PremierInvestor.net Newsletter Monday 07-02-2001 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/070201_1.asp ================================================================= In section one: Market Wrap: Today's trading lacked grand finale Market Sentiment: Tech Sectors Test Resistance Play-of-the-Day: BISYS Group Inc., BSYS (Bullish) Watch List: Taxes, Spin Cycle and Telecom ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 07-02-2001 High Low Volume Advance/Decline DJIA 10593.75 + 91.32 10638.87 10467.38 1.11 bln 1600/1471 NASDAQ 2148.72 - 11.82 2181.05 2140.65 1.51 bln 1555/2234 S&P 100 639.96 + 7.94 642.08 632.02 totals 3155/3705 S&P 500 1236.72 + 12.34 1239.78 1224.03 46.0%/54.0% RUS 2000 498.39 - 14.25 513.28 498.25 DJ TRANS 2806.50 - 27.06 2836.63 2802.80 VIX 20.29 - 1.34 21.58 20.26 Put/Call Ratio 0.60 ----------------------------------------------------------------- =========== Market Wrap =========== Today's trading lacked grand finale by Jeff Bailey Last year I went to a fireworks display on the 4th of July and left disappointed. I had been accustomed to a late barrage of fireworks filling the sky as the show came to an end. At one point today, the stock market looked like it might be set for an explosive rally into the close of trading, but by session's end many traders walked away like I did a year ago at the end of the aforementioned fireworks display, unfulfilled and somewhat disappointed. Today's fireworks show started off with what seemed like a dud. Shares of Minnesota Mining & Manufacturing (NYSE:MMM) were analogous to one of those yellow-colored "stink bombs" when the company announced it wasn't going to meet analysts estimates on it's recently completed quarterly earnings due to economic woes around the globe and the adverse affect of a strong U.S. dollar. At the open, shares of MMM traded $109.25, but by session's end the stock looked like a pop bottle rocket as it rallied to the $117.26 level and actually posted a gain of 2.76%! Minnesota Mining & Manufacturing - last eleven months There are technical challenges ahead for MMM at the $120 level, but I like to monitor stocks that have bad news and follow their progress or deterioration. The longer-term trend and 200-day moving average (thin red at $108) remain below the stock and should offer support. I'd consider the shorter-term trend to be negative at $120, but a break above that level considering an earnings warning my give hint that market participants feel the economy is recovering and good things lie ahead for the stock. This might also be true for other stocks rooted in the deep cyclical category. Part of today's comeback in 3M might have been found in today's National Association of Purchasing Management report, which still showed the economy was in low gear, but may be entering a turning point and starting to recover. The June reading for this indicator showed the index rose to 44.7%, which is above May's reading of 42.1%. The string of monthly reading below 50%, which is indicative of a slowing economy stands at eleven. However, Junes reading is the highest since last November and that seemed to have stocks finding life by mid-session. One item I wanted to see by sessions end was for the S&P 500 (SPX.X) to close above the 1,241 level. I derived this "magic number" from a retracement technique called "fitting" that I used recently for shares of Rational Software (NASDAQ:RATL). My thoughts here are that the markets will often times trade levels, and by fitting a retracement bracket to a stock or market index, we can begin setting tests for a particular stock or index to uncover levels of support or resistance. Today, I really though a close above the 50% retracement bracket at 1,241 would bring on further bullishness, but it looks like we're going to have to set this test for yet another day. S&P 500 Index - last nine months The last 13-sessions of trading for the S&P 500 has been range- bound between 1,203 and 1,241. It sure looks like there were quite a few market participants that were buying the 1,241 level back in early May. Then on June 14th, that 1,241 level (support) was violated to the downside and has since been acting very much like resistance. I'm thinking that there is a lot of money sitting on the sidelines right now waiting for the break above the 1,241 level. At this point, I'd rather wait for the break to the upside before aggressively accumulating stocks and tread lightly in those stocks that have reached what looks to be the upper end of a trading range. This is EXACTLY what I wrote about last Thursday as it related to our "fitted" retracement technique in shares of Rational Software (NASDAQ:RATL). We couldn't figure out why the stock wasn't moving higher, but the retracement bracket hinted that bullish traders had better be careful! Rational Software Corporation - last six months Earlier today it was 3M that warned and tomorrow morning it will be shares of Rational Software (NASDAQ:RATL) that will be under selling pressure at the open. I'm not a big proponent of buying stocks with bad news, but I will want to see how the stock responds early in trading. Should the stock test the $21.25 level early in the trading session and trade some big volume (10,000,000 shares or more) and start to bounce, don't be totally surprised if the stock finishes above $23.30. While this stock is not nearly as technically strong as 3M, experienced traders are aware that most of the bad news comes out at the bottom. You don't have to trade this stock to learn from it, but if we start seeing more stocks act like 3M acted today, the market might be finding a bottom. Remember today's NAPM report and how it has been coming in under 50% now for eleven months. This tells us that the economy has been "slowing" for eleven months. What's interesting is that the NASDAQ Composite reached its peak on March 10, 2000 when it traded 5,132 and declined rapidly to a May 24, 2000 low of 3,042, well before the NAPM data fell below the 50% level. It sure seems that the market knew the decline was coming before the NAPM data signaled rapid slowing. My guess is the market will also signal a recovery well before the NAPM data shows strengthening. All we need is more earnings warnings and higher stock prices for further verification. Whenever the market gets good news and stock prices fall, that's when I get worried. When the market gets bad news and stock prices rise, that's when I begin thinking the fireworks display is going to be good, and the grand finale will be that much better. If the SPX can close above the 1,241 level soon, then this might just be a 4th of July to remember! ================ Market Sentiment ================ Tech Sectors Test Resistance by Jeffrey Canavan The Nasdaq Composite tried to finish the day in positive territory, but was held down by biotechnology stocks. The Biotechnology Index (BTK.X) has been battling with the 200- dma for the past three days, and lost the battle today. The war can still be won, since support looks strong at 570, oscillators look oversold, and prices are above a rising 50-dma. A close above 625, and getting the bullish percent data off of bear alert status would help to clear up the picture. There are still some bullish stocks in the group, but overall the sector is neutral. Internet, software, networking, and semiconductors tried to put in a good showing today, but faded into the close. That could be because they are pegged at the their May downtrends, and the holiday-shortened week may lack the necessary volume to push these sectors through resistance. Muddying the picture even more are short-term stohastics that are suggesting these sectors are a little overbought, but longer-term MACDs and bullish percent data are oversold. A brief pullback before another attempt at the May downtrends could be the scenario that plays out for these sectors. The trend for energy stocks continues to be straight down, but pharmaceutical stocks were able to put a temporary stop to their skid, closing up 1.73%. The financial sector looks overbought, but continues to be the strongest sector, with insurance stocks doing especially well. *************************Sector Watch**************************** Weekly Daily Overbought Support Resistance Trend Trend Oversold DJIA Bearish Neutral Oversold 10,400 10,800 NASD Bearish Neutral Overbought 2,000 2,200 S&P 500 Bearish Neutral Neutral 1,200 1,250 Rus 2000 Neutral Neutral Oversold 480 500 Semis Neutral Neutral Neutral 545 660 Biotech Neutral Neutral Oversold 570 625 Internet Neutral Neutral Neutral 160 186 Networking Bearish Bearish Neutral 314 380 Software Neutral Neutral Neutral 210 241 Banking Bullish Bullish Overbought 640 670 Retail Bearish Bearish Oversold 840 880 Drugs Bearish Bearish Oversold 375 400 Percent Change Last 5 Days Last 10 Days Last 30 Days DJIA (1.0%) (1.1%) (6.6%) NASD 4.8% 8.1% (2.3%) S&P 500 1.5% 2.3% (4.3%) Rus 2000 2.9% 1.6% (1.6%) Semis 5.6% 5.9% (3.3%) Biotech 3.4% 2.8% (0.3%) Internet 2.5% 10.5% (13.4%) Networking 5.5% 7.9% (22.4%) Software 6.1% 11.9% (0.6%) Banking 1.4% 4.1% 2.9% Retail (0.4%) (0.8%) (4.4%) Drugs (2.1%) (4.6%) (6.0%) ***************************************************************** ========================= Play-of-the-Day (Bullish) ========================= BISYS Group Inc. BSYS $60.66 +1.66 Stop: $57.50 Original Comments When Selected: This Little Falls, New Jersey-based firm is an IT outsourcing company for more than 11,000 financial institutions and corporations including banks, mutual funds, insurance companies, and retirement plans. Its BISYS's TotalPlus products and services offer transaction processing and document imaging (it is a leading provider). The company also offers mutual fund and retirement plan distribution, administration, and fund accounting services. They are also a major distributor of life insurance, annuities, group health, and long-term care products. Seeking to be the single source for all its clients' outsourcing needs, BISYS adds to its stable of products and services through acquisitions. The company's purchase of HML added professional certification training, continuing education, and other support services to BISYS Insurance and Education Services division. Other purchases include Pictorial Holdings, the parent company of a provider of professional certification and licensing and maker of compliance software products; Ascensus Insurance Services, a distribution services provider for life insurance products; and retirement plan administrator Universal Pensions. BISYS has customers throughout the US and in several other countries, notably the UK. The analysts' consensus estimate for the July 30th fiscal fourth quarter earnings report is for the firm to earn $0.47 per share on sales of $194 million. On an annual basis, analysts expect the firm to earn $1.47 per share on sales of $698 million and $1.78 on $849 million in 2002. Last years earnings were $1.23 per share. This give firm an estimated 2001 P/E of 40.7. This is a premium over the industry average P/E of 18. However, this premium is warranted given the company's 29-percent earning growth rate for the current year against the industry average of 9.9-percent. This play came to our attention as a potential split candidate. The company split last September when the shares hit $78.00. Although the share price is not currently at that level, a great technical picture and the coming earnings announcement may give it the bullish momentum to get there. The shares pushed right through $58 resistance to set a new closing high for the year at $59.91. Volume at 1.01 million shares traded was over double the 486k daily average suggesting the buying sentiment is strong. The former $58.00 resistance level is now support in the event of a bearish reversal. Updated Comments: BSYS shares reacted positively on Monday to positive comments from First Union Security. The broker reaffirmed their "strong buy" rating and has a target price of $67.00. The company cited BISYS's strong internal growth in excess of 15-percent and the positive impact of their acquisition program. BISYS recently announced their fourth acquisition of the year. The Pennsylvania-based Toner Organization, adds over 7,000 agents to the 100,000 agents using the BISYS application platform and an estimated $5 to $10 million in revenue to the BISYS balance sheet. The strong move of the shares on Monday created a new 52-week high of $60.75. This topped the previous high of $60.65 set just last Thursday. Also encouraging to BISYS longs was that the close of the day was just off the high at $60.66. Add to this strong above average volume of 527k shares traded and it is clear BISYS shares have plenty of bullish momentum. Support in the event of a bearish reversal is nearby at $59 and $58. Our price objective agrees with First Union at $67. Picked on June 28th at $59.91 Gain Since Picked: 0.75 Earnings Date 7/30 (Not Confirmed) ========== Watch List ========== HRB - H&R Block Inc. $68.41 +3.86 WHY WE LIKE IT: There is no denying that the trend on HRB has been bullish ever since it took off on Nov. 30th, 2000. While there has been a few bumps in the road it has certainly turned in an enviable performance over the last several months. Bulls definitely have a strong grip on this stock. POTENTIAL TRIGGER EVENT: Look for a pull back. Today the stock surged almost 6% on volume of 1.2 mm versus normal volume of 545K. Checking the news doesn't offer many clues to explain the sudden charge in share price. Split traders should know that HRB has a 2:1 split coming on August 1st which can't hurt investors' enthusiasm for the stock. Today's move is too much to chase HRB and we'd like to see the stock pull back on a dip. The stock had seen heavy resistance at 65 and today is a clear breakout. It should now find support at 65 and a bounce back to 65 before the next leg up would make a good entry point. --- WHR - Whirlpool Corp. $64.60 +2.10 WHY WE LIKE IT: It's been said before. This is a real company with real products and real profits. Plus it's up 85% from last October but who's counting? WHR's chart or more specifically its investors make it a little more easy to identify entry and exit points. When reading the chart there is always noise but opportunities exist for traders willing to watch this stock. POTENTIAL TRIGGER EVENT: With the share price building on higher lows from the recent pull back in June the stock is approaching resistance again at the 65.00 - 65.50 level. A solid break above this would be a clear signal for bulls. Look for a speed bump at 67.50 and more resistance at 70. --- TTIL - TTI Team Telecom International $20.85 +1.41 WHY WE LIKE IT: Everyone has heard about telecom's woes and while TTIL appears to be bucking the trend with rising revenues the share price looks to be guilty by association. At least until recently. The stock has just put in five positive sessions in a row. While we are encouraged by this event the stock is staring at heavy resistance at $22. POTENTIAL TRIGGER EVENT: The 7.25% move today is a bit steep but bulls will note it was made on twice average volume today. Optimists will also claim that the stock has finally regained the $20 level after its protracted fall from $22 to $10 that started in February. Interested traders probably need to keep their eye on this one for a day or two as the stock might need to consolidate before tackling the $22 level again. ================================================================= 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 07-02-2001 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/070201_2.asp ================================================================= In section two: Split Trader New Plays: No new Split Trader play this issue. Play Updates: ESI, BSYS - Change in recommended stops Closed Plays: ADVP - Long-term Up, Short-term Out Net Bulls New Plays: No new NetBulls play this issue. Play Updates: No play updates this issue. Closed Plays: ELON - Profit Taking Hits Echelon Stock Bottom / Active Trader New Plays: QLogic (QLGC) (Bearish) Play Updates: No play updates this issue. Closed Plays: No closed ST/AT plays this issue ================================================================= Split Trader (ST) section ================================================================== =============== ST Play Updates =============== ----------------------- Split Candidate Updates ----------------------- ITT Education Services (ESI) stop change from $41.50 to $41.88. BISYS Group Inc., (BSYS) stop change from $57.00 to $57.50. =============== ST Closed Plays =============== ---------------------------- Closed Split Candidate Plays ---------------------------- AdvancePCS ADVP $61.15 -2.90 Stop: $61.00 ADVP shares are retracing after failing to take out resistance at $65. We closed out his play when it hit our stop at $61.00. Although the longer-term bullish trend from last December is still intact, there is little doubt that in the short-term the bears are in the driver's seat. Monday's intraday behavior was weak from the opening bell through to the close. There was no company specific news to account for the bears mauling what had been a very bullish picture. However, the next levels of down side support are at $58.75, $57.21 and $54.41. Picked on June 22nd at $62.82 Gain since picked: (1.82) Earnings Date 8/28 (Not Confirmed) ================================================================== Net Bulls (NB) section ================================================================== =============== NB Closed Plays =============== ----------------- Closed Long Plays ----------------- Echelon Corporation ELON $28.04 -2.72 Stop: $28.00 Our bullish selection had a nice run, but the shares became over extended on Friday and became vulnerable to some profit taking. In anticipation of this possibility we had tightened up our stop to $28.00 and the journey to Monday's session low of $27.60 tripped it. We officially close out this play with a gain of $2.00 per share. For those still in this play, the longer-term up trend remains intact as long as the shares remain above the lower trend line at approximately $24.00. However, before it gets there the shares would have to go through significant support between $26 and $27. Picked on June 27th at $26.00 Gain since picked 2.00 Earnings Date 7/19 (Not Confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ --------------- New Short Plays --------------- QLogic QLGC $62.53 -1.92 Stop:70.00 QLogic chips, switches and adapters help keep data flowing between computers and storage devices. Although the company sells components for IDE and storage area network (SAN) Fibre Channel technologies, the bulk of their sales come from their SCSI (small computer system interface) adapters used to manage communication inside a computer with its hard disks, scanners and tape drives. Principal customers include Fujitsu (30-percent of sales), Sun Microsystems (13-percent), Dell, IBM and Compaq. In May, the firm reported that fourth-quarter earnings, adjusted for a sales discount to Sun Microsystems, increased 55- percent from the year ago period to 27-cents per share. Analysts had forecast earnings between 25 to 29 cents per share according to First Call. Gross revenue rose 55-percent from the previous year to $100.5 million. For the year, the company earned $1.03 per share on sales of $358 million. For the fiscal first-quarter ending in June, the company is projected to earn 23-cents per share on sales of $95 million. In the year ago quarter, the company earned 21-cents per share on revenue of $77 million. The consensus estimate of analysts for the current fiscal year is for the company to earn $1.05 on sales of $422 million. This gives the shares a P/E of 61. Qlogic shares have been on a roll since the early April low of $17.81. However, the past two days have shown signs of a topping pattern. Each day has produced a failed test of resistance at the 200-day moving average currently at $65.81. After reaching a $66.16 high about midday last Friday, the shares faded badly into the $63.60 close. Monday was more of the same with a midday high of $65.67 slumping into a $62.53 close. The trend of failed highs and tests with lower closes suggests selling sentiment is on the rise. Conservative traders can wait for additional bearish confirmation with a close below $60 on volume in excess of 6.6 million shares traded. If the shares can produce this $60 break we have a bearish price objective in the range of $54 to $47. Picked on July 2nd at $62.53 Earnings Date N/A (Not Confirmed) ================================================================= 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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