PremierInvestor.net Newsletter Tuesday 11-13-2001 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/8211_1.asp ================================================================= In section one: Market Wrap: 16 up, 14 down.... Market Sentiment: Positive "event" gives Wall Street a lift Play-of-the-Day: Poised to Play Catch Up ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 11-13-2001 High Low Volume Advance/Decline DJIA 9750.95 +196.60 9755.80 9551.40 1.3 bln 2220/ 930 NASDAQ 1892.11 + 51.98 1893.92 1867.27 2.1 bln 2346/1261 S&P 100 587.04 + 10.91 587.28 576.13 Totals 4566/2191 S&P 500 1138.90 + 20.76 1139.14 1118.33 RUS 2000 448.34 + 7.86 448.34 440.48 DJ TRANS 2340.94 + 69.02 2342.06 2272.07 VIX 28.63 - 2.63 30.34 28.51 VXN 55.94 - 3.05 58.43 55.91 TRIN 0.46 Put/Call Ratio .58 ----------------------------------------------------------------- =========== Market Wrap =========== 16 up, 14 down.... Look at a bear and you'll most likely see a frown. Today's action has our hypothetical Dow Industrials portfolio benchmarked from the September 10th close now showing a gain, with 16 of the Dow components closing higher than their September 10th close. In yesterday's "Market Wrap" on PremierInvestor.net it was a numbers game in the Dow Industrials where we witnessed 1, then three components turning green in the short-term that seemed to lead to a late session comeback in the Dow Industrials. Is today's action with 16 of the 14 components showing green since the September 10th close a sign of things to come longer-term? Dow Industrials Hypothetical Portfolio from Sept. 10 close Today marks the first close where we now find more than 15 of the Dow component stocks showing gains since their September 10th close. When subtotaled, we also see a fractional gain of $37.17 or 0.12%. Is this a sign that the markets are turning the corner? One way to help answer this question is too look at relative strength. What I've done above in the far right column is indicate what the "status" of relative strength is doing on each stock's relative strength chart, measured against the Dow Industrials Index ($INDU) itself. There are basically four different "cycles" a stock will go through based on relative strength. Let's start with Phase 1. This is a " somewhat bullish" cycle. A stock having been in the "very bearish" cycle begins building a bottom and relative strength improves short-term. This would be characterized by a relative strength point and figure chartist saying "relative strength Sell signal, but now in a column of X." (S, X). The next phases from here could either be Phase 2 or Phase 4. Phase 2 might be described as a "very bullish" cycle where the stock now matures from Phase 1. The stock has now become very much in favor both near-term and longer-term. The stock has been outperforming and showing excellent relative strength vs. the comparable index (in this case, the Dow Industrials). Relative strength is characterized by "relative strength on a Buy signal and in a column of X. (B, X). The next phases from here are either Phase 1 or Phase 3. Phase 3 is what I think of as the "somewhat bearish" phase. This could be thought of as a stock that has been in favor with the market long-term, but is beginning to perhaps stall out, or undergo distribution near-term. The point and figure chartist that is charting relative strength would see a RS chart that shows a Buy signal, but has now reversed into a column of O's. The next phases from here could be Phase 2, or Phase 4. Phase 4 is the "very bearish" cycle. In this cycle, the stock has lost favor not only longer-term, but has also been under performing the index short-term. This stock is/ has been out of favor. In point and figure lingo "relative strength is on a Sell signal and in a column of O. (S, O). The next phase from here is Phase 1. Just like a roller coaster, a stock will go up and down through the four phases described above. Sometimes, phase 2 will evolve to phase 3 and then resume phase 2 once again. For those stocks that fall out of favor, phase 3 turns to phase 4 and is usually no fun for the bull holding on. So what does all this have to do with a turn for the better and the beginning of a longer-term bull market? Just like we've been doing since September 10th and monitoring the Dow 30 and the various "rankings" of stocks as they shuffle back and forth, we now look to build on the process and try to understand relative strength of each stock and how they all stack up against each other and vs. the Dow Industrials (we could measure RS vs. the S&P 500 too, but RS vs. Dow keeps the concept simple). In the far right column of the Dow portfolio, I've placed four different "abbreviations" for the relative strength chart for the corresponding stock RELATIVE to the Dow Industrials Average. The first letter is either B (buy) or S (sell) as it relates to the relative strength chart showing a "buy" or "sell" signal. This is the Longer-term "signal" from the relative strength chart. The second letter is either X (showing near-term relative strength) or O (showing near-term relative weakness). In essence, Phase 1 = S, X (sell, column of X) , Phase 2 = B, X , (buy, column of X), Phase 3 = B, O (buy, column of O) and Phase 4 = S, O (sell, column of O). What I think needs to happen from here Now we're going to try and pull this all together and begin building further on what I think needs to happen going forward for a "super bull market" or at least a longer-term turning point to take place. As we go down the list of the Dow components, we can count 18 X's in the RS column. This means that there are 18 stocks, currently showing some strength near-term vs. the Dow Industrials. Now, it may be entirely possible for all 30 to show RS in a column of X's as it takes a 3-box reversal to get the RS chart in a column of O's. But what we want to start looking for near-term is for some of the stocks in the LOWER part of our portfolio to begin showing signs of strength near-term (reverse from O to X). What this should do is create a "tidal wave" and push the Dow Industrials along with investor psychology higher. So far, we've seen a progression of leadership in our Dow portfolio where we've built a progression of 3 stocks in positive territory to the now 16 stocks since their September 10th close. The first step for a bull market to occur has. We've gotten some leadership and positive breadth (number of stocks advancing) has improved markedly. A market can go nowhere if there isn't some type of leadership. But for a continued bull phase to continue, you need some of the "laggards" to start carrying their fair share of the weight. At least, this is what creates a more healthy and stronger bull. In essence, a bull with just two legs is less likely to run an extended distance than one with four. Let's take a look at the relative strength chart of General Electric (NYSE:GE). It's a stock I felt would be the "swing stock" for the Dow Industrials if it could break above the $40 level. This was prior to yesterday's plane crash in New York, but its also a good example of a "Phase 4" stock where its Relative Strength chart is on a Sell Signal and currently in a column of O's. Subscribers will remember that this stock was profiled as bullish ONLY due to the nice correlation in its bar chart with that of the Dow Industrials. Now we look at relative strength to see where the stock might be able to create the "tidal wave" of relative strength that could push things higher for the Dow. Due to apparent problems at www.stockcharts.com we are unable to access their site at this time and show a relative strength chart or access any charts at this time. We'll look to follow up on this topic in tomorrows wrap. Where do we go from here? Well, I must say, our "stock picker" is doing a heck of a job. James Brown has turned into a thermos! Much like a thermos, he's able to either keep hot things hot, or cold things cold. How does he know? Actually, it's been a process and a disciplined one at that. It's never simple to trade/invest an account. Often times its the process or discipline that ends up having the account achieve success or failure. Some may think the only reason the PremierInvestor.net portfolio is doing so well is that we got lucky and the market rallied. Others would argue that a trader/investor had to be positioned correctly before today's move to have benefited from it. Yes, it's true that our bullish plays did well as the broader markets rallied today, but our bearish plays haven't done too bad considering some of the broader market gains. For any trader, "paper profits" do little good. Profits that are generated from a trade having been closed is what counts and pays the bills. Yes, it's "nice" that F5 Networks (NASDAQ:FFIV) is up 14.7% since profiled on November 9th in the "High Risk / High Reward" F5 Networks Chart - There are three past events that seem to stick out in the trading of F5 Networks (NASDAQ:FFIV) that I think are interesting and subscribers should be aware of. One is the apparent "bull trap" that looks to have taken place back in late June above the $17.47 level. Remember where the NASDAQ-100 bullish % was at that time? Yep, it had been "overbought" at 82% in April-May, then went "bear confirmed" in June. The seeming break above the $17.47 level now looks to have been a classic "bull trap" that sucked in some momentum players, but the broader market action pulled the stock lower, violating level after level of retracement. Then in late September, the "dip" below the $9.11 level looks to have been a "bear trap." Remember where the NASDAQ-100 bullish percent chart was in late September? Yep, 2% and very "oversold." Now what we're looking at is large down volume on November 8th of 3.1 million shares. To me, this hints of a large crossing of shares between at least two institutions. One was a seller, the other a buyer. We never know for sure if the seller was a bear, or just a long that has been holding the stock from the $4-$9 level that had accumulated in the base. Tomorrow could be another bullish day for F5 Networks on a break above the November 8th high of $22.94, but a trader is looking to lock in a profit at our raised stop of $20.85 (see tonight play update) or sell strength at their original target. We have hint that this stock is susceptible to some "manipulation" and subscribers are carrying a relatively nice gain in the stock. We want to be tightening up a stop to try and help assure subscribers a gain. This was a "High Risk / High Return" trade and now its time to try and remove some of the risk. Our original profit target was the $23-$25 area and we came close to that today at $22.88. We can't review all of the trades in the market commentary, but I think F5 Networks (FFIV) is a classic example of not trying to shoot for the sky, but stick to your original trading plan, and when the trade begins working in your favor, then remove some of the risk in the trade by following trade direction with a trailing stop. Stick with your discipline and trade strategy. You'll book more consistent profits over the long run. Yes, there will be those that you sell too early, but that's the only way to actually realize a gain. Something to think about The bulk of reader e-mail pertains to "what is causing all this bullishness? Is this rally for real?" I can't answer that and I don't think there's a person alive that can. Many believe that the current rally is a culmination of certain events that have unfolded and currently unfolded. Analysts point to the aggressive Fed rate cuts and the MARKET factoring in a recovery. Some think the current success by the U.S. and Northern Alliance in Afghanistan and progress being made toward the damaging of a key terrorist ring is part of the market's bullishness. Perhaps James L. Fraser said it best. "History shows that once the United States fully recognizes an economic problem and thereby places all its efforts on solving it, the problem is about to be solved by natural forces." Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Positive "event" gives Wall Street a lift by Russ Moore Positive "event" gives Wall Street a lift. Good news from overseas and an increasing likelihood that yesterday’s crash was not terrorist related had investors opening their wallets and sending stocks higher. The blue chip DOW soared +2.1 percent while the NASDAQ and NDX continued to power higher with gains of +3.4 percent each. Volume was on the rise as 1.34 billion shares traded hands on the big board and 2.19 billion shares were exchanged on the tech index. Market breadth positive with winners trouncing losers by a 22/9 count on the NYSE and a 23/13 margin on the NASDAQ. The broader markets saw retail, biotech, airline and financial sectors attracting the bulk of the buying action while chip, software, and networking sectors were very strong on the tech side. Gold was the only sector on the downside. Retail sales figures will be released on Wednesday. This sector has enjoyed a nice run of late and tomorrow’s data will be critical to its continued success. The Fed’s senior loan officer survey of large banks showed commercial and industrial lending activity hit the skids in the third quarter. In addition, seventy percent of banks reported declining demands for loans, the largest percentage in more than 10 years. The bulls continue to snub their snouts at the bears, completely ignoring the growling of "overbought" and "pullback". For now at least, the bulls are definitely winning the tug-of-war. VIX Tuesday 11/13 close: 28.63 VXN Tuesday 11/13 close: 55.94 30-yr Bonds Tuesday 11/13 close: 4.91 Total Put/Call Ratio: .58 Equity Option Put/Call Ratio: .46 Index Option Put/Call Ratio: 1.12 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 39.36 Volume/Open Interest Maximum calls: 38/ 68,874 Maximum puts : 33/101,164 Moving Averages 10 DMA 37 20 DMA 35 50 DMA 33 200 DMA 42 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: 587.04 Volume/Open Interest Maximum calls: 610/7,302 Maximum puts : 500/9,138 Moving Averages 10 DMA 569 20 DMA 563 50 DMA 552 200 DMA 613 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: 1139.09 Volume / Open Interest Maximum calls: 1100/18,298 Maximum puts : 950/22,389 Moving Averages 10 DMA 1106 20 DMA 1094 50 DMA 1076 200 DMA 1191 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: 9,750.95 Volume / Open Interest Maximum Calls: 94/23,712 Maximum Puts 92/19,115 Moving Averages: 10 DMA 9,474 20 DMA 9,390 50 DMA 9,267 200 DMA 10,220 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: 584.35 Volume / Open Interest Maximum Calls: 580/ 720 Maximum Puts: 420/1,576 Moving Averages 10 DMA 566 20 DMA 546 50 DMA 503 200 DMA 537 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: 541.29 Volume / Open Interest Maximum Calls: 570/ 529 Maximum Puts: 420/ 783 Moving Averages 10 DMA 503 20 DMA 474 50 DMA 456 200 DMA 572 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: 392.40 Volume / Open Interest Maximum Calls: 420/ 282 Maximum Puts: 400/1000 Moving Averages 10 DMA 391 20 DMA 393 50 DMA 388 200 DMA 393 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 11/09 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 10/23/01 377,177 413,658 (36,481) 0.1% 10/30/01 377,468 413,729 (36,261) (0.06%) 11/06/01 376,807 416,063 (39,256) 8.2% 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 10/23/01 127,016 71,212 55,804 9.9% 10/30/01 123,546 71,225 52,321 (6.2%) 11/06/01 132,106 81,208 50,898 (2.7%) 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 10/23/01 29,920 40,358 (10,438) (19.7%) 10/30/01 32,055 45,574 (13,519) 29.5% 11/06/01 39,410 47,890 (8,480) (37.0%) 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 10/23/01 11,567 6,934 4,633 (22.9%) 10/30/01 12,725 6,475 6,250 34.9% 11/06/01 11,406 8,143 3,263 (47.7%) 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 10/23/01 25,568 11,832 13,736 (9.2%) 10/30/01 25,872 12,556 13,316 (3.1%) 11/06/01 25,977 11,951 14,026 5.4% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 8,925 - 5/22/01 Small Traders Long Short Net %Change 10/23/01 4,902 11,900 (6,998) (7.8%) 10/30/01 4,261 11,220 (6,959) 0.0% 11/06/01 3,569 12,281 (8,712) 25.2% 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 +50,898 +52,321 -39,256 -36,261 Total Open Interest % (+23.86%) (+26.86%) (-4.95%) (-4.58%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -8,712 -6,959 +14,026 13,316 Total Open interest % (-54.97%) (-44.95%) (+36.98%) (+34.65%) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +3,263 +6,250 -8,480 -13,519 Total Open Interest % (+16.69%) (+32.55%) (-9.71%) (-17.41%) net-long net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.Four weeks and counting as the Commercials barely budged in their net-short position on the S&P 500. We did see a move worth noting on the NASDAQ 100 with the Commercials and Small Specs headed in opposite directions. The Commercials reduced their net-short position while the Small Specs reduced their net- long positions. Are the Commercials moving towards a net-long position on the NASDAQ? We have seen considerable strength on the tech index this week and a move to net-long by the Commercials would get our attention. Gold: No significant changes on Commercial positions. 10/09 64,729 contracts net-short 10/16 51,816 contracts net-short 10/23 25,191 contracts net-short 10/30 33,199 contracts net-short 11/06 35,435 contracts net-short Data compiled as of Tuesday 11/06 by the CFTC. ========================= Play-of-the-Day (Bullish) ========================= Allegiance Telecom - ALGX - close: 9.05 chg: +0.10 stop: 7.90 Company Description: Allegiance Telecom is a facilities-based CLEC based in Dallas, Texas. Allegiance Telecom offers businesses a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. Allegiance is targeting a total of 36 major metropolitan areas in the U.S. with its "one-stop shopping" approach. (source: company press release) - ORIGINAL WRITE UP, Nov. 7th, 2001 - Why We Like It: ALGX is a telecom stock making a comeback. The Monday opening after the September terrorist attacks was crucial for ALGX (like so many other stocks) but this telecom stock broke below key support at $10. The down trend picked up steam with the market's terrible decline that week but on the 26th of September shares of ALGX were hammered for a 30% loss. Management had told analysts that the 9-11 attack would lower revenues by 5% but they expected earnings to be on track. Shares continue to get pummeled before finding a bottom near $3. The company maintained their guidance that the 2nd half of 2002 they would be breakeven. Since then ALGX has announced earnings on Oct. 23rd and the stock has been in a bullish climb since. Today's close was the third consecutive day higher after closing above its 50-dma and the stock appears to be using the $8.00 level as new support. Some traders will see today's close at 8.62 as important as it surpasses the April 2001 lows. We're looking for a short-term move up to $10 while longer-term players can aim for $12 but there is a lot of congestion once the stock passes $10. We're going to initiate the play with a tight stop at $7.85, which is just under today's lows. Traders who like to move in on confirmation can wait for the stock to trade above the $8.80 level (or $9.00 if you really want confirmation). Those with a longer time horizon may want to widen their stop closer to $7.50 or lower. FYI: if ALGX trades to $10.00 intraday we will close it for a profit. - TUESDAY's UPDATE - The early morning panic on Monday sent shares of ALGX to a low of 8.31 before the stock quickly rebounded and spent the rest of the day trading sideways. Shares continued their horizontal trading on Tuesday despite the strong rally in the Nasdaq. We would have preferred more participation from this telecom stock but it does appear ready for a bullish move up tomorrow. Traders still looking for an entry point can look for dips to $9.00 or shares above $9.20. However, we will close the play for a profit if ALGX can trade to $10.00 on an intraday basis. At the moment our 43-cent gain is worth almost 5%. We're going to leave our stop at 7.90 for the moment but 8.25 looks like an attractive area to put a stop as well. If you're feeling really conservative something under 9.00, like 8.95, might work as long as you confirm stock direction first. Picked on November 7th at $ 8.62 Gain since picked: +0.43 Earnings Date 10/23 (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. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Tuesday 11-13-2001 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/8211_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: ALGX, CHKP, LGTO, NETA Bearish Play Updates: WWCA Stock Bottom / Active Trader Bullish Play Updates: GE, HON, IKN Bearish Play Updates: BRL Closed Bullish Plays: BMS, CLX Closed Bearish Plays: HCR High Risk / High Reward Bullish Play Updates: AOL, FFIV, HM Split Trader - 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) ================================================================= Net Bulls (NB) section ================================================================== =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Allegiance Telecom - ALGX - close: 9.05 chg: +0.10 stop: 7.90 The early morning panic on Monday sent shares of ALGX to a low of 8.31 before the stock quickly rebounded and spent the rest of the day trading sideways. Shares continued their horizontal trading on Tuesday despite the strong rally in the Nasdaq. We would have preferred more participation from this telecom stock but it does appear ready for a bullish move up tomorrow. Traders still looking for an entry point can look for dips to $9.00 or shares above $9.20. However, we will close the play for a profit if ALGX can trade to $10.00 on an intraday basis. At the moment our 43-cent gain is worth almost 5%. We're going to leave our stop at 7.90 for the moment but 8.25 looks like an attractive area to put a stop as well. If you're feeling really conservative something under 9.00, like 8.95, might work as long as you confirm stock direction first. Picked on November 7th at $ 8.62 Gain since picked: +0.43 Earnings Date 10/23 (confirmed) --- Check Point Software - CHKP - cls: 41.90 chg: +3.39 stop: 39.90*new* Wow! We were expecting good things from CHKP but not quite this fast. Unlike the rest of the market that really saw a strong dip on Monday morning due to the plane crash, shares of CHKP merely dipped to $35. Bulls saw this pullback to support as their buying opportunity and they ran with it as the software index posted strong gains. The rally continued on Tuesday with CHKP gapping up to open at $40.30 and trading to $42.17 before pulling back again. What traders should find interesting was the strong close on Tuesday after a late day dip to $40.35. Most of this can be attributed to a strong bullish Nasdaq and big moves in the GSO software index, which has moved from support at 160 to resistance at 170. Buttressing the sector was leadership in MSFT, which also posted two nice days and is currently trading above potential resistance at $67.50. Check Point has also received a couple of upgrades this week with the one today by influential broker JP Morgan. JPM moved their rating from "buy" to "long-term buy" with a price target of $50. Their analyst believes most of the risks for CHKP are behind them and increased spending on security by corporations should continue. Currently, the newsletter is up almost 6 points and over 16.5% in this bullish play. In this bullish market environment we think CHKP may be able to keep the momentum going. Thus we're going to raise our stop to $39.90 and place an exit point of $44.50 on the stock. At $39.90 we can secure a move of 3.94 points or 10.9%. If CHKP trades to $44.50 we can exit the play with a move of 8.54 points or 23.7%. Only aggressive players should consider new positions in the stock at this time but dips back towards the $40 level may be an opportunity. Our risk is the stock gaps down below our stop and eats into our gain. Hopefully the extremely strong volume of 23.3 million shares is an indication that the move still has some gas left in it. Picked on November 9th at $35.96 Gain since picked: +5.94 Earnings Date 10/18 (confirmed) --- Legato Systems - LGTO - close: 10.92 change: +0.94 stop: 9.85*new* It doesn't get any closer! The Monday morning slide in the markets sent shares of LGTO to trade at $9.00. We had our stop set at 8.99. Shares quickly rebounded and closed higher on the day which rewarded those traders who bought the dip. The bullish trend continued on Tuesday with the strongly positive tech sector. LGTO rallied quickly in the morning and then consolidated sideways between 10.30 and 11.00 for the rest of the session. The good news for the bulls was the late day surge as the stock appeared to make a run at overhead resistance of $11.00. Another positive sign was the very strong volume of 3.8 million shares versus the average of just 1.26 million. We're still aiming to exit the play as soon as the stock trades to $12.00. The newsletter will raise its stop to 9.85 but more conservative traders may be able to get away with a stop below 10.30 if the broader markets are positive Wednesday morning. Day traders should wait for shares to break over $11. Readers who bought the dip on Monday should be doing well. Picked on November 8th at $10.47 Gain since picked: +0.45 Earnings Date 10/23 (confirmed) --- Network Associates - NETA - cls: 23.08 chg: +2.25 stop: 22.15*new* All of that waiting and watching paid off. If you haven't been following the play in NETA, our staff has been watching the stock for the right entry point for days. Friday's dip and bounce looked like the perfect entry point. The tragedy on Monday kept shares subdued but the bullish move in the markets and in the software sector today let NETA play catch up. In our original write up we discussed how our target was $25.00 but we'd be happy with a rally back to $23. NETA has achieved $23 and traders who began the trade with that as their target should stick to their plan and consider taking profits. The high last week was $23.13 and the high today was $23.14. We're encouraged the stock closed over the $23 level (something it hasn't done in a long time) but there is obvious resistance directly overhead. We've decided to tighten our stop to protect the majority of today's gain while exiting the play at a profit if NETA trades to $24.50. PI's new stop will be $22.15, which is just under the late afternoon dip to $22.18 on Tuesday. If you want to give the stock a little more room but still protect some profits a stop at 21.95 should help you keep over 5% of the NETA's move. Picked on November 9th at $20.82 Gain since picked: +2.26 Earnings Date 10/18 (confirmed) -------------------- Bearish Play Updates -------------------- Western Wireless - WWCA - close: 26.22 change: -0.15 stop: 28.05 WWCA is performing to expectations considering the bullishness of the overall markets. The stock continues to drift lower while the Dow and the Nasdaq add strong gains. The stock has been bouncing along support at the $26 area and conservative traders should probably wait for the stock to close below this level. It appears that WWCA could be building a bearish wedge but we need to see lower highs. Traders should confirm stock direction before initiating any new positions. Alternative stop placements could be $27.75 or $27.50. PI is leaving its stop at 28.05. Picked on November 9th at $26.40 Gain since picked: +0.18 Earnings Date 11/07 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- General Electric - GE - close: 40.56 change: +1.13 stop: 39.90 *new* As a Dow component, GE was a direct beneficiary of the 196-point rally in the industrial average today. Monday saw shares of the giant corporation slide quickly over uncertainties surrounding the plane crash. For most of the market the uncertainty centered around possible terrorist activities. GE had even more to worry about. American Airlines flight 587 was an Airbus plane with GE- produced CF6 engines. On Tuesday, the stock seemed to shrug off any investors concerns about potential liability over engine problems even though investigators were looking closely at the issue. The liability concerns even if it is only perceived liability over the downed plane's engines is the catalyst for our new stop on the play. We are raising our stop from 37.75 to 39.90 with the expectation that the $40 level should be support now. The good news for traders is GE's close over resistance of $40.50. There was even more good news after the close this evening. Preliminary reports show no evidence of internal failure in the CF6 engines. This is great news for GE investors but traders need to be aware the investigation is ongoing and bad news reversing tonight's reports could come out at any time. The caution here is don't forget to adjust your stops as necessary. Picked on November 8th at $40.10 Gain since picked: +0.46 Earnings Date 10/24 (confirmed) --- Honeywell Intl - HON - close: 31.70 change: +1.18 stop: 31.15 *new* While not an engine maker, Honeywell seemed to be hit hard by the American Airlines crash on Monday. The stock immediately dropped toward support near $30 and spent the first half of the day trading under the $30.50 level with a brief dip to $29.93. Those investors looking for a dip to $30 had their chance. The strong rally in the markets on Tuesday helped HON gap up at the open and trade higher. However, shares continue to languish under heavy resistance at $32. Traders with a slightly longer time horizon should note the low on Monday was near the stock's 15-dma which has been acting as support for the last couple of weeks. It may be a good area to consider new stops. The newsletter is going to turn conservative on HON. The stock has not been able to breakout above the $32 level since we picked it and we're concerned that shares may be running out of steam. We did mention that HON is more of a slow mover and the retest of support at $30 could have been exactly what the stock needed. We just feel there are other stocks in the Dow or traded on the NYSE that could offer stronger opportunities. This doesn't mean we're throwing in the towel on HON but we are moving our stop up to breakeven at $31.15. If the Dow follows through with another big day tomorrow then HON might be able to finally trade through $32 which could be seen as a new potential entry point. Picked on November 2nd at $31.15 Gain since picked: +0.55 Earnings Date 10/24 (confirmed) --- Ikon Office Solutions - IKN - close: 10.20 change: +0.00 stop: 9.45 Today could have been the premium entry point. We highlighted the stock in the watch list on the weekend and Monday's breakout looked too good to not go long so we added it last night. During the morning hours on Tuesday IKN traded higher but the stock started to pull back through most of the session. We did discuss the possibility that IKN would retest the $10 level and the low today at 10.05 may suffice. The good news is the spike up towards the end of the day as bulls seemed to buy the dip, which is what we would have done. Investors should confirm stock direction before starting any new positions. We are not adjusting our stop as today's move does not really constitute a confirmation of the new leg up. Picked on November 12th at $10.20 Gain since picked: +0.00 Earnings Date 10/25 (confirmed) -------------------- Bearish Play Updates -------------------- Barr Labs Inc - BRL - close: 62.49 change: -5.62 stop: 66.68 *new* The Friday/Monday bounce in BRL was both an oversold bounce and a failed rally at resistance of $70. Bears took the opportunity to short the stock and the bad news from Watson Pharmaceutical helped get things moving. WPI, a rival generic drug producer, delivered quite a whammy to the generic drug sector with a terrible 3Q earnings report and news they planned to refocus their product line. Basically WPI said that the generic drug market was getting too competitive and they would be focusing on "branded" drugs they could sell at higher margins. WPI lost over $18 and fell 39% on the news. This sparked a sell-off in BRL that ended with the stock near its lows for the day. Currently the newsletter is up over four points in the play (over 6%). We think shares have farther to fall but conservative investors happy with a 5% profit can consider taking profits. BRL's volume today was huge at 3.6 million shares. We're going to lower our stop to breakeven at 66.68 but if shares continue to fall we'll bring it down to secure a profitable move. We would strongly consider taking profits and closing the play at $60 but the odds of BRL falling below this level just became an attractive possibility. Picked on November 8th at $66.68 Gain since picked: +4.19 Earnings Date 10/23 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Bemis Co. - BMS - close: 49.20 change: +0.59 stop: 47.75 We just can't seem to get that last five to ten cents out of Bemis. The packaging player has been a nice winner for us and we've been trying to close the play as soon as shares reach $49.95. However, Friday's rally ended with a high of 49.87, yesterday saw a little profit taking but maintained the bullish trend, and today's rally ended with a high of 49.85. We felt we had two choices. We could raise our stop and our target or just close the play. We're opting for the second choice. By closing the play at $49.20 we can capture the $4.21 move from the picked price at $44.99. This is a 9.35% gain in the price. Yet traders who bought the dip in late October are looking at even better gains. If you still think BMS has enough fuel to make it to $50 and beyond then we would consider moving the stop to just under Monday's low of $48.50 and see how far the stock can run. Picked on October 26th at $44.99 Gain since picked: +4.21 Earnings Date 10/23 (confirmed) --- Clorox Co. - CLX - close: 39.14 change: -1.15 stop: 38.95 The market's bullish enthusiasm today appeared to be a signal for traders to rotate out of stocks like CLX and into tech or financials. This is unfortunate, as CLX's close over $40 on Monday was a very bullish development. In Monday's newsletter we raised our stop in CLX to $38.95 based on the idea that $40, now cleared, should be support. Plus, the $39.00 to $39.50 level that had been resistance should also have been support. We had considered using $38.85 which was 5 cents below the late afternoon dip on Friday and if we had the play would still be open. However, considering that we still closed the play with a 3.9% gain we're not going to complain. Picked on November 1st at $37.48 Gain since picked: +1.47 Earnings Date 11/01 (confirmed) -------------------- Closed Bearish Plays -------------------- Manor Care - HCR - close: 22.20 change: +0.70 stop: 21.75 Monday should have been a clue for traders in HCR. The stock quickly rebounded from the negative slide on Friday and began to trade in somewhat of a bullish trend on Monday. Shares closed relatively close to our stop. The rally today was fueled by the market's overall bullishness and a positive healthcare sector. The HCX.X only closed up 4.5 points and remains under its 200-dma which doesn't inspire a lot of confidence in this move up for HCR. Traders should notice that the high today was $22.50, the exact same level that proved to be support in late October. This could be tough resistance for HCR. We are closing the play today at the open of $21.80, or five cents above our stop. This allows for a 10% gain even though there were several opportunities to close the short for a gain of more then 3.70 points or 15%. Picked on October 26th at $24.23 Gain since picked: +2.43 Earnings Date 10/26 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- AOL Time Warner - AOL - close: 38.00 change: +1.57 stop: 36.90 *new* As tech stocks continue higher our play in AOL keeps on climbing. The positive news for traders is the strong close over previous resistance at $37.25 which the stock had trouble trading over on Friday and Monday. AOL may begin to consolidate sideways again as the $38 level was support back in mid-August and previous support is commonly re-encountered as resistance. The PI team has decided to move the stop up to $36.90 which will ensure a gain of 5% in the play if the stock pulls back too far. Investors with a longer time horizon may want to keep their stops under the $35 level or consider something under $35.75 which acted as support on pullbacks both Friday and Monday. Picked on November 6th at $35.15 Gain since picked: +2.85 Earnings Date 10/17 (confirmed) --- F5 Networks, Inc - FFIV - cls: 22.01 chg: +1.59 stop: 20.85*new* It's been an exciting week for stocks in the networking sector and our play in FFIV is already up 14.6%. The bullish enthusiasm in the tech sector helped propel the Nasdaq higher and FFIV gapped open to $21.05. The stock quickly moved to overhead resistance at $23 but pulled back both due to some profit taking and to some negative comments by CSCO's CEO Chambers. He claimed that the next two to eight months could see slow growth. Way to rain on the parade, John. I know he's just trying to communicate with CSCO shareholders but his comments did allow for a late day pullback in the rally. FFIV found more buying interest at $21.50 and bounced from there. We are going reconfirm our target of $25. Actually, if FFIV trades to $24.80 intraday we'll close the play out for a profit. However, we're also raising our stop. The low today was $21 and we're going to place a stop at 20.85 which should protect a gain of over 8.6%. Aggressive traders can look for new entries on pullbacks to $21 or $21.50 or breakouts over $23. Picked on November 9th at $19.19 Gain since picked: +2.82 Earnings Date 10/25 (confirmed) --- Homestake Mining Co. - HM - close: 8.01 change: -0.19 stop: 7.95 No one's paying much attention to gold with all the excitement in the tech sector. HM gapped lower and ended the day with a whimper at $8.01. Day traders willing to scalp the 40 to 50 cents in HM's trading range will be watching for a bounce tomorrow. There will also be short traders looking for the stock to breakdown below $8.00 or $7.95. We regret not putting an entry price of $8.51 on the stock which would have kept us out of the play until it was ready to trade higher. Picked on November 2nd at $ 8.37 Gain since picked: -0.36 Earnings Date 10/31 (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 MAY May Department Stores Co 35.63 +0.91 SFA Scientific Atlanta Inc 23.19 +0.76 NRG Nrg Energy Inc 19.90 +0.80 N Inco Ltd 15.19 +0.65 CXR Cox Radio Inc 24.15 +1.77 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change CPQ Compaq Computer Corp 8.80 +1.14 NXTL Nextel Communications 10.69 +1.13 AMCC Applied Micro Circuits 14.70 +1.61 VTSS Vitesse Semiconductor 13.58 +1.66 RSTN Riverstone Network 14.84 +1.83 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change MU Micron Technology Inc 29.00 +1.85 KSS Kohl's Corp 66.25 +3.01 AL Alcan Inc 34.30 +1.63 SPW Spx Corp 109.18 +2.75 PD Phelps Dodge Corp 30.95 +1.64 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change FRX Forest Laboratories Inc 69.85 -2.61 ELN Elan Corp 39.80 -2.85 WPI Watson Pharmaceuticals 28.54 -18.61 MYL Mylan Laboratories Inc 32.05 -2.06 CTXS Citrix Systems Inc 21.91 -1.38 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- BSYS Bisys Group Inc 54.09 -0.26 HU Hudson United Bancorp 27.00 -0.13 CXP Centex Construction 32.40 -0.28 CDN Cadence Design Systems 23.05 -1.50 ================================================================= 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.
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