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Daily Newsletter, Wednesday, 02/06/2002

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PremierInvestor.net Newsletter              Wednesday 02-06-2002
                                                  section 1 of 2
Copyright  2001, All rights reserved.
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In section one:

Market Wrap:      Wild ride in after hours
Watch List:       RETK, VRTS, VRSN, VZ, PSFT
Market Sentiment: A New Approach.
Play-of-the-Day:  Shorts, Earnings & Healthcare.

-----------------------------------------------------------------
U.S. Market Numbers
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MARKET WRAP  (view in courier font for table alignment)
-----------------------------------------------------------------
    02-06-2002          High     Low     Volume Advance/Decline
DJIA     9653.39 - 32.04  9733.10  9608.21 1.67 bln   1134/1930	
NASDAQ   1812.71 - 25.81  1853.13  1805.01 2.06 bln   1206/2364
S&P 100   550.20 -  2.18   555.04   546.89   Totals   2340/4294
S&P 500  1083.51 -  6.51  1093.58  1077.78             
RUS 2000  462.41 -  6.41   469.48   461.67
DJ TRANS 2621.98 - 80.45  2707.45  2615.84
VIX        28.05 +  1.28    28.66    27.14 
VXN        49.06 +  2.32    49.20    47.33
TRIN        1.21 
Put/Call    0.70
-----------------------------------------------------------------

===========
Market Wrap
===========

Wild ride in after hours

After hours trading in shares of Cisco Systems (NASDAQ:CSCO) 
$18.61 +0.59% have been on a roller coaster ride after the 
company released official earnings this evening.  The bulls took 
charge in early after-hours trading driving the stock as high as 
$19.14 when the networking giant reported earnings of 9-cents a 
share, which handily beat consensus estimates from analysts 
looking for earnings of 5-cents a share.  Cisco said it was able 
to generate approximately $2 billion in cash from operations 
(this number now seems to be a number that some feel is important 
to follow considering recent accounting issues) and a book-to-
bill ration of 1.00 (1 order coming in for every 1 order billed 
going out).

But things turned sour in after hours trading when Cisco said it 
still had limited visibility given uncertain economic conditions, 
and as such, it will only be providing guidance for its upcoming 
3rd quarter.  Bulls appeared to pull the proverbial "plug" and 
the stock fell rather sharply to the $17.65.  Then Cisco followed 
by saying it could end up with a lower book-to-bill ratio on 
product slides in the 3rd quarter as it attempts to tighten up 
its lead times in a seasonally slow quarter.  Shares of Cisco 
then slid further and currently trade at $17.20 in post-market 
action.

Cisco said it sees revenues flat to up in the low single digits 
on a sequential basis.  Since 2nd quarter revenues were $4.8 
billion, guidance on revenues would be higher than current 
consensus for $4.67 billion.  The company said pro forma gross 
margins should hold in the high 50% range and operating expenses 
should be flat.  Cisco felt it could generate approximately $300-
$400 million per month in cash from operations.

All said, Cisco's conference call has traders jittery, mostly due 
to the company only willing to give next quarter guidance, and 
that has impacted stock futures markedly.  NASDAQ futures had 
jumped 14 points higher, but Cisco's "lack of visibility" 
comments had broader tech seeing selling and NASDAQ futures now 
trade down 35 points at $1,427.

Shares of other networking stocks Juniper Networks (NASDAQ:JNPR) 
$13.86 +2.59, gave back 86 cents in after-hours trading to 
$13.00, while Extreme Networks (NASDAQ:EXTR) $11.17 -2.86%, fell 
57 cents to $10.60 and Ciena (NASDAQ:CIEN) $9.02 +0.22%, gave 
back 25 cents to $8.77.

Other large cap tech action found Microsoft (NASDAQ:MSFT) $60.45 
-1.14% falling to $59.68, Intel (NASDAQ:INTC) $32.92 -2.6% 
slipped to $32.25 and Dell Computer (NASDAQ:DELL) $26.68 +0.45 
traded down 38 cents to $26.30.

Playing an earnings run!

Don't laugh!  It's not a technology stock, it's an HMO stock!  
Recent earnings out of the HMO stocks have been strong and 
subscribers that have followed our play list have found some 
bullish action in UnitedHealthcare (NYSE:UNH) and Trigon 
Healthcare (NYSE:TGH).  Today's earnings from Anthem (NYSE:ATH) 
had this health benefits provider posting earnings of $0.95 a 
share, which handily beat consensus estimates of $0.90 a share.  
Those earnings also had the stock jumping to a new 52-week high 
of $57.94, before the stock settled back for a "measly gain" of 
+4.16% at $56.50.

We think traders may want to book some gains from Trigon 
Healthcare (TGH) $77.00 +0.01% (see play update) and perhaps roll 
some of those gains for an earnings run in shares of PacifiCare 
Health Systems (NASDAQ:PHSY) $20.25 +4.48% on the thought that 
earnings from the HMO group have been strong and there may even 
be a short-squeeze getting ready to take place in PHSY.

PacifiCare Health Systems Chart - Daily Interval




Last fall, shares of PHSY went on a torrid run from $15 to $23 in 
the wake of earnings that beat the Street's estimates.  The stock 
then found selling to the $14 level just when Merrill Lynch made 
the "sell PHSY" call at the bottom, which came at the same time 
the company filed a secondary offering on December 10th.  Since 
that time, the stock has been seeking the higher ground as other 
HMO stocks have been reporting strong earnings.

A secondary offering is dilutive to earnings as supply of the 
stock is increased.  Sometimes, bears will short a stock that 
announces a secondary offering (like PHSY did on December 10th) 
with the belief the share price will fall due to the extra supply 
of stock.  As you can see, the shares of PHSY currently trade 
well above the December 10th close of $16.15.  Any shorts 
(roughly 8.28 million shares short, or 14.34 short interest 
ratio) that may have shorted the stock with the belief of a price 
decline, may be getting a little nervous with the stock moving 
higher and strong earning's in the group.  With the broader 
market negativity, that nervousness might be getting ready to 
reach a peak as the stock moves against the bears.  Thus the 
potential for a short squeeze adding some catalyst like symptoms 
ahead of earnings.

OK, enough bullish talk

Today's broader market action was bearish and one of our "key" 
economic sectors in the Dow Jones Transportation Average (TRAN) 
broke back below its 200-day moving average.  The breaks above 
that downward trend dating back to May 1999 continue to be rather 
short-lived and this sector's technicals have us getting more 
cautious on the thought of economic recovery near-term.  Economic 
bulls that have this group needing to trade technically bullish 
are still in the game, but a break below the $2,589 level should 
be regarded as bearish and traders in the group will most likely 
turn defensive.

Dow Jones Transportation Average




The decline back below the 200-day moving average and 50-day 
moving average now heightens my alert to a potential downside 
move coming in the Transports and the broader market averages.  I 
would discourage bulls in the sector from being "complacent" on 
any break of upward trend near the $2,589 level.  We're raising 
our stop to profitability in shares of Fedex Corp. (NYSE:FDX) 
(see play update) just in case there is a "wholesale" move lower 
in the group.  Subscriber may note that the Transports (TRAN) 
were trading $2,667 at the January 18th close, while Fedex traded 
$50.82.  A quick comparison has the TRAN below that close, but 
Fedex still holding a $2.44 gain.  I don't want this one to turn 
into a loss.  If the Transports can rebound, then bulls in Fedex 
should be fine.  If not, we would rather leave with a small gain 
than a loss.

All is not lost

Trader that are willing and able to trade short or buy puts on 
two of our "financial" related trades in Citigroup (NYSE:C) and 
Silicon Valley Bancshares (NASDAQ:SIVB) are beginning to see some 
technical breakdowns in those two stocks.  The broader KBW Bank 
Index (BKX.X) had troubles today as that index fell 1.2% and 
outpaced the broader S&P 500 decline.  

KBW Bank Index Chart - Daily Interval




Two short plays we currently have going in the "Current Play 
List" are financial/bank related and the KBW Bank Index (BKX.X) 
looks ready to fall further.  After a sharp decline at the open, 
the group did try and put together a rally during today's 
sessions, but settled back into the middle of the day's range.

Yesterday, banking stocks took a drubbing in Japan amid 
persistent concerns over both Japanese banks' bad loan problems 
and this week's bearish performance from U.S. stocks.  As I 
write, the Japanese Nikkei (equivalent to the U.S.'s Dow 
Industrials), which lost 600 points on Wednesday to 9,420 (its 
lowest close since Dec. 14th 1983) is trading fractionally higher 
(up 38 points).

Internals continue to deteriorate

Our bullish percent charts continue to show deteriorating 
internals from the various markets we follow for these indicators 
and depict that of a defensive market environment.

The NASDAQ-100 Bullish Percent ($BPNDX) from www.stockcharts.com 
found a net loss of 2 stocks to sell signals today, bringing the 
bullish percent reading to 32% and getting very close to the 
"oversold" reading of 30%.

The S&P 500 Bullish Percent ($BPSPX) also found a net loss to 
stocks giving sell signals on their point and figure charts.  The 
current reading here is now at 53.6%, down from last night's 
reading of 55.4%.  In September, subscribers may remember this 
"market risk" indicator reached a low level of 16%.  In essence, 
there is still quite a bit of risk yet to be removed in this 
broader market indicator.

Game plan

For the most part, we would suggest "avoiding" technology-related 
stocks from the bullish side at this point.  If shorting, expect 
volatility and be willing to take some heat when initiating a 
short.  To help remove some risk from a bearish trade, consider 
the use of put options, but know what you're doing in regards to 
premiums paid as the Market Volatility Index (VIX.X) is rising 
and option premiums are rising as more investors scramble to the 
options market to hedge their portfolios or speculate on downward 
price moves.  

In September, the VIX.X spiked to the 55 level and currently 
reads 28.15.  This is often thought of as a "contrarian" 
indicator and reading above the 36 level can be correlated with 
near-term bottoms in the broader market averages.  It is perhaps 
no coincidence that the bullish percent charts all reached very 
oversold levels in September, when the VIX.X spiked to an amazing 
55 level that had not been seen since October of 1998.

In essence, the current indicators are by no-means at levels 
where bullish traders should be thinking a bottom is in place and 
any bullish positions should be followed with disciplined stops.  
There will be a time to trade bullish again.  If you can't or 
won't trade bearish, then the groups that I feel are currently 
finding the bulk of bullish activity is the HMO group where 
earnings have been strong and not as economically sensitive as 
other areas of the market.

Jeff Bailey
Senior Market Technician


==========
Watch List
==========

The PremierInvestor.net watch list is not designed to be read
as full fledged stock picks.  Rather we would prefer to offer
it as an extra tool in today's investor toolbox.  Think of it
as a radar screen with your own radar operator pointing out
interesting developments, technical patterns or potential plays
that you may or may not have seen on your own.  Due to time
constraints we do glance at the news but rarely do we have 
time to fully read pertinent news stories, due background 
research and other necessary screens that investors should do
before making a decision.  A common exercise is to read the
entry, glance at the sector and other stocks in that industry
and then compare what's happening in the stock to what's 
happening in the broader market indices.  We hope you enjoy
the Watch List and that it proves to be a useful tool for your
own trading success.

----------

Retek Inc - RETK - close: 19.56 change: -0.93

WHAT TO WATCH: The slide in software continues and pacing the 
descent is shares of RETK.  The stock has been under a lot of 
selling pressure the last couple of weeks but today's breakdown 
under $20 just confirms the trend yet again.  RETK is very 
oversold but that doesn't mean it won't trade $16.00 in the next 
few sessions first.  The $15 to $16 area would be our target for 
RETK's next level of support.  However, that is just looking at 
the daily chart.  The point-and-figure chart tells a different 
story.  According to the PnF chart, RETK has stopped dead on its 
ascending bullish support line.  An aggressive trader might 
actually consider a long play here with a stop under $19.00 but 
we'd look for a move back over $20 first.  We're more of a mind 
to look for a continuation of the breakdown especially 
considering the moves in the GSO.X software index.




---

VERITAS Software - VRTS - close: 36.20 change: -1.15

WHAT TO WATCH: Another software company we think will be worth 
watching.  The recent breakdown under the $41/$40 level was a 
major blow to the bulls and bears are quickly running the stock 
to its net support level at $35.  However, while the new trend is 
negative, bears will be facing the point-and-figure bullish 
support trend at $35.00.  It will be an area where short-term 
bears consider covering their shorts and pocketing profits while 
bulls look for support and potential entry points.  A drop under 
$35.00 could signal the next wave down to $30 but without any 
support from the PnF chart below it.  Keep an eye on MSFT as the 
leader (or lack of leadership) for the sector.  While you're at 
it keep tabs on the GSO.X.




---

VeriSign Inc - VRSN - close: 23.93 change: -2.52

WHAT TO WATCH: Yet another software company that has collapsed 
under recent market and tech weakness.  VRSN's stock has looked 
weak for months and had slowly been building a long-term bearish 
pattern with lower highs.  Unfortunately for shareholders, the 
negative trend was accelerated when VRSN caught the Enron-itis 
bug.  Investor concerns over VRSN's many acquisitions and 
minority stakes in other companies has the stock in a free fall.  
The breakdown under $30 was a key level for traders.  Shares are 
very short-term oversold and could probably bounce but any 
fragment of a creative accounting deal could have shares trading 
to $20 (or less) in a heartbeat.  VRSN did post a strong intraday 
bounce off its lows today.




---

Verizon Communications - VZ - close: 43.40 change: -1.61

WHAT TO WATCH: Aside from VZ and QCOM, most of the wireless 
stocks are trading in the $20 to $10 range (or less).  For some 
traders this means that VZ and QCOM could have plenty of downside 
to go.  This descent for VZ may have begun anew as it starts to 
catch up with the rest of the ailing wireless sector.  Shares of 
VZ had broken through previous support at $47 several sessions 
ago and appear to be heading for lows not seen since July of 
2000.  Don't be surprised if the stock bounces back to the $46 
level as the 10-dma seems to be the top end of the downward 
channel lately.  A failed rally at $46 might be a good position 
to short it as bears try and take it back to $40 and below.




---

PeopleSoft Inc - PSFT - close: 29.29 change: -1.03

WHAT TO WATCH: We put PSFT on the watch list this Monday and 
suggested that traders watch it for a breakdown under the $30 
level for a potential short.  That opportunity has arrived and if 
we don't board quickly it could leave the station without us.  
Why the rush?  One could argue that the growing weakness in the 
GSO.X software index is signs that investors are fleeing the 
group (and they wouldn't be wrong).  However, when word hits 
investors ears about creative accounting allegations at PSFT then 
shares may trade lower in a hurry.  What makes this story so 
interesting is the accounting question was asked, or more 
accurately fired at PSFT from one of its competitors - Siebel 
Systems.  SEBL's CEO recently made certain statements aimed at 
PSFT's accounting practices at a technology conference for 
analysts.  It will be interesting to see where it leads.






================
Market Sentiment
================

A new approach.
by Russ Moore

Investors are getting out their fine-tooth combs as they get 
ready to pick through the numbers like never before.

It seems that many investors are "mad as h..., and aren’t going to 
take it any more". That attitude, although positive in the long 
run, will make it increasingly difficult for the bulls to muster 
a sustained rally over the short-term.

With Investor skepticism on the rise, Wall Street was saddled 
with another choppy session. The DOW lost -03 percent while the 
NASDAQ slipped -1.4 percent and the NDX -1.2 percent. Volume was 
heavy with 1.65 billion shares moving on the NYSE and 2.07 
billion on the tech index. Losers continued their assault on 
winners, trouncing them by a 19/11 margin on the big board and 
24/12 on the NASDAQ.

In a predominantly red arrow session, networking and chip sectors 
managed modest gains. Broader market action saw oil and oil 
service sectors finish in positive territory.

Fear levels, as measured by the volatility indices (VIX, VXN) are 
on the rise. Current levels suggest a modest bounce could be at 
hand, however, don’t expect a huge move. Simply too much 
resistance to overcome in a nervous market environment.


VIX
Wednesday 02/06 close: 28.15


VXN
Wednesday 02/06 close: 49.06


30-yr Bonds
Wednesday 02/06 close: 5.37


Total Put/Call Ratio: .99


Equity Option Put/Call Ratio: .88


Index Option Put/Call Ratio: 1.69


===

NASDAQ 100 Index (NDX/QQQ)
52-Week High: 103.51
52-Week Low:   28.19
Current close: 36.06

Volume/Open Interest
Maximum calls: 38/56,991
Maximum puts : 35/56,657

Moving Averages
 10 DMA 37
 20 DMA 38
 50 DMA 39
200 DMA 40

Fibanocci Retracements
Relative High: 43.24 (12/06/01)
Relative Low:  27.20 (09/21/01)
38% 37.22
50% 35.31
62% 33.37

===

S&P 100 Index (OEX)
52-Week High:  834.93
52-Week Low:   491.70
Current close: 550.20

Volume/Open Interest
Maximum calls: 580/7,781
Maximum puts : 520/9,420

Moving Averages
 10 DMA  564
 20 DMA  572
 50 DMA  581
200 DMA  598

Fibanocci Retracements
Relative High: 600.80 (01/04/02)
Relative Low:  480.07 (09/21/01)
38% 554.05
50% 539.83
62% 525.37

===

S&P 500 (SPX)
52-Week High:  1530.01
52-Week Low:    965.80
Current close: 1083.51

Volume / Open Interest
Maximum calls: 1150/26,270
Maximum puts : 1100/25,319
Moving Averages
 10 DMA 1113
 20 DMA 1125
 50 DMA 1138
200 DMA 1168

Fibanocci Retracements
Relative High: 1176.97 (01/07/02)
Relative Low:   944.75 (09/21/01)
38% 1087.63
50% 1060.54
62% 1032.99

==

DJIA (INDU)
52-Week High:  11,518.83
52-Week Low:    8,235.81
Current close:  9,653.39

Volume / Open Interest
Maximum Calls:  98/12,137
Maximum Puts    90/17,225

Moving Averages:
 10 DMA  9,773
 20 DMA  9,824
 50 DMA  9,923
200 DMA 10,096

Fibanocci Retracements
Relative High: 10,300.15 (01/07/02)
Relative Low    8,062.34 (09/21/01)
38%  9,445.31
50%  9,181.25
62%  8,912.71

==

Biotech Index (BTK)
52-Week High:  811.61
52-Week Low:   383.28
Current close: 464.84

Volume / Open Interest
Maximum Calls: 520/326
Maximum Puts:  520/607

Moving Averages
 10 DMA 501
 20 DMA 520
 50 DMA 559
200 DMA 546

Fibanocci Retracements
Relative High: 625.15 (12/06/01)
Relative Low:  410.54 (09/21/01)
38% 543.17
50% 517.85
62% 494.09

==

Semiconductor Index (SOX)
52-Week High: 1280.84
52-Week Low:   362.00
Current close: 542.88

Volume / Open Interest
Maximum Calls: 580/1209
Maximum Puts:  500/1168

Moving Averages
 10 DMA 543
 20 DMA 545
 50 DMA 546
200 DMA 554

Fibanocci Retracements
Relative High: 606.88 (01/09/02)
Relative Low:  343.93 (09/27/01)
38% 506.43
50% 475.40
62% 443.85

==

Pharmaceutical Index (DRG)
52-Week High:  455.28
52-Week Low:   339.49
Current close: 369.63

Volume / Open Interest
Maximum Calls: 390/690
Maximum Puts:  380/825

Moving Averages
 10 DMA 374
 20 DMA 376
 50 DMA 382
200 DMA 390

Fibanocci Retracements
Relative High: 407.83 (11/26/01)
Relative Low:  353.67 (09/21/01)
38% 384.78
50% 378.88
62% 372.87

*****

CBOT Commitment Of Traders Report: Friday, 02/01. 
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 
01/15/02     340,005   397,024   (57,019)  (11.7%)
01/22/02     342,841   394,041   (51,700)   (9.3%)
01/29/02     345,583   401,923   (56,340)    9.0%

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
01/15/02       129,987    64,311    65,676    (5.5%)
01/22/02       125,451    65,423    60,028    (8.6%)
01/29/02       128,826    63,127    63,127     5.1%

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 
01/15/02      32,068    34,859    (2,791)    (58.1%)
01/22/02      30,671    34,103    (3,432)     23.0%
01/29/02      31,577    33,651    (2,974)    (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
01/15/02       10,230     9,782      448    (87.8%)
01/22/02       11,885     8,787    3,098  
01/29/02        9,709     8,293    1,416    (54.2%)

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 
01/15/02      15,866     9,175    6,691    (15.7%)
01/22/02      18,152    11,013    7,139      6.6%
01/29/02      19,956    12,171    7,785      9.0%

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
01/15/02       4,979     8,747    (3,768)    (21.6%)
01/22/02       5,424     8,969    (3,545)     (5.9%)
01/29/02       5,872     9,709    (3,837)     11.1%
 
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        +65,699     +60,028        -56,340    -51,700

Total Open
Interest %       (+34.23%)  (+31.45%)      (-7.54%)   (-6.95%)
                 net-long   net-long       net-short  net-short


                     Small Specs             Commercials
DJIA futures     (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value          -3,837     -3,545          +7,785    +7,139
Total Open
interest %       (-24.63%)    (-24.63%)      (+24.23%)  (+24.48)
                 net-short   net-short     net-long    net-long


                     Small Spec              Commercials
NASDAQ 100      (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value         +1,416      +3,098         -2,074    -3,432

Total Open
Interest %        (+7.86%)   (+14.99%)     (-3.18%) (-5.30%)
                 net-long   net-long      net-short  net-short


What COT Data Tells Us
----------------------
Indices:.On a percentage basis we saw little change in the S&P 
Commercial activity. The Commericals have been fluctuating 
between 4 and 9 percent net-short for months, while the Small 
Specs float between 28 and 38 percent net-long. .

Gold: The gold index (XAU) continued its bullish move this week 
closing at 62.80. We did see the Commercials unload 40 percent of 
their short contracts while still remaining in a net-short 
position.

01/01 14,555 contracts net-short
01/08 24,042 contracts net-short
01/15 53,938 contracts net-short
01/22 50,959 contracts net-short
01/29 31,515 contracts net-short

Data compiled as of Tuesday 01/29 by the CFTC.




=========================
Play-of-the-Day (Bullish)
=========================

PacifiCare Health - PHSY - close: 20.25 change: +0.87 stop: 18.24

Company Description:
PacifiCare Health Systems is one of the nation's largest health-
care services companies. Primary operations include health 
insurance products for employer groups and Medicare beneficiaries 
in eight Western states and Guam serving approximately 3.6 
million members.  Other specialty products and operations include 
pharmacy benefit management, behavioral health services, life and 
health insurance, and dental and vision services. (source: 
company press release)

Why We Like It:
We like PHSY for multiple reasons.   We actually closed TGH 
prematurely to allow us to add PHSY without having too many 
healthcare stocks on the play list.  Traders need to be aware of 
a few items before they make a decision to play PacifiCare.  
First of all the company recently announced its "Profit 
Improvement and Cost Savings Plan".  In this plan, PHSY will cut 
15% of its workforce in an effort to save between $80M and $90M a 
year.  This move will include a charge that will result in a loss 
for the fourth quarter.  However, it is the fourth quarter 
earnings announcement we are looking at as a catalyst.  
Management has already said that they feel earnings will be on 
the upper end of the spectrum for 2002 and they expect profit 
margins to improve over the year.  Their CEO actually stated that 
PHSY expects to grow earnings by 15% in 2002.  Now that Wall 
Street knows that earnings will come in on the positive side they 
are likely to overlook the one-time charge for reducing their 
staff.  The rash of positive earnings announcements and even more 
positive conference calls from big-name healthcare companies over 
the last three weeks should help keep bullish interest focused on 
shares of PHSY.  Unfortunately, PHSY has at least one skeleton in 
the closet that investors should no about.  We don't think it 
will actually affect the stock over the next five or six trading 
sessions but it is something to be aware of.  On and around the 
December 10th and 11th, 2001, the company basically offered a 
secondary offering to an institutional investor.  This 
institutional investor would receive/buy shares up to 19.9% of 
the current number of outstanding shares for PHSY (over 6M 
shares).  When word hit the wires about this deal, PHSY stock 
sank quickly but most of the grief was caused by Merrill Lynch.  
The investment behemoth actually slapped a "sell" rating on PHSY 
due to this transaction.  Merrill's analyst was concerned that 
PHSY had been "forced" to do this deal to pay off debt.  Part of 
their concern was for liquidity issues that PHSY may be facing.  
Well, it's not everyday that a broker comes out with a sell 
rating so the markets reacted negatively.  Other brokers were 
also less enthusiastic but were more concerned with the dilution 
effects of this bump in shares outstanding.  The company admitted 
that it would be dilutive but Merrill was also concerned about 
the institutional investors freedom to sell its new shares to 
hedge its position.  Soon thereafter PHSY was trading near 
$14.00.  The bad news for everyone who went short the stock is 
that PHSY has been charging higher ever since.  We glanced at the 
short-interest numbers and as of January 8th, 2002 there was 9.8M 
shares short or almost 50% of the float.  This sounds like a 
recipe for a short-squeeze and the bullish run lately may be a 
symptom of such a squeeze taking effect.  We also looked at the 
point-and-figure chart and it shows the stock just piercing the 
upper bearish trend line and about to signal a double-top 
breakout.  The normal daily chart is also producing bullish 
signals with PHSY recently bouncing off the $18.25 level (and its 
15-dma) while also closing above round-number resistance at $20 
on strong volume today.  Investors who choose to consider a 
longer-term position may want to further investigate the offering 
to its institutional investor and you can do so at most of the 
free Edgar SEC filing sites.  We are looking for a short-term 
move to the $23.00 to $24.00 level as investors bid it up in 
front of the earnings report.  We will start the play with a stop 
at $18.24.  

Picked on February 6th at $20.25  
Change since picked:       +0.00
Earnings Date           02/13/02 (confirmed)





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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

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Do not duplicate or redistribute in any form.



PremierInvestor.net Newsletter               Wednesday 02-06-2002
                                                   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
=================================================================
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charts and graphs, click here:
http://www.PremierInvestor.net/htmlemail/7150_2.asp
=================================================================

In section two:

Stock Bottom (non-tech stocks)
  New Bullish Plays:      PHSY
  Closed Bullish Plays:   PBY, TGH 
  

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)


==================================================================
StockBottom/Active Trader (AT) section
==================================================================

============
AT New Plays
============

   ----------------
   New Bullish Play
   ----------------

PacifiCare Health - PHSY - close: 20.25 change: +0.87 stop: 18.24

Company Description:
PacifiCare Health Systems is one of the nation's largest health-
care services companies. Primary operations include health 
insurance products for employer groups and Medicare beneficiaries 
in eight Western states and Guam serving approximately 3.6 
million members.  Other specialty products and operations include 
pharmacy benefit management, behavioral health services, life and 
health insurance, and dental and vision services. (source: 
company press release)

Why We Like It:
We like PHSY for multiple reasons.   We actually closed TGH 
prematurely to allow us to add PHSY without having too many 
healthcare stocks on the play list.  Traders need to be aware of 
a few items before they make a decision to play PacifiCare.  
First of all the company recently announced its "Profit 
Improvement and Cost Savings Plan".  In this plan, PHSY will cut 
15% of its workforce in an effort to save between $80M and $90M a 
year.  This move will include a charge that will result in a loss 
for the fourth quarter.  However, it is the fourth quarter 
earnings announcement we are looking at as a catalyst.  
Management has already said that they feel earnings will be on 
the upper end of the spectrum for 2002 and they expect profit 
margins to improve over the year.  Their CEO actually stated that 
PHSY expects to grow earnings by 15% in 2002.  Now that Wall 
Street knows that earnings will come in on the positive side they 
are likely to overlook the one-time charge for reducing their 
staff.  The rash of positive earnings announcements and even more 
positive conference calls from big-name healthcare companies over 
the last three weeks should help keep bullish interest focused on 
shares of PHSY.  Unfortunately, PHSY has at least one skeleton in 
the closet that investors should no about.  We don't think it 
will actually affect the stock over the next five or six trading 
sessions but it is something to be aware of.  On and around the 
December 10th and 11th, 2001, the company basically offered a 
secondary offering to an institutional investor.  This 
institutional investor would receive/buy shares up to 19.9% of 
the current number of outstanding shares for PHSY (over 6M 
shares).  When word hit the wires about this deal, PHSY stock 
sank quickly but most of the grief was caused by Merrill Lynch.  
The investment behemoth actually slapped a "sell" rating on PHSY 
due to this transaction.  Merrill's analyst was concerned that 
PHSY had been "forced" to do this deal to pay off debt.  Part of 
their concern was for liquidity issues that PHSY may be facing.  
Well, it's not everyday that a broker comes out with a sell 
rating so the markets reacted negatively.  Other brokers were 
also less enthusiastic but were more concerned with the dilution 
effects of this bump in shares outstanding.  The company admitted 
that it would be dilutive but Merrill was also concerned about 
the institutional investors freedom to sell its new shares to 
hedge its position.  Soon thereafter PHSY was trading near 
$14.00.  The bad news for everyone who went short the stock is 
that PHSY has been charging higher ever since.  We glanced at the 
short-interest numbers and as of January 8th, 2002 there was 9.8M 
shares short or almost 50% of the float.  This sounds like a 
recipe for a short-squeeze and the bullish run lately may be a 
symptom of such a squeeze taking effect.  We also looked at the 
point-and-figure chart and it shows the stock just piercing the 
upper bearish trend line and about to signal a double-top 
breakout.  The normal daily chart is also producing bullish 
signals with PHSY recently bouncing off the $18.25 level (and its 
15-dma) while also closing above round-number resistance at $20 
on strong volume today.  Investors who choose to consider a 
longer-term position may want to further investigate the offering 
to its institutional investor and you can do so at most of the 
free Edgar SEC filing sites.  We are looking for a short-term 
move to the $23.00 to $24.00 level as investors bid it up in 
front of the earnings report.  We will start the play with a stop 
at $18.24.  

Picked on February 6th at $20.25  
Change since picked:       +0.00
Earnings Date           02/13/02 (confirmed)






===============
AT Closed Plays
===============

  -------------
  Bullish Plays
  -------------

Pep Boys Man Moe - PBY - close: 14.79 change: -0.77 stop: 15.35

We were right to be apprehensive about PBY in Tuesday's 
newsletter.  Our prediction that we'd be stopped out didn't take 
long to come to fruition.  Shares of PBY dropped quickly after 
the first 30 minutes of trading to the $14.80 level.  The close 
under $15.00 is pretty bearish and we would expect the stock to 
fall to $14 shortly.  Where it goes from there could be an event 
to watch.  A breakdown under $14, which should be significant 
support, would be an attractive place to short the stock to its 
200-dma near $12.  The bad news for bulls is the PnF chart on PBY 
is about to produce a double-bottom breakdown signal.  MACD has 
rolled over as well.  There was no support from other stocks in 
the group either.  

Picked on January 18th at $16.00 
Gain since picked:         -0.65
Earnings Date           02/14/02 (unconfirmed)




---

Trigon Healthcare - TGH - cls: 77.00 chg: +0.01 stop: 73.95 

Dropping TGH may come as a surprise since we just discussed 
holding it for a move towards $80 last night in the Tuesday 
newsletter.  Let me explain our new strategy.  First of all, 
traders comfortable with the play don't need to drop it just 
because we do.  We still expect TGH to eventually make it to the 
$80 level and thus the exit price at $79.75 might be a good 
strategy to employ.  However, shares do look a bit over-extended 
and we said so yesterday.  Conservative traders should monitor 
their stops carefully to protect as much capital and as many 
gains as possible.  A bounce at $75 still appears to be an 
attractive entry for a short-term play.  We were actually 
encouraged by the move up today to $79.00 when we were expecting 
a pull back.  Yet we're still dropping it and will close the play 
with a move of over $5.50.  Here's why...we think there is an 
opportunity to play any earnings excitement in fellow healthcare 
sector stock PHSY but at the same time we don't want to be too 
exposed to the healthcare group with three plays so we'll add 
PHSY and keep UNH which looks less extended.  PacfiCare Health 
has been building on a bullish trend and is expected to announce 
earnings next Wednesday.  Please see our new play write up in 
tonight's newsletter.

Picked on January 11th at $71.42 
Gain since picked:         +5.58
Earnings Date           02/08/02 (confirmed)






==================
  Trading Ideas
==================

This section contains stocks that meet criteria which may make
them of interest to long and short side traders.  These are not
recommendations, nor have they been reviewed by PremierInvestor
editors for investment potential.  However, each of them has
technical and fundamental characteristics that make them worthy
of further review by traders and investors looking for fresh ideas.
New stocks will appear daily following the market close.

--------------------------------- 
Value Plays With Bullish Signals 
--------------------------------- 
Ticker  Company Name               Close     Change 

RJR     RJ Reynolds Tobacco        60.20     +1.40
PDS     Precision Drilling Corp    26.28     +0.97
WPS     WPS Resources Corp         37.40     +0.92
BN      Banta Corp                 32.80     +0.84
AREA    Area Bancshares Corp       19.95     +0.93
MBWM    Mercantile Bank Corp       19.77     +1.07

--------------------------------------- 
Breakout to Upside (Stocks $5 to $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

GFF     Griffon Corp               16.60     +1.31
ROIA    Radio One Inc              19.28     +1.23

--------------------------------------- 
Breakout to Upside (Stocks over $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

ATH     Anthem Inc                 56.50     +2.26
ITT     ITT Industries Inc         54.05     +1.06
LPNT    Lifepoint Hospitals        37.55     +2.12
CYMI    Cymer Inc                  41.37     +5.62
KMX     CircuitCity/Carmax Group   24.41     +3.86
JILL    J. Jill Group Inc          22.49     +1.38

------------------------------------------- 
Breakout to Downside (Stocks over $20) 
------------------------------------------- 
Ticker  Company Name               Close     Change 

SBC     SBC Communications         34.49     -1.52
VZ      Verizon Communications     43.40     -1.61
FTE     France Telecom             27.80     -1.26
CMCSK   Comcast Special Stock      32.04     -2.45
VRTS    Veritas Software Corp      36.20     -1.15
HI      Household Intl. Inc        44.71     -2.82

----------------------------------------- 
Recently Overbought With Bearish Signals (Stocks over $20)
------------------------------------------- 
Ticker  Company Name               Close     Change 

AVP     Avon Products Inc          48.52     -0.18
MGA     Magna Intl. Inc            61.52     -1.62
ECL     Ecolab Inc                 41.67     -0.34



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=================================================================
DISCLAIMER
=================================================================

This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

*****************************************************************


Copyright  2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.




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