Option Investor

Daily Newsletter, Thursday, 09/06/2001

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PremierInvestor.net Newsletter                Thursday 09-06-2001
                                                  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:

In section one:

Market Wrap: Out Of The Frying Pan, Into The Fire!
Market Sentiment: Capitula 
Play-of-the-Day: Fifth Third Bancorp - FITB (Bearish)

U.S. Market Numbers
MARKET WRAP  (view in courier font for table alignment)
        9-6-2001          High      Low     Volume Advance/Decline
DJIA     9840.84 -192.43 10028.35  9826.09 1.34 bln    997/2106 
NASDAQ   1705.64 - 53.37  1753.83  1702.92 1.85 bln   1101/2537
S&P 100   565.51 - 13.38   578.89   564.98   Totals   2098/4643
S&P 500  1106.40 - 25.34  1131.74  1105.83             
RUS 2000  453.39 -  9.12   462.51   452.60
DJ TRANS 2804.84 - 30.33  2834.83  2800.66
VIX        32.42 +  3.46    32.80    30.12 
VXN        62.01 +  3.28    62.01    60.06
TRIN        2.38 
Put/Call Ratio      0.98

Market Wrap

Tonight we have a guest market commentator on PremierInvestor.net.
Jim Brown is well known for his market insight and option trading
education in the Option Investor Newsletter.  If you'd like more
information about Option trading, please visit their website,
www.OptionInvestor.com. Our normal market wrap columnist,
Jeff Bailey, is on vacation this week.


Out Of The Frying Pan, Into The Fire!
Jim Brown

The news just after the open this morning, that the Justice Dept
had dropped plans to ask for a breakup of Microsoft, provided a
momentary bounce for the beaten down indexes but the relief was
short lived. The good news, no breakup plans and no intent to
pursue the browser bundling question. The bad news, the government
wants to impose very strict guidelines and penalties for the
charges that have already been judged. Now that breaking up the
company is not an option it means that Microsoft will end up 
with a government oversight committee of some kind that will rule
on all future business practices. This means Windows-2004 may not
be released until 2010 if every feature has to be approved in
advance by the Justice Dept. In 1984 the same thing happened to
AT&T after their breakup. They had to ask Judge Harold Greene
for permission on every decision it made. The Justice Dept also
said late today that they would not seek to delay Windows-XP 
because the damage had already been done and Windows-DOJ may be 
the next release you see.

The Labor Day rally is officially over and the gains made since
last Thursday's low of 9869 have all disappeared with today's
close of 9839. The +313 point bump in the beginning of the week
has gone the way of prior weeks rally to 10440. Lower lows and 
lower highs, not a pretty picture. Welcome to the dog days of 

The layoffs continue with Motorola warning today that it would
cut -2000 more jobs and they would not return to profitability
this quarter as they previously predicted. The 3Q is now expected
to be flat compared to estimated gains of +5%. The CEO apologized
to shareholders for consistently providing poor performance and
said again that he thought the sector was near the bottom. He
also said Motorola was gaining market share in the handset business
but that sales in that sector were still slowing. A bigger piece
of a much smaller pie doesn't pay the bills in the case of MOT. 

The economic news today was mixed with the NAPM falling another
-3.4% to 45.5, the lowest level in eight months. New orders
fell -2.7% as the economic contraction continued to deepen. The
only bright side was a continued fall in inventories. Traders
were cheered by the news that the Fed was a long way from done
and could shift into aggressive mood again, but they were also
worried that the economy could continue to get worse before it
gets better. As a result the stock markets fell as earnings
estimates fell yet again.

The Jobless claims previewed a possible problem with the Jobs
Report on Friday. Claims fell slightly to 402,000 from a revised
405,000 from last week but continuing claims rose to 3.2 million
for the first time since 1992. Workers are finding it hard to
get a new job with layoffs continuing across all sectors. The 
market is scared that jobs are finally getting critical and the
unemployment is about to skyrocket as companies in denial of
the trend finally capitulate and trim the ranks. Traders will be
holding their breath as they watch the Jobs Report on Friday.
The other report will be Wholesale Inventories and any real
reduction in this number will be welcomed.

Chain Store Sales increased slightly by +3.5% which was mostly
credited to consumers spending their tax checks. Discount retailers
benefited the most and apparel retailers the least, especially 
the higher priced retail stores. Tax holidays in several states
also fueled the bounce but indicate that there may not be any
follow through. The tax checks will probably impact September
as well but then retailers will be on their own as of the start
of the holiday season. Worst hit was the Gap which reported a
sales slump of -17% and a drop in share price of 22% on the news.

The biggest piece of news, which had the market teetering on
the edge was the Intel mid quarter update after the bell. The
bulls were hoping for an affirmation of prior guidance and the
bears were afraid they would warn like MOT, AMD and several
other chip makers. The results...INTC split the difference and
said revenue would be in the middle of the lower end of prior 
estimates and margins would be slightly higher from reduced 
expenses. Sounds like nit picking but considering how traders
were straining for good news they wanted to be very careful in
how they phrased the release. Margins were quoted at 47% but 
were far less than recent quarters as high as 64%, so how can
the margins be higher due to improved expenses? Did I miss 
something? Intel and the chip sector were up only slightly 
after the news.

Phraseology is becoming more important as evidenced by a MSFT
statement from yesterday. Microsoft CFO, John Connors, was
quoted as saying that MSFT was reiterating its company and
revenue goals for 2002. Several sources including the WSJ
reported it. Today Microsoft issued a statement correcting his
comments saying they were NOT reiterating estimates but they 
were not changing estimates either. So...when is a positive
statement not a positive statement? Evidently this one. If
they went to the effort to say they were NOT reiterating
then the obvious conclusion is a pending drop. Will they warn?
It may be too soon to tell but I would not bet against it.

Investors are dropping stocks at record rates. The TrimTabs.com
cash flow report today showed that outflows from mutual funds
were accelerating. After losing more than $15 billion in all
of August the first week of September, including the holiday,
accounted for -$10 billion of outflows from stock funds. OUCH!
There are also rumors of stock funds being forced to liquidate
like the big hedge fund scandal from a couple years ago. Fund
liquidation? Now that would be a really big hurdle for the 
already shaky markets to overcome. We all know that money in
funds may go up and down with the markets but suddenly a scare
of losses due to liquidations, that would shake ma and pa investor
back into CDs and cash in mason jars. These are only rumors but
you can bet the boys at the Fed would meet this problem
head on and do everything possible to avoid any messy public
fund failures. 

We don't need any fund failures when we already have a really
messy market failure. We are quickly heading below the April
lows on some indexes and not far away on others. The S&P-500
low on April 4th was 1103.25 and the close today at 1105.94
was only a hair above it. The Nasdaq 100, not the comp, set
a new 52-week low today at 1361 by slipping below the 1370
April low. The Dow has over 800 points to cover before being
in danger of the 9106 March low but at the current rate of 
fall that is only about a week. Other global markets are
continuing to fall with the German Dax also setting a new
52-week low today. 

Traders can no longer complain that they are waiting for 
volume to return after Labor Day. The NYSE posted 1.3 billion
shares and the Nasdaq a whopping 1.84 billion shares. The 
internals were very bad with decliners beating advancers
2:1. The put/call ratio rose to almost 1.0 as investors
feeling real fear bought puts to protect portfolios. Speaking
of fear the VIX has now risen to a five month high of 32.42
after seven straight days of gains. The last time we were at
these levels....April. Can we go higher from here? You bet,
the VIX spiked over 40 several times in Feb/March of this 
year. The VXN, the Nasdaq equivalent, hit a four month closing
high of 62.01 but well below the April high well over 80.
The TRIN also closed at 2.31 with a spike over 4 at the open
this morning. What does all this mean? 

The market internals and indicators mentioned above show that
the market is very oversold again. In fact it is indicating a
possible relief rally on Friday. I have said here many times
that nothing goes straight up or straight down. We all know
that stocks and markets oscillate from overbought to oversold
and back again. Sometimes quickly, sometimes slowly. If funds
are truly liquidating to raise cash to pay those redemption
requests then we could become a lot more oversold before we
see any real bounce. When investors call for their money the funds
have no choice but to sell anything with value to raise that
cash. It makes no difference how good a deal the fund managers
think stocks may be at these levels, the investor rules and
they have to raise cash. -$35 billion has left stock funds in
the last five weeks and with September and October still ahead
of us the cash drain may not be over. 17% of the Nasdaq-100 hit
new 52-week lows today but investor sentiment still shows over
40% of analysts are still bullish. Until the indexes see a 
washout of this sentiment we will not see a bottom. 

The global economy is still a factor. Japan continues to fall
and is only days away from even more serious problems. Intel
said tonight that sales in Japan had fallen significantly and
the outlook was worsening. Brazil markets hit another 52-week 
low. As investors we need to be aware of the world around us
and not be so introverted that we are fixated on some index
number like S&P-1100 or Nasdaq 1638. These numbers would be
critical in any normal market as clear turning point signals
but in today's environment they may be meaningless. 

The forecast for Friday is a good possibility of a relief or
short covering rally. Highly profitable shorts may want to
clear the table and start over on Monday. However, last Friday,
while positive did not really show a rush to cover. Shorts are
becoming more confident that the markets have much farther to
fall and therefore are less likely to cover. There are no
bargain hunters. There will be some investors averaging down
but funds will be using any bounce to raise cash and that is
not a recipe for a long term rally. Sell the rally is the 
battle cry and until that strategy fails it will continue to
create repeat profits for those who trade the trend instead
of their beliefs. 

Definitely, enter passively, exit aggressively!

Market Sentiment

Jeffrey Canavann

Tech warnings, weak retail sales, and worse than expected 
economic data was almost enough to make bulls capitulate.  The 
S&P 500 lost 2.23%, and closed within 16 points of the April 4th 
low.  The Nasdaq finished the day at 1,705, 86 points away from 
its April low.  It's almost as if bulls were running scared.

Market Volatility Index Daily Chart

Since May, bulls have been relatively fearless, but over the last 
seven days the Market Volatility Index (VIX) has jumped 10 
points, 3.40 of that today, to 32.36.  A rising VIX means 
increasing fear, but readings above 35 are generally interpreted 
as overly pessimistic and possible turning points.  We are not 
there yet, but fear is starting to permeate Wall Street.

Bullish percent data, which measures the number of stocks trading 
on a point and figure buy signal, is also telling us that stocks 
may be getting too skewed to the downside.  Readings below 30 
generally mean that an index is too oversold.  The Nasdaq-100 
bullish percent is currently sitting at 14 and closing in on 
oversold levels not seen since April.  The S&P 500 bullish 
percent is also closing in on April levels.  Throw in some 
put/call ratios that are leaning to the bearish side and an Arms 
Index above 1.50, and perhaps were getting somewhere.

But then Intel had to come out and say that they are "as 
comfortable as [we] can be with the third quarter."  
Microprocessors continue to follow seasonal growth patterns, 
sales in Japan are weak, but revenues and margins should come in 
just below the mid-point of estimates.  Not a stellar report, but 
not too bad when everyone was expecting the worst.

That should prevent a sharp sell off tomorrow, which would have 
helped to push contrarian indicators to extreme levels, but 
instead we might have to wait for the next warning for that to 
happen.  That shouldn't take long.

So in conclusion, things are getting so bad that they are almost 
good.  The arguments against are deteriorating advance/decline 
and new high/new low readings, failure of bonds to continue their 
sell off, and consistent flows out of equity mutual funds.


Market Volatility

VIX   32.36
VXN   62.01

          Put/Call Ratio  Call Volume   Put Volume
Total           .98        742,052       728,941
Equity Only     .82        598,331       489,344
OEX            1.13         25,292        28,602
QQQ            1.05         95,054        99,387


Bullish Percent Data

           Current   Change   Status
NYSE          32      -2      Bear Confirmed
NASDAQ-100    18      -6      Bear Confirmed
DOW           30       -      Bear Confirmed
S&P 500       42      -2      Bear Confirmed
S&P 100       32      -4      Bear 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


 5-Day Arms Index  1.60
10-Day Arms Index  1.46
21-Day Arms Index  1.47
55-Day Arms Index  1.30

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 


        Advancers     Decliners
NYSE       997           2107
NASDAQ    1098           2533

        New Highs      New Lows
NYSE       67            150
NASDAQ     35            267

        Volume (in millions)
NYSE     1,340
NASDAQ   1,872

Advisory Sentiment 

Bullish  Bearish  Correction  Net Bullish   Change 
  43.9%    30.6%     25.5%       16.7%       -3.4%

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: 08/28/01
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

Commercial traders increased their net bearish by 6.9%.  This 
isn't a drastic move, but (79,126) is the most bearish commercial 
traders have been since 3/13/01.

Commercials   Long      Short      Net     % Of OI 
8/14/01      337,327   411,504   (74,177)   ( 9.91%)
8/21/01      342,332   416,372   (74,040)   ( 9.76%)
8/28/01      342,742   421,868   (79,126)   (10.35%)

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
8/14/01      130,432     55,750   74,682     40.11%
8/21/01      134,280     58,785   75,495     39.10%
8/28/01      141,046     58,001   83,045     41.72%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

Commercial traders didn't add any long positions, but did dump a 
few short positions, so the net bearish position improved 

Commercials   Long      Short      Net     % of OI 
8/14/01       29,909     37,822   ( 7,913)  (11.68%)
8/21/01       30,348     38,964   ( 8,616)  (12.43%)
8/28/01       29,255     36,551   ( 7,296)  (11.09%)

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
8/14/01       11,165     9,508    1,657       8.02%
8/21/01       10,499     7,576    2,923      16.17%
8/28/01       11,131     9,694    1,437       6.90%

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01


Last week commercials came close to the most bullish reading of 
the year, but have pulled back this week.  

Commercials   Long      Short      Net     % of OI
8/14/01       21,652    15,856    5,796     15.5%
8/21/01       22,710    14,625    8,085     21.7%
8/28/01       22,141    14,959    7,182     19.4%

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
8/14/01        4,441     8,528    (4,087)   (31.51%)
8/21/01        5,059    10,410    (5,351)   (34.59%)
8/28/01        5,240     9,835    (4,595)   (30.48%)

Most bearish reading of the year:  (7,572) - 5/08/01
Most bullish reading of the year:   1,909  - 1/16/01

COT Commercial Net Position Charts


Play-of-the-Day (Bearish)

Fifth Third Bancorp - FITB Close:$55.92 Change:-1.44 Stop:$57.75 NEW

Original Comments When Selected on August 28th:

Company Description:
Fifth Third Bancorp, through its affiliate banks, operates over 
1,000 branches in Florida, Arizona, Kentucky, Illinois, Michigan 
and Ohio.  The company also offers insurance (credit, health and 
accident), investment services (mutual funds, trust and brokerage) 
and processes credit card transaction.

Last year, the company earned $1.88 per share on revenue of $3.3 
billion.  This year, the firm is expected to earn $2.37 on revenue 
of 3.7 billion and $2.77 on $4.3 billon in 2002.  It has a forward 
2001 P/E of 25, which is significantly higher than the industry 
average of 16.

Why We Like It: 
Regional banks in general are looking very weak.  Sector shares had 
been benefiting from a resilient real estate market and falling 
interest rates.   Traders are becoming concerned that the poor 
economy is finally reaching the home sale market and that the Fed 
may be nearing the end of this cycle of cutting interest rates.  
Having been driven up so far, banks are looking painfully 
overvalued.  FITB shares have moved from below $30 in March of 2000 
to a 52-week high of $64.77 on August 15th.  After stalling out at 
that level since then, the shares began tumbling from above $64.  
The bulls attempted to right reverse direction at the $59 support 
level, but after some initial success in the morning hours on 
Tuesday, the shares faltered badly.  Despite the 10-cent gain, it 
is clear the bears are in charge.  Downside support should occur at 
the 200-day moving average of $56.48.  We have a bearish price 
target of $53.  Aggressive traders can get in now; conservative 
ones should wait for the break below $59.  

Updated Comments:
FITB continued its slide today by dropping 2.51%.  That puts it 
below the 200-dma, and free to fall further.  The Banking sector 
also lost some key support levels today.  We are moving our 
trailing stop down to $57.75.

Picked on August 28th at $59.30
Gain since picked:        +3.38
Earnings Date              N/A

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Copyright  2001  PremierInvestor.net. and
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Do not duplicate or redistribute in any form.

PremierInvestor.net Newsletter                 Thursday 09-06-2001
                                                   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:

In section two:

Split Trader
  New Plays: Toro Co - TTC (Bullish) 
  Play Updates: AHC, STJ, 
  Closed Plays: Lennar - LEN 

Net Bulls
  New Plays: Amgen Inc - AMGN (Bullish) 
  Bullish Play Updates: Atrix Laboratories - ATRX 
  Bearish Play Updates: MEDI, MMM, QCOM, 
  Closed Plays: none 

Stock Bottom / Active Trader
  New Plays: none 
  Bullish Play Updates: CLX, MO, PEP
  Bearish Play Updates: FITB, TCB, PSFT, VRSN 
  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

ST New Plays

  New Split Candidate Play

Toro Co - TTC Close: 46.48 Change: +0.49 Stop: $45.00

Company Description:
Toro makes mowers, snow blowers and other lawn and landscaping 
products for professional (nearly two-thirds of sales) and 
residential use.  Its professional products (Toro, Dingo) include 
turf and grounds maintenance equipment such as mowers, trimmers, 
sprayers, and aerators.  Its residential products -- sold under the 
Toro, Lawn-Boy, and Lawn Genie names -- include power walk-behind 
and riding mowers and snowblowers.  Toro also makes irrigation 
products (Toro, Irritrol).  The company sells its products through 
mass retailers, home centers, and distributors mostly in North 
America, and in more than 65 countries.  Major competitors are 
Deere and Honda. 

For the first half of 2001, net income increased 13-percent to 
$31.4 million on a 3-percent pop in sales to $747 million.  
Analysts expect the company to earn $3.90 per share in the fiscal 
year ending in October 2001 and $4.35 per share in 2002.  Last 
year, the company earned $3.47 per share on sales of $1.3 billion. 
The company expects full-year revenue growth to be relatively flat 
and is comfortable with analysts' earnings projections. For 2002, 
the firm expects single-digit revenue growth, but double-digit 
earnings growth.

Why We Like It:
Toro is not letting the weak economy mow it down (sorry for the 
pun).  They've announced a plan to increase net margins to 5-
percent by 2003.  If successful, this would give them earnings in 
excess of $6.00 per share, a nice increase over the $3.90 
forecasted for 2001.  Based on their estimated 2001 P/E of 12, this 
would give them a projected share price of $72.  Although the bulk 
of this appreciation should occur in 2002 as investors track the 
success of their efficiency plan, the shares are performing well in 
today's bear market.  Since hitting $29.87 in late-October they 
have been on a consistent up trend.  The shares have backed off 
from their $48.82 52-week high set on August 21st, but four 
consecutive positive trading sessions on rising volume suggests 
they are ready to resume their upward movement.  We see a short-
term target of price of $51 and a one-year target of between $69 
and $72.  Short-term traders can start with a $45.00 stop, which 
would be just below the recent $45.25 lows.  Long haul investors 
can sleep at night with a stop at $40, which is just below the 
long-term bullish trend line at $41. 

Picked on September 6th at $46.48
Earnings Date:             N/A (Not Confirmed)

ST Play Updates

  Split Candidate Updates

Amerada Hess - AHC - close: 77.98 change: -0.17 stop: 75.80 

AHC is hanging in there despite the pounding losses in the
broader market.  The Oil Services sector was one of the few that
closed in positive territory on Thursday.  Recent news that is
probably propping up a number of oil stocks was the API report
showing a 1.9 million barrel drop in last week's gasoline
inventories.  This helped push gasoline futures to a 14 week
high.  The price for October crude oil rose 63 cents to 27.58
a barrel.  Shares of AHC have benefited from this trend in
gas and oil prices.  The stock has managed to hold a new level
of support at $78 since the 4th of September.  This doesn't 
look strong enough to trade from it but it is an encouraging
sign in a discouraging market.  We still suggest that investors
wait for the stock to close over $79 before considering a long

Picked on August 15th @ $ 78.90
Gain since picked:      -  0.92
Earnings Date:             N/A  (not confirmed)


St. Jude - STJ - close: 69.39 change: -0.45 stop: 67.88 

There is something to be said for relative strength (again). 
STJ continues to hold on to its bullish trend in direct contrast
to the larger market declines.  If only the stock could break
through resistance at $70; then the trend would truly be 
confirmed as bullish.  $70 has been a tight lid on the stock price 
for over a week now.  Today's news of a joint marketing alliance
with LifeScan, a Johnson & Johnson company, for an anti-
coagulation monitoring system could not inspire the buyers 
with enough strength to make a break out.  Who could blame them
with the DJIA down almost 200 points today?  If you're looking for 
long plays then patience is the name of the game.  Right now we're 
patiently waiting for that close over $70 to mark our potential 
entry point.  

Picked on August 30th @ $ 69.85
Gain since picked:       -  .46
Earnings Date:              N/A  (not confirmed)

ST Closed Plays

  Closed Split Candidate Plays

Lennar - LEN - close: 42.43 change: -1.61 stop: 42.50 

Giving in to market pressure, traders did some profit-taking
in LEN the last couple of days.  We were stopped out at 42.50
today helping cement a gain of 1.84 or 4.5%.  We should have
followed our own advice on Tuesday and closed the play when 
it was up almost 11%.  Aside from the last couple of days, LEN
has shown surprising strength.  If $42 can hold as new support
traders should watch the stock for the up trend to continue.
The company put out a press release yesterday stating their
preliminary new home orders for August were up 7% over last
year.  If business is that good they are sure to see buying
interest while the rest of the market is falling.  

Picked on August 16th @ $ 40.66
Gain since picked:       + 1.84
Earnings Date:          09/19/01 (not confirmed)

Net Bulls (NB) section

NB New Plays

  New Long Play

Amgen Inc - AMGN Close: 65.66 Change: +0.46 Stop: $62.00

Company Description:
This is the largest of the biotech firms.  Amgen makes drugs for 
nephrology, cancer, inflammatory disorders, and metabolic and 
neurodegenerative diseases.  It’s anti-anemia drug Epogen and 
immune system stimulator Neupogen account for nearly 90-percent of 
sales.  Amgens Infergen has been commercialized as a treatment for 
hepatitis C, and Stemgen is approved for stem cell therapy in 
Australia, Canada, and New Zealand. The company has a strong 
pipeline of drugs in various stages of development. 

Analysts expect the firm to earn $1.18 per share on sales of $4.1 
billion in 2001 and $1.40 on $4.8 billion in 2002.  Last year, the 
company earned $1.06 on sales of $4.3 billion.  

Why We Like It:
Although not immune to the recent market weakness, the biotechs 
have held up reasonably well.  With the markets approaching the 
April lows, we want to position ourselves for a possible bounce.  
If a rally does ensue, as one of the stronger sectors, biotechs 
should perform well over weaker sectors.  As one of the best names 
in the sector, AMGN shares have been on a solid bullish run since 
hitting $53.48 in mid-July.  If they can move this well in the 
teeth of a declining hitting, it is reasonable to think they will 
outperform the market with any rally. 

There are several reasons for the popularity of AMGN shares.  The 
company's has strong earnings and a great pipeline ensuring a rosy 
future for their shares.  An FDA advisory panel has recommended 
approval of Kinerit for rheumatoid arthritis, which is expected to 
have sales of $160 million.  Later this year, approval is expected 
for Aranesp, a second-generation anti-anemic drug, which is 
forecast to be a blockbuster product with sales in excess of $1 

After basing around their $63.69 200-day moving average, AMGN 
shares look ready for the next leg up.  Four out of the last five 
trading session have been positive on rising volume.  A short-term 
test of the June 5th $70.60 session high is likely, with a possible 
run at the February 28th $75.06 high.  To the downside, the before 
mentioned 200 dma should provide support from a bear attack.  We 
will start this play with a stop at $62, which is just below 
Wednesday's $62.20 session low. 

Picked on September 6th at $65.66
Earnings Date:             10/25 (Not Confirmed)

NB Play Updates

  NB Bullish Play Updates

Atrix Laboratories - ATRX - close: 25.99 change: -0.49 stop: 24.25

By the close of today's session, traders found shares of Atrix 
bouncing off of support at 25.50.  The stock bounced here at 25.50
last Thursday before making a rally attempt towards $28.  If shares
closed under this level of support we would be concerned.  Traders
should see it as a red flag.  Investors probably feel fortunate that
ATRX didn't drop farther today with both the Drug index and the
Biotech index both dripping red ink today.  The question for traders
now is whether ATRX has the strength to rally from this level.
Company management provided long-term shareholders positive news
today with their decision to recall the remainder of their convertible
notes.  Redeeming these notes will erase over $7 million in debt
and strengthen the company's financial position.  Before we wrap
up our comments on ATRX let us remind you of our comments on 
Tuesday.  Any dip and bounce at $26 or $25.50 could be viewed as
potential entry points for long positions.  We got the dip.  If 
the stock can bounce from here the play might work out after all.

Picked on August 31st @ $26.97
Gain since picked:      - 0.98
Earnings Date:             N/A  

  NB Bearish Play Updates

MedImmune - MEDI - close: 39.21 change: -2.39 stop: 41.50 *new*

U.S. Bancorp Piper Jaffray's Biotechnology analyst released a
116 page report on the biotech sector today.  We're sure it 
would make interesting reading but the media has summarized
the report for us.  The analyst claims that investors should
be focusing on select small to mid-cap companies for future
investments to profit in the second half of 2001.  Interestingly
enough the press release made sure to show us that his top
rated large-cap pick was MEDI.  Unfortunately for MEDI this
proved to be no support today as the stock fell 5.74% to close
below key support of $40.  But this got us thinking...(okay,
so it didn't but stay with us)... are there any biotechs worth
buying right now?  As long as you're in them for the short-term
trade we thought Amgen and Biogen both looked pretty attractive.
Thus, we decided to put conflicting trades on the newsletter.
We maintain our short play in MEDI but tonight you'll see a 
new long play for AMGN which is clearly bucking the trend in
the overall markets as well as the biotech sector.  Speaking of
the biotech sector, the BTK.X produced huge gains from Aug. 22nd
through Aug. 27th.  Yet since then the group has pulled back
and today completed a retracement of 61.8% of those gains.  
Retracement fans should recognize that number as a common 
Fibonacci retracement level for gauging potential reversals
and/or levels of support.  Unfortunately, if it's come back 
this far we don't have a lot of hope aside from an oversold 
bounce.  We are going to lower our stop on MEDI to 41.50 or
just over today's intraday high.  Look for speed bumps on the
way down at $38, $36 and $34.

Picked on August 28th @ $40.46
Gain since picked:      + 1.25
Earnings Date:           10/24 (not confirmed)


3M - MMM - close: 103.90 change: -1.10 stop: 108.00

Hmmmm... today's trading in 3M should have you wondering.
The Dow Jones falls almost 200 points and we get a lousy 
$1.10 slip in MMM?  That doesn't sound like what we were
hoping for.  Looking at today's low and last Thursday's low
it appears that someone's willing to pay $103 for this stock
and until they change their mind or they run out of money
this short play may be in trouble.  Don't get us wrong.
We don't seriously think one person or agent out there is
going to stop this stock from going down if the market 
keeps sliding but this does make us pause for concern.  We
did lower our stop to $108 yesterday and we've decided to
leave it there for the moment.  Since both the Dow and MMM
both look weak we should be okay but we don't want to get
caught in a relief rally too soon.  Confirm stock and market
direction before initiating any new plays.

Picked on August 29th @ $106.75
Gain since picked:      +  2.85
Earnings Date:              N/A  


QUALCOMM - QCOM - close: 48.51 change: -4.70 stop: 49.50 *new*

QCOM could be working on a new record.  The stock has suffered
eight down days in a row.  The bulls may be battered and beaten
but even the bears have to pause and catch their breath.  Which
is our primary concern - the sharp sell-off in QCOM is way over-
due for a bounce.  Negative market conditions bolstered by still
more negative sector news has powered the move down on big volume.
Today's drop was produced with volume of 24.9 million versus the
normal 11.9 million shares traded.  In Tuesday's update we 
mentioned that bears would likely target support at $50 or $48
before choosing to cover.  Looks like they preferred the latter
which was support in mid-March and again in mid-June.  However,
considering that the stock closed on its low for the day could
mean the selling isn't quite over.  Thus our dilemma; do we cover
here at 48.50, just 50 cents from what looks like decent support
and close the play with a 18.5% gain in a week?  Or, do we keep
the short open and "see just how far down the rabbit hole goes"?
Well, we may be greedy but we're not stupid.  After putting our
heads together we've decided to lower our stop down to $49.50.
If the pain continues for QCOM shareholders and the bears decide
that the ride won't stop until we hit the April low of 42.75 then
we want to hold on to our seat.  But if the stock bounces and the
shorts decide to cover we want out before it gets violent.  At
$49.50 our only concern is a gap up above our stop, which would 
cut into our gains.  Friday could be an interesting day to say 
the least.

Picked on August 30th @ $ 59.59
Gain since picked:      + 11.08
Earnings Date:              N/A  


PeopleSoft - PSFT - close: 27.70 change: -3.38 stop: 30.25 *new*

Were you watching the GSO index like we said?  The Goldman
Sachs Software index fell over 5% today closing at 142.  The
software sector has not seen levels this low since October of
1998 and that marked the bottom before the next leg up in a
huge bull market.  Somehow we don't get the same feeling today.
PSFT is really feeling the pressure as well.  Shares managed
to avoid any heavy losses yesterday despite the fact that a
brokerage started coverage on them with an "underperform" based
on earnings visibility concerns.  Today shares gapped down under
the stock's key support level of $30 and didn't look back.  Even
worse, the loss came on huge volume of 16.9 million shares versus
the normal 8 million.  We've said it before and we'll say it again,
it never hurts to take a profit.  Currently, the newsletter is 
up about 19.6% in this bearish play for PSFT.  Odds are you are
not the only trader short this stock and there could be some
covering tomorrow.  We've decided to lower our stop to $30.25
which was Wednesday's low.  With the software sector in such
disarray over earnings for the foreseeable future it wouldn't 
hurt us to get stopped out and re-enter a new bearish play at
a future date.  Of course by the looks of it the selling in PSFT
could pick up again first thing tomorrow morning.  

Picked on August 31st @ $ 34.48
Gain since picked:      +  6.78
Earnings Date:              N/A  


VeriSign Inc. - VRSN - close: 34.16 change: -2.29 stop: 37.25 *new*

This is another software stock that is falling on huge volume.
Today's losses were fueled on volume of 17.1 million shares
versus the normal 7.3 million shares.  There are different schools
of thought on volume and how it pertains to stock activity but
usually when you see a breakout or a breakdown on big volume 
it really confirms the move or trend.  What traders should find
interesting with VRSN is the late day rallies.  The stock is
fighting hard to rebound from these losses but so far the bears
are winning.  The bulls are likely to find strong support at
the $30 level and with the condition of the GSO.X we could be
there soon.  Needless to say the whole group is oversold and
due for a relief rally.  It was a tough choice to decide between
closing the play with an 11% gain today or maintaining the short
based on the big volume drops.  We chose to keep the play open
but we're lowering our stop to $37.25.  If you look at an 
intraday chart of VRSN you'll see that the afternoon rally on
Wednesday peaked near $37.  We opted to put our stop just above
this level.  We've already said it once today but it bears 
repeating, it never hurts to take a profit.  If you're profitable
in this play think about taking some money off the table.  

Picked on September 4th, 2001 @ $38.44
Change since picked:            + 4.28
Earnings Date:                10/25/01 (not confirmed)


Stock Bottom / Active Trader (AT) section

AT Play Updates

  Long Play Updates

Clorox CLX Close:$38.40 Gain:-0.02 Stop:$27.00

Losing two cents on a day when the Dow lost 192 isn't too bad.  
Clorox should be positioned well if and when the overall market 
turns around, and based on today's performance, should hold up 
well during a sell off.

Picked on September 5th at $38.42
Gain since picked:          -0.02
Earnings Date                 N/A


Phillip Morris MO Close:$47.86 Gain:-0.64 Stop:$45.00

Even defensive stocks could avoid the carnage on Wall Street today, 
and Phillip Morris slipped $0.64 today.  It did hold up better than 
most, and remained above recent lows at $47.  

Picked on August 30th at $47.94
Gain since picked:        -0.08
Earnings Date            10/17/01 (unconfirmed)


Pepsi PEP Close:$47.10 Gain:-0.70 Stop:$46.50

Pepsi Bottling Group (PBG) said that they were on track to meet Q3 
earnings, but that couldn't help Pepsi (PEP) during today's sell off.
The stock lost $0.70, but remains in a five-day consolidation range 
between $46.79 and $47.94. 

Picked on August 10th at $45.66
Gain since picked:        +1.44
Earnings Date               N/A

  Short Play Updates

Fifth Third Bancorp FITB Close:$55.92 Gain:-1.44 Stop:$57.75 NEW

FITB continued its slide today by dropping 2.51%.  That puts it 
below the 200-dma, and free to fall further.  The Banking sector 
also lost some key support levels today.  We are moving our 
trailing stop down to $57.75.

Picked on August 28th at $59.30
Gain since picked:        +3.38
Earnings Date              N/A


TCF Financial TCB Close:$43.10 Gain:-0.89 Stop:$44.60 NEW

TCF Financial has lost $2.23 over the past two days as banking 
stocks, and most stocks for that matter, continue to attract 
selling.  We are now up 9.45% on this pick, but the 200-day 
moving average is only $1.48 away, which may offer a place for 
this stock to bounce.  For now we are lowering our stop to 
$44.60, but keeping an eye on the 200-day moving average.  

Picked on August 24th at $47.60
Gain since picked:        +4.50
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
COCB      Conoco Inc                 31.06  +0.56
DEBSDeb Shops Inc24.37+1.37

   Breakout to Upside (Stocks $5 to $20)

Ticker    Company Name              Close  Change
SLNK      Spectralink Corp          18.70  +1.83

   Breakout to Upside (Stocks over $20)

Ticker    Company Name              Close  Change
BGEN      Biogen Inc                61.76  +1.10
FTN       First Tennessee National  32.61  +1.32
GWW       WW Granger Inc            44.93  +1.48
EXPD      Expeditors Int Wash Inc   55.46  +3.18
VLO       Valero Energy             43.59  +1.59
DP        Diagnostic Products       43.95  +1.40

   Breakout to Downside (Stocks over $20)

Ticker    Company Name              Close  Change
QCOM      Qualcomm Inc              48.51  -4.70
BAC       Bank of America           59.78  -1.51
MSFT      Microsoft                 56.02  -1.72
MDT       Medtronic                 42.86  -2.09
JPM       Jp Morgan Chase &Co       36.94  -1.41

   Recently Overbought With Bearish Signals (Stocks over $20)

Ticker    Company Name              Close  Change
AEE       Ameren Corp               41.43  -0.07
CIV       Conectiv Inc              23.65  -0.10
GALN      Galen Holdings Plc        41.40  -2.10
TOL       Toll Brothers Inc         35.66  -1.59

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