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. 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