Option Investor
Newsletter

Daily Newsletter, Monday, 07/09/2001

HAVING TROUBLE PRINTING?
Printer friendly version
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.




DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives