Option Investor
Newsletter

Daily Newsletter, Thursday, 09/27/2001

HAVING TROUBLE PRINTING?
Printer friendly version
PremierInvestor.net Newsletter               Thursday 09-27-2001
                                                  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/3592_1.asp
=================================================================

In section one:

Market Wrap: Testing 1,2,3
Market Sentiment: Late Day Rally 
Play-of-the-Day: Right Mgmt Consultants - RMCI (Bullish)

-----------------------------------------------------------------
U.S. Market Numbers
-----------------------------------------------------------------
MARKET WRAP  (view in courier font for table alignment)
-----------------------------------------------------------------
       9-27-2001           High     Low     Volume Advance/Decline
DJIA     8681.42 +114.03  8681.42  8471.97  1.69 bln   1930/1197
NASDAQ   1460.71 -  3.33  1465.70  1418.15  2.04 bln   1799/1910
S&P 100   521.96 +  5.67   522.39   510.73   Totals    3729/3107
S&P 500  1018.61 + 11.57  1018.92   998.24
RUS 2000  392.96 +  3.17   393.32   384.43
DJ TRANS 2069.05 -  7.74  2081.25  2036.63
VIX        37.59 -  1.56    39.65    37.20
VXN        65.19 -  0.75    68.63    65.19
TRIN        1.03
Put/Call Ratio       .81
-----------------------------------------------------------------

===========
Market Wrap
===========

Testing 1,2,3
by Jeff Bailey

We may be onto something as it relates to the US$ and other 
foreign currencies as a pulse on market psychology.  Subscribers 
that get a chance to review last Wednesday's thoughts against 
today's action may give hint as to what took place and what takes 
place from here.  This morning's action in the Swiss Franc 
futures (sf01z) perhaps gave traders/investors the needed heads 
up for today's performance in stocks.

Swiss Franc (Dec. 2001) - last 6 months





The Swiss Franc was in an upward trend prior to the terrorist 
attacks on September 11th, but the sharp upward spike that day 
had us thinking that this currency was one to keep an eye on as 
it related to investor psychology toward the U.S currency and 
perhaps U.S. based stocks.  Notice how yesterday's trading saw 
the Swiss Franc seemingly "test" the 0.622 level at 80.9% 
retracement, then break that level this morning at the opening of 
trading.  As it relates to our previous scenario, a lower Swiss 
Franc should have been a sign that some short-term "fears" were 
being put to bed.  As the trading session progresses, stocks 
finally showed some strength and finished positive or recouped 
much of their earlier losses.  Subscribers will want to note the 
difference or DIVERGENCE in today's action vs. that found on 
September 19th.  Today, the strength in the US$ held up.  On 
September 19th, the early strength in the US$ gave way and stocks 
suffered the consequences.

We've said before that we need to be watching more than just 
currency relationships.  We also need to be monitoring the 
Treasury bond market.  Here's where I think equity bulls need to 
find some help.  While we're starting to see some mutual fund 
inflows begin to happen on the equity side, I think also need to 
see some selling in bonds along with a stronger US$ in coming 
sessions.  Equity bulls didn't get that help today, but here's 
where we could get a prolonged rally in stocks.

30-year Treasury YIELD Chart - last six months





I feel it's important for subscribers to understand what may be 
going on in the bond market.  Again, the 30-year Treasury is 
considered the "riskiest" Treasury bond as a 30-year time frame 
is more uncertain than is a 10-year, 5-year or 13-week maturity.  
With that said, we understand that the YIELD on the 30-year began 
a new downward trend just after the May 15th high (downward YIELD 
caused by buying of the underlying bonds).  The "jump" higher in 
YIELD from the 5.346% YIELD at our retracement bracket came just 
after the terrorist attacks.  I feel the selling in this bond for 
the next three sessions to the 5.635% YIELD level and 38.2% 
retracement was the MARKET panicking and selling some 
uncertainty.  This makes sense and is perhaps confirmed by the 
Swiss Franc's previous gains vs. the U.S$.  We can also come to 
this conclusion as the 13-week Treasury Bill YIELD ($IRX.X) dove 
lower!  Yes lower!  This makes sense as it relates to market 
psychology as the 13-week Treasury Bill is much "safer" compared 
to the 30-year.

13-week Treasury Bill YIELD - last seven months





Where the heck is the money coming from to buy 30-year YIELD?  
Perhaps some of the money is coming from the short-end of the 
bond market and the 13-week Treasury Bill ($IRX.X).  Here we note 
that the "safest" bond has been seeing some selling.  If 
investing/trading is all about risk/reward then perhaps the 
recent low YIELD of 2.14% isn't worth the perceived safety.  Six 
session's ago, the 30-year YIELD was at 5.62%.  

Do you see where we're going with this?  This is where some YIELD 
curve traders get into trouble.  Some traders believe that a 
flattening of the YIELD curve (distance between short-end and 
long-end gets narrower or comes together) is bullish for stocks.  
This can be true, but some of that money coming out of bonds had 
better find its way to stocks is my belief.  Right now, there's a 
lot of money flowing into the 30-year Treasury bond ($TYX.X) and 
bullish equity traders want to see some selling in the long end.

Bullish equity traders DO NOT want to see selling in the long-end 
due to fears that the U.S. will not be able to pay interest on 
the 30-year bond.  We monitor that type of thought with the 
foreign currency.  

Right now, equity bulls have one thing going for them.  That "one 
thing" is that some fears seem to be subsiding as indicated in 
the currency markets.  The one "fear" that seems to remain 
present is that stocks will be a good investment.  As it relates 
to the bond market, as long as market participants are willing to 
buy the riskiest bond (30-year) and drive that YIELD lower, we 
have to remain cautious on stock investments.  

It makes sense that the MARKET might be willing to rotate out of 
a 13-week YIELD of 2.2% and roll to a 5-year, 10-year or 30-year 
YIELD at a much higher rate of YIELD.  At least it does to me, 
assuming the risk/reward was there.  Right now we must assume 
that the lower YIELD in the 30-year is the MARKET telling us that 
it still finds a 5.45% YIELD attractive.

What does this tell us?

This is a great statement toward stocks at this point.  Some 
subscribers won't think about selling a stock they bought last 
month let alone three days ago if that investment doesn't shell 
out a 30% gain.  However, the bond MARKET seems to be saying that 
somebody is willing to settle for a 5.45% return per year for 30-
years!  Yes, you can always sell that 30-year bond, but right now 
they aren't being sold!  Taking it too the extreme, that money 
that is going into the 30-year bond may be tied up for 30-years 
and never find its way into stocks.

Now lets talk about stocks!

OK, now that we've got the review process out of the way and have 
everyone up to speed on the most exciting stuff that's taking 
place, lets move onto stocks.  Remember that portfolio of Dow 
Stocks that we hypothetically invested $1,000 into each of the 30 
Dow components?  Yesterday there were just three stocks that were 
showing gains as compared to their September 10th close.  Today 
there are 5!

Remember those previous observations of telecom strength that 
every subscriber made back on September 19th 
http://www.PremierInvestor.net/markets/marketwrap/091901_1.asp 
regarding SBC Communications (NYSE:SBC) and AT&T (T)?  It took a 
couple of days, but both of those stocks are at the top of the 
leader board in the Dow.  Wal-Mart (NYSE:WMT) is now at the top 
of the list.  As time passes, the cream may be starting to float 
to the top and we'll continue to watch things closely.

Here's that list again, sorted by gain/loss as of September 10th 
close.  It's kind of like a horse race isn't it?  The horses that 
usually are the best performers are those that had some strength 
to begin with.  What I've done here is entered a "blue number" 
next to the stock symbol so that we can compare "field position" 
or changes in ranking dating back to September 25th close.  
http://www.PremierInvestor.net/markets/marketwrap/092501_1.asp  
This may help us monitor further progress or decline RELATIVE to 
September 25th's field position.  This allows for some 
observations of relative strength once again, but just a 
different date.  Much like looking at things in three-dimensions!

Dow Industrials Hypothetical Portfolio from Sept. 10 close





The Dow portfolio is up just fractionally from the September 10th 
close.  The subtotal at the bottom shows a 10.27 decline, and the 
portfolio value from September 25th showed a 10.54% decline.  For 
the most part, those stocks that started near the bottom have 
stayed there, but there are some exceptions.  These "exceptions" 
spell DIVERGENCE and this is where we want to be looking for some 
new potential trades.

Downside notables!

Two stocks that have slipped markedly that traders should be 
aware of are International Business Machines (NYSE:IBM) 
"computer" and Caterpillar (NYSE:CAT) "heavy equipment."  Both of 
these stocks were trading on "sell signals" on their 
point/figure charts before the terrorist actions.  

The current bearish price objective (from vertical count) for IBM 
is $84 and that bearish vertical count was in place PRIOR to the 
terrorist attacks.

The bearish price objective for CAT is/was $41.  CAT did trade 
the $41 level on September 21st, but the bearish vertical count 
was put into place PRIOR to the recent terrorist attacks.  In 
Tuesday's market wrap we commented on past history and reversals 
lower in relative strength for CAT relative to the Dow 
Industrials.  Recent action here is starting to look like history 
is repeating itself.

My thinking here is that both of these stocks already had some 
downside being indicated (bearish vertical counts PRIOR to 
terrorist attacks) and now the market may be factoring in further 
bad news as channel partners are contacted and Chief Investment 
Officers (CIO) fine tune some budgets.

Upside Notables!

Share of Merck (NYSE:MRK) "pharmaceutical" have jumped 5 
positions to the number 5 slot as benchmarked against its 
September 10th close.  Either the drug pipeline is looking strong 
or the stock is benefiting from a more "defensive posture" in the 
market.  Drug stocks are often times a more defensive investment 
as consumers don't forgo their medications even though the 
economy is slowing.

Minnesota Mining and Mfg. (NYSE:MMM) "chemicals/deep cyclical" is 
another stock that has gained some field position.  
PremierInvestor.net traders made some good money on this one from 
the short side recently, but the stock has started to recover.  
Our original bearish price objective from a vertical count PRIOR 
to the terrorist attacks was $94.  The stock more than achieved 
that level at the $86 level and now trades on a "buy signal" with 
a bullish price objective of $107.  I don't like the stock here 
at $96 as a pullback to the $93 level (where the buy signal 
occurred) is entirely possible.  Instead, I'd be keeping an eye 
on the stock, and look for a rally near the $100 level as a 
potential shorting opportunity.  Again... let this stock do its 
thing and perhaps wait for an "inside day" trade set-up.

Exxon Mobil (NYSE:XOM) "oil" is one that I can't explain, other 
than short-covering.  Either that or somebody knows something 
about oil/natural gas prices that I don't know.  The current 
bearish price objective from point/figure vertical count 
indicates potential downside to $26 and a "buy signal" doesn't 
occur until $46.  Resistance looks BIG at $40 and I'd expect some 
shorts to be active at that level.  Light Sweet Crude (cl01z) was 
up 2.11% today to $23.21, while XOM was up 6.69%.  Natural Gas 
(ng01z) fell 0.87% to $2.61.  Leaning toward a short in XOM under 
current commodity prices should the stock trade $39-$40, with a 
stop at $42.25.

One sector that really isn't represented in the Dow Components, 
but one we've talked about recently is the Biotechs.  Today's 
gain for the BTK.X of 6% lead sector winners.  This is the tech 
sector we felt "NASDAQ only" traders should be focusing and today 
this group did well.  The BTK.X cleared some short-term 
resistance at the 440 level and a break above today's high of 452 
could get bears nervous and rushing to cover.  Retracement 
resistance at 494 and some prior support levels at 480 will most 
likely find resistance.  Amgen (NASDAQ:AMGN) and Biogen 
(NASDAQ:BGEN) are what I consider two "representative" stocks to 
be monitoring for continued strength.  Subscribers that took 
PremierMarkets.com bullish play in shares of Genentech (NYSE:DNA) 
"biotech" from September 20th at $41.20 got a nice pop today with 
a close at $44.84.  Retracement resistance could come into play 
at the $46 or $48 level.  If the BTK.X can push higher tomorrow, 
then shares of DNA have a chance to achieve these higher levels.

Follow along!

If you've yet to visit www.stockcharts.com and follow some of the 
point and figure charts and techniques that we've been using, put 
some of this stuff to the test.  Check the relative strength 
charts and see if some of what we're trying to teach makes any 
sense.  Browse through the "Education" section of the site.  

I'm amazed at some of the subscriber e-mail.  Some traders are 
really getting the hang of things and are having some success 
where they used to get drilled.  They're not jumping in over 
their heads either, but their building some confidence.  One 
subscriber couldn't believe that AT&T could be up 5% today!  The 
markets never cease to amaze!

Jeff 


================
Market Sentiment
================

Late Day Rally
by Jeffrey Canavan

Some poor economic data had the Dow down 96 points before a late-
day rally, possibly due to end of quarter window dressing by fund 
managers, pushed the Dow up 114 points.

Orders for durable goods fell 0.3% in August, slightly more than 
consensus estimates of a 0.2% drop.  Gains in communications 
equipment and semiconductors were offset by declines in aircraft 
and automobile orders.  The overall book-to-bill ratio remains 
below one, but inventories did decline for the seventh straight 
month.

Initial jobless claims came in higher than expected at 450,000, 
and the number of people still collecting unemployment rose to 
3.298 million.  Based on airline layoffs and the latest release 
of the Help Wanted Index, unemployment could continue to worsen.

The Conference Board Help Wanted Index fell to 53 in August, a 
40% drop from the end of last year.  While online ads may play a 
part in this low number, it is still the lowest reading since 
1983.

Economic data was fully expected to come in bad, but it still 
cast a pall over Wall Street.  That gloomy mood lasted until 
about 2 o'clock when stocks started to surge.  It's hard to have 
a lot of faith in the rally since it smelled of fund managers 
shuffling their portfolios, rotating out of tech into defensive 
issues.

Mutual fund investors continue to lose faith, pulling another 
$9.5 billion out of stock funds.  Even bond funds saw $1.1 
billion in outflows.

S&P 500 8/98 to 11/98 and 2/01 t0 5/01 Daily Charts





So what might happen if this rally proves to be false?  Perhaps 
the S&P 500 will from a double bottom like it did back in October 
of 1998 and April of this year.  

S&P 500 Daily Chart





We're halfway there, but the direction of the S&P 500 is yet to 
be determined.  The 1,000 level has held the past three days, and 
could be the level to watch.  If the S&P 500 continues to hold 
this level, perhaps it is consolidating before moving higher.  If 
it drops below it could be starting the second half of a double 
bottom.

Tomorrow's Chicago Purchasing Managers Index and revised consumer 
sentiment could set the tone early.

-----------------------------------------------------------------

Market Volatility
    
VIX   37.41
VXN   65.91

-----------------------------------------------------------------

          Put/Call Ratio  Call Volume   Put Volume
Total          0.81        641,828       520,113
Equity Only    0.71        581,666       412,989
OEX            0.78         10,515         8,237
QQQ            1.12         39,382        44,088
 
-----------------------------------------------------------------

Bullish Percent Data


           Current   Change   Status
NYSE          18       -      Bear Confirmed
NASDAQ-100    12      +12      Bear Confirmed
DOW           18       -      Bear Confirmed
S&P 500       16       -      Bear Confirmed
S&P 100       16       -      Bear Confirmed

Bullish percent measures the number of stocks in an index 
currently trading on a buy signal on their point and figure 
chart.  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  0.91
10-Day Arms Index  0.94
21-Day Arms Index  1.18
55-Day Arms Index  1.23

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      1931           1185
NASDAQ    1710           1851

        New Highs      New Lows
NYSE       34            220
NASDAQ     11            359

        Volume (in millions)
NYSE     1,472
NASDAQ   2,034
-----------------------------------------------------------------

Advisory Sentiment 

Bullish  Bearish  Correction  Net Bullish   Change 
  35.7%    37.6%     26.7%       -1.9%      -15.3%

A bearish reading of 25% to 30%, combined with a bullish reading 
greater than 55% is typically considered bearish by contrairians.  
A net percentage greater than 30% is also viewed as bearish. 

-----------------------------------------------------------------

Commitments Of Traders Report: 09/18/01

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

This week's data only reflects trading on Monday and Tuesday, but 
in those two days commercial traders added 47,027 long positions 
and only 29,753 short positions.  That drops their net bearish 
stance by 17,274 contracts.  Small traders on the other hand 
loaded up with 31,441 short contracts.  Right now it looks like 
small traders made the right move, but we shall see next week.

Commercials   Long      Short      Net     % Of OI 
9/04/01      350,626   430,613   (79,987)   (10.24%)
9/10/01      359,360   442,070   (82,710)   (10.32%)
9/18/01      406,387   471,823   (65,436)   ( 7.45%)

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
9/04/01      147,080     62,004   85,076     40.69%
9/10/01      156,500     69,090   87,410     38.75%
9/18/01      172,988    100,531   72,457     26.49%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01
 
NASDAQ-100

Small traders have gotten more bearish, and are approaching their 
most bearish levels of the year.

Commercials   Long      Short      Net     % of OI 
9/04/01       28,757     38,119   ( 9,362)  (14.00%)
9/10/01       26,784     37,912   (11,128)  (17.20%)
9/18/01       35,497     45,731   (10,234)  (12.60%)

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
9/04/01       12,341     9,806    2,535      11.45%
9/10/01       15,263    12,555    2,708       9.73% 
9/18/01       22,876    21,702    1,174       2.63%

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

DOW JONES INDUSTRIAL

Institutions continue to increase their net long position in Dow futures.

Commercials   Long      Short      Net     % of OI
9/04/01       23,459    14,099    9,360     24.9%
9/10/01       25,445    13,033   12,412     32.3% 
9/18/01       28,425    15,077   13,348     30.7%

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year: 13,348  - 9/18/01

Small Traders  Long      Short     Net     % of OI
9/04/01        6,952    12,744    (5,792)   (29.41%)
9/10/01        7,460    12,735    (5,275)   (26.12%) 
9/18/01        7,335    15,044    (7,709)   (34.45%)

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)
=========================

Right Mgmt Consultants - RMCI - close: 28.54 change: +1.94 stop: 25.00 NEW

Original Comments When Selected on September 20th:

Company Description:
For Philadelphia-based Right Management a weak economy with hoards 
of layoffs is a growth opportunity.  The company specializes in 
career transition and management consulting services through over 
200 company-owned and franchised offices worldwide.  Right  
consults on termination interviews, severance and termination 
benefits and provides career planning services for employees. It 
also runs group seminars and on-site career transition centers. Its 
management consulting practice (about 20-percent of revenue) is 
focused on leadership development and organizational performance. 
The company suffered in the 1990's due to the booming economy and 
low unemployment, which encouraged the company to develop its 
management consulting practice. However, the recent economic 
downturn has brightened prospects as many employers are reducing 
headcount.

Fundamentals:
What a difference a changed economy makes.  The company that earned 
89-cents a share in 2000, is expected by analysts to earn $1.66 in 
2001 and $2.42 in 2002.  These forecasts are up sharply from 
consensus estimates of $1.19 for 2001 and $1.38 for 2002 made just 
90-days ago. RMCI shares are low priced on a fundamental basis when 
compared to industry averages.  The firm has forward P/E's of 14.8 
for 2001 and 10.2 for 2002; as compared to an industry average P/E 
of 28.82.  It has a bargain basement PEG (Price/Earnings Growth) of 
0.97 as opposed to the industry average of 1.81.  

Why We Like It: 
There are a number of reasons for long and short-term investors to 
like this stock.  The company is cheap on a valuation basis and in 
the right sector during an economy that is showing few signs of a 
pulse.  Its shares are in a well-established up trend extending 
back to December of 2000.  Our point and figure analysis produced a 
bullish 6-month price target of $34.50; however, as the economy 
continues to degrade it is likely we will see this target within a 
much shorter time frame.  

The stock blasted through critical resistance at $24.50 on Friday.  
This represented a move out of the top-end of congestion the shares 
have been in for the past month.  With a solid base underneath and 
only slight resistance in the $26 to $27 range, the shares seem 
poised to put in a short-term test of the $29.49 52-week high set 
in mid-July.  Depending on their personal tolerance for pain, long-
term investors can start with a stop at either $18.50, which would 
indicate a violation of big time support that has held since May, 
or our shorter-term trader stop of $22.00.

Updated Comments:
Right Management was right on the money today, gaining 7.29%.  A 
strong finish on good volume suggests that this stock is ready to 
set a new 52-week high by trading $29.50.  We'll slide our stop up 
again, this time to $25.

Picked on September 20th at $24.70
Gain since picked:           +3.84
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                Thursday 09-27-2001
                                                   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/3592_2.asp
=================================================================

In section two:

Split Trader
  Split Announcements: PLATO Learning - TUTR  
  New Plays: none
  Play Updates: Jacobs Engineering - JEC 
  Closed Plays: none

Net Bulls
  New Plays: First Data Corp - FDC (Bearish)
  Bullish Play Updates: Genentech - DNA
  Bearish Play Updates: Molex Inc - MOLX
  Closed Plays: QUALCOMM - QCOM, MedImmune - MEDI

Stock Bottom / Active Trader
  New Plays: Lockheed Martin - LMT (Bullish)
  Bullish Play Updates: MO, RMCI, SZA, 
  Bearish Play Updates: ACF, KMI, TROW
  Closed Plays: Eli Lilly - LLY 

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
===================

Thursday, September 26, 2001 4:22 PM ET

TUTR Teaches Shareholders a Thing or Two

After Thursday's closing bell, e-learning company PLATO Learning 
(Nasdaq:TUTR) announced a 4-for-3 stock split of its common 
outstanding shares. This marks the first stock split since the 
company went public in December 1992 and will effectively 
increase the number of outstanding shares to approximately 16.3 
million. Qualifying shareholders will receive an additional one-
third share for each share owned as of the payable date of 
October 26, 2001. 

PLATO recently released Q3 earnings, which revealed a 41 percent 
increase in revenues and a 54 percent increase in net earnings 
over financial results of the same period of 2000. Diluted 
earnings per share of $0.30 met analyst expectations and beat the 
prior year's Q3 results by two cents.  

TUTR shares closed the day down -0.50 to 23.70. The 52-week range 
is 12.06 - 36.40 and the average daily volume is 222 thousand.

About the Company 

PLATO Learning, Inc. is a leading provider of computer-based and 
e-learning instruction, offering basic to advanced level 
courseware in reading, writing, math, science, social studies, 
and life and job skills. The PLATO® Learning System and PLATO® 
Web Learning Network provide more than 3,500 hours of objective-
based, problem-solving courseware and include assessment, 
alignment and management tools to facilitate the learning 
process. The software is marketed to K-12 schools, colleges, job 
training programs, correctional institutions, military education 
programs, corporations and consumers. PLATO software is delivered 
via networks, CD-ROM, the Internet and private intranets. It is 
available for immediate purchase and electronic download on the 
company's Web site.


===============
ST Play Updates
===============

  -----------------------
  Split Candidate Updates
  -----------------------

Jacobs Engineering - JEC - close: 60.91 change: +0.40 stop: 57.50

Shares of JEC remained on target despite an early morning dip to
bounce at $59.  The quick rebound was encouraging and shares were
climbing towards the end of the day.  To repeat our comments from
Tuesday, the 200-dma (now at 58.06) appears to be holding up as
support.  If you are looking for a little confirmation consider
waiting for the stock to close above the $61 level.  Now that the
Dow has put in another bounce near 8500 we might see another move
up for the index.  This could spur buyers in JEC and the stock is
likely to trade up to the $65 area in the event of a tradable rally.
Strong overhead resistance can also be found at $70.

Picked on September 25th @ $ 61.21
Gain since picked:         -  0.30
Earnings Date:               11/01 (not confirmed)





==================================================================
Net Bulls (NB) section
==================================================================

============
NB New Plays
============

  ------------------------
  New Bearish (Short) Play
  ------------------------

First Data Corp - FDC - close: $53.24 change: -1.24 Stop: $56.00

Company Description:
First Data is the largest U.S. processor of credit card transactions 
serving approximately 2.6 million merchant locations, 
1,400 card issuers and millions of consumers.   Operational units 
include Western Union (forget telegrams, it is now one of the 
largest cash-transfer agents in the world),  TeleCheck (a leading 
check authorization service), and Paymentech (merchant processing).  
First Data also provides e-commerce solutions, is expanding its 
Internet payment services and has bought a majority stake in an ATM 
network operator. 

Fundamentals: 
Last year, the company earned $2.14 per share on revenue of $5.7 
billion.  Analysts expected the company to earn $2.48 per share in 
2001 on revenue of $6.4 billion and $2.90 on $7.1 billion in 2002.

Why We Like It:
Retail stores and gas stations are two of FDC's largest market 
areas (financials are the third).  If empty stores were not enough 
evidence, Tuesday's slump in the Consumer Confidence Index and 
sales warnings from many of the large retail chains confirm that 
consumer spending, which has acted as a pillar propping up the 
economy, is deteriorating fast.  US business stopped cold the week 
following the terrorist attacks and is taking its time warming up.  
As the big name in processing credit card transactions, it is 
difficult to imagine that FDC executives will have anything good to 
say when they announce earnings on October 8th.

FDC shares have already been on a big slide, after closing at 
$68.50 on August 24th, the shares have lost 22-percent into 
Thursday's close.  With no sign of a bullish catalyst and selling 
pressure on the rise, FDC shares seem likely to test the next level 
of support at about $47.50.  A move through this level would 
encounter the next levels of support at $45 and the $36.93 52-week 
low set in September 2000.  We will initiate this bearish play with 
a $56 stop, which is just above the $55.50 50-day moving average.  

Picked on September 27th at $53.24
Earnings Date                10/8(Confirmed)





===============
NB Play Updates
===============

  -----------------------
  NB Bullish Play Updates
  -----------------------

Genentech - DNA - close: 44.84 change: +3.04 stop: 41.50 *new*

Finally, some good news comes out for a few biotech companies.
The sector was relatively undamaged by the Sept. 11th attacks,
minus a few companies that suffered some delivery delays due
to the airport closings, and industry experts still believe that
sector fundamentals are still strong.  In one news story today,
Genentech got some press when analysts discussed the growing 
sales of Rituxan.  Rituxan is a non-Hodgkin's lymphoma treatment
marketed by both Genentech and IDEC Pharmaceuticals.  The same
Reuters article also claimed that DNA should benefit from sales
of its Herceptin breast cancer treatment.  On top of all the
good news, the biotech sector itself produced a strong rally
(not the least of which was probably boosted by strong moves
in DNA and IDPH).  The BTK.X had fallen from late August highs
near 550 to lows around 420 by September 19th.  The next several
days saw the group basing and today's strong 6% move up looks
like the beginning of a new trend.  However, be cautious.  Today's
move in the sector put the BTK at a 23.6% retracement of its
recent drop.  This is a classic Fibonacci retracement level.
This is not to say the rally won't continue as the BTK could 
go as high as 480 which is current overhead resistance (and 
incidentally pretty close to a 50% retracement level) and one
in-house analyst predicted it might get as high as 500 soon.
But our caution doesn't just extend to the big gains in the sector.
We're excited by the 7.27% move in DNA today but with overhead
resistance for the stock at $46 (and again at $48) would go easily
see some selling or shorting pressure.  The good news is the 
stock has cleared several moving averages and through resistance
at $42.  We're going to move our stop up to 41.50, which should
prevent any potential loss while still giving the stock room
to maneuver if shares pull back some before climbing higher.  
Fortunately, the strong close bodes well for tomorrow's open.
New players should probably wait for a dip or a close over $46.
Note - DNA will be announcing earnings on Oct. 10th after the
bell.

Picked on September 20th @ $41.20
Gain since picked:         + 3.64
Earnings Date:              10/10 (confirmed)





  -----------------------
  NB Bearish Play Updates
  -----------------------

Molex Inc - MOLX - close: 28.05 change: -0.03 stop: 30.50

Our brand new short play is off to a rip-roaring start. Okay,
we're kidding...MOLX did slide to $26.90 intraday but the late
day market-wide rally in both the Dow and the Nasdaq fueled a
bounce in MOLX too.  We stand by our stop at 30.50 but would
urge strong caution if shares traded above $29.00.  The markets
remain in oversold conditions and even though we would expect
MOLX to see strong overhead resistance at $30 no one wants to
be short and see the stock breakout to the upside on them.
We have not heard of any fundamental changes in the manufacturing
sector (or the electronic component manufacturing sector) and
thus fundamentals are still negative for the industry.  

Picked on September 26th @ $28.08
Gain since picked:         + 0.03
Earnings Date:              10/18 (not confirmed)





===============
NB Closed Plays
===============

  -----------------
  Closed Bullish Plays
  -----------------

QUALCOMM - QCOM - close: 46.56 change: +1.23 stop: 45.75 

A frustrating day for technology traders as the Nasdaq suffered
a strong sell-off early morning only to bounce later in the day.
This influence pushed shares of QCOM back to its support level 
hovering around $45.  The strong bounce back in both the COMPX 
and QCOM was encouraging but our play remains stopped out.  We 
considered reinitiating a play on QCOM based on the strong bounce.  
We still believe this could be a strong mover once the Nasdaq 
finally gets moving again but we have elected to take a wait and 
see approach.  Aggressive traders may want to consider a new entry 
on another bounce near the $45 mark and those of us looking for 
more confirmation of a new up trend should consider waiting for 
shares to close above the $50 mark which could be strong resistance.  
Unfortunately, our play that was up almost 4 points on Tuesday is 
closed with a move of only 75 cents.  On a side note, QCOM announced 
that they had signed a deal with video-game maker Sega.  Japan-based
Sega already produces games for other wireless providers and
this will be Sega's first game-producing venture into the U.S. 
cell phone market.

Picked on September 19th @ $45.00
Gain since picked:         + 0.75
Earnings Date:               N/A  (not confirmed)





  -----------------
  Closed Bearish Plays
  -----------------

MedImmune - MEDI - close: 34.48 change: +1.58 stop: 34.50 

What can we say?  Tuesday we warned traders that MEDI's down
trend appeared to have stalled and profitable positions should
probably be closed.  The 6% rally in the biotech sector was
too much pressure for MEDI bears to take and the late
afternoon buying pushed the stock through our stop at 34.50.
Fortunately, this closed the play with a move of 5.96 points
or almost 15%.  However, watchful traders could have produced
better results than these.  The low today was 31.15 while the
Nasdaq was in its early morning slide.  We would continue to
keep an eye on MEDI.  It has been under performing the biotech
group and there is overhead resistance at even dollar marks 
all the way to $42.  It could try to play catch up if the
sector continues to rally but we would expect it to feel 
renewed short pressure the minute any momentum stalls.

Picked on August 28th @ $40.46
Gain since picked:      + 5.96
Earnings Date:           10/24 (not confirmed)





==================================================================
Stock Bottom / Active Trader (AT) section
==================================================================

============
AT New Plays
============

  ------------------------
  New Bullish (Long) Plays
  ------------------------

Lockheed Martin - LMT - close: $43.30 change: +1.30 Stop: $40.00 

Company Description:
Lockheed is the largest weapons manufacturer in the world and the 
second largest defense and aerospace company (after Boeing). The 
company has five principal segments: systems integration (missiles 
and fire control), space systems (communication satellites and 
submarine-launched missiles), aeronautics (aircraft), technology 
services (management, engineering, and logistic services), and 
global telecommunications (satellites).  Well known products 
include: the F-16 and F-22 jet fighters, the C-130J transport plane 
offensive missiles like the Trident II and defensive ones such as 
their Theater High Altitude Area Defense.  Over 70-percent sales 
comes from the US government.

Fundamentals: 
The company earned $1.07 per share on sales of $25.3 billion in 
2000.  This year, the company earned is expected to earn $1.44 per 
share on revenue of $24.6 billion and $1.71 on $26 billion in 2002.

Why We Like It:
On a fundamental basis, with a forward 2001 P/E of 30, LMT shares 
are not inexpensive.  However, as the leading recipient of US 
defense spending, it stands to reason the company and its shares 
are going to benefit well from the expected U.S. defense build up. 
This should make the shares resistant to the economic woes and thus 
a buy on any dip.  Prior to the events of September 11th, LMT had 
been consolidating for six months within a roughly $35 to $40 price 
range.  When the markets reopened, the LMT shares saw a $5.46 one-
day gain.  Too sudden to chase and too high to hold, profit-taking 
over the next few days brought the shares back to support in the 
$41 to $42.50 area.  On Thursday, a spike in volume and price 
suggests the shares are ready to put in a test of the $46.00 52-
week high. If the shares can maintain momentum through this level, 
a run at our bullish $56 6-month price target would be a reasonable 
expectation.  We will start this play with a $40 stop, although 
more risk averse traders probably could do as well with a stop just 
below last Friday's $41.00 session low. . 

Picked on September 27th at $43.30
Earnings Date                10/25 (Not Confirmed)





===============
AT Play Updates
===============

  -----------------
  Bullish Play Updates
  -----------------

Phillip Morris - MO - close: 49.00 change: +2.14 stop: 45.00

Back in the green.  After playing a good game of defense, Phillip 
Morris finally made a move by gaining $2.14 today.  If all the sellers 
have been shaken out of this stock, it should be ready to take out 
resistance at $49.55.  That would clear the way for a run to $54.

Picked on August 30th at $47.94
Gain since picked:        +1.06
Earnings Date            10/17/01 (unconfirmed)




---

Right Management - RMCI - close: 28.54 change: +1.94 stop: 25.00 NEW

Right Management was right on the money today, gaining 7.29%.  A strong 
finish on good volume suggests that this stock is ready to set a new 
52-week high by trading $29.50.  We'll slide our stop up again, this 
time to $25.

Picked on September 20th at $24.70
Gain since picked:           +3.84
Earnings Date                  N/A




---

Suiza Foods - SZA - close: 63.85 change: +0.85 stop: 62.50 NEW

"There's nothing more recession proof than food," so says William Leach 
of Banc of America.  He also added that food stocks typically do well 
in the forth quarter.  Goldman Sachs concurred, upgrading the food 
sector to "overweight."  

Looking back through Suiza's chart, it does pretty well in fourth 
quarter.  But seeing that we already have a 12% gain in this stock, we 
are going to raise our stop to $62.50.  This locks in a nice profit, 
and if we're stopped out we can always get back on board on a pullback.  

Picked on September 19th at $57.01
Gain since picked:           +6.84
Earnings Date                  N/A





  ------------------
  Bearish Play Updates
  ------------------

AmeriCredit - ACF - close: 29.24 change: +0.88 Stop: 31.00

Every day looks like the day we are going to get stopped out of 
AmeriCredit, but this stock refuses to go up.  With financial 
stocks doing well today, ACF was susceptible.  Perhaps concerns 
over automobile sales are enough to suppress this stock. I don't 
want to jinx us, but ACF looks like it might be getting ready to 
make another run at support.

Picked on September 7th at $40.00
Gain since picked:         +10.76
Earnings Date                 N/A




---

Kinder Morgan - KMI - close: 47.14 change: -1.21 stop: 51.00

The Natural Gas Index got some relief from its recent sell off by 
gaining 2.52% today, but Kinder Morgan lost another 2.50%.  KMI 
closed below support at $47.25, but tried to rally into the 
close.  If KMI can't climb back above that level, it looks like a 
drop to $43 in the near future.

Picked on September 25th at $50.00
Gain since picked:           +2.86
Earnings Date               10/17/01 (unconfirmed)




---

T. Rowe Group - TROW - close: 28.05 change: -0.68 stop: 30.50

With $9.5 billion coming out of stock mutual funds again last 
week, the earnings outlook for asset managers continues to look 
bleak.  TROW lost 68 cents today, which gets us close to even, 
but TROW must lose support at $27.81 to get the selling momentum 
going.

Picked on September 20th at $27.57
Gain since picked:           -0.48
Earnings Date               10/19/01 (unconfirmed)





===============
AT Closed Plays
===============

  -------------------
  Closed Bearish Play
  -------------------

Eli Lilly - LLY - close: 80.10 change: +1.55 Stop: 80.00

Lilly looked ready to top, but a flight to defensive stocks sent 
the Pharmaceutical Index up 3.37%, taking Lilly through our stop.  
A lot of today's buying is being attributed to end of quarter 
window dressing by fund managers - making it look like their 
portfolios are in nice defensive stocks by loading up in the last 
days of the quarter.  But pointing fingers doesn't change the 
fact that we were stopped out, so we will walk away to short 
another day.

Picked on September 26th at $78.55
Gain since picked:           -1.45
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
NOC       Northrup Grumman         102.97   +4.37
ASBC      Associated Banc-Corp      33.30   +1.58
KLT       Kansas City Power & Light 25.79   +0.76
DTL       Dal-Tile Internat Inc     15.00   +0.90
RMCI      Right Management Consult  28.54   +1.94

  ---------------------------------------
   Breakout to Upside (Stocks $5 to $20)
  ---------------------------------------

Ticker    Company Name              Close  Change
HUM       Humana Inc                11.90  +1.30
SKYF      Sky Financial Group       19.95  +1.24
MATK      Martek Bioscience         17.05  +1.75
ARNA      Arena Pharmceuticals      10.24  +1.19
ABMD      Abiomed Inc               16.00  +1.88

  ---------------------------------------
   Breakout to Upside (Stocks over $20)
  ---------------------------------------

Ticker    Company Name              Close  Change
AZN       Astrazeneca Plc           46.14   +2.46
AVE       Aventis                   74.75   +3.89
PFE       Pfizer                    39.75   +1.20
MDT       Medtronic                 42.57   +1.57
GSK       Glaxosmithkline           55.78   +2.48

  -----------------------------------------
   Breakout to Downside (Stocks over $20)
 -------------------------------------------

Ticker    Company Name              Close  Change
IBM       IBM                       90.00  -1.30
FDC       First Data Corp           53.24  -1.26
BTY       British Telecom           50.40  -2.62
MXIM      Maxim Integrated Prod     33.68  -1.78
ADBE      Adobe Systems             22.84  -1.06

  ------------------------------------------------------------
   Recently Overbought With Bearish Signals (Stocks over $20)
  -------------------------------------------------------------

Ticker    Company Name              Close  Change
none

=================================================================
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.




DISCLAIMER

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 "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives