PremierInvestor.net Newsletter Tuesday 10-09-2001 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/1612_1.asp ================================================================= In section one: Market Wrap: Having trouble at retracement Market Sentiment: Standing room only. Play-of-the-Day: SYSCO Corporation - SYY (Bearish) ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 10-2-2001 High Low Volume Advance/Decline DJIA 9052.44 - 15.50 9086.97 9004.14 1.1 bln 1488/1595 NASDAQ 1570.19 - 35.76 1607.20 1565.97 1.5 bln 1422/2094 S&P 100 541.84 - 3.04 545.44 540.30 Totals 2910/3688 S&P 500 1056.75 - 5.69 1063.37 1053.83 RUS 2000 408.68 - 3.50 412.27 407.87 DJ TRANS 2128.67 - 54.57 2185.91 2128.67 VIX 36.06 + .15 36.62 35.57 VXN 66.26 + .13 67.20 65.86 TRIN 1.18 Put/Call Ratio .97 ----------------------------------------------------------------- =========== Market Wrap =========== Having trouble at retracement by Jeff Bailey Many of the broader market averages are having trouble getting above some retracement levels that we have pointed out in past sessions and it sure looks like the market needs some type of good news to bring enough bulls to the table to create a stampede. Here's a look at some of the major near-term levels of resistance. Until they're broken, bullish traders should be trading cautiously as we'd expect bearish traders to begin getting some confidence behind recently established trades that begin to work in their favor. Dow Industrials Chart - last nine months The Dow Industrials plays an important role in investor psychology. While today's 15 point decline (-0.17% decline) is not a heartbreaker for bulls, it can create some weight on a bulls mind. On Friday I thought the Dow Industrials components were showing some signs of "lack of leadership" as shares of SBC Communications (NYSE:SBC) had drifted back after showing early leadership after the terrorist attacks. Yesterday, shares of SBC met our challenge to show some leadership with a $0.97 gain (+2.16%) and then had some follow through today as it added another $0.84 cents (+1.83%) to close at $46.69. As of today's close, there are now seven stocks in our "hypothetical Dow portfolio" showing gains from their September 10th close (WMT, T, SBC, MO, MRK, IBM and C). In the current economic/political environment we're in, this is still the group where I think we should find the greatest amount of strength and lesser amount of weakness near-term. Today's big gainers in the Dow Industrials were Aloca Inc. (NYSE:AA) "aluminum" and American Express (NYSE:AXP) "financial" as both gained over 5%. Psychology is important Those subscribers listening to the evening news have possibly heard some military specialists talking about U.S. troop psychology. The input there has been that troop psychology might dip should they run out of targets to be bombing in Afghanistan. While this seems somewhat gruesome, I think it does make sense. The same could be thought of as it relates to certain resistance levels or bullish targets for bullish traders. Once a bullish trader has achieved what might be a bullish target and doesn't get any follow through, then psychology could sour. S&P 500 Index Chart - last nine months The S&P 500 (SPX.X) was a little quicker to see selling from a "key" retracement level. Note that our 61.8% retracement level at 1,082 correlates very nicely with the relative low found back on March 22nd. There are undoubtedly many market participants "expecting" some type of pullback from the 1,082 level and are now waiting to be proven wrong on a move back above the 1,082 level when they can get back on board. Those that have locked in some gains on the move from 1,011 to 1,082 have some dry powder and may offer support should we find a pullback to the 1,011 level. NASDAQ Composite Index - last nine months The NASDAQ Composite (COMPX) is trading very similar to that of the S&P 500. By simply anchoring our retracement bracket from the relative highs found in early Spring and then again in early summer and then "fitting" that retracement to the April lows we get the feeling that the break below 1,782 (38.2% retracement) had market makers playing defense to the 1,618 level (50% retracement). When that level was "gapped" lower market makers then had to play defense in their inventory to 1,454 (61.8% retracement). We saw some violation of that level on September 21st and then again on September 27th. The recent rally to 1,570 has perhaps found market makers once again on the "sell side" as they must be ready to provide liquidity to the market should it wish to sell once again at 1,454. Those traders that like to trade like a market maker are undoubtedly shorting some stocks with four letters in their stock symbols, but will flip to a "buy side" bias on a close above 1,618. Something the NASDAQ has not been able to do since September 10th's close of 1,695. Looking for news Various pieces of economic data will be coming out later this week. Some of the more closely watched economic data that could provide some type of catalyst for a move is Jobless Claims for the week ending October 6th (due 10/11 at 08:30 am EST) with economists looking for a number near 521,000, which would be slightly less than a previous 528,000. Any type of number below the 500,000 level then sets up what could be a bullish surprise (surprise as it is not expected) in retail sales. The jobless numbers will then be followed on Friday, October 12th, with September Retail Sales and expectations for a decline of 0.7%, vs. an August Retail Sales number showing a gain of 0.3%. As you can see here, were looking for a bit of a lagging indicator to jobless rates to actually show a dip. These expectations may help explain why some of the major indices are having trouble with our retracement levels acting like resistance. The "fly in the ointment" for an upward move in stocks will most likely have to begin with the jobless data. The Producer Price Index (PPI) is also due out on Friday and here economists are looking for modest gains of inflation. Market consensus is at 0.1% with the core rate (excluding food and energy) also at 0.1%. Many investors are not worried about any type of inflation at this point and we'd expect little surprise or market catalyst coming from this number. And finally we get the University of Michigan Consumer Sentiment Survey for September. Previous data showed a reading of 81.8%, but consensus this time around is for a drop to 75.7%. Many believe the consumer is what continues to prop up the U.S. economy and the lower expectations also lends to some of the resistance problems we've been seeing in the broader indices. Traders/investors perhaps short/put shares of Fannie Mae (NYSE:FNM) will be watching tomorrow's MBA Mortgage Applications Survey due out at 07:30 am EST. This is not as widely followed of a number, but it is due out nonetheless. Last reading was 771.1 and any type of deviation from that level could affect interest sensitive mortgage stocks. Jeff ================ Market Sentiment ================ Standing room only. by Russ Moore Standing room only. The Wall Street bleachers were full, as investors continued to sit on the sidelines during these uncertain times. The major indices moved within a very tight trading range throughout the day, and, without a positive catalyst, the limited action favored the sell, rather than buy side. The DOW ended with a fractional loss of +0.2 percent while the NASDAQ gave back –2.2 percent and the NDX dropped –2.7 percent. Volume was light with the NYSE trading 1.10 billion shares and the NASDAQ moving 1.50 billion shares. Losers outpaced winners by a 16/15 margin on the big board and a 21/14 difference on the NASDAQ. Brokerage, oil, oil service, biotech, paper and chemical sectors closed in positive territory. Microsoft shares were hit hard after news of the Supreme Court decision not to hear the Microsoft appeal was released. The stock shed 6.0 percent on the day and put downside pressure on both the DOW, and NASDAQ. The incentive to buy continues to be the missing link. Nervous investors do not make for sustained rally makers and therein lies the primary challenge to any upside market move. We already know what that the third quarter earnings numbers are going to be weak, coupled with visibility shrouded in a thick fog. With all this negativity you might think it’s a perfect time for the bears to rise up, however, sentiment is currently leaning to the bullish side and any morsel of good news would likely see those horned beasts trample the bears. The result is a standoff, with markets moving in a narrow range, poised to breakout one way or the other. VIX Tuesday 10/09 close: 36.06 VXN Tuesday 10/09 close: 66.26 30-yr Bonds Tuesday 10/09 close: 5.36 Total Put/Call Ratio: .97 Equity Option Put/Call Ratio: .97 Index Option Put/Call Ratio: .97 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 31.09 Volume/Open Interest Maximum calls: 30/88,606 Maximum puts : 30/72,779 Moving Averages 10 DMA 30 20 DMA 30 50 DMA 35 200 DMA 45 Fibanocci Retracements Relative High: 51.95 (05/22/01) Relative Low: 27.00 (09/21/01) 38% 36.60 50% 39.57 62% 42.59 === S&P 100 Index (OEX) 52-Week High: 834.93 52-Week Low: 491.70 Current close: 541.84 Volume/Open Interest Maximum calls: 600/6,774 Maximum puts : 500/8,036 Moving Averages 10 DMA 537 20 DMA 532 50 DMA 575 200 DMA 629 Fibanocci Retracements Relative High: 680.03 (05/22/01) Relative Low: 480.07 (09/21/01) 38% 556.14 50% 579.65 62% 603.55 === S&P 500 (SPX) 52-Week High: 1530.01 52-Week Low: 965.80 Current close: 1056.75 Volume / Open Interest Maximum calls: 1050/21,132 Maximum puts : 1050/24,335 Moving Averages 10 DMA 1048 20 DMA 1041 50 DMA 1124 200 DMA 1219 Fibanocci Retracements Relative High: 1315.93 (05/22/01) Relative Low: 944.75 (09/21/01) 38% 1086.75 50% 1130.62 62% 1175.23 == DJIA (INDU) 52-Week High: 11,518.83 52-Week Low: 8,235.81 Current close: 9,056.44 Volume / Open Interest Maximum Calls: 100/26,613 Maximum Puts 100/38,720 Moving Averages: 10 DMA 8,930 20 DMA 8,940 50 DMA 9,765 200 DMA 10,374 Fibanocci Retracements Relative High: 11,350.05 (05/22/01) Relative Low 8,062.34 (05/21/01) 38% 9,308.92 50% 9,693.99 62% 10,085.60 == Biotech Index (BTK) 52-Week High: 811.61 52-Week Low: 383.28 Current close: 455.83 Volume / Open Interest Maximum Calls: 520/ 318 Maximum Puts: 440/2002 Moving Averages 10 DMA 454 20 DMA 455 50 DMA 494 200 DMA 545 Fibanocci Retracements Relative High: 811.61 (09/25/00) Relative Low: 383.28 (03/22/01) 38% 546.22 50% 596.57 62% 646.71 == Semiconductor Index (SOX) 52-Week High: 1280.84 52-Week Low: 362.00 Current close: 401.52 Volume / Open Interest Maximum Calls: 490/2,924 Maximum Puts: 390/2,122 Moving Averages 10 DMA 385 20 DMA 414 50 DMA 517 200 DMA 592 Fibanocci Retracements Relative High: 710.78 (05/22/01) Relative Low: 343.93 (09/27/01) 38% 484.50 50% 527.18 62% 570.57 == Pharmaceutical Index (DRG) 52-Week High: 455.28 52-Week Low: 339.49 Current close: 389.50 Volume / Open Interest Maximum Calls: 400/705 Maximum Puts: 360/628 Moving Averages 10 DMA 390 20 DMA 381 50 DMA 388 200 DMA 396 Fibanocci Retracements Relative High: 448.43 (12/29/00) Relative Low: 339.49 (03/22/01) 38% 382.22 50% 395.69 62% 409.03 ***** CBOT Commitment Of Traders Report: Friday 10/05 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts on the Chicago Board Of Trade. 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 are not. Extreme divergence between each signals a possible market turn in favor of the commercial trader’s direction. S&P 500 Commercials Long Short Net %Change 9/18/01 406,387 471,823 (65,436) (20.8%) 9/25/01 357,873 407,036 (49,163) (24.9%) 10/02/01 365,200 408,567 (43,367) (11.7%) 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 %Change 9/18/01 172,988 100,531 72,457 (5.6%) 9/25/01 122,613 71,721 50,892 (29.7%) 10/02/01 124,249 73,882 50,367 (1.1%) Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 NASDAQ-100 Commercials Long Short Net %Change 9/18/01 35,497 45,731 (10,234) (8.0%) 9/25/01 26,761 36,812 (10,051) (1.8%) 10/02/01 26,703 37,699 (10,996) 9.4% 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 %Change 9/18/01 22,876 21,702 1,174 (56.6%) 9/25/01 10,699 6,580 4,119 251.0%) 10/02/01 10,918 6,804 4,114 (0.1%) 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 Commercials Long Short Net %Change 9/18/01 28,425 15,077 13,348 7.5% 9/25/01 20,013 7,806 12,207 (8.5%) 10/02/01 22,755 10,124 12,631 3.5% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 8,925 - 5/22/01 Small Traders Long Short Net %Change 9/18/01 7,335 15,044 (7,709) 46.1% 9/25/01 4,530 12,621 (8,091) 4.9% 10/02/01 4,731 11,868 (7,137) (12.1%) Most bearish reading of the year: (7,572) - 5/08/01 Most bullish reading of the year: 1,909 - 1/16/01 Small Specs Commercials S&P 500 (Current) (Previous) (Current) (Previous) Open Interest Net Value +50,367 +50,892 -43,367 -49,163 Total Open Interest % (+25.42%) (+26.19%) (-5.60%) (-6.43%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -7137 -8091 +12631 +12207 Total Open interest % (-43.00%) (-64.11%) (+38.42%) (+43.88%) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +4114 +4119 -10,996 -10,051 Total Open Interest % (+23.21%) (+23.84%) (-17.07%) (-15.81%) net-long net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.No significant changes this week although we did see the Commercial players continue to reduce their net-short contracts on the S&P 500. We will wait until the Commercials have moved into net-long positions before we raise the bullish flag.. . Gold:.Another wild reversal took place this week as the Commercials are once again net-short. We have seen gold level off over the last week and it will be interesting to see if this bearish stance by the Commercials, pays off. 9/04 49,839 contracts net-short 9/11 No Data. 9/18 49,456 contracts net-short 9/25 36,638 contracts net-long 10/02 67,122 contracts net-short Data compiled as of Tuesday 10/02 by the CFTC. ========================= Play-of-the-Day (Bearish) ========================= SYSCO Corporation - SYY - close: $25.21 change:-0.34 stop:$27.75 Original Comments when selected on October 5th: Company Description: This Houston, Texas-based firm is the largest food distributor in North America. SYSCO provides frozen foods, canned and dry goods, fresh meat and produce, medical supplies, and cleaning supplies (approximately 275,000 different products) to roughly 365,000 customers including restaurants (two-thirds of sales), schools, health care facilities and schools. The company has 115 distribution centers in the US and Canada. Fundamentals: In the fiscal year ended June 2001, the firm earned 90-cents per share on sales of $21.8 billion. The analysts' consensus forecast for this year is for earnings of $1.10 per share on sales of $24 billion and $1.13 per share in 2003. The company has a current P/E of 29 and forward 2002 one of 26. The industry average P/E is 18. Why We Like It: Since the terrorist attacks on September 11th, there has been no waiting in American restaurants. Some estimates predict that business has been off from 15 to 25-percent. This makes SYY shares rise from $21.75 on September 21st to the $26.80 close on October 3rd a bull run without legs. The catalyst was optimistic bargain- hunters betting that the sharp drop from $27.79 in the wake of the disasters was a temporary event. Unfortunately for the restaurant business, the problems existed before the attacks. A slew of warnings from companies such as Applebee's (APPB), California Kitchen (CPKI) Cheesecake Factory (CAKE) and even the low-cost burger chain Jack in the Box (JBX) indicates a longer standing drop in sales for the industry. And if restaurants are serving fewer customers, it stands to reason that they are not ordering as much food from distributors like SYSCO. Profitable longs who bought below $24 must be getting nervous now that the shares have stalled short of resistance at the $27.38 200-day moving average. Two consecutive days with small losses must have them thinking that it's time to consider taking profits. A weak sector, nervous longs and nearby upside resistance add up to an attractive bearish play. We see a move to the $22- $23 range with an outside shot at $19 to $20. We will take advantage of the 200-dma and place a $27.75 stop just above it. Updated Comments: This bearish play is playing out much as we expected. A little slow, but the direction is correct. A nice little pop from Monday's 1.71 million shares traded to 1.88 million on Tuesday may be a harbinger that the rising selling pressure will pick up the pace. Still time for new entrants, we see a move to the $22- $23 range with an outside shot at $19 to $20. Picked on October 05th at $26.12 Gains since picked: + 0.91 Earnings Date 10/18 (Not Confirmed) ================================================================= 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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PremierInvestor.net Newsletter Tuesday 10-09-2001 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/1612_2.asp ================================================================= In section two: Split Trader New Plays: none Play Updates: Chevron Corp. - CHV, Tenet Healthcare - THC Closed Plays: Net Bulls New Plays: eBay Inc. - EBAY (Bearish) Bullish Play Updates: Engineered Support Sys. - EASI Bearish Play Updates: none Closed Plays: QUALCOMM - QCOM Stock Bottom / Active Trader New Plays: Lincare Holdings - LNCR (Bearish) Bullish Play Updates: BMET, LMT, MO Bearish Play Updates: SYSCO Corporation - SYY Closed Plays: none Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================= Split Trader (ST) section ================================================================== =================== Split Announcements =================== =============== ST Play Updates =============== ----------------------- Split Candidate Updates ----------------------- Chevron Corp. - CHV - close: 90.89 change: +1.94 stop: 87.75 *new* It's approved. The $39.5 billion acquisition of Texaco was voted and approved by shareholders today. Texaco, the No. 3 oil company in the U.S. will be joining with Chevron, the No. 2 oil company in the U.S. and together they'll be the fifth biggest oil company in the world. Analysts applaud the deal as debt ratios come down and cost savings reach into the billions. TX had to sell $3.8 billion worth of assets to rivals in order to clear FTC guidelines. The new company will be named ChevronTexaco Corp. Shares of both companies were up today. Actually, shares of CHV have been very strong. The stock has almost completely erased its losses since the Sept. 11th attack and the rally has almost been non-stop. Where we could have seen significant resistance at $89 and $90, CHV merely touched the $90 yesterday, came back, and plowed through it today. Volume was very heavy today adding emphasis to today's bullish breakout. Is the stock overbought? On the short-term scale, yes, but looking at the MACD one might think there is still plenty of room to run. The stock should find new support at previous resistance and thus dips should find buying at $89 and $90. Looking at the price of sweet crude, the December contract remains near the $22.89 level. It's interesting that the price has been forming a pennant or to better explain it the price is showing higher lows and lower highs. This means as the price per barrel coils tighter and tighter we're closer to a breakout one way or the other. By the looks of it, the move could be soon. We are moving our stop up to 87.75 which is just under the Monday low. The move up is encouraging but we would enter new positions cautiously. Technically, this is a positive breakout and should be traded accordingly. However, initiate only with a close stop. Picked on September 27th @ $ 84.75 Gain since picked: + 6.14 Earnings Date: 10/25 (not confirmed) --- Tenet Healthcare - THC - close: 59.88 change: -0.77 stop: 57.00 Is anyone out there betting that THC will announce a split tomorrow morning? You'd better not be. We warned you about gambling on an announcement. For those who have not been following the play, there are several clues that would lead some stock split players to believe THC could, I repeat the word "could", announce a split tomorrow at their annual shareholders meeting. The stock price is above historical norms for previous announcements and they have enough authorized shares to announce up to a 2:1. Now, on a trading level, we would prefer to focus on the dip in THC that was largely due to the dip in the broader markets. This could be a buying opportunity but we would wait to see if any further weakness might bring THC back down to $59 or $58 which would be a better entry point. Be sure to confirm the stock is bouncing at these levels before initiating a new play and absolutely play with a stop. Buying on the dip with a stop at $57.00 should reduce your potential risk. Picked on October 4th @ $ 60.22 Gain since picked: - 0.34 Earnings Date: 10/03 (confirmed) ================================================================== Net Bulls (NB) section ================================================================== ============ NB New Plays ============ ------------------------ New Bearish (Short) Play ------------------------ eBay Inc. - EBAY - close:$54.39 change:-1.03 stop:$57.00 Company Description: Pierre Omidyar created an Internet flea market called Auction Web in 1995 because he was inspired by his future wife's interest in collecting Pez dispensers. His site allowed sellers to list items for sale and buyers to bid on items of interest. In 1997 he renamed the site eBay and was soon hosting 800,000 auctions a day. Now the company has over 3 million items listed for sale in more than 4,500 categories and is expanding its presence internationally. It created eBay Japan in 2000 and moved into Europe through its acquisition of French auction house iBazar. It also has launched Canadian and Austrian sites and purchased an interest in car seller Autotrader.com. The company earns money through advertising and by charging a small fee for every item sold. These small fees have added up into a healthy and growing bottom line. Fundamentals: Last year the company earned 21-cents per share. For 2001, analysts expect earnings to increase 114-percent over 2000 to 45-cents per share and revenue to grow 57-percent to $681 million. They see this hyper-growth continuing in 2002 with a consensus estimate of an additional 68-percent jump in earnings to 72-cents a share on a 39- percent rise in revenue to $970 million. eBay is not a cheap stock. Investors have rewarded their growth by giving its shares a current P/E of 259 and a forward 2001 one of 120. Why We Like It: eBAY has been one of the miracle Internet stocks, able to float above the tech carnage with a growth business model that seemed unfazed by economic conditions. However, for the first time there may be cracks forming in the bullish juggernaut. eBay reported that growth in total auction listings are beginning to slow. The second quarter of 2001 saw a 10-precent jump in auction from the first quarter. In 2000, the comparable period saw a 17-percent increase. In addition, a survey of eBay auctions in the first five months of the year by TIAS.com, shows that collectable prices have decreased an average of 40-percent to $50 from $84. Since eBay earns a fee based on the sale price of the items and is responsible for 4 to 8-percent of total US collectable trading this is a worrisome trend. In addition, the attacks on September 11th have clearly accelerated the decline of the US economy, increasing the likelihood that Internet companies will be reducing guidance in the upcoming earnings season. Taken as a whole, traders are beginning to question whether the eBay can maintain its stellar growth rate. And if it can't maintain its growth, it can't maintain its astronomical valuation. The technical picture strongly suggests that eBay shares are running out of gas after a sharp run up from a low of $40.48 on September 27th. As the share price has risen so has the trading volume declined. Over the last five trading sessions the volume has fallen from 13.7 million to Tuesday's 4.9 million (an average day is 7.4 million). This is an indication that longs are losing enthusiasm as they are starting to view the stock as overvalued. Although Tuesday's $1.03 per share loss was on low volume, we think the selling pressure will increase as profitable longs begin to sell to protect gains. This pace will accelerate if a parade of Internet companies begins to report poor earnings and eBay longs and shorts begin to sense reduced guidance when eBay reports on the 18th. Impeding a downside move will be support at the $50.99 200-day moving average. Our point and figure analysis produced a $46 price target with a possibility of a move to $43.00. We will start this play with a $57.00 stop, which is just above the $55.59 50-day moving average and right at longer-term bearish price resistance.. Picked on October 18th at $54.39 Earnings Date 10/18 (Not Confirmed) =============== NB Play Updates =============== ----------------------- NB Bullish Play Updates ----------------------- Engineered Support Sys. - EASI - cls: 52.93 chg: +1.03 stop: 48.25 As expected, the launch of America's attack on Taliban and terrorists targets helped push buying interest in many defense stocks on Monday. EASI opened higher on Monday and traded to $58.00 before falling throughout the day and bouncing at the 50.60 level. Tuesday's session also saw another dip to the 50.60 level before the bulls did some late morning buying. EASI traded sideways the rest of the afternoon. This may be the dip we've been looking for as we discussed a possible dip back to the $50 level on Sunday. The constant coverage by the media of America's new war could keep investor interest on the defense stocks for the time being. Confirm stock and market direction before starting any new positions. Picked on October 4th @ $53.50 Gain since picked: - 0.57 Earnings Date: N/A =============== NB Closed Plays =============== -------------------- Closed Bearish Plays -------------------- QUALCOMM - QCOM - close: 40.85 change: -0.37 stop: 42.00 Our $42 stop was barely able withstand a surprising one-day $2.76 gain on Monday. There was no news to account for the jump; this was just bargain hunting on a very volatile play. The bargain hunters ran out of gas Tuesday morning and the shares returned to their bearish trend, but not before our $42,00 stop was clipped. The tech picture on this stock is still plug ugly, but a stop is a stop, so we're out. Picked on October 5th at $38.46 Gain since picked - 3.54 Earnings Date: 11/06 (not confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ ------------------------ New Bearish (Short) Play ------------------------ Lincare Holdings - LNCR - close: $23.65 change: -0.32 stop: $25.00 Company Description: Lincare is one of the US's largest providers of oxygen and other respiratory therapy services to in-home patients. Lincare's liquid oxygen systems and other respiratory equipment, used by people suffering from chronic pulmonary diseases and other respiratory ailments, account for nearly 90% of its sales. The company also offers infusion therapy (including nutrition therapy, chemotherapy, and other treatments) and rental of such medical equipment as beds and wheelchairs. The firm has over 500 offices in 44 states. Fundamentals: Last year the company earned $1.08 on sales of $703 million. This years analysts project the firm will earn $1.31 on sales of $834 million. The company has a forward 1001 P/E of 18, slightly lower than the industry average of 22. Why We Like It: Lincare shares have dropped steadily since hitting a $34.39 52- week high last July. This weakness became more pronounced over the last week as investors became concerned that proposed reimbursement reductions for Medicare would hurt profit margins. The House Committee on Energy and Commerce is considering such reductions. This followed a General Accounting Office report that said health-care providers were purchasing drugs at rates far below the average wholesale price upon which Medicare reimbursement rates are based. Some analysts have defended the shares saying the sell off was overdone considering that reductions would only effect about 10-percent of total sales. Traders were not paying attention to the defense as a point and figure chart for Lincare shares is now sporting a very bearish triple bottom breakdown. This breakdown shatters a base of consolidation the shares have been in since January. Absent a reversal, we these shares testing falling to test support levels at $21.50, $20 and possibly $18. We will start this play with a stop at $25. Picked on October 22nd at $23.65 Earnings Date 10/18 (Not Confirmed) =============== AT Play Updates =============== ----------------- Bullish Play Updates ----------------- Biomet Inc - BMET - close: 30.48 change: -0.15 stop: 29.00 NEW Biomet shares are starting to look tired. Four days in a row the stock has failed to break through resistance at $31.00. Although Tuesday's decline was slight at 15-cents, both the close and the $29.90 session low represented respective lows for the past four trading sessions. Yet there are some bullish signs. Tuesday's volume at 2 million was low in comparison to the 2.2 million daily average and the shares rebounded sharply off of the session low. This suggests that if there is a dip it ought not to be severe, as it will mostly represent profit taking by longs that have been riding it up from since the shares hit $24.33 on September 21st. The fundamental long-term picture of the stock remains solidly in the bull camp. With some hesitation we will are going to tighten our stop to $29.00, but short-term traders may consider selling into strength with a view to reentering this play on a dip. Picked on October 2nd at $30.35 Gain since picked: + 0.13 Earnings Date 09/20 (confirmed) --- Lockheed Martin - LMT - close: 47.55 change: -1.56 stop: 46.50 No change in our outlook. LMT shares and those of most companies in the defense sector saw some profit taking after an extended run up. We don’t see a serious correction, perhaps only to the next area of support at $46 and look for traders to use any dip as a possible entry point. . Many traders are still playing the long side hoping for a contract win on the $500 billion Joint Strike Fighter. The big decision is due October 26th. Picked on September 27th at $43.30 Gain since picked: + 4.25 Earnings Date 10/25 (Not Confirmed) --- Phillip Morris - MO - close: 50.97 change: +0.33 stop: 49.25 No change in our outlook from last Friday. But please note that we raised our stop on Monday. If you missed our pervious comments, here is a reprint: Hey, did you hear that Phillip Morris is replacing Global Crossing (GX) in the S&P 100 index? No? It appears neither did anyone else. This stock is just creeping along and it's driving the trader in us nuts. Don't get us wrong, we don't mind stocks with a slow and steady climb but MO has been focused on the slow since we picked it. If you get impatient keep repeating our mantra...MO is a defensive stock for any recession and their yield makes them an attractive investment in a low interest rate environment. We've been eagerly anticipating MO to breakout above resistance at $49 and $50 and now that it has we'd like to see at least a little more momentum. Looking ahead we see resistance at $52 and $54. Fortunately, the company is expected to announce earnings in a week and a half. Maybe we'll get some excitement then. New positions could be considered now that MO is over $50 Picked on August 30th at $47.94 Gain since picked: +2.22 Earnings Date 10/17 (unconfirmed) ------------------ Bearish Play Updates ------------------ SYSCO Corporation - SYY - close: $25.21 change:-0.34 stop:$27.75 This bearish play is playing out much as we expected. A little slow, but the direction is correct. A nice little pop from Monday's 1.71 million shares traded to 1.88 million on Tuesday may be a harbinger that the rising selling pressure will pick up the pace. Still time for new entrants, we see a move to the $22- $23 range with an outside shot at $19 to $20. Picked on October 05th at $26.12 Gains since picked: + 0.91 Earnings Date 10/18 (Not Confirmed) ================== Trading Ideas ================== This section contains stocks that meet criteria which may make them of interest to long and short side traders. These are not recommendations, nor have they been reviewed by PremierInvestor editors for investment potential. However, each of them has technical and fundamental characteristics that make them worthy of further review by traders and investors looking for fresh ideas. New stocks will appear daily following the market close. --------------------------------- Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change MARY Saint Mary Land & Explor 18.35 +0.57 BTU Peabody Energy 29.31 +2.23 FCS Fairchild Semiconductor 18.35 +0.57 TMX Telefonos De Mexico 33.71 +0.66 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change TASR Taser Intl 11.19 +2.34 VISG Viisage Tech 15.97 +2.87 KROL Kroll Inc 14.27 +2.97 ACLA Aclara Biosciences 6.90 +1.32 RGR Sturm Ruger & Co 11.60 +1.09 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change AHMH American Home Mtg 20.92 +1.31 HRH Hilb Rogal & Hamilton 52.75 +2.25 MYGN Myriad Genetics 38.95 +4.17 SGR The Shaw Group 35.50 +1.63 EDMC Education Management 36.37 +1.32 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change GKSRA G&K Services 24.20 -1.05 IPCR Ipc Holdings Ltd 25.80 -1.20 PDX Pediatrix Medical 29.30 -4.41 GMT Gatx Corp 26.40 -1.59 PIXR Pixar 40.30 -1.95 ------------------------------------------------------------ Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------------------------- Ticker Company Name Close Change BN Banta Corp 26.80 -0.77 DP Diagnostic Products 44.00 -2.85 NDC National Data Corp 35.05 -0.77 TGH Trigon Healthcare 64.73 -1.34 LOW Lowe's Companies 30.40 -1.09 ================================================================= 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. 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