PremierInvestor.net Newsletter Monday 06-25-2001 section 1 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/4901_1.asp ================================================================= In section one: Market Wrap: Internet and Advertising flexing some muscle Market Sentiment: The Market is a Paine by Jeff Canavan Play-of-the-Day: Citrix Systems, Inc. CTXS (Long) Watch List: BRCM, APPL, LH, JNJ ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 06-25-2001 High Low Volume Advance/Decline DJIA 10504.22 -100.37 10644.24 10468.12 1.03 bln 1302/1780 NASDAQ 2050.87 + 16.03 2060.06 2026.40 1.48 bln 1893/1882 S&P 100 632.03 - 4.12 640.05 629.24 totals 3195/3662 S&P 500 1218.60 - 6.75 1231.50 1213.60 46.6%/53.4% RUS 2000 484.19 - 4.46 490.20 483.75 DJ TRANS 2646.31 - 30.18 2685.98 2644.03 VIX 23.25 + 0.75 23.82 22.26 Put/Call Ratio 0.63 ----------------------------------------------------------------- =========== Market Wrap =========== Internet and Advertising flexing some muscle. For some, the picture that may come to mind with Internet stocks "flexing some muscle," might be similar to that of Alfalfa (the Little Rascal with the pointy hair) striking a muscular pose with both arms hoisted above his head. While some may laugh at such a thought, this little group (what's left of them) may be turning a corner. If you're looking for the leader of the group, look no further than eBay (NASDAQ:EBAY). When I was a little kid, I rarely missed an episode of "The Little Rascals" and always wondered just how the group of rascals would get themselves out of the corner they had painted themselves into. Don't look now, but the Internets might be doing just that, with shares of eBay leading the way. One thing that might very well be taking place is that bearish traders are looking at eBay (NASDAQ:EBAY) and how well that stock has been holding up and deciding that the group itself is about to get out of what has seemed to be a troubling "fix." We've written before how important it can be for traders to keep an eye on "big named stocks" in a sector as one stock can often times act like a tow truck and pull the rest of the group out of the gutter. Four sessions ago, shares of eBay broke above major horizontal resistance at $66.50 and since that time, the CBOE Internet Index ($INX.X) has started to turn a corner. eBay Inc. - last eleven months One might begin to think, "as long as eBay can stay above $66.50, then there's hope for Internet stocks." I like to see the leader lead and then begin pulling the rest of the pack forward. That appears to be what is taking place with the CBOE Internet Index ($INX.X) in recent sessions. CBOE Internet Index - last eleven months An upward move to the 50-day moving average at 198 is not out of the question. For the INX.X that would represent a 10% gain from current levels and this can happen in just one trading session. Should the group continue to show strength above 200, then an all out assault could be launched on the 200-day moving average to 250. What could be the catalyst for such an assault? One thing that seems to be presenting itself is the possibility for a bottom to have been found in advertising spending. While many think of the Internet as a way to disseminate news and information across a global network, it's also a way to generate revenue for Internet based advertising firms or Internet portals. Today, shares of Yahoo! Ind. (NASDAQ:YHOO) another "big name" in the Internet space jumped 13.9% to $19.73 after Safa Rashtchy, an analyst with U.S. Bankcorp Piper Jaffray said it appeared that the advertising market hit bottom in April. Now... I'm not one to simply take Mr. Rashtchy's word for granted, but I have noticed a couple of things in recent weeks that has me thinking that somebody other than Mr. Rashtchy, namely the MARKET might also be thinking that advertising spending is turning a corner. Dow Jones Co. - last eleven months Dow Jones (NYSE:DJ) might be the "who's who" of advertising. Among its print offerings are The Wall Street Journal and Barron's. It also owns a network of Television Stations as well as electronic publishing operations like Dow Jones Newswires. I think they're very dependent on ad revenues. The reason I point out the above chart of Dow Jones (DJ) is that it is a great stock to at least be monitoring if you're a bullish trader in some Internet stocks that derive a large portion of their revenues from ad spending. If the Internets are truly going to get themselves out of a corner, I think we may now begin to understand the plot. Check out tomorrow's new bullish play in the NetBulls section of the web site. It might make sense! Jeff Bailey ================ Market Sentiment ================ The Market is a Paine According to Paine Weber, their Index of Investor Optimism fell to a four-year low. The reading came in at 104, which was well below May's reading of 113. Basically, only 44% of the sample population is optimistic, compared to a reading of 51% last month. The decline was mostly attributed to rising concerns over energy prices. The Mickey Indicator, which measures the attendance at Walt Disney World as a gauge consumer sentiment, is currently down 7% for the current quarter. On the positive side, sales of previously owned home increased by 2.9%, while analysts were only expecting the number to come in flat. The real estate market continues to hold up tremendously well in the face of a slowing economy. Overall the market sentiment remains pensive ahead of the Feds announcement on Wednesday. Perhaps it's just me, but it seems that there is a lot less hoopla ahead of this Fed meeting. Could it be that we've become numb to Fed's rate cuts? Commitments Of Traders Report: 06/19/01 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercials Long Short Net %Change Open Interest 6/05/01 323,109 400,509 (77,490) 13.1% 510,122 6/12/01 353,074 423,257 (70,183) (9.4%) 562,025 6/19/01 301,376 371,121 (69,745) (0.6%) 457,618 Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: (41,144) - 5/1/01 Small Traders Long Short Net %Change 6/05/01 154,233 76,632 77,601 10.5% 6/12/01 167,720 100,610 67,110 (13.5%) 6/19/01 128,296 56,038 77,258 (7.7%) Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 Comments: We've changed the way we present this data to give readers more information, but if the shock is too much, please let us know. We've left in the previous two weeks data to give traders a better feel for how the data is trending. For example, Commercial are still net bearish by 69,745 contracts, but if we look at the past two weeks we can see that is a 10% improvement from the net bearish reading of 77,490 on 6/05/01. The next piece of data we've added is the number of contracts long, and the number of contracts short. This helps to give readers an idea of how the change in net position came to be. This week the number of commercial short positions dropped from 423,257 to 371,121. Things are looking good on the surface, since the institutions are shorting less. But if we look at the number of commercial long positions we can see that number also dropped from 353,074 to 301,376. So the reduction of both long and short positions is more of a reflection of market indecision. That brings us to our next new column, Open Interest. Open interest is the total number of positions outstanding (keeping in mind that one long contract and one short contract equals one position). The general theory behind this data is that a rising market should be supported by rising open interest (new positions being added). The other new column is just the percentage change in net position. Changes of 5% or greater in commercial net position are generally regarded as significant. Lastly, we've added the most bullish and bearish readings of the year to give readers an idea of where we stand from a historical perspective. Nasdaq-100 Commercials Long Short Net %Change Open Interest 6/05/01 25,098 36,433 (11,335) (1.5%) 51,660 6/12/01 33,586 44,234 (10,648) (6.1%) 68,245 6/19/01 23,480 34,097 (10,617) (0.3%) 47,202 Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: (1,825) - 1/02/01 Small Traders Long Short Net %Change 6/05/01 11,217 10,062 1,155 (60.3%) 6/12/01 18,374 16,264 2,110 82.7% 6/19/01 14,284 8,403 5,881 178.7% Most bearish reading of the year: (1,028) - 1/02/01 Most bullish reading of the year: 8,460 - 3/13/01 Comments: We can see that commercial traders have been slowly reducing their net bearish position, but the reduction in both long and short positions tells us that there is a general lack of conviction in either direction. Small traders, ever optimistic about technology, and have increased their net bullish stance by 178%. Hmmm, if they tend to be on the wrong side? Dow Jones Industrials Commercials Long Short Net %Change Open Interest 6/05/01 22,717 16,888 5,829 0.3% 35,257 6/12/01 37,886 22,611 6,239 6.6% 37,886 6/19/01 22,611 12,346 1,876 (232.6%) 22,611 Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 8,925 - 5/22/01 Small Traders Long Short Net %Change 6/05/01 3,881 8,132 (4,251) (0.6%) 6/12/01 5,332 9,637 (4,305) 1.3% 6/19/01 3,884 7,555 (3,711) (13.8%) Most bearish reading of the year: (7,572) - 5/08/01 Most bullish reading of the year: 1,909 - 1/16/01 Comments: Ahhhhhhhhhh!!!!! A 232.6% drop in the net bullish position of commercial traders! Actually the percentage change can be a bit deceiving since these contracts are thinly trade when compared to the S&P 500, but nevertheless the trend is disturbing. Notice how institutions started dumping their long positions in the Dow just before the likes of Merck and Alcoa started to warn about earnings. ====================== Play-of-the-Day (Long) ====================== Citrix Systems, Inc. CTXS $30.14 +1.95 Stop: $26.50 Citrix Systems, Inc. is one of the leading suppliers of application delivery and management software and services that enable the effective and efficient enterprise-wide deployment and management of applications. The company's products permit organizations to deploy and manage applications without regard to location, network connection, or type of client hardware platform. Recent upgrades, a potential bottom in the GSTI software index (GSO.X) and a fresh convergence of the 50 & 20 dma's all add up to reasons why Citrix Systems, ticker CTXS, gets the nod for a new long position this evening. Lets start with the fundamentals. A once high flyer, CTXS crushed its own groove back in June of 2000 by saying that they would miss earnings estimates for the quarter and year-end. Traders and investors alike liquidated the stock en mass after the warning, but more recently, the pain that was felt has subsided and institutions have started to nibble at shares of this up-n-comer in software. Earnings are again on the rise, a merit badge for management considering the current economic environment. Citrix is slated to earn 0.18 cents per share this quarter and 0.74 cents for the year, EPS growth rates of 75 and 19.6 percent, respectively. Yesterday, CSFB upgraded the company to Buy from Hold, saying that they believe the market for Citrix's products continues to accelerate, and the Windows XP upgrade cycle should only benefit the company further. Comments: Last Friday, CTXS shares stopped right at important resistance at $31.00. On Monday, the shares broke through, closing the day at $31.84. Volume was solid at 3.4 million shares traded. We see sight resistance at $32.00 and $33.50. Stronger resistance should be encountered when the shares attempt to tackle the $37.19 52-week high. Conservative traders can wait for a move through $32.00 before taking a position. We have a stop loss implemented at $26.50. Picked on June 20th at $30.14 Change since picked 1.68 Earnings Date 7/18 (Not Confirmed) ========== Watch List ========== BRCM – Broadcom, Inc. $35.49 +1.81 WHY WE LIKE IT: We may have not seen the worst out of the communications chip companies, but the bottoming process is definitely in process, and leaders in the field should begin to show signs of life soon. BRCM looks to have found support near the $30.00 level, and is seeing volume pick up in the past few session. It will be interesting to see how this afternoon's after the bell warning from peer AMCC affects shares in trading Tuesday. POTENTIAL TRIGGER EVENT: While shares have made good progress since last Monday's close at $30.41 (+14%), it would take a settlement north of $36.00 in order for us to get on board. This would undoubtedly clear the path for a run at the 50-dma at $37.78, and more likely the $40.00 level. With the FOMC sure to cut rates this week, BRCM should see higher ground by Friday. === AAPL – Apple Computer, Inc. $23.99 +1.73 WHY WE LIKE IT: Despite the Nasdaq going basically nowhere in the past 5 sessions, shares of AAPL are displaying excellent relative strength as compared to the market as a whole. Today, AAPL took out both the 50 & 200 dma's, although the steep decline of the 200-dma would scare us from adding the stock on the bullish crossover alone. Volume has also been only average in the past week or so, giving cause for doubting the technical progress achieved today. POTENTIAL TRIGGER EVENT: While we are more inclined to sell AAPL versus considering it for a long position, a closing above $26.50 might entice us to give Steve Job's company a shot on the long side. This accomplishment would take out yearly highs set by the stock, and would probably lead to a process of filling of the gap formed in October 2000 when the company warned of lower earnings. === LH – Laboratory Holdings, Inc. $75.50 -3.80 WHY WE LIKE IT: While market uncertainty and earnings pressure has hurt even the strongest of tech companies in the market sell- off, independent clinical laboratory company LH has been firing on all cylinders. A steady northerly progress is seen on the chart, and with the stock taking a break since running from $67.50 to $82.50, the time to get LH could be fast approaching. The declining volume seen in the 4.9% sell off should indicate that traders selling the stock are of the weak hands variety. POTENTIAL TRIGGER EVENT: We would love to see the stock continue to trade lower on lackluster volume and bounce off of the 50-dma, although the relative strength of the stock will probably negate this happening. Our bet is that bulls will line up near the 38% retracement bracket ($74.38), and thus we would like to see how shares react near this level. If volume were to be below the 1m level on this occurrence, LH would offer an excellent risk/reward scenario for a long trade. === JNJ – Johnson & Johnson, Inc. $51.60 -0.79 WHY WE LIKE IT: JNJ has been sold lately in sympathy with the rest of the sector, as Merck's warning last week rocked an already shaky group. JNJ recently completed its acquisition of Alza Corp. and also took out its yearly closing high last Wednesday. While the sell-off has been swift and has come on fairly heavy volume, the up trend in the stock is firmly in place unless shares compromise $50.50. POTENTIAL TRIGGER EVENT: As evidenced by the volume spike on Friday, the bulls appear to have drawn a line in the sand near $51.50. So long as this level, and certainly not $50.95 is not taken out to the downside, the forward momentum will be confirmed in JNJ. While oscillating indicators have started to roll over, shares could quickly rebound considering the more recent institutional interest in the company of late. We would prefer to wait for a closing north of $52.40 before considering the company as a long candidate. ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Monday 06-25-2001 section 2 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/4901_2.asp ================================================================= In section two: Split Trader New Play: Schuler Homes, Inc. SHLR Net Bulls New Plays: Yahoo! YHOO (Long), Getty Images, Inc. GETY (Short) Closed Play: Scientific-Atlantic SFA (Short) Stock Bottom / Active Trader New Play: Rational Software, Inc. RATL Closed Play: Washington Mutual WM (Long) ================================================================= Split Trader (ST) section ================================================================= ============ ST New Plays ============ ------------------------- New Split Candidate Plays ------------------------- Schuler Homes, Inc. SHLR $13.57 +1.02 s/l $11.94 Sector – Semiconductors SCHULER HOMES INC. develops residential housing in Hawaii. Co.'s developments primarily consist of single-family homes, multi- family homes, such as condominiums and townhomes and, to a lesser extent, residential lots. Co.'s homes are generally priced at levels that either (i) are at or below ceilings established under applicable governmental land use policies, or (ii) represent the low to moderate end of the market for a home in a particular locality. Co. is generally required to sell its homes only to owner-occupants by lottery or on a first-come, first-served basis. With existing home sales rising 2.9% today to a seasonally adjusted rate of 5.37 million in May from an upwardly revised pace of 5.22 million in April, and interest rates for mortgages in steady decline thanks to an aggressive Federal Reserve, the housing market is continuing to hold steady as others area of the economy are still feeling the heat. Tomorrow, we get more information on the sector with the new home sales data for May, and should the numbers come in much like today's figures, we could see homebuilding stocks like SHLR benefit even further. Looking at the fundamental picture, Schuler offered up an upside EPS surprise on 5/9/01 by posting $0.81 cents per share on revenue of $488 million and closings of 1594 new homes. Despite the positive report, Solomon Smith Barney decided that the appreciation in the group was reason to take profits, and on 5/16 downgraded the sector, lowering shares of SHLR from Buy to Outperform. After selling off to an intraday low of $12.00 on 6/20, share of SHLR are now on the rebound, thanks to above average volume totals. In the past four trading sessions, SHLR has now twice seen participation north of 400k shares versus its 97k, 3 month average. The 30-day average volume trend is also rising, seen this evening at 121k per day. An important technical hurdle was also cleared Monday as shares climbed back above the key 50-dma at $13.51. Oscillating indicators are plotted firmly in the bull camp, with MACD offering up a very bullish crossover (60-Min) coupled with a move into positive territory due to the $1.02 or 8.13% move higher achieved in the session. With this resistance now acting as support, shares of SHLR should have very little trouble in achieving prices near the $15.00 mark. We've placed a stop down at $11.94 for the trade, but considering the positive bias in the sector combined with the constant flow of bad news emitting from the tech sector, we think the lows for SHLR have been seen near term. Look for this homebuilder to reassert its leadership position and command higher prices for its stock in the next few trading sessions. Average Daily Volume = 97K 52-week: High = $18.70 Low = $12.50 Next Earnings 08-09 est = 0.34 versus = N/A ================================================================== Net Bulls (NB) section ================================================================== ============ NB New Plays ============ -------------- New Long Plays -------------- Yahoo! Inc. YHOO $19.77 +2.46 Stop: $17.25 To many people Yahoo is the Internet. Each month 54 million people view 900 million pages of Yahoo sites daily. They use Yahoo's search engine, chat rooms, email, news, finance tools, auctions and stores. In December, the number of registered users increased to 180 million from 166 million in September. As a victim of the dot-bomb the normally profitable Yahoo warned in March that the absence of visibility into future business conditions made it difficult to predict whether it would be profitable in 2001. Analysts responded by slicing their 2001 earning estimates from 37-cents a share to 4-cents. For 2002, they forecast the firm to earn 15-cents per share. They also project revenues to increase from $738 million in 2001 to $905 million in 2002. Yahoo shares jumped more than 14-percent on Monday due to positive comments from U.S. Bancorp Piper Jaffrey analyst Safa Ratschy. Ratschy said, "Given the expected positive Q2 results, the potential of positive announcements in the next few weeks, the bottoming of the ad market and the new CEO, we believe the stock is likely to trade up in the next few weeks." These comments are consistent with mounting evidence that the ad market has hit bottom. Last week, AOL-Time Warner CEO Gerald Levin said that advertising price have stabilized. Although few analysts are predicting an imminent recovery for the industry, Yahoo! shares are beginning to attract the attention of bargain hunting investors. Monday's move pushed Yahoo's shares up against resistance between $20 and $20.50. Bullish enthusiasm was evident with volume of 15 million shares traded. This well above the 11 million daily average. The shares ended the day with the bulls clearly in control. We are optimistic that positive momentum will carry over into Tuesday's trading. The next levels of upside resistance are at $23.75, $26.75 and $30.00. Conservative traders can wait for additional confirmation of bullish momentum by waiting for a break above $21 before taking a position. Support in the event of a bearish reversal exists at $17.50. Picked on June 25th at $24.89 Earnings Date 7/11 (Not Confirmed) --------------- New Short Plays --------------- Getty Images, Inc. GETY $24.89 -4.56 STOP: $27.00 Getty is the largest provider of stock images for business and consumers has an archive of 70 million still images and illustrations and more than 30,000 hours of stock film footage. The Seattle-based firm targets four basic markets -- creative professionals (advertising and graphic design), the media (print and online publishing), other businesses, and consumers -- and has grown through the acquisition of such brands as Tony Stone Images, EyeWire, and rival Visual Communications Group in 2000. Getty has distribution offices in 30 cities and continues to capitalize on the Internet and CD-ROM collections for distribution. Over 40 percent of its revenues come from outside North America. Last year, the firm lost $1.99 per share. This year, analysts expect the firm to reduce those losses to 86-cents per share on sales of $512 million. Next year, the analysts' consensus estimate for is for the company to lose 40-cents per share on revenue of $584 million. In their first-quarter ending March 31st the firm lost 24-cents per share on a 20-percent increase in revenue from the same quarter the previous year of $14.6 million. They attributed the revenue increase to improved sales across all geographies; and the reduced loss to a greater sales of higher margin product and the absence of debt conversion expenses. Technically, the shares broke down Monday due to negative comments from Thomas Wiesel. The broker sees increasing risk to Getty's second-quarter and late-2001 estimates because of continued deterioration of print advertising spending. In addition, they cited weakness in both the Euro and the British Pound. Although Weisel remains bullish on the company's long-term prospects, they cautioned investors not to expect meaningful improvement in the second half of 2001. Gety shares had been stabilizing after a three-day bearish slide that ended on June 15th, however Weisel's negative comments re-energized the bears. On Monday, the shares produced significant downside breaks of support at $26.45, the $26.78 50-day moving average and the $27.12 200-day moving average. Confirming the bearish reversal was high volume of 1.2 million shares, well above the 493k daily average. This degree of negative momentum is not likely to resolve itself quickly. The next levels of support are at $23.00 and $20.00. Resistance to a return of the bulls is at $26.45. Picked on June 25th at $24.89 Earnings Date N/A (Not Confirmed) =============== NB Closed Plays =============== -------------------- Closed Bearish Play -------------------- Scientific-Atlantic SFA $40.00 0.00 Stop: $41.50 We are sorry to see this Bearish selection go. Monday's $41.80 high just barely tripped our $41.50 stop leaving us with a final gain to date of $9.18 per share. The shares set this high in the early minutes of trading and spent the remainder of the session giving the $1.80 back. This is encouraging for those still in this play. The $40.00 level has turned into important support, if the shares can break through weak support at $38.60, the pril $35.02 low would be within target range. Picked on June 12th at $49.18 Change since picked 9.18 Earnings Date 7/19 (Not Confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ -------------- New Long Plays -------------- Rational Software, Inc. RATL $27.14 +0.84 s/l $24.50 Sector – Software Rational Software Corp. is a provider of integrated solutions that automate the software development process. Its integrated solutions include unified tools, software engineering best practices, and services that allow customers to successfully and efficiently develop and deploy software. The company's solutions help customers organize, automate, and simplify the software development process and enable them to gain a competitive advantage by being able to more quickly develop and deploy high- quality, mission-critical software. Will software lead the Nasdaq out of its current trough? Many have speculated that this will be the case, as uncertainty within the semiconductor space has caused investors to question whether the likes of MU, INTC and AMAT can pull the COMPX out of its rut this time. Despite both tech heavy indexes being below key support levels, names in the software group (GSO) have been displaying better relative strength lately than those in the Philadelphia Semiconductor Index (SOX), and this indicates to us that institutional accounts are more comfortable holding stocks in this sector going into Q2 earnings. We've chosen to add RATL as a long this evening for many reasons, not the least of which is an encouraging technical snapshot. While RATL is still within a tight trading range between $22 and $28, a pricing collar that has plagued its advance since late May, excellent support has formed and been tested twice since the stock surpassed the 50-dma back on 5/16. We like the way shares appear to be coiling near $27.50, ready to explode to the upside with any hint of positive news. With the two-day FOMC meeting beginning tomorrow, the news needed could well be on the horizon in the form of a 50-basis point reduction in the fed funds target. Looking at the chart, RATL took out Friday's relative high with the $0.84 advance Monday, and also managed its highest settlement since 6/7 with the close at $27.14. Of concern was the meager participation, with only 1.4 million shares crossing the tape versus the 3.0 million count that is typical over the prior 30-days. But support is strong as we previously mentioned near the 50-dma ($24.17), and we are willing to embrace the risk/reward scenario seen in the daily chart of the stock. In short, with $2.64 of downside risk and a minimum of $10.00 upside from current levels, the time to get long RATL is now. Whether the Fed lowers rates by 25 or 50 basis points on Wednesday, it is clear that the liquidity injections by the FOMC are nearing an end, and thus gains to be achieved in fixed income, if any, should be very limited going forward. Combining all of this together with RATL's slow, up sloping chart and nice close near the highs of the day leads us to believe that higher prices are more likely than the converse, even with AMCC's warning after the bell. Our stop loss is set at $24.50, and while a breaching of this level would not break the up trend, it would likely send shares below the $23.00 mark, compromising recent support and handing the advantage over to those in the bear camp. Average Daily Volume = 4.4 mln 52-week: High = $70.62 Low = $12.50 Next Earnings 07-11 est = 0.08 versus = 0.14 =============== AT Closed Plays =============== ---------------- Closed Long Play ---------------- Washington Mutual WM $37.00 -1.90 s/l $38.50 Friday's rumor that Washington Mutual was acquiring East Coast financial Dime Bancorp turned out to be a reality, as the merger was confirmed this morning by management. Under the terms of the agreement, Seattle-based Washington Mutual will pay $40.84 for each share of Dime Bancorp, a 10.7 percent premium over Dime's closing price of $36.88 on Friday. In typical merger price participation fashion, shares of WM sold off while shares of Dime moved higher. Our stop loss trigger was easily compromised in the sell-off, but not before we managed to capture $1.42 or 3.8% for our readers. Picked on June 15th @ $37.08 CLOSED OUT @ $38.50 Changed Since Picked = +1.42 or + 3.8% Best Change = + 2.72 or + 7.3% ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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