PremierInvestor.net Newsletter Monday 07-23-2001 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/5873_1.asp ================================================================= In section one: Market Wrap: One break deserved another and then another Market Sentiment: Psychological Damage e Play-of-the-Day: AmeriPath - PATH (Bullish) Watch List: Adding Security and Games ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) 07-23-2001 High Low Volume Advance/Decline DJIA 10424.42 -152.23 10595.40 10419.71 1.03 bln 1326/1760 NASDAQ 1988.56 - 40.81 2047.85 1987.51 1.48 bln 1381/2347 S&P 100 614.41 - 11.18 628.07 614.07 totals 2707/4107 S&P 500 1191.03 - 19.82 1215.22 1190.50 RUS 2000 487.70 - 5.23 489.51 482.70 DJ TRANS 2961.81 - 3.85 2982.31 2957.00 VIX 26.13 + 1.16 26.77 24.92 Put/Call Ratio 0.45 ----------------------------------------------------------------- =========== Market Wrap =========== One break deserved another and then another by Jeff Bailey For the most part, today's trading was quite range-bound for many stocks. Today's early optimism at the open seemed to turn sour as some key technical support levels gave way as sellers simply overwhelmed buyers. The first "key" level of technical support broken to the downside came with a break in the Dow Industrials (INDU). This index has been having trouble holding above its 200-day moving average and when that level was broken to the downside, bulls seemed to move back into their pens and bears awoke from an early morning hibernation. Dow Industrials Chart - last 10 months The Dow Industrials (INDU) continues to have problems with the 200-day moving average. It sure seems like many market participants were watching the break below 10,575 as a reason to cash things in today. Two levels of support that bears will be targeting from here is upward trend at 10,560 and the recent low found on July 11th at 10,120. Subscribers may find it interesting that the recent high on the above chart was accomplished on May 22nd, which was five sessions after the 30- year YIELD had peaked at 5.901% on May 15th. It sure seems that too much money rolled into the bond market on that day and following sessions and left little cash available to drive the index any higher. With the 30-year YIELD now below July 11th lows, I'm expecting the Dow Industrials to test the 10,120 level should bond YIELDS continue lower from here. Current YIELD on the 30-year is 5.526%. S&P 500 Index Chart - last 10 months With about an our left to go in trading, selling picked up in stocks as market participants got the feeling that there was little hope for a close above the closely watched 1,200 level on the S&P 500 (SPX). Todays close below 1,200 marks the first close below 1,200 since 1,180. Bears will be trying to get the SPX to close below upward trend and will undoubtedly be targeting the 1,168 level, which was the recent low set on July 11th. From there, equity bears will have planted the seed that the next level of support for weak bulls is 1,081 and that may get some weak longs to relinquish their stocks on a break below 1,168. The recent relative high on the SPX came on May 22nd at 1,315. NASDAQ Composite Index - last 10 months The NASDAQ tried to stay above the 2,000 level as it had been doing for the past six sessions, but in the last 90-minutes of trading the daily action in the Dow Industrials and S&P 500 put many bulls on the proverbial "psychiatric couch." Upward trend at 1,975 is about as thin as depicted on the above chart. The recent slough of earnings from the technology sector has been less than stellar and that is going to keep many of the smaller traders on the sidelines. I still think the only thing that is going to get a bears attention is a major round of selling in the bond market. Since early April, the ONLY THING I've seen that has indicated a higher stock market was the large amount of selling that occurred in the bond market. Since May 15th when the 30-year YIELD hit a relative high of 5.901 YIELD, bonds have been attracting buyers. The markets have had a lot of bad news in recent weeks on the earning's front, but even the good news has found selling. It still seems to me that bears are wearing a smile on their face as they look at the bond market and know that there's not a lot of cash coming from it that is going to compete for stocks. By my count, the relative low for the 30-year YIELD came on March 22nd. The relative low for the NASDAQ was found 9 trading sessions later on April 5th. The most recent relative high for the 30-year YIELD was found on May 15th and the NASDAQ reached its recent peak 5 sessions later. If we continue seeing buying in bonds, the market is telling me it prefers the risk/reward of bonds over stocks, with the reward being a YIELD of 5.526 plus whatever type of gain can be accomplished on further buying in the bond. I do think that some of the bullish percent data is at a level where we could see a reversal in bond YIELDS as the market raises cash to come into stocks at a lower risk level. With that said, all a bullish trader has to do is wait for it to happen, while a bear will continue feeding until it does. ================ Market Sentiment ================ Psychological Damage by Jeffrey Canavan A blow was dealt to the market psyche today when the Nasdaq Composite closed below 2,000. Granted it's just a psychological number, and there is technical support just below, but each dip below this level runs the risk of spurring a selling spree. The S&P 500 closing below 1,200 didn't help either. Speaking of psychological levels, lets see where certain sectors/indices stand in relation to their April to May gains. Given Back Less Than 38.2% Russell 2000, Banks, Insurance, Retail, Drugs, Healthcare, Paper Products, Cyclical, Transports, REITs, and Midcaps Given Back More Than 38.2%, but Less Than 50% Dow Jones Industrial, Nasdaq Composite, S&P 100, Computers, and Airlines Given Back More Than 50%, but Less Than 61.8% S&P 500, Nasdaq-100, Semiconductors, Biotechnology, Telecommunications, Brokers, Chemicals, Gold Given Back More than 61.8% Software, Networking, Disk Drives, Internets, Oil, Oil Service, Utilities Today the Semiconductor and Biotechnology Indices were the leading losers, and are now close to dropping into that "given back more than 61.8%" category. The Pharmaceutical Index was also a big loser today, down 2.21%, but is still safely above the 38.2% retracement level. The Airline Index continues to buck the overall trend, and was one of the only sectors in positive territory, up 0.27%. Oil Service stocks also got a boost after reports of a possible reduction in output by OPEC. The QQQs are flat after another round of earnings announcements, but tomorrow could bring us closer to testing support rather than resistance. *************************Sector Watch**************************** Weekly Daily Overbought Support Resistance Trend Trend Oversold DJIA Bearish Bearish Overbought 10,200 10,600 NASD Bearish Bearish Overbought 1,940 2,125 S&P 500 Bearish Bearish Overbought 1,170 1,240 Rus 2000 Bearish Neutral Overbought 465 500 Semis Bearish Bearish Overbought 525 585 Biotech Bearish Neutral Overbought 490 550 Internet Bearish Bearish Neutral 160 186 Networking Bearish Neutral Neutral 300 365 Software Bearish Bearish Neutral 180 210 Banking Neutral Bullish Overbought 625 670 Retail Neutral Bullish Overbought 875 920 Drugs Bearish Neutral Overbought 385 410 Percent Change Last Last Last Relative Strength 5 Days 10 Days 30 Days vs S&P 500 DJIA - - - Positive NASD (2.7%) (1.2%) (10.3%) Neutral S&P 500 (0.9%) (0.6%) (5.8%) N/A Rus 2000 (0.2%) (0.7%) (5.7%) Neutral Semis (0.1%) (1.1%) (17.5%) Negative Biotech 4.1% (8.3%) (18.7%) Negative Internet (4.7%) (6.2%) (22.0%) Neutral Networking 0.7% (1.2%) (21.9%) Neutral Software (7.6%) (10.9%) (21.3%) Negative Banking 0.8% 0.4% (0.5%) Positive Retail 0.6% 6.8% (1.2%) Positive Drugs 3.1% 0.6% (4.7%) Neutral ***************************************************************** ========================= Play-of-the-Day (Bullish) ========================= AmeriPath - PATH Close:$36.70 Change:+0.70 Stop:$34.00 new Original Comments When Selected On July 11th: Company Description: AmeriPath contracts with more than 200 hospitals to manage their anatomic pathology practices in some 20 states. Over 400 pathologists in AmeriPath's network diagnose diseases by examining cells and tissues. The work is performed in hospitals and outpatient laboratories. PATH operates more than 40 outpatient labs that account for some 40-percent of sales. The company manages the non- medical aspects of the practices, including payroll, staffing, supply, financial reporting, and administration. AmeriPath continues to develop its regional network of practices through acquisitions. They currently have 49 practices in 21 states. Fundamentals: Higher physician compensation and a $7.1 million merger expense combined to drop income 47-percent in the first three months of the year to $3.2 million. But do not be fooled, this company has a strong fundamental picture. Revenue in the same period jumped 32- percent to $98.7 million. After earning $1.16 per share on revenue of $330 million last year, analysts expect the company to earn $1.40 per share on sales of $400 million in the current 2001 fiscal year. Next year the company is projected to earn $1.65 per share on sales of $445 million. This gives the shares a current P/E of 26 and a forward 2001 P/E of 22. These numbers are low in comparison to the industry average P/E of 38 and inline with a 2001 earnings growth rate of 23-percent. Strategy: These shares have been on a rally climbing 342-percent since May of 2000. On Tuesday the share pushed north once more when they closed above resistance at $30 on a solid spike in volume. Wednesday confirmed the Bullish momentum when the shares gain 58-cents and closed at the session high establishing a new 52-week closing high. We have a target price of $36. Former resistance at $30 has now become downside support with additional strong support at $28. We are starting out with a stop of $27. Updated Comments: The strength of these shares continues to impress. After spending a scant two days consolidating from its two week run from $28 the shares spiked up on Friday and again on Monday. A jump in volume on Monday suggests these shares are ready to keep going. Although each day is bringing yet another 52-week high, a point and figure analysis indicates a target price of $45 to $47 is reasonable. Picked on July 11th at $30.95 Gain Since Picked +5.75 Earnings Date 7/31 (Not Confirmed) ========== Watch List ========== Symantec - SYMC - Close: $48.31 change: +2.38 WHY WE LIKE IT: Last week, Symantec ran counter to the their security software rivals and managed to report earnings that beat their lowered expectation bar. The company reported diluted quarterly earnings of 44-cents a share on sales of $228 million. Analysts were expecting 41-cents on sales of $228.7 million. Already the dominant provider of systems utilities and security products for individual PC's, the company showed strong progress in its attempt to tackle the enterprise security business. POTENTIAL TRIGGER EVENT: Investors liked what they saw in the earnings report SYMC shares have tacked on more than $8 bucks since the announcement. However, they are a bright light in what has been a weak sector and we want to see more progress to ensure SYMC shares have the strength to continue to swim upstream. Strong resistance exists through $52, however if the shares can gather the mojo to push through than we will become believers and a run to the mid-sixties seems likely. === Electronic Arts - ERTS - Close:$53.10 Change:-1.48 WHY WE LIKE IT: These shares have made frequent appearances on our Watch List. They make video games for all the major game console manufacturers and there is a battle royale brewing up between two deep-pocketed heavy weights for our holidays dollars. Microsoft is pledging $500 million to promote their new xBox and Sony is unlikely to be quiet in defense of its Playstation 2 franchise. A sure winner in this war will be the publishers of games for the platforms and Electronic Arts is a big time player in this category. Another bullish factor is that ERTS shares have gone up an average of 25-percent in each of the last 5 years from July 1st to Sept 30th. POTENTIAL TRIGGER EVENT: A rumor has been floating around that Microsoft is having technical problems in the manufacture of the xBox and this is putting pressure on the all the shares in this sector. Microsoft vigorously denies the rumor. Although Monday was a weak day for ERTS shares, they did manage to bounce off of significant support at $52.50. Either a move above $55 or a dip below $52 would represent good entry points for a trade. The first would indicate the bulls are gathering steam and the latter represents a low risk situation with strong support nearby at between $50 and $51 ------------------------- -- Continuing to Watch -- ------------------------- Some stocks on the Watch List will be carried over from one day to the next if they continue to show potential but have not yet breached the trigger point. Some stocks have met our conditions for a trigger point but other factors hold us back from making it a full-time stock pick. ------------------------- Nextel Communications - NXTL - close: 17.36 change: -0.36 Friday, July 20th's write up: WHY WE LIKE IT: Lehman Brothers isn't doing us any favors. A press release came out on Friday with a Lehman analyst cutting their price targets on three wireless companies. NXTL was one of them and its price target was cut from $32 to $21. But wait, they are "still bullish" on the sector. Despite this news NXTL shares gained over 2% and is butting heads with resistance at $18. POTENTIAL TRIGGER EVENT: We're putting NXTL on the watch list because we want to be ready when they announce earnings this week on Tuesday, July 24th. The stock has been consolidating but managed to breakout above $17 on Thursday and added to its position on Friday. Above $18 shares will probably rise to $20 before hitting heavy resistance there. Keep this one on your radar screen for a potential mid-week play. === Johnson and Johnson - JNJ - close: $53.60 change: -0.89 UPDATE: JNJ was added to the Watch List on Thursday, July 19th and we've decided to carry it again. The Drug index managed to eke out a small gain on Friday and drug giant, Merck, announced earnings Friday morning. While growth was slowing, profits still rose for MRK. Shares of JNJ are holding up well. If technology falls out of favor again investors might turn to drug stocks. Thursday, July 19th's write up: WHY WE LIKE IT: The Drug sector has seen a bounce the last couple of days and JNJ is part of the reason. On Tuesday, the drug maker announced their earnings and everyone was happy to hear that profits were rising on strong sales of drugs and medical devices. Earnings would have been even better if it wasn't for JNJ's $10 billion acquisition of Alza corp. So can the stock keep up some of its recent gains? We hope so. Investors have not witnessed any massive selling now that the earnings news is out and if the technology sector rolls over traders will probably run for the safety of drugs. POTENTIAL TRIGGER EVENT: The stock saw some late day buying on Thursday despite closing in negative territory. Traders have a choice to try and target shoot into a long position with a dip between 53.00 and 53.50 or a higher close over 55.00. Keep a close eye on the remaining big drug companies that have yet to announce. MRK, SGP and BMY all have earnings coming. === Qlogic Corp. - QLGC - close: 42.13 change: -4.00 UPDATE: We are uncomfortable about entering a short play on the day before earnings, but perhaps you are not. If so, then the break below $44 we were looking for occurred Monday. Qlogic is a big time volatile play and is suitable for only the most risk tolerant of traders. For everyone else we recommend waiting until after earnings are announced. Thursday, July 19th's write up: WHY WE LIKE IT: Qlogic has been a recent play on PremierInvestor so we'll keep this short. Shares are breaking down and yester- day's drop was on very strong volume. Today's trading looked more like an oversold bounce than anything else. With gloomy news from tech heavyweights like MSFT and EMC, QLGC could quickly feel pressure as investors look for safer havens than tech stocks (again). POTENTIAL TRIGGER EVENT: The stock price appears to have found some support near $44. Coincidentally, the 100-dma is below it at $42.90. One can argue that the stock should find support at $40 but the question is will it hold or would it just be a speed bump on the way down. Our potential trigger will be a close under $44. Expect earnings on July 24th. ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to remove@PremierInvestor.net ================================================================= 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 advertising@PremierInvestor.net. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Monday 07-23-2001 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/5873_2.asp ================================================================= In section two: Split Trader Split Announcements: Fiserv, Inc - FISV New Plays: No new ST play Play Updates: No updates for ST Closed Plays: CERS, NVR Net Bulls New Plays: No new play for NB Play Updates: Stops Updated Closed Plays: No closed plays for NB Stock Bottom / Active Trader New Plays: No new SB plays Play Updates: Stops updated Closed Plays: No closed SB plays ================================================================= Split Trader (ST) section ================================================================== =================== Split Announcements =================== Just as we thought.... After regular trading on Monday, Fiserv Inc. (Nasdaq:FISV) announced record earnings for second quarter and a 3-for-2 stock split of its common shares. Premier Investor alerted readers to this split announcement and will continue to monitor the split run for lucrative Play opportunities. The payable date is set for August 31 and the stock is expected to trade on a split-adjusted basis on September 3. There are currently 124 million shares outstanding, a float of 104 million, and 300 million shares are authorized for issuance. This marks the Company's sixth stock split since it began trading publicly in 1986. Also announced today were the Company's earnings results for second quarter ended June 30, 2001. Revenue of $472.6 million came in 13.5% over the prior year and net income of $0.40 per diluted share compared to $0.34 per share for the second quarter of 2000. FISV shares closed down -1.31 to $59.94 on average volume. About the Company: Fiserv, Inc. is an independent, full-service provider of integrated data processing and information management systems to the financial industry. As a leading technology resource, Fiserv serves more than 10,000 financial services providers worldwide, including banks, broker-dealers, credit unions, financial planners and investment advisers, insurance companies and agents, mortgage banks and savings institutions. Headquartered in Brookfield, Wisconsin, Fiserv also can be found on the Internet at www.fiserv.com. =============== ST Closed Plays =============== ---------------------------- Closed Split Candidate Plays ---------------------------- NVR - NVR, Inc. Close:$173.50 Change:-3.00 Stop:$174.00 The indecision we noted with Friday's doji pattern ended up decisively to the downside today. For those who are still playing this stock, note that volume has dropped off slightly but is still strong. To the bull's benefit, NVR closed up two points from the day's low, demonstrating hesitation from the bears. We are pleased with our gains of $7.70 and we look forward to the next opportunity to play this stock. Picked on July 17 at $166.30 Gain since picked: +7.70 Earnings Date 7/24 (Not Confirmed) === Cerus Corp - CERS Close:$68.16 Change:-2.94 Stop:$69.50 Friday's sell-off mercilessly continued through Monday, hitting our stop early on. The drop-off in volume today indicates that the current levels are likely to hold, although the failure to hit resistance this time around ($75) signals weakness. The next support is now potentially at $65.88, and trading also appears to be reacting to the 50-day moving average, offering weaker support at $67.86. Picked on July 13 at $69.25 Gain since picked: +0.25 Earnings Date 7/24 (Not Confirmed) ================================================================== Net Bulls (NB) section ================================================================== =============== NB Play Updates =============== ----------------------- NB Bearish Play Updates ----------------------- Change stop for Brocade (BRCD) to $33.00. ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== ----------------- Long Play Updates ----------------- Change Stops: Anadarko Petroleum (APC) to $50.00 Laboratory Corp. of America (LH) to $84.50 AmeriPath (PATH) to $34.00 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to remove@PremierInvestor.net ================================================================= 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 advertising@PremierInvestor.net. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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 "firstname.lastname@example.org"
Option Investor Inc