PremierInvestor.net Newsletter Tuesday 08-07-2001 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/3504_1.asp ================================================================= In section one: Market Wrap: It doesn't get any tougher than this Market Sentiment: Finally Play-of-the-Day: Transocean Sedco Forex - RIG (Bearish) Watch List: ADBE, THC and SCUR are new. ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 8-7-2001 High Low Volume Advance/Decline DJIA 10458.74 + 57.43 10472.72 10376.05 .97 bln 1702/1382 NASDAQ 2027.79 - 6.47 2043.48 2013.75 1.28 bln 1741/1941 S&P 100 618.71 + 3.50 619.70 613.13 Totals 3443/3323 S&P 500 1204.40 + 3.92 1207.56 1195.64 RUS 2000 480.33 - 0.63 481.19 477.49 DJ TRANS 2921.46 + 13.19 2922.67 2898.05 VIX 22.65 - 1.09 23.46 22.56 Put/Call Ratio 0.81 ----------------------------------------------------------------- =========== Market Wrap =========== It doesn't get any tougher than this by Jeff Bailey Believe me. It's not just you and I that are having a tough time trying to figure out future market direction. The market is having the same problem. The chart of the S&P 500 may have a buy side bias, but it isn't much, and that makes for tough trading short-term. The outside appearance of the patient, as depicted by the S&P 500 couldn't be at more of a crossroads than it is right now. If you're a shorter-term trader looking for a 20% gain in a stock that is a component of the S&P 500 (SPX.X) good luck. The odds are slim that a trader will be able to find that type of move on a consistent basis. As the retracement bracket shows, you've almost had to pick the high and the low to get a 4% move in the SPX over the past couple of months. When it's come, its come quick and then evaporated nearly as fast (for bulls and bears). S&P 500 Index Chart - last nice months What bias there is to the S&P 500 from the market looks to be fractionally bullish. The downward trend from the 09/01/00 high at 1,530 and attached to the high on 01/31/01 is the longer-term trend. The SPX has had a tendency to rally above this trend (sign of strength), but then gravitate back toward it. The upward trend on the chart was derived conservatively from the bottom found on 03/22/01 at 1,081 to the very next low of 04/04/01. Here too, the SPX tested this trend, broke slightly below, but then managed to get back above. The past two sessions, we've seen the SPX test this "cradle" or crossing of trend. Right now, the upward trend is the overriding trend and can still be traded bullish. A close below today's low of 1,195 could see a test of 1,176 and 61.8% retracement. Today's close at 1,204 truly puts this broader market index at a crossroads (interesting trends) and 50% retracement. Bullish Percent for S&P 500 - 2% box The "internals of the patient" as depicted by the bullish percent chart of the S&P 500 ($BPSPX) remain in "bull confirmed" status after having just recently reversed back into a column of X's. Simply looking at the above chart and counting X's and O's, we've seen a reversal back into X's end up with a minimum of 4 X's in a reversal. The way a trader can be incorporating the bullish percent chart with their bar chart can be best explained by the retracement bracket on the bar chart. First, if we correlate the recent low on the bullish percent chart at 38% bullish coinciding with where I have anchored the lower end of the retracement bracket on the S&P 500 at 1,091, then I've got a decent tile with low to low. The recent high for the bullish percent is also correlated with the appropriate highs found on the bar chart at 1,313. While the bullish percent tells us very little about market direction, it speaks volumes about risk. ONLY WHEN YOU UNDERSTAND MARKET/SECTOR risk are you able to get a feel for how to manage your trading and the potential for future market direction. It makes sense to me that the recent turning of the bullish percent back into "bull confirmed" status is just that. Early! Doesn't it make sense then that this is why the SPX deflected off of the 38.2% retracement level at 1,228 just recently? The move from 1,176 to 1,228 represented a move of 4% in just 7 sessions (remember, as of today's close, the SPX is DOWN 8.78%) and there are going to be traders looking to book profits every time there is a hint of weakness. What we're finally starting to see is the bullish percent reach a new relative high and now hold above a new relative low. This gives hint that a lot of repair is starting to take place and perhaps that market bears are getting less aggressive with their shorting of breakdowns for some of the bigger capitalized stocks in the S&P 500. The only reason a bear is less hesitant to short a breakdown is that he/she feels that the risk/reward is unfavorable as the bulk of the damage has been done. Don't take this wrong and start lifting your stops. The stock that blows the trader/investor up, is the one they hold long/short that they didn't honor their stop on. Meanwhile there capital is tied up in a losing proposition and the broader market moves away from them. At the same time, a trade needs to have an realistic expectation and target for their trade. The expectation comes from proper trade set-up and understanding the current market environment. I STRONGLY suggest that traders continue to set their sight low and not lofty. I think yesterday's 01:00 EST Update is a perfect example. I didn't just throw out Abercrombie and Fitch (NYSE:ANF) "testing bullish support" as an interesting topic. The stock had achieved a level that we had discussed in the passed along with the bullish support trend. In a range bound market, this stock had given the bearish trader an ample gain relative to the MARKET and it was time to take some chips off the table. The only reason I would have bought ANF yesterday or today for that matter would be to lock in gains. The stock had been losing relative strength for the past couple of weeks and looks to have lost favor. With the bullish percent for the SPX in bull confirmed status, now is not the time to be swinging for the fences with shorts. Should the stock rally back to the $40 level and bullish percent charts weaken again, this stock will rank high on my short list, I will have raised cash (and a profit) and be ready to reload. HAVE YOU BEEN FOLLOWING THE "Pivotal" stocks? These were simply three stocks that were NASDAQ and S&P 500 related stocks that were trading right at bullish support. Microsoft (NASDAQ:MSFT), eBay (NASDAQ:EBAY) and Oracle (NASDAQ:ORCL). On August 3rd (09:00 EST Update), we touched on all three of these stocks and felt they needed to show some strength from then traded levels. How are they doing? MSFT is down $1.10 and hasn't really budged. There has been no action taken on its point and figure chart and it is still sitting on top of bullish support trend at $65. Shares of eBay (EBAY) have risen by $3.50 since that morning update and threatens to give a buy signal should the stock trade $66. What takes place there at the "buy signal" (should it happen) could give indication of just how aggressive the market really is. We said before that there are probably some shorts in this stock that are getting anxious. We made that observation or stated it, and with the stock up $3.50, bears are no more relaxed now than they were then. Oracle (ORCL) looks to be the trouble child of the three, but I've seen worse. Since August 3rd's open, the stock has fallen $1.07 (5.8%), given a double bottom sell signal, but did not trade at our "shouldn't trade $17 if institutions believe in technology or Oracle for that matter" (see 08/03 09:00 Update). Today's low trade for ORCL was $17.01. It has not traded $17 yet (operative word is yet). The sell signal at $17.50 did have this stock taking away from the NASDAQ-100 bullish percent by 1 percentage point and must currently trade $21 for the stock to contribute positively to the bullish percent. Oracle is interesting now, even if you're just following it as one observation of many. It's fairly simple. A trade at $17 is sell and the stock settled at $17.24. A 3-box reversal has the stock trading $19. In essence, risk/reward for a bull is $0.25 risk, $1.76 reward. We never know for sure what kind of buyer is hanging around the $17.01 level. You think $17.01 is just a quirk? Think again. The stock traded a low of $17.01 on 06/26 before the stock traded an intraday high of $19. Three sessions later the stock traded $20. I'm watching that $17 level and today I think somebody else was too. If nothing else, see if it holds to get a feel for how bullish/bearish this market can be. ================ Market Sentiment ================ Finally by Jeffrey Canavan Finally we have the much awaited Cisco numbers. No more relying on worker productivity data, analyst upgrades/downgrades, or Procter and Gamble's new cavity fighting gum for market direction. Finally we have something we can sink out teeth into, or do we? Cisco earnings came in at $0.02 a share, in line with estimates. Revenues were $4.3 billion. 25% lower than last year, but within the lower range of expectations. Revenues for the next quarter are expected to come in flat to down 5 percent. Inventory came in lower than the April quarter, but still remains high at $1.68 billion. Days sales outstanding fell to 31 from 38, but allowance for doubtful accounts rose to $288 million from $150 million. So what's it all add up to? Short-term visibility is improving, but long-term outlook is still challenging, or as John Chambers himself said, "We are not there yet." Not quite the stellar results everybody was hoping for. With Cisco down $0.37 and the triple Qs down $0.18 in after hours, it doesn't look like we got the bullish catalyst the market needed. Most likely will we fall back into a pattern of drifting from one economic event to the next, waiting for that elusive signal that the bottom is here? Bullish percent data is saying that it is safe to test the waters, and the low readings in the VIX and VXN tell us that bulls are unafraid. But could these indicators also be telling us that everybody who is bullish is already in, and everybody else is waiting for some more good news? Talk of a summer rally has turned into talk of a late-summer rally, and as August continues fade away, we may soon find ourselves waiting for the Great Pumpkin. Until we get a string of positive news events, buying at support and selling at resistance continues to look better than a trend following approach. ----------------------------------------------------------------- Market Volatility VIX 22.65 VXN 48.76 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total .81 548,803 445,629 Equity Only .73 479,427 351,277 OEX .94 8,665 8,176 QQQ .83 81,118 67,517 A total put/call reading above 80 is usually considered overly pessimistic. An equity only reading above .75 is often viewed as bullish. Not quite there, but close. ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 34 - Bear Confirmed NASDAQ-100 50 - Bull Alert DOW 36 - Bull Alert S&P 500 54 - Bull Confirmed 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 1.21 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 1703 1383 NASDAQ 1734 1946 New Highs New Lows NYSE 134 20 NASDAQ 81 57 ----------------------------------------------------------------- Advisory Sentiment Bullish Bearish Correction Net Change 52.6% 23.7% 23.7% 28.9% -0.4% 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: 07/31/01 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 There were no significant changes in the bullish percent data this week. Commercials Long Short Net % Of OI 7/17/01 336,836 403,561 (66,725) ( 9.01%) 7/24/01 317,241 392,146 (74,905) (10.56%) 7/31/01 335,532 409,352 (73,820) ( 9.91%) 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 7/17/01 122,525 50,211 72,314 41.86% 7/24/01 141,372 61,665 79,717 39.26% 7/31/01 129,648 54,552 75,096 40.77% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 NASDAQ-100 There were no significant changes in the bullish percent data this week. Commercials Long Short Net % of OI 7/17/01 26,721 37,225 (10,504) (16.43%) 7/24/01 27,396 39,198 (11,802) (17.72%) 7/31/01 28,009 39,613 (11,604) (17.16%) 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 7/17/01 11,680 8,183 3,497 17.61% 7/24/01 12,170 7,744 4,426 22.23% 7/31/01 11,216 8,938 2,278 11.30% 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 There were no significant changes in the bullish percent data this week. Commercials Long Short Net % of OI 7/17/01 14,145 12,963 1,182 4.4% 7/24/01 16,080 12,812 3,268 11.3% 7/31/01 17,748 13,669 4,079 13.0% 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 7/17/01 5,255 9,144 (3,889) (27.01%) 7/24/01 5,599 9,526 (3,927) (25.96%) 7/31/01 5,049 9,079 (4,030) (28.52%) 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 (Bearish) ========================= Transocean Sedco Forex - RIG Close Close:$31.05 Gain:-0.39 Stop:$36.50 Original Comments When Selected on July 31st: Company Description: This Houston, Texas-based firm is one of the world's largest offshore drilling contractors specializing in deepwater drilling. The company has over 170 mobile offshore drilling units and a fleet which includes 50 semisubmersibles, 58 jackup rigs, and 16 drillships operating in the world's major offshore oil-producing regions. Transocean Sedco Forex also provides well management services. The company was formed in 1999 when Transocean Offshore merged with Sedco Forex, which had been spun off from Schlumberger. It has expanded with the acquisition of competitor R&B Falcon. Fundamentals: On Tuesday the company reported strong quarterly earnings but warned that that it expects full-year earnings for 2001 and 2002 to fall short of analysts' estimates. The company blamed a recent downturn in Gulf of Mexico drilling activity and slow recovery elsewhere. "Many of your forecasts are simply too aggressive on how fast all this is going to happen," CEO Michael Talbert told analysts during the conference call. In a statement he said, "Although additional exploration and production dollars could be forthcoming, we are at present witnessing reduced customer spending," he added, "This development is causing utilization and day rates for shallow water drilling rigs to decline." Talbert gave guidance that he believes earnings will be at the bottom of First Call estimates. Those estimates call for 2001 earnings from $1.02 to $1.50 per share (consensus is $1.28) and the 2002 range to be from $2.17 to $3.40 (consensus is $2.91). Why We Like It: Even at the current consensus estimates RIG shares are expensive. They give the company a forward 2001 P/E of 25 as compared to the industry average of 14. Keep in mind; this consensus estimate is going to drop as the 26 analysts covering the company revise their estimates downward over the next few days. This should keep solid selling pressure on the shares. Look for a test of the $27.50 to $24.00 support range. Given the shares sharp drop on Tuesday, wait for a bargain hunter's bounce to present a more advantageous entry point. We will start this play with a stop at $36.50. Updated Comments: Much like Chevron, RIG got an early morning boost, but sold off as the day progressed. RIG finished the day in negative territory, and closed on its low. The oil services sector got whacked for 2.35%, and it looks like the carnage could continue tomorrow. Picked on July 31st at $32.29 Gain since picked: +1.28 Earnings Date N/A ========== Watch List ========== Adobe Systems, Inc - ADBE close: 34.42, change: -2.34 WHAT TO WATCH: This one screams bear run. Tuesday's high volume sell off blasted through resistance offered by a gap from April 10th. A textbook low volume bargain hunters rally in the morning could offer an attractive entry point. Of course so would an immediate meltdown if longs are AWOL. Either way $30 looks doable. --- Tenet Healthcare Corp - THC close: 54.74, change: +0.60 WHAT TO WATCH: After an extend bull run from $39.00, these shares are consolidating while volume tapers off. Declining volume is a good sign the stock is getting ready to pop and we have no reason to believe it won't resume its well-established up trend. Typical trading strategies would be to get in now because support is nearby, or wait for the break above $56.00 on a pop in volume. --- Secure Computing Corp - SCUR close: 15.95, change: +0.25 This one's a mixed bag. This company makes network security products such as firewalls. At its last earnings report the company announced big time increases in sales and that it expects to reach profitability in the fourth-quarter 2001. We normally don't like to jump on a play when it's in a sector that is getting clobbered, but this chart looks so sweet it may be worth a play. A point and figure analysis shows this company breaking to the upside out of a bullish triangle. When this happens the company is a buy on any dip. True to the textbook, this stock has dipped back to long-term support while volume is dropping off. Normally this is a no-brainer, great tech picture, improving fundamentals, but dang security stocks are suffering - your call. ------------------------- -- 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. --- St. Jude Medical - STJ close: $64.73, change: -0.96 UPDATE: Getting closer, but even if the shares drop to our target range, we won't jump in until we see volume drop off significantly indicating the selling is running out of steam. Tuesday's trading volume of 1.4 million is way too much by twice. Monday, August 6th write-up: WHAT TO WATCH: Despite recent weakness these shares are still on a bullish trend extending back to March. This drop was caused by an expected decrease in payment rates for implantable cardioverter defibrillators due to changes in the rates hospitals receive from Medicare. Once the market digests the news, investors ought to notice there is a lot of other good news surrounding company. A dip to the $64 to $62 range would present a good entry point with long- term support nearby at $62. --- Deere & Co. - DE close: 41.38 change: +0.02 UPDATE: No change in outlook Friday, August 3rd write-up: WHAT TO WATCH: Ok, so maybe tractors are not the most glamorous of stocks, but this sector is so strong it could win a tractor pull at the county fair. Our master strategist Jeff Bailey loves this stock and for many of us that’s as good as it gets. Expect to see Deere as one of our active plays in the next few days. The shares are on the verge of climbing out of a strong base and we see a price objective north of $50 as the likely end point. Our trigger will be a close above $43 on increasing volume. --- QUALCOMM - QCOM - close: 67.56 change: +0.26 UPDATE: No change in outlook. Thursday, August 2nd's write up: WHAT TO WATCH: Looking for a little more volatility? An old tech favorite may be making a move. Shares of QCOM have been fighting back from a sub-$50 share price for the last six weeks. The stock seemed to hit a wall in the $67-$68 level until today. In the last half-hour of trading buyers were able to push QCOM up and through the $68 mark and above its 200-dma (67.88). Aggressive traders may want to look at this as a potential trigger to go long. The rest of us will wait to see if shares can breakthrough more resistance at $71 (established in mid-May). ================================================================= 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. 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PremierInvestor.net Newsletter Tuesday 08-07-2001 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/3504_2.asp ================================================================= In section two: Split Trader Split Announcements: Philadelphia Suburban Corporation - PSC New Plays: Sterling Bancshares - SBIB (Bullish) Play Updates: E W Scripps - SSP Closed Plays: Woodward Governor Co - WGOV Net Bulls New Plays: PeopleSoft, Inc. - PSFT (Bearish) Bullish Play Updates: CTXS, EMC, MSFT, RFMD Bearish Play Update: SPOT Closed Plays: No closed plays for NetBulls Stock Bottom / Active Trader New Plays: No new plays for Stock Bottom Bullish Play Updates: GCI, RAIL Bearish Play Updates: BZH, CHV, RIG Closed Plays: No closed plays for Stock Bottom Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================= Split Trader (ST) section ================================================================== =================== Split Announcements =================== Utility Company Powers Up, Issues Cash and Stock Dividends Philadelphia Suburban Corporation (NYSE:PSC) announced during morning trading that its Board of Directors approved a 5-for-4 stock split and a 6.9 percent increase in the quarterly cash dividend. The split is payable in the form of a 25 percent stock dividend and will be issued on December 1, 2001 to shareholders of record as of November 16, 2001. The number of outstanding shares will effectively increase to approximately 67.63 million and the float will rise to 54.75 million. There are currently 100 million shares authorized. This marks the Company's fourth stock split in six years; the last split (August 2000) was also a 5:4 dividend, declared when shares were at the $22 level and rising by two points by the execution date. The Board also authorized a 6.9 percent cash dividend increase that will be distributed December 1, 2001 to shareholders of record on November 16, 2001. The regular quarterly dividend of $.155 will still be paid on September 1 to shareholders of record on August 17. PSC shares are currently trading up +0.21 to $26.06, just off the 52-week high of $26.25. The average volume traded is 57.8 thousand shares. About the Company: PSC is the holding company for regulated public utilities that provide water and wastewater services to approximately two million residents in Pennsylvania, Ohio, Illinois, New Jersey, Maine, and North Carolina. The company has been committed to the preservation and improvement of the environment throughout its history, which spans more than 100 years. (company press release) ============ ST New Plays ============ ------------------- New Split Run Play ------------------- Sterling Bancshares - SBIB Close: $22.09 Change: +0.87 Stop:$20.00 Company Profile: SBIB, a bank holding company, provides commercial and retail banking services primarily in the Houston metropolitan area. Fundamentals: For the 3 months ended 3/31/01, total interest income rose 2% to $37.9M. Net interest income after loan loss prov. rose 7% to $23.2M. Net income rose 6% to $6.4M. Net interest income reflects increased average loans and higher interest margin. Higher income was partially offset by increased salaries and benefit costs. For the 2001 fiscal year the company's net income is estimated to increase 14-percent, while it is anticipated that 2002 net income will rise by 14-percent. Analysts expect company earnings to rise from $1.00 in 2001 to $1.14 in 2002. The current P/E is 20 and the forward P/E is 17. Why We Like It: Higher highs, higher lows, and a reasonable price inside a currently favorable interest rate environment- that’s it in a nutshell. SBIB is well positioned going into its 3 for 2 split effective September 19th and shares have climbed very nicely ever since the announcement was made. Today's move beyond the 52 week high came on the second consecutive day of increasing upside volume and buyers are still hungry for more. Stochastics have crossed over after the last two days of positive gains and MACD has mirrored the behavior. At current valuations, this regional bank could be considered fairly priced despite the strong run in the stock price this year. This recommendation is intended for the trader with a longer-term perspective. As mentioned above, we believe that current levels represent a fair price for SBIB given the economic climate and the firm's ability to generate revenue. Shares last split in February of 1998 at a ratio of 3 for 2 with the stock making a nice run into the share adjustment. We're looking at a target price of approximately $25 and have protected our position with a stop at a nice round number of $20.00. Picked on August 7th $22.09 Earnings Date (Unconfirmed) =============== ST Play Updates =============== ----------------------- Split Candidate Updates ----------------------- E W Scripps - SSP - close: 70.05 change: -0.08 stop: 66.40 If this was an airline stock we'd say SSP was stuck in a holding pattern. Maybe we should say the bulls and the bears have writer's block when it comes to writing the next chapter for SSP's stock price. News is still quiet and the stock is drifting sideways as the market decides what direction it wants to go. We're not ready to give up yet so we'll leave our stop where it's at. More concerned individuals should consider tightening their stops. Picked on August 2nd @ $ 70.21 Gain since picked: - 0.11 Earnings Date: 7/12/01 =============== ST Closed Plays =============== ---------------------------- Closed Split Candidate Plays ---------------------------- Woodward Governor Co - WGOV close: 76.06 change: -1.88 stop: 74.00 Just a little too far. Our fresh new play on WGOV was supposed to last longer than a couple of days. We anticipated a pullback but the dip today was too sharp and traded through our stop. Shares should have found some support in the $74.50-$75 area. If you're still interested in WGOV, watch for shares to trade above the $80 level. Nimble short-term traders could watch for moves from 80 to 85 to 90. At each milestone there is support and resistance that could offer quick and dirty entry or exit points. We're going to move on but we'll be keeping an eye on WGOV. Picked on August 3rd @ $ 78.53 Gain since picked: - 4.43 Earnings Date: n/a ================================================================== Net Bulls (NB) section ================================================================== ============ NB New Plays ============ --------------- New Short Play --------------- PeopleSoft, Inc. - PSFT Close:$42.38 Change:-0.31 Stop:$45.50 Company Description: PeopleSoft is the third largest developers of enterprise resource planning (ERP) software after SAP and Oracle. ERP software helps clients manage human resources, financial, manufacturing, purchasing, sales and inventory planning. The Pleasanton, California-based company's vertical applications target the health care, financial services, public-sector, and communications industries. PeopleSoft generates 65-percent of sales from related software maintenance, training, and consulting services. After six consecutive years of doubled sales, the company saw demand for its flagship ERP products diminish due to increased competition and a saturated market; it slipped into the red in 1999 for the first time in the decade. In response, the company launched an aggressive array of new products and services, particularly in the customer relationship management (CRM) industry. The company is counting on its Internet-based PeopleSoft 8 CRM offering to make further inroads into competitor Siebel Systems' dominant market share. Fundamentals: Analysts forecast the company will earn 60-cents on sales of $2.1 billion in the current fiscal year and 83-cents on $2.4 billion in 2002. Last year, the company earned 31-cents on sales of $1.74 billion. This gives the company a 2001 earnings growth rate of 93- percent (industry average is 3.9-percent), a current P/E of 136 and a forward 2001 one of 71 (industry average is 43) and a PEG of 2.86 (industry average is 2.18). For the fourth quarter, the company has said it was comfortable with analysts' current estimates of 19 cents per share. Why We Like It: PeopleSoft's emphasis on web-based applications have scored big with customers and enabled it to rebound after a tough 1999. However, the shares are richly valued making them vulnerable to dips during market pullbacks. Although the company is predicting a solid year with license-revenue growth "slightly ahead" of the top of the 30-percent to 35-percent annual growth the company had projected, and that full year EPS would be at the "high end" of the company's 55 to 60-cent range, investors are still concerned. They question whether the firm can maintain this robust growth when even the company admits the selling environment has become more difficult. After bouncing off a session low of $29.80 on July 20th , the shares put together an impressive run to a session high of $44.78 on August 1st. Unfortunately for longs, this high represented the second failed attempt to top $45 this month. Since then, the shares have been noticeably weaker and seem poised to test lower levels. On Tuesday, after opening at $42.41, longs managed to drive the shares in the morning hours to a session high of $44.26 before a strong wave of selling pushed the shares lower for the remainder of the trading day. This selling was on a spike in volume from Monday's 4.5 million shares traded to 6.8 million on Tuesday, suggesting the bears have momentum. This makes likely a test the next level of downside support at the 200-day moving average of $38.41, and possibly support offered at $35 and the July $29.80 low. We will start this Bearish play with a stop at $45.50, which is just above the thus far unreachable $45 resistance level. Picked on August 7th at $42.38 Earnings Date N/A (Not Confirmed) =============== NB Play Updates =============== ----------------------- NB Bullish Play Updates ----------------------- Citrix Systems - CTXS - close: 35.13 change: -0.09 stop: 34.00 CTXS shares slipped two days in a row following the lead set by the GSO software index and the NASDAQ market. However, despite the declines, CTXS is still holding above support in the $35 range. With the NASDAQ fast approaching the 2000 level and the GSO at 190, bullish investors hope that the market will respond positively to the CSCO earnings report and post-market conference call tonight. Confirm stock direction before entering any new plays. Picked on August 2nd @ $36.69 Gain since picked: - 1.56 Earnings Date: 07/19 (not confirmed) --- E M C Corp. - EMC - close: 19.58 change: -0.45 stop: 18.50 There is going to be a similar theme with all the major tech players this week. The NASDAQ's three day losing streak has been weighing heavily investor sentiment. A potential positive for EMC is fellow hardware maker CSCO's earnings report tonight. While CSCO is in the networking business and EMC in the storage business, a positive conference call can re-energize the tech stock buyers to have faith in the forthcoming recovery (even if it is still a ways off). Confirm stock direction before initiating any new plays. Conservative traders should probably wait for the stock to close over $20 again. Picked on July 27th @ $20.01 Gain since picked: - 0.43 Earnings Date: 07/18 --- Microsoft Corp. - MSFT - close: 66.35 change: +0.22 stop: 64.00 Yet another page in the ongoing U.S. vs. Microsoft case was unveiled today. MSFT is going to the Supreme Court. The Court of Appeals declined MSFT's request to remove the monopoly finding. The appeal was sent to the U.S. Supreme Court but the court's next session doesn't begin until October and the court would most likely make a decision to hear MSFT's appeal in November. The dates are important for softie-watchers as MSFT's Windows XP is due to be released on October 25th. Why should investor's care? MSFT will no doubt bundle its XP software with other MSFT products which comes after the courts fight over MSFT's bundling practices of its Internet Explorer. Shares of MSFT have been showing relative strength compared to the NASDAQ and the GSO software index which have both been drifting downward. Traders should wait for a clear signal before initiating a new play. A close over $67 or $68 might do the trick if you've got a bullish bias. Picked on August 2nd @ $67.45 Gain since picked: - 1.10 Earnings Date: 07/19 (confirmed) --- RF Micro Dev - RFMD - close: 29.92 change: +0.12 stop: 28.50 It's up! It's down! It's up! It's down! Investors need to be careful following the semiconductor sector. Major brokers on Wall Street can't seem to agree on whether now is the time to buy chip stocks or whether the downturn is far from over and thus traders should shun the whole group. Last Wednesday, the semis rocketed on a group wide upgrade by Merrill Lynch. RFMD was one of the several stocks individually upgraded by the broker giant. Today, after two days of declines in the SOX, Credit Suisse First Boston announced a downgrade of the whole sector. RFMD was not named specifically but several stocks where downgraded to "hold" from a "buy" rating. Further pressuring chip stocks is the ongoing story that Dan Niles, an analyst with Lehman, believes that Intel will be slashing prices on their top level Pentium 4 chips by the end of the month. Shares of RFMD have shown strength in front of this negative press and managed a small gain today. We are keeping our stop tight at 28.50 but we're encouraged by the stock's lack of selling pressure. New plays could be consider once shares close over $30 again. Picked on July 26th @ $27.79 Gain since picked: + 2.13 Earnings Date: 07/17 ----------------------- NB Bearish Play Updates ----------------------- PanAmSat Corp. - SPOT - close: 32.26 change: -0.23 stop: 34.00 SPOT now has 21 satellites in its network with its most recent addition launching just yesterday. Exciting news, yes, but most of the headlines are focused on Colorado-based, EchoStar making a $30 billion bid for Hughes Electronics (GMH). GMH owns a majority stake in SPOT so a winning bid by EchoStar would net them control of PanAmSat as well. However, there seems to be a lot of questions over whether a bid by EchoStar would pass government approval. Looking at the chart the last couple of days may have produced a failed relief rally at $32.25. This could be a good entry point to begin a short position. If you're looking for more confirmation, wait for shares to trade under $31. Remember to play with stops. Picked on August 3rd @ $31.58 Gain since picked: - 0.68 Earnings Date: N/A ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== ----------------- Long Play Updates ----------------- Gannett GCI Close:$68.91 Gain:-0.10 Stop:$65.00 Gannet has consolidated for the past two days, but given the current market conditions, not much else could be expected. GCI remains above its previous congestion zone, and has the support of a two-month up trend. Picked on August 3rd at $68.53 Gain since picked: +0.38 Earnings Date N/A === RailAmerica RAIL Close:$13.12 Gain:+0.17 Stop:$12.00 RAIL went on a wild train ride this morning, dipping within 3 cents of our stop. The 200-period moving average on the 60-minute chart marked the low point, and the train conductor was able to get back control of the stock and finish 17 cents in positive territory. That enable the stock to once again close above $12.90. Picked on July 14th at $11.41 Gain since picked: +1.71 Earnings Date N/A ------------------ Short Play Updates ------------------ Beazer Homes BZH Close:$66.51 Gain:+1.43 Stop:$70.00 Beazer was down over $2 today, but managed to stage a late-day rally and finish up $1.43. But BZH was unable to fill the down gap that formed on Monday, and as concerns about housing starts continue to mount, this stock could be in trouble. With fellow homebuilder stocks like Pulte and KB Home getting hit today, Beazer's time will come. Picked on August 6th at $65.08 Gain since picked: -1.43 Earnings Date N/A === Chevron CHV Close:$90.68 Gain:-0.37 Stop:$93.00 Oil stocks got a slight bump as the price of crude oil climbed to over $28 a barrel, but Chevrons attempt a rally looked a little suspect. After jumping in the first hour, Chevron slowly drifted lower into the close, giving about 50% of today's gains. Picked on August 2nd at $91.05 Gain since picked: -0.08 Earnings Date N/A === Transocean Sedco Forex RIG Close:$31.05 Gain:-0.39 Stop:$36.50 Much like Chevron, RIG got an early morning boost, but sold off as the day progressed. RIG finished the day in negative territory, and closed on its low. The oil services sector got whacked for 2.35%, and it looks like the carnage could continue tomorrow. Picked on July 31st at $32.29 Gain since picked: +1.28 Earnings Date N/A ================== Trading Ideas ================== This section contains stocks that meet criteria which may make them of interest to long and short side traders. These are not recommendations, nor have they been reviewed by PremierInvestor editors for investment potential. However, each of them has technical and fundamental characteristics that make them worthy of further review by traders and investors looking for fresh ideas. New stocks will appear daily following the market close. --------------------------------- Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change IRWN Irwin Financial Corp. 26.55 +0.90 FED Firstfed Financial 32.60 +1.15 SBR Sabine Royalty Tr Ubi 24.50 +0.95 GISX Global Imaging Systems 16.80 +1.73 HKF Hancock Fabrics Inc 11.05 +0.94 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change BCF Burlington Coat Factory Whse 15.65 +1.55 GISX Global Imaging Systems 16.80 +1.73 OPTN Option Care Inc 17.42 +2.92 ESLR Evergreen Solar Inc 10.16 +1.01 PHLI Pacifichealth Labs, Inc. 5.95 +1.83 ARRY Array Biopharma Inc. 10.25 +1.25 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change BP Bp Plc 50.15 +1.33 XL XL Capital Ltd. 78.65 +1.15 WON Westwood One Inc. 28.85 +2.95 EXPD Expeditors Int Wash Inc 57.05 +1.44 BWA Borg Warner Inc. 54.50 +1.60 UAG United Auto Group Inc. 20.81 +1.81 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change EPG El Paso Corp 48.10 -1.85 MON Monsanto Co 35.07 -1.44 ADBE Adobe Systems 34.42 -2.34 BRW Broadwing Inc 21.75 -1.45 DRI Darden Restaurants 26.95 -2.90 DO Diamond Offshore Drilling 27.50 -1.07 ------------------------------------------------------------ Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------------------------- Ticker Company Name Close Change BA Boeing Co 57.50 -0.90 EPG El Paso Corp 48.10 -1.85 KR Kroger Company 25.88 -0.30 IP International Paper 39.98 -0.58 CDWC CDW Computer Centers 43.24 -2.58 SYMC Symantec Corp 46.25 -2.12 ================================================================= 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. 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