PremierInvestor.net Newsletter Thursday 01-17-2002 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/7471_1.asp ================================================================= In section one: Market Wrap: Big tech reports earnings, but cautious on future Market Sentiment: Searching for consistency. Play-of-the-Day: No Reason to Buy ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 1-17-2002 High Low Volume Advance/Decline DJIA 9850.04 +137.77 9857.79 9712.21 1.3 bln 1958/1179 NASDAQ 1985.82 + 41.38 1985.83 1954.06 1.8 bln 2167/1414 S&P 100 581.63 + 6.64 581.97 574.99 Totals 4125/2593 S&P 500 1138.88 + 11.31 1139.27 1127.57 RUS 2000 482.39 + 5.97 482.40 475.71 DJ TRANS 2674.89 + 38.55 2674.89 2627.68 VIX 23.74 - 1.52 25.21 23.72 VXN 47.03 - 2.40 50.23 46.92 TRIN 1.18 Put/Call Ratio .79 ----------------------------------------------------------------- =========== Market Wrap =========== Big tech reports earnings, but cautious on future Widely anticipated and closely watched earnings from computer giant International Business Machines (NYSE:IBM) and software behemoth Microsoft (NASDAQ:MSFT) reported earnings after the close of trading. It's not what they did in the past, but what they said about the future that has after-hours trading seeing lower prices. Dow Component and tech heavyweight International Business Machines (IBM) finished the regular trading session at $119.90 (+2.26%), but is trading near the $115 level in after-hours trading on the heels of earnings. Big blue said it earned $2.3 billion, or $1.33 a share, which barely beat estimates of analysts looking for earnings of $1.32. Sales for the quarter were $22.8 billion, slightly lower than the $23.8 billion analysts had expected. The pulse of this evening's conference call was cautious with the company saying, "The forward business environment continues to be challenging." Microsoft (NASDAQ:MSFT), another Dow component, reported net income of $2.28 billion, or $0.41 a share. Excluding lawsuit- related charges, the company would have reported earnings of $0.49 a share. This makes it unclear if MSFT beat or missed estimates as some analysts factored in the charge and others left it out. Estimates as polled by Zacks were for earnings of $0.45 a share. Microsoft said revenue was $7.74 billion, up from year- ago revenues of $6.6 billion, and higher than estimates of $7.26 billion. Shares of Microsoft finished today's regular session at $69.86, but fell 3.8% in after-hours trading to $67.15. Programmable chipmaker Xilinx (NASDAQ:XLNX) gained 4.3% to $43.06 ahead of tonight's earnings, when the company reported net income of $9.7 million, or 3 cents a share, on revenue of $228.1 million. Pro-forma (before charges) XLNX said it earned $23.5 million, or 7 cents a share, beating analyst's estimate for earnings of 4 cents and revenue consensus of $212.5 million. Shares of XLNX slipped $1 to $42.06 in after-hours action. Traders that took our "High Risk/Return" bearish play in shares of Altera (NASDAQ:ALTR) will note tonight's earnings from rival Xilinx (XLNX) and monitor tomorrow's action closely. Shares of Altera (ALTR) are trading lower in "sympathy" with Xilinx at $23.86 (see tonight's play update). Altera Corporation Chart - Daily Interval It's probably no coincidence that analyst's are expecting Altera (ALTR) to earn 3-cent a share when they are scheduled to report earnings next Tuesday (that's what XLNX reported tonight). Both companies are rivals in the programmable chip market and their business track almost identical. However, the MARKET seems to feel that XLNX is a better stock to own, which has us thinking the MARKET doesn't like ALTR as much. There were some reasons we picked Altera (ALTR) as a short over rival XLNX and it was all based on technicals. Xilinx trades above its 200-day MA, while ALTR trades below its 200-day MA. Altera recent failed a test of downward trend, which is longer that the current upward trend, which bears are wanting to see a test of near the $22 level. What may make this trade even more interesting now is that the "cat" may be out of the proverbial bag after tonight Xilinx earnings announcement. It's my thinking that both companies' business tracks will track identical and Altera's earnings report will be similar and get the same response as that found in Xilinx. If there have been a bunch of bulls buying Altera's stock ahead of earnings, they may try and exit tomorrow now that they've seen Xilinx's hand. Another reason we decided to play Altera short instead of Xilinx is that Altera's stock performance has been lagging that of Xilinx since August. Look at the point and figure method of measuring relative strength. Relative Strength of Altera vs. Xilinx - 1-point box When given the choice we prefer to try and select weak stocks to short. We could have selected XLNX as a short candidate, but a relative strength comparison between the two showed ALTR was a weaker stock. I chose August 1st as a hypothetical investment point for a $1,000 investment in ALTR and XLNX based on their closing values that day. You can see that ALTR's RS vs. Xilinx has given 4 sell signals and has not given a buy signal, thus our feeling that ALTR is truly a weaker stock. The MARKET seems to prefer XLNX over ALTR, thus our more bearish outlook on ALTR. Try using the relative strength charts in selecting stocks (long or short) that you may be following or trading on your own. You can "test" a stock's relative strength against a broader market index to look for strength/weakness. You can also test for RS against other "like stocks" in the group. Try and stack as many odds in your favor as possible. Relative strength is one important measure to monitor and test against. You can get free relative strength charts at www.stockcharts.com in the point and figure format or the line graph format. Bad news is "good news" for our ADRX play! Tonight I was busy posting earnings for OptionInvestor.com and I saw an interesting news flash come across the wires.... "Andrx Group (ADRX) loses court case to Biovail (BVF)." I have yet to find any further news other than that headline, but shares of Andrx (NASDAQ:ADRX) were trading down about $3 at $59 in after- hours trading and that should have traders that took this play from January 5th at $64.14 sitting pretty (see tonight play update). More after-hours earnings Here are some of the more widely followed earnings from tonight's after hours action. I've made a few comments to each and how they were trading at the time of observation. Nortel (NT) $7.74 +6.75% ... reports loss of $0.16, inline with estimates of loss of $0.16. Stock trading $7.40 after-hours. Powerwave (PWAV) $17.95 +13% ... reports earnings loss of $0.06, matching estimates for loss of $0.06. Revenue fell 30.4% year- over-year to $84.4 million, but above consensus of $73.2 million. Stock trading lower at $17.39 in after-hours. Scientific Atlanta (SFA) $23.80 -0.75% ... reports earnings of $0.25 a share, 3-cents better than estimates for $0.22. Sales fell 34% to $418.2 million (estimates were for $394.2). Excluding items, earnings would have been $0.26. Stock trading higher at $25. TranSwitch (TXCC) $4.40 +8.9% ... reports loss of $0.11, penny better than consensus for loss of $0.12. Revenues were $4.5 million vs. estimates for $4.4 million. Callaway Golf (ELY) $17.37 +0.46% ... reports loss of $0.14, 8- cents lower than estimates for loss of $0.06 by Multex (only 2 analysts coverage). Revenues fell 25.9% year-over-year to $105.3 million vs. the $104.7 million consensus. Harley Davidson (HDI) $54.30 +1.68% ... reports earnings of $0.39, 2-cent better than estimates of $0.37. Revenues rose 18.3% to $894.4, bettern than estimates of $875.17. Company saying quarter good enough to increase production target of motorcycles for 2002. Stock trading up at $55.00 Network Associates (NETA) $26.71 +5% ... reports earnings of $0.23 (excluding McAfee.com) which is much better than estimates of $0.08. Revenue for quarter was $241 million (consensus of $207.7). Guidance for Q1 is earnings of $0.04-$0.06 on revenues of $190-$200 (consensus $0.06 and $192.7). NETA raising full- year guidance to EPS of $0.42-$0.47 on rev of $860-$890 (consensus $0.38, $826.5). Company saying higher earnings due to reduction in tax rate from 25% to 20%. Stock trading $26.04 in after-hours. All in all, tonight after hours trading looked lower. The ten heaviest weighted stocks in the NASDAQ-100 Trust (QQQ) were trading lower. The top ten most heavily weighted in QQQ are as follows. After hours price and (04:00 EST closing prices in parenthesis)... MSFT trading $67.15($69.86), INTC $33.70 ($34.53), CSCO $19.00 ($19.48), QCOM $46.64 ($47.27), ORCL $16.80 ($17.22), DELL $27.60 ($28.95), AMGN $55.27 ($55.80, MXIM $56.75 ($56.75), IMNX $27.60 ($27.79), AMAT $40.27 ($41.60). In essence, the top ten weighted QQQ stocks are trading lower from their close, so investors are most likely looking at lower open tomorrow morning in technology. Most fundamental analysts are saying it will be very difficult to draw any conclusions from this quarter's earnings. Many still don't expect a meaningful turn higher in profits until later this year. We're now just three days into the earnings reporting period and there's a long way to go. For those keeping track, we've had one positive response to earnings (today) and one negative response to earnings (Wednesday). Tomorrow's looking like a down day, but as I've said before, the after-hours doesn't have all market participants casting their votes. Today's surprise! As mentioned in today's 01:00 EST update, the Philly Fed number really got a reaction out of the bond market, but stocks stood still for the most part since that release. I want to take a moment here to try and expound on just what the Philly Fed report is. It's a measure of business activity in the mid-Atlantic region (more industrial part of the nation) that attempts to measure business activity. Economists expected a reading of -2.4, but today's +14.7 really seemed to catch some bond market traders/investors by surprise as this indicator hasn't been this high since August 2000. Hey! That was 17 months ago! Historical studies point to bear markets (usually tied to an economic downturn) lasting 12-18 months. While the Philly Fed number can be volatile, today's number will have some economic bull's hoofing the ground. Surveys on new orders rose to 12.6 from negative 6.2 and shipments rose to 14.4 from negative 12.1. Both show a marked improvement. Every other indicator except delivery times and inventories improved during the month. I (Jeff Bailey) do think today's Philly Fed number is a plus for the bulls. Yes, it's a volatile number, and will most likely bounce around for the next couple of months, but it is perhaps one of the biggest "economic number" or survey that really raises an eyebrow toward economic recovery. I think the "economic recovery" question is slowly being pushed toward a back burner right now. At least the economic data is showing signs of a decline bottoming out, but the newer question will be, "what type of growth, if any, is their going to be?" It is one thing for the economic decline to level out, but will there be consistent growth? As I look at earnings, I do have to wonder just how long some companies can continue to report losses before they just can't pay the bills anymore. Company's like IBM and Microsoft are earning money, but their stock prices have done very well in recent months. It's great for them to be posting billions of dollars in earnings each quarter, but at current valuations, the bears are saying the stocks are just too richly valued for the lack of growth, especially if the economy just stagnates and doesn't grow. I still feel we need to keep a very close eye on the bond market for part of the answer to where things go from here. We did see a good round of selling in the bond market, so we know some cash was raised. The bullish percent data we review so often is looking very similar to what we found in May, June and July of last year. We're starting to see more and more supply/demand sell signals on the charts and that is/has been taking place with the recent buying we have witnessed in Treasuries. I think equity bulls may have breathed a collective sigh of relief today when that Philly Fed number hit and the bond market found selling, but one day does not make a trend. We saw a brief spat of selling in Treasuries from June 26th to July 5th last year, only to see money pour right back into bonds. The current technicals at play in the Treasury market look very similar to this summer so bullish traders still need to be very cautious. I still feel that bulls and bears need to be rather quick at the trigger right now. James deserves a lot of credit on lowering the stop in our bearish play on shares of Nextel (NXTL) and that helped subscribers capture a nice gain in the stock and not let them erode. The stock reached a level of potential support (52- week lows), but that's where buyers were lurking. We would have been perfectly happy if the stock had broken to a new 52-week low, but with some economic numbers showing some stabilization, bears just aren't being greedy with profits. If other bears in the market aren't being greedy, then we can't be either. Tomorrow's events Tomorrow is option expiration for stocks and we might get a few wild swings as stocks whip around on any positions that institutions may be unwinding. The earnings calendar is light tomorrow. Before the bell we'll have earnings from Sun Microsystems (NASDAQ:SUNW) and Johnson Controls (NYSE:JCI). Analysts are looking for SUNW to report a loss of 4-cents a share, while JCI is expected to show a profit of $1.06 a share. The ever-important Consumer sentiment numbers for January are due out and economists expect a reading of 89.9, which is just higher than the previous reading of 88.8. This number or surprise from the estimate of 89.9 could be a market moving number. It's due for release at 10:00 AM EST. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Searching for consistency. by Russ Moore Better than expected economic reports and positive earnings reports from two bellwether stocks restored calm to the markets, helping the major indices recoup most of yesterday’s losses. The DOW added +1.4 percent while the NASDAQ gained +2.1 percent and the NDX +2.8 percent. Volume was moderate with 1.36 billion shares trading on the NYSE and 1.87 billion on the tech index. Winners were back on top, edging losers by a 19/12 count on the big board and 22/14 on the NASDAQ. All tech sectors were in the green with hardware, software and Internet leading the way. Broader markets saw brokerages attracting solid interest while airline, biotech, drug, gold, utility and natural gas sectors faced selling pressure. After yesterday’s decline, investors were treated to more positive news beginning with initial jobless claims falling - 14,000 to 384,000 versus expectations of 441,000. J.P. Morgan Chase had cast a cloud over the financial sector but Citigroup broke through the clouds, providing the sunshine with “beat the street” numbers. General Electric followed suit with “match the street” numbers and a reiteration of its’ forward guidance. The final upside catalyst came from the Philly Fed Index. The monthly index was expected to show another negative reading (- 2.4). Instead, the data came in at +14.7, the first positive reading in a year and the highest since August 2000. Trim Tabs reported outflows to all equity funds of -4.7 billion for the first two weeks of 2002. This is the first time since the company began tracking funds that a year has started with two weeks of outflows. After hours we see IBM beating the street by a penny but coming up a little short on revenue. The company said business conditions remain difficult. Microsoft’s numbers are creating some confusion due to the method of accounting being used. The company exceeded expectations if you exclude legal charges. Mr. Softy said fiscal 2002 profits should come in at 1.57 to 1.60 a share. Analysts were expecting 1.83 per share. The stock is down in after hours trading. The last two days has provided us with all the clarity we need. No, not to figure out where we’re headed but rather, where we’ve been over the last two months. Since November, we’ve been stuck in a sideways market, why? Simple answer is confusion. A mountain of contradictory data that continues to fall short in the answer department has barraged investors. Yesterday we had Intel and J.P. Morgan Chase, and today we get Citigroup and Philly Fed Index. Consistency is what’s needed in order for new money to be put on the table. The current earnings season is unlikely to provide us with that consistency, and therefore, we can expect to see the sideways shuffle continue. Thursday 01/17 close: 23.74 VXN Thursday 01/17 close: 47.03 30-yr Bonds Thursday 01/17 close: 5.41 Total Put/Call Ratio: .79 Equity Option Put/Call Ratio: .68 Index Option Put/Call Ratio: 1.30 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 39.65 Volume/Open Interest Maximum calls: 40/141,434 Maximum puts : 40/104,716 Moving Averages 10 DMA 40 20 DMA 40 50 DMA 40 200 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: 581.63 Volume/Open Interest Maximum calls: 590/7,348 Maximum puts : 580/9,032 Moving Averages 10 DMA 587 20 DMA 587 50 DMA 585 200 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: 1138.90 Volume / Open Interest Maximum calls: 1150/36,008 Maximum puts : 1150/30,792 Moving Averages 10 DMA 1150 20 DMA 1151 50 DMA 1143 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: 9,850.04 Volume / Open Interest Maximum Calls: 100/13,897 Maximum Puts 100/19,893 Moving Averages: 10 DMA 10,013 20 DMA 10,044 50 DMA 9,922 200 DMA 10,105 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: 529.93 Volume / Open Interest Maximum Calls: 660/354 Maximum Puts: 500/822 Moving Averages 10 DMA 551 20 DMA 566 50 DMA 578 200 DMA 543 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: 539.55 Volume / Open Interest Maximum Calls: 440/1,097 Maximum Puts: 470/2,079 Moving Averages 10 DMA 567 20 DMA 550 50 DMA 542 200 DMA 553 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: 375.98 Volume / Open Interest Maximum Calls: 400/ 525 Maximum Puts: 360/1035 Moving Averages 10 DMA 377 20 DMA 380 50 DMA 387 200 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, 02/11. 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 12/25/01 412,581 471,239 (58,658) (9.7%) 01/01/02 338,288 407,107 (68,729) 17.1% 01/08/02 333,742 398,283 (64,541) (6.1%) 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 12/05/01 152,521 79,444 73,077 (6.1%) 01/01/02 127,419 55,576 71,843 (1.6%) 01/08/02 130,335 60,780 69,555 (3.1%) 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 12/25/01 55,250 47,476 7,774 01/01/02 29,801 37,497 (7,696) 01/08/02 30,786 37,457 (6,671) (13.3%) 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 12/25/01 15,810 25,687 (9,877) 01/01/02 10,649 5,913 4,736 01/08/02 10,073 6,404 3,669 (22.5%) 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 12/25/01 15,492 7,335 8,157 .6% 01/01/02 15,820 7,553 8,267 1.3% 01/08/02 15,921 7,981 7,940 (3.9%) 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 12/25/01 4,293 9,086 (4,793) 15.4% 01/01/02 3,368 8,668 (5,300) 10.6% 01/08/02 4,380 9,188 (4,808) (9.3%) 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 +69,555 +71,843 -64,541 -68,729 Total Open Interest % (+36.39%) (+39.26%) (-8.82%) (-9.22%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -4,808 -5,300 +7,940 8,267 Total Open interest % (-35.44%) (-44.03%) (+33.22%) (+35.37) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +3,669 +4,736 -6,671 -7,696 Total Open Interest % (+22.27%) (+28.60%) (-9.78%) (-11.44%) net-short net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.No significant changes this week as Commercials continue to sit net-short on the SPX with little change over last week’s numbers. Gold: Despite a red-hot week for the gold market, Commercial players were busy adding to their net-short positions. This may be an early signal that the bullish run is coming to an end. 12/11 13,626 contracts net-long 12/18 15,198 contracts net-short 12/25 11,976 contracts net-short 01/01 14,555 contracts net-short 01/08 24,042 contracts net-short Data compiled as of Tuesday 01/08 by the CFTC. ========================= Play-of-the-Day (Bullish) ========================= (high risk/high reward play) Altera Corp. - ALTR - close: 24.35 change: +1.22 stop: 24.76 Company Description: Altera Corporation is the world's pioneer of system-on-a- programmable-chip (SOPC) solutions. Combining programmable logic technology with software tools, intellectual property, and technical services, Altera provides high-value programmable solutions to approximately 14,000 customers worldwide. (source: company press release) - ORIGINAL WRITE UP: January 11th, 2002 - Why We Like It: On Tuesday, Altera offered positive comments that the bottom for the chip sector may have been found but the good news and all the hype wasn't enough to keep shares over its 200-dma. Additionally, the SOX.X chip index has had trouble with the 600 level and may be looking for another pull back of its own. There is a lot of congestion for ALTR between $20 and $26 so it's hard to pick a target but short-term traders might want to aim for $22. If you have more conviction about a pull back in the semiconductor group then aim for support at $20, which is support both on the daily chart and the point-and-figure chart. We are going to start the play with a stop at Friday's high ($25.56). Part of the risk with this short play is Intel's earnings announcement this coming Tuesday. If INTC produces some really positive results or really talks up the conference call then ALTR might rally with it on Wednesday. - Most Recent Update, Thursday, Jan. 17th, 2002 - We will be the first ones to say that ALTR's performance has been nothing but disappointing for our bearish play. We did get a move down on Wednesday after Intel's comments about cutting capital spending but support at the $23 level held all too well. Then we have to endure the 5% rally in ALTR on Thursday as the markets swell from positive economic and earnings news this morning. This put ALTR dangerously back over the $24 level and looking like it just signaled a potential bullish reversal. Fortunately for the bears, the Xilinx (XLNX) earnings report came out after the close today. XLNX is ALTR's main competitor and at first glance it looks like the report was positive. The bad news for the bulls is investors seem to be selling the news. With the XLNX news out, there would not appear to be any reason to hold or buy more shares of ALTR in hopes of an upside surprise. As if to confirm this sentiment, both XLNX and ALTR were trading lower after hours with ALTR trading back under $24 again. Also in the news was confirmation from ALTR that they would announce earnings on Tuesday. Considering that there was no big surprise from XLNX we're going to hold over the earnings report from ALTR. Normally, we avoid such situations as an earnings surprise or an overly enthusiastic conference call could make short positions very painful the following day. Traders not willing to take such a risk should consider exiting the play ahead of the weekend. We are going to lower our stop to $24.76 with the expectation that we'll lower it again on Friday if the play moves in our direction. For additional comments about ALTR check tonight's wrap. - Play of the Day comments, Thursday, Jan. 17th, 2002 - We're highlighting ALTR as the play of the day for Friday based on the after hours reaction to the XLNX earnings report. Even though we expect ALTR to open lower we are not expecting it to gap down so far that it would not make sense to consider new short positions. This is a High Risk/High Reward play so may not be suitable for all traders. Wait to see the initial market reaction on Friday morning. Don't forget about ALTR's own earnings report on Tuesday (the markets are closed on Monday). Picked on January 11th at $24.20 Gain since picked: -0.15 Earnings Date 01/22/02 (confirmed) ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Thursday 01-17-2002 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/7471_2.asp ================================================================= In section two: Stock Bottom / Active Trader Bullish Play Updates: IKN, TGH, UNH Bearish Play Updates: ADRX, SPY Closed Bearish Plays: PRX, VGR High Risk / High Reward Bullish Play Updates: PVN Bearish Play Updates: ALTR Closed Bullish Plays: LUV, LPX Net Bulls - none - 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) ================================================================== Stock Bottom / Active Trader (AT) Non-tech stock section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Ikon Office Solutions - IKN - cls: 12.37 chg: +0.10 stop: 11.69 Wednesday marked the third day in the previous four sessions that shares of IKN had dipped to the $12 area before rebounding back in the afternoon. Traders can continue to target shoot possible entries near the $12.05 level or wait for IKN to break through the $12.50 level. The stock's 15-dma, which has been strong trading support on its recent ascent, is also near $12. As long as the bullish trend holds up, longs should do okay. A potential concern is how the market reacts to all the earnings news this week and the next. If Wall Street turns back to tech stocks then IKN could suffer due to lack of attention. Yet on the other hand, if the economic news out today means the economy is rebounding then IKN should benefit and keep climbing. Picked on January 11th at $12.31 Change since picked: +0.06 Earnings Date 01/25/02 (unconfirmed) --- Trigon Healthcare - TGH - close: 70.85 change: -0.94 stop: 68.49 Trigon hit some selling pressure early in the day and fell to price support at $70 before bulls chose to buy the dip and lift it off its lows. We mentioned on Tuesday that a dip to $70 could be a nice entry to go long. Today's move was a clean pull back to the stock's 15-dma. We were under the impression that there may have been some bad news in the healthcare group today but really didn't find anything. Doing some research we did notice that Manor Healthcare (HCR) was hammered today for a 16% drop. How this would affect TGH is unclear. HCR is a healthcare facility while TGH is more of a healthcare services/insurance type of company. It would make more sense that investors took some profits and moved into some select tech stocks after all the high-profile earnings announcements. Look for TGH to move higher from here. Conservative traders could tighten their stop if they felt inclined. Picked on January 11th at $71.42 Change since picked: -0.57 Earnings Date 02/08/02 (unconfirmed) --- UnitedHealth Group - UNH - close: 72.34 change: -0.66 stop: 68.49 Posting a similar performance to TGH above, shares of UNH slipped less than one percent as it fell back to the $72 level. Bullish investors would like to see $72 hold as new support but we wouldn't be surprised if UNH fell a bit lower towards the $71 or $70 level. A bounce above $70 could be a great place to evaluate a new long position. As noted above in the TGH write up, we didn't see anything negative that might affect UNH's stock price but the action in HCR is negative for the broad-based healthcare sector as a whole. We look at today's move in UNH as just a normal pull back. We did notice that a few websites have updated the UNH earnings date for Jan. 24th, 2002. We will probably close the play before the announcement. Picked on January 11th at $71.75 Change since picked: +0.59 Earnings Date 01/24/02 (unconfirmed) -------------------- Bearish Play Updates -------------------- Andrx Group - ADRX - close: 62.03 change: -0.93 stop: 65.01 *new* Bears finally get a breakdown in ADRX under the $62 level but a late day surge sends it higher again. It did appear that the stock's 10-dma was putting pressure on it these last two days but new developments may make it a moot observation. Rumor has it that ADRX lost a court battle against Biovail today and word has spread to the after-hours markets. We couldn't find any thing to substantiate the litigation news but ADRX was trading below $60 in after hours. We have been looking for a breakdown below the $60 support level but if shares are going to gap down tomorrow then only aggressive traders should consider chasing it for a new position. We would not recommend this sort of strategy. There is potential support at $58 but we are going to look for a move to $55 or lower. Don't get greedy and adjust your stop once you're profitable. We are going to lower our stop to $65.01 and we'll probably lower it again tomorrow if shares fall substantially. Picked on January 4th at $64.14 Change since picked: +2.11 Earnings Date 10/25/01 (confirmed) --- SPDRS on the S&P 500 - SPY - cls: 113.67 chg: +0.85 stop: 118.25 Bears got a nice drop on Wednesday in the SPY but a lot of those "gains" were erased by the market's reaction to the positive economic reports and the positive earnings announcements by UTX and GE. The question investors will be asking now is how will Wall Street react to tonight's earnings reports. Will money managers buy on the expectation that things will be improving? Or will they continue to see weakness as many companies may be meeting numbers but not due to top line revenue growth. Short- term traders might want to consider looking for an exit near the $112 level, which acted as support in mid-December. Our original target was $110 and we're going to hang on to that goal for the time being. We would expect the 115 level and the 50-dma just overhead to act as resistance. Currently, the futures appear to be trading lower for tomorrow's open but this could easily change by Friday morning. Picked on January 9th at $115.57 Change since picked: -1.90 Earnings Date n/a =============== AT Closed Plays =============== -------------------- Closed Bearish Play -------------------- Pharmaceutical Res. - PRX - close: 28.65 change: -0.27 stop: 29.51 A positive market rally helped push PRX higher after encouraging economic reports lifted investors' spirits. The stock opened at $29.10 and ran to price resistance at $30 before slipping back. This move places the share price back above its 10 & 200-dma. We would have been stopped out at $29.51. Still no news on its 4Q earnings report date. Picked on January 11th at $27.30 Change since picked: -2.21 Earnings Date 10/25/01 (confirmed) --- Vector Group - VGR - close: 27.49 change: +0.73 stop: 28.80 Recent market weakness, with today as the exception, may have finally started to steer investors towards a more defensive position. Negative earnings reports one day seem to be replaced by positive reports the next and vice versa. Market sentiment seems to still be cautious and a rebound in the tobacco stocks took place on Thursday. This time shares of VGR joined the group. Tuesday's update discussed looking for a breakdown under the $26.75 level, which actually occurred early this morning, but the stock quickly reversed higher and spent the rest of the afternoon trading sideways. Then towards the close buyers were able to spur a last hour rally higher for VGR. This has us concerned for two reasons. The short-term bearish wedge appears to have been broken to the upside. Not a good sign for shorts. Secondly, the daily chart produced a bullish engulfing candlestick pattern, which is another major caution signal for bears (and a potential buy signal for the bulls). Volume was pretty light, which does not express much conviction from buyers but the safe play is to close the trade. One alternative would be to keep the play open with a scalpel thin stop (like $27.51). This might work as shares were trading near $27.30 in after hours but the risk is a gap up above your stop. We're going to close the play and look for new opportunities elsewhere. Picked on January 9th at $28.80 Gain since picked: +1.31 Earnings Date 11/14/01 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Providian Financial - PVN - close: 4.59 change: +0.26 stop: 3.99 Thursday was not a bad start to our new high risk/reward play. Shares of PVN ended the session up six percent and back above the $4.50 level. Some traders may feel our stop is too wide and for them they may be correct. This is more of a lottery ticket play were we are looking for big moves and willing to take a bit more risk. It may be prudent to raise your stop if you're looking to enter above the $4.50 level. For more info on the play, check the original write up from Wednesday. Picked on January 16th at $ 4.33 Change since picked: +0.26 Earnings Date 10/18/01 (confirmed) -------------------- Bearish Play Updates -------------------- Altera Corp. - ALTR - close: 24.35 change: +1.22 stop: 24.76 *new* We will be the first ones to say that ALTR's performance has been nothing but disappointing for our bearish play. We did get a move down on Wednesday after Intel's comments about cutting capital spending but support at the $23 level held all too well. Then we have to endure the 5% rally in ALTR on Thursday as the markets swell from positive economic and earnings news this morning. This put ALTR dangerously back over the $24 level and looking like it just signaled a potential bullish reversal. Fortunately for the bears, the Xilinx (XLNX) earnings report came out after the close today. XLNX is ALTR's main competitor and at first glance it looks like the report was positive. The bad news for the bulls is investors seem to be selling the news. With the XLNX news out, there would not appear to be any reason to hold or buy more shares of ALTR in hopes of an upside surprise. As if to confirm this sentiment, both XLNX and ALTR were trading lower after hours with ALTR trading back under $24 again. Also in the news was confirmation from ALTR that they would announce earnings on Tuesday. Considering that there was no big surprise from XLNX we're going to hold over the earnings report from ALTR. Normally, we avoid such situations as an earnings surprise or an overly enthusiastic conference call could make short positions very painful the following day. Traders not willing to take such a risk should consider exiting the play ahead of the weekend. We are going to lower our stop to $24.76 with the expectation that we'll lower it again on Friday if the play moves in our direction. For additional comments about ALTR check tonight's wrap. Picked on January 11th at $24.20 Gain since picked: -0.15 Earnings Date 01/22/02 (confirmed) =============== HR Closed Plays =============== -------------------- Closed Bullish Play -------------------- Southwest Airlines - LUV - close: 17.90 change: +0.39 We did post an update in the Wednesday night newsletter but we wanted to make a note in the regularly scheduled play updates that the LUV long play discussed on Tuesday night was never opened. The game plan was to go long if LUV opened between $18.00 and $18.50 on Wednesday. This did not occur, as the stock opened at $17.96 and eventually traded lower by the close. Interested investors should take note that LUV did announce earnings today and Wall Street may respond positively come tomorrow but we'd still want to see shares back over $18. Picked on January 16th at $ never opened. Change since picked: +0.00 Earnings Date 01/17/02 (confirmed) --- Louisiana Pacific - LPX - close: 7.83 change: +0.33 stop: 7.35 Well game fans, we had our pure technical bounce play strategy correct but the execution was a bit too conservative. LPX opened at $7.60, our new picked price, but traded down to $7.33 before posting a nice rally in the last two hours of the day. The intraday low would have been enough to stop us out at $7.35 for a 25-cent loss. High-risk traders with a wider stop could have reaped the 4.4% move higher by the close. We will wave good bye to LPX but the bounce back to $9 may still take affect. Picked on January 16th at $ 7.50 Gain since picked: -0.25 Earnings Date 01/29/02 (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 MOV Movado Group Inc 19.00 +1.49 SHOO Steven Madden Ltd 17.05 +1.78 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change MSO Martha Stewart Living 16.90 +1.70 KROL Kroll Inc 18.91 +1.45 PSTI Per-Se Technologies 11.14 +1.08 SPCT Spectrian Corp 15.01 +1.19 BMHC Building Materials 13.25 +1.85 OVRL Overland Data Inc 14.25 +1.25 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change S Sears Roebuck & Co 52.70 +1.23 MCK McKesson Corp 37.05 +1.50 SNV Synovus Financial Corp 26.57 +1.07 GILD Gilead Sciences Inc 70.22 +1.11 AAPL Apple Computer Inc 22.48 +1.70 TSG Sabre Holdings Corp 40.50 +1.97 SYMC Symantec Corp 75.35 +8.40 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change GSK Glaxosmithkline 47.50 -1.01 DNA Genentech Inc 48.60 -2.18 DUK Duke Energy Corp 36.00 -2.00 GENZ Genzyme Corp 48.69 -2.38 TER Teradyne Inc 27.00 -1.75 CVG Convergys Corp 31.78 -1.13 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change SKIL Skillsoft Corp 27.12 -1.18 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. 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