

I've place a "fitted" retracement from $40.94 to $12.43 on the stock, this has 80.9% at $17.88 and could serve as an aggressive stop. The 100% of $12.43 would currently be a bearish trader's target.

  Leigh Stevens   5/7/02,  11:39:24 AM
Index Update: DJX - Minor rebound underway after DJX held prior (4/29) hourly low. I don't think that it's going to lead to anything except another swing down. Consolidation so far looks like a bearish flag. Overhead resistance is at 99.5. DJX would have to get through this area, to get something going. Not enough potential buyers do that no doubt - to step up to the plate ahead of the Fed announcement and Cisco's earnings tonight. Next lower "support" implied by low end of downtrend channel lines is 97.3-96.8 zone.

  Jim Brown   5/7/02,  10:54:11 AM
Swing Trade Signals

Markets are still in a holding pattern after losing most of the ground gained in the early bounce. The type A traders are nashing their teeth and seeing their blood pressure rise as the day continues. There may be a trade here but we are not going to take it.

If you can tell me what the Fed will say and how the markets will react then we will pull the trigger and enter a trade. Since nobody can predict that the best course of action is simply wait.

As you can see by the market action this is what everyone else is doing as well. Our turn will come and we do not want to get caught trying to wish the market in our direction so we can get out of a bad trade. We want to keep our capital safe until the odds line up in our favor. Right now it is 50/50 and no better odds than flipping a coin.

Nasdaq THe Nasdaq has been slipping dangerously close to the 1558 low from October 10th and a break under that level could drag all the indexes lower.

SPX The S&P is also nearing a breakdown below 1050. Should it break 1049 it would be very tempting to take a short position prior to the Fed announcement but not prudent. If their announcement says something positive about the economic conditions the shorts could race to cover and quickly stop us out.

Summary - The markets are in a holding pattern that could break either way after the Fed announcement. We are also waiting for this holding pattern to end before entering any directional plays.

  Jeff Bailey   5/7/02,  10:52:50 AM
Jeff: What are the weakest & strongest stocks in the sector(s) that contain - PG, MMM, GS, MSFT, IBM and MME? - also, Is there a simple way to determine that via some web - investigation?

Relative strength charts are one way. MSFT is component of the GSTI Software Index (GSO.X). Trader can got to the "MARKET POSTURE" section of the OI web site, go down to GSO.X and click the GSO. Link and get a list of the sector components. Then simply pull up some relative strength charts of each versus the GSO.X as a starting point.

  Leigh Stevens   5/7/02,  10:50:21 AM
ON THIS DAY in 1915, the German submarine U-20 torpedoes the passenger ship Lusitiania, sinking her in 21 minutes with 1,978 people on board. ALSO, on this day in 1945, Germany signed an unconditional surrender, ending hostilities in Europe. Well, it took a while from one event to the other, but now we have a peaceful Europe and Germany is our friend and ally. In honor of how things can change for the better, make up with someone today that you have had past difficulties with. What the heck, kiss and make up.

  Jeff Bailey   5/7/02,  10:37:41 AM
Brocade (BRCD) $19.93 -8.95% ... Jeff: What's a downside target?

Bearish vertical count of $22 was exceeded. Could use Professor Davis' probabilities study at the spread-triple-bottom. Link

Spread-trip profitable 86.5% of the time, for avg. gain of 24.9% in 4.6 month time span. From $21 this would be about.... $15.77

  Jeff Bailey   5/7/02,  10:34:23 AM
Dynegy (DYN) $13.07 -12% ... breaking new lows again and defensive.

  Jeff Bailey   5/7/02,  10:32:03 AM
IGT $61.63 -0.64%.... subscriber wanting to know if $64.05 is a good stop?

Yes, this would be just above the recent highs. I have retracement from $70.99 to $38.90, which has the 80.9% at $64.86. I like stop just above $65, but $64.05 not bad either.

The rest of retracement levels have 61.8% at $58.73, 50% at $54.94, 38.2% at $51.15, which would also be lower end of downward regression.

  Jeff Bailey   5/7/02,  10:26:18 AM
AnnTaylor (ANN) $44.90 +2.6% ... stock trades up on Morgan Stanely upgrade to "overweight" from "equal-weight", believes company is transitioning from a value play to a momentum story, driven by the reaccelerated rollout of AnnTaylor Loft concept in 2003; comps should improve with easy comparisons at core AnnTaylor until December. Raises FY03 estimates to $2.15 from $2.12 and FY04 to $2.60 from $2.45; price target is $55. Link

P/f chart bullish with vertical count of $56.

  Jeff Bailey   5/7/02,  10:21:42 AM
Dow Breadth positive with 22 up and 8 down.

Weakness is SBC -2.06%

Strength is HPQ +3.18%, MSFT +2.1%, UTX +1.39%,

  Leigh Stevens   5/7/02,  10:17:04 AM
Index Update: Nasdaq - Nasdaq has resumed its free fall. COMP resistance > 1604; overran first implied support at 1578 at what had been low end of broad hourly downtrend channel; next downside target at re-drawn downtrend line > around 1538;

Nas 100 (NDX) resistance at 1187, at prior "breakdown" point; next downside target and implied "support" at low end of downtrend channel > 1138 -- major downside target = 1090 area, at Sept. lows;

QQQ key resistance > 29.5; next downside target and possible "support" at low end of downtrend channel > 28.4, where we are currently; major next downside target = 27, at Sept low.

  Jeff Bailey   5/7/02,  10:13:29 AM
Biotechnology Index (BTK.X) 380.60 -1.43% ... trading here is break of the March 2001 lows and looks defensive. Overhead resistance now 417 and formidable at 450. Link

  Jeff Bailey   5/7/02,  10:08:10 AM
Overture Services (OVER) $17.39 -7% .... profiled this one as bearish on 05/01 at 11:24:52 Link in the November $20 puts (GUOWD) at $4.00. Stock breaking below the $17.88 level, which was first hurdle for the bears. Sets up test of the IPO lows of $15.00. Link

  Leigh Stevens   5/7/02,  10:05:16 AM
Index Update - S&P/DJIA resistance levels - Since the market has stabalized a bit and attempting to rally, have first focus on resistance areas. There are actually 2 minor technical resistance points for each of the Indices. Ones I gave earlier are at the down trendlines on the hourly charts, but there are levels of "first" resistance implied by the previous lows that were taken out on the this latest downswing. So, restating 2 levels of resistance for each index - take out of the second seems unlikely, but would be minor breakout if penetrated: SPX > 1063.5; then, 1067; OEX > resistance 525.5; then, 527; DJX - never took out prior low, so first resistance is at trendline > 99.4; then, 100;

  Jeff Bailey   5/7/02,  10:02:37 AM
Intl. Game Technology (IGT) $61.71 -0.49% ... I like a bearish play in IGT. Stock has rallied back up to upper end of downward regression. Action point is break back below the 50-day MA of $61.50. Near-term target is retracement at $58.73 with swing-trader's target back to $55.00. Stop on stock at $65.10.

  Jeff Bailey   5/7/02,  9:55:49 AM
Oracle (ORCL) $7.75 -5.8% ... losing Friday's low and breaking to 52-week low here.

  Jeff Bailey   5/7/02,  9:41:51 AM
Per Sunday's market wrap I like a 1/4 or 1/2 position in the QQQ Sep. $30 calls (QAVID) here at $2.45.

  Jeff Bailey   5/7/02,  9:38:07 AM
Providian (PVN) $7.21 +13.5% ... stock trading higher after last night's earnings when company reported Q1 earnings of $0.02, 2-cents better than consensus. Link

  Leigh Stevens   5/7/02,  9:36:50 AM
Index Update: Per my chart descriptions last night at Link -> Technical resistance - possible levels to short/buy puts. However, with upside penetrations of these levels, would amount to minor breakout points for a pop higher: SPX > 1065; OEX > 526; DJX > 99.3; COMP > 1615; Nas 100 (NDX) > 1190; QQQ > 29.5;

  Jeff Bailey   5/7/02,  9:32:32 AM
SAP AG (SAP) $29.85 ... Soundview downgrading SAP to "hold" from "buy" based on weak application spending, the pending acquisition of NavisionDamgaard by MSFT (see this morning's 09:00 intraday), optimistic management guidance, and premium valuation; recent inputs from the Gartner Group and industry contacts suggest that application deployments continue to be stretched out, with little new project activity, believes SAP will be increasingly challenged to maintain its aggressive 15% 2002 revenue growth targets. Link

  Jeff Bailey   5/7/02,  9:27:18 AM
MetLife (MET) $34.15 ... reported earnings of $0.61 per share, 3-cents better than consensus. Revenues rose 2.0% to $8.09 billion versus the $8.13 billion consensus. Link

  Jeff Bailey   5/7/02,  9:24:19 AM
Salomon lowers price target for IBM to $90 from $105 attributing yesterday's 7% decline to market speculation of 1) a restructuring, 2) an EPS restatement, 3) the potential departure of CFO John Joyce to Sun Micro (SUNW). Salomon Smith Barney says it does not expect an earnings restatement and would be surprised to see Joyce leave.

  Leigh Stevens   5/7/02,  9:19:17 AM
Market Movers - FMOC Meeting: They meet today and that is a big topic of trader discussion pre-opening. Fed watchers will be looking for any signs of an easing stance. Unlikely, but economists think that the Federal Reserve will at least NOT raise interest rates. It like the Hypocratic Oath that Doctors take -- what I remember is "Do NO Harm".

The Federal Open Market Committee meets today, to have a serious chat about the economic recovery. Fed watchers and financial markets are predicting no change in the FOMC's 1.75 percent target rate or its "balanced risk" statement when the announcement is made at 2:15 p.m. eastern.

  Jim Brown   5/7/02,  9:16:29 AM
Swing Trade Signals

Good Morning! What a day to start a new product. A Fed meeting, IBM warning that the outlook is gloomy, Cisco earnings after the bell and a severe sell off on Monday. Volatility is spiking with the VIX closing at 24.88 on Monday. Time to hit the ground running!

I do not anticipate any opening plays this morning. With the productivity report showing a strong gain and unit labor costs showing a strong drop the futures have spiked several points to +57 for the Dow and +6.40 for the S&P.

This bump in the futures is based on two things. The economic reports AND the severely oversold conditions from the Monday sell off. It is not based on some strong urge by investors to buy stocks. The economic reports should cause a new wave of short covering with the Fed as a major unknown. If you have short profits it is best wise to lock them in before any Fed policy statement that could be directed at the markets.

I am going to list the support/resistance levels as a guide but with the Fed meeting today we will want to let the post announcement volatility pass before opening a new position. The levels below are watch points only until after the Fed announcement.

SPX - The S&P closed exactly at support levels dating back to October (1050) and could see a quick bounce due to the oversold conditions. We will be looking to short the S&P (buy puts) under 1049. I do not have an entry point for going long until we see what the day provides.

OEX The same level for the OEX will be 515. Short below that level.

QQQ The QQQ is nearing a significant support level and could see a bounce at 28. The drag here is the IBM outlook and CSCO earnings tonight. Tech buyers will not want to risk the farm before those earnings are known. I do not see any major drop below 28 since the September low was 27. This could be the launch point for the next bear trap rally and could be our first new play.

Dow/DJX The Dow is resting on support at 9800 with the next support level at 9735. We are likely to see a bounce at the open due to the positive economic data and oversold conditions. Again, with the Fed meeting today we do not want to open positions until the outcome is known.

Summary - In short, we are not likely to open any new plays until after the Fed meeting. However any short term bounce before then could change the outlook and provide a post Fed entry point for shorts.

  Leigh Stevens   5/7/02,  9:12:50 AM
Good Morning -- It's Showtime! Productivity numbers: a big jump in productivity was reported by the Labor Dept. The U.S. Labor Dept. reported that unit labor costs fell substantially in Q1. Productivity was +8.6 per cent, well above the 7 percent increase predicted by the Street. This gain was largest since 1983. This decline is good news/bad news. Good news as there is more output per worker, bad news for those hoping to get hired, as companies are slow to take on new workers. Traders are impressed by the number! as they notice anything that is startlingly better that points to rising output.


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