PremierInvestor.net Newsletter Tuesday 01-22-2002 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/1671_1.asp ================================================================= In section one: Market Wrap: "Strong signal" recession may soon be over. Market Sentiment: Where’s Johnny Nash when you need him?. Play-of-the-Day: Green on a Red Day. ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 1-22-2002 High Low Volume Advance/Decline DJIA 9713.80 - 58.05 9842.84 9696.57 1.3 bln 1374/1758 NASDAQ 1882.53 - 47.81 1947.41 1882.14 1.8 bln 1333/2306 S&P 100 570.63 - 4.61 579.22 569.68 Totals 2707/4054 S&P 500 1119.31 - 8.27 1135.26 1117.91 RUS 2000 469.43 - 4.94 476.96 469.42 DJ TRANS 2659.70 - 7.55 2684.04 2652.40 VIX 25.10 + 0.76 25.24 23.97 VXN 50.37 + 1.48 50.76 49.31 TRIN 1.33 Put/Call Ratio .65 ----------------------------------------------------------------- =========== Market Wrap =========== "Strong signal" recession may soon be over Despite today's tech drubbing by Wall Street that found sellers in many technology stocks, today's economic number has the index of leading economic indicators rising 1.2% in December, with 10 of the 12 indicators showing gains. The Conference Board said, "The economy, barring any unexpected shock, is gather momentum." December's 1.2% gain is the strongest increase in the index since February 1996. The biggest contributors were the decline in initial jobless claims, the wide interest-rate spreads and the growing money supply. The only negatives found in the Conference Board's report were continued weakness in new orders for capital goods and consumer goods. Economists continue to advise caution toward the scenario of a "v-bottom" type recovery as the economic measurements tell the Conference Board very little about the strength of the recovery. "Easy money and falling energy prices are providing essential boost to the economy," said Conference Board economist Ken Goldstein. "Steep retail discounting also stimulated demand" he said. In the past four months, only 4 of the 10 indicators have risen during that time -- an indication of the "dual personality" of the recession, with financial indicators like money supply and stock prices showing more improvement than "real" economic indicators like factory orders. This type of "counting of the cards" has many stock traders feeling that stocks may have moved too far too fast and gotten ahead of themselves. S&P 500 now at "bull correction" Almost as if writing a script that is read time and time again, the S&P 500 Bullish Percent ($BPSPX) from www.stockcharts.com has reversed into a column of O's and now reads "bull correction," and is following the NASDAQ-100 Bullish Percent ($BPNDX) in "bear confirmed" lower. The bull's defensive team had better be on the field as the bear's are marching down the football field and getting within field goal range. That's football terminology, but as it relates to market terminology, the MARKET is efficiently removing risk as stocks begin giving sell signals on their supply/demand charts. As of tonight close, only 40% of the 100 stocks that comprise the NASDAQ-100 currently show a buy signal on their point and figure charts, while 61.4% (307 out of 500) of the stocks in the S&P 500 Index (SPX.X) currently show a buy signal on their point and figure chart. S&P 500 Bullish % ($BPSPX) - 2% box Equity bulls and bears have come to "love" the bullish percent as it seems to do such a good, yet simple, job of explaining market risk. In September (just before the red A) the bullish percent reached a level not seen since September 1998 (during the Asian flue and Russian debt crisis). The recent rally in the S&P 500 bullish percent came very close to the 70% level, which is considered "overbought" and now the MARKET is beginning to digest its excesses and profit taking is beginning to pick up. I think Tom Dorsey, author of "Point and Figure Charting" sums it up when he says "The bull correction phase is telling us that the market leaders will likely drop in price due to profit taking." Microsoft and Applied Materials giving sell signals "The bull correction phase is telling us that the market leaders will likely drop in price due to profit taking." One might consider Microsoft (NASDAQ:MSFT) a leader in the software group and Applied Materials (NASDAQ:AMAT) a leader in the semiconductor equipment sector. Today, both of these stocks fell just enough to generate "sell signals" on their point and figure charts, and effectively take away at least two stocks that had previously generated "buy signals" and contributed positively to the bullish percent indicators. One subscriber was perhaps right on the money when he said "It probably doesn't matter what kind of earnings this semiconductor stock has tonight, as it's a tech stock and the market just wants to sell technology." Well, that's kind of harsh, but what the subscriber may really have been saying is "the ODDS of a bullish reaction to the reported earnings may be stymied due to the stock being computer/semiconductor/technology related. Microsoft Chart - $1 box Microsoft (NASDAQ:MSFT) is a great stock for traders and investors to understand and at least monitor. The stock is a component of the Dow Industrials, NASDAQ-Composite, S&P 500 and NASDAQ-100. It's no "coincidence" that shares of MSFT found their bottom in late September (after red 9) and began reversing higher and giving a "buy signal" in early October (red A), just when the S&P 500 bullish % ($BPSPX) reversed course higher during that same time period. Its not a coincidence that MSFT gave a sell signal today at $65, just when the S&P 500 bullish percent reversed lower either. Look for MSFT to offer some short-term bullish rallies to the $67 level as I don't think this one will simply slice through longer-term bullish support trend. If we eventually see a NASDAQ-100 bullish percent fall below the 30% level, coupled with an S&P 500 bullish percent near the 50% level, look for a bullish trade in "Mr. Softy" near $59. I would not be an "aggressive" short in Microsoft (NASDAQ:MSFT). I feel the current action is MARKET related and simply a good round of profit taking. A future bull wants to take advantage of the selling and let it run its course. A bear is simply trying to take advantage of some "late bulls" that perhaps ignored the MARKET risk as indicated by the bullish percent charts and tried squeezing another $1 or $2 to their bullish target of $72. Today's trade at $65 now has that one X-box at $70 looking like a "bull trap" where momentum players got caught and if still stuck, will gladly sell a rally back near $67-$68. It's not looking like a bear raid Fundamentalists that believe in economic numbers and earnings may be wondering just what the heck is going on. Finally they're getting some bullish undertones in the economic numbers, and the plethora of downside earnings surprises are starting to abate. Well, we would expect that analysts have undercut earnings so much, that many companies can't help but beat some of the slashed estimates. After all, the analysts had many technology company's earnings ballooning to the upside, are the same ones running the numbers today, so its only fair that they have now undercut the earnings estimates to the downside. If we take Microsoft (MSFT) as an example, we'd see that the stock was trading $60 at this time last year. Earnings were right inline in the year-ago period and revenues grew a modest 7.7%. In the latest quarterly earnings, the bottom-line number was inline with estimates and revenues have grown 18.2% versus the year ago period. There's still the "anti-trust" concerns that keep showing up, and I don't think this is a whole lot different than what has been the case for a couple of years. I think Microsoft (MSFT) is a great bellwether for technology and especially the software sector, but I don't think an economic bear can hang his/her hat on the stock. Yes, people will buy more PC's that have Microsoft software on them, but don't expect this one to see the lows found in September. The Treasury market has been holding tough. Even though stocks got punished again today, we're not seeing a rush of capital back into the Treasury bond market. As simple as it may sound, current stock action is what we were warning about in December and January when the NASDAQ-100 bullish percent was above the 70% level. Right now, the MARKET is simple digesting its excesses from the nice run off the bottom. The money hasn't rushed to the bond market so I think bearish traders in tech stocks still need to be trading for profits. This evening's earnings As I look over the 60-some earnings from tonight, I don't see any major surprises that could drive tomorrow's open. Traders that took our bearish "High Risk/Reward" trade in Altera (NASDAQ:ALTR) will note this evening's earnings of $0.03 a share, which was inline with estimates. We didn't think there would be any surprise in this one as its major competitor Xilinx (NASDAQ:XLNX) reported inline earnings last week. Both stocks have sold off from there. However, Altera (ALTR) did say that they feel they've seen the "bottom in the cycle." Today, ALTR did trade our first bearish target of $22 (that's where the stock closed tonight), but I still think there's a chance that the stock could trade $20 before all is said and done. This trade has gone pretty much to plan and should not turn into a loss. James will be setting a lowered stop on the trade, but subscribers should review their accounts and act accordingly. If you're in need of a profit, then don't try and squeeze every last drop of water from the sponge. Tomorrow's earnings are full again Tomorrow's calendar for earnings holds some of the "who's who" once again. With some of the major technology stocks having already given us the early preview, I'm not expecting any "market moving" earnings. Drug stocks as depicted by the Pharmaceutical Index (DRG.X) found bidders today and this sector bucked the broader market with a 1.49% today. Drug maker Eli Lilly (NYSE:LLY) is scheduled to report earnings tomorrow morning of $0.60 a share, and any type of upside surprise there could get a nice move going in this group. When technology stocks are under some selling pressure, the more defensive drug stocks can find cash rotating to them as well as some of the healthcare stocks. Subscribers have a nice profit going in our bearish play in shares of Andrx Group (NASDAQ:ADRX) so check tonight's play update as we're moving down our stop just in case the sector gets too bullish, which can sometimes create a tide that lifts all boats. A stock I've mentioned before that I like as the "drug leader" are shares of Forest Labs (NYSE:FRX). This one's been bumping its head at $83 since last summer and a break above that level has the stock at new 52-week highs with no overhead supply in the way. Remember to check the "Market Watch" section of the newsletter for a snapshot view of major earnings due out this week. http://www.PremierInvestor.net/indexes/marketwatch.asp Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Where’s Johnny Nash when you need him? by Russ Moore Mr. Nash, for those that don’t remember, was the gentleman who gave us the tune "I can see clearly now", a song which few CFO’s have had on their lips and the primary reason for the market’s performance of late. Earnings estimates continue to be met or exceeded, but we’ve yet to hear much in the way of growth prospects. Lack of positive guidance continues to be the missing factor in the bull market equation. The day started out with green arrows before turning red by the lunch-hour. The DOW ended with a loss of -0.6 percent while the NASDAQ dropped -2.5 percent and the NDX -2.9 percent. Volume was moderate with 1.30 billion shares trading on the NYSE and 1.80 billion on the tech index. Losers triumphed over winners by an 18/14 margin on the big board and 23/13 on the NASDAQ. Despite the bearish tone, several sectors managed decent gains. Drug, bank, biotech, paper and retail were among the winners while brokerage, natural gas, utility and oil service sectors were headed lower. Tech action was weak across the board with hardware, networking and chip stocks facing stiff selling pressure. Investors seemed indifferent to a surprisingly strong piece of economic data. December’s leading economic indicator number increased by +1.2 percent, the strongest number since February 96’. The positive data prompted the Conference Board to state “ the recession could be over soon”. Richard Bernstein, Merrill Lynch’s chief U.S. strategist, told clients in a research note that a re-allocation of funds would be advisable. Mr. Bernstein noted "the tech sector is selling at the highest P/E ratio in the history of our data, while the drug industry is selling at one of its lowest". He went on to say that tech stocks had reached "bubble-like" valuations. Coupled with good numbers from Johnson and Johnson, the drug index enjoyed a nice move of +1.49 percent Funds flow tracker, Trim Tabs remains in the bearish camp. The company said corporate liquidity has set another negative record with an absence of cash takeovers and a small amount of new stock buybacks. As more and more company’s report limited growth prospects, investors should begin to lower their expectations. At least, that’s what the bulls are hoping for. With lowered expectations, and the possibility of better than expected second quarter numbers, the markets would be perfectly positioned for a spring rally. Sounds good doesn’t it? Of course, the bears have a completely different scenario in mind. The bears are counting on the tag team of media and analysts to do their bit in pre- maturely lifting the markets, thereby providing the perfect shorting opportunity. Should make for an interesting few months. VIX Monday 01/22 close: 25.10 VXN Monday 01/22 close: 50.37 30-yr Bonds Monday 01/22 close: 5.37 Total Put/Call Ratio: .65 Equity Option Put/Call Ratio: .59 Index Option Put/Call Ratio: 1.88 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 37.40 Volume/Open Interest Maximum calls: 40/28,854 Maximum puts : 38/64,604 Moving Averages 10 DMA 39 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: 570.63 Volume/Open Interest Maximum calls: 580/3,504 Maximum puts : 500/5,746 Moving Averages 10 DMA 582 20 DMA 586 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: 1119.31 Volume / Open Interest Maximum calls: 1150/27,049 Maximum puts : 1150/25,635 Moving Averages 10 DMA 1141 20 DMA 1148 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: 9,713.80 Volume / Open Interest Maximum Calls: 98/10,507 Maximum Puts 90/16,987 Moving Averages: 10 DMA Unavailable 20 DMA 50 DMA 200 DMA 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: 520.88 Volume / Open Interest Maximum Calls: 520/285 Maximum Puts: 600/506 Moving Averages 10 DMA 542 20 DMA 560 50 DMA 576 200 DMA 544 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: 499.13 Volume / Open Interest Maximum Calls: 570/960 Maximum Puts: 370/638 Moving Averages 10 DMA 553 20 DMA 549 50 DMA 541 200 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: 380.27 Volume / Open Interest Maximum Calls: 380/ 51 Maximum Puts: 380/1300 Moving Averages 10 DMA 377 20 DMA 379 50 DMA 386 200 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, 02/18. 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 01/01/02 338,288 407,107 (68,729) 17.1% 01/08/02 333,742 398,283 (64,541) (6.1%) 01/15/02 340,005 397,024 (57,019) (11.7%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: (41,144) - 5/1/01 Small Traders Long Short Net %Change 01/01/02 127,419 55,576 71,843 (1.6%) 01/08/02 130,335 60,780 69,555 (3.1%) 01/15/02 129,987 64,311 65,676 (5.5%) 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 01/01/02 29,801 37,497 (7,696) 01/08/02 30,786 37,457 (6,671) (13.3%) 01/15/02 32,068 34,859 (2,791) (58.1%) 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 01/01/02 10,649 5,913 4,736 01/08/02 10,073 6,404 3,669 (22.5%) 01/15/02 10,230 9,782 448 (87.8%) 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 01/01/02 15,820 7,553 8,267 1.3% 01/08/02 15,921 7,981 7,940 (3.9%) 01/15/02 15,866 9,175 6,691 (15.7%) 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 01/01/02 3,368 8,668 (5,300) 10.6% 01/08/02 4,380 9,188 (4,808) (9.3%) 01/15/02 4,979 8,747 (3,768) (21.6%) 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 +65,676 +69,555 -57,019 -64,541 Total Open Interest % (+33.80%) (+36.39%) (-7.74%) (-8.82%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -3,768 -4,808 +6,691 +7,940 Total Open interest % (-27.45%) (-35.44%) (+26.72%) (+33.22) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +448 +3,669 -2,791 -6,671 Total Open Interest % (+2.24%) (+22.27%) (-4.17%) (-9.78%) net-long net-long net-short net-short What COT Data Tells Us ---------------------- Indices:. Slight shift by the Commercials as they reduced their net-short position by a small percentage on the S&P 500. Nothing to get too excited about though, remember, we’re looking for increased divergence, and this week the Small Specs were also lightening up on their net-long positions. Gold: After peaking at 61.04 on Wednesday, the XAU (gold and silver index) has fallen to today’s close of 58.34. The fact that the Commercial players were busy loading up on short contracts (moving from 24,042 to 53,938) on Tuesday, might have had just a little influence on the index’s demise. 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 01/15 53,938 contracts net-short Data compiled as of Tuesday 01/15 by the CFTC. ========================= Play-of-the-Day (Bullish) ========================= Fedex Corp - FDX - close: 50.99 change: +0.17 stop: 48.75 Company Description: With annual revenues of $20 billion, FedEx Corp. is the premier global provider of transportation, e-commerce and supply chain management services. The company offers integrated business solutions through a network of subsidiaries operating independently, including FedEx Express, the world's largest express transportation company; FedEx Ground, North America's second-largest provider of small-package ground delivery service; FedEx Freight, a leading provider of regional less-than-truckload freight services; FedEx Custom Critical, the world's largest provider of expedited time-critical shipments; and FedEx Trade Networks, a provider of customs brokerage, consulting, information technology and trade facilitation solutions. (source: company press release) - ORIGINAL WRITE UP: January 18th, 2002 - Why We Like It: We think FDX is an attractive trading buy. What does that mean? It means traders might be able to capture a short-term bounce in the stock price after the recent selling but to do so with diligent stop placement and realistic targets. As a major air freight carrier, shares of the company were obviously hit hard during the September tragedy. However, FDX has risen strongly from those September lows hitting new relative highs while stopping along the way to consolidate gains and head higher again. Earnings on December 19th were okay but were boosted by their portion of the airline bailout package. Last Friday Salomon Smith Barney downgraded FDX to a neutral. Their concerns seemed to stem from current valuations being too high ahead of actual economic recovery. The stock gapped down and fell to sellers for the next few days. On Wednesday of this week shares had reached their 50-dma near $48.75 (FDX closed at $48.70). Ending the day at its low, FDX had appeared to confirm the new downtrend on a high volume break of support at $50. The very next day the stock posted a reversal back above the $50 level on even stronger volume. This bounce off the 50-dma was confirmed with a another positive day on Friday made even more bullish by the negative market action in the broader indices. We're being optimistic but the MACD is showing a potential bullish divergence in its histogram. We are going to try and play any bounce with an initial target of $55. Our initial stop will be $48.75 or Thursday's low. Given the recent downturn in the Dow Jones, we think that a market bounce next week might accelerate any rebound in FDX. - Play-of-the-Day Comments: January 22nd, 2002 - The trend in the price of oil continues to slip. As a large provider of transportation services FDX spends a lot of money on fuel. It was also encouraging for the bulls to see shares of FDX posting a small gain today despite selling pressure across the markets. A dip to $50 might be an attractive entry point to consider a long position. Picked on January 18th at $50.82 Gain since picked: +0.17 Earnings Date 03/20/02 (unconfirmed) ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Tuesday 01-22-2002 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/1671_2.asp ================================================================= In section two: Stock Bottom / Active Trader Bullish Play Updates: FDX, IKN, LTR, PBY, TGH, UNH Bearish Play Updates: ADRX, SIVB, SPY High Risk / High Reward Bullish Play Updates: EXPE Bearish Play Updates: ALTR Closed Bullish Plays: PVN 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) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Fedex Corp - FDX - close: 50.99 change: +0.17 stop: 48.75 Any day our long plays can post a gain with the broader markets in decline sounds like a good day to us. FDX was one of those stocks that ended in the green but shares did show weakness as the Dow Jones continued to descend. Traders might get an opportunity to buy on a dip to $50 if the sell-off continues tomorrow in the stock market. We see no need to rush into a long position so choose your entry carefully. Picked on January 18th at $50.82 Gain since picked: +0.17 Earnings Date 03/20/02 (unconfirmed) --- Ikon Office Solutions - IKN - cls: 12.02 chg: -0.42 stop: 11.69 We are noticing an interesting pattern on some stocks that had held up well during the first half of the trading session and then suddenly fell to selling pressure midday. The broader indices all traded in similar fashion with steady declines after the morning open so we don't know what the catalyst for the sudden drop may have been. Shares of IKN have traded to the $12 level multiple times in the past several sessions and bulls will want to see the stock hold this support level. A bounce higher may offer an attractive entry point. If shares fall under $12, we would expect to be stopped out soon thereafter. On a side note, Ikon's Board of Directors approved the company's normal quarterly cash dividend of $0.04. The shareholder record date to receive this dividend is Feb. 18th, 2002. The dividend is payable on March 10th. Don't forget that earnings are expected on Friday, Jan. 25th. Picked on January 11th at $12.31 Gain since picked: -0.29 Earnings Date 01/25/02 (unconfirmed) --- Loews Corp - LTR - close: 60.67 change: +0.52 stop: 55.99 LTR is another long play that has managed to out perform the major indices for the first day of trading this week. The stock gained about 50 cents but the move was not very convincing. Volume has been climbing the last few days which is an encouraging sign for the bulls. News of note over the weekend is the coming "IPO" for LTR's tobacco division, Lorillard. LTR plans to issue a tracking stock of its tobacco unit under the name Carolina Group and the stock symbol "CG", which was the previous stock symbol for the Columbia Energy Group. The offering is expected to raise more than $800 million with Salomon Smith Barney and Morgan Stanley each selling over 31 million shares between $25 and $28. A dip back to $59.50 or $59.00 in LTR would not be a surprise but we would prefer to see the stock bounce at the $60 level. Picked on January 18th at $60.15 Gain since picked: +0.52 Earnings Date 01/31/02 (unconfirmed) --- Pep Boys Man Moe - PBY - close: 15.60 change: -0.40 stop: 14.99 PBY's battle for the $16 level slid back into the bear's favor on Tuesday. Shares lost 2.5% while the broader markets slipped lower. In contrast, other auto parts retail/service stocks made marginal gains. Traders may want to be patient and wait for PBY to rebound back above the $16.00 level before initiating new plays considering the current market environment. Yet a bounce at $15.50, as discussed over the weekend, might be an attractive entry for more aggressive players as long as you wait for the bounce to begin. Picked on January 18th at $16.00 Gain since picked: -0.40 Earnings Date 02/14/02 (unconfirmed) --- Trigon Healthcare - TGH - close: 71.42 change: +0.01 stop: 68.49 Our normally bullish healthcare play in TGH languished in a sideways trading pattern while the majority of the market tumbled. Investors have about 2.5 weeks before TGH plan to announce earnings, which they confirmed, would be Friday, Feb. 8th, 2002. Picked on January 11th at $71.42 Gain since picked: +0.00 Earnings Date 02/08/02 (confirmed) --- UnitedHealth Group - UNH - close: 72.55 change: -0.03 stop: 68.49 More of the same for shares of UNH. The stock has been holding support at the $72 level but the intraday highs have been dropping the last couple of days. UNH did confirm that they would announce earnings on Thursday, Jan. 24th, 2002 before the market opens. The estimates are for $0.73 a share. We are choosing to hold over the announcement but doing so does entail a higher degree of risk. If you choose not to, you'll need to close your position before the ending bell on Wednesday. Picked on January 11th at $71.75 Gain since picked: +0.80 Earnings Date 01/24/02 (confirmed) -------------------- Bearish Play Updates -------------------- Andrx Group - ADRX - close: 60.49 change: -0.47 stop: 61.76 *new* There has been nothing new to report for ADRX but bears should feel a bit more comfortable that the stock did not react to the positive move in the DRG.X drug index. The move higher for the drug sector was fueled by a positive earnings report from drug giant Merck & Co (NYSE:MRK). Just in case ADRX decides to produce a delayed reaction to the new bullish sentiment for the drug sector, which was partially powered by comments from Merrill Lynch today, we are going to lower our stop to $61.76. The intraday highs on Friday and today were both near $61.60 to $61.65. Bears are now looking for a breakdown below the $60 mark. If it occurs we'll want as much volume as possible to emphasize any conviction behind the move. Picked on January 4th at $64.14 Gain since picked: +3.67 Earnings Date 10/25/01 (confirmed) --- Silicon Valley - SIVB - cls: 22.27 chg: -0.66 stop: 24.00 *new* Shares of SIVB continue to fall on heavy volume, which is exactly what bears want to see. The move today helps confirm the breakdown below the 200-dma on Friday. This 2.88% drop also puts SIVB below the price congestion seen near the end of October and early November. Shares were given an extra push when Merrill Lynch downgraded the stock from long-term buy to long-term neutral. It is possible that the stock could produce an oversold bounce at $22 but we think the real obstacle was potential support at $23.00 and $22.50. Now that SIVB is past this area we're feeling a bit more confident. Shorts should still expect potential bullish support at $22 and $21. We are going to nudge our stop down to one cent over Friday's high ($24.00). Our exit price of $20.05 is still in effect. Picked on January 18th at $22.93 Gain since picked: +0.66 Earnings Date 01/16/02 (confirmed) --- SPDRS S&P 500 - SPY - cls: 112.37 chg: -0.78 stop: 115.57 This is it! The S&P 500 SPDRs (SPY) fell to a low of $112.02 before bouncing higher towards the close. For days now we have been focusing on support at the $112 level. Bears need to see this level break soon. There are a growing number of technical analysts clamoring that the markets are oversold. On a short- term basis we would agree with them but that doesn't mean the markets can't slip a little further. If the SPY trades to $110.05 we'll close the play but we're not expecting it to happen tomorrow. The good news, or the bad news depending on your perspective, is that today's performance actually produced a bearish engulfing candlestick pattern. It is not terribly impressive but it is a bearish pattern and not one we would be buying big long positions in front of. The move conservative stop at $114 still looks like a sensible position but we are not moving our stop. Picked on January 9th at $115.57 Gain since picked: +3.20 Earnings Date n/a =============== AT Closed Plays =============== -------------------- Closed Bullish Plays -------------------- ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Expedia, Inc. - EXPE - close: 43.21 change: -1.28 stop: 41.99 It would have been natural to expect AMZN's strong performance (+24%) might have boosted the rest of the Internet sector but no such luck for the bulls today. Instead, shares of EXPE fell almost 3% towards its 15-dma. Volume was light and aggressive traders may want to see this move as an entry point. We did mention over the weekend that a dip to $43.00 or $42.50 might be a good place to evaluate a new position. However, we are suddenly cautious on the stock for two reasons. The first and most obvious reason is the broader market activity. The drops in the Dow Jones and the Nasdaq do not bode well for long positions in general and less active traders may want to sit on the sidelines until we find a bottom. The second reason we are turning cautious on EXPE was today's candlestick pattern. EXPE just produced a bearish engulfing candlestick pattern, which could be forecasting that a new downward trend is in the works. Look for confirmation on any bounce before initiating any positions. With out stop at $41.99 there isn't a lot of room for EXPE to "play with". Don't forget that earnings are expected on Monday. Picked on January 18th at $44.49 Change since picked: -1.28 Earnings Date 01/28/02 (confirmed) -------------------- Bearish Play Updates -------------------- Altera Corp. - ALTR - close: 22.00 change: -1.01 stop: 23.01 *new* Another day of weakness hit the technology sectors on Tuesday with chip stocks leading the way. The SOX.X fell 23.91 points or 4.57% to close below the 500 level, a very bearish move. The semiconductor general, INTC, also fell dramatically with a 5.3% loss. Negative comments from German chipmaker Infineon Technologies (NYSE:IFX) did little to inspire investor confidence when they stated that any economic or profit recovery was still a ways off and probably going to be smaller than expected (Reuters). A lot of the guidance coming out tonight after the close seemed to be negative or at least disappointing with many companies saying any improvement will be very late 2002 or even 2003. At the time of this writing, we have not yet heard about the ALTR conference call. The did post a press release about their year-end and 4Q numbers with quarterly earnings coming in line with estimates at $0.03/per share (pro forma). After hour trading to this point has shown ALTR moving from $21.97 to $22.23. If you have been following this play then short-term traders should have already taken profits at the $22 level (about 9%). We are going to move our stop down to $23.01, which should protect a 5% move in the stock. Given the action in the SOX we think there could be more downside in the group and ALTR might be able to trade to $20. Picked on January 11th at $24.20 Gain since picked: +2.20 Earnings Date 01/22/02 (confirmed) =============== HR Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Providian Financial - PVN - close: 3.90 change: -0.64 stop: 3.99 After trading higher near the open, shares of PVN appeared to have fallen off a cliff shortly after 10:00 a.m. this morning. The cause of the drop is unclear. There was no news for the company that might explain the sharp reaction. We did see a large trade for more than 70K shares go by at $4.15 as well as a ton of trading right at the $4.00 mark. We would have been stopped out at $3.99 for a 34-cent loss. PVN could still be a candidate for an aggressive trade but it would be beneficial to know what caused the move today. Bullish investors willing to bet on a long-term move for PVN may want to wait until after their earnings report this month. Picked on January 16th at $ 4.33 Gain since picked: -0.34 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 CEO Cnooc Ltd 20.45 +0.77 CF Charter One Financial 28.02 +0.73 KBH Kb Home 40.28 +0.76 NX Quanex Corp 29.11 +0.71 PLMD Polymedica Corp 19.85 +0.85 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change AMZN Amazon.com Inc 12.60 +2.44 PC Perez Compac 10.15 +1.28 FLM Fleming Companies Inc 19.15 +1.88 BUCA Buca Inc 18.00 +1.55 BFR Banco Frances 5.21 +1.66 ENMD Entremed Inc 7.83 +1.03 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change WFC Wells Fargo & Co 46.67 +1.29 BAC Banc of America Corp 62.67 +1.87 CAH Cardinal Health Inc 67.19 +5.27 WY Weyerhaeuser Co 53.72 +2.21 MCK McKesson Corp 38.94 +1.99 AGN Allergan Inc 74.26 +2.94 RBK Reebok Intl. Ltd 28.44 +1.13 ----------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change VIA.B Viacom Inc Class B 38.60 -1.94 NOK Nokia Corp 21.15 -1.35 RTRSY Reuters Group 52.09 -1.07 PSFT PeopleSoft Inc 33.59 -1.75 KYO Kyocera Corp 58.75 -2.27 ACS Affiliated Computer Svc 103.00 -5.08 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change FSH Fisher Scientific 28.31 -2.44 ================================================================= 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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