PremierInvestor.net Newsletter Wednesday 09-05-2001 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/960_1.asp ================================================================= In section one: Market Wrap: Brief-Squeeze Rallies Market Sentiment: Microsoft Confirms, Manugistics Warns Traders Corner: Rule 2520 Play-of-the-Day: PepsiCo, Inc. - PEP (Bullish) Watch List: Signs of Life ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 09-05-2001 High Low Volume Advance/Decline DJIA 10033.27 + 35.78 10066.69 9885.88 1.36 bln 1248/1874 NASDAQ 1759.01 - 11.77 1782.50 1715.86 1.92 bln 1319/2308 S&P 100 578.89 + 0.85 581.01 568.92 Totals 2952/3750 S&P 500 1131.74 - 1.20 1135.52 1114.86 RUS 2000 462.51 - 4.45 466.95 458.78 DJ TRANS 2835.17 - 0.48 2842.22 2812.12 VIX 28.96 + 0.30 30.50 28.58 Put/Call Ratio 0.75 ----------------------------------------------------------------- =========== Market Wrap =========== Tonight we have a guest market commentator on PremierInvestor.net. Austin Passamonte is the editor for our sister site www.Indexskybox. com If you'd like more information about trading in index options, please visit their website. Our normal market wrap columnist, Jeff Bailey, is on vacation this week. ================================== Brief-Squeeze Rallies by Austin Passamonte Anyone who thought September's return would bring a halt to ceaseless market volatility may have changed their minds the past two days. We continue to be plagued by short-squeeze rallies that wipe out bearish plays within minutes, but call plays taken during these times have brief and narrow life spans as well. Is there an end to this in sight? More on that later. I get frequent mail from readers who ask how I can waffle back and forth from bullish to bearish on what seems to be a daily basis. My market bias always depends on the time frame we are discussing to trade. Let's look at a bunch of different charts to see what the long, medium and near-term future all may have in store. Did you expect one simple answer? If so, let today's action prove continual and persistent market uncertainty. First of all, we had plenty of bullish reversal warnings in our midst this session. Spiking VIX over 30 ushered in the afternoon short-squeeze event. Some say there was a bit of manipulation in the Dow today by shorts trying to run up the market on artificial buying so they could sell into it. But all that's mere noise. Here's a broad view instead. (Weekly/Daily Charts: SPX) In the past twelve months SPX weekly stochastic values (left) have reached oversold extreme only three times before now. Note the results from there. Up 125 index points last fall, up 225 points this spring and another 85 points in early summer. That is a lot of distance for the big index to cover for sure. Now we have slow bar values nearing oversold for only the fourth event in one year. Care to buy puts and hunker down for weeks! Bear beware! Four times since early July we've seen daily chart stochastics (right) reach oversold extreme as before now. Look what happened each time: would you feel better about having had long calls or puts at those events? Realize that we appear near another market bottom right now but haven't yet turned the corner. When will markets turn? Obviously not today, but we must remain cognizant of the fact that they soon will in the same manner as before without exception. Is this then the ultimate bottom? Not in my opinion, but we'll save that discussion for last. (60/30-Minute Charts: SPX) Dialed down to intraday charts, we see a clear call play entry at 2:00pm when price action sold off to new session lows and buried stochastic values in oversold extreme reversed to head higher. Solid entry points were found above the descending trendline (green) on each respective 30-minute chart. Yesterday saw price action break neutral wedges just past 10:00am and rally strong most of the session from there. The move held up very well indeed with no signs of looking back until 3:00pm EST when the rug got snatched out from under this rally and price action plunged. I sat right in my chair watching 60/30 and 10/5 (not shown) minute chart signals all line up in bearish reversal fashion but dismissed the notion of loading up on puts. Stupid charts... it was 3:00pm and the Dow up +220 points. Who in their right mind would fade that? I've seen this setup happen literally hundreds of times and ought to know better than to doubt such powerful alignments. So I set stops on open calls and played two measly put options just to have a toe in the water should things dip from there. Set my stops and took a brief nap to shake off utter exhaustion from our weekend road trip across the country. I woke up 40 minutes later to see the puts had since swelled in a big way. Can you believe the Dow shed almost 200 index points in less than 40 minutes? I can and should have at the time. Chart signals supercede logic but heeding them is another matter of mind over emotion in itself. So when today's selloff spiked the VIX above 30.00 and all 60/30 and 10/5 minute charts went bullish from the lows, aggressive day traders had a green light to pounce on high-risk call plays. I happen to know that SPX 1150 calls were clearing at 9.50 when this happened, and they reached a high sale of 15.50 not long after when the afternoon surge rocketed from there. Trust the charts! (60/30-Minute Charts: Dow) Right now the Dow seems poised to continue its late-day recovery from the lows. Thought we couldn't use Fibonacci values for intraday charts? Nonsense! Just look at how price action tends to magnetize at these values. We can also determine support when prices move back down as well. The 30-minute chart at right shows two trendlines in place: support and resistance. This will also help us determine intraday strength and weakness tomorrow as well. (60/30-Minute Charts: QQQ) The QQQs continue to post ascending consolidations, which are bearish patterns. Hourly stochastic values (left) have plenty of room to ascend while thirty-minute signals (right) show the first little hint of weakness. As these charts show, the QQQ has been a very tough index to trade lately in comparison to the S&Ps. While the OEX and SPX offer trades in both directions, the QQQ has moved continually down. By the same token it has been immune to numerous rogue spikes and dips to blow out directional trades, so put plays have worked quite well. (60/30 Minute Charts: OEX) As with the SPX and Dow, the OEX looks to ascend on Thursday itself but plenty of overhead resistance exists. The 582 area lies at the lower trendline of the hourly bearish pennant and it also happens to be a 62% retracement bounce from Tuesday highs to Wednesday lows. Wonder where these stochastic values might possibly make a bearish reversal? If 582 stalls price ascent out while stochastics turn down, buy puts with confidence! (Monthly Charts: Dow & NDX) Broadest picture of all. Monthly charts show the Dow and NDX recent history from "pre-bubble" until now. The Dow remains relatively overbought on a historical basis or at the very least is far from oversold. Stochastic values are bearish and suggest the long-term decline has merely begun. NDX is much farther along in the shakeout process but lacks any sign of bullish reversal itself. It has fallen from a historical high of 4,800 down to 1,400+ and stares at an uphill battle all the way from here. I would wager that 1,055 is more likely to be reached than 3,800 area by the end of 2002 or before. Here is one reason I believe broad market action will continue to grind sideways to lower into the future, quite possibly for years. Those who think a bottom is in or right around the corner at most must be looking at other proof than I have to work with. Just like today's screaming put-play signals at 3:00pm that I refused to believe, monthly chart studies forecast what lies ahead for years to come. Bullish? Bearish? Confused? So to recap, I'm bearish for the near term as shown in 60/30 minute charts. I'm bullish for the medium term as shown in weekly/daily charts. And I'm bearish for the long term as shown in monthly charts. Any questions? One might reasonably ask how this can be. Why not just buy distant-month puts right now and take a much longer nap? Excellent question! What if you & I had done that the past four times weekly/daily chart signals were in oversold extreme since last October? How well would our put plays have done on the subsequent bear market rallies that follow a VIX above the 30.00 level? Not good at all. We need to trade the time horizons that affect our chosen vehicles. Just because I believe the markets will churn sideways to lower for years means nothing about next week. Markets could be at the zenith of another failed rally and we'd lose big money holding puts thru that. Nothing frustrates most traders more than volatile, whipsaw markets like these. Just when a favored market bias is developed and backed by emotional comfort, markets lurch the other way. It remains a skilled day trader's market right now and all others who try to force buy & hold or part-time tactics on current action suffer. I don't like that fact at all, but the markets don't care about my preference nor do they even know I'm alive. All we can do is play in harmony with that which the markets have to offer. Summation You'll notice I've not mentioned anything about HWP & CPQ, MSFT reaffirming earnings smoke & mirrors, INTC's usual misguidance, Thursday's NAPM or any other details like that. I omitted them for a reason: they do not matter for more than a few hours at most. All we need to know is reflected in the charts as an actual measure of dollars at work in the market. Right now that reflection suggests lower prices at first, then higher prices ahead but only to a certain degree. Make sense? Each timeframe is a directional bias in itself. So, the warning remains in place: do not fall in love with either direction. We are destined to see plenty of both straight ahead, and sometimes in the same session as endured today! ============== Traders Corner ============== Rule 2520 By Eric Utley Editor's Note: Eric had planned to publish Part 2 of his series Ursus Arctos. Instead, he thought it would be prudent to make readers aware of the changes to NASD Rule 2520. A few readers I have spoken with day trade with less than $25,000 and use margins. Because of that, I thought it would be appropriate to address a few changes in margin requirements for day traders. The National Association of Securities Dealers (NASD) filed with the Securities Exchange Commission (SEC) to impose more strict margin requirements on day traders. The NASD has proposed to make six changes to Rule 2520, which concerns margin requirements. The first proposed change is to redefine who a day trader is. The new rule will include anyone who a brokerage firm knows or thinks will engage in day trading. It will also include anyone who trades four or more times over five business days. The exception is if that person's day trading activities don't exceed six percent of their overall trading activity for that given time period. In short, if you trade more than three times per week, you're a day trader. The second proposed change is to require a minimum equity of $25,000 to be deposited into an account in order for a customer to day trade on margin. The current minimum equity requirement for margin is $2,000, which the NASD feels is not sufficient to prevent day traders from continuingly generating losses. They feel that a $25,000 requirement would better address risks of day trading on margin. The third proposed change is certainly a benefit to those who meet the initial $25,000 requirement. The NASD has proposed to permit up to four time buying power of a day trader's margin excess. That means instead of twice your available capital, day traders will be made available up to four times their capital. Here again, the NASD feels that four times buying power will better address the risks of day trading. The fourth proposed change is to impose a margin call if day trading buying power is exceeded. The NASD would require day traders to deposit additional funds to meet the margin call. If the day trader doesn't meet the margin call, the account would be restricted to trading on a cash only basis. The fifth proposed change is to no longer allow meeting a margin requirement with a cross guarantee. Instead, only resources within the account would be available to meet margin calls, such as newly deposited funds. The sixth and final proposed change would alter the classification of holding a security over night, then selling or covering the next day. As it is now, buying a stock yesterday, selling today, and buying the same stock back today is considered a day trade insofar as the SEC is concerned. The proposed changes would treat that transaction as a liquidation and establishment of a new position, or in other words, not a day trade. Now, keep in mind that the new rules are only for those who day trade on margin. For those who trade on a cash only basis, the new rules don't mean anything to you. And remember that buying and selling options is a cash only transaction. But I have spoken with plenty of readers who have small day trading accounts on the side and do in fact use margin. Because of the new rules, these traders won't be able to employ margin unless the $25,000 is in the account, which in my opinion is a disservice to individual investors. I tried, for the life of me, to get in touch with the appropriate person at the NASD to discuss the rule changes further. But after spending about three hours on the phone, transferring from the Denver office to D.C., and back again, the "right" person had apparently gone home for the day. From what I gathered from various individuals at the NASD, the rule changes have already been imposed on NYSE listed stocks. And were going into effect on NASDAQ listed stocks in late September. But I haven't heard anything from either of my two brokerages that I do business with. In fact, I called both of my brokers and neither could lend a hand. Anyway, I think the proposed changes - especially the requirement for $25,000 - are bunk. ================ Market Sentiment ================ Microsoft Confirms, Manugistics Warns by Jeffrey Canavan The day started out with Merrill Lynch lowering estimates and downgrading anything that had to do with wireless technology. The selling then spread over to Internet stocks after concerns were raised about Amazon's ability to reach profitability. Cisco CEO John Chambers didn't help the situation by saying that half the Nasdaq-100 might not be around in five years. Granted he meant consolidation as well as bankruptcy, but it didn't help the situation. Retailers Sears, Kohls, and Costco reported increases in same store sales, but retailers still sold off, as investors remain concerned about consumer spending. Early on Biotechnology stocks were the best performing sector, but finally succumbed to selling. Defensive sectors drugs and gold finished as today's top sectors. Microsoft helped the Dow finish in positive territory, and kept the Software Index from melting down. Speaking at an SG Cowen Technology Conference, CFO John Conners reaffirmed that Microsoft was on track to meet fiscal forecasts. While Microsoft should carry more weight, an atrocious warning from Manugistics (MANU) might hurt the software sector tomorrow. The company was expected to earn $0.03 per share, but they now believe that a $0.14 loss is more likely. Texas Instruments confirmed its Q3 guidance, and should help the semiconductor index in its quest to hold at support. Retail should be the sector to watch tomorrow, since the remainder of August chain store sales will be released. Wall Street is anxious to see how back to school sales went. Sectors should continue to see chopping trading as they try to dodge a minefield of warnings, downgrades, and economic reports. Intel's mid-quarter update tomorrow after the bell is the biggest potential bomb on the horizon. *************************Sector Watch**************************** Support Close Resistance DJIA | 9,865 | |10033 | | | | 10,450| NASD | 1,710 | 1759 | | | | | 2,000| S&P 500 | 1,100 | | 1132 | | | | 1,200| Rus 2000 | 455 | | 463 | | | | 481| Semis | 535 | 535 | | | | | 660| Biotech | 473 | | | 528 | | | 575| Internet | 105 | 106 | | | | | 125| Networking | 217 | | 254 | | | | 330| Software | 130 | | | 150 | | | 175| Banking | 625 | | 639 | | | | 685| Retail | 822 | | 841 | | | | 880| Drugs | 380 | | | 392 | | | 410| Support Alerts: Dow, S&P 500, RUS 2000, Internet, Networking, Software, Retail Resistance Alerts: ____________________________________________________ | Long | Short | Strength | Relative | | Term | Term | of | Strength | | Trend | Trend | Trend | vs S&P 500 | DJIA | Bearish | Bearish | Strengthening | Positive | NASD | Bearish | Bearish | Strengthening | Negative | S&P 500 | Bearish | Bearish | Strengthening | -- | Rus 2000 | Bearish | Bearish | Strengthening | Positive | Semis | Bearish | Bearish | Weak | Neutral | Biotech | Bearish | Neutral | Weak | Positive | Internet | Bearish | Bearish | Strong | Negative | Networking | Bearish | Bearish | Strengthening | Negative | Software | Bearish | Bearish | Strong | Negative | Banking | Neutral | Bearish | Weakening | Negative | Retail | Bearish | Bearish | Strengthening | Negative | Drugs | Neutral | Neutral | Weak | Positive | _____________________________________ | Short-Term | | Point and | | Overbought/ | Momentum | Figure | | Oversold | | Signal | DJIA | Oversold | Falling | Sell | NASD | Oversold | Falling | Sell | S&P 500 | Oversold | Falling | Sell | Rus 2000 | Oversold | Flat | Sell | Semis | Oversold | Falling | Sell | Biotech | AP OS | Rising | Sell | Internet | Oversold | Flat | Sell | Networking | Oversold | Falling | Sell | Software | Oversold | Falling | Sell | Banking | Oversold | Falling | Sell | Retail | Oversold | Falling | Sell | Drugs | Oversold | Falling | Buy | AP OB = Approaching Overbought AP OS = Approaching Oversold ***************************************************************** ========================= Play-of-the-Day (Bullish) ========================= PepsiCo, Inc. - PEP Close:$47.80 Change:+0.65 Stop:$46.50 Original Comments When Selected on August 10th: Company Description: The Purchase, New York-based company produces the world's second most popular soft-drink brand, Pepsi, and other beverages such as Mountain Dew. Over 60-percent of sales comes from its snack food maker Frito-Lay. The firm's Tropicana Products leads the world in juice sales. Although PepsiCo is number two to Coca-Cola it has begun adding non-carbonated beverages, such as its Aquafina bottled water, and beating Coca-Cola in this fast-growing segment: PepsiCo has also taken a majority stake in South Beach Beverage Co., maker of the SoBe brand of non-carbonated beverages. In addition, PepsiCo's August 2001 purchase of The Quaker Oats Company added the dominant Gatorade sports drink brand (80-percent market share in the US) to its lineup. (However, as a concession to competition concerns, PepsiCo will not be allowed to distribute Gatorade in its own distribution system for 10 years. It is also selling its own sports drink, All-Sport, to make room for Gatorade. The Quaker Oats acquisition also added Cap'n Crunch cereal, Aunt Jemima pancake mix, and other brands to the PepsiCo product line. Fundamentals: Analysts project the firm will earn $1.66 per share this year on sales of $25.1 billion and $1.86 on $32 billion in 2002. Last year the company earned $1.45 on $20.4 billion. This gives the firm a current P/E of 31 and a forward one of 27.5 for 2001. The company has a 58-cent per share annual dividend. Why We Like It: A weaker dollar is beneficial for companies with a large export business such as PepsiCo. In addition the acquisition of Quaker Oats makes the firm the fifth-largest food and beverage company in the world. The combination is also expected to save "hundreds of millions of dollars in purchasing, manufacturing and distribution synergies," according to the PepsiCO CEO Steve Reinemund. With high levels of uncertainty in the stock markets it makes sense to reduce risk by looking for plays near significant support. PepsiCo shares fit the bill. Solid support is nearby at $43 and this is where we will place our stop. To the upside, a point and figure analysis gives us a long-term bullish price objective of $60. On the way, upside resistance exists at $47, $48.43 and $50. Updated Comments: PEP shares have been going up as investors look for a defensive place to park some money. On Wednesday PEP got a further boost when their largest bottler, Pepsi Bottling Group (PBG) said it was on track to meet third quarter and full year earnings target. In the short-term, a test of the $49.94 52-week high is looking probable. Picked on August 10th at $45.66 Gain Since Picked: + 2.14 Earnings Date 7/19 (Not Confirmed) ========== Watch List ========== Americredit Corp. - ACF close: 44.57 change -0.83 WHAT TO WATCH: Shares of this sub-prime lender are reaching a monster support level. A move through $43 would represent a breakthrough of a long-term bullish trend that has lasted since April 2000. If the shares bounce off of this level ACF shares become a possible bullish play with short-term upside to $47-48. However, the real jackpot would be on a downside break. The long up trend has left support far behind. If the shares hit $42, a point and figure analysis gives us a bearish objective of $29. --- Exxon Mobil - XOM close: 41.22 change +0.47 WHAT TO WATCH: The oil sector is starting to show signs of life and so are shares of one of the premier names in the industry. XOM shares have put in two strong trading sessions in a row. A continuation of this move should put in a test of resistance at $44 and $46. Aggressive traders may decide to get in now, while more conservative players may want to wait for a close over $42 to provide confirmation of bullish momentum. --- Forest Labs - FRX close: 75.12 change +1.52 WHAT TO WATCH: Drug issues are benefiting from positive analysts comments and a move by investors to more defensive names. Forest Labs bounced off of support at $72.85 on Tuesday and added to those gains with $1.52 pop on Wednesday. Rising volume is confirming the bullish move. These shares look ready to make a run at upside resistance at $77.25 and $82.00. ------------------------- -- 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. NVIDIA Corp. - NVDA - close: 80.71 change: +1.68 UPDATE: That might be the dip. Any confirmation of Wednesday's late afternoon bullish strength should put these shares in the buying zone. Friday, August 31st write-up: WHAT TO WATCH: Returning to hover near the $85 area, shares of NVDA are making a rebound from their Thursday lows. Readers should recognize NVDA as a recent long play for the stock split section. The stock has a 2:1 split approaching on Sept. 11th. The company has great fundamentals in a growing industry. Traders should be able to capture the move back up to $90 which is current resistance. If you're patient you might be able to pick an entry if the stock dips to $80 or $81 again. We would not hold this play over the split on the 11th. --- VERITAS Software - VRTS - close: 25.10 change: -2.45 UPDATE: No change in outlook. The software index (GSO) broke through the April lows and closed Wednesday at 149.95. Veritas shares are following along and look shortable on any strength. Can't see a bottom from here. Friday, August 31st write-up: WHAT TO WATCH: I know we picked on the software sector on Wednesday but this one is worth watching. Shares of VRTS collapsed when the GSO index (software index) fell through major support on Thursday at 160. In like fashion, VRTS gapped down below $30 and remained there. We were not the only ones picking on the software sector as Goldman Sachs cut their outlook on the group on Thursday (they must be readers of our letter). The VRTS breakdown below $30 was a very bearish move and shares remain there going into the weekend. If you're going to trade VRTS you need to watch the GSO. The GSO is currently at or near its April lows of 155. A breakdown from here would be very bad and the down trend shows no signs of stopping. But beware! A new move up in the group would likely cause a violent round of short covering. Consider a short play in VRTS with a tight stop above $30 or if you're bullish wait for a close back over $30 and consider a long with a tight stop under $30. --- Vodaphone Group - VOD - close: 20.96 change: +0.95 UPDATE: No change in outlook. The shares showed good late day strength on Wednesday. Friday, August 31st write-up: WHAT TO WATCH: Shares of VOD look very tempting for a long play. Has this extremely beaten stock finally found a bottom? The stock has been in a serious downtrend (just look at the 200-dma) for some time now. It's been a bumpy ride but maybe just maybe VOD put in a bottom when it touched $18 on August 17th. Since then shares have slowly been climbing which is contrary to what the market has been doing. Sounds like relative strength to us. Even more interesting is the fact that the stock closed up after Morgan Stanley downgraded the stock Friday morning. We would consider this as a long play with our stop at just under $19 (a little over 5%). Our target would be $22 or $22.50 or +10-12%. If you need further encouragement wait for the stock to close above its 50-dma currently at 20.51. Remember this is really an overseas stock and it very prone to gaps up and down on the open. Whatever happens in Britain on the FTSE will influence the VOD stock price. ================================================================= 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 Wednesday 09-05-2001 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/960_2.asp ================================================================= In section two: Split Trader Split Announcement: Genesis Intermedia, Inc. - GENI New Plays: none Play Updates: Lennar - LEN Stop Updated Closed Plays: THQ Inc - THQI Net Bulls New Plays: none Bullish Play Updates: none Bearish Play Updates: MMM, QCOM stops updated Closed Plays: none Stock Bottom / Active Trader New Plays: Clorox Company - CLX (Bullish) Bullish Play Updates: none Bearish Play Updates: none Closed Plays: none 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 =================== Wednesday, September 05, 2001 11:28 AM ET Geni's Looking for a Little Magic GenesisIntermedia, Inc. (Nasdaq:GENI; Frankfurt:GIA) announced a 3-for-1 stock split today in what some consider a desperate attempt to bolster the stock and to maintain the minimum requirements for its Nasdaq listing. Nevertheless, it would be difficult to argue that the Board's announcement is motivated by recent altercations with the SEC. On Tuesday the Board issued a letter to the shareholders that reiterated current corporate endeavors and a reminder that the company had been added to the Russell 2000 Index in July. Sounds great until you get to the part that states their concern about the massive short selling of common shares. Chairman and CEO Ramy El-Batrawi encouraged shareholders to take their shares off the street and into certificates, stating, " By doing this, a short seller would not be able to borrow your stock for short sales without your permission. When your stock is held in a margin account, brokers can loan it out." In a Bloomberg article that was also issued September 4, it was sited that Saudi financier Adnan Khashoggi (financial middleman in the Iran-Contra scandal) forfeited $7 million in inside trades to help GENI repay his loan. As the second-largest shareholder in the company, the SEC became aware of potential problems as Khashoggi's actions raised several issues under U.S. securities laws. According to a former SEC commissioner, using inside information would be the prime violation. According to Bloomberg, Khashoggi's holding company Ultimate Holding Ltd. has lent as much as $49 million to Genesis, which currently maintains a $9.3 million negative net worth. During the first six months of this year Ultimate surrendered almost $7 million in short-swing profits to Genesis. These are profits accumulated solely from buying and selling GENI shares. The article stated, " In an interview with Bloomberg News in January, Ramy El- Batrawi, chief executive of Genesis, said he has known Khashoggi for about 15 years and worked with him "on deals" between 1988 and 1993. He said the two speak "almost every day. El-Batrawi expressed surprise that Khashoggi's name had been listed on Ultimate's filings with the U.S. Securities and Exchange Commission. `It's strange that it came out,' the Genesis CEO said. `He wanted a low profile.' Genesis issued its last stock split just six months earlier. That split was also a 3:1 announced at the $19 level. At the execution date, shares began trading at $7.45 and continued to escalate to the current price of $17.70. There are currently 23.3 million shares outstanding and a float of 9.8 million - 20.6 percent of which is short interest. The current stock split is payable September 24, 2001. =============== ST Play Updates =============== ----------------------- Split Candidate Updates ----------------------- Update stop for Lennar Corp (LEN) from $41.25 to $42.50 =============== ST Closed Plays =============== ---------------------------- Closed Split Candidate Plays ---------------------------- THQ Inc - THQI - close: 50.09 change: -0.87 stop: 49.75 The shares clipped our $49.75 stop in the morning hours on Wednesday before regaining their footing in the afternoon. Longer-term investors should note that although the shares have been weak of late, it would take a move to $47.00 before their long-term bullish up trend line is violated. Picked on August 24th @ $ 51.45 Gain since picked: - 1.80 Earnings Date: N/A (not confirmed) ================================================================== Net Bulls (NB) section ================================================================== =============== NB Play Updates =============== ----------------------- NB Bearish Play Updates ----------------------- Stops Updated: Minnesota Mining and Manufacturing (MMM) from $111.00 to $108.00 Qualcomm Inc (QCOM) from $59.59 to $56.00 ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ -------------- New Long Plays -------------- Clorox Company - CLX Close: 38.42 Change: +0.41 Stop: $37.00 Company Description: Although best known for the biggest selling bleach in the world, Clorox also makes laundry and cleaning products (Pine-Sol, Soft Scrub), insecticides (Combat), kitty litter (Fresh Step), car care products (Armor All), and charcoal briquettes (Kingsford). About 90-percent of its sales come from brands ranked first or second their markets. Almost 40-percent of total sales comes from Glad plastic wraps, storage bags, and containers. Clorox sells its products in more than 110 countries and rising international sales account for about 20-percent of its total. Fundamentals: Management recently raised guidance for fiscal first-quarter earnings from a range of 34 to 36-cents per share to 36 to 38- cents. For all of fiscal 2002, the company expects a profit in the range of $1.57 to $1.62 a share, while estimates from analysts are for $1.52 to $1.61 a share, with a consensus of $1.57 a share. Last year, they earned $1.63 a share, on revenue of $3.9 billion. The company has a stated 84-cent per share annual dividend. Why We Like It: With longs getting pummeled on the street, formerly non-sexy plays such as Clorox are looking more attractive every day. On Wednesday, Clorox shares closed above big-time resistance at $38.00 continuing their slow, steady climb from $29.95 last April. More importantly, the break represented a double top breakout suggesting this move has legs. There is little resistance to these shares continuing on to at least $42.00. If they can reach $43, they should have a good bead on $48.00. Picked on September 5th at $38.42 Earnings Date: N/A (Not Confirmed) ================== 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 SAH Sonic Automotive Inc 18.45 +0.55 NVR Nvr Inc 166.75 +2.25 NFX Newfield Exploration 34.51 +0.71 RJF Raymond James Financial 29.37 +0.59 YELL Yellow Corp 27.25 +0.54 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change RDEN Elizabeth Arden 14.80 +1.35 MOGN Mgi Pharma Inc 13.70 +1.03 GADZ Gadzooks Inc 15.90 +1.01 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change XOM Exxon Mobil Corp 41.22 +0.47 WAG Walgreen 35.48 +0.49 FRX Forest Laboratories 75.12 +1.52 ADLAC Adelphia Communciation 32.96 +0.67 GT Goodyear Tire & Rubber 25.11 +0.17 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change TXN Texas Instruments 30.84 -1.26 TEF Telefonica Sa 32.30 -1.12 QCOM Qualcomm Inc 53.21 -1.09 JPM Jp Morgan Chase &Co 38.35 -1.48 AIG American International Grp 73.99 -2.51 ------------------------------------------------------------ Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------------------------- Ticker Company Name Close Change CSB Ciba Speciality Chem Hldg 31.08 -0.57 TSCO Tractor Supply 22.90 -0.60 ================================================================= 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. 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