PremierInvestor.net Newsletter Tuesday 02-12-2002 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/94_1.asp ================================================================= In section one: Market Wrap: Abundance of inside days hints of uncertainty. Market Sentiment: Conviction has disappeared. Play-of-the-Day: More Telecom Fears. ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 02-12-2002 High Low Volume Advance/Decline DJIA 9863.70 - 21.10 9906.00 9811.60 1.09 bln 1520/1560 NASDAQ 1834.21 - 12.45 1852.22 1817.13 1.59 bln 1708/1804 S&P 100 562.51 - 2.57 565.30 560.02 Totals 3228/3364 S&P 500 1107.50 - 4.44 1112.68 1102.98 RUS 2000 472.01 + .69 473.55 467.67 DJ TRANS 2730.76 + 7.10 2747.75 2697.32 VIX 23.47 - 0.07 24.98 23.29 VXN 45.45 - 0.96 47.59 44.87 TRIN 1.40 PUT/CALL 0.80 ----------------------------------------------------------------- =========== Market Wrap =========== Abundance of inside days hints of uncertainty It's amazing the number of "bellwether" stocks in each of their respective industries/sectors that have formed some "inside days" on their bar charts today and tomorrow's action could have bulls or bears closing some positions that were slated toward the short-term. You don't have to look any further than our play list and shares of financial giant Citigroup (NYSE:C) $45.15 -1.48%. A short- term trader that has been holding this one short since we profiled it on January 29th as a short can move down a tight stop if they feel fit, just above yesterday's high of $45.90. In tonight's play update, we're going to cut the trade a little more slack with a stop at $46.15, but still give ourselves the opportunity to benefit from a downside move we feel is still in the cards. Citigroup Chart - Daily Interval I've tried to set the above chart to show subscribers how Citigroup (C) has set up the "inside day" from a relatively tight trading range. This is perhaps a good example of how "tough" and range bound trading is right now, but may also show just how "easy" trading could be tomorrow. A break above today's high at $45.85 (bar at top of chart) or Monday's high of $45.90 (box in lower left corner) could have buyers coming into the stock (existing bulls or bears covering more aggressively) and getting a rally going short-term to the $47 level as near-term tensions build in the stock by bulls and bears. Conversely, a trade below today's low of $45.05 or Monday's low of $45.00 along with the break of retracement at $44.95 could have traders/investor looking for support near the $42.92 level. As we look at this trade, we can really get the feeling that things are 50/50 at this point. Our "swing vote" to the bearish side has been the point and figure chart, which currently carries a longer-term bearish vertical count of $35. Tomorrow, a bear wants to see a break to the downside to help squash the recent edging higher. Microsoft Corporation Chart - Daily Interval Just as Citigroup (C) is a "big gun" in the financials, Microsoft is the big gun in the software sector. Here too we see a tight intra-day range and inside day. A break above the $61.24 level or even our retracement at $61.33 could move trader to the long side and targeting the 200-day moving average at $64.75. A break below today's low of $60.02, lets say $60.00 could have the market assessing near-term downside to $57.55 or even the $53.76 level. In January, shares of MSFT traded a triple-bottom sell signal at the $65 level and have steadily inched their way lower from there to $58.83. The longer-term bearish price objective remains $47, which correlates rather well with our 80.9% retracement level. While the longer-term bearishness has us bearish on the shares, that doesn't mean there might not be a short-term trading rally to the 200-day if we were to see a short-term break to the upside. With MACD trying to hook around, there could be some short-term bears willing to lock in some profits if the stock were to get back above the $61.33 level. All a short-term trader has to do is look to play the break and follow with a tight stop. Tyco International Chart - Daily Interval Tyco International (NYSE:TYC) has been on a wild ride as of late. Today's tight range and "inside day" can help the trader control his/her risk near term. A break below today's low of $30.15 could have bulls that stepped up to the plate from $22-$26 locking in gains on the first sign of weakness, while any move above the $31.42 level or Monday's high of $31.90 could have complacent bears running for the door as they've already given back some nice gains from the bottom. We noted in past commentary that share of Tyco (TYC) did achieve their bearish vertical count of $24, that had been put in place back in early January. If the recent trading at $22 was the bottom, then TYC may be a good one to keep an eye on for bullishness where a bull can perhaps control their risk with a tight stop. Notice the "inside day" from February 6th. A trader may have traded the stock long on February 7th at $28.17 as the stock broke ABOVE the inside day from February 6th. A trader that was trading the "inside day" technique might still be long the stock and would be following with a stop just under today's low of $30.15. There are others too! AOL Time Warner (NYSE:AOL) $27.68 -1.14% and Qualcomm (NASDAQ:QCOM) $40.50 -1.88% also show that today was an "inside day" on their bar charts. A trader that can monitor these stocks and set some upside and downside alerts at these tight ranges will get a pretty good feel for how things are trading on a short-term basis. In recent commentary we noted that both of these stocks had achieved/exceeded their bearish vertical counts by one or two dollars and that bears should be looking to lock in gains. Both stocks have moved higher since those vertical counts and may hint that bears aren't sticking around when an objective has been met, regardless of how much "bad news" is out on the stock. On Friday, we noted that shares of Qualcomm (QCOM) had achieved a bearish vertical count of $37 from its point and figure chart and had also come pretty close to Professor Davis' study of probabilities. Not wanting to be too greedy, we felt that traders that were short the stock from our "High Risk/Reward" section should move stops down to $37. I'm not really looking to trade QCOM tomorrow, but since it carries a heavy weight in the NASDAQ-100, it's a stock that could impact some broader market action and simply keeping an eye on the stock and understanding which direction (if any) the stock breaks from the inside day, may give a trader some extra insight into the wireless area of technology. Speaking of "inside days" We're getting ready to "pull the plug" on our bullish trade in retailer Chico's FAS (NYSE:CHS) $32.99 -1.52%. This one has been very good to bullish traders since our profile on January 26th and has bucked the broader market trend like a champ. We're going to use the "inside day" to help control our risk. If the stock wants to run to our original target, we'd love to see it happen, but we're just not willing to let any type of "terrorist" negativity erode the handsome gains. Chico's FAS Chart - Daily Interval We've been trailing our bullish trade in CHS with a stop and now that bulls have an 11.6% gain going, we're going to use the "inside day" to protect that gain. CHS has recently traded two other "inside days" and each day following the stock has moved higher. That would be fine and perhaps the 3rd time's a charm and the stock will run to our target of $34.75, which is just shy of our upper level of "fitted retracement." From $32.99, that leaves about $1.76 of upside to our target, and about $1.74 to downside support at 80.9% retracement. In my book, that's about 50/50 from here, so we'll use the "inside day" and any DIVERGENCE from the past two inside days and a downside move as a good excuse to exit the trade with a decent profit. Trading rally for tech, not out of the question One reason I'm showing some "inside days" tonight is that the NASDAQ-100 Bullish Percent ($BPNDX) from www.stockcharts.com is currently showing 32% of the stock in the NASDAQ-100 now showing a buy signal on their charts. Last week, this indicator reached the "oversold" level of 28% and a reading of 36% would have this indicator flashing the "bull alert" status. NASDAQ-100 Bullish % Chart - 2% box Our shorter-term and more volatile bullish percent for measuring the internals of the NASDAQ-100 recently reached the "oversold" level below the 30% level. In June and July of last year (red 6 and red 7) we did see some short-term trading rallies to the upside. It would take a 3-box reversal higher, a reading of 34%, to get this indicator into "bull alert" status. The recent strength in the biotechs has helped the internals of the NASDAQ- 100 start to show some improvement and at a lower level of risk, this group of stocks could see some bears covering and using the "inside days" in some of the stocks mentioned above as "reasons to cover." We do not suggest that bullish tech traders "load the boat" on technology stocks as we understand that the internals are still weak. Instead, should a trader be following a couple of stocks that they are comfortable with and perhaps have an "inside day" trade setup, then there is some reason to believe that there may be a short-term rally in the making from an "oversold" level in the NASDAQ-100. Other things to be cognizant of The Dow Jones Transportation Average (TRAN) has rebounded back above its rounding out 200-day moving average and once again trades right at its longer-term downward trend at $2,730 which has been somewhat of a gravitational trend dating back to the May 1999 highs. If your a trader that has been overly bearish this market, but are a believer in market history and that transports often lead a market advance higher in the early stages of an economic upturn, then current action while "neutral" at downward trend still should get both a bulls and bears attention. This group of stocks has been wavering back and forth from this downward trend since early January. The lower highs and lower lows following the trend still hint of bearishness, but if we see some type of sharp move or DIVERGENCE from this longer-term downward trend, be alert as this group could spark broader market direction based on the "rate" of DIVERGENCE from trend. We have NOT seen any type of "rush" to the Treasury bond market by investors looking for safety. Despite today's "FBI Terrorist Alert," the Treasury bonds actually found some willing sellers. Wouldn't you know it, the YIELD on the 10-year ($TNX.X) finished the session at 4.967% and getting right back near the 5.0% level that has become somewhat of a pivot point for stocks. A bold break above the 5.0% level could have the bond market signaling a rotation out of this bond and some cash could then find its way into stock. Once again, another observation that doesn't appear as being overly bearish toward stocks. Strategy With so many "inside days" and some of our key sectors like the Treasury bonds and Transports hovering at rather "neutral" levels, I think it best to trade some of the inside day's, but only trade with partial positions. I think our play list and profiled stops speaks to what could be a near-term pivot point for traders. If you are one that truly believes the worst is yet to come for stocks, then Clestica (NYSE:CLS) $38.87 -3.4%, Citigroup (NYSE:C) $45.15 -1.48% and Silicon Valley Bancshares (SIVB) $22.40 +0.49% are still at levels where a bearish trader can take some action with tight stops nearby. Today's action in Time Warner Telecom (NASDAQ:TWTC) $9.30 -9.79% was an excellent bearish trade near the open of trading, but I don't like trying to chase 9.79% with further short action. From those plays in the bullish section, it is probably not a surprise that Phelps Dodge (NYSE:PD) $36.36 +0.80% is one that I like from the bullish side. The 200-day moving average is just ahead at $36.61 and this is the "first hurdle" for our trade that needs to be cleared. We'll be watching this one close and I'd like to see a break above the 200-day moving average come on strong volume of more than 2.5 million shares. Subscriber will note we recently added another "airfreight" stock in Airborne Freight (NYSE:ABF) $15.80 -1.86% to our bullish play list. Last week we set a tight stop on our bullish play in shares of Federal Express (NYSE:FDX) and that stock rebounded sharply after that pullback that stopped us out. Both ABF and FDX have recently set 52-week highs and this sector of the transports is an area we feel the bullish traders can trade and not have as high of a likelihood of getting crushed by some unpleasant surprise. Nonetheless, we want to still follow the trades with some rather tight stops until we see some type of "breaking free" from longer-term trend by the Dow Transports (TRAN). Any trade at this point that gets a gain of more than 7-10%, I want to be moving my stops in the direction of profitability. The broader market averages are still rather range bound and a 10% gain in a short amount of time may well outpace the broader market averages on a year-to-date type of performance. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Conviction has disappeared. by Russ Moore Light volume sessions have become commonplace of late, as investors search for reasons to buy, or sell. The major indices chopped around for most the day, closing with modest losses of -0.2 percent on the DOW, -0.7 percent on the NASDAQ and -0.9 percent on the NDX. Big board volume came in at 1.07 billion shares while the NASDAQ saw 1.60 billion shares change hands. Losers edged winners by a 16/15 count on the NYSE and 18/17 on the tech index. Lots of red ink on the tech side with the Nortel spillover handing the Networking sector the largest loss. Biotech, drug, airline, utility and gold sectors enjoyed decent gains on the broader markets. Analysts spent the better part of December and January trying to pump us up for the impending economic/market recovery. Seven weeks into the new-year we find ourselves looking at a rather poor market performance. The DOW opened 2002 at 10,021 and currently sits at 9,863. The NASDAQ began 02’ at 1,965 and closed today at 1,834. Of course, the fall-off has been attributed to the “natural pullback” after those lofty, post 9/11 gains. To be fair, earlier predictions were dealt a mighty blow with the Enron affair, but that fiasco does not account for the continued lack of guidance from corporate America. Stocks have enjoyed hearty gains on the basis of a second half recovery, unfortunately the evidence for that recovery has yet to show itself. Oh sure, we’re seeing modest improvement in the economic numbers, but what about the corporate side? We’ve seen that most companies have been able to meet their drastically lowered earnings numbers, however, when it comes to looking past tomorrow, their lost. Is it any wonder why investors are being a little cautious about throwing their money in Wall Street’s direction? In this emotional roller coaster we call the stock market, corporate, and investor conviction is a principle component to a sustained market move in either direction. Right now, conviction is non-existent, paving the way for range-bound markets in the days ahead. VIX Tuesday 02/12 close: 23.47 VXN Tuesday 02/12 close: 45.45 30-yr Bonds Tuesday 02/12 close: 5.46 Total Put/Call Ratio: .80 Equity Option Put/Call Ratio: .74 Index Option Put/Call Ratio: 1.04 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 36.73 Volume/Open Interest Maximum calls: 39/56,732 Maximum puts : 35/65,329 Moving Averages 10 DMA 36 20 DMA 37 50 DMA 39 200 DMA 39 Fibanocci Retracements Relative High: 43.24 (12/06/01) Relative Low: 34.97 (02/08/02) 38% 38.13 50% 39.11 62% 40.10 === S&P 100 Index (OEX) 52-Week High: 834.93 52-Week Low: 491.70 Current close: 562.51 Volume/Open Interest Maximum calls: 575/7,360 Maximum puts : 520/9,175 Moving Averages 10 DMA 559 20 DMA 567 50 DMA 578 200 DMA 596 Fibanocci Retracements Relative High: 600.80 (01/04/02) Relative Low: 546.13 (01/30/02) 38% 567.00 50% 573.44 62% 579.99 === S&P 500 (SPX) 52-Week High: 1530.01 52-Week Low: 965.80 Current close: 1107.50 Volume / Open Interest Maximum calls: 1150/22,752 Maximum puts : 1150/19,285 Moving Averages 10 DMA 1102 20 DMA 1115 50 DMA 1135 200 DMA 1161 Fibanocci Retracements Relative High: 1176.97 (01/07/02) Relative Low: 1077.78 (02/06/02) 38% 1115.67 50% 1127.37 62% 1139.27 == DJIA (INDU) 52-Week High: 11,518.83 52-Week Low: 8,235.81 Current close: 9,863.74 Volume / Open Interest Maximum Calls: 96/12,039 Maximum Puts 90/20,342 Moving Averages: 10 DMA 9,773 20 DMA 9,777 50 DMA 9,918 200 DMA 10,080 Fibanocci Retracements Relative High: 10,300.15 (01/07/02) Relative Low 9,529.46 (01/30/02) 38% 9,823.86 50% 9,914.80 62% 10,007.28 == Biotech Index (BTK) 52-Week High: 811.61 52-Week Low: 383.28 Current close: 520.91 Volume / Open Interest Maximum Calls: 460/677 Maximum Puts: 520/606 Moving Averages 10 DMA 491 20 DMA 508 50 DMA 550 200 DMA 545 Fibanocci Retracements Relative High: 625.15 (12/06/01) Relative Low: 450.20 (02/07/02) 38% 517.03 50% 537.67 62% 558.66 == Semiconductor Index (SOX) 52-Week High: 1280.84 52-Week Low: 362.00 Current close: 548.01 Volume / Open Interest Maximum Calls: 580/1,248 Maximum Puts: 500/1,327 Moving Averages 10 DMA 544 20 DMA 537 50 DMA 547 200 DMA 551 Fibanocci Retracements Relative High: 606.88 (01/09/02) Relative Low: 499.09 (01/22/02) 38% 540.26 50% 552.98 62% 565.91 == Pharmaceutical Index (DRG) 52-Week High: 455.28 52-Week Low: 339.49 Current close: 379.78 Volume / Open Interest Maximum Calls: 390/690 Maximum Puts: 380/825 Moving Averages 10 DMA 373 20 DMA 375 50 DMA 380 200 DMA 390 Fibanocci Retracements Relative High: 403.83 (11/26/01) Relative Low: 365.22 (02/08/02) 38% 379.93 50% 384.51 62% 389.17 ***** CBOT Commitment Of Traders Report: Friday, 02/08. 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 01/22/02 342,841 394,041 (51,700) (9.3%) 01/29/02 345,583 401,923 (56,340) 9.0% 02/05/02 347,583 401,569 (53,986) (4.3%) 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 01/22/02 125,451 65,423 60,028 (8.6%) 01/29/02 128,826 63,127 63,127 5.1% 02/05/02 128,235 64,404 63,831 1.1% 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 01/22/02 30,671 34,103 (3,432) 23.0% 01/29/02 31,577 33,651 (2,974) (13.3%) 02/05/02 32,357 35,405 (3,048) 2.5% 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 01/22/02 11,885 8,787 3,098 01/29/02 9,709 8,293 1,416 (54.2%) 02/05/02 10,416 8,173 2,243 58.2% 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 01/22/02 18,152 11,013 7,139 6.6% 01/29/02 19,956 12,171 7,785 9.0% 02/05/02 21,868 12,068 9,800 25.9% 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 01/22/02 5,424 8,969 (3,545) (5.9%) 01/29/02 5,872 9,709 (3,837) 11.1% 02/05/02 5,764 10,528 (4,764) 24.2% 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 +63,831 +65,699 -53,986 -56,340 Total Open Interest % (+33.13%) (+34.23%) (-7.21%) (-7.54%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -4,764 -3,837 +9,800 +7,785 Total Open interest % (-29.24%) (-24.63%) (+28.88%) (+24.48) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +2,243 +1,416 -3,048 -2,074 Total Open Interest % (+12.07%) (+7.86%) (-4.50%) (-3.18%) net-long net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.Very little change in Commercial activity. Keep in mind that we are looking for an increase in diversion between Commercials and Small Specs. Gold: Commercials were busy adding to their net-short positions this week while gold continued to move higher. The precious metal seems to be attracting a lot of attention these days perhaps as a result of the growing weakness in the Japanese markets. 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 02/05 58,180 contracts net-short Data compiled as of Tuesday 02/05 by the CFTC. ========================= Play-of-the-Day (Bearish) ========================= Time Warner Telecom Inc - TWTC - cls: 9.30 chg: -1.01 stop: 10.51 Company Description: Time Warner Telecom Inc., headquartered in Littleton, Colo., delivers "last-mile" broadband data, dedicated Internet access and voice services for businesses in 44 U.S. metropolitan areas. Time Warner Telecom Inc. is one of the country's premier competitive telecom carriers delivers fast, powerful and flexible, fiber, facilities-based metro and regional optical networks to large and medium customers. (source: company press release) - ORIGINAL WRITE UP: February 8th, 2002 - Why We Like It: Depressed telecom stocks is nothing new for traders. Previous Wall Street darlings like Lucent and Nortel have been in the poor house for months. One of these previous high flyers is TWTC. TWTC is partially owned by the AOL-Time Warner conglomerate. It is no secret that 2001 was a bad year for telecom companies. TWTC's stock price fell from the high 70s and didn't stop until it hit its October 2001 lows near $6. With the market in rebound mode through the end of 2001 TWTC was able to climb back to the $19 level but could not overcome resistance at $20. Now the technology bears have a death grip on the industry and TWTC has fallen back to the $10 level. Earnings were announced last week on Feb. 5th. Revenues were stronger than estimates but earnings were pretty dismal with the company losing 28 cents a share versus 3 cents a share the year before. The stock failed to rally on Friday and shares appear to be forming a pennant formation during the last four or five sessions with higher lows and lower highs (of course the lower highs have been a problem for most of 2002). We still believe the trend is down but we're going to force TWTC to prove it by crossing our trigger point. We'll start the play if shares can trade to $9.49. Once triggered we'll start with a stop at $10.51. More aggressive traders can try and jump in early and try and play if shares fall under $10 again. Our target will be a re-test of the October lows near $6. Wait for the trigger! - Most Recent Update: February 12th, 2002 - Our new tech short play from the weekend newsletter was triggered today when shares fell through our entry price of $9.49. We had discussed how TWTC was forming a pennant formation with higher highs and higher lows but the overall trend was negative and we expected a downside breakout. Monday's session merely saw shares coil tighter for a small loss while the market was in rally mode. This was a big clue for traders that there was no real strength in the stock. When shares opened today and quickly fell below the $10 level it was another clue for traders and a breakout of the pennant. We put our trigger at $9.49 because we wanted to be sure the new trend was definitely down and not just a fake out move. Volume was stronger than normal at 2.3 million versus the average of less than 800K. The stock actually traded to $9.00 a few times before bouncing near the close. More conservative traders could certainly try a tighter stop and one suggestion we discussed was today's high at $10.33 but for the time being the newsletter will leave ours at 10.51. A failed rally back to $10 may be another opportunity to short TWTC but we don't mind a play at current levels. Our ultimate goal is near the $6.00 level but we don't have an official exit/target price yet. Short-term traders may want to go for the quick turnaround and consider an exit near $7.50, which would still be a nice gain. - Play-of-the-Day Comments: February 12th, 2002 - The cautious comments from Nortel this morning cast a pall across the technology landscape and the gloom was heaviest for the telecom sector. The drop in TWTC triggered our entry into a bearish play and shares closed within thirty cents of their low for the day. We think TWTC has a good chance of confirming the breakdown today and if it doesn't then a failed rally at the $10 level looks like a good place to consider a short entry as well. Picked on February 12th at $ 9.49 Change since picked: +0.19 Earnings Date 02/05/02 (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. 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PremierInvestor.net Newsletter Tuesday 02-12-2002 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/94_2.asp ================================================================= In section two: Net Bulls New Bearish Play: Bullish Play Updates: COGN Bearish Play Updates: CLS, TWTC Stock Bottom / Active Trader Bullish Play Updates: ABF, CHS, HRB, PD, UNH Bearish Play Updates: C, SIVB High Risk / High Reward Bullish Play Updates: GMST Split Trader Announcements - JEC - 2-for-1 split WERN - 4-for-3 split (Monday) Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================= Net Bulls (NB) section ================================================================== =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Cognos Inc. - COGN - close: 28.67 change: +0.22 stop: 27.98 *new* We continue to see a real lack of leadership in the larger software stocks that should be marching out in front of the sector. Instead we are left with stocks like COGN gaining ground individually despite a flat GSO.X software index over the last two sessions. We mentioned in the Monday newsletter that COGN was trading higher due to a number of positive comments about their specific niche of the software world. One analyst felt that the industry sector COGN was in could see revenue growth of 30 to 35 percent over the next two to three years. We also made $29.50 our official exit price for this play and shares traded to $29.08 at its high today. Due to the weakness in the Nasdaq and many of the big cap Nasdaq 100 stocks we are going to be more conservative with our stop placement on COGN. Adjusting our stop to $27.98 should protect a gain of +$2.51 or almost 10%. Considering the current market atmosphere ten percent sounds pretty good. Currently we're up about 12.5%. Picked on January 25th at $25.47 Gain since picked: +3.20 Earnings Date 04/10/02 (unconfirmed) -------------------- Bearish Play Updates -------------------- Celestica - CLS - close: 38.87 change: -1.38 stop: 42.05 As we expected, the $40 level is proving to be new overhead resistance for CLS. Shares tried to rally through it on Monday with the broader market rally and did manage to close at $40.25. Fortunately for the bears, weakness took over again at the open today and shares dropped back below $39. We still like this area as a potential entry point for a short position but if you prefer to see more confirmation wait for shares to break below $38. The descending 10-dma may be additional resistance for the bears as the play progresses. We're not too surprised that shares are trading sideways a bit at this level since bears are fighting with the bullish support trend on the point-and-figure chart. Of course an actual break through below it will be a huge negative for the bullish camp. Picked on February 5th at $39.40 Gain since picked: +0.53 Earnings Date 01/31/02 (confirmed) --- Time Warner Telecom Inc - TWTC - cls: 9.30 chg: -1.01 stop: 10.51 Our new tech short play from the weekend newsletter was triggered today when shares fell through our entry price of $9.49. We had discussed how TWTC was forming a pennant formation with higher highs and higher lows but the overall trend was negative and we expected a downside breakout. Monday's session merely saw shares coil tighter for a small loss while the market was in rally mode. This was a big clue for traders that there was no real strength in the stock. When shares opened today and quickly fell below the $10 level it was another clue for traders and a breakout of the pennant. We put our trigger at $9.49 because we wanted to be sure the new trend was definitely down and not just a fake out move. Volume was stronger than normal at 2.3 million versus the average of less than 800K. The stock actually traded to $9.00 a few times before bouncing near the close. More conservative traders could certainly try a tighter stop and one suggestion we discussed was today's high at $10.33 but for the time being the newsletter will leave ours at 10.51. A failed rally back to $10 may be another opportunity to short TWTC but we don't mind a play at current levels. Our ultimate goal is near the $6.00 level but we don't have an official exit/target price yet. Short-term traders may want to go for the quick turnaround and consider an exit near $7.50, which would still be a nice gain. Picked on February 12th at $ 9.49 Change since picked: +0.19 Earnings Date 02/05/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Airborne Inc - ABF - close: 15.80 change: -0.30 stop: 14.95 Our new long play for ABF was triggered in Monday's session when shares traded to a high of $16.35, bypassing our entry price of $16.05. The upside move was fueled by positive earnings comments from chief rival Fedex (FDX). FDX said that earnings would come in at the top or slightly exceed current forecasts for the next quarter. FDX claims that a lot of the good news was due to strong growth in the expanded ground-package shipping business. It is unsure whether FDX is taking marketshare from the US Postal Service, UPS, ABF or all three. Optimistic commentators speculated that a pick up in business for FDX was a positive sign that the economy was turning around and thus also a positive for ABF. Other brokerage analysts were more cautious about the FDX comments but secretly we think they are short the stock. At any rate, the pull back in ABF back under the $16 mark should be viewed as cautious but more aggressive traders should see it as an entry point to go long. A tighter stop at $15.39 wouldn't be a bad idea but we'll leave ours at $14.95 for the moment. We would confirm stock direction on Tuesday before committing new capital. Picked on February 11th at $16.05 Change since picked: -0.25 Earnings Date 02/01/02 (confirmed) --- Chico's F A S Inc - CHS - cls: 32.99 chg: -0.51 stop: 32.49 *new* The rally in the retail sector on Monday lead the RLX.X right up to the 940-945 level of resistance. This helped push shares of CHS up over the $33 level and actually trading to $34 before slipping back by the close. The RLX managed to hang to most of those gains today despite weakness in the Dow Jones and the Nasdaq and CHS lost about 50 cents due to profit taking. We're encouraged by the intraday support we see in CHS' chart at $32.80 today but don't believe it will hold up if the markets post strong declines tomorrow. Therefore, given the current market environment, we are going to really tighten our stops on CHS to protect decent gains while still allowing for some room tomorrow morning. Our exit price of $34.75 is still in affect but our new stop will be $32.49, which should protect a gain of $2.94 or 9.9%. Currently the newsletter is up $3.44 or 11%. A breakout in the RLX above 945 would be very positive for the group and for CHS but we don't have the faith in the broader markets to leave our stop too wide on CHS. Picked on January 25th at $29.55 Gain since picked: +3.44 Earnings Date 03/05/02 (unconfirmed) --- H R Block - HRB - close: 47.15 chg: -0.29 stop: 44.25 There has been nothing new to report for HRB in the news or due to stock price movement since the weekend. Shares have traded sideways as it consolidates at the $47.00 level. This is disappointing that the stock didn't participate in the market rally on Monday but it is encouraging that it didn't participate in the market decline today either. Very conservative traders could attempt to protect capital with a tight stop under $46 but we are going to leave ours at $44.25 as we wait and see if any sort of earnings run develops for the end-of-the month announcement. Picked on February 5th at $47.01 Gain since picked: +0.14 Earnings Date 02/27/02 (unconfirmed) --- Phelps Dodge - PD - close: 36.36 change: +0.29 stop: 33.99 Our newest play is off to a decent start with a 30-cent gain in the face of a declining market. Shares of PD confirmed the move over $36 from yesterday but paused when they approached the 200- dma looming overhead. We discussed this in the original write up on Monday. Some traders may prefer to wait for PD to actually close above the 200-dma before initiating a position and 9 out of 10 times I would be one of these traders waiting for the move. However, Jeff has me convinced that PD's relationship to copper prices is much more powerful than the technical resistance presented by the 200-dma. If you disagree with him then it is certainly okay to wait. Checking the current copper futures, it did tick up a very small amount today but more importantly it does look like it's about to rally back to the 74-cent level. A breakout over 74 cents would be a powerful force on shares of PD. It is our hope that PD will be able to hold the $36 level as support but an intraday bounce near the $35 area may be an attractive entry for active traders able to watch the stock during the day. A break below $35 would be a preliminary warning signal for bullish traders to tighten their stops. Picked on February 11th at $36.07 Change since picked: +0.29 Earnings Date 01/30/02 (confirmed) --- UnitedHealth Group - UNH - cls: 75.56 chg: +1.16 stop: 73.45 *new* A positive earnings report by Wellpoint (WLP) last night and the ensuing positive comments from analysts today helped lift the healthcare sector amidst a market decline. A few analysts were very bullish on WLP and significantly raised their price targets. UNH joined the rally and closed strongly over the $75 level on decent volume. One thing we can say about UNH is that shares have been a lot less volatile than their peers lately. Of course that means that we're not seeing some of the gains either but slow and steady is okay with us. MACD is starting to lose it oomph and we'd like to see a strong couple of days to really confirm the move over $75 again. We have decided to raise our stop to $73.45 and protect a small gain should shares reverse course. Picked on January 11th at $71.75 Gain since picked: +3.81 Earnings Date 01/24/02 (confirmed) -------------------- Bearish Play Updates -------------------- Citigroup Inc - C - close: 45.15 change: -0.68 stop: 46.15 *new* Shares of Citigroup did trade higher on Monday with the market rally but couldn't conquer current overhead resistance at $46, which had been previous support prior to February. Selling pressure began anew for C on Tuesday but the lackluster volume traded eroded any amount of conviction for the bears. This looks like a good place to consider a new short position with a tight stop but confirm stock direction first. A move under $45 may be the signal you're looking for. Given some of the "inside days" we saw across different market sectors and large cap stocks we feel that Wall Street could see the exchanges go either way even though we're expecting weakness. Thus we are going to lower our stop to $46.15, which is 30 cents over today's high. Check out tonight's wrap for Jeff's take on the markets. Picked on January 29th at $46.71 Gain since picked: +1.56 Earnings Date 01/17/02 (confirmed) --- Silicon Valley - SIVB - cls: 22.40 chg: +0.11 stop: 23.01 Both the BIX.X and the BKX.X banking indices continued the Friday rally into Monday's trading session which supported a number of weaker financial stocks like SIVB. However, while the BIX stalled at resistance at 620 and the BKX couldn't break resistance at 820, shares of SIVB actually traded higher to $22.85 before slipping back into the close. The 20-dma has fallen to $22.95, which should support the $23 level as resistance but the stock isn't acting very weak at the moment. Actually, the MACD, which had been bottoming out, actually produced a bullish crossover today. We would urge strong caution for traders in the play and a tightening of stops to protect capital. We would not consider new positions until SIVB closed back under the $22 mark. Picked on January 18th at $22.93 Gain since picked: +0.53 Earnings Date 01/16/02 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Gemstar-TV Guide Intl. - GMST - cls: 17.18 chg: -1.59 stop: 16.49 The breakout in shares of GMST from Friday did produce a follow through move on Monday but the rally didn't last long. The stock closed near its highs on Monday at $18.77 but selling pressure hit fast this morning and the stock closed back below the $18 level. Looking at the chart we see that the 20-dma may have been the culprit where traders decided that was the level to take short-term profits (thus, the 20-dma is overhead resistance). In a contrary move to the stock price today, the MACD completed its second day in a bullish crossover. The overall weakness in the markets and the tech sector in general may keep any gains in GMST to a minimum. Shares are already trading lower in after-hours markets (around the $17.05 area). Aggressive traders may want to consider a bounce off of $17 as a possible entry but we'd prefer a move back over $18 as confirmation. Under $17 and we'd be very cautious and expect to be stopped out. We would not recommend any new positions at this time until shares were back over $18. If the stock continues to drift lower, both the bulls and the bears will be focusing on he $16.00 mark as the battlefield to win therefore shares could trade sideways from here unless one group quickly wrests control from the other. Picked on February 8th at $18.11 Gain since picked: -0.93 Earnings Date 03/02 (unconfirmed) ================================================================== Split Trader - Stock Split (ST) section ================================================================== ============== Announcements ============== Engineering A 2-for-1 Split. Shareholders for Jacobs Engineering Group Inc (NYSE:JEC) received a welcome surprise after the market close this evening. JEC's Board of Directors has approved a 2-for-1 stock split in the form of a stock dividend. The shareholder record date will be March 1st, 2002. We can look for the payable date to be on or near April 1st, 2002, which would lead us to believe the ex-dividend date or day shares trade at their new stock price will be Tuesday, April 2nd. After the split, JEC will have approximately 54 million shares outstanding. Traders may want to keep an eye on JEC as shares have been falling from the $75 level to bounce along support between $59 and $60. The current trend of lower highs is bearish but maybe a stock split can help turn investor sentiment around for JEC. The stock closed at $63.18 on Tuesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=JEC About the company Jacobs Engineering Group Inc. is one of the world's largest providers of technical professional services. With more than 21,000 home office employees, the company offers full-spectrum support to industrial, commercial, and government clients in diverse markets. Services include scientific and specialty consulting as well as all aspects of design, construction, and operations & maintenance. (company press release) ----- Late Monday ----- Trucking Company Offers 33% More! Late after the market close on Monday Werner Enterprises, Inc. (NASDAQ:WERN) announced that its Board of Directors had approved a 4-for-3 stock split. The split will take place as a 33 1/3 percent stock dividend. The payable date for the split will be March 14th, 2002 for shareholders of record on February 25th, 2002. Shares will likely trade ex-dividend on Friday, March 15th. Fractional shares will be paid in cash to shareholders. The stock closed at $26.14 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=WERN About the company Werner Enterprises is a full-service transportation company providing truckload services throughout the 48 states, portions of Canada and Mexico. C.L. Werner founded the Company in 1956. Werner is one of the nation's largest truckload carriers with a fleet of 7,775 trucks and 19,775 trailers as of December 31, 2001. (company press release) ================== 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 EXC Exelon Corp 51.76 +0.90 AYE Allegheny Energy 34.74 +0.62 CBSS Compass Bancshares 29.50 +0.60 KCP Kenneth Cole Productions 17.56 +0.75 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change THOR Thoratec Corp 17.50 +1.30 VAST Vastera Inc 15.33 +1.14 PEGS Pegasus Solutions Inc 16.20 +1.08 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change WLP Wellpoint Health Network 130.02 +2.73 MLNM Millennium Pharmaceuticals 21.47 +1.22 BBI Blockbuster Inc 21.01 +1.70 PDLI Protein Design Labs Inc 23.56 +1.50 VRTX Vertex Pharmaceuticals 23.68 +1.92 FRED Fred's Inc 31.57 +1.31 WW Watson Wyatt & Co 23.56 +1.91 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change RTRSY Reuters Group 48.51 -2.12 MHP McGraw-Hill Companies 63.08 -2.27 HDI Harley-Davidson Inc 50.99 -3.04 LNCR Lincare Holdings Inc 24.86 -2.75 ATTC AT&T Canada Inc 22.55 -2.98 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change PDS Precision Drilling Corp 25.21 -0.69 ================================================================= 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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