PremierInvestor.net Newsletter Monday 07-09-2001 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/9966_1.asp ================================================================= In section one: Market Wrap: Lack of fiber not necessarily bad Market Sentiment: A Good Sector Is Hard To Find Play-of-the-Day: ISRG -Shares Ready To Pop Watch List: Is There A Bottom To Oil's Slide? ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 07-09-2001 High Low Volume Advance/Decline DJIA 10299.40 + 46.72 10323.11 10222.24 1.04 bln 1589/1476 NASDAQ 2026.71 + 22.55 2038.17 2000.08 1.39 bln 2027/1717 S&P 100 618.29 + 5.34 620.19 612.86 totals 3616/3193 S&P 500 1198.78 + 8.19 1201.76 1189.75 53.1%/46.9% RUS 2000 485.98 + 2.72 487.24 480.98 DJ TRANS 2774.71 + 25.79 2775.35 2740.20 VIX 24.55 - 0.42 25.84 24.42 Put/Call Ratio 0.63 ----------------------------------------------------------------- =========== Market Wrap =========== Lack of fiber not necessarily bad by Jeff Bailey After the bell, optical fiber and cable equipment maker Corning (NYSE:GLW) warned of continued slowing business conditions and said it would cut jobs and close plants because of the continued slowdown in the telecommunications sector. Shares of GLW were trading as low as $14.15 in after-hours trading, which is lower than its regular session close of $15.10. The company said it will disclose full details for its plan to eliminate 1,000 jobs and close three manufacturing facilities at a later date. Corning (GLW) said it will take a pre-tax charge totaling approximately $5.1 billion in its upcoming second quarter financials, which will reflect the impairment of goodwill and other intangible assets. Traders that continue to avoid this group from the long side are finding that a "lack of fiber" in their portfolio is not necessarily a bad idea. Corning Chart (GLW) - $1 and $0.50 box The first heads up to negative news in the pipelines for GLW came in the form of a bearish vertical count and longer-term price objective of $11 back in late April when the stock traded $20. After that, shares of GLW were range bound for nearly a month and that set up what would eventually become a bearish triangle formation that was underway when the stock traded $19.50. Professor Earl Davis from Purdue University did a study on point and figure chart pattern. He found the bearish triangle to be profitable 87.5% of the time, with an average gain of 33.3% for a bearish trader in just 2.5 months. The bearish triangle is the most powerful and rewarding of bearish chart patterns and looks to have really played itself out nicely in the GLW chart. A 33.3% decline from the $19.50 level would have GLW trading near the $13 level based on the Purdue University study. It will be interesting to see how things play out here, but perhaps gives hint to other stocks in the sector. JDS Uniphase Chart - $1 and $0.50 box It's no coincidence that the supply/demand chart for JDS Uniphase (NASDAQ:JDSU) is just as bearish as that of GLW. Both companies are big players in the fiber optics networking arena. Both stocks also have some pretty ugly bearish price objectives associated with their charts. Networking Index Chart - $5 box Traders looking to perhaps add to, or get short some fiber optic stocks should also assess the condition of the Networking Index (NWX.X). I like to chart this index on the $5 box scale. A bearish vertical count of $305 ties in nicely with some of the bearish counts we're calculating on JDSU and GLW. A trader looking to perhaps short JDSU or GLW tomorrow might want to also have an alert on their trade station at the 345 level for the NWX.X to alert them to any potential strength. At the same time a break below the 310 level would have the NWX.X giving another sell signal and I'd think that shares of GLW and JDSU might also be getting closer to their bearish price objectives. One reason I like point and figure charts is that I'm able to calculate some bearish price objective and get a better understanding of how close a stock or sector may be to their bearish or bullish price objectives. The closer a stock gets to its bearish price objective, the more careful a bearish trader must become. If you believe in the system like I do, we understand that the bearish price objective comes about because "smart money" knew what the ultimate bad news would bring to a stock or sector and acted on the knowledge with a vengeance. It's my thinking that if smart money "knew" a bearish price objective when they were shorting or selling, then perhaps they would turn into buyers once they were proved right at the level they had targeted. Today in the "hot list" on OptionInvestor.com I actually highlighted a bearish trade in shares of JDSU on a break below $12. I did this only because we could use the some information we were getting from the 60-minute interval bar chart and rounding 50-pd moving average on that time frame to place a stop just above $12.30. Some stocks that have given bearish triangle patterns July 3rd, Agile Software (AGIL) at $16, with BPO of $12.50 July 3rd, PRAECIS Pharma (PRCS) at $13, with BPO of $1.00 July 6th, General Electric (GE) at $47, with BPO of $42.00 June 18th, Isomet (IOMT) at $7.50, with BPO of $3.00 July 6th, Abercrombie & Fitch (ANF) at $41, with BPO of $36.00 July 3rd, Axcelis Tech (ACLS) at $13.50, with BPO of $7 July 6th, Comverse Tech (CMVT) at $53, with BPO of $37.00 ================ Market Sentiment ================ A Good Sector Is Hard To Find by Jeffrey Canavan I've always been told that if you can't say anything nice don't say anything at all, but it's hard to find anything nice to say when 99% of all sectors are below their 25, 50, and 200-day moving averages. Perusing the percentage change data for the past 5, 10, and 30 days also makes it hard to find any sectors to be bullish on. If your looking for relative strength, drugs, banks, and Russell 2000 stocks are the only groups performing better than an S&P 500 Index fund on a relative strength basis. If buying oversold sectors at support is your cup of tea, the Nasdaq-100, software, networking, and healthcare sectors might be the place to look. Semiconductors and biotechnology lost key support levels and are not quite oversold yet, making them a 50/50 proposition. Bargain basement stocks can be found in the oil services sector. On a seasonal basis these stocks do tend to bottom in July, but let the buyer beware, these stocks are cheap for a reason. Of the three major indices, the Nasdaq looks like the strongest, as long as 2,000 continues to hold. *************************Sector Watch**************************** Weekly Daily Overbought Support Resistance Trend Trend Oversold DJIA Bearish Bearish Neutral 10,200 10,500 NASD Bearish Bearish Neutral 2,000 2,200 S&P 500 Bearish Bearish Neutral 1,180 1,200 Rus 2000 Neutral Bearish Oversold 480 520 Semis Bearish Bearish Neutral 545 650 Biotech Neutral Bearish Netural 550 615 Internet Neutral Bearish Oversold 160 186 Networking Bearish Bearish Oversold 314 365 Software Neutral Bearish Neutral 200 233 Banking Bullish Neutral Overbought 640 670 Retail Bearish Bearish Neutral 815 860 Drugs Bearish Neutral Oversold 375 400 Percent Change Last Last Last Relative Strength 5 Days 10 Days 30 Days vs S&P 500 DJIA (3.0%) (4.3%) (7.7%) Negative NASD (6.3%) (0.4%) (11.2%) Neutral S&P 500 (2.1%) (2.2%) (7.3%) N/A Rus 2000 (5.2%) (0.5%) (4.8%) Positive Semis (9.7%) (3.8%) (14.4%) Negative Biotech (7.7%) (6.0%) (9.7%) Negative Internet (6.3%) 2.6% (26.1%) Negative Networking (7.8%) (3.6%) (32.1%) Negative Software (8.9%) (3.5%) (15.0%) Neutral Banking (1.1%) (2.0%) (2.0%) Positive Retail (2.7%) (6.5%) (9.1%) Negative Drugs 2.0% (2.6%) (3.4%) Positive ***************************************************************** =============== Play-of-the-Day =============== Intuitive Surgical - ISRG $13.95 +0.74 Stop: $12.90 Original Comments When Picked On June 17th: Intuitive Surgical is the maker of the recently-FDA-approved da Vinci(TM) Surgical System for removing cancerous prostate glands. It consists of a surgeon's viewing and control console having an integrated, high-performance InSite(TM) 3-D vision system, a patient-side cart consisting of three robotic arms that position and precisely maneuver endoscopic instruments and an endoscope, and a variety of articulating EndoWrist(TM) Instruments. By integrating computer-enhanced technology with surgeons' technical skills, Intuitive believes that its System enables surgeons to perform better surgery in a manner never before experienced. Surgical robotics; it sounds like something out of a movie. The thought of letting machines assist in delicate, precise, surgical procedures sounds risky. How does a computer know how much pressure to apply, how can the computer feel, and will it stop cutting or operating if makes a mistake? Well, in the case of prostate surgery, confidence in science and technology have apparently come far enough to allow the approval of such a device, made by Intuitive Surgical, one of this weekend's plays. As far as ISRG shareholders are concerned, June 4 was one happy day. Shares of the small Mountainview, CA-based outfit, since galloping from $7 to $8.21 on 6/4, have continued their ascent up the daily chart, hitting $11.80 at one point. We have decided to play ISRG because the subsequent run-up in the stock has now happened, with shares apparently coiling for the next leg up. Volume, though it has come down from the unbelievable 2.5 million shares it logged on 6/11, has stayed well above the normal 259k average daily count over the past three months. Just over the past two weeks, average volume has soared more than 270 percent to 987k shares per day. All stocks need a pause that refreshes, as well as a pause to shake out the weak holders of a stock before moving higher. Sales for the three months ending March 31, 2001 were $12.1 million, up 312% from $2.9 million in the prior year period. The sales increase was primarily due to an increase in the number of da Vinci Surgical Systems sold, to 12 in the first quarter of 2001 from 3 in the first quarter of 2000. Gross Profits for the three months were $5.5 million, a 1275% jump from the $0.4 million in the same period last year. As far as an entry point is concerned, given that shares have had a week to settle down, we think entries at current levels could prove quite rewarding. Buyers still seem to be around, judging from the solid volume numbers, and to boot, sales of the company's surgical systems should only increase over time. Add to that, the coiling/pause pattern on the chart suggests another leg up could be in ISRG's future. A ride to natural resistance at $15 could be forthcoming. There are simply too many positives here. Updated Comments: ISRG shares have had their rest and now appear ready for the next leg up. The shares have been locked in a tight sideways trading channel bounded by roughly $13.00 and $14.00 since late-June. After volume bottomed at an anemic 147k traded on July 3rd (the average is 663k), interest and volume has been rising steadily into Monday's 493k. Monday's close of $13.95 took it to within a hair of the top of the trading channel. If they can penetrate this level ($14) and the volume trend continues, then significant resistance at $15 should be a way station on the way to a test of the $19.06 52- week high set last July. Picked on June 17th at $11.05 Gain since picked 2.90 Earnings Date 7/24 (Not Confirmed) ========== Watch List ========== Halliburton Holding Co. - HAL $32.80 -0.37 WHY WE LIKE IT: HAL has been in a steady downtrend since the middle of May. Dropping from $49, the recent high in May, to the low today of $31.99 doesn't offer much support for bullish investors. Unless this is the bottom. As you know professional analyst have an uncommon ability to show up late to the party. In today's news, an analyst from Merrill Lynch lowered his earnings estimates by 7 percent for this year and by 20 percent for 2002. Those sound like pretty hefty numbers. Why didn't they say something about a month ago? Many believe that a lot of this bad news has already been priced into the sector. If this is true then some of these stocks could be putting in a bottom soon. POTENTIAL TRIGGER EVENT: Speaking of bottoms HAL's low today was a very clear triple bottom off of support at $32. The stock bounced at this level on December 1st, 2000, again on April 3rd and today. The last two bounces offered great opportunities to ride the stock up with significant gains. We recommend you look at a chart. Candlestick fans might recognize today's candle as a potential "hammer". If we have a positive day tomorrow (hopefully closing above today's high) then we could have a confirmed reversal. Yet even if we don't see green tomorrow, this stock bears watching as the bullish run in April got off to a slow start. --- Exxon Mobil Corp. - XOM $86.72 -0.08 WHY WE LIKE IT: Continuing the oil theme today we highlight shares of Exxon Mobil. The oil giant hasn't seen the same steep declines that Halliburton did but the stock has been producing lower highs since early June. We emphasize again that if all the bad news is out then our risk is certainly diminished (but that's IF all the bad news is out). A wild card could be the violence and fragile cease fire in the Middle East and whether it spreads from Israel. POTENTIAL TRIGGER EVENT: Got to love those candles! XOM is also demonstrating a "hammer" which could prove to be a turning point if shares reverse up from here. We like this signal because the low today was a clear bounce off the 100-dma while shares of XOM still managed to close above the important 200-dma. The stock has shown that support lies at $86 more than once but we need to see the price break out of its downward trend. --- QLogic Corp. - QLGC $47.88 -2.03 WHY WE LIKE IT: An unusual addition to our watch list tonight is currently a successful short play on the PremierInvestor.net play list. We picked QLGC as a short at $62.53 and the play is "up" about $14.47. So why is it on the watch list tonight? The stock is approaching some measure of support and a bounce could be significant as shares of QLGC can be volatile. POTENTIAL TRIGGER EVENT: Traders need to be watching shares of QLGC at the $46 level. The stock price produced a large bounce from $46 in the middle of June that continued as a rally up to $66. However, before the bulls start salivating, be cautious. The bears have a huge grip on this one and the volume lately has been accelerating on the downside. If the stock breaks through $46 then we could be looking at $40 soon. If you're currently playing QLGC look in tonight's newsletter or the play list for an updated stop on the QLGC short play. --- Sun Microsystems, Inc. - SUNW $14.82 +1.14 WHY WE LIKE IT: A carry over from the weekend watch list, SUNW produced a 8 percent gain today as buyers stepped in with decent volume. Should we make it a bullish play? Well, we could but $16 is still significant resistance. Aggressive or nimble traders could still try and scalp about 8 percent from here to resistance at $16 but we'll wait for shares to actually close over $16 before calling the shot. POTENTIAL TRIGGER EVENT: Not to be redundant but if the stock can continue higher on strong volume we'll be more comfortable making this a long play. $16 is the key and even though that's 8 percent from today's close SUNW could be more of a longer trade as we aim for $20 down the road. ================================================================= 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 07-09-2001 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/9966_2.asp ================================================================= In section two: Split Trader New Plays: Fiserv Inc. - FISV Play Updates: No play updates for ST Closed Plays: No closed plays for ST Net Bulls New Plays: No new NB play Play Updates: Update stop for EMLX to $33 Closed Plays: Qualcomm - QCOM Stock Bottom / Active Trader New Plays: No new SB play Play Updates: New stops for QLGC, SHLR Closed Plays: ViroPharma - VPHM ================================================================= Split Trader (ST) section ================================================================== ============ ST New Plays ============ ------------------------- New Split Candidate Plays ------------------------- Fiserv Inc. - FISV $59.94 +1.41 Stop: $56.50 Company Description: This Brookfield, Wisconsin-based firm is one of the largest processors of financial data. The company provides securities clearing, check processing and software development to over 10,000 banks, credit unions, brokers, financial planners, thrifts, insurance firms and mortgage banks. The company's original growth came from over 100 acquisitions and by targeting community financial institutions. The firm now targets megabanks and international firms. It is also benefiting from a banking industry trend towards fee- based services that often require hefty IT muscle. Another area of growth has been the Internet, although less than 5-percent of total revenue, Fiserv's web banking products have been well received by financial institutions. Fundamentals: Last year, the company earned $1.36 per share on sales of $1.65 billion. In the current fiscal year ending December 2001 analysts project the company will earn $1.61 per share on sales of $1.9 billion and $1.90 per share on $2.1 billion in 2002. This gives them an earnings growth rate of 19-percent for 2001 against an industry average drop of 9.9-percent. One reason for the company's resistance to the economic blues is that over 80-percent of revenue comes from long-term contracts. Their superior growth rate would suggest company shares should sell for a premium over the industry average. However, their 2001 P/E of 36 is just inline with the industry average P/E of 37. Strategy: Recent weakness in tech shares drove FISV from $64 down to significant support at $57.00. There was no specific company news to account for the slide. The shares have rebounded off this support on two strong days of trading. High levels of volume are confirming that bullish sentiment is on the rise. Friday's volume of 1.8 million and Monday's 1.5 million is well above the 1.2 million daily average. Another boost should come leading into the July 23rd earnings release. Taken as a whole, the shares appear ready to put in a test of the 52-week high of $64.63 set on June 29th. Only weak resistance at the 10-day moving average of $61.52 is appearing along the way. We will place our stop at just below support at $56.50. Picked on July 9th at $59.94 Earnings Date 7/26 (Not Confirmed) ================================================================== Net Bulls (NB) section ================================================================== =============== NB Play Updates =============== ----------------------- NB Bearish Play Updates ----------------------- Update stop for Emulex (EMLX) from $35 to $33 =============== NB Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Qualcomm - QCOM $61.72 +3.54 Stop: $61.88 It is so painful when volatile plays turn against your bias. We had been hoping the shares would confirm the bearish sentiment by busting through $57.50, instead the Nasdaq composite rebounded off of big time support at 2000 and QCOM shares made an abrupt and violent reversal. After dropping $5.69 over the final two trading days of last week, QCOM made gained $3.54 on Monday. There is no play here so we are closing it out at our stop of $61.88. Picked on July 6th at $58.18 Gain since picked (3.70) Earnings Date 7/26 (Not Confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== ------------------ Short Play Updates ------------------ Change stop for QLogic from $53.00 to $52.50 Also, please note comments for QLogic in Watch List Change stop for Schuler (SHLR) from $11.94 to $13.75 =============== AT Closed Plays =============== ---------------- Closed Long Play ---------------- ViroPharma VPHM $27.09 -1.49 Stop: $27.50 The stock weakness that began with managements' decision to offer up to $300 million in stock and/or debt securities and warrants for "general corporate purposes" has picked up steam. We closed this play when it hit our stop of $27.50. If the shares push through the 200-day moving average of $25.07 the next levels of support are at $22.20 and $19.00. Picked on June 22nd at $29.94 Gain since picked: (2.85) 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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