PremierInvestor.net Newsletter Thursday 07-26-2001 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/2038_1.asp ================================================================= In section one: Market Wrap: The market already knew Market Sentiment: Phylum Porifera Play-of-the-Day: Alpha Industries - AHAA (Bullish) Watch List: Will Tech Stocks Confirm the Rally? ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 7-26-2001 High Low Volume Advance/Decline DJIA 10455.63 + 49.96 10459.02 10284.09 1.22 bln 1916/1153 NASDAQ 2022.96 + 38.64 2025.88 1963.21 1.75 bln 2128/1531 S&P 100 619.14 + 5.19 619.85 608.67 totals 4044/2684 S&P 500 1203.20 + 12.44 1204.18 1182.65 RUS 2000 484.75 + 8.08 485.07 475.74 DJ TRANS 2929.06 + 64.15 2931.78 2851.23 VIX 25.15 - 1.55 27.40 25.15 Put/Call Ratio 0.54 ----------------------------------------------------------------- =========== Market Wrap =========== The market already knew I'd argue today's after market disappointing "surprise" from JDS Uniphase (NASDAQ:JDSU) is only a disappointment to those bullish the stock, but not necessarily a "surprise" to the market. And perhaps that's where bullish opportunity exists tomorrow morning! JDS Uniphase Chart - $1 and $0.50 box Was today's JDS Uniphase (JDSU) earnings a surprise? C'mon! I counted six sell signals without so much as a buy signal on the above chart. The sell signal at $10.50 was enough to set off the most powerful of point and figure bearish chart patterns (bearish triangle). That study by Professor Earl Davis at Purdue University indicated that even at $10.50 the bearish triangle was profitable for a bearish trader 87.5% of the time, which resulted in an average decline of 33.3% over a 2.5 month period. Heck, that comes out to a decline to approximately $7.03. Hey! That's within $0.03 of the bearish price objective established on April 26th! Is the MARKET really that smart to see into the future? No, it can't be. It's got to be a coincidence right? Is it time to buy JDSU now that it's so close to a bearish price objective? Nope, not until the stock gives some type of a buy signal where we can establish risk/reward. Besides... there's got to be some stocks with chart patterns indicating future potential to the upside. Now, I'd argue that today's earnings debacle by JDSU is not a surprise. I'll admit it is a bit unnerving to think that analysts would have expected the company to earn $0.03 a share and the company report a loss of $0.36. That's a BIG miss. The chart above gives hint that the MARKET knew all too well what was in store for JDSU and didn't need a fundamental analyst to tell them otherwise. This may be exactly where opportunity now exists tomorrow morning. If the market is so much smarter than the fundamental analysts and industry analysts following JDSU, then we might say that the news from JDSU was already known by smart money. This news from JDSU will undoubtedly have many technology investors pulling the plug on some of their tech holdings at the opening of trading. There will also be some "stock" investors that sell their stock, regardless of tech or non-tech similarity. What I'm going to be watching in the morning is... you guessed it! Bond YIELDS! If today's news from JDSU is gloom and doom, then smart money will run into bonds and dump stocks. They'll do it only if the JDSU earnings are a real surprise and something they hadn't planned on. However, if it wasn't a surprise, or isn't even meaningful to the market (lets face it, JDSU isn't as meaningful to the market at $9 as it was at $100, or $50) then we need to be watching for clues tomorrow morning. If the MARKET is really worried over JDSU and thinks other companies are as poorly managed and are going to suffer the same consequences, then they'll run for bonds like there's no tomorrow. If however the MARKET has factored this little earnings debacle into things, then "smart money" may try and pull a fast one and buy the weakness. I'll be watching bonds very closely when they open before stocks do. The stocks I'm looking to buy are those stocks that are diverging from the recent markets decline. I think the market is declining more from the lack of cash as a result that money had been flowing back into Treasuries in June, but the past six days that has changed somewhat. The past six days, we've actually seen bond YIELDS base a bit and start to move higher. Remember, a higher bond YIELD is caused by the selling of bonds! The result of selling in bonds is the generation of cash! What that cash is doing and where it is going is where I want to be bullish! I'll say this right now. I'm mentioning bullish thoughts because that's where subscribers probably need the most guidance. If the market buys bonds in the morning and drives YIELDS lower and stocks open lower, subscribers won't need much help. Here is the kind of "divergence" that I've been talking about as it relates to the broader market trend, and the lower bond YIELD since June. If you still disagree that a lower YIELD is bad for stocks, then simply look at a chart of the NASDAQ (COMPX) or the S&P 500 (SPX.X) or the Dow Industrials (INDU) since the 10-year YIELD fell lower on May 31st. Now, if I believe from past observations that a lower bond YIELD is BAD for stocks (and I can confirm this by looking at the broader market indexes) then why is this stock acting so strong? Does the MARKET know something now (perhaps like the market knew something about JDSU) that we need to be aware of? Nike Inc. - $1 box The point and figure chart of Nike (NYSE:NKE) sure looks different than the chart of JDS Uniphase (JDSU). So opposite that it makes one wonder if smart money knows something that we should be alert to and perhaps trying to participate in. Yesterday morning my alert went off at my trade station at $44.88. I had set a "fitted" retracement bracket on the stock from $35.50 to $60 days before. I first mentioned NKE back on 07/18 at 09:00 EST when the stock had closed at $46.40. The reason my alert went off yesterday was to alert me to a strong stock on pullback. You can see that the trade at $45 on the chart above had the stock reversing three boxes and right back to the triple top and break of downward trend. Today, shares of NKE closed at $47.84. Even though bond YIELDS had been falling as money rotated out of most stocks and the result was a lower broader market, that hasn't been the case for NKE. The supply/demand chart shows money rotating into the stock. These are the kinds of stocks to be looking for I think. This is DIVERGENCE! JDSU was not diverging. It was leading a decline! When the markets were heading higher in May and June, JDSU and NKE both were heading higher. But when JDSU turned south (the weakest always lead a decline) the NASDAQ soon followed as money rotated into bonds and drove YIELD lower. But Nike (NKE) hasn't seen the rotation out of its stock. Today we may see some pressure in technology stocks as they may be affected by "guilt by association." If however we see selling in bonds, then looks for stocks that have shown DIVERGENCE from the past two months broader bond and stock market patterns. For those bound to play technology, then take a look at the point and figure charts of FDRY and RFMD. Heck, both of these stocks are technology, but they're charts are disgustingly different than that found in JDSU. ================ Market Sentiment ================ Phylum Porifera Sponges feed off of microorganisms in the water that flow through small openings known as ostia. Flagella then move the water through the sponge, absorbing food particles as the water passes. The water then exits through a cavity at the top of the sponge known as an osculum. Why the biology lesson? Investors have basically been acting like a sponge - they soak up bad news, but don't sell their stocks. Today investors absorbed bad news from Hewlett Packard, Compaq, and a worse than expected 2% drop in orders for durable goods. It took the better part of the trading day for investors to sop it all up, but eventually all three major averages finished in positive territory. They didn't finish deep into positive territory, but enough to put the Nasdaq back above 2,000 and the S&P 500 above 1,200. But a sponge can only absorb so much water before it must be wrung out. Tomorrow the sponge will have to absorb and atrocious earnings report from JDS Uniphase. The fiber-optic component maker was expected to report earnings of $0.03, but instead posted a loss of $0.36. 16,000 more jobs will be cut, and the company sees no signs that the situation is improving. Luckily Amgen and Qualcomm might be able to mitigate any losses in the broader indices. Amgen posted earnings 2 cents a share greater than expectations, and reaffirmed guidance for the rest of the year. Qualcomm earnings came in one penny above expectations, and revenues came in better than anticipated, $640 million instead of the planned $608. When we add it all up, the triple Qs are up 50 cents in after hours. Sponges live at the bottom of the ocean, and perhaps investors are feeling a little more confident about doing some bottom fishing as the treacherous waters earning's season begin to calm. ----------------------------------------------------------------- Market Volatility VIX 25.15 VXN 52.72 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total .54 649,535 347,709 Equity Only .47 581,714 273,540 OEX .64 11,249 7,158 QQQ .73 39,433 28,863 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 34 -2 Bear Confirmed NASDAQ-100 26 - Bear Confirmed DOW 36 - Bull Alert S&P 500 48 -2 Bear Alert Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 10-Day Arms Index 1.15 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when the do, they can signal significant market turning points. ----------------------------------------------------------------- Advancers Decliners NYSE 1793 1220 NASDAQ 2025 1560 New Highs New Lows NYSE 64 38 NASDAQ 87 91 ----------------------------------------------------------------- Advisory Sentiment Bullish Bearish Correction Net Change 52.5% 23.2% 24.3% 29.3% +3.3% A bearish reading of 25% to 30%, combined with a bullish reading greater than 55% is typically considered bearish by contrairians. A net percentage greater than 30% is also viewed as bearish. ----------------------------------------------------------------- Commitments Of Traders Report: 07/17/01 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Institutions have lightened up on their net bearish for the second straight week, and the S&P 500 remains above 1,200. Coincidence? The commercial sentiment is still bearish, but improving. Commercials Long Short Net % Of OI 7/03/01 316,543 395,410 (78,867) (11.08%) 7/10/01 309,374 385,178 (75,804) (10.91%) 7/17/01 336,836 403,561 (66,725) ( 9.01%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: ( 41,144) - 5/1/01 Small Traders Long Short Net % of OI 7/03/01 133,098 54,865 78,233 41.62% 7/10/01 135,587 59,889 75,698 38.72% 7/17/01 122,525 50,211 72,314 41.86% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 NASDAQ-100 About face! After slowly reducing their net bearish position for seven straight weeks, institutions abruptly switched gears. Keep in mind this data is from 6/17/01, before the start of earnings week. Perhaps some institutions sold some futures contracts to limit their risk. This change could be a one or two week anomaly. Commercials Long Short Net % of OI 7/03/01 26,544 34,880 ( 8,336) (13.57%) 7/10/01 26,688 34,640 ( 7,952) (12.97%) 7/17/01 26,721 37,225 (10,504) (16.43%) Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: (1,825) - 1/02/01 Small Traders Long Short Net % of OI 7/03/01 10,443 7,063 3,380 19.31% 7/10/01 9,073 7,486 1,587 9.58% 7/17/01 11,680 8,183 3,497 17.61% Most bearish reading of the year: (1,028) - 1/02/01 Most bullish reading of the year: 8,460 - 3/13/01 DOW JONES INDUSTRIAL Institutions got slightly more bullish on the Dow for the second week in a row. This is the only index with a commercial net bullish position, and the Dow was the only index to finish the week higher than it started. Commercials Long Short Net % of OI 7/03/01 12,761 14,623 (1,862) (6.8%) 7/10/01 13,743 12,999 744 2.8% 7/17/01 14,145 12,963 1,182 4.4% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 8,925 - 5/22/01 Small Traders Long Short Net % of OI 7/03/01 4,708 5,715 (1,007) ( 9.66%) 7/10/01 5,048 7,835 (2,787) (21.63%) 7/17/01 5,255 9,144 (3,889) (27.01%) Most bearish reading of the year: (7,572) - 5/08/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- =============== Play-of-the-Day =============== Alpha Industries - AHAA Close:$38.60 Change +3.15 Stop:$33.50 NEW Original Comments When Selected On July 24th: Company Profile: Alpha Industries, Inc. designs and manufactures gallium arsenide (GaAs) integrated circuits, silicon and GaAs discrete semiconductors and ceramic products for cellular telephones, global positioning systems and wireless equipment. For the FY ended 4/1/01, net sales rose 46% to $271.6M. Net income rose 86% to $33.4M. Revenues reflect increased demand for wireless and broadband products. Earnings also reflect increased interest income. Fundamentals: For the 2001 fiscal year the company's net income increased 86- percent. Analysts expect company earnings to rise from a loss of $0.10 in 2002 to a profit of $0.48 in 2003. Because of the loss AHAA shares do not possess a current P/E. However, the forward P/E is 75. Why We Like It:: AHAA has rebounded nicely from the doldrums it sat in back in April. And though it certainly wasn't uncommon for a tech stock to sink to its lows in April, recent performance from AHAA has been uncommon. With a strong profit forecasted for the upcoming fiscal year end and recent upgrades from influential brokerage firms, AHAA could be ready to move. The predominantly positive moves that have taken shape over the course of the month of July have typically aroused quite a bit of volume. The intersection of the 20 and 200 DMAs on strong volume just days ago could indicate that the run will continue. If you take a glance at the daily chart for AHAA, you'll undoubtedly notice that the stock has several gaps, both up and down. The inherent volatility suggests that the stop be placed under the $33.00 support level at $32.50. Significant support exists at $30.00, however, we are not prepared to risk a percentage loss of that magnitude. For those leaning more toward a short-term time horizon, a $40.00 target above resistance of $36.00 would likely present the best exit price. Those with a longer time horizon might look to the next level of resistance just above $44.00. Keep in mind that the company caters to the cell phone industry and the battered sector may have most of its bad news out already. Updated Comments: By the end of Thursday's trading session AHAA shares had but in a strong day pulling free of consolidation in the $33.50 to $37.80 range. The only cloud on the horizon light volume of 989k shares traded. Although it was lighter that the 1.4 million average, it was still higher than the previous day's 751k traded. We are hopeful the up volume trend continues, as this would be confirmation of rising bullish sentiment and put $44 square in our sights. We are running our stop up to $33.50. . Picked on July 24th $36.00 Gain Since Picked: +2.90 Earnings Date 10/17 (Not Confirmed) ========== Watch List ========== Cisco Systems Inc. - CSCO - close: 19.38 change: +0.68 WHAT TO WATCH: It seems that everyone is watching Cisco these days. The stock has been unable to mount a serious comeback after its recently failed rally from $14 to $24 (April/May). Traders should be watching for CSCO to close over resistance at $20. Short-term players can probably play the 10% move to $22 wherein lies the next level of serious resistance. It will be interesting to see if JDSU's earnings will have any affect on this tech bellwether. --- Intel Corp. - INTC - close: 29.83 change: +0.41 WHAT TO WATCH: Another big boy, Intel, has also left momentum traders dying for lack of any serious moves. The stock has been coiling into a pennant formation with higher lows and lower highs since early June. The closer it coils the sooner we can expect a breakout one way or the other. At the moment, shares are poised near the top of the pattern and could breakout to the upside. However, we're skeptical it will occur and thus, INTC is on the watch list. At this point traders should be watching for a strong close on heavy volume over $30 or a close under $28. Either one will be a signal to watch this one further as there is both support and resistance only a point or two away from either level. --- E M C Corp. - EMC - close: 19.27 change: +1.10 WHAT TO WATCH: We continue the parade of tech heavy-weights and add EMC to the watch list. The stock responded well to the rally despite the bad news from HWP. EMC has been so beat up investors might begin to believe there is no bad news left. Whether you agree with that theory or not, one might be able to make a profitable trade if the bulls are going to push this one through resistance at $20. Volume has been pretty stagnant the last few days so it would help if it could breakout on stronger than average volume. --- AOL Time Warner - AOL - close: 44.91 change: +1.16 WHAT TO WATCH: We can't have a list of tech stock big caps without including AOL. The stock has been consolidating between $43 and $44 since the 19th of July. Bullish traders might consider a long play if shares close above resistance at $45. However, be forewarned that the 200 & the 100-dma's are directly overhead in the $47.50 area. ------------------------- -- 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. ------------------------- Sun Microsystems - SUNW - close: 16.03 change: +0.50 WHAT TO WATCH: SUNW finally did it. It managed to close over resistance at $16 but just barely. A positive sign was the slightly better than average volume. We feel encouraged that the stock has trigger our signal for a potential long play. Nimble traders who can jump in and out quickly should consider doing so. The rest of us are going to watch this one for a little more confirmation first. FYI, the 50-dma = 16.36 and the 100-dma = 17.00. Wednesday, July 25th's write up: POTENTIAL TRIGGER EVENT: SUNW just finished its second up day in a row. It managed to close right on its most current down trending resistance line (of lower highs). Bullish tech traders could watch SUNW for a break above $16 as a potential long-play. Once over $16, potential resistance is at $17 and again near $19.25. --- Oracle Corp. - ORCL - close: 19.36 change: +0.10 WHAT TO WATCH: No change from yesterday. Wednesday, July 25th's write up: POTENTIAL TRIGGER EVENT: Oracle has been on and off the watch list for weeks as it continues to consolidate under heavy resistance at $20. The stock set a new higher low yesterday near $18 and today's 5.9% move is impressive. Our potential trigger to go long is still a close over $20. ------------------- POTENTIAL PLAYS NOW These Watch List candidates have met yesterday's potential triggers and many could be great plays for the active trader now. We are going to watch list them for another day to see if they confirm the move. Choose your stop wisely if you proceed to trade them. ------------------- Siebel Systems, Inc. - SEBL - close: 34.71 change: +1.02 WHAT TO WATCH: Up 3% today, shares of SEBL were able to close above resistance at $34. Aggressive traders should have no trouble picking their entry point and setting their stop loss if you look at an intraday chart. There was a comment made that SEBL might have true resistance at $35. We're going to keep it on the watch list another day to see if it can hurdle this as well. Wednesday, July 25th's write up: POTENTIAL TRIGGER EVENT: Now that earnings are already past for SEBL, the worse may be over. The stock put in a potential bottom yesterday with its intraday dip to $30. If the bulls can keep this rally alive then shares of SEBL might be able to reach $40 again. A nice trigger point would be a close over $34. --- VERITAS - VRTS - close: 42.16 change: +3.10 WHAT TO WATCH: Wow! Up almost 8% today on better than average volume. We are encouraged by the move but it may be a little aggressive for some investors. More conservative traders could consider a bounce on a dip back to $40 or $41. Wednesday, July 25th's write up: POTENTIAL TRIGGER EVENT: Another stock that suffered a large drop after is earnings report is VRTS. Shares of VRTS may have put in a bottom with its intraday low near $34 back on the 19th of July. The stock has quietly been inching higher since and if the market is going to climb higher the stock might be able to fill the recent gap. This would mean a potential climb back to the $48-$50 area. An easy trigger point to go long would be a close over $40. --- Check Point Software - CHKP - close: 42.00 change: +2.53 WHAT TO WATCH: Another big mover, Check Point has broken through resistance at $40 giving us a bullish signal to consider a long play. Like VRTS above, aggressive traders should consider a trade now while more conservative folks may want to wait for a potential dip back to $40 or $41 (but wait for that bounce!). Wednesday, July 25th's write up: POTENTIAL TRIGGER EVENT: CHKP is another stock that has been fighting its way back after the negative reaction to its earnings report. CHKP is currently a short-play on PremierInvestor.net but if the stock closes over $40, PI will likely close the short play and bulls can look at this as a potential trigger to go long the stock. There is mild resistance at $42.50 but above this the stock could climb to $50 or higher if the market puts in a prolonged rally. Then again, if the market sours again the stock should return to $35 and we'll be looking for new lows. --- Nokia Corp. - NOK - close: 20.50 change: +0.89 WHAT TO WATCH: We don't want to sound like a broken record but NOK has also made the list of triggered bullish signals. Traders should consider long positions now that it has closed over resistance at $20. More conservative moves would be to wait for a possible dip (and bounce) back at $20 or wait for a close over $21.50. Wednesday, July 25th's write up: POTENTIAL TRIGGER EVENT: NOK's next bullish move could be dependant on the development and implementation of the next generation of handsets and the new wireless networks build to make them work (both referred to as 3G or third generation). The stock has been consolidating in a tight range between $19 and $20. Our potential bullish signal will be a strong close over $20. There is obvious resistance at the $21.50 level but beyond that is anyone's guess. --- Procter & Gamble - PG - close: 71.00 change: +1.00 WHAT TO WATCH: Compared to the other stocks on this list, PG's 1 point move equated to a mild 1.4% gain in the stock. Clearing $70 is our trigger to evaluate a possible bullish position. This chart on this stock looks pretty good and patient traders could potentially see $76. Don't forget to play with stops. Wednesday, July 25th's write up: POTENTIAL TRIGGER EVENT: Shares of PG closed with an impressive 2.8% gain climbing throughout the day with a strong finish in the last forty minutes of trading. Without looking at the news to see what has powered the move we see that there was a similar move in the Retail Index (RLX.X). PG's stock has seen a strong climb from its recent June low near $62 and the stock has been consolidating around its 200-dma and support at $68. A bullish trader's potential trigger event would be a close over $70. Strong overhead resistance can be seen between $76 and $78. ================================================================= 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 Thursday 07-26-2001 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/2038_2.asp ================================================================= In section two: Split Trader New Plays: AmeriSource Health - AAS (Bullish) Play Updates: BMET, ATK Closed Plays: No closed plays for ST Net Bulls New Plays: RF Micro Devices - RFMD (Bullish) Bullish Play Updates: Alpha Industries - AHAA Bearish Play Updates: No active bearish tech plays Closed Plays: BRCD, CHKP Stock Bottom / Active Trader New Plays: NIKE Inc. - NKE (Bullish) Bullish Play Updates: APC, RAIL, SGU Bearish Play Updates: Professional Detailing - PDII Closed Plays: ANF ================================================================= Split Trader (ST) section ================================================================== =================== Split Announcements =================== ============ ST New Plays ============ ------------------------- New Split Candidate Play ------------------------- AmeriSource Health - AAS Close:$57.50 Change:+2.17 Stop:$52.00 Company Description: The Chesterbrook, Pennsylvania-based firm is the holding company for AmeriSource Corp., the forth-largest distributor of pharmaceuticals and health care products in the US (McKesson HBOC is the largest). AmeriSource supplies hospitals, managed care facilities, drugstores, nursing homes, clinics, supermarkets, and mass merchandisers through nearly 25 distribution facilities. The company also offers a variety of value-added products to enhance its own profitability and bolster customer loyalty. These include the ECHO Suite, which is a software system for ordering and inventory management assistance; the Family Pharmacy program, which provides online shopping through familypharmacy.com and helps connect independent and small chain drug stores to various merchandising and other services; and Pharmacy Healthcare Solutions, which offers hospital consulting aimed at improving operational efficiency. The federal government, which includes the Veterans Administration, accounts for about 20-percent of sales. AmeriSource has announced that it is acquiring Bergen Brunswig, a major drug-distributor rival. The company created by the merger will be called AmeriSource-Bergen. Pending regulatory approval (expected sometime this summer) the combined entity will have revenues in the vicinity of $35 billion. Under the terms of the agreement, which has been unanimously approved by both Boards of Directors, each share of Bergen Brunswig common stock will be converted into 0.37 share of AmeriSource-Bergen common stock while each share of AmeriSource common stock will be converted into one share of AmeriSource-Bergen common stock. The new Company will have approximately 103 million shares outstanding, with current AmeriSource shareholders owning approximately 51-percent of the combined company and current Bergen Brunswig shareholders owning about 49-percent. Fundamentals: Earnings projections have not been made for the combined entity. However, AAS Chairman David Yost said, " This combination of two strong, service-oriented companies boosts our confidence that we can achieve a long-term earnings per share growth objective of about 20 percent." As a separate entity AAS is expected to earn $2.27 per share on sales of $13.8 billion in the fiscal year ending in September 2001. Last year, the company earned $1.89 on sales of $11.6 billion. Bergan Brunswig (BBC) is expected to earn 80-cents per share on sales of $20.2 billion. Last year, BBC earned 60-cents per share on sales of $22.8 billion. Why We Like It: The combination of these two companies ($34 billion in sales) should put it on a par with the industry giant McKesson HBOC (MCK $35.3 billion in sales). Investors evidently like the merger, since it was announced in March, AAS shares have climbed steadily from near $43.39. To be fair, AAS shares have been on a solid winning streak since hitting $12.00 on March 14th of 2000. Wednesday saw the shares reverse a dip when the companies reported solid reports. On Thursday, the shares built on the momentum and seem poised for the next leg up. In the short-term, if the shares can push through $59 while maintaining strong volume (725k is daily average), then they are likely to make a run at resistance at $62.50 and the longer-term upper trend line at about $65.00. We suggest traders wait for this break of $59 before taking a position. Solid support from a bearish reversal exists at $55.00, the 200-day moving average of $50.99 and the lower trend line at about $50.00. We will start this Bullish play with a stop at $52.00. Picked on July 26th at $57.50 Earnings Date 7/25 (Confirmed) =============== ST Play Updates =============== ----------------- Split Run Updates ----------------- Biomet Inc. - BMET - close: 50.49 change: +1.66 stop: 45.50 News has been quiet since BMET's insider trading data became available on Wednesday. The bulls were able to push shares as high as 51.54 before closing half a point north of $50. Volume was more than double the norm at 3.4 million shares trading. This is a very positive sign for the bulls and investors are hoping the up trend will continue into its 3:2 split on August 7th. We wouldn't be surprised to see shares dip a little after the two big days but if they offer an intraday bounce that could be a good entry point. Our stop may be a little wide for some traders. If it's too far away for you, move yours up tighter (but not too tight). Picked on July 25th @ $48.83 Gain since picked: + 1.66 Earnings Date: N/A (not confirmed) ----------------------- Split Candidate Updates ----------------------- Alliant Tech - ATK - close: 97.57 change: +0.78 stop: 93.50 *new* It keeps going and going and going...maybe they should rename this stock the energizer bunny. The stock has seen 10 positive days out of the last 13 trading sessions. Shares are quickly approaching resistance in the $100 - $101 area. While everything looks great we are beginning to be concerned over the lack of volume. Today's volume was just over 1/3 its average volume. If volume continues to be low like this there may not be enough steam behind this run up to punch through resistance. As a precaution we are going to move our stop up to $93.50. This is just under Tuesday's low. More conservative traders could consider putting a stop at our cost of $95.44 but you risk being stopped out on an intraday swing. Picked on July 24th @ $ 95.44 Gain since picked: + 2.13 Earnings Date: 8/08/01 (confirmed) ================================================================== Net Bulls (NB) section ================================================================== ============ NB New Plays ============ -------------- New Long Play -------------- RF Micro Devices - RFMD Close: $27.79 Change: +2.20 Stop: $25.00 Company Profile: RF Micro Devices designs, develops, manufactures and markets proprietary radio frequency integrated circuits for wireless communications applications, including cellular and PCS. For the fiscal year ended 3/31/01, revenues rose 16% to $335.4M. Net income decreased 30% to $35M. Revenues reflect increased demand for handset and broadband products. Earnings were offset by increases in research & development, and marketing expenses. Fundamentals: For the 2001 fiscal year the company's net income is estimated to decrease 28-percent, while it is anticipated that 2002 net income will rise by 52-percent. Analysts expect company earnings to rise from $0.22 in 2001 to $0.41 in 2002. The company is not currently profitable, therefore a current P/E can not be calculated. The forward P/E is 103. Strategy: A surprise announcement of +10% revenue growth for the company's second quarter, followed by an upgrade in the stock and RFMD has begun to move. Uncertainty has been somewhat mitigated with earnings announcements from NOK, MOT, ERICCY having already hit the wires. A rebounding NASDAQ and strong revenue growth, despite a sluggish economy might prove to be the right formula for RFMD. Pushing through minor resistance of $27.00 today after two consecutive days of increasing upside volume, RFMD stands poised for its next challenge- $30.00. Minor resistance exists just above the $30.00 level and it is here that short-term traders may need to re-evaluate their course of action. Though the level is more psychologically influential than anything else, given the circumstances, this is probably the best exit point. On the other hand, a longer-term perspective would allow for a potential move to resistance of $37.38. I realize that this insinuates a +20% move but with technical indicators turning up after the last two weeks of consolidation, such a move could be a real possibility. Picked on July 26th $27.79 Earnings Date 07/17 (Confirmed) =============== NB Play Updates =============== ----------------------- NB Bullish Play Updates ----------------------- Alpha Industries - AHAA Close:$38.60 Change +3.15 Stop:$33.50 NEW By the end of Thursday's trading session AHAA shares had but in a strong day pulling free of consolidation in the $33.50 to $37.80 range. The only cloud on the horizon light volume of 989k shares traded. Although it was lighter that the 1.4 million average, it was still higher than the previous day's 751k traded. We are hopeful the up volume trend continues, as this would be confirmation of rising bullish sentiment and put $44 square in our sights. We are running our stop up to $33.50. . Picked on July 24th $36.00 Gain Since Picked: +2.90 Earnings Date 10/17 (Not Confirmed) =============== NB Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Brocade Comm. - BRCD - close: 32.70 change: +3.73 stop: 30.88 After bouncing between $30 and $28 for a couple of days, investors piled into shares of BRCD sending the stock up almost 13% in a late day rally. There was no news as traders decided to snap up shares of tech stocks as the NASDAQ made an afternoon run breaking through 2000 again. This is a good example of why you play with stops. We still managed to close the play with a nice gain - up over 9%. Picked on July 16th @ $34.06 Gain since picked: + 3.18 Earnings Date: 8/14 (not confirmed) --- Check Point - CHKP - close: 42.00 change: +2.53 stop: 39.75 We certainly saw this one coming. After a quick two day gain of 5 points on this short play the bulls pushed and pushed and pushed to finally break back above what was new resistance at $40. If you've been reading our Watch List, you'd know that we would consider CHKP a potential long play now that its over $40. Sometimes you just want to quit while you're ahead. Picked on July 18th @ $40.09 Gain since picked: + 0.34 Earnings Date: 7/23 ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ -------------- New Long Plays -------------- NIKE Inc. - NKE Close:$47.84 Change:+1.06 Stop:$44.00 Company Description: The Beaverton, Oregon based firm is the world's largest athletic shoe and apparel maker. It has over 40-percent of the entire US athletic shoe market. The company also sells Cole Hann dress and casual shoes and a Nike-branded product line of athletic apparel and equipment. The company also operates NIKETOWN stores and is opening JORDAN in-store outlets featuring Michael Jordan brand merchandise. As youth fashion tastes have moved toward hiking boots and other casual shoes, and consumer demand has slumped in Asia, NIKE has felt the pain. To cut expenses, the firm has reduced athlete endorsements, downsized facilities, and released 6-percent of its employees. The company, which relies on outside manufacturers, has taken steps to avoid more criticism of human rights violations in its factories. Fundamentals: Analysts expect the firm to earn $2.34 per share on sales of $9.9 billion in the fiscal year ending May 2002. Last year, the company earned $2.16 per share on sales of $9.5 billion. The company's earnings growth of 8-percent is inline with the industry average of 7.8-percent. The firm has a current P/E of 22 and a forward one of 20, a premium over the industry average P/E of 15. Why We Like It: To gain a fuller understanding of why we like NKE shares please read Jeff Bailey's Market Wrap. He discusses how the selling in Treasury bonds may not necessarily be needed for this stock to advance. Bonds are the bank account for big money. When they are buying bonds it often is because they are selling equities. They reason it is better to be safe in bonds (and earn a little interest) than suffer equity losses. Yet since March, Nike shares have been in a slowing ascending trading channel seemingly impervious to drops in the general market. This suggests there is a lot of underlying strength in the shares. Simply put, even when the market looks ugly money managers are not selling Nike shares to buy bonds. What they (and we) are seeing is that this franchise company is making progress in reducing inventories and expenses, and improvements in future overseas orders are suggesting that historical double-digit growth is likely to return to Nike sometime next year. What is also improved is the short-term technical outlook for Nike shares. For the last week and a half NKE shares have been consolidating between roughly $46 and $48. On Wednesday the shares bounced off of this lower range on a slight rise in volume and followed through on Thursday with another jump in price and volume. This indicates Nike shares are going to make a run at breaking through resistance at $48 and the upper trend line at approximately $48.75. This would put the shares on a strong path to test subsequent level of resistance at $50, $52.50, $57.50 and $60. We don't see this play as an aggressive short-term play, but rather a longer trending one. Accordingly, we will start this play with a stop at $44, which is just below the 200-day moving average of $44.25. Picked on July 26th at $47.84 Earnings Date N/A (Not Confirmed) =============== AT Play Updates =============== ----------------- Long Play Updates ----------------- Anadarko Petroleum APC Close:$57.25 Gain:+1.55 Stop:$54.75 NEW Shares of APC jumped $1.55 cents after the company reported better than expected earnings. Wall street was expecting earnings per share of $1.10, but actual results came in $1.50, 36 percent higher. APC has now recouped 50% of its May to July decline, and is currently sitting just below the 50-day moving average. We are cinching up our stop to $54.75. This still gives APC some room to maneuver, but locks in a gain. Picked on July 20th at $51.51 Gain since picked: +5.74 Earnings Date 7/26/01 RailAmerica RAIL Close:$13.20 Gain:+0.35 Stop:$11.50 RAIL finally did it! After four days of trying, RAIL finally broke through support at $12.90. The next point of resistance on this ride is $13.75, and then it's off to New52weekhighville. Since $12.90 has been such stiff resistance, it should offer solid support. If RAIL close above this level for a few more days, we will move our stop up to just below that level. For now it remains at $11.50. Picked on July 14th at $11.41 Gain since picked: +1.79 Earnings Date N/A Star Gas Partners SGU Close:$21.39 Gain:-0.01 Stop:$19.50 We noted when we profiled this pick that this stock was a turtle and not a hare. The stock is only up 1 percent since we picked it, but that could change if resistance at $21.50 is cleared. Natural gas prices are starting to heat up, and so could this stock. Picked on July 10th at $21.18 Gain since picked: +0.21 Earnings Date 7/26/01 ------------------ Short Play Updates ------------------ Professional Detailing PDII Close:$65.00 Gain:-0.13 Stop:$67.25 While the rest of the market rallied Professional Detail stayed put, actually it dropped 13 cents, but you get the point. This is third day this stock consolidated, as buyers and sellers are indecisive about who is going to take control. As long as our stop at $67.25 holds, we'll wait to see if sellers take control. Picked on July 18th at $70.00 Gain since picked: +5.00 Earnings Date N/A =============== AT Closed Plays =============== ----------------- Closed Short Play ----------------- Abercrombie & Finch - ANF closed at $42.50 ================================================================= 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. 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