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  Jim Brown   3/3/2004,  6:26:06 PM
Editors Play - DNA - Genetech just announced a 2:1 stock split. This should provide even more short covering on Thursday and may push the stock over the $110 stop. However, regardless of how high it flies there is usually a post announcement depression phase and I would not hesitate to short/put any apparent weakness at the highs. DNA last trade = $110.25

  Jeff Bailey   3/3/2004,  4:52:27 PM
Closing Internals at this Link

  Jeff Bailey   3/3/2004,  4:40:56 PM
As a benchmark ... According to Dorsey/Wright & Associates sector bullish % data, the Semiconductor Bullish % (BPSEMI) was "bear confirmed" status at 60.61% as of Tuesday's close. Will get a new reading later today once all semiconductor charts are tabulated. From my count, Dorsey currently tracks 142 different semiconductor-related stock's point and figure charts.

So... at 60.61% bullish, this would equate to 86 stocks followed, currently having a point and figure buy signal associated with the chart.

  James Brown   3/3/2004,  3:58:36 PM
For anyone watching CNBC right now, get used to the Ameritrade commercials. They'll be the ONLY broker running ads during the last hour of trading for the next 4-to-6 weeks. I'm tired of them already. *grin*

  James Brown   3/3/2004,  3:56:17 PM
Another one for the bulls... Borders Group (BGP) is trying to breakout over resistance at $24.50 (currently at 24.45). Should it be successful this would be new highs not seen since late 1998. BGP failed at $24.50 back in 2001 and 2002.

  Linda Piazza   3/3/2004,  3:52:27 PM
As I began typing this post, the OEX 60-minute chart showed a three-candle reversal signal known as an evening star formation, forming just under the 60-minute 21-pma. However, that signal had not resulted in a fall beneath the 100/130-pma's, which would be needed for a confirmation of a 60-minute reversal, at least in my mind, and once I began the post, the OEX began bouncing from the 130-pma. Those averages are at 566.22 and 565.80, respectively. Such a rollover beneath those averages, even if it should occur, would see support again at 563-563.50. All the cautions I've expressed all day about this choppy zone still apply.

  James Brown   3/3/2004,  3:52:22 PM
Borg Warner (BWA) was on our watch list over the weekend and we've been watching it for a breakdown under the $90.00 mark. Monday's rally sent the stock higher and bulls appeared to wrest control from the bears but the rally faded and BWA broke support at $90.00 early in today's session. It has seen a bounce back above the $90 mark this afternoon but today's move is certainly a crack in its armor.

  Linda Piazza   3/3/2004,  3:40:56 PM
Is the SOX going to end the day back below the 100-dma at 507.47? It certainly looks as if it might, but the day isn't over yet. It's perched at the bottom of a short-term ascending trendline off the 2/23 low, with that trendline perhaps being the bottom support of a bear-flag formation. It broke through that trendline earlier today but bounced temporarily from support.

  James Brown   3/3/2004,  3:35:14 PM
Murphy Oil Corp (MUR) might be a bullish play with its bounce from its simple 50-dma. Patient traders can hope for a dip back toward its rising trendline of support. Momentum traders may want to consider positions above yesterday's high near $66.00. See chart: Link

  Linda Piazza   3/3/2004,  3:32:07 PM
The TRAN has bounced from the 19.1% retracement of the recent bounce and from a "best fit" rising trendline off the February low, but it's still trading within the triangle at the bottom of the recent plummet.

  James Brown   3/3/2004,  3:27:49 PM
Varian Medical Systems (VAR) is looking pretty bullish with today's move back over the $85 level and bounce from its 21-dma. Bulls might want to consider new positions if VAR trades above today's high at $86.05 or the early February high of $86.24.

  Ray Cummins   3/3/2004,  3:26:18 PM
Spread/Combos & Premium-Selling -- Position Selection: OSI Pharma (NASDAQ:OSIP)

With regard to rally in OSIP shares and a bullish position, I was actually referring to a calendar or diagonal spread when I said, "a longer-term time-selling position (calendar or diagonal) at the $45 strike." Obviously, the option prices have changed a bit since that post but a speculative calendar spread at $45 (APR-45C/MAR-45C) or an aggressive diagonal position (APR-40C/MAR-45C) both offer viable risk/reward, depending on your outlook (how bullish?) for the underlying issue.

  James Brown   3/3/2004,  3:24:24 PM
AdvancePCS (ADVP), a prescription benefits manager, has been maintaining January-February gains and consolidating sideways in a tight 67.50-70.00 range. The stock is moving strongly higher today, up 3%, despite a bearish MACD indicator. If ADVP closes at current levels (70.60) it will be the first close above the $70 mark despite multiple attempts over the last two weeks. ADVP's shareholders are expected to vote soon (this month) on the proposed merger with Caremark RX (CMX).

  James Brown   3/3/2004,  3:17:29 PM
Another homebuilder to check out is Lennar Corp (LEN). LEN is holding its gains from the recent rally in homebuilders and traders bought the dip this morning as it pulled back under the $51 mark.

  Ray Cummins   3/3/2004,  3:15:27 PM
Spread/Combos & Premium-Selling -- Strategy Selection: Diagonal Spreads - Part IV

The majority of advantages in a diagonal spread are obvious but there is one characteristic that most traders overlook. In a debit spread, if the stock advances substantially and the options trade at parity, the maximum potential profit will be limited to the difference between the strike prices. With a diagonal spread, the long option has more time premium. Thus, when the underlying issue trades near the strike price at expiration, the value of the position will grow beyond the theoretical profit range. With that in mind, it's easy to see why the maximum potential for profit (at expiration) occurs at the strike price of the sold option.

For the investor who is not familiar with spread trading, this strategy offers an excellent opportunity to learn the basics in a low-risk environment. The concept of the diagonal spread is easy to understand and once established, the position can be managed with little difficulty. In adition, the occasional adjustments also provide the necessary background for more advanced techniques. Good Luck!

  James Brown   3/3/2004,  3:15:04 PM
Bulls can take another look at Coach Inc (COH) the high-end apparel/accessories maker. The stock has recently broken out above resistance at $40.00 on strong volume. The move also produced a double-top buy signal on its P&F chart, which points to a $62 price target.

  Jeff Bailey   3/3/2004,  3:11:23 PM
03:00 Internals at this Link

Current trade in RUT.X is back at the downward trend from 01/27 to 02/11 relative high.

  Linda Piazza   3/3/2004,  3:09:48 PM
Here's an update on the daily OEX chart: Link I keep referring readers to this chart to pinpoint the difficulties trading this particular range on the OEX, where scalping a couple of points isn't going to be particularly profitable for your trading account. Don't worry, though, because I think a time is coming when we'll be out of this congestion and non-scalping traders can benefit, too.

  Linda Piazza   3/3/2004,  3:03:26 PM
Next OEX Keltner resistance at 567.21, with 569.16 looking like next resistance above that. Strong support now at 566.

  Jonathan Levinson   3/3/2004,  3:02:01 PM
Confirmed that the delivery date of the coupon pass is tomorrow.

  Jonathan Levinson   3/3/2004,  3:01:35 PM
Followup on the coupon pass announced this AM- the amount is $779.2M, which is delivered tomorrow, if I'm not mistaken. That will be added to the amount of any temporary open market ops (repos) that get added tomorrow.

  Jane Fox   3/3/2004,  3:00:37 PM
Ray your spread information is so helpful to me and I'm sure others. Would you explain as to why you choose a 40/45 call debit spread for OSIP?

  Ray Cummins   3/3/2004,  2:57:34 PM
Spread/Combos & Premium-Selling -- Strategy Selection: Diagonal Spreads - Part III

In most cases, a diagonal position is an improvement over the standard price spread. If the stock price remains relatively unchanged or falls slightly, the long option will retain more value because of its extended maturity. If the near-term (sold) call expires, the position can be reestablished with the sale of a new call. Also, if the long option is current month, the position can be converted to a normal price spread. Once again, if the underlying issue rises above the sold strike price, the spread will be profitable.

With longer-term options, the character of the spread can be adjusted to match the outlook of the underlying issue. A neutral or bearish position can be established with the sale of an ATM option or the original spread can be duplicated (at a lower cost basis) with the sale of a new OTM option. In either scenario, the long-term diagonal spread benefits from the sale of additional options throughout the life of the (long) position.

  Jeff Bailey   3/3/2004,  2:51:45 PM
Swing trade short alert ... Semiconductor HOLDRs (AMEX:SMH) $41.00 here (bid), stop $41.85, target $39.25

  Jeff Bailey   3/3/2004,  2:48:21 PM
Semiconductor Index (SOX.X) 502.30 -1.55% ... since the Fed Beige Book was released, session high has been 504.07. Intra-day chart of SOX really showing that 503.89 level coming finding some attention from sellers. Here's a chart of the SOX.X from this weekend's Ask the Analyst column. Link

  Linda Piazza   3/3/2004,  2:44:30 PM
For the last hour, the OEX has been printing small-bodied candles right above mid-channel S/R on the 15-minute Keltner channels, but other resistance is circling above the current OEX position while that happens, and 15-minute osicllators begin to tip downward, although they're not yet rolling down. They're showing vulnerability to a downturn but not a probability of a downturn as yet. The 60-minute 18/21-pma's continue to serve as resistance. Daily MACD remains flat, its action not telling us much. I just would not feel compelled to trade this range inside a narrowing triangle on the daily chart.

  Ray Cummins   3/3/2004,  2:42:21 PM
Spread/Combos & Premium-Selling -- Strategy Selection: Diagonal Spreads - Part II

The diagonal spread is a combination of a price and a time (calendar) spread. The most common version of this strategy involves the purchase of a long-term call and the sale of a short-term call at a higher strike price. The initial debit of the position should generally be less than the spread between the two options, eliminating the possibility of loss in an upside break-out. The primary advantage of this strategy is the cost basis of the long position is reduced by the sale of the short-term option. The spread achieves maximum profit (at expiration) if the stock price remains above the sold option's strike price. The position can also profit (before expiration) if the underlying issue advances significantly after the play is opened.

  Jeff Bailey   3/3/2004,  2:39:58 PM
US Dollar Index (dx00y) 30-minute delayed, but really giving back gains from session high of 89.84 .... 89.13 +0.33% here.

  Ray Cummins   3/3/2004,  2:36:50 PM
Spread/Combos & Premium-Selling -- Strategy Selection: Diagonal Spreads

I mentioned our successful positions in Sepracor (NASDAQ:SEPR) earlier today and since we reviewed vertical (or price) spreads in Tuesday's MM, I thought it might be a good time to talk about the diagonal spread. The majority of traders utilize spreads to reduce the cost and the risk of option ownership. They construct combination plays with partially offsetting option positions to limit the potential for capital loss. Spreads can be designed to generate return diagrams of almost any character but unfortunately, the fundamental benefit of this type of trading is also its downfall; the potential gains are limited. The most popular types of combination positions are:

Price spreads - the purchase of an option at one strike price and the sale of another option with a different strike price. The potential profit in this strategy is based on the correct forecast of the direction of the market.

Time (calendar) spreads - the purchase of an option with one expiration month and the sale of another option with a different expiration month. This type of spread benefits from the faster decay of the "time value" of the short-term option.

  Jeff Bailey   3/3/2004,  2:36:06 PM
KLA-Tencor (KLAC) $52.62 ... too tight a stop at $52.25

SOX.X 503.32 -1.35%

  Jeff Bailey   3/3/2004,  2:31:39 PM
02:00 Internals at this Link

  Linda Piazza   3/3/2004,  2:24:29 PM
Thanks for the advice, Jonathan. (See the 14:15 at 14:16 posts.)

  Linda Piazza   3/3/2004,  2:22:57 PM
The OEX is up against this short-term descending trendline, with stochastics moving toward levels indicating overbought conditions: Link

  Jeff Bailey   3/3/2004,  2:22:53 PM
Day trade bullish stop alert .... KLAC $52.25

  Jonathan Levinson   3/3/2004,  2:16:35 PM
I've found that violently attacking either the keys or monitor tends not to avail positive results, Linda. fwiw.

  Linda Piazza   3/3/2004,  2:15:31 PM
My charting service has decided it would rather not produce charts at the moment. I'm working on it.

  Jim Brown   3/3/2004,  2:13:04 PM
Text of Fed Beige Book release: Link

  Jim Brown   3/3/2004,  2:11:38 PM
Editors Play - The Sunday's editors play was puts on DNA at $108. The stock traded down as far as $104 yesterday and several readers emailed that they had already taken profits. Good thing they did because a Forbes online article today at 1:PM has spike the stock back to $109 intraday. This is purely another example of the new shorts getting squeezed on any new news. The actual trading float is very low and that makes a squeeze very easy to produce.

I do not think anything has changed in the original concept. I would have no problem buying puts on DNA on any failure at $110 or below. The current squeeze should be weaker than the first one as the earlier bears are still licking their wounds. Good luck!

  Jeff Bailey   3/3/2004,  2:09:08 PM
Semiconductor Index (SOX.X) 503.25 -1.36% ... trying to work its way back above its DAILY S2 of 502.61.

KLAC $52.50. RED #4 of 5-MRT is at $52.53 and has been resistance since 12:00 PM ESt

  Jeff Bailey   3/3/2004,  2:02:43 PM
Day trade raise bullish stop alert .... KLA-Tencor (KLAC) $52.48 -1.9% .... raise stop to $52.25.

  Ray Cummins   3/3/2004,  1:58:56 PM
Spread/Combos & Premium-Selling -- Market Movers: Express Scripts (NASDAQ:ESRX)

One of the popular stocks in the Specialized Health Services group is at a new "all-time" high today. ESRX shares are up $1.09 at $75.50 as traders buy into the recent rally and the trend shows no signs of weakness. With the stock above a near-term support area (JAN-FEB trading range top), a bullish credit spread at $70 offers reasonable profit with minimal downside potential.

  Linda Piazza   3/3/2004,  1:52:40 PM
The OEX met the upside target predicted by its inverse H&S. The OEX is trying to steady above mid-Keltner channel support on its 15-minute chart. On the daily chart I posted in my first OEX-related post this morning, it's moved back above the rising red trendline, suggesting a rise toward the top red trendline near 570-570.75, depending on how it's drawn, but first it must steady here and get above the 60-minute 18/21-pma's. Those are located at 567.18 and 567.04. As I mentioned earlier, I wouldn't feel comfortable trading the inside of this narrowing triangle on the daily chart.

  Jeff Bailey   3/3/2004,  1:50:28 PM
Day trade long alert .... KLA-Tencor (KLAC) $52.35 here, stop $52.20, target $52.80.

  Linda Piazza   3/3/2004,  1:35:29 PM
The OEX now (already) approaches the upside target predicted by its inverse H&S.

  Ray Cummins   3/3/2004,  1:24:04 PM
Spread/Combos & Premium-Selling -- Market Movers: OSI Pharmaceuticals (NASDAQ:OSIP)

Shares of OSIP are in "rally mode" as rumor-driven short-covering has pushed the issue up $2.96 to $38.36 in a volatile morning session. There is no "pubic" news to explain the activity, however OSI's jointly-produced lung cancer drug, Tarceva, is in late-stage clinical trials. Our recent bearish position in the issue was closed earlier in the week, when the stock moved above the sold (call) strike at $35 and now it appears as if a bullish trend is emerging. Traders who agree with that outlook might consider a (short) put at $30 in March, or a longer-term "time-selling" position; calendar or diagonal, at the $40/$45 (call) strike in April.

  Linda Piazza   3/3/2004,  1:15:31 PM
It looks to me as if the Dow might have an upside target to just over 10,600, based on the break above its inverse H&S. We've seen these formations confirm now, but now should watch for a test of the upside targets to see if they're met before we begin feeling too bullish here. Upside targets aren't always met, and that is another sign that underlying strength is not what it should be. As of yet, these are just gyrations within a known congestion zone.

  Linda Piazza   3/3/2004,  1:08:25 PM
The OEX looks to be breaking above that inverse H&S neckline, with the break coming at about 564.70, and with an almost two-point upside target.

  Linda Piazza   3/3/2004,  1:04:43 PM
The OEX currently tests the neckline of its inverse H&S on its five-minute chart again.

  Linda Piazza   3/3/2004,  1:00:53 PM
With the markets feeling a bit shaky, I wondered how traditional safe-haven stocks such as healthcare and drug stocks were doing. I took a look at the HMO, the Morgan Stanley Healthcare Index, and found that the index is at 912.72, near the all-time high of 916.02 hit yesterday. The candles here have been growing smaller and smaller, however, so there doesn't appear to be a lot of conviction left. However,the index was moving up as I began to type, and it has a P&F upside target of 990.00. This index is too far extended above its 200-dma for my liking, however. Perhaps this wasn't the best to watch, as perhaps it's also being affected by political uncertainties in this election year. The DRG, the Pharmaceutical Index, hovers just above its 200-week MA at 335.06, with that index at 337.62 as I began typing. The weekly chart shows a possibility that this index is forming a H&S with a neckline roughly congruent to that 200-week MA, which is why I mentioned that particular moving average. If so, it's about time for the index to bounce up into a right shoulder. A break below that 200-week MA might send it to the bottom of a long-term ascending regression channel, in place since July, 2002, with bottom support currently near 320.00. A break above 346.50 would put it back above the midline of its regression channel and would negate the potential H&S. Both show the possibility of short-term gains with much downside vulnerability showing up, too. Not the picture of strength, exactly, so we have to wonder if these shaky markets are just markets consolidating recent gains, ready to move up again when they've done so, or if another sector--other than the traditional ones--would benefit from any rotation out of the recent big gainers.

  James Brown   3/3/2004,  12:51:02 PM
Computer Sciences Corp (CSC) is up 1% today (to 42.02) after announcing a 5-year $228 million NASA contract. The stock is bouncing from a recent test of support at $40.00 and just bounced from its 200-dma. Internals have turned bullish but CSC does have potential resistance at its 50-dma near $44 and its old highs near $47.

  James Brown   3/3/2004,  12:43:54 PM
The analysts on Wall Street are notorious for being late to the party and Bank of America is just now getting in on the act with new coverage of Intl. Game Technology (IGT) and Alliance Gaming (AGI).

BAC starts IGT with a "buy" and a $50 price target after a very strong surge in the stock over the last few days. IGT, currently at $42.20, is up 18% in 2004 and up 211% from its 2002 lows.

AGI was also started with a "buy" and a $33 price target. AGI is up almost 22% in the last six days (to $28) and recently produced a new double-top buy signal on its P&F chart.

  Linda Piazza   3/3/2004,  12:43:52 PM
While the OEX has been hovering just above 564, the central Keltner channel resistance has been descending and is now at 565.98. After a few hours of this, that resistance will have descended closer to the weekly pivot. Before that time, however, resistance lies at about 464.45; at the neckline of that possible inverse H&S, now descended to 564.80; at Keltner resistance just a dime above that; and at the weekly pivot at 565.02.

  James Brown   3/3/2004,  12:38:38 PM
yeah, I'm really going to be heart-broken over the Stewart trial ending.

  Jane Fox   3/3/2004,  12:38:06 PM
Speaking of which, the jury in the Martha Stewart has gone into deliberations. Sorry James.

  Jeff Bailey   3/3/2004,  12:37:30 PM
Semiconductor Index (SOX.X) 500.20 -1.96% ... back near session low of 499.61 and trying desperately to hang on to psychological 500 level.

  Jane Fox   3/3/2004,  12:36:18 PM
Former WorldCom Chief Executive Bernard Ebbers surrendered at FBI offices earlier Wednesday and has pleaded innocent to charges that he conspired with his chief financial officer to commit the biggest corporate fraud in American history. His lawyer, Reid Weingarten, said "Bernie Ebbers never sought to mislead investors, never sought to improperly manipulate WorldCom's numbers, never improperly took any money and never sought to hurt the company he built."

Prosecutors and defense lawyers agreed that Mr. Ebbers would be released on $10 million bond, secured by his home in Mississippi. He was to surrender his passport and have his travel restricted to New York City, Mississippi and Washington, D.C.

We now have our new Martha Steward trial.

  James Brown   3/3/2004,  12:35:33 PM
Toys R Us (TOY) the nation's second biggest toy seller announced earnings this morning that appear to miss by a substantial margin. First Call was looking for $1.05/share and TOY turned in 67 cents but there are a handful of charges to account for. Profits dropped sharply on lower video game sales.

TOY also announced a $197 million deal to sell 124 of its recently closed Kids R Us stores to Office Depot as part of its restructuring.

TOY did say that its "Babies R Us" stores turned in a good quarter.

  Jeff Bailey   3/3/2004,  12:30:36 PM
Biotechnology Index (BTK.X) 546.13 +0.01% ... edges into positive territory for first time in today's trade.

GILD $55.68 +2.3%, GENZ $49.99 +1.77%, DNA $106.87 +1.52%

CRA $14.15 -1.32%, MLNM $18.14 -1.14%, AFFX $34.89 -1.04%

  Ray Cummins   3/3/2004,  12:26:38 PM
Spread/Combos & Premium-Selling -- Market Movers: ADE Corporation (NASDAQ:ADEX)

Shares of ADE Corporation, which supplies production metrology and inspection systems for the semiconductor wafer, semiconductor device, magnetic storage and optics manufacturing industries, is in "rally mode" after announcing today that revenue grew to $23.1 million in the third quarter of fiscal 2004, up 14% compared with $20.2 million for the second quarter of fiscal 2004 and up 25% compared with $18.5 million for the third quarter of fiscal 2003. The stock is up $1.46 at $23.16 and our bullish positions in the issue are comfortably profitable. As far as a new entry point, conservative traders might consider the (short) $20 put in April on a pull-back or consolidation to the JAN-FEB highs near $22.

  Linda Piazza   3/3/2004,  12:25:10 PM
The OEX did not confirm the inverse H&S by a move through the neckline and will have dropped past the right shoulder level if it doesn't halt its descent by 564. Such a failure to confirm this formation would instead confirm weakness.

  Linda Piazza   3/3/2004,  12:22:33 PM
Thanks, Jane, for your 12:13 post. The trouble is that pattern recognition, one of my strengths as a trader (she says modestly--grin), hasn't been particularly helpful this last year. In fact, it's been a rather useless skill to have for the last year, as those market participants trading rising wedges, H&S, or other such patterns usually found themselves stopped out of trades, to the detriment of their trading accounts. Fortunately, markets do seem to be reorganizing themselves a bit over the last month or so, and it has been possible to trade some of these formerly reliable patterns. Not always, though: the Dow sure looked as if it was headed toward a confirmation of a H&S pattern a while back, with the TRAN's plummet seeming to confirm that possibility. Didn't happen. Despite the TRAN's plummet, the Dow then moved to a new high, setting up DJI/TRAN divergence. Is this going to be the year that Dow theory doesn't work?

  Jim Brown   3/3/2004,  12:13:43 PM
INTC at 28.95 now only 30 cents away from a five month low. It appears there is some serious fear about the mid quarter update tomorrow night. Could be a chance for a real relief rally if their news is good.

  James Brown   3/3/2004,  12:12:26 PM
Sector Update...

IUX insurance: +0.36%
HOM healthcare: +0.23%
BKX banking: +0.11%

XAU gold & silver: -1.39%
DJUSHB homebuilders: -1.07%
OSX oil service index: -1.36%
SOX semiconductors: -1.75%

Also noteworthy is the 4.37% drop in copper prices.

  Linda Piazza   3/3/2004,  12:11:31 PM
Here's the possible inverse H&S on the OEX five-minute chart: Link

  James Brown   3/3/2004,  12:09:50 PM
AMZN continues its trend of lower highs. Yesterday AMZN rallied to its 10-dma and rolled over closing under very short-term support at $42.00. AMZN traded back to $42.39 this morning but couldn't hold it and slipped back to 41.77.

  Jeff Bailey   3/3/2004,  12:07:55 PM
12:00 Internals at this Link

  Ray Cummins   3/3/2004,  12:07:34 PM
Spread/Combos & Premium-Selling -- Market Movers: Sepracor (NASDAQ:SEPR)

This recent winner is "on a roll" after the FDA granted conditional approval of its anti-insomnia drug Estorra. The "approvable" status opens the way for the drug to reach the U.S. market later this year and investors are speculating on that outcome. Our bullish positions in the issue, which include a speculative diagonal spread, are at maximum profit. However, aggressive traders might consider a "premium-selling" play at $40 or $42.50 for a short-term position.

  James Brown   3/3/2004,  12:05:47 PM
Litigation happy SCO Group (SCOX) now plans to file suit against car-maker DaimlerChrysler (DCX) over a "violated software agreement".

SCOX is better known for its lawsuits against the likes of IBM claiming that the Linux operating system is a patent infringement on their UNIX system. It is unclear if these two suits are related in any way. Shares of SCOX are down 1.32 to $12.10 and DCX is down 85 cents to 44.06.

  Linda Piazza   3/3/2004,  12:03:51 PM
The Dow also has a possible inverse H&S on its five-minute chart, with a neckline at about 10,575, it appears. The Dow is currently testing that neckline, but is at Keltner resistance. Remember that a "possible" formation is not necessarily going to be confirmed. Watching whether it is or not tells us something about underlying strength or weakness. For example, when KO set up a possible bullish formation on its daily chart a couple of weeks ago, but that formation wasn't confirmed, that told us there wasn't as much underlying strength as there appeared to be.

  Linda Piazza   3/3/2004,  11:59:29 AM
If the inverse H&S I mentioned in my 11:57 post should be confirmed, it would have an upside target of about 2 points above the neckline break. That would bring the OEX up to the mid-channel Keltner resistance, currently at 566.22.

  Linda Piazza   3/3/2004,  11:57:53 AM
A bullish inverse H&S is appearing on the OEX five-minute chart. Confirmation would come on a move above the descending neckline at . . . guess where . . . the weekly pivot. Give the OEX a few cents leeway to overshoot the target, as it sometimes does.

  Linda Piazza   3/3/2004,  11:54:27 AM
I was just preparing this chart on the BIX when Jeff updated us on its percentage loss. Jeff has been watching the BIX longer than I have, so I look forward to his updates on its performance. Here was what I was noticing: Link

  Jeff Bailey   3/3/2004,  11:49:01 AM
S&P Banks (BIX.X) 354.07 -0.16% ...

KBW Banks (BKX.X) 1,012.81 +0.05% ...

  Linda Piazza   3/3/2004,  11:44:50 AM
TASR: For the benefit of the readers watching TASR, here's an updated TASR chart, with the original annotations from this morning: Link TASR is, so far, bouncing from that trendline, the 21-dma, and the historical support. However, it has not yet broken above a recent descending trendline, with that trendline roughly congruent to the 10-dma, so I wouldn't consider the bounce confirmed just yet. If it does break out, resistance could be expected at about $55.40 and $57.70, in addition to the previously mentioned $60.00 and $65.00.

  Jeff Bailey   3/3/2004,  11:42:24 AM
September Fed Funds futures (ff04u) downside alert at 98.75. Market particpants now see 100% chance of 1/4-point rate increase before September.

  Linda Piazza   3/3/2004,  11:36:22 AM
The OEX was looking as if it was going to roll over into a lower high, and that's what it appears to be doing. Next Keltner support shows up at 563.83, however. So far, the OEX is trapped today between the weekly pivot and strong support.

  Jeff Bailey   3/3/2004,  11:34:30 AM
Top Image Systems (TISA) $5.03 +103% ... maker of intelligent document recognition systems reported quarterly results. Said Q4 revenues were $2.32 million, a 41% increase above year-ago $1.65 million. EPS was $0.014 per share.

Volume heavy at 1.49 million shares, nearly 1/2 the public float of 3.7 million.

  Linda Piazza   3/3/2004,  11:31:09 AM
Now we have the TRIN headed down (at the time I began the post) and the advdec line headed up, with indices headed up along with that advdec line. However, the OEX five-minute chart shows the OEX in danger of rolling over into a lower high, just beneath the previous five-minute high and at the weekly pivot. It's not settled yet, either direction.

  Jonathan Levinson   3/3/2004,  11:28:03 AM
The Fed has announced a coupon pass, no amount specified. This will add to liquidity.

  Linda Piazza   3/3/2004,  11:28:03 AM
KO: Is it time for KO to bounce from support between $48.43 (100-dma) and $49.00? The oscillators don't yet predict any such bounce, but here's a chart that the basis for my wondering if it might be time for that bounce: Link Note that I would expect to see strong resistance at $51.00, the site of historical resistance and the red trendline, and it's possible that KO would then roll over into a right shoulder. I'm not seeing anything that screams bullish or bearish to me right now.

  Jim Brown   3/3/2004,  11:13:49 AM
Snapshot of the ISM Services internal components for the last six months. Only imports and exports rose in February: Link

  Linda Piazza   3/3/2004,  11:07:53 AM
The TRAN certainly appears due for a bounce, at least on the basis of the five-minute Keltner charts. It hit the 19.1% retracement of the bear-market decline, at 2866.48, and is trying to bounce from that retracement level. The Keltner channels shows it deeply oversold on a five-minute basis, suggesting an eventual move up toward central channel S/R, now at 2895.97 but falling. That move may not occur just yet, however, as Keltner channels can give valid breakout (breakdown, in this case) signals, too. All we can say for certain is that the TRAN is on the cusp of breaking down out of its recently established neutral triangle, but it hasn't yet quite confirmed that breakdown and may decide to bounce instead.

  Jeff Bailey   3/3/2004,  11:05:26 AM
11:00 Internals at this Link

  Linda Piazza   3/3/2004,  11:02:50 AM
Is the bounce finally beginning? Perhaps so, but Jane has taught us to watch that TRIN closely, and so far, it's suggesting that any bounces we see might be nothing more than bear-flag or other distribution-type bounces. As one guide on the OEX, watch the previous five-minute high at 565.59. Bears want to see a lower five-minute high, preferably beneath the weekly pivot at 565.02, while bulls want to see a higher high.

  Linda Piazza   3/3/2004,  10:45:58 AM
The TRIN has been generally rising since the 10:00 ISM number while the advdec line has been dropping during that period, too. Although we're all seeing the various indices we watch approach strong support levels, those TRIN and advdec trajectories don't suggest strong bullish fervor building.

  Linda Piazza   3/3/2004,  10:34:14 AM
It looks to be time for an OEX bounce, based on Keltner channel evidence, with 564.50-564.60 being first resistance, followed by 565.34, 566, and 566.50-566.89.

This is the reason that I thought a play on a break of the red trendline on the daily chart would be a treacherous play. The OEX might be trapped by its weekly pivot and turn right back down again, but it might not, as 563-563.50 is presumed to be strong support.

  Linda Piazza   3/3/2004,  10:30:00 AM
The OEX tried to bounce where it should have bounced, but it can't seem to make it back above its weekly pivot at 565.02, or at least sustain levels above that weekly pivot. That presents the possibility that the formation we're seeing on the 15-minute chart is a "b" distribution pattern, with the break below that weekly pivot constituting a downside break out of the pattern. As I mentioned this morning in my first OEX-related post, a break below 564.50 constituted a break below the rising red trendline and such a break could have signaled a bearish entry, but it would be risky and would have needed a close stop since 563-563.50 is presumed to be such strong support. A break below 563 suggests a move toward 559.50, but there's that 561.23 level (38.2% retracement of the bear-market decline) that's now also near the site of the weekly S1 (561.28) to contend with, too. It's all risky within this congestion zone, but those with good discipline might scalp a play or two. It's not my kind of play, however.

  Linda Piazza   3/3/2004,  10:18:16 AM
Perhaps someone has already mentioned it, but the SOX is falling beneath its 100-dma again this morning. So far, it's holding just above an ascending trendline that began forming 2/20, but this could be the bottom support of a possible bear-flag pattern. The bottom support lies at about 501.50, but since the SOX regularly overshoots its targets and since 500 support lies just beneath, followed closely by other support levels, be cautious with your stops if thinking about trading the downside in semi stocks. The SOX could bounce from that trendline or one of the multiple support levels just below. I'm not saying that you shouldn't trade these bearish if chart characteristics on the particular stock you're watching warrant such a play, but only warning that stops should be judiciously set and then adhered to.

  Jeff Bailey   3/3/2004,  10:10:35 AM
10:00 Internals at this Link

Yesterday's Internals at this Link

  Jonathan Levinson   3/3/2004,  10:08:28 AM
Correction: 1.75B net ADD from the Fed. Time for a coffee.

  Linda Piazza   3/3/2004,  10:04:04 AM
The OEX is still holding to the lower red ascending trendline on its daily chart, depicted in my 9:00 post.

  Jim Brown   3/3/2004,  10:00:43 AM
ISM - all components lower on first glance.

  Jim Brown   3/3/2004,  9:59:32 AM
ISM Services = 60.8 , (est 63.4, last 65.7)

  Jeff Bailey   3/3/2004,  9:59:28 AM
U.S. Dollar Index (dx00y) 89.31 +0.54% ... higher by 0.48 points and trading above its WEEKLY R2 of 89.14.

  Jonathan Levinson   3/3/2004,  9:56:37 AM
The Fed has announced a 7.75B overnight repo to cover 6B expiring, net drain 1.75B.

  Linda Piazza   3/3/2004,  9:54:00 AM
A couple of months ago, I noticed that the OEX was trading more in concert with its 60-minute 100/130-pma's and envelopes than its 30-minute ones. Perhaps it's a function of the lower volatility, but now it's migrated even further, with the last month or two's trading pattern more in concert with the 120-minute chart: Link This chart is one of the reasons I pinpointed that 565.60-564.60 level as possible support, although only one of the reasons. The OEX breached the 120-minute 100-pma at 564.61, but only minimally, and now is attempting a bounce from that level. As I mentioned this morning, I wouldn't feel comfortable going long this bounce, however, as it's a bounce within a narrowing triangle on the daily chart. A break below that support zone would likely see the 130-pma tested.

  Jeff Bailey   3/3/2004,  9:52:07 AM
QQQ .... daily interval bar chart. QQQ now in its near-term "zone of support" from $36.50-$36.44. Link

  Jeff Bailey   3/3/2004,  9:45:52 AM
Mamma.com (MAMA) $14.75 +48% Link ... adds to yesterday's gains. Short squeeze cited.

  Jeff Bailey   3/3/2004,  9:43:10 AM
Swing trade bullish stop alert .... QQQ $36.43.

  Linda Piazza   3/3/2004,  9:43:10 AM
A couple of weeks ago, just after the TRAN had turned down at the 50% retracement of its recent plunge, I suggested that we should watch for a higher low (did happen) with the possibility that the TRAN might then print a lower high as it coiled itself into a triangle at the bottom of its recent decline. That lower high appears to have happened while I was gone, with the TRAN getting turned back neatly at the 38.2% retracement of the recent decline. Today, the TRAN approaches a "best fit" rising trendline that describes the bottom support of that triangle, with that trendline now at about 2875. The TRAN has a habit of sending candle shadows down to pierce that trendline, with candle bodies forming above it, so we can't take the first piercing of that trendline as a definitive sign that the TRAN is breaking down. However, the presumption now is that it will break to the downside. Look for a break below 2866 as confirmation that the TRAN has broken below that trendline, and next watch the test of the previous lows at 2837 and 2816. A print at 2800 will create a new sell signal. This is important because of the TRAN's importance in Dow theory.

  Jeff Bailey   3/3/2004,  9:41:57 AM
QQQ $36.47 -0.43% .... tried to fill its gap lower with a session high of $36.57 (WEEKLY Pivot $36.57) but turned back quickly.

  Jeff Bailey   3/3/2004,  9:39:24 AM
Semiconductor Index (SOX.X) 509.53 -0.13% ... XLNX Link $41.60 -2.3% after mid-quarter update.

KLAC Link $53.56 +0.14% upgraded by Moors & Cabot on their belief that orders are tracking ahead of plan, booking trends will continue to be strong for most of the year, margins are improving, and the recent decline in the stock's price has created an attractive entry point. Firm raised its price target to $69 from $55.

  Linda Piazza   3/3/2004,  9:37:05 AM
During the first five minutes of trading, the OEX ranged from 565.66 to 565.08. This brings the OEX within the 564.60-565.60 range predicted by the Keltner channels. As the first retracement of the day begins in a few minutes, I wouldn't be surprised to see the OEX steady off somewhere near the bottom of this range and then attempt a bounce. Not sure how far it will get, however.

  Jeff Bailey   3/3/2004,  9:31:18 AM
QQQ $36.53 -0.25% ... session low has been $36.50.

  Linda Piazza   3/3/2004,  9:30:44 AM
The OEX heads down toward that 554.60-555.60 level predicted by the Keltner channels and envelope systems.

  Jeff Bailey   3/3/2004,  9:29:06 AM
Autozone (AZO) $88.40 ... sharply lower at $83.00 after the auto parts retailer reported second quarter EPS of $1.04, which was 4 cents better than consensus estimates. Revenues rose 3.4% year-over-year to $1.16 billion, which was below consensus estimates of $1.2 billion.

  Jeff Bailey   3/3/2004,  9:20:46 AM
09:00 Update at this Link

  Linda Piazza   3/3/2004,  9:16:07 AM
While I was out of town, I had received several requests to look at TASR, and pinpoint resistance and support levels I might see. Here's a chart I posted a couple of weeks ago, with new annotations: Link Note that since the Fib retracement bracket is a fitted one, it may or may not have any validity, but that its Fib lines do seem to be congruent to other types of S/R.

  Jonathan Levinson   3/3/2004,  9:11:26 AM
It's muggy here in Montreal too, Linda. We're up to -1 celcius.

  Linda Piazza   3/3/2004,  9:00:41 AM
I left for a couple of days and returned to find the OEX just about where it was when I left. To show you what I mean, here's a chart with the annotations I'd added Friday afternoon: Link

What about on the short-term? Keltner channels and envelope patterns suggest a move toward 564.60-565.60 this morning, with such a move touching or slightly violating the ascending red trendline on that daily chart. That evidence also suggests that we should see a bounce attempt from that zone, perhaps at about the time the ISM number is released? I wouldn't go long the OEX on such a bounce, however, as I wouldn't play the inside of that narrowing triangle on the daily chart. If such a bounce occurs, action gets iffy and difficult to predict ahead of a look at early trading patterns. Will it bounce all the way to the top red line and maybe to the green one or will it roll over sooner?

If the OEX should roll over and fall below 464.50, it looks as if it will have violated that rising red trendline, but the support at 563.50 can be presumed to be strong. If volume patterns, TRIN levels, and other measures support a bearish thesis, traders could risk a bearish entry with a tight stop, but I'm not too enticed by such a play with the support layered so thickly and with the OEX still within its congestion zone. A fall below 563 would get the player past that 563-563.50 support zone, and such a move might then suggest a fall toward 559.50 support, a 3.5-4.0 OEX move. That's not a big move and would require getting in and out quickly to hope to make a profit. A bearish entry on a drop through 553 would need a tight stop, too. Once through 559.25-559.50, a drop to 557.36 is suggested, but I would expect a bounce attempt from that level. The gist of all this is that playing this range is playing a congestion zone that could find support at any one of a number of proven support levels. It's treacherous trading, and OEX traders have felt the pinch all this year as volatility drops on the slightest bounce and they find themselves unable to profit even when the OEX moves their direction. A fall below 557 suggests a fall toward 541, with fewer support levels to stop the fall.

I would not go long on an upside break out of the red triangle with green resistance so close overhead. I would wait for a break above the double-top level, but would then be aware that the OEX then moves into a congestion zone on its weekly chart, so I'd keep stops tight with any long play, too.

  Linda Piazza   3/3/2004,  8:59:42 AM
Thanks, Jonathan and Jane, for your welcome back. It's good to be back, too, although I seem to have brought Houston's muggy weather back with me to Dallas.

  Jane Fox   3/3/2004,  8:48:22 AM
Welcome back Linda.

  Jeff Bailey   3/3/2004,  8:37:18 AM
Swing trade raise bullish stop alert in QQQ to $36.38.

  Jonathan Levinson   3/3/2004,  8:34:35 AM
The ISM is due at 10AM.

  Jonathan Levinson   3/3/2004,  8:01:43 AM
It's good to have you back, Linda.

We await ISM services for Feb, est. 63.4, and the Fed Beige Book at 2PM.

  Linda Piazza   3/3/2004,  7:22:05 AM
Good morning. Within the first hour of trading on Wednesday, the Nikkei had already traded in an 100-point range. By the end of the second hour, it had traveled in that same 100-point range, going the opposite direction. Dipping slightly lower in the early afternoon before printing a lower high, the Nikkei closed about 30 points off its low of the day, down 9.59 points or 0.08%, at 11,351.92. Greenspan's comments yesterday targeted Japan's intervention efforts in the currency markets, but other effects sent the dollar higher against the yen. Still, some exporters that had headed up in early trading had traded lower by the end of the day. Asian carmakers reported strong U.S. sales, sending the sector higher across Asia in early trading, but Toyota was one of those exporters trading lower by the day's end. Nissan and Toyota closed higher, but by less than 1% each. With Merrill Lynch and Nikko Citigroup recommending the banks and with many feeling that banks will benefit from a growing economy, banks moved higher in early trading and closed higher, too. In addition, Mizuho Financial announced that it would pay back taxpayer money this month, with the result that Mizuho led the early gains in this sector and closed up by 2.9%. Technology stocks turned in a mixed performance. Two techs in the news included Softbank, falling after Citibank loaned a U.S. unit money to grow its broadband business, and DoCoMo, flat after it announced that problems receiving incoming e-mail would force it to suspend sales of Fujitsu FOMA mobile phones.

Most other Asian bourses traded lower. The Taiwan Weighted lost 0.62% and South Korea's Kospi lost 0.38%. Hyundai Motor erased early gains to close down 1.3%. Singapore's Straits Times fell 0.65%. Hong Kong's Hang Seng lost a heftier 2.02%. With J.P. Morgan cutting bank HSBC's rating to underweight from the previous neutral rating, the bank's stock fell 2.4%. China's Shanghai Composite fell 1.51%, with China Telecom losing 3.4% and China Unicom falling 4.4%. China Telecom announced a stock and debt offering.

European bourses mostly head lower this morning, too. The dollar's rally resulted in a mixed blessing for those bourses. It helps exporters, but also likely reduces the pressure on the ECB to lower interest rates, with that decision expected tomorrow. Stock-specific news included an earnings report from French luxury goods manufacturer LVMH Moet Hennessy Louis Vuitton, and plans for a share-swap merger by Belgium's Interbrew with Brazil's AmBev. Louis Vuitton reported 2003 net profit rising 30%, in line with expectations, on declining sales. Sales would have been up 4% on constant currencies, the company commented, and it gave an upbeat forecast for 2004, based on sales for the first two months of the year, but the earnings report was reportedly receiving mixed reviews by analysts. Interbrew plans to remain in control in its planned deal with AmBev, but would leave AmBev with North American assets. Interbrew's shares plummeted in early trading.

As of this writing, the FTSE 100 was down 19.50 points or 0.43%, to 4520.60. The CAC 40 was down 24.70 points or 0.65%, to 3760.66. The DAX was down 22.19 points or 0.54%, to 4078.15.

  OI Technical Staff   3/2/2004,  10:10:40 PM
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