PremierInvestor.net Newsletter Thursday 01-03-2002 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/3417_1.asp ================================================================= In section one: Market Wrap: Made a list and checking it twice Market Sentiment: Wall Street pulls up its’ Sox. Play-of-the-Day: Dabbling In Telecom ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 1-3-2002 High Low Volume Advance/Decline DJIA 10172.14 + 98.74 10174.01 10051.95 1.4 bln 2106/1052 NASDAQ 2044.27 + 65.02 2044.56 1987.06 2.1 bln 2288/1353 S&P 100 595.13 + 6.15 595.13 588.61 Totals 4394/2405 S&P 500 1165.27 + 10.60 1165.27 1154.01 RUS 2000 495.51 + 8.32 495.52 487.19 DJ TRANS 2727.50 +107.52 2727.50 2620.91 VIX 22.83 - 1.09 24.19 22.82 VXN 47.07 - 0.98 48.78 46.63 TRIN 1.52 Put/Call Ratio .68 ----------------------------------------------------------------- =========== Market Wrap =========== Made a list and checking it twice Wow! Our last two "tax-loss bounce" candidates have gone ballistic. Can traders make it three for three? We're willing to play a pattern if you are. We've made a list and this one looks like she could make a move higher too. ADC Telecommunications Chart - Daily Interval Here's a similar pattern in ADC Telecommunications (NASDAQ:ADCT) that we've been looking at in TranSwitch (NASDAQ:TXCC) from Monday evening and Newport Corporation (NASDAQ:NEWP) last night. Both stocks have had some nice gains in past session or two. Notice the volume spike prior to a move higher, then a "settling back" into the end of the year, then some consolidation and the beginning of a move higher. Newport Corporation Chart - Daily Interval What a day for bullish traders that took today's "play of the day" in shares of Newport Corporation (NASDAQ:NEWP). The stock gapped marginally higher at the open of trading. For about 3- hours the stock was stuck at the $22 level (61.8% retracement), but when she broke through the stock packed on some gains into the close. I think a trader should be raising stops in this one to just under the $22.35 level. The reason I think this way is that we have about $1 upside to 200-day (previously identified target) and stop at $22.35 is risking $1 from today's close. With this strategy, we try and preserve the bulk of the gain, but still give the stock some room to try and work higher. Don't get carried away! Remember, we want to try and lock in some early gains and rotate to some other patterns as they develop. TranSwitch (NASDAQ:TXCC) is up more that 20% in the past two sessions. I don't think this move is a "revelation" from the market that TXCC is the most fundamentally strong stock in the semiconductor sector. TXCC is bouncing per our scenario. Don't be ashamed to take some profits, and then rotate some of that capital to another idea if you're comfortable with it. I don't think it is wise to have a portfolio or trading account full of "tax-loss bounce" candidates. If you've been putting $1,000 into each stock, don't all of a sudden put $2000 into the next candidate thinking, "this one is going to do the exact same thing and jump another 10%." It's much better to wish I had invested more capital in a trader that worked in my favor than wishing I hadn't invested as much as I did in a trade that went against me. Stay disciplined! Definitely a technology day. Make no bones about it. Today was a bullish tech day and the Semiconductor Index (SOX.X) surged some 8.2%. To me this is a great surprise, but also a pleasant one (see TranSwitch). When the Semiconductor Index (SOX.X) broke above its 200-day moving average, all heck broke loose and it sure looks as if some bears rushed to cover. Not long ago I had mentioned a short play in Broadcom (NASDAQ:BRCM) near $43. The stock fell to $37, then rebounded back to $43, but today broke above the $45 level. In past commentary I thought even bearish traders (regardless of sector) needed to be trading for profits. That sure turned out to be the case. When Broadcom (BRCM) broke back above the $45 level today, any traders still short the stock should have stopped out. Just goes to show I'm not right all the time and have never claimed to be. I talk about a lot of stocks in the intraday commentaries and sometimes when action gets hot like it was today, it's hard to remember when I mentioned a particular stock (date and time). Review the 12/20/01 01:00 Update for what we had been looking at in BRCM. Note how stock traded right down to that "lower end of Channel" trend. Stock bounced like a rubber ball from there and now resides right at upper end of channel. When I get stopped out of a trade for a loss, I'm not real eager to get involved in a similar trade so soon after I've stopped out. The Networking Index (NWX.X) also had a banner day with a 5.9% gain as shares of Cisco Systems (NASDAQ:CSCO) jumped better than 7% to $20.76. This is a stock we started mentioning in commentary again recently as a bullish candidate. The stock never made it to our play list, but traders/investors that did nip away at this one from the bull side should be doing well. The stock found some good volume today (91 million shares) on the break above recent consolidation of $18-$19. I would have stop set at a minimum of $17.50 from here. I like the way MACD on the daily chart is turning higher, so I'm a little more apt to give this one some room that I would be with some other stocks in the sector. Cisco is my "bellwether" of the networking stocks (it is for most). I was rather patient with this one and watched her climb from $12 to $21.90 and the recent pullback to $19 was a level I felt was the "safest" for entry. Will now want to see the stock set a new relative high above $22 and hint that demand continues to build for the stock. OK, it wasn't all technology In the December 18th "Market Wrap" we had our seatbelts on and both hands clamped on the steering wheel of our Mac truck. Today's move above the 200-day MA by the Dow Jones Transportation Index (TRAN) was impressive and now looks to have this group breaking through a roadblock that has been in place for the past two weeks. I view today's move higher as a "vote of confidence" from the MARKET that the economy is truly beginning to recover. Dow Jones Transportation Average Chart - Daily Interval This may be the most important technical event that took place today. It is believed by many that the transports are the true test of a growing economy. If they do well, then the economy should be doing well. Today's move above the 200-day will have some bears scratching their heads, and wondering just what the heck is going on. Tomorrow an equity bull would like to see this group continue with a strong move higher and give some confirmation to the thought of an economic recovery. Trucking Stocks - Sorted by volume This isn't a complete list of "trucking stocks," but it gives us a good idea of what took place today. If you compare this list to the one from the December 18th market wrap, you'll note that many of these stocks are trading at levels pretty close to December 18th. On December 18th we highlighted shares of CNF Inc. (NYSE:CNF) at $30.93 and the next day (Dec. 18th) that stock jumped to $32.90. CNF has been parked at the weigh station for past couple of weeks. If the TRAN makes a continued move higher, then CNF may get back on the high road tomorrow for a second leg of its trip higher. Airline Stocks - Sorted by volume Trucking stocks aren't the only "transportation" segment that has been moving in the past couple of weeks. Today the AMEX Airline Index (XAL.X) jumped 5.84% and helped drive transports higher. The list above is that of airline stocks and it is NOT the components of the Airline Index XAL.X. One thing I might point out is how the above list (sorted by volume) seems to indicate that some of the stocks that don't trade a lot of volume may not necessarily participate in a groups move. Institutions tend to shy away from more illiquid stocks or even some of the lower priced stocks in a group. I personally prefer to focus the bulk of my trading in stocks where institutions like to trade/invest. From time to time I'll trade a less liquid stock, but only in certain circumstances and stocks that I've been monitoring for an extended period of time. Shares of Southwest Airlines (NYSE:LUV) $18.91 look interesting and might warrant a bull's attention if looking for some airline exposure. The stock recently traded the $20 level and pulled back near a now flattening 200-day MA $17.79 and a trending higher 50-day MA at $18. The point and figure chart gives us a bullish vertical count of $25. LUV has been one of the stronger standouts in the group since its gap down to near $12 after the terrorist attacks. A move above the $19 level could see a near- term test of $20. Interesting conversation, but it sounds familiar Late this afternoon, I was listening to an interview with JP Morgan Chase's chief equity strategist Douglas Cliggott. He was one of the first Wall Street analysts to publicly warn investors about a pending decline in late 2000. Mr. Cliggott still isn't convinced the U.S. stock market is in for a steady rise higher. One thing that caught my ear was the "historical" correlation between higher oil prices and a strong economy. Mr. Cliggott seemed to think, "If the economy is truly in the recovery mode, then energy stocks should be the best value in the market." This is something we have been talking about in recent weeks. The past two trading sessions have been a little rough on some of the energy stocks. I don't see any glaring alerts of pending doom, but I do think Mr. Cliggott's thoughts are worth mentioning as it relates to past commentary. If anything, I do take Mr. Cliggott's to heart. Not because he is saying some of the same things we have been in our commentary regarding energy stocks (oil, natural gas and oil service), but how they should be performing in the scope of an economic recovery. I'd also use Mr. Cliggott's comments about the energy as a dose of smelling salts for those subscribers that think today's action is a sign of smooth waters and blue skies. For the most part, I'm very happy with the current gains and play selections. It certainly looks as if our "bullish" play have been on the right side of things, but some stocks have moved considerably higher in recent months and their near-term earnings are going to be closely scrutinized. Many of these stocks are going to need to come thought with some strong earnings or at leas give some firm guidance to the investment public that demand is building and clarity is building on the horizon. I'll be the first to admit that there is always something that is worrying me. Today's move higher in the transports is a very good sign in my book. This is an economically sensitive group. They shouldn't be acting bullish if the economy was going in the tank. Today is just one day and there's a lot of work yet to be done. What worries me today is what looked "so good" last week. An that is energy prices. No, two days of downside in the energy complex doesn't send a bull running for cover, but its one piece of the puzzle that I want to see firm up. Some argue that transportation stocks can't do well when energy prices are rising. I feel this argument has validity when the transportation sector has been at full capacity and demand begins to wane, yet energy prices are moving higher due to a strong economy and those energy/fuel costs start dragging on bottom line performance. That's when energy prices have their most negative impact on the transportation segment. In an "early" economic recovery, demand should be building for transportation needs. Today's action in the transports is a good sign. I feel there is probably quite a bit of "capacity" to fill for many transportation stocks if the economy is truly recovering. Undoubtedly, competition is fierce for business and prices have been slashed in order to keep the doors open form many transportation stocks. Once demand begins to firm, then there becomes the ability to start getting some pricing points back on the upside. This is the "trickle down" economic theory at work. Once business picks up in the transportation sector, then fuel consumption begins to pick up. With OPEC still cutting production we get the supply/demand shift there and so on. I do think that some of the past week's bullish action in the energy stocks is a sign that other market participants are thinking this way, but the recent pullback in the sector needs to be monitored. In the past couple of day's, I've pretty much come to conclusion that OIL is the place to be in the energy sector. This is where supply is being limited by OPEC cuts and the most likely area to see demand build from any economic recovery. I'm going to establish the $285 level in the CBOE Oil Index (OIX.X) as a level a bull does NOT want to see violated to the downside. I'm deriving this level by simply taking retracement from the May 2000 highs near $352 and the September and November 2001 lows of $270. 19.1% retracement then falls right at $285, with 38.2% retracement right here at $300. I think energy stocks are perhaps the most perplexing yet interesting group in the market. They are also one of the most difficult to really figure out. Any "commodity based" sector is difficult to truly figure out. Oil and natural gas commodities have so many uses. Weather (hot or cold) can really impact demand. Economic activity (strong or weak) can also have an impact. It's tough to simply draw a line in the sand and say definitively what is going on. I do believe though, that the cuts by OPEC should begin to have an impact on oil prices. Regardless of weather conditions, a strengthening economy should see demand increasing and that demand should firm up oil prices if not drive them higher. If this is going to be the case, then any equity bull (regardless of sector) will most likely want to see some of the energy groups find bidders soon. Nothing happens overnight. As I mentioned above when talking about TranSwitch (NASDAQ:TXCC), I don't think the market has suddenly put its finger on that stock and now charts out plan for it to be this year's single best idea. I just think we got the stock right recently and subscribers are now in a good position to benefit. Heck... a couple of weeks ago, we couldn't get stopped out of XM Satellite Radio (XMSR) on that stocks run from $12 to $20. Eventually we did and the stock is trading $15.59. Today on CNBC I heard some comment that a viewer was blaming XMSR's 8.5% decline on some commentary they heard on a product review broadcast on CNBC. Give me a break! I didn't hear any complaint of "foul play" when the stock was vaulting from $17 to $20 when CNBC talked about the company and its super neat technology/product. All we want to do is keep our heads and stay disciplined. Yes, we have our duds in the trading account. If you trade a lot of stocks you're going to have some losing trades. The key is and most likely will always be to book some gains when they come. Keep the losses small and as you build some gains in the account (by closing the trade and taking a profit) you are then better able to give a high flyer some room to work. Not every trade is going to be a 20% winner. We've had our fair share in the past couple of months. What I think we've done right is not have any 20% losers and keep our losses less than or equal to 10% on average. One stock I about dropped my teeth on today was shares of Suiza Foods (NYSE:SZA). Subscribers that have been with us for a while will remember this one from September 19th as bullish at $57.01. I like to look at some old favorites that we did well on in the past to see if they might be tradable. That stock is trading $66.80! Am I feeling like I missed the boat on this one? Not at all. We took our "pound of flesh" out of this stock and subscribers made good money in the trade. At the same time, there are stocks that we cut for a loss that I'm darned glad we did. Trader isn't a dirty word! I don't think anyone should be ashamed to take profits or call themselves a trader! I remember attending one of the OptionInvestor.com seminars over a year ago. Dick Arms was speaking and talking about how many of his institutional clients had become "traders" and that the "buy and hold" strategy that worked so well in the late 1990's was starting to cost them money. Today on CNBC, I heard another institutional money manager saying that his firm had also become more open to a trading style of money management for stocks. If some of the bigger guns in the market are going to be trading, then I think its something you and I need to be open to. The market has learned in the past couple of years that "capital in the market is capital at risk." As you get some profits under your belt (especially if you're trying to rebuild) you can then begin taking on more risk or giving a stock more room to work. Don't be ashamed to lock in some gains and get the New Year off to a good start. So far so good! See you tomorrow and sleep well. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Wall Street pulls up its’ Sox. by Russ Moore The Semiconductor index (SOX) was on fire today (+8.3 percent), igniting a broad-based tech rally while taking the DOW along for the ride. The NASDAQ added +3.3 percent and settled nicely above the 2000 level. Big cap techs put in solid performances led by Intel and Cisco. The NDX ended with a gain of +3.5 percent. The blue-chip DOW managed a modest gain of +1.0 percent. Volume returned to more normal levels with 1.40 billion shares trading on the big board and 2.11 billion on the NASDAQ. Winners trounced losers by a 21/11 margin on the NYSE and 23/14 on the tech index. The SOX surge came after two positive analyst comments. Eric Chen, of J.P.Morgan, said it would be a buyer of Intel shares ahead of the company’s mid-January earnings report. Merrill Lynch’s, Joe Osha, believes the data reported on Wednesday by the Semiconductor Industry Association, supports a chip recovery. Meanwhile, Lehman Brother’s, Edward White, believes Q1 estimates may be “at risk” and advised clients to sit on the sidelines until evidence of an imminent rebound presents itself. In addition to the chips, hardware and networking sectors attracted a good deal of buying interest. Broader market action saw airline stocks continuing to fly high giving the XAL (airline index) its’ fourth consecutive winning session with a gain of +5.84 percent. Brokerage and cyclical issues were also on the rise. Biotech’s remained under pressure with BTK (biotech index) marking its’ third losing session in a row (-2.03 percent). Economic data had weekly jobless claims rising 36,000 to 447,000, far worse than the 386,000 forecast. More importantly, continuous claims rose +42,000 to 3,715,000. The economic data of late seems to indicate the worst may be over. Corporate earnings, on the other hand, have yet to show significant signs of recovery. Is it any wonder why we continue to trade in a narrow range? Recent action is reminiscent of a heart monitor, with a series of modest peaks, and shallow valleys. If the markets are going to break out of this state of flux, it will need to see the corporate side do its’ part in the form of positive guidance and real earnings. Thursday 01/03 close: 22.83 VXN Thursday 01/03 close: 47.07 30-yr Bonds Thursday 01/03 close: 5.54 Total Put/Call Ratio: .68 Equity Option Put/Call Ratio: .56 Index Option Put/Call Ratio: 2.21 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 40.50 Volume/Open Interest Maximum calls: 40/134,529 Maximum puts : 40/ 91,260 Moving Averages 10 DMA 39 20 DMA 40 50 DMA 38 200 DMA 40 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: 595.13 Volume/Open Interest Maximum calls: 590/4,706 Maximum puts : 520/4,799 Moving Averages 10 DMA 588 20 DMA 585 50 DMA 579 200 DMA 599 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: 1165.27 Volume / Open Interest Maximum calls: 1150/40,789 Maximum puts : 1150/35,700 Moving Averages 10 DMA 1151 20 DMA 1147 50 DMA 1130 200 DMA 1166 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: 10,172.14 Volume / Open Interest Maximum Calls: 100/14,199 Maximum Puts 100/29,401 Moving Averages: 10 DMA 10,074 20 DMA 10,009 50 DMA 9,783 200 DMA 10,091 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: 559.60 Volume / Open Interest Maximum Calls: 660/ 368 Maximum Puts: 580/2,281 Moving Averages 10 DMA 581 20 DMA 583 50 DMA 578 200 DMA 539 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: 590.62 Volume / Open Interest Maximum Calls: 440/1,577 Maximum Puts: 500/2,879 Moving Averages 10 DMA 532 20 DMA 549 50 DMA 521 200 DMA 554 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: 378.90 Volume / Open Interest Maximum Calls: 400/525 Maximum Puts: 360/510 Moving Averages 10 DMA 383 20 DMA 384 50 DMA 390 200 DMA 390 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, 12/28. 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 12/11/01 367,397 429,640 (62,243) 2.6% 12/18/01 391,995 456,968 (64,973) 4.3% 12/25/01 412,581 471,239 (58,658) (9.7%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: (41,144) - 5/1/01 Small Traders Long Short Net %Change 12/11/01 158,490 86,717 71,773 (1.4%) 12/18/01 158,300 80,507 77,793 8.4% 12/05/01 152,521 79,444 73,077 (6.1%) Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 NASDAQ-100 Commercials Long Short Net %Change 12/11/01 45,468 51,392 (5,924) (35.9%) 12/18/01 55,276 58,433 (3,157) (46.7%) 12/25/01 55,250 47,476 7,774 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 12/11/01 12,425 11,754 671 (81.0%) 12/18/01 17,649 18,626 (977) 12/25/01 15,810 25,687 (9,877) 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 12/11/01 23,135 12,576 10,559 (1.7%) 12/18/01 21,919 13,810 8,109 (23.2%) 12/25/01 15,492 7,335 8,157 .6% 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 12/11/01 3,469 9,065 (5,596) (8.6%) 12/18/01 6,790 10,943 (4,153) (25.8%) 12/25/01 4,293 9,086 (4,793) 15.4% 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 +73,077 +77,793 -58,658 -64,973 Total Open Interest % (+31.50%) (+32.58%) (-6.64%) (-7.65%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -4,793 -4,153 +8,157 8,109 Total Open interest % (-35.82%) (-23.42%) (+35.73%) (+22.70) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value -9877 -977 +7,774 -3,157 Total Open Interest % (-23.80%) (-2.69%) (+7.49%) (-2.78%) net-short net-short net-long net-short What COT Data Tells Us ---------------------- Indices:.We’ve seen a major move by the Commercial players on the NASDAQ 100 this week. The Commercials have gone net-long while the Small Specs added to their net-shorts. This would seem to be a bullish move for the tech side however, we still see the Commercials holding their net-short positions on the SPX, the favored vehicle, and usually a better barometer of overall Commercial sentiment. Gold: No significant changes this week. 11/27 1,738 contracts net-long 12/04 2,534 contracts net-short 12/11 13,626 contracts net-long 12/18 15,198 contracts net-short 12/25 11,976 contracts net-short Data compiled as of Tuesday 12/25 by the CFTC. ========================= Play-of-the-Day (Bullish) ========================= (new high risk/high reward play) ADC Telecommunications - ADCT - cls: 5.06 chg: +0.38 stop: 4.54 Company Description: ADC is The Broadband Company(TM). ADC tailors high-quality, custom solutions of network equipment, fiber optics, software and systems integration services that enable communications service providers to deliver high-speed Internet, data, video and voice services to consumers and businesses worldwide. ADC has sales into nearly 100 countries. (source: Company Press Release) Why We Like It: Are telecom stocks back from the dead? No one knows if 2002 will be any better for the tarnished sector but it can't be much worse than 2001. Looks can be deceiving but it does appear that many of the equities in this sector have put in a bottom. The last few sessions have been positive for many telecom stocks and ADCT has decided to join the party. We like the bullish pattern it has been building with higher lows growing from its September bottom. On a more short-term basis, it looks like ADCT has bottomed or found decent support at the $4.50 level if you look at the last several sessions. Today's big move sent shares soaring through resistance at $4.75 and $5.00. The MACD is about to turn positive so we may be able to catch three or four days in the next leg up. We're going to set our initial stop at Wednesday's low of $4.54. If all goes according to plan we'll try and exit at $5.95, a nickel below the 200-dma at $6.00. However, if the opportunity presents itself, exiting at $5.75 would be a great move as well. Picked on January 3rd at $ 5.06 Change since picked: +0.00 Earnings Date 11/28/01 (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. 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PremierInvestor.net Newsletter Thursday 01-03-2002 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/3417_2.asp ================================================================= In section two: Net Bulls New Bullish Play: NOK Bullish Play Updates: NEWP, SFA Stock Bottom / Active Trader New Bullish Play: NCOG Bullish Play Updates: BGP, SEIC, UVN High Risk / High Reward New Bullish Play: ADCT Bullish Play Updates: INKT, TXCC 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) / Tech Stock section ================================================================== =========== NB New Play =========== ---------------- New Bullish Play ---------------- Nokia Corp - NOK - close: 26.90 change: +1.33 stop: 24.39 Company Description: Nokia is the world leader in mobile communications. Backed by its experience, innovation, user-friendliness and secure solutions, the company has become the leading supplier of mobile phones and a leading supplier of mobile, fixed and IP networks. By adding mobility to the Internet Nokia creates new opportunities for companies and further enriches the daily lives of people. (source: company press release) Why We Like It: With investors looking to tech stocks for early gains in the new year, it is interesting to see telecom stocks as big gainers. Also interesting was the big move in wireless telecom players like NOK. NOK has been consolidating under resistance at $26 in a long, slow and ugly bullish wedge since mid-November. Now that it is finally above its resistance it might have a chance to do something. The big volume was a nice confirmation of the move and the MACD just produced a bullish crossover. It does have potential resistance at $28.50 but the point-and-figure chart shows it cleanly above the descending bearish line of resistance so we're looking for a multi-day move. We'll start the play with a stop just under Monday's low. A pull back and bounce at $26 might be a good entry point if you don't like the stock here. We don't see an earnings date for January yet but we'll expect an announcement in the next couple of weeks. Picked on January 3rd at $26.90 Change since picked: +0.00 Earnings Date 10/19/01 (confirmed) =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Newport Corp - NEWP - close: 23.35 change: +3.10 stop: 22.34 *new* Our play-of-the-day for Thursday certainly paid off. Optimistic comments by analysts this morning fueled a big move in tech stocks and NEWP was not left behind. On the contrary, shares opened at $20.60 this morning and didn't look back. This big move produced the technical breakout point-and-figure chart watchers may have been looking for. The volume was huge with 2.3M shares trading versus the average of 879K. We debated on whether it would be wiser to close the play with the 15% move today or see if shares can keep the rally going. We opted for a much higher stop and an exit price just under the 200-dma. Readers can double check extra comments made by Bailey in tonight's wrap as well. Our new stop will be $22.34 and should protect a move of $2.09 or 10%. If NEWP trades to $24.25, about a nickel below its 200-dma, we want to close the play for a profit. In the news today, NEWP put out a release stating their CEO and CFO will be presenting at the Fourth Annual Needham & Co. Growth Conference in New York on Jan. 8th. If we're still in the play by then, any good news could be an extra boost for the share price. Picked on January 2nd at $20.25 Change since picked: +3.10 Earnings Date 10/17/01 (confirmed) --- Scientific Atlanta - SFA - cls: 26.31 chg: +1.25 stop: 23.74*new* The rising tech tide also lifted shares of SFA in Thursday's rally. The stock had been languishing near its 50-dma under resistance at $25. The 5% move today helped push it over both the $25 and the $26 levels. The MACD is about to produce a bullish crossover and our short-term indicator of the 5-dma versus the 15-dma just produced a bullish crossover. We wouldn't be surprised to see shares dip back to $25.50 or $25.00 but wait for the bounce if it does. Closing near the high of the day is bullish for Friday morning. We are raising our stop a buck to $23.74. With the play currently up about six percent, more conservative traders might want to put their stop at breakeven ($24.73). Look for resistance at $27.50, $28 and $30. Any of these levels may qualify as exit points depending on your game plan. Picked on December 28th at $24.73 Change since picked: +1.58 Earnings Date 01/17/02 (unconfirmed) ================================================================== Stock Bottom / Active Trader (AT) Non-tech stock section ================================================================== ============ AT New Plays ============ ---------------- New Bullish Play ---------------- NCO Group, Inc. - NCOG - close: 24.17 change: +1.10 stop: 22.19 Company Description: NCO Portfolio Management, Inc. is a leading purchaser and manager of delinquent accounts receivable. (Source: company press release) Why We Like It: With the economy in a recession, folks at NCO are probably doing a pretty good business right now. The stock had run into a brick wall with resistance at $18 in late November and early December but then something or someone "happened" to NCOG. We couldn't find any news but the stock broke out on big volume. More interesting was how the gains and the volume kept coming for the next several sessions. Shares eventually broke above its 200-dma but investors did some profit taking as it approached the $25 level. We like the orderly pull back to the $22 level and the two-day "bounce" at this level looks like buyers were waiting for the dip. Today's move back over the 200-dma and over $24 looks like a possible entry point. Aggressive traders can look for dips to $23 while more conservative traders may want to wait for it to close over $25. We think shares might be able to trade to $29 but expect resistance at $27.50 (and $25). Enter any plays carefully. We're going to start the play with a stop under yesterday's low. We don't expect earnings until February but can not find any date yet. Picked on January 3rd at $24.17 Change since picked: +0.00 Earnings Date 11/06/01 (confirmed) =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Borders Group Inc - BGP - cls: 20.35 chg: +0.46 stop: 19.19 *new* Shares of BGP traded through our trigger point of $20.05 on Monday but gave it all back the same day as many stocks fell to year-end profit taking. Not the most promising opening act for our long play that took a turn for the worse in Wednesday's trading. Early morning weakness in the broader markets on Jan. 3rd combined with more profit taking in the retail group sent shares of BGP below its 200-dma before bouncing near its 15-dma at the $19.20 level. Our stop was $18.99. Fortunately, the late day rebound brought shares back above its 200-dma. The optimistic market that lifted several sectors higher on Thursday forgot the retail index, which dropped a couple of points, but BGP rallied despite the lack of strength in the group. This is the strongest close over the $20 level since early October and may be the confirmation many bulls were looking for. We would still be somewhat cautious and consider new plays only with shares above $20. We are raising our stop just below yesterday's low ($19.19). More conservative traders might want to use something tighter. Picked on December 27th at $20.05 Change since picked: +0.30 Earnings Date 03/14/02 (unconfirmed) --- SEI Investments - SEIC - cls: 44.65 chg: +0.20 stop: 42.99 The same broad market weakness that affected the DJIA and the Nasdaq on Wednesday also hit the brokerage/financial group. Shares of SEIC gapped down and traded to $43.01, two cents above our stop. Shares did close off its lows but not with much conviction. Today was a bit different. Cautious comments about Merrill Lynch did not slow down the rally in the XBD.X broker/dealer index but investors were still slow to move into SEIC. Again, shares traded toward the $43 mark but this time the afternoon rally had a bit more punch for SEIC. Despite the rebound this stock seems to have new trouble with resistance at $45. We would be cautious starting new positions at this time and look for new confirmation that the up trend is still intact. Picked on December 15th at $43.41 Change since picked: +1.24 Earnings Date 10/16 (unconfirmed) --- Univision - UVN - close: 40.21 change: -0.69 stop: 37.99 All the excitement about tech stocks seem to have stolen any interest in our Spanish language media play. Shares have bounced off the $40 level twice in the past two days. As long as the stock remains above $40 bullish traders should be okay. Aggressive investors might consider a bounce at $39 as a possible entry but we would turn cautionary if this occurred. Picked on December 28th at $40.89 Change since picked: -0.68 Earnings Date 11/06/01 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bullish Play -------------------- Barr Labs - BRL - close: 78.00 change: -1.00 stop: 76.99 The last few sessions have not been kind to drug or biotech stocks. Add a couple of downgrades to other big name stocks in the two groups and we're not surprised to see BRL reverse its breakout over $80 and lose its 10-dma. The MACD is rolling over and we're choosing to close the play now for a small loss than get stopped out in the next day or two. Shares should still find support at $75 and again at $70. Picked on December 24th at $79.05 Gain since picked: -1.05 Earnings Date 10/23 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== ============ HR New Plays ============ ---------------- New Bullish Play ---------------- ADC Telecommunications - ADCT - cls: 5.06 chg: +0.38 stop: 4.54 Company Description: ADC is The Broadband Company(TM). ADC tailors high-quality, custom solutions of network equipment, fiber optics, software and systems integration services that enable communications service providers to deliver high-speed Internet, data, video and voice services to consumers and businesses worldwide. ADC has sales into nearly 100 countries. (source: Company Press Release) Why We Like It: Are telecom stocks back from the dead? No one knows if 2002 will be any better for the tarnished sector but it can't be much worse than 2001. Looks can be deceiving but it does appear that many of the equities in this sector have put in a bottom. The last few sessions have been positive for many telecom stocks and ADCT has decided to join the party. We like the bullish pattern it has been building with higher lows growing from its September bottom. On a more short-term basis, it looks like ADCT has bottomed or found decent support at the $4.50 level if you look at the last several sessions. Today's big move sent shares soaring through resistance at $4.75 and $5.00. The MACD is about to turn positive so we may be able to catch three or four days in the next leg up. We're going to set our initial stop at Wednesday's low of $4.54. If all goes according to plan we'll try and exit at $5.95, a nickel below the 200-dma at $6.00. However, if the opportunity presents itself, exiting at $5.75 would be a great move as well. Picked on January 3rd at $ 5.06 Change since picked: +0.00 Earnings Date 11/28/01 (confirmed) =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Inktomi Corp - INKT - close: 7.29 change: +0.66 stop: 6.94*new* At least one of our bullish Internet stock plays is panning out. INKT enjoyed a 9.95% gain today with the several tech sectors scoring big moves. The close at $7.29 is encouraging, as $7.25 could have been overhead resistance (look at a 30-minute chart). Volume was decent and shares closed near their high for the day. We're still gunning for an exit near $8.00 but are going to try and let the stock run. In the mean time we'll raise our stop to $6.94. This way we can try and protect some of these gains. Traders should be cautious on new entries but a bounce at $7.00 might be doable if you have a tight stop to limit your risk. Currently, the newsletter is up over 11% in INKT. Picked on December 28th at $ 6.55 Change since picked: +0.74 Earnings Date 10/18/01 (confirmed) --- TranSwitch Corp - TXCC - cls: 5.50 chg: +0.50 stop: 5.15 *new* Our big winner for the new year is currently TXCC. The stock is up 22% in two days. Today shares gapped up above their 100-dma before pulling back just a bit to tag it and they were off and running. The question bulls should be asking now, is can TXCC conquer resistance at $5.60 like it did in early December? The $5.50 to $5.60 area has stopped TXCC twice in mid-October and once in mid-November. If volume is any indicator then the answer might be yes. Volume has been rising the last two days as the stock climbed higher with Thursday's volume double the normal at more than 6M. We are going to raise our stop and create an exit point. The new stop will be today's low at $5.15. Our exit point will be $6.50. If TXCC trades there intraday we'll hypothetically close the play for a profit. Check out tonight's wrap for Bailey's comments on TXCC. Picked on December 31st at $ 4.50 Change since picked: +1.00 Earnings Date 01/17/02 (unconfirmed) ================== 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 HBC Hsbc Holdings 60.67 +0.85 AXA Axa Ads 22.12 +0.69 TMX Telefonos De Mexico 36.73 +1.00 NCR Ncr Corp 38.98 +0.73 ROK Rockwell Intl. Corp 18.64 +0.71 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change TSM Taiwan Semiconductor 18.58 +1.10 ORCL Oracle Corp 15.29 +1.31 EMC Emc Corp 16.59 +1.79 SCH Charles Schwab 16.85 +1.29 AMD Advanced Micro Devices 19.37 +2.98 BMC Bmc Software Inc 18.10 +1.40 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change TXN Texas Instruments Inc 30.70 +1.88 INTC Intel Corp 35.52 +2.52 NOK Nokia Corp 26.90 +1.33 WAG Walgreens Co 34.41 +1.33 SNE Sony Corp 47.25 +1.30 PHG Koninlijke Philips 31.36 +1.31 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change SGP Schering-Plough Corp 34.63 -1.37 TYC Tyco Intl. Ltd 54.98 -2.27 AMGN Amgen Inc 54.34 -2.06 EDS Electronic Data Systems 64.45 -2.80 SLM Usa Education Inc 80.00 -2.29 PGR Progressive Corp 145.56 -2.45 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change ELN Elan Corp 42.40 -1.95 CNI Canadian Natl. Railway 47.69 -0.22 BVF Biovail Corp 54.20 -1.05 ABI Applied Biosystems Corp 36.06 -1.94 FDO Family Dollar Stores Inc 29.14 -0.47 SWK The Stanley Works 44.97 -0.99 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. 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