PremierInvestor.net Newsletter Tuesday 09-18-2001 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/091801_1.asp ================================================================= In section one: Market Wrap: Government yet to define potential aid Market Sentiment: Stable But Indecisive Play-of-the-Day: Campbell Soup Co - CPB (Bullish) ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 9-18-2001 High Low Volume Advance/Decline DJIA 8903.40 - 17.30 9022.06 8861.05 1.9 bln 1226/1936 NASDAQ 1555.08 - 24.47 1605.06 1548.85 1.8 bln 1441/2303 S&P 100 526.80 - 2.30 533.74 524.25 Totals 2667/4239 S&P 500 1032.74 - 6.03 1046.42 1029.25 RUS 2000 411.66 - 6.01 419.25 410.18 DJ TRANS 2217.07 - 54.61 2296.21 2212.88 VIX 42.50 - 2.44 46.59 41.70 VXN 74.74 + 1.48 75.32 72.28 TRIN 1.09 Put/Call Ratio 0.989 ----------------------------------------------------------------- =========== Market Wrap =========== Government yet to define potential aid by Jeff Bailey This afternoon, Norm Mineta (Transportation Secretary) held a "Transportation and Airlines News Conference" in order to bring investors and reporters up to speed on the process currently underway regarding a potential federal aid program for the airline industry. Many market participants have been anxiously awaiting news from the current administration regarding potential Federal aid, but there was no disclosure of potential aid. Mr. Mineta did say that a panel of industry representatives (corporate executives from the airline group) had recently gathered to discuss financial needs of companies that had been adversely affected by recent events in the U.S. Mr. Mineta noted that the panel discussed many issues regarding past and future costs of insurance that airlines carry pertaining to their liability for air travel customers, fuel costs and other fixed costs. Those fixed costs have adversely affected the group as their revenues came to an abrupt halt in the past week, putting thier bottom lines at risk. Mr. Mineta said that he will be submitting some preliminary estimates to Congress regarding short-term and longer-term financial needs of the industry. At the time of the press conference, many of the broader market averages had been showing gains, but soon after the press conference ended, sellers came to the table. It may have just been "coincidence" that we saw selling due to lack of immediate guidance, but to some investors, it may have been hard to imagine that some of the world's largest airlines are so close to financial trouble after a 5-day travel restriction. Yes, many travelers have cancelled previous bookings, but to think that a 5-day travel halt could have some companies threatening bankruptcy is staggering to many. Me included. Perhaps it was this type of realization that had stocks souring when the press conference ended without any hard numbers. Nonetheless, the AMEX Airline Index (XAL.X) did manage to finish in positive territory and posted a 2.17% gain to 71.37. Bond watch We did see selling in Treasury bonds today, but that selling didn't take hold today. It's too soon to tell if today's selling in the bond market was to pay for stocks bought yesterday by some institutions. The 30-year bond YIELD ($TYX.X) rose to 5.511%, the 10-year jumped to $4.705% and the 5-year ($FVX.X) rose to 3.927%. The 13-week ($IRX.X) fell to 2.45%. The action there told a story that there is still some money that is concerned about things near-term and willing to forgo potential gains in the stock market, option for a low YIELD and perceived safety short-term. Currencies For the most part, the US$ held firm for most of the trading session. But much like the stock market, we saw the US$ lose strength by sessions end to the Swiss Franc. We moved to the December contract (sf01z) and will note that the Swiss Franc gained strength over and above yesterday's trading. Per yesterday's "market wrap" this is a concern short-term and perhaps gives some hint that there are some concerns regarding the US$. Today's action in currencies wasn't "alarming," but traders are most likely skittish enough to be keeping a close eye on things. Gold Gold was relatively quiet today and not much happened here. The December 2001 Gold contract (gc01z) showed a loss of $1.80/oz to $289.70. Investors can perhaps breath a sigh of relief that this commodity did not rise with some of the weakness we saw in the US$ and the weakness that was found late in the session for stocks. Nonetheless, it's worth mentioning per yesterday's market wrap. Crude Oil The December Light, Sweet Crude Oil contract (cl01z) ticked ever so slightly higher today to $28.15 (+$0.12) and it would be a good sign for the consumer should the price of oil fall further. With some economic uncertainty being exacerbated recently, U.S. consumers don't need higher energy prices. Oil service stocks took it on the chin today as the Oil Service Index (OSX.X) fell 6.66% to 71.29. My view here is that the past cuts in production by OPEC in recent months were indeed "bad news" for the group. As the economies around the world have shown economic slowing, so had this groups demand for services. We'll keep an eye on this group overtime, and a rebound could give hint to some economic strengthening. The thought process here is that a weakening in the OSX.X Oil Service Index - last eleven months There are some "attractive" looking stocks in the oil service sector, but this group of stocks remains in a substantial downtrend. The bar chart shows some buyers may have rushed to judgment in the group yesterday morning and today they paid the price. While the group looks cheap after a 50% drop in a six month time frame, the $50 lows found in the latter part of 1998 during the "Asian Flu" may be tested. One day at a time Once again, we're taking things one step at a time and many investors seem to be taking a wait and see approach. There are some hefty wounds that need to heel. Not only as it pertains to recent events terrorist events, but also financial losses. There is so much news yet to be announced regarding potential fallout, that many investors are wise to let that news trickle out into the market. Undoubtedly there are many stocks that have discounted future negative news, but there are probably some stocks where the full ramifications are yet to be known. Reports of some hedge funds using yesterday's losses to leverage off of for further gain to the downside may have come into play today. The Dow Industrials traded a smidge over the 9,000 level at one point (approximately 30 minutes) until selling squashed the rally there. Since the markets opened for trading on Monday, we've now seen two mini-attempts by the Dow Industrials to stage a comeback. On Monday it was a rally attempt from the 9,000 level to the 9,150 area, then today's attempt from 8,875 to 9,000. So far, both attempts have seen a violation of the previous low. Until that pattern changes, bullish traders need to exercise some prudent account management. Right now its much easier to point out some technical levels of resistance than it is levels of support. In any economic environment this makes for very difficult risk/reward assessment and will have many investors staying on the sidelines. ================ Market Sentiment ================ Stable But Indecisive by Jeffrey Canavan It wasn't the big snapback rally that everyone was hoping for, but stocks are starting to show signs of stabilization. Dow Jones Industrial Daily Chart The Dow briefly resided above 9,000, but closed down 17 points at 8,903. A close above 9,000 would have helped investor psychology, but we did get the second day of a possible morning star candlestick pattern. This three-day reversal pattern starts with a steep decline on day one. Day two a small candle forms just below the first day's close as indecision takes over. Confirmation should come on day three with a long white candle. Without confirmation tomorrow, today's close just marks a day of indecision. Market Volatility Index Weekly Chart One thing missing from recent attempts at a bottom was worried bullish investors. For months the Market Volatility Index (VIX), which measures the level of fear in the markets, resided at low levels that suggested complacency. Now the VIX has jumped to fearful levels not seen since October of 1998. This doesn't guarantee a bottom, but does suggest that a lot of sellers have been shaken out. CBOE Put/Call Ratio The CBOE Put/Call Ratio has also climbed to overly bearish levels not seen since October of 1998. Past performance does not guarantee future results, but readings over 1.00 have generally led to market turning points. S&P 500 Bullish Percent Chart Lastly, bullish percent data for the S&P 500, the number of stocks trading on a buy signal on their point and figure charts, is at historically oversold levels. This indicator could fall lower like it did in 1998, but we are certainly oversold. So have all the sellers been shaken out of the market, leaving only buyers? I'm not going out on that limb, but bearish traders might want to stay on their toes for a reversal. Bullish traders should start lining up stocks they feel have been unjustly sold, but that four-letter stock CASH looks pretty good for the next few days. Until the fog clears, keep positions small. ----------------------------------------------------------------- Market Volatility VIX 42.50 VXN 74.74 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 1.13 875,143 989,123 Equity Only 1.03 723,282 744,140 OEX 1.02 38,825 39,601 QQQ .77 89,548 68,756 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 26 -6 Bear Confirmed NASDAQ-100 6 -6 Bear Confirmed DOW 24 -4 Bear Confirmed S&P 500 26 -12 Bear Confirmed S&P 100 20 -10 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 0.97 10-Day Arms Index 1.29 21-Day Arms Index 1.32 55-Day Arms Index 1.28 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 1232 1924 NASDAQ 1442 2298 New Highs New Lows NYSE 31 332 NASDAQ 15 350 Volume (in millions) NYSE 1,672 NASDAQ 1,859 ----------------------------------------------------------------- Advisory Sentiment *New data not yet available Bullish Bearish Correction Net Bullish Change 44.3% 30.9% 24.8% 13.4% +0.1% 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: 09/10/01 This data is from 9/10/01, and does not reflect positions taken after last week's terrorist attacks. 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 As of last Monday, Commercial traders got 3.4% more bearish. This is still below the most bearish reading of the year, but marks three straight weeks of increasing bearishness. Commercials Long Short Net % Of OI 8/28/01 342,742 421,868 (79,126) (10.35%) 9/04/01 350,626 430,613 (79,987) (10.24%) 9/10/01 359,360 442,070 (82,710) (10.32%) 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 8/28/01 141,046 58,001 83,045 41.72% 9/04/01 147,080 62,004 85,076 40.69% 9/10/01 156,500 69,090 87,410 38.75% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 NASDAQ-100 Commercial traders dumped 207 short positions, but also dropped 1,973 long positions, causing the net bearish position to increase by 1,766. Commercials Long Short Net % of OI 8/28/01 29,255 36,551 ( 7,296) (11.09%) 9/04/01 28,757 38,119 ( 9,362) (14.00%) 9/10/01 26,784 37,912 (11,128) (17.20%) 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 8/28/01 11,131 9,694 1,437 6.90% 9/04/01 12,341 9,806 2,535 11.45% 9/10/01 15,263 12,555 2,708 9.73% 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 The Dow continues to be the only index with a commercial net bullish position. 12,412 is the most bullish reading of the year, but that may change next week. Commercials Long Short Net % of OI 8/28/01 22,141 14,959 7,182 19.4% 9/04/01 23,459 14,099 9,360 24.9% 9/10/01 25,445 13,033 12,412 32.3% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 12,412 - 9/10/01 Small Traders Long Short Net % of OI 8/28/01 5,240 9,835 (4,595) (30.48%) 9/04/01 6,952 12,744 (5,792) (29.41%) 9/10/01 7,460 12,735 (5,275) (26.12%) 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 (Bullish) ========================= Campbell Soup Co - CPB Close:$28.94 change:+0.59 Stop:$27.00 Original Comments When Selected On September 17th: Company Description: Campbell Soup is the sells more soup than anyone else in the world with a 70-percent share of the US market. Yet this company is about more than just the condensed canned soup featured so prominently in Andy Warhol's art. They also make ready-to-serve and microwaveable soups in resealable and pop-top containers, Pace picante sauce, Pepperidge Farm cookies and goldfish crackers, Godiva chocolates, V8 beverages, Prego spaghetti sauce, Swanson broths, and Franco-American sauces and SpaghettiOs. Campbell's food service unit sells soup and buns to fast-food restaurants and cafeterias. Descendants of John Dorrance, who invented condensed soup, own about 50% of Campbell. Fundamentals: The company has been sacrificing some short-term earnings in exchange for using its strong cash flow to strengthen their competitive position through strategic acquisitions. After earning $1.55 per share in the fiscal year ended July 2001, analysts anticipate the firm will earn $1.29 in 2002 and $1.35 in 2003. CPB shares sell for a current P/E of 18 and a forward 2002 P/E of 22. The industry average P/E is 25. The company has indicated an annual per share dividend of 90- cents (or 3.17-percent). Why We Like It: The fall and winter months bring consumers to soup and the bulls to shares of this soup maker. The following tables show the total point gain or loss for Campbell by month and also the average gain or loss: Total Point Gain by Month for Campbell Soup (1992-2001) January ($22.98) February ($ 2.08) March $ 3.65 April ($ 5.29) May $ 5.66 June $ 2.21 July ($ 0.58) August ($ 9.94) September $ 7.31 October $21.31 November $16.50 December ($ 1.88) Average Point Gain Average Percentage Gain January ($2.30) (5.70%) February ($0.21) (0.21%) March $0.36 1.31% April ($0.53) (1.79%) May $0.57 2.04% June $0.22 0.06% July ($0.06) (0.24%) August ($1.10) (1.80%) September $0.81 3.81% October $2.37 7.26% November $1.83 5.48% December ($0.19) 0.39% Clearly, September through November are the months to own a position in CPB. However this year, the shares have been in a slow motion rally since mid-August. And despite Monday's record breaking drop in the DOW, Campbell Soup shares managed to squeeze out a 9- cent gain. It stands to reason that long investors looking for a defensive place to park some money will be looking favorably on a high dividend play such as Campbell Foods. Traders should wait for a break above resistance at $28.75 or a dip back to $27.75 before taking a position. On the upside path, significant resistance exists at the $29.77 200-day moving average and at the early-May high near $31.00. If the shares can push through $31, we see a bullish target in the $33 to $34 range. We will start this play with a stop at $27.00, which is just below the $27.33 50-day moving average and to the lower end of the late-June/early July congestion. Updated Comments: Campbell Soup had a nice day in an otherwise volatile market. The stock gained 2.08%, but more importantly closed above resistance at $28.73. Market and seasonal conditions should continue to make soup good food. Picked on September 17th at $28.35 Gain since picked: +0.59 Earnings Date N/A ================================================================= 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 Tuesday 07-24-2001 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/091801_2.asp ================================================================= In section two: Split Trader Split Announcements: none New Plays: none Play Updates: no active plays Closed Plays: none Net Bulls New Play: SBC Communications Inc - SBC (Bullish) New Play: Mercury Computer Sys - MRCY (Bearish) Bullish Play Updates: none Bearish Play Updates: MEDI, MMM, PSFT Closed Plays: RF Micro Devices - RFMD Stock Bottom / Active Trader New Plays: none Bullish Play Updates: Campbell Soup - CPB, Phillip Morris - MO Bearish Play Updates: AmeriCredit - ACF, TCF Financial - TCB Closed Plays: Clorox - CLX, Fifth Third Bancorp FITB Trading Ideas Due to technical difficulties with our data provider we are unable to generate the Trading Ideas section. We have been assured the problem will be rectified and we will resume daily publication of this section on Wednesday. ================================================================== Net Bulls (NB) section ================================================================== ============ NB New Plays ============ ----------------------- New Bullish (Long) Play ----------------------- SBC Communications Inc - SBC Close:$45.65 change:+1.35 Stop:$44.00 Company Description: SBC is a telecommunications holding company selling a wide range services through subsidiaries. After Verizon, SBC is the second largest local phone company with 61 million phone lines in 13 states. It sells through Pacific Bell in California, Southwestern Bell in Texas and Ameritech in Illinois. Its newly formed venture with BellSouth called Cingular Wireless makes it the second largest wireless provider (behind Verizon again) with 21 million subscribers in 38 states. SBC also provide DSL services with Covad and Prodigy and long distance services in Connecticut, Kansas, Texas and Oklahoma. It also has an international presence with partial ownership of telecoms in 20 countries. Fundamentals: Last year, the firm earned $2.26 per share on sales of $51.4 billion. This year analysts expect the company to earn $2.36 per share on sales of $56.7 billion and $2.55 on $64.4 billion in 2002.With a current P/E of 20 and a forward 2001 one of 19, SBC shares are under valued when compared to the industry average P/E of 26. SBC has indicated an annual per share dividend of $1.02 (or 2.13-percent). Why We Like It: In this nervous market, investors are beginning to rediscover the attractive valuation of the well-established telecoms. They also feel the telecoms will benefit from decreased business travel. The bullish momentum of SBC shares began with a $2.43 gain the day before Tuesday's disaster and has continued in the two days following the reopening of the markets. Tuesday $1.35 gain produced a triple top breakout and fractured the $44.87 200-day moving average. A point and figure analysis shows these shares are performing better than the S&P 500 and its peers in the North American Telecommunications Index ($XTC). We have a bullish price target of $51 with resistance at $48. Long term investors can start this play with a stop at $41, which would represent a reversal of SBC's long-term bullish up trend. Short-term traders should start with a $44 stop just below the before mentioned 200 dma. Picked on September 18th at $45.65 Earnings Date 10/22 (Not Confirmed) ------------------------ New Bearish (Short) Play ------------------------ Mercury Computer Sys - MRCY Close:$35.87 change:-1.18 Stop:$38.50 Company Description: Mercury makes real-time digital signal processing systems for the defense and medical imaging markets. Almost 70-percent of sales comes from its defense products that enable commanders "see" battlefields through clouds, darkness, trees, and water by processing radar, sonar, and other signals. Its medical systems enable a physician to "see" inside a body rather than performing invasive surgery by processing magnetic resonance, tomography, and X-ray images. Customers Raytheon, Lockheed Martin, Northrop Grumman, and GE's Medical Systems division collectively account for nearly 60-percent of sales. The company is developing digital TV products through AgileVision, a joint venture with a subsidiary of SRI International Fundamentals: For the nine months ended 3/31/01, revenues rose 25-percent to $131.7 million. Net income increased 9-percent to $22 million. Results reflect increased demand for defense electronics products, partially offset by higher component and infrastructure costs. Last year, the company earned $1.33 per share. Analysts expect the firm to earn $1.22 per share in the fiscal year ended June 2002 and $1.67 in 2003. Why We Like It: This play is for aggressive shorts traders only. Expectations of increased levels of defense spending jumped MRCY shares a whopping $11.50 or 45-percent when the markets reopened on Monday. However, the shares were unable to hold the session high of $43.60 and gave back another $1.18 on Tuesday. Although Mercury will undoubtedly benefit from government spending, we suspect we are looking at a classic market overreaction. The sharp move has left support way behind at $26. Even if the shares do not revisit this level, there is a lot of air underneath and a number of suddenly flush bottom fishers are likely to want to take profit at the first sign of weakness. As will long-term investors, who after riding the shares down from their July $58.95 high, promised themselves they will sell if the shares ever give them another chance. The chance is here and nimble short-sellers may have an opportunity to take advantage of it. We think a reasonable bearish target is between $27 and $30. A bullish reversal would occur with a move to $38 and would also represent a break of the $37.97 50-day moving average. We will start this play with a stop at just above these levels at $38.50. Picked on September 18th at $35.87 Earnings Date N/A (Not Confirmed) =============== NB Play Updates =============== ----------------------- NB Bearish Play Updates ----------------------- MedImmune - MEDI - close: 34.23 change: -0.98 stop: 36.00 *new* Charts of the Biotech sector and the Semiconductor sector look eerily alike. Both began an extended decline on Aug. 28th and both paused to find temporary support at the 500 level. Both have sold off in the last two days as investors cope with the grim prospect of an already burdened economy. The biotech bulls had probably hoped that the mid-August lows near 480 would have provided more support for the index. Unfortunately, the sector is now trading at 442. If we look to the March/April lows for direction, we see that the index could go lower as the March low was 382 while the April low was 407. MEDI put in a similar pattern for March and April but its own recent decline did not begin until early September. Monday the shares gapped down but traded off its lows. Today, shares opened higher but found selling pressure at $36. Traders now have a choice. They can close the play now at a profit if you assume that the August low of $33.20 will provide a bottom for MEDI, or looking at the BTK.X, make a case that the group will continue to see selling pressure and thus MEDI could see a sub-$30 share price again. We are willing to bet that there could be more weakness but to protect our capital and lock in a positive change for the newsletter we are going to lower our stop to $36. Currently, the play is up $6.23 or 15.3%. Decide what your profit target is and trade your plan accordingly. Before we move on, there was some positive news for MEDI on Monday as they announced the beginning of its Phase II clinical trials for its siplizumab drug for the treatment of psoriasis. If these trials are fruitful, then Phase III trials could begin in early 2002. Picked on August 28th @ $40.46 Gain since picked: + 6.23 Earnings Date: 10/24 (not confirmed) --- 3M - MMM - close: 94.14 change: -1.31 stop: 97.00 New Shares of MMM were going to feel a lot of selling pressure merely by being a Dow component but did you know MMM sells airplanes? Well they don't but the markets sold all things related to the air travel business including plane part makers of which MMM must have at least some small business as Forbes listed them as one of five Dow components involved in the airplane creation sector. It is unclear to us just how much MMM's revenues are derived from the plane building business but as a large conglomerate it is likely to feel more pressure from a slowing economy. The stock lost almost seven points on Monday and bargain hunters tried to step in on Tuesday but they encountered selling pressure at the $97 mark. Late afternoon saw the stock trading at $93.50. Today's close is a new nine-month low for MMM as the stock has not traded under $95 since November of 2000. Is the stock oversold? Absolutely. Will it rebound from here? MMM will probably rebound if the Dow does. We are going to lower our stop to $97 which will protect a gain of almost 10 points for the play but still gives the stock some wiggle room to bounce. If asked how much lower the stock might go...we would expect some support in the $90 to $92.50 levels. If you feel like reaching in the dark you could look for the 200-week moving average at $92.00 or the 50-month moving average at $91.81 to offer some support but we doubt most investors would even care. Keep your eye on the Dow as a forecast for MMM's direction. Picked on August 29th @ $106.75 Gain since picked: + 12.61 Earnings Date: N/A --- PeopleSoft - PSFT - close: 20.46 change: -4.49 stop: 22.65 *new* Reconfirming our comments from the weekend newsletter, the software sector was already in weak shape and there has been no improvement in earnings forecasts. Actually things appear to have gone from bad to worse. Monday, Goldman Sachs cut their numbers for the industry and singled out PSFT, MSFT, VRTS, BEAS and SEBL. Goldman's comments on PSFT boil down to an estimate of 10 cents a share, down from 15 cents for 3Q and 50 cents EPS, down from 61 cents for 2001. Industry experts report that software companies usually wrap up 50% of their quarterly sales in the last month and some companies complete up to 40% of their sales in the last two weeks of the quarter. The disaster last week and the airport shutdowns significantly affected software vendors abilities to close these deals for the 3Q. Now on the positive side many believe that government spending will improve the picture but not until the 2nd half of 2002. Plus, the attack last week might accelerate the move to using the Internet to "decentralize information" and PSFT actually said it expects to see more business in the future. On top of it all, PSFT reminded investors that its board had approved a $100 million stock buy back program last October of which $85 million could still be used. Unfortunately, traders seemed to care little for any of the positives and shares of PSFT fell almost 18% on Tuesday alone. Looking again at the sector, more specifically at the GSO software index, the GSO is now at 127 down from 160 in early September and down from its May highs near 245. The down trend has been long and painful and the sector has surpassed its April lows. As a matter of fact, our favorite charting service only has the GSO going back to July of 1997 and the index has never been below 130. So what are traders to do? The newsletter team seriously considering closing this short on PSFT because we are already up 14 points or +40% on the play. The bad news for software bulls is the downtrend is likely to continue. Therefore instead of cutting our winners we're going to lower our stop and give the stock more room to fall. The April low for PSFT was $17.50 and at this rate we could be there soon. Obviously the stock is oversold and overdue for a bounce and if we get stopped out in a market rebound then so be it. The late afternoon bounce for PSFT around 1:40 p.m. ET was around $22.64. We're going to put our stop at $22.65, which is more than 10% above the current share price. Picked on August 31st @ $ 34.48 Gain since picked: + 14.02 Earnings Date: N/A =============== NB Closed Plays =============== ----------------- Closed Long Plays ----------------- RF Micro Devices - RFMD - close: 22.84 change: -0.25 stop: 19.50 We are pulling the plug on our long play for RFMD. Analysts are concerned about the chip sector and the semiconductor index shows it. The SOX has been in a steady decline since Aug. 28th but we had hoped investors might offer it support near the 500 level. Unfortunately, the index has dropped precipitously in the last two days with a Tuesday drop of 6.3% or 29 points to 435. This put the group below what should have been very strong support near 450. April's lows for the SOX were 453 and 455 but by the looks of it, the SOX merely paused at the 453 level before sliding further. In contrast, RFMD was actually up on Monday bouncing off of support at $20. The stock traded higher today but lost 1% by the close. We think the relative strength shown by RFMD may be due to its business in the mobile phone handset sector. There has been some renewed interest in Nokia the last two days where some speculate the interest may be fueled by the role mobile phones played in last Tuesday's events. Yesterday there was positive comments about the mobile-phone component players as a few of them like TQNT, ANAD and RFMD offered some earnings comments last week and many now believe these three will meet or beat street estimates for the September quarter. This may be true but today's trading in RFMD confirmed the down trending line of resistance as seller's continue to unload shares of RFMD when bulls try to get a rally going. We would love for RFMD to buck the trend in the chip sector and set new highs but we'd probably avoid it for now and wait for the stock to close over $25 to $26 before we would reconsider it. Traders who believe this is a long they don't want to give up on are probably okay if they maintain a stop under $20 of if you can stand it, there is stronger support at $19. This should help limit your losses if the downturn continues. Hopefully, we're wrong on this one and the late day bounce off of $22.50 is a sign of things to come. Picked on September 7th @ $22.31 Gain since picked: + 0.53 Earnings Date: 10/25 (not confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== --------------------------- Bullish (Long) Play Updates --------------------------- Campbell Soup CPB Close:$28.94 Gain:+0.59 Stop:$27.00 Campbell Soup had a nice day in an otherwise volatile market. The stock gained 2.08%, but more importantly closed above resistance at $28.73. Market and seasonal conditions should continue to make soup good food. Picked on September 17th at $28.35 Gain since picked: +0.59 Earnings Date N/A --- Phillip Morris MO Close:$48.30 Gain:-0.60 Stop:$45.00 Phillip Morris lost 60 cents today, but continues to hold up well under difficult market conditions. Political and financial indecision should continue to favor defensive stocks as well as stocks with a strong dividend. Picked on August 30th at $47.94 Gain since picked: +0.36 Earnings Date 10/17/01 (unconfirmed) ---------------------------- Bearish (Short) Play Updates ---------------------------- AmeriCredit - ACF Close:$34.02 Gain:-0.98 Stop:$38.96 AmeriCredit tried mount a rally, but failed to take out yesterday's high. With a big gap now on the chart after Monday's decline, ACF has a lot of work to do if it wants to move higher. Picked on September 7th at $40.00 Gain since picked: +5.98 Earnings Date N/A --- TCF Financial - TCB Close:$42.38 Gain:+0.84 Stop:$43.00 TCF Financial refuses to drop below the 200-day moving average. With the stock 62 cents from our stop, a race is setting up to see which will crack first - our stop or support at the 200-dma. Picked on August 24th at $47.60 Gain since picked: +3.72 Earnings Date N/A =============== AT Closed Plays =============== -------------------------- Closed Bullish (Long) Play -------------------------- Clorox CLX Close:$38.00 Gain:-0.53 Stop:$37.00 Clorox dipped below our stop level before quickly rebounding. This defensive stock should perform well over the coming weeks, but we must honor our stops. Picked on September 5th at $38.42 Gain since picked: -1.42 Earnings Date N/A ----------------- Closed Short Play ----------------- Fifth Third Bancorp FITB Close:$55.58 Gain:+2.08 Stop:$55.80 FITB quickly reversed course today and jumped 3.88%. That was enough to stop us out of the stock with a $3.50 gain. Picked on August 28th at $59.30 Gain since picked: +3.50 Earnings Date N/A ================== Trading Ideas ================== Due to technical difficulties with our data provider we are unable to generate the Trading Ideas section. We have been assured the problem will be rectified and we will resume daily publication of this section on Wednesday. ================================================================= 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.
Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.
Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.
To ensure you continue to receive email from Option Investor please add "firstname.lastname@example.org"
Option Investor Inc