PremierInvestor.net Newsletter Weekend Edition 06-29-2001 section 1 of 3 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/1873_1.asp ================================================================= In section one: Market Wrap: A new quarter begins Play-of-the-Day: Pull back over, time to go. Watch List: Retail, Telecom, Medical ------------------------------------------------------------------ U.S. Market Numbers ------------------------------------------------------------------ MARKET WRAP (view in courier font for table alignment) ------------------------------------------------------------------ WE 6-29 WE 6-22 WE 06-15 WE 6-08 DOW 10502.40 -102.19 10604.59 - 19.05 10623.64 -353.36 - 13.41 Nasdaq 2160.54 +125.72 2034.82 + 6.39 2028.43 -186.67 + 65.66 S&P-100 632.02 - 4.13 636.15 + 9.52 626.63 - 25.29 + 2.31 S&P-500 1224.38 - .97 1225.35 + 10.99 1214.36 - 50.60 + 4.28 W5000 11407.15 + 94.70 11312.45 + 74.45 11238.00 -498.70 + 65.13 RUT 512.64 + 23.99 488.65 - 6.48 495.13 - 16.51 + 9.92 TRAN 2829.96 +153.47 2676.49 - 17.13 2693.62 -188.47 - 4.96 VIX 21.63 - .87 22.50 - 3.83 26.33 + 4.92 - 2.55 Put/Call .58 .69 .73 .54 ------------------------------------------------------------------ =========== Market Wrap =========== A new quarter begins Today marked the end of the second quarter and trading got dicey near the session end. Late today, NASDAQ's trading network experience problems when a software upgrade was installed and that installation brought part of the network to its knees. At that time, stocks were rallying to their session high, but when the network went down, many institutions were not able to complete some trades. The NASDAQ then decided to extend trading an additional hour in hopes they could get the network up and running. Any other day, the NASDAQ probably would have ceased trading at the normal time of 04:00 pm EST, but with mutual funds still trying to complete orders for their end of quarter positioning an extra hour of trading could have helped clear out the remaining unfilled orders. That made sense, but by 05:00 pm EST, parts of the NASDAQ network were still not working and now some uncertainty had set in. We watched shares of Dell Computer (NASDAQ:DELL), Applied Materials (NASDAQ:AMAT) and Cisco Systems (NASDAQ:CSCO) begin to give up ground as soon as the NASDAQ network began experiencing problems. At 03:00 EST (just before the network outage), shares of Cisco Systems were trading at the $19.57 level. By the close of the extended trading session, shares of Cisco Systems had fallen nearly 4.3% to $18.71. The market dislikes uncertainty and there was plenty of that in the last two hours of trading for NASDAQ stocks. This network outage that was experience late today, might be a short-term traders opportunity to pick up some bargains in stocks that had traded higher earlier in the session. We're not sure how many orders are yet to be filled for some institutions that had to buy/sell certain stocks to get their portfolio's weighted properly against some of the major indexes, but we'd expect trading to be relatively brisk at the open on Monday. One index that has market bulls somewhat concerned right now is the lackluster performance of the Dow Industrials. Many market technicians (me included) don't like the fact that this index is starting to have trouble getting back above its 200-day moving average. The Dow Industrials plays an important role in investor psychology and confidence and current action from this index could put a damper on broader market bullishness. Market bulls would feel much better about the recent NASDAQ attempt at a rally if this index were acting better. Dow Industrials Average - last eleven months The technicals for the Dow Industrials (INDU) are starting to look similar to that found back in October 2000. What a trader now looks for is continued similarity or DIVERGENCE. A bullish trader wants to see the Dow Industrials get back above the 200- day moving average and quick! That kind of action should have the MACD oscillator turning higher. If both of those happen from here, that would be DIVERGENCE and give hint that things are different this time. However, bullish stock traders/investors should be cautious as the Dow Industrials play not only an important role in investor psychology, but also helps measure some of the worlds largest corporation's stock price. If the big guys aren't cutting the mustard, then other stocks can become suspect to lower prices. Bullish Percent for Dow Industrials - 2% scale I love to use the bullish percent indicator to help me ascertain "risk" for a particular sector, index or market. While the Dow Industrials only contains 30 stocks, we can get a feel for "risk" based on the percentage of stocks in this index that are giving supply/demand (point and figure chart) buy signals. As you can see, in April (red 4) the Dow Industrials bullish percent had just reverse up to 16% bullish (5 stocks were on point/figure buy signals) and this indicated that strength was beginning to build from a very oversold level. By May and June (red 5 and red 6) the bullish percent had skyrocketed to 80% (24 of the 30 stocks in the index had their point/figure charts giving buy signals) and was at a very high level. Now we can simply look back at September and October of 2000 (red 9 and red A) to better understand the current level of risk that currently is present in the Dow Industrials. A trader can also begin correlating these periods with the bar chart above and perhaps conclude that a further deterioration in the bullish percent might have the Dow Industrials testing the 10,000 level, but should the bullish percent reverse course and turn higher, then the Dow Industrials might just try and test a new high. The reason I say this is because of the "field position" of the bullish percent chart as it relates to how the Dow Industrials are trading. If I compare the lows on the bullish percent chart from April to the lows of the INDU bar chart, we note that the Dow Industrials were trading at 9,106. If I then look at the recent high reading for the bullish percent in May and June and note the highs for the INDU at 11,350 I can perhaps draw this scenario. The bullish percent has now retraced about 1/2 of its range, but the Dow Industrials have only retraced about 38.2% of its range. This is very good sign as it relates to strength and has me believing that the Dow Industrials found a bottom in April! I think the current condition still has a bullish trader exercising caution as the bullish percent has been declining (weakness), but they should be VERY alert and ready to take action should the bullish percent reverse up from current levels to the 50% level. If you're thinking risk right now, your thinking that 44% of the risk (from the bullish percent chart) has been removed from the Dow Industrials. After all, the lowest reading is 0% (no stocks giving buy signals). While there is always risk associated with an index, in "relative terms" risk has been reduced to a greater extant than the point decline in the index. This in itself is a sign of divergence and something we should be alert to! Over the weekend, try giving this some thought and then start looking at the bullish percent chart for the S&P 500 ($BPSPX) and compare it to a bar chart or point/figure chart of the S&P 500. It may very well give you a better feel for how the market is currently viewing risk/reward and potential strength in the markets. You can get free point/figure charts at www.stockcharts.com. Jeff Bailey Senior Analyst PremierInvestor.net ========================= Play-of-the-Day (Bullish) ========================= THC - Tenet Healthcare, Inc. $51.60 +0.24 Stop: $49.75 Company Description Tenet Healthcare, through its subsidiaries, owns and operates 111 acute care hospitals with 27,300 beds and numerous related health care services. The company employs approximately 106,501 people serving communities in 17 states and services its hospitals from a Dallas-based operations center. Original Write Up on June 17th, 2001 If you read the watch list yesterday, THC was one of the stocks we had on the list. We talked about the stock's impressive move since putting in the triple-bottom during late-April and mid-May. We also mentioned that shares had broken through key resistance near $47.50, had consolidated around the $48-$49 level for a couple of days, and would be a good long-play given a close above $50. Well today, that scenario came to fruition, and with authority. Not only did THC, the nation's No. 2 hospital chain, bust through the half-century mark with gusto, but also did it on no news and double the average volume, while putting in a new 52- week high. Can the outlook for THC get much more bullish than this, particularly on a day in which the SPX drops 5, the Dow gives back 66, and the COMPX etches its worst weekly percentage drop since the first quarter? We mentioned on Thursday that short-term technical indicators looked very healthy, with MACD well above the trigger line (1.5) and stochastics over the 80- mark. Things keep on getting better. We are now very enthusiastic about the prospects for THC, not to mention a few Wall Streeters who share the same opinion. Nineteen of the twenty firms covering the stock possess either Strong Buy or Buy ratings. To boot, THC is a 15% annual grower, just announced last Tuesday that it will likely exceed 4Q earnings estimates of 61 cents per share AND has no technical hurdles left to cross. With technology still a question mark regarding future growth rates and profitability, this stock seems like a no-brainer. It has great fundamentals, is showing extremely positive technical signs, just closed over $50, setting a new high in the process and resides in a sector that will only get bigger and likely more profitable, given our aging population. To be perfectly honest, this is one of the healthiest charts we've seen in a long time, no pun intended. As far as an entry point is concerned, how about yesterday? Average Daily Volume = 1.7 mln. 52-Week: High = $49.95 Low = $25.00 Next Earnings: 07-16 est = 0.62 versus = 0.51 Most Recent Update on Friday, June 29th, 2001 $51.60 +0.24 Stop: $49.75 The healthcare/hospital sector is on absolute fire, and despite technology beginning to catch investor's attention, a small segment of traders actually care about earnings, pushing THC higher. With THC slated to grow earnings at a 22% clip for the quarter and 18% rate for the year, it's easy to see why interest is high in the stock. It is only a matter of time before this stock is again setting new 52-week highs. Yesterday's advance took us just above the flat line. It doesn't hurt that the stock closed at its high for the day. 52.00 is our next obstacle. ========== Watch List ========== GYMB - Gymboree, Inc. $8.50 +0.55 WHY WE LIKE IT: The retailing sector has been in the process of forming a bottom, and opinions are all over the board as to when this group might finally start to recover. Children's apparel company Gymboree is making a nice slow but steady ascent up the chart, and appears to be fairly priced. Back on June 7th, GYMB reported same store sales were higher by 39%, and also reiterated their estimates to match consensus estimates of Q2 EPS of (0.18) to (0.20). POTENTIAL TRIGGER EVENT: While the uptrend is definitely in force for GYMB, oscillating indicators tell us that a pull back might be likely near term. We would like to enter a trade in GYMB on a pull back to the $8.00 -$7.80 level (but we'll be looking for a bounce from these levels). --- SBC - SBC Communications, Inc. $40.06 +0.25 WHY WE LIKE IT: With the Dow near firm support at the 10,400 level, component stock SBC Communications could provide a nice bounce in the event the index finds buyers willing to place orders near this point on the chart. While the stock did set a new 52-week low this past week; the trading below $39.00 also confirmed a double bottom in shares. POTENTIAL TRIGGER EVENT: Telecom is still in the tank. Despite this, there is some safety in picking up SBC on a break and close above $40.75, an event that would likely lead to a run to $44.00, representing gains of nearly 8%. Watch for congestion at $42. --- GDT - Guidant, Inc. $36.48 +0.12 WHY WE LIKE IT: Another leading company that appears to have found a bottom, Guidant shares appear to have found fair value near the $36.00 level. Recent reasons for higher prices include a rumor that JNJ would make a bid for the company. While GDT is in a earnings slump, slated to only earn 0.37 this quarter, a -8.3% YOY decline, the long term prospects for the company remain in tact, with 2002 EPS expected to grow at 17.9%. With a P/E of 21 for 2002, the company represents an excellent value at current levels. POTENTIAL TRIGGER EVENT: With the all-important 50-dma ($37.01) only about 50 cents away, it makes sense to wait for this hurdle to be cleared before getting on board the GDT train. In reality, it could be the GDT turtle, as this is not a stock that will fly unless the rumor turns out to be reality. Conservative traders should also watch for resistance in the 38.00 to 38.50 level. Any upside breakout on strong volume would be more comforting. ================================================================= 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. 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PremierInvestor.net Newsletter Weekend Edition 07-07-2001 section 2 of 3 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/5971_2.asp ================================================================= In section two: Split Trader New Plays: No new ST Plays Play Updates: Splits Hold Their Own - ATK, ESI Closed Plays: Bears Take Center Stage - BSYS Net Bulls New Plays: ERTS (Bullish) and QCOM (Bearish) Long Play ALLTEL Corporation Bearish Play Updates: Great Day For The Bears Bullish Plays Update: Yahoo - YHOO Closed Plays: AMAT (Bullish), SFA (Bullish) Stock Bottom / Active Trader New Plays: QQQ (Bullish) Long Play Updates: Testing Support Short Play Updates: Sellers in Charge Closed Long Plays: NBIX Closed Short Play: No closed short plays ================================================================= Split Trader (ST) section ================================================================== =============== ST Play Updates =============== ----------------------- SPLIT CANDIDATE Updates ----------------------- Alliant Techsystems - ATK $86.90 -0.60 Stop: $84.00 Alliant had been holding its own until it lost 34 cents in the last half hour of trading. Still, on a day filled with selling, ATK only lost 60 cents. For the past five days, ATK has traded in a relatively tight $3 range on light volume. A break above $90 on heavy volume would get this stock back on its bullish track, but a break below $86.50 could be a sign of short-term weakness. Picked on June 29th at $89.90 Gain since picked: (3.00) Earnings Date N/A (Not Confirmed) === ITT Educational Services - ESI $44.90 +1.00 Stop: $41.88 ITT rallied into the close, and finished up $1. 11 more cents would put the stock above a recent series of relative highs at $45, and move it on its bullish ways. We will leave our stop at its current location to give ITT some room to breath. Picked on June 12th at $43.70 Gain since picked: 1.20 Earnings Date N/A (Not Confirmed) =============== ST Closed Plays =============== ----------------------- Closed Split Candidate ----------------------- The BISYS Group BSYS $58.82 -1.08 Stop: $58.50 BISYS continued its bearish ways today, losing another $1.05. Volume continues to pick up, as this stock looks even more top heavy. Our stop was hit at $58.50, so we won't be around for any further declines. Picked on June 28th at $59.91 Gain since picked: (1.01) Earnings Date N/A (Not Confirmed) ================================================================== Net Bulls (NB) section ================================================================== ============ NB New Plays ============ -------------- New Bullish Play -------------- Electronic Arts ERTS $54.38 +1.39 Stop: $50.00 Company Description: The Redwood City, California-based Electronic Arts is the worlds' largest publisher of video games. They have over 100 titles including the popular John Madden football games, Command & Conquer and SimCity. Over half of company revenue comes from games developed for console systems like the Sony Playstation (41-percent of sales), the Nintendo N64 and Microsoft's soon to be released xBox. Electronic Arts also acts as distributor for over 1,000 titles for 3rd party developers. The company is diversifying its business by operating a game channel for AOL and by creating its own EA.com subscription game site. However, it is the coming war between the deep pocket game console developers that ought to bring a smile to ERTS shareholders. Microsoft has said it will spend $500 million to promote its xBox console scheduled for release in early November. You can be certain the equally flush Sony will respond to protect their lucrative Playstation franchise and to launch their new Playstation 2. As a games developer for all the platforms, Electronic Arts is in a win-win situation. Fundamentals: In the fiscal year ended last March, the firm earned 4-cents per share on sales of $1.3 billion. The analysts' consensus forecast for the current year is for earnings of 61-cents per share on revenue of $1.6 billion. They predict the good times will continue the following year with earnings of $1.48 per share on revenue of $2.2 billion. Although the shares sport a high current P/E of 89 and a forward one of 37 for 2001, the firm's superior growth rate and recession resistant business model make the valuation reasonable. Strategy: For five consecutive years ERTS shares have increased an average of 25-percent from July 1st to September 30th. Taking out 1998's anemic rise of 2-percent and the average becomes 31-percent. This makes sense, as this quarter is when retailers stock up for the holidays. As a beneficiary of the massive amounts of holiday advertising in the hotly contested game console market, there is little reason to think that ERTS sales and shares will not have a similar rise this year. As far as an entry point is concerned, since last April $53 has proven to be a resilient support level and it held up well last week. On Friday, the shares went counter to the bear market and rebounded off of this level on high volume of 2.6 million shares traded. A good entry point would be following a confirmation of this bullish breakout with a close above $54.84 on a similar spike in volume. Our price objective is in the range of $63 to $67. To avoid getting whipsawed put we will set a stop at $50.00. Picked on July 7th at $54.38 Earnings Date 7/26 (Confirmed) ---------------- New Bearish Play ---------------- Qualcomm - QCOM $58.18 -3.23 Stop: $61.88 Company Description: Qualcomm created the code-division multiple access (CDMA) standard for wireless networks. CDMA-based networks account for 12-percent of the worlds' mobile subscribers. Qualcomm collects royalties for CDMA use and makes CDMA-based products such as chipsets and software. Although, the US is a Qualcomm stronghold, it is working hard to expand in Asia, in particular China, off of its dominance in South Korea. This effort got a big boost recently when China Unicom, China's second largest wireless operator, awarded $1.46 billion in contracts for equipment to build a cdma- based network. The Chinese adoption of cdma is seen as crucial for Qualcomm, because as it is also critical for the adoption of cdma throughout Asia. Unfortunately, on the heels of the good news was an announcement that Verizon Wireless was switching from cdma to a rival technology based on wCDMA. Rumors of this set QCOM shares on a dive from the June 6th close of $65.00 to $48.45 on June 20th. The shares recovered somewhat to reach a close of $63.87 on July 3rd, fueling this boost was news that Qualcomm had expanded their existing CDMA agreement with Nokia. And this is how it goes with Qualcomm shares, every news story of expanded or delayed CDMA implementations causes wild swings in the stock price. Fundamentals: Analysts project the company, which earned $1.05 per share on sales of $3.2 billion in the fiscal year ended September 2000, will earn $1.03 in 2001 on sales of $2.8 billion and $1.33 per share on $3.4 billion in 2002. This gives the company a forward 2001 P/E of 56. Fourteen brokers covering the company have a mean 12-month target price of $76.29, specific estimates range from a high of $100 to a low of $65. Strategy: The two-day post holiday market slide has dropped QCOM shares from a high of $64 to Friday's $58.18 close. The catalysts were a string of tech earning warnings that gave an overall bearish hue to the market. Also some profit taking when many traders decided that there wasn't enough in the Nokia agreement to account for a 10- percent spike in stock price. Another catalyst may have been Thursday's announcement by SK Telecom (South Korea) that it was joining the rising chorus of telecom operators delaying the implementation of costly third-generation technology. Taken as a whole, there was plenty of news to punish the stock. The strength of the bearish sentiment was in evidence when the shares broke though significant support posed by a rising gap from $59.68 to $61.30 that was created on the Nokia announcement. An additional test of the sellers' conviction will be if the shares can break through support at $57.50 on solid volume. If it accomplishes this then a test of additional support at $52.50 is likely with a possible shot at $48.50. Picked on July 6th at $58.18 Earnings Date 7/26 (Not Confirmed) ================= NB Long-Term Play ================= Great Cash Flow - Great Prospects During times of economic uncertainty, three key features make a shares company's attractive to long-term investors. First is a defendable franchise - long-term investors love a company that has established an unassailable market position. The economy may tank but McDonald's will still sell hamburgers, we will write checks to our local utility company and drink Coca-Cola. Second is a strong balance sheet - Microsoft shares may react to changes in economic conditions but with $30 billion in the bank their business plans and operations are little effected. The final feature is failing rivals. One truism is that the rich get richer. This is doubly so during economic down turns. So one feature long-term investors like to see is when a company has rivals who are so weak that they are leaving the field in droves. This week's selection, ALLTEL Corporation has these desirable features in spades. ALLTEL Corporation AT $999.999 on July 6th. Company Description: ALLTELL is a wireless and landline telecommunications giant. The Little Rock, Arkansas-based firm provides local phone service to 2.5 million customers in 15 states through mostly rural exchanges. It has approval to provide competitive local-exchange carrier (CLEC) services in 17 states and does so in 10 of them. They provide long-distance service to approximately 1 million customers and paging services to 500,000. It also is a big player in wireless communication with over 6.4 million subscribers in 21 states. Fundamentals: Analysts forecast in 2001 the company will earn $2.87 per share on sales of $7.8 billion and $3.26 on $8.4 billion in 2002. Last year, per share earnings were $2.72 on revenue of $7 billion. This gives the firm a current P/E of 21 and a forward P/E of 19 for 2001. These are below the industry average P/E of 28 suggesting the shares are undervalued against their peers. Also reflecting the company's reasonable valuation is a Price/Earnings Growth (PEG) ratio of 1.41 (lower is better here). The industry average PEG is 2.23 and the average PEG of the S&P 500 is 1.80. The company paid a quarterly dividend of 33-cent per share in June. At its upcoming quarterly earnings report on July 27th, the analysts' consensus estimate is for the firm to earn 71-cents on sales of $1.9 billion. Strategy: The rapid deterioration of rival CLEC's and fiber optic network carriers has reduced competitive pressures on balance sheet strong carriers like ALLTEL. In addition, ALLTEL's strong cash flow will enable their acquisition minded management to go shopping for under valued assets that ought to pay off big during an economic recovery. AT shares have risen from a late April low of $50.01 to a high of $63.03 earlier last week. However, a look at the weekly chart suggests the shares are sitting at a cusp. Bulls and bears have each taken their turn this week driving the shares up to $63.03 and pushing them down to $59.75. By weeks end the result was little changed from the $60.75 beginning. Although this is a solid long- term play at current price levels, the short-term market dynamics say that patience may reward with a more advantageous entry point. Our first indication that the bears are winning the short-term tug- of-war would be a close below $60 on a spike in volume. This would mean there is a likely return to support near $57.50 and a bounce of off this level would be a good entry point. If the bulls take control with a close above $61.75 on a spike in volume, then a test of resistance between $64 and $67 is the likely scenario and long- termer's can still jump on the bandwagon at a fundamentally good price. =============== NB Play Updates =============== ----------------------- NB Bullish Play Updates ----------------------- Yahoo! Inc. - YHOO $17.88 -1.31 Stop: $17.25 The market slumped and Yahoo went along. We placed our stop of $17.25 just south of support at $17.50. We are maintaining that stop as we wait to see if we can catch a rally going into Wednesday's earnings announcement. Our long-standing entry recommendation stands - traders should wait for a break over $21 before taking a position. This breakout would confirm bullish momentum and place resistance levels at $25.94 and $30 square in our sights. If this break does not occur, the shares are liable for a pullback. Picked on June 25th at $19.77 Gain since picked (1.89) Earnings Date 7/11 (Not Confirmed) ----------------------- NB Bearish Play Updates ----------------------- Computer Sciences Corporation CSC $33.36 -0.77 Stop: $35.00 New Bearish sentiment keeps rising. We are looking for a close below $33.15 on solid volume to kick this Bearish selection into high gear and put it in range of out $30 target. We came close on Friday. We are moving our stop to $35.00. Picked on June 21st at $35.00 Gain since picked: 1.64 Earnings Date N/A (Not Confirmed) === Automatic Data Processing, Inc. ADP $51.10 -0.59 Stop: $52.90 ADP resumed its bearish move by falling out of congestion on high volume of 1.4 million shares. The daily average 1.3 million. This gives us encouragement that this Bearish selection is ready to put us back in the black. We are maintaining our stop at $52.90. Picked on June 29th at $49.70 Gain Since Picked (1.40) Earnings Date 8/13 (Not Confirmed) === Emulex Corporation EMLX $29.06 -6.76 Stop: $35.00 New Well this turned into one sweet Bearish selction in no time at all. We are now up $6.76 per share to date. Emulex shares were in a classic topping pattern, then fell hard on the heels of repeated earning warnings from the tech sector. The move through the $30 support level on Friday is significant as it puts $27.50 as the next area of support. We are going to protect our gains by moving our stop to the top side of yesterday's gap at $35.00 to keep us from being whip-sawed out of this play. You may consider putting in a tighter stop. Picked on July 5th at $35.82 Gain since picked: $6.76 Earnings Date 8/02 (Not Confirmed) =============== NB Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Applied Materials - AMAT $45.30 -3.38 Stop: $48.10 A slew of earnings warnings hit late Thursday. The most damaging for AMAT shares was semiconductor manufacturer AMD. This set the entire chip sector and our Bullish selection on a steep Friday slide. The $47.98 open gapped our $48.10 stop so we close this play at the opening price. Picked on June 22nd at $49.05 Gain since picked (1.07) Earnings Date 8/14 (Not Confirmed) === Scientific-Atlantic - SFA $41.62 -2.39 Stop: $41.50 This one hurts. Friday's decline, although severe enough to trip our $41.50 stop was on below average volume. This leads us to think the dip will not be severe, and the base the shares have been building since mid-June will hold. On a fundamental basis we still hold these shares are undervalued. This tempts us to reduce our stop to $40, but we won't. We prefer to reevaluate the shares when this wave of tech selling subsides. Picked on July 3rd at $44.45 Gain since picked (2.95) Earnings Date 7/19 (Confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ -------------- New Long Plays -------------- Nasdaq-100 Series Trust - QQQ $41.65 -1.80 Stop: $40.00 Company Description: The QQQ's are a pooled investment designed to emulate the results of the Nasdaq-100 Index ($NDX). This index contains the 100 largest companies in the Nasdaq Composite according to their market capitalization. As of the end of last year, the composition by sector was: Technology (75.33-percent), Health Care (9.78-percent), Communication Services (5.36-percent), Consumer Cyclicals (3.98- percent), Consumer Staples (3.17-percent) and Basic Materials (0.23-percent). The 10 largest companies as of the end of last year were: Cisco (6.36-percent of index), Microsoft (5.15-percent), Qualcomm (4.80-percent), Intel (4.59-percent), Oracle (4.39-percent), Sun (2.56-percent), JDS Uniphase (2.53-percent), Veritas (2.27-percent), Siebel (2.27-percent) and Amgen (1.99-percent). Buying shares of the QQQ's, in effect enables the holder to participate in the fortunes of 100 large companies. In contrast to mutual funds, the QQQ's trade on the Nasdaq in the same manner as the shares of any Nasdaq company. Since the QQQ's are tied to the tech laden Nasdaq 100, they are a good vehicle for investors who want to take advantage of the current slump in technology stocks, yet minimize the risks associated with owning a particular company. Strategy: After an extended slumping market a rise in government bond yields are giving us indications that the major money managers are building cash to go stock shopping. For a fuller explanation and analysis of how we are coming to this conclusion read the weekend Market Wrap prepared by our master market analyst Jeff Bailey. For the impatient, the short version is this - bonds act as passbook savings accounts for large money managers. When the market slumps they sell stocks and use the money to buy bonds, when they are optimistic about stocks they raise cash by selling bonds. One way to predict if the big money boys are buying or selling bonds, hence getting ready to sell or buy stocks, is to check the yield of bonds. If they are selling bonds, the yield (think interest rate) of bonds has to go up to attract new buyers. So, if the major money managers are building a pile of cash to go equity shopping, often the yield of bonds goes up. We are currently experiencing a significant rise in bond yields, even as the equity markets are dropping. This leads us to believe money managers are getting liquid. As Jeff describes in the Market Wrap, if the yield on the 30-year bond goes over 5.8 from its current 5.75, we believe this signifies enough cash is sitting on the sidelines that a major positive move in the stock market is highly likely within the next two weeks. The next few days should tell the tale as far as yields are concerned. One way to play that pop is by buying the QQQ's. However, traders should wait for the yield in the 30-year bond to exceed 5.8 before taking a position, otherwise we are not getting the confirmation we need. Because we are adding this to our play list before this confirmation, we are instituting a stop at $40. Picked on July 6th at $41.65 Earnings Date N/A (Confirmed) =============== AT Play Updates =============== ----------------- Long Play Updates ----------------- Corning GLW $15.13 -0.32 Stop: $14.50 Corning sold off in the first hour of trading, but slowly tried to recoup its losses throughout the day. When it was all said and done, GLW lost 32 cents. It did come within inches of triggering our stop, but the intra-day rebound offers some signs of strength. Picked on June 28th at $15.80 Gain since picked: -0.67 Earnings Date N/A (Not Confirmed) === Intuitive Surgical ISRG $13.21 -0.14 Stop: $12.90 ISRG continues to consolidate just above $13 on light volume. The fact that we weren't stopped out while the rest of the market tanked hints that this stock wants to move higher. We just need the market to cooperate. Picked on June 17th at $11.05 Gain since picked: +2.16 Earnings Date N/A (Not Confirmed) === Schuler Homes, Inc. SHLR $14.55 +0.15 Stop: $11.94 It was only a 15-cent gain, but a gain is gain today. $15.25 remains overhead resistance and the 50-day moving average should offer near-term support. Picked on June 25th at $13.57 Gain since picked: 0.98 Earnings Date N/A (Not Confirmed) === Tenet Healthcare THC $50.01 unchanged Stop: 49.75 Investors are holding out for the earnings announcement. At least that's one explanation for THC stock's amazing resilience given the Dow and NASDAQ's declines this week. THC hasn't been immune but the stock is only down 1.60 from last Friday's close. CBSMarketwatch had a glowing article on Tenet Healthcare with Andrew Heyward, an analyst at Wells Fargo. He said he doesn't see any potential problems that might cause THC to suffer over the next several quarters. In June THC said they would beat consensus estimates of 61 cents a share. This has probably given bullish investors hope that the future really is bright for THC. One word of caution. The CBSMarketWatch article mentioned that THC was due to report earnings next week. Other news sources don't have THC due to report until July 25th. Be careful. If they announce earnings and have any negativity in their conference call shares could pull back sharply despite a good quarter. For the immediate future, $50 is the key. If the stock can hold then we're probably safe. Otherwise the next support level is about $47.50. Picked on June 17th at $51.09 Gain since picked: -1.08 Earnings Date 7/25 (Not Confirmed) --- ViroPharma VPHM $28.51 -1.49 Stop: $27.50 The stock's price finally breaks out of a downward trend. We begin to think the company's products might have promise so we make a decision to make it a long play. That's when company management decides now is the time to offer up to $300 million in stock and/or debt securities and warrants for "general corporate purposes". We weren't the only ones who didn't appreciate the news as the stock has bled over 9% since the announcement. Yet to be fair the NASDAQ has lost 6% in the same time so VPHM's move has probably been exacerbated by the market's broader decline. Our dollar plus gain has become a dollar plus loss. Watch this one closely as the stock should (we repeat should) have support at $28.00 thus our stop is at 27.50. Picked on June 22nd at $29.94 Gain since picked: -1.43 Earnings Date N/A (Not Confirmed) ------------------ Short Play Updates ------------------ Qlogic - QLGC $49.91 -7.46 Stop: 53.00 *new* QLGC suffered a mauling today as investors sold shares in a host of tech stocks after EMC's earnings warning. Qlogic's shares gapped open and fell from there. The stock has a lot of support at the $50 level and the price began to gravitate toward this level late in the afternoon. More than one bull is probably concerned that it failed to close over the magic $50 mark but despite the negative implications we're going to tighten our stop to 53.00 which is just north of the 50-dma at 52.15. Picked on July 2nd at $62.53 Gain since picked: +12.62 Earnings Date N/A (Not Confirmed) === AstroPower - APWR $48.13 -0.46 Stop: 50.50 *new* With almost a 1% lost today, shares of APWR actually made a late day recovery. News has been quiet since we picked this one in Thursday's newsletter. Bears were hoping that shares of APWR might continue to fall once they traded under the 50-dma at 47.57 but the late day buying mentioned above put the stock about half a point above it. Since the trade is moving our direction albeit slowly we're going to tighten our stop to 50.50 which is just over the high of July 3rd's 50.45. Picked on July 5th at $48.59 Gain since picked: + 0.46 Earnings Date 7/31/01 (Not Confirmed) =============== AT Closed Plays =============== ----------------- Closed Long Plays ----------------- Neurocrine Biosciences - NBIX $36.60 -0.90 Stop:36.00 Due to no fault of its own, shares of NBIX have dropped from a high near $40 last Friday to a low of 35.72 today. This has been the work of the sudden and perilous drop in the Biotech index (BTK). In the last three days the BTK fell from 610 to a low on Friday of 553 (its 100-dma). The index completely blew past strong support at 570 probably catching many by surprise. While some analyst argue that the group may be oversold in the short-term we're still stopped out of our play in NBIX. The good news, if there is good news, is that NBIX held up rather well compared to sector mates ABGX, AMGN, and IDPH. Picked on June 29th at $39.99 Gain since picked (3.99) Earnings Date N/A ================================================================= 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 Weekend Edition 06-29-2001 Section 3 of 3 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/1873_3.asp ================================================================= In section three: Long-Term Tech Play: The Gloves Are Off Expected/Likely Split Announcements For The Coming Week New Split Candidates: Three new candidates to add to the list. Market Watch for Week of July 2nd - 6th: - Major Earnings - Board of Directors Meetings - Stock Splits - Economic Reports ================================================================= ===================== New Long-Term Play ===================== MSFT - Microsoft Corporation $73.00 on June 29, 2001 Microsoft's recent legal victory strengthens the future of the most dominant software developer in the world. When the U.S Court of Appeals reversed the lower court decision that called for a breakup of the company, it ensured long-term investors that there would be a Microsoft and that the company would be free to continue their aggressive approach to product development and marketing. Of course, the legal decision was not a complete victory - the court did agree with the finding that Microsoft monopolized the operating system market with its Windows product. This may mean that Microsoft is still liable to private lawsuits from competitors such as Sun Microsystems, Apple and AOL-Time Warner. However, these types of lawsuits are a normal course of business for Microsoft and with over $30 billion in cash and other liquid investments, are unlikely to have a significant effect on company operations. With this cloud lifted, the share price should receive repeated pops from a string of product releases scheduled for the remainder of the year. These include the new operating systems upgrade Windows XP, the already released office suite upgrade Office XP, the new SQL Server 2000 and the likely hit of the 2001 holiday season, the xBox gaming platform. Looking beyond this year, the company's .Net strategy should ensure the company's dominance in the next generation of computer technology. This strategy intends to wean computer users away from buying shrink-wrapped software to renting it over the Web. They also want to extend their influence beyond the PC with a group of online services called Hailstorm. Hailstorm promises to integrate personal data such as email and addresses, regardless if it is stored on your PDA, cell phone or PC. In short, .Net will use the web to connect all the high tech devices in your life and Hailstorm will make certain they are all speaking the same language. Of course all this new Flash Gordon technology is going to take some time to get into the hands of consumers, some say years. In the meantime Windows monopoly (its official now) position in the PC world continues to produce lucrative results for Microsoft. For the fiscal year ending June 2001 the company is expected to earn $1.80 per share on sales of $25.2 billion and $1.94 in on $28.8 billion in 2002. Shares of this core tech holding are selling for 40 times 2001 estimated earnings and 37 times the 2002 projection. As investors begin to shift their focus past trying to determine how badly a company will be hit by the economic woes to which ones will benefit first in a recovery, they are beginning to view a company like Microsoft selling at 40-percent less than its 2000 high as a good value. A point and figure analysis suggests a shorter-term bullish price target of $95 and support at $66.00. Chart ======================================================= Expected/Likely Split Announcements For The Coming Week ======================================================= Date Expected Symbol Company To Announce* ================================================= No major splits expected for week of 7/2 ======================================= New Split Candidates to add to the List ======================================= ATK - Alliant Techsystems Alliant shares have experienced a recent pullback, but we've added this stock to our Split Candidates list due to some strong indications that point to a future announcement. On August 7 the Company is holding an Annual Shareholders meeting at which time they will vote to increase the number of outstanding shares by 40 million, thereby allowing ample room for a stock split. The other sign that confirms our conviction is the fact that the last split announcement was declared at the stock price of $89; they're in that range at this time so stay tuned! chart = --- BSYS - The Bisys Group BSYS announced their last stock split last September when shares were trading at $78 per share. At current levels, we've got some time before we reach that point again, but we don't want to miss out on any trading opportunities in the meantime. Shares keep reaching for new highs this month so we look forward to the next split announcement with the next major company event. In that respect, earnings are expected to be released on July 30. There are currently 58 million shares outstanding with 160 million authorized. chart = --- FRX - Forest Labs We're keeping an eye on Forest Labs as the stock reenters historical split levels. Granted, the last announcement was given when prices were at a higher range of $135 in December 2000, however, we understand that the inflated conditions in the market at that period of time will probably not be reached again for a very long time. The previous splits announced in 1998 and 1991 were at $60, which is already below current levels of $72. We expect a possible announcement with the next earnings release on July 17 or with the annual shareholder meeting on August 13. chart = ================================================== Market Watch for the week of June 25th - June 29th ================================================== ------------------------ Major Earnings This Week ------------------------ Symbol Company Date EPS Est Comment WDFC WD-40 Mon, JUL 02 0.31 Before the Bell RECN Resources Connect Mon, JUL 02 0.20 After the Close HB Hillenbrand Ind TUE, JUL 03 0.63 Before the Bell ROAD Roadway Express TUE, JUL 03 0.18 Before the Bell OCENY Oce N.V. THU, JUL 05 n/a ----- n/a ----- AVX AVX Corp FRI, JUL 06 0.18 Before the Bell STI SunTrust FRI, JUL 06 1.16 Before the Bell STAR Lone Star Steak. FRI, JUL 06 0.24 After the Close AA ALCOA FRI, JUL 06 0.45 ----- n/a ----- IBC Intrst Bakeries FRI, JUL 06 0.15 ----- n/a ----- ------------------------------------ Board of Director Meetings This Week ------------------------------------ Symbol Company Date IVCO IVC Industries 7/02 IR Ingersoll Rand 7/05 CTIC Cell Therapeutics 7/06 ------------------------------- Upcoming Stock Splits This Week ------------------------------- Symbol Company Name Payable Date Ratio MTON - Metro One Telecom 06/29/2001 3:2 LOW - Lowe's Companies 06/29/2001 2:1 ING - ING Groep, N.V. 07/02/2001 2:1 HOC - Holly Corp 07/06/2001 2:1 FLGS - Flagstar Bancorp 07/12/2001 3:2 RAVN - Raven Industries 07/13/2001 3:2 XOM - Exxon Mobil 07/18/2001 2:1 KG - King Pharmaceuticals 07/19/2001 4:3 TRH - Transatlantic Holdings 07/20/2001 3:2 TARO - Taro Pharmaceutical 07/26/2001 2:1 MSCC - Microsemi Corp PENDING 2:1 SFD - SmithField Foods PENDING 2:1 -------------------------- Economic Reports This Week -------------------------- On the heels of this past week's tame 25 basis point cut, the upcoming economic reports are expected to show modest slowing of spending in spite of increased unemployment and falling equity wealth. Look for light trading volume throughout the week due to the holiday on Wednesday. Date Forecast Previous Monday, 07/02/01 Auto Sales (Jun) 6.4M 6.4M Truck Sales (Jun) 7.1M 7.2M Personal Income (May) 0.3% 0.3% PCE (May) 0.4% 0.4% Construction Spending (May) 0.0% 0.3% NAPM Index (Jun) 42.0% 42.1% Tuesday, 07/03/01 Factory Orders (May) 1.5% -3.0% Wednesday, 07/04/01 None scheduled Thursday, 07/05/01 Initial Claims (May) N/A 388K NAPM Services (Jun) 46.5% 46.6% Friday, 07/06/01 Nonfarm Payrolls (Jun) -40K -19K Unemployment Rate (Jun) 4.6% 4.4% Hourly Earnings (Jun) 0.3% 0.3% Average Workweek (Jun) 34.3 34.3 ================================================================= 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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