PremierInvestor.net Newsletter Monday 11-26-2001 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/3846_1.asp ================================================================= In section one: Market Wrap: Today's recession began in March of 2001 Market Sentiment: Team "Tech" leads the way Play-of-the-Day: One Reason Only Watch List: DRIV, GOSHA, COLM, PLB ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 11-26-2001 High Low Volume Advance/Decline DJIA 9982.80 + 23.10 9992.80 9903.80 1.08 bln 1666/1508 NASDAQ 1941.20 + 38.00 1941.31 1906.89 1.72 bln 2106/1561 S&P 100 596.24 + 2.97 596.85 590.82 totals 3772/3069 S&P 500 1157.42 + 7.08 1157.88 1146.17 RUS 2000 461.22 + 2.80 461.44 456.97 DJ TRANS 2525.85 - 9.05 2550.67 2506.57 VIX 25.24 + 0.46 26.20 24.94 Put/Call Ratio 0.45 ----------------------------------------------------------------- =========== Market Wrap =========== Today's recession began in March of 2001 Today's announcement by the National Bureau of Economic Research that the U.S. economy is in a recession that began in March of this year, appeared to have come a little late for some and fell on deaf ears for others. The NBER is a private academic group that officially dates U.S. expansions and contractions and has played an important role in monitoring past business cycles that helps shape government policy. Robert Hall, an economics professor at Stanford University, heads the NBER business cycles committee. Reuters quoted Princeton's Ben Bermarke, one of the members of the commitee, as saying, "The bottom should be reached by July at the latest, given past behavior of recessions." Today's news from the NBER may be "too late" for many, but the commission is not a forecaster. They're more like a good reporter. They just report the facts. What is rather interesting about some of their comments is that today's "realization" that the U.S. economy officially ended an expansion phase that began in 1991 has officially come to an end. That's not necessarily "bad news" for stock investors. 10-year from now, one might now believe the S&P 500 will be trading 2,170. Today's close was 1,157. I fell out of my chair today when I put the NBER to the test. Yes, the test of retracement. There are a couple of reasons I fell out of my chair. The first reason was some work we had done about a month ago that "identified" the 1,082 level as a key "pivot point" or level to be monitoring for resistance when the S&P 500 was recovering from its September lows of 945. Now stick with me here and lets take it slow. If 1991 was the beginning of a 10-year expansion, then it makes sense that the MARKET new about the beginning and the end of the expansion when the S&P 500 (SPX.X) traded a high of 1,552 back in March of 2000. If so, then a retracement bracket from the January 1991 levels of SPX $324 might gives some type of credence to the committees thoughts. The chart below shows two retracement brackets. The recent 10- year's trading on the SPX is shown in blue. I've also added a red retracement bracket that is fitted. This is too weird and way too coincidental, thus I fell out of my chair. S&P 500 Index Chart - monthly interval The longer-term chart of the S&P 500 Index (SPX.X) is quite interesting with retracement overlaid on the "10-year expansion" that the NBER says came to an end in March of this year. As we start from the far left of the chart, we might think of the first 4 years and 8-months spent in the lower end of our blue retracement bracket as rather meaningless. But during that 4.8 months, the S&P 500 gained roughly 71% from it's January 1991 levels. Once the 80.9% retracement levels was broken to the upside, things really got moving as the S&P 500 then gained 41% from the $794 level in August 1995 to February 1997. What I'm now trying to do on a longer-term basis is to create the same types of levels of retracement to get my longer-term thinking working. That $940 level sure looks like a level that the S&P 500 wanted to turn around from (on 09/21 the SPX traded a low of $944.75). I'm not sure why as the economic data and world events taking place in September were horrendous. Could it possibly be that the MARKET knew about a coming expansion and nearing the end of an economic recession that began in March of this year? Is it a "coincidence" that the turn higher in September came at 50% retracement of the last 10-year's economic expansion? With my "red" retracement, I'm now going to "roll up" retracement and anchor my 0% at $940 (as close as I could get to "blue" retracement of $939.48). I'm also going to be relatively conservative in rolling up retracement and "fit" the new "red" retracement at 50% with the all time high of the SPX at $1,555. Why could this be considered "conservative?" Well, it took 4 years and 8 months for the SPX to get out of the lower 19.1% end of retracement from 1991-1995 (blue retracement) and our red retracement shows the SPX just under the 19.1% retracement level, currently at $1,175. If you can, go back and read the October 9th, market wrap on PremierInvestor.net and note the "bull's reward" levels we were discussing at that time. The "bull's reward" levels on a close above $1,082 were $1,126 and $1,170. We're above the $1,126 level and just 13 points away from $1,170. Near-term, I think bulls have a good shot at the SPX $1,170- $1,175 range, based on our retracement work. So. What takes place at the $1,175 level? That becomes a point where I begin believing (as the MARKET does based on the retracement scenario) that we are indeed entering a new economic growth phase. Not convinced? Lets talk about March of this year as it relates to today's comments out of the NBER. Let's also talk about some peculiar relative strength attributes between Government bonds and higher risk "junk bonds." I've said before that the bond market is much smarter than the stock market. It has to be as the underlying instrument (the bond) often times carries a relatively low "return" in the YIELD. Based on "risk" the YIELD will reflect the amount of risk perceived by the market. It makes sense that in a "troubled" economic environment, a "junk bond" or high yield bond fund like the AIM High Yield Fund (AMHYX) might under perform a bond fund holding higher grade and safer bonds issued like the AIM Intermediate Government Fund (AGOVX). We can test this with relative strength. I'm picking some bond mutual funds, as I don't want to necessarily try and make a blanket call on "junk bonds" based off of just one junk bond. I'd rather compare a basket of these types of bonds to that of a basket of Government bonds. Apples vs. apples so to speak. However, there are red apples and there are yellow apples. There are government bonds, which are deemed "safer" than corporate junk bonds, which are "riskier." Here's a reprint of an update I wrote on OptionInvestor.com on November 16th at 03:00 EST. It gives subscribers an idea for their company 401k-plan, but also an excellent indicator going forward to help try and keep a finger on the pulse of the economy going forward, that will come from the bond market. Getting a craving for some "junk" bonds Every so often, a 401-k or even a retirement account needs a little "junk" food. As it pertains to the fixed income portion of your portfolio, that might mean some exposure to the higher risk/higher potential return and YIELD of the junk bond market. Junk bonds got their name partially due to their higher risk as the underlying company that offers the debt does not carry the highest level of debt rating. These bonds tend to perform more like stocks in a strengthening or strong economic environment. At least for awhile, until they become "fair value" and money rotates back out. There are times to be "in" some junk bonds and there are times to be "out." So why should you be interested in junk bond price action even though you are just an options trader? The bond market is perhaps much more complex than the stock market. The decision making process requires an extreme amount of due diligence and knowledge of the company and the economic environment now and going forward. One way to really judge things is to compare relative strength within the bond market. Since we cant really get a good feel of relative strength by just one bond vs. one bond, I'm going to show relative strength of the AIM Intermediate Govt. Fund (AGOVX), which holds mostly U.S government securities. I want to compare that fund price strength (based on NAV) against the AIM High YIELD Fund (AMHYX), which invests in non-investment grade securities with an average credit quality of B. This was the first high yield fund established in the United States. Relative Strength AGOVX vs. AMHYX Wow! As you can see, the Govt. Income Fund (AGOVX) has shown incredible strength vs. the High Yield Fund (AMHYX) but perhaps that makes sense based upon what we know today about the economy. But what about the future? If this relative strength relationship tells us something about the past, then might it not tell us about the future? I sure think so. What I've done to the above chart is lay out a retracement bracket on the RS chart range. It's kind of interesting that we actually get some correlation with RS at the retracement levels dating back to the period right around January 2001. I've also added a "trading" strategy that a fixed income investor might have implemented based solely on RS. This plays very much into the hands of trading/investing at levels and playing the power of relative strength measurements. Going into June 2000, an investor may have had their bond portion of the 401-k or retirement account fully invested in the High income fund (consult your financial professional to see if this would be within your risk profile). Once the RS moved above the 19.1% level, the investor may have sold 1/2 of their High Yield (AMHYX) fund and moved that money into the perceived safer Govt. Income fund (AGOVX). They didn't want to move it all there as they perhaps still weren't sure what was going on in the market and liked the higher rate of income they were receiving from the high yield fund vs. what was offered from the Govt. Income Fund. The High Yield fund had also had a very nice price performance gain while they had held it. Nonetheless, the change in relative strength was worth noting and time to take some profits and move some money to safety. Then in October of 2000, relative strength continued to climb as the Govt. Income fund (AGOVX) was outperforming the High YIELD fund (AMHYX). An additional 25% of the original bond holding in the high YIELD may have been sold and that money rotated to the Govt. Income Fund. In November of 2000, the further strength of the Govt. Income fund (AGOVX) was really starting to overtake the performance of the High Yield fund (AMHYX) and the remaining amount of capital was rotated to the perceived safety. Only a break of a level of retracement would the investor rotate money back to the High Yield fund (AMHYX). Well... here we are. The past four sessions, we've seen some impressive selling in the Treasury bond fund and I've seen some Net Asset Value (NAV) price decline in the AIM Intermed. Govt Fund (AGOVX) and some price strength in the AIM High Yield Fund (AMHYX). Why would "junk bonds" be showing price appreciation? Is the market out of its mind? Doesn't it know that we're most likely in the midst of a recession? Hmmmm.... but if we think back to June of 2000, everything was rosey as I remember. Why was the market opting to sell junk bonds and buy Govt. Treasury bonds? Was it because the bond market knew something the stock market had yet to figure out? On the right side of the retracement brackets, I've now put together an investment plan going forward, but also a plan that we as option traders might use to understand the bond MARKET's view on things going forward. At the bottom of retracement, we were willing to sell 50% High Yield (AMHYX) and buy 50% Govt. (AGOVX). The reason we were willing to do this is that we wanted to SELL RISK! Now we look to be near the top. But! And this is the BIG but. I don't want to buy a lot of RISK right now. Remember, we're in what looks to be a recession. If I load up on junk bonds (AMHYX) and the economy doesn't pull out of things, we're going to be stuck holding too much risk! What I want to do is dip my toe in the water. Then if I have success I will add further to the exposure of junk bonds. As stock/option traders, we can learn from the dynamics that take place in the bond market. We can get a better feel for what very smart money thinks about the economy going forward. I think the bond market did a very good job of figuring things out back in June of 2000 don't you? Monitor both markets In the past two years, I've talked a lot about the bond market and how it can be a stock investor's best friend. There's trillions of dollars in the bond market. Sometimes it just rotates within the bond market, but some money also comes out and rotates to stocks. As "risky" as a junk bond may seem, a "junk bond" on company ABCDEF is actually "safer" than the stock of ABCDEF. The reason being is that the bond is an OBLIGATION to pay a stated rate of interest and then return original principle back to the investor. While there are no guarantees of either, it is still an OBLIGATION, something a stock does not carry. (End of Nov 16th commentary). Thinking caps on! Hmmmm.... March 2001, March 2001. Hey! March of 2001 is right where the RS chart of the AGOVX vs. AMHYX kicked higher on March 20th, 2001! Yep, right at that 61.8% retracement bracket. Relative strength AGOVX vs. AMHYX current day Since we started this exercise of monitoring relative strength of the AGOVX vs. the AMHYX, the AGOVX has lost just about 1.19% (November 15th Net Asset Value close was $9.22). That can be a rather painful drop for an investor committing new money to the fund, considering its SEC YIELD of approximately 5.4% (based on recent distribution of $0.0415 for 10/31/01). The higher risk and higher YIELDing AMHYX is up just $0.02 since its November 15th close and recently paid a $0.05 disbursement on 10/31/01, roughly a 13% effective YIELD. In essence, the HIGHER YIELD of the "junk bond" fund has more risk, but recent price performance of the funds indicates that the MARKET has been willing to take on the risk. The only reason I see this as "feasible" is if the bond market is also perhaps beginning to believe that the economy is turning a corner. We'll continue to monitor this relationship in the bond market and also monitor levels as that described above in the S&P 500. Profit taking vs. economic doom Everyone, and I mean just about everyone is expecting a pullback in the stock market. You can count me among the "everyone." However, I learned a long time ago, that a market rally can be stronger and last longer than many expect and it is often times best to still have some cash exposed to stocks at this time. I don't want to chase stocks that look overextended. Especially technology stocks. But technology isn't the only think there is to invest in. As it relates to the question of "profit taking vs. economic doom" the above analysis in the bond market becomes our "ace in the hole." Scenario going forward is this. Should we continue to see RS favor the High YIELD portion of the bond market, then any pullbacks in the broader market averages can be considered "profit taking" and not "here we go again for economic doom." One reason I fee comfortable in thinking this is that in the April-June stock rally, the RS chart of the AGOVX vs. AMHYX really didn't show any type of RS strength by the higher YIELD fund. At that time, the Relative Strength was still above the 50-day MA. RS is now below the 50-day MA. We'll continue to monitor this relationship going forward. If you're retirement fund is loaded up in Government bond funds, you'll want to do the same. Right now, it sure looks like we're starting to see some "shift" in the markets thought of risk/reward. If Government bonds are so safe, then why are they being sold? As they get sold, YIELD moves higher. As YIELD moves higher, they should also become more attractive. Shouldn't they? The answer is "maybe." It all depends on other investment alternatives available and it is all about risk/reward. One last note. In the above example of "asset allocation" between Govt. Treasuries and High YIELD bonds, don't think that is just a strategy for individual investors and dollar-cost averaging. If you think for a minute that "BIG money" takes 100% of their bond allocation and turns it into stocks or high YIELD bonds one day, you might want to rethink things. It's a process that is defined by levels, tons of research and input from analysts and economists. But most important, it is a process of risk/reward analysis. Just as we find breaks in levels of retracement on the stocks we trade, we'll find breaks in levels in other relationships. At each break, the MARKET takes a new stance, places a bet, then follows that bet with a stop. If at some point, we see the Relative strength reading in the bond fund relationship above cross a retracement level lower, it wont surprise me in the future if the NBER report eventually proclaims that an "economic expansion" began near that date! Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Team "Tech" leads the way by Russ Moore Team "Tech" leads the way. No doubt energized after a few days off, tech bulls powered the NASDAQ a step closer to the 2000 mark with a gain of +2.0 percent. The big-cap NDX was up +2.7 percent thanks to a wild run on Amazon (+34.4 percent), along with upside performances turned in by Cisco, Intel, and Microsoft. The DOW had trouble picking a direction for much of the session but did manage to eke out a small gain of +0.2 percent. Volume was on the light side with 1.08 billion shares moving on the NYSE and 1.72 billion shares trading on the NASDAQ. Winners outpaced losers by a margin of 17/15 on the big board and 21/16 on the tech index. The majority of sector action was to the upside with biotechs and airlines leading the broader markets while chips, Internet, and hardware were the big tech winners. Oil, oil service, utility, natural gas, transportation, and chemical sectors were weak. Trim Tabs reported outflows in all equity funds of 1.3 billion dollars for the four days ending November 21, however, U.S equities saw inflows of 600 million for the same period. It’s official; we’ve been in a recession since March of this year. The National Bureau of Economic Research, a group of academic economists, made the announcement this morning. The announcement had zero impact on market direction (what a surprise). Lot’s of "extended valuation" talk making the rounds (mainly from those without horns), and that’s probably going to stop a few investors from emptying their pockets just yet. Bullish sentiment remains strong however, and a move beyond key overhead resistance levels (NASDAQ 200DMA 1967.00 and DOW 200DMA 10,178), could have many of the so-called bears rethinking their positions. VIX Monday 11/26 close: 25.24 VXN Monday 11/26 close: 48.22 30-yr Bonds Monday 11/26 close: 5.37 Total Put/Call Ratio: .68 Equity Option Put/Call Ratio: .53 Index Option Put/Call Ratio: 2.55 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 40.25 Volume/Open Interest Maximum calls: 40/151,151 Maximum puts : 37/ 83,324 Moving Averages 10 DMA 39 20 DMA 37 50 DMA 34 200 DMA 41 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: 596.24 Volume/Open Interest Maximum calls: 600/4,097 Maximum puts : 500/6,499 Moving Averages 10 DMA 589 20 DMA 576 50 DMA 555 200 DMA 608 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: 1157.42 Volume / Open Interest Maximum calls: 1150/34,750 Maximum puts : 1050/42,458 Moving Averages 10 DMA 1141 20 DMA 1118 50 DMA 1080 200 DMA 1182 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: 9,982.75 Volume / Open Interest Maximum Calls: 98/25,228 Maximum Puts 90/50,491 Moving Averages: 10 DMA 9,852 20 DMA 9,617 50 DMA 9,270 200 DMA 10,178 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: 618.92 Volume / Open Interest Maximum Calls: 580/ 777 Maximum Puts: 540/1,149 Moving Averages 10 DMA 588 20 DMA 574 50 DMA 514 200 DMA 536 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: 532.46 Volume / Open Interest Maximum Calls: 520/ 748 Maximum Puts: 470/1558 Moving Averages 10 DMA 522 20 DMA 503 50 DMA 454 200 DMA 564 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: 403.55 Volume / Open Interest Maximum Calls: 420/406 Maximum Puts: 360/320 Moving Averages 10 DMA 395 20 DMA 393 50 DMA 390 200 DMA 392 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: Monday, 11/26. 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 11/06/01 376,807 416,063 (39,256) 8.2% 11/13/01 381,539 421,284 (39,745) 1.2% 11/20/01 369,784 415,822 (46,038) 13.6% 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 11/06/01 132,106 81,208 50,898 (2.7%) 11/13/01 136,047 87,645 48,402 (4.9%) 11/20/01 140,507 86,861 53,646 9.8% 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 11/06/01 39,410 47,890 (8,480) (37.0%) 11/13/01 38,751 49,257 (10,506) 23.9% 11/20/01 38,042 46,446 (8,404) (20.0%) 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 11/06/01 11,406 8,143 3,263 (47.7%) 11/13/01 11,568 6,505 5,063 55.1% 11/20/01 12,933 8,230 4,703 (7.1%) 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 11/06/01 25,977 11,951 14,026 5.4% 11/13/01 24,145 10,204 13,941 (0.6%) 11/20/01 25,033 11,525 13,508 (3.1%) 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 11/06/01 3,569 12,281 (8,712) 25.2% 11/13/01 4,094 12,121 (8,027) (7.8%) 11/20/01 3,609 10,565 (6,956) (13.3%) 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 +53,646 +48,402 -46,038 -39,745 Total Open Interest % (+23.59%) (+21.64%) (-5.86%) (-4.95%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -6,956 -8,027 +13,508 13,941 Total Open interest % (-49.07%) (-49.50%) (+36.94%) (+40.59) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +4,703 +5,063 -8,404 -10,506 Total Open Interest % (+22.22%) (+28.01%) (-9.95%) (-11.94%) net-long net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.Commercial players finally moved off of their four-week holding period as they added to their net-short positions. The increase was limited to less than a percentage point; nonetheless, it does show that the Commercials have not yet moved in to a full-blown accumulation phase (bullish) and would appear to be playing a cautious hand. Gold: November has not been kind to the XAU (gold and silver index), however, Commercial players have reduced their net-short contracts to near flat and that could signal a bounce in gold is around the corner. 10/23 25,191 contracts net-short 10/30 33,199 contracts net-short 11/06 35,435 contracts net-short 11/13 23,637 contracts net-short 11/20 2,489 contracts net-short Data compiled as of Tuesday 11/20 by the CFTC. ========================= Play-of-the-Day (Bullish) ========================= ! note, SBAC was also the POD last Monday. SBA Communications - SBAC - close: 11.70 change: +0.50 stop: 10.45 Company Description SBA is a leading independent owner and operator of wireless communications infrastructure in the United States. SBA generates revenue from two primary businesses -- site leasing and site development services. The primary focus of the Company is the leasing of antenna space on its multi-tenant towers to a variety of wireless service providers under long-term lease contracts. Since it was founded in 1989, SBA has participated in the development of over 15,000 antenna sites in the United States. (source: company press release) - ORIGINAL WRITE UP, Nov. 16th, 2001 - Why We Like It: We like SBAC because the stock looks to have plenty of upside potential despite the strong gains it has already made from its October lows. We placed this new long play in the high risk/high reward section because of the big move it has already produced this week. The first thing traders should notice when the look at a chart of SBAC is the long steady down trend from its late April highs. The stock has painfully evaporated from the $34 level down to a low on Nov. 7th of $5.91. During this time the selling would ease for a couple of weeks as the stock rebounded only to get squashed again. This price history is yet another reason to place it in the high-risk category. Of course the disciplined use of stop losses can prevent most of this pain. The stock recently announced its 3Q earnings on November 13th and the results were good. The three months ending on Sept. 30th, 2001 produced total revenues of $63 million, which is almost 39% higher than the previous year. The company's chairman commented on their strong revenues despite a challenging business environment. These positive results helped spur the strong gains in the stock this last week. On a technical level we are encouraged that shares have broken through price resistance of $10. The dip to $9.65 late Thursday and early Friday could have been bears trying to pressure the stock at a psychological resistance level like $10 but the bulls powered it higher. Another technical plus was the close at $10.66, which is above the Sept. 7th low of 10.48, which could have represented additional resistance at 10.50. So how should traders approach this stock that has already rebounded more than 70% from its October lows? We feel that Friday's close at 10.66 is a confirmation of the breakout over the $10 level from Wednesday. The challenges that bulls will face is the 50-dma at 11.37 and a retracement level at 11.50. We would encourage readers who have the ability to apply a retracement tool to the chart to do so. We like to view the Fibonacci levels of 23.6%, 38.2% and 61.8%. However, most tools also add the 50% level and many will highlight the ends at 0% and 100%. In addition to these, if you can, add the 19.1% and the 80.1% (a couple of Mr. Bailey's favorites). Now apply the tool to SBAC from the late April highs near 34.25 to the October low near 5.90. It is uncanny how accurate the stock trades between these levels of support and resistance. Add these technical levels to the common round number price support (psychological numbers for investors) and you have a very clear picture of what portfolio managers and market makers are trading. You should see the 80.1% retracement very close to the 50-dma. This could be a very tough hurdle for the stock. However, one short-term signal some traders like to use is the 5-dma vs. the 15-dma. SBAC just produced a bullish crossover with the 5 crossing over the 15. Additionally, the MACD is turning positive and also has plenty of upside. We decided to consult the point-and-figure chart for SBAC and it shows the stock on a fresh buy signal. The new p-n-f bullish price target is $20. This coincides with the descending bearish resistance line. We're not quite that greedy but we're still going to aim for a move to $13.90 as our ultimate exit point. Shares might stall at $12 but if SBAC breaks out above the 11.50 level there could be a short squeeze big enough to fuel the move higher. We're going to initiate the play with a stop just under Friday's low at 9.64. We're willing to risk 9.5% to hopefully make 30%. If you like the pattern developing in the stock but you're not fond of our entry point consider waiting for shares to close above the 11.50 level - just use a tighter stop once you enter. It's very possible that shares will pull back to the $10 area which would make a good entry point but wait for the bounce up to begin. - POD UPDATE, Nov. 26th, 2001 - The bullishness in the tech sectors helped SBAC trade up another 4.4% to close below overhead resistance at $12.00 (really 11.85). We are raising our stop to 10.45 after SBAC's successful bounce at 10.25 last Wednesday. We are selecting SBAC as the Play-of- the-day tomorrow for one reason. If SBAC can trade above $12.00 there could be a short squeeze or short covering combined with new bulls taking positions on the breakout. We would not look to enter a new position until the stock confirms the move higher (over $12.00). The newsletter is currently up almost 10% on the play. Picked on November 16th at $10.66 Gain since picked: +1.04 Earnings Date 11/13 (confirmed) ========== Watch List ========== The PremierInvestor.net watch list is not designed to be read as full fledged stock picks. Rather we would prefer to offer it as an extra tool in today's investor toolbox. Think of it as a radar screen with your own radar operator pointing out interesting developments, technical patterns or potential plays that you may or may not have seen on your own. Due to time constraints we do glance at the news but rarely do we have time to fully read pertinent news stories, due background research and other necessary screens that investors should do before making a decision. A common exercise is to read the entry, glance at the sector and other stocks in that industry and then compare what's happening in the stock to what's happening in the broader market indices. We hope you enjoy the Watch List and that it proves to be a useful tool for your own trading success. ----------- Digital River - DRIV - close: 17.11 change: +1.53 WHAT TO WATCH: This is one Internet stock that is really out-pacing its peers. DRIV has been on fire from late August where it was trading for less than $5. Now shares have added another 9.8% to close over $17. This is one we certainly don't feel like chasing despite its strong volume supporting the climb. It is definitely a stock to watch for pull backs or breakdowns. --- Oshkosh B'Gosh Inc - GOSHA - close: 39.93 change: +0.68 WHAT TO WATCH: This youth apparel company has been in a non-stop climb from $25.00 in early October to its current position just under round number price resistance at $40. GOSHA has surpassed the previous 52-week high set back in June and this appears to be an all-time high for the stock price. The stock doesn't trade a lot of volume and bears have got to be thinking "when does the six week up trend begin to pull back?" How you choose to trade GOSHA depends on your beliefs about retail clothing, this holiday shopping season and whether or not you feel like shorting something that is up 60% in the last six weeks. Believe it or not, the candlestick formation produced by Monday's trading looks like a "hanging man". This could be a bearish signal that might preclude a new bearish trend or pull back. However, we do need to see confirmation first which alluded the bears when they saw a smaller hanging man on Halloween. Considering the trend we would wait for shares to close under its 10-dma and we'd still be very cautious. FYI, we found GOSHA on the Trading Ideas page for today on Premier. --- Columbia Sportswear Company - COLM - close: 32.06 change: -2.29 WHAT TO WATCH: Here's another apparel company that also enjoyed a strong move up from October through November but now appears to be ready to change directions. The last several sessions have shown the bulls to be finding fruitlessly with overhead resistance at $35. The 200-dma is hanging just beyond at $36.50. The breakdown today came on twice the average volume and we could see shares pull back to $27.50. --- American Italian Pasta - PLB - close: 38.00 change: -2.00 WHAT TO WATCH: One might think that with the onset of cool weather the amount of pasta Americans eat would go up. Whether this is true or not, shares of PLB are doing the opposite. The stock just broke down below its 200-dma on twice its average volume. Today's close is below the September lows and if the stock follows through on the technical breakdown we could see shares fall to $35 before finding support. Longer-term shares are looking unhealthy as well. Confirm stock direction. ================================================================= 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 Monday 11-26-2001 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/3846_2.asp ================================================================= In section two: Net Bulls Bullish Stop Adjustments: CBR, NOK Bearish Stop Adjustments: WWCA Stock Bottom/Active Trader Bearish Stop Adjustments: PB High Risk/High Reward Bullish Stop Adjustments: SBAC, TMPW Closed Bearish Plays: EBAY, INTC 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 Stop Adjustments =================== Bullish Plays ------------- CBR - close: 7.53 change: +0.38 stop: 6.98 *new* With the Nasdaq enjoying a strong rally lead by the chip and Internet sector the software sector added its own 3.5% gain. Our new bullish play in CBR added over 5%. We're still aiming for $8.50 but don't let that stop you from taking profits along the way. The close over the $7.50 level is encouraging for tomorrow. We are raising our stop to 6.98. --- NOK - close: 25.24 change: +1.06 stop: 23.25 *new* The positive markets helped NOK make another gain. Bulls should feel positive by the close over the $25.00 level. We're going to raise our stop to just under the 15-dma (currently 23.39). Don't forget that our target for NOK is $27.50. Traders should also remember that NOK has its annual analyst meeting tomorrow. Bearish Plays ------------- WWCA - close: 25.16 change: -0.69 stop: 26.01 *new* Our bearish play on Western Wireless is finally starting to move our direction again. After slowly consolidating sideways it looks like the bears have finally taken control. The stock has hit a new 52-week low and fell below the recent lows in November. Looking at an intraday chart shows the stock really sliding near the close. The fact that it closed on its low for the day is not a good sign for the bulls tomorrow. We are lowering our stop to $26.01. If WWCA trades to $20 intraday we'll close the play at $20. ================================================================= Stock Bottom / Active Trader (AT) section ================================================================== =================== AT Stop Adjustments =================== Bearish Plays ------------- PB - close: 14.48 change: -0.47 stop: 15.11 *new* We didn't see any news articles on PB today so it looks like the stock is merely following through on its breakdown of support last week. Shares started sliding lower and then began to pick up speed and eventually traded to $14.00 before bouncing back by the close. Volume of 633K is 200% above normal. We are lowering our stop to $15.11. ================================================================= High Risk / High Reward (HR) section ================================================================== =================== HR Stop Adjustments =================== Bullish Plays ------------- SBAC - close: 11.70 change: +0.50 stop: 10.45 *new* The bullishness in the tech sectors helped SBAC trade up another 4.4% to close below overhead resistance at $12.00 (really 11.85). We are raising our stop to 10.45 after SBAC's successful bounce at 10.25 last Wednesday. --- TMPW - close: 44.00 change: +3.49 stop: 39.95 *new* The excitement in the online retail (Internet) sector carried over into the rest of the Internet stocks and TMPW added over 8% in Monday's trading. With shares closing at $44.00, traders who originally targeted this level for profit taking should do so. The newsletter is up over 10% in the play but we're not ready to call it quits yet. TMPW could encounter resistance at 44.50 or its 200-dma at 45.70. Readers may want to adjust their strategy accordingly. We are raising our stop from $37.69 to $39.95. Remember, if TMPW trades to $49.00 we'll close the play. =============== HR Closed Plays =============== -------------------- Closed Bearish Plays -------------------- eBay Inc - EBAY - close: 65.16 change: +3.61 stop: 61.60 A number of positive comments about the current holiday shopping season and how it may affect retailers, specifically online retailers like Amazon.com sent the whole sector running higher today. AMZN closed up over 34% today and in its wake buyers pushed EBAY up over 5%. The opening price for EBAY was $62.36. This is above our stop on the play and thus we'll take a slightly larger loss on this high risk/high reward bearish stock pick. Picked on November 20th at $59.11 Gain since picked: -3.25 Earnings Date 10/18 (confirmed) --- Intel Corp - INTC - close: 31.87 change: +0.81 stop: 31.31 Positive comments from brokers in addition to Taiwan Semiconductor's (NYSE:TSM) comments on higher sales and profit expectations for 2001 due to a "substantial increase in customer orders" had the SOX index on fire today. The SOX ended the day up 4%, which helped shares of INTC gap up at the open and close with a 2.6% gain. As of Friday's close we were already close to being stopped out at 31.31. Now we will have to take today's open at 31.43 as the closing price. This brings the play to a 65-cent loss or just over 2%. Traders should note that INTC remains under strong resistance between $32.00 and $32.50. A close above this level would be very bullish for the stock. Something that might help Intel achieve more buying interest was news today of their new transistor design. Intel proclaimed that their new TeraHertz transistor will be able to run 1 trillion cycles per second. Intel says that their new design allows them to overcome two current problems facing the chip industry of power consumption (electron leakage in the chip itself) and heat, which can actually melt the silicon if not addressed properly. Picked on November 15th at $30.78 Gain since picked: -0.65 Earnings Date 10/16 (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 SI Siemens Aktkien 60.80 +0.87 BLX Banco Latino Americano 33.00 +1.30 GOSHA Oshkosh B'gosh Inc 39.93 +0.68 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change YHOO Yahoo Inc 18.07 +2.34 AMZN Amazon.com Inc 12.21 +3.13 JDEC J.D.Edwards & Co 14.06 +1.57 ONIS Oni Systems Corp 10.11 +1.38 MUSE Micromuse Inc 16.57 +2.07 LGND Ligand Pharmaceuticals 16.00 +1.25 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change PHG Koninklijke Philips 29.25 +1.07 CVS Cvs Corp 26.90 +1.56 A Agilent Technologies Inc 26.25 +1.15 CVC Cablevision Systems 40.30 +1.79 AAPL Apple Computer Inc 21.37 +1.53 SNPS Synopsys Inc 58.25 +4.15 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change CHIR Chiron Corp 44.08 -1.27 SHPGY Shire Pharma Group 35.20 -1.66 TPP Teppco Partners 31.20 -1.27 COLM Columbia Sportswear Co 32.06 -2.29 PLB American Italian Pasta 38.00 -2.00 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- GNTX Gentex Corp 25.75 -0.66 WPL Wp Stewart & Co 24.25 -0.18 CAPX Capital Crossing Bank 20.98 -1.55 ================================================================= 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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