PremierInvestor.net Newsletter Thursday 02-14-2002 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/7541_1.asp ================================================================= In section one: Market Wrap: Robbing Peter to pay Paul? Market Sentiment: Treading water. Play-of-the-Day: 2 Failed Rallies + 1 Breakdown ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 02-14-2002 High Low Volume Advance/Decline DJIA 10001.99 + 12.32 10052.29 9959.23 1.26 bln 1468/1624 NASDAQ 1843.37 - 15.79 1877.74 1840.78 1.66 bln 1367/2121 S&P 100 567.13 - 0.66 571.40 564.76 Totals 2835/3745 S&P 500 1116.48 - 2.03 1124.72 1112.30 RUS 2000 470.75 - 5.58 477.36 470.75 DJ TRANS 2686.67 - 25.02 2721.71 2681.34 VIX 22.89 + 0.47 23.66 22.47 VXN 42.14 - 2.33 45.04 42.14 TRIN 1.27 PUT/CALL 0.91 ----------------------------------------------------------------- =========== Market Wrap =========== Robbing Peter to pay Paul? Shares of Denver based telecom services provider Qwest Communications (NYSE:Q) fell 12.8% to a new 52-week low of $7.49 after the once high flying baby bell said it would have to access a $4 billion line of credit, which was four times the amount Wall Street had expected, in order to pay off $3.2 billion in short- term debt. The move came after the company was unable to find buyers for its short-term debt commonly known as commercial paper. The tapping of credit lines often suggests that a company is having trouble borrowing money, and that raises speculation that a company may run out of cash to pay its debts or fund its operation. Qwest Communications Chart - Daily Interval Shares of Qwest (Q) look like they are in serious trouble as the stock breaks to a new 52-week low. I can't speak for the bank that has provided the $4 billion credit facility, but if it were me loaning the $4 billion, then I'd want some type of leverage to help secure that loan. One way to provide that hedge would be to short some of the common stock, just in case the company isn't able to repay the loan. The recent bankruptcy filing by fellow telecom members Global Crossing (GBLXQ) and McLeodUSA (MCLDQ) have rocked the sector as demand for voice and data services has slowed and pricing has become very competitive. Qwest has roughly $3.2 billion in commercial paper and $1.2 billion in long-term debt coming due in 2002. According to Lehman Bothers, Qwest is the No. 12 U.S. corporate bond issuer, with about $19 billion outstanding as of January 31st. The beleaguered telecom carrier said it might raise cash by selling assets such as some telephone access lines or its cash generating DEX directory publishing business. To make matters worse, S&P cut Qwest's debt rating to BBB from BBB+ and assigned its outlook as negative. In an attempt to further cut spending and preserve capital, Qwest announced on Thursday further cuts in it capital spending budget to $3.7 billion from $4 billion. Last year, Qwest was expected to have a capital spending budget of $7.5 billion for 2002. Its capital spending budget was $8.54 billion in 2001. Other telecom/communications under pressure With Qwest announcing it would have to access its bank credit facilities, sellers showed up in other telecom and networking related stocks on worries that there may be other players in the sector with similar problems looming on the horizon. The Wireless Telecom Index (YLS.X) fell 2.87%, Fiber Optic Index (FOP.X) declines 4.7%, Combined Telecom (IXTCX) dropped 3.18%, North American Telecom (XTC.X) slid 2.75% and the Networking Index (NWX.X) fell 3.13%. Subscribers that took our telecom-related bearish play in shares of Time Warner Telecom (NASDAQ:TWTC) saw this stock shed 12.83% of its value today (a nice gain for those short/put) as the stock dropped to $8.15. Time Warner Telecom Chart - Daily Interval Qwest (Q) is based in Denver, CO, and Time Warner Telecom (TWTC) is based about 4 miles south in suburbia Littleton, CO. Both are telecom related and both stocks got hammered to the downside today. All we're going to do is follow the trade lower with a trailing stop. How low will she go? We're not sure, but all a trader/investor wants to do at this point is protect their bearish gains. The bearish vertical count from the point and figure chart is $7.50 and that's just about the middle of our "Zone of Accumulation" from retracement. Don't worry, the only accumulation we think should be done near-term is by buying of stock by bears that want to lock in some handsome gains. SEC inquiry hits NVIDIA Shares of NVIDIA Corporation (NASDAQ:NVDA) $62.16 +1.23% are under selling pressure in evening trading at $55.00 (-11.55% from close) after the company reported 4th-quarter pro-forma earnings of $0.43 a share, which was 9-cents better than consensus estimates. Revenues for the graphic software maker grew 129% to $499.9 million, which also beat revenue estimates of $444.56 million. The "good news" on earnings was offset by the company announcing that it would conduct an internal review of the recording of certain reserves and the timing of recording certain expenses in its financial statements, per an inquiry by the Securities Exchange Commission (SEC). In accordance with the SEC inquiry dating back to January, NVIDIA (NVDA) will launch its own internal fact finding mission to answer SEC specific questions regarding 1) the recording of reserves in Q4 of fiscal 2000 and Q1 of fiscal 2001; and 2) the possibility that certain product costs of up to $3.6 million should have been recorded in Q1 of fiscal 2001, but were recorded in Q2 and Q3 of the same year. The SEC inquiry followed a review of information provided by the company in connection with the SEC's previously announced investigation of alleged insider trading by certain non-executive employees. NVIDIA Corporation Chart - Daily Interval There are two times that I see the $55 level having come into play in recent past for shares of NVIDIA. I wondered why the stock would trade the $55 level in after-hours trading once the SEC news found seller in the stock in after-hours trading. The recent pullback where I have place upward trend came right near the $55 level, but most likely the $55 level should be tied back to November 29th when 44 million shares traded (red spike in volume) as the stock was added to the S&P 500. The reason the spike in volume records as red (sell volume) is most likely due to institutions using the liquidity of mutual funds that track the S&P 500 to sell into. While the $55 level has some technical significance, so does the $50 level or our 38.2% retracement level. I actually place retracement on the above chart by anchoring the retracement bracket to the 12/21/00 low and then "fitting" the 38.2% retracement level right at the June highs, which really looks like it served as a pivot, or where the stock was able to eventually break through that level in November, pullback and test that level and then launch to the upper end of retracement. It is always a tough decision for what type of trade if any to put on at this point. The SEC inquiry is just that. An inquiry. There has been no admittance of wrongdoing, but in the current market environment, that by itself will most likely way on the stock. If the company is reporting earnings accurately and within generally accepted accounting rules, then the stock has had strong fundamental growth. After reporting earnings tonight, the company actually increased guidance significantly higher. Guidance for fiscal 2003 (ending January) should have revenue of $2.3-$2.5 billion and EPS of $1.70-$1.75. Prior to this guidance, analysts were looking for revenues of $1.98 billion and EPS of $1.42. A trader measuring risk/reward from after hours trading at $55 is looking at the 19.1% retracement level and seeing $5 upside and retracement at the 38.2% level as $5 downside. If you believe like I do that market makers use the retracement brackets to understand risk/reward levels in their inventory, we may better understand why the stock is trading $55 in after-hours. Bears looking for a shorting opportunity will look for any rally near the $60 level as an entry point and targeting the $50 near-term. This way a trader/investor can control their risk with a stop just above at $64. As I've said in the past... anytime there is "speculation" in a stock, it is usually best to stay away from that stock (bullish or bearish). If you end up on the wrong side of the speculation, you can end up in big trouble. The best way I know to play the speculation is to do it in the options market where the purchase of the option is the most you can lose. One key to options trading is to no over leverage. Negative Psychology "Not again" is going to be the psychology of investors tomorrow. With Qwest (Q) pulling down bank credit because they aren't able to float some short-term notes in the bond market and SEC concerns on a tech bull's favorite in NVIDIA (NVDA), a bulls psychology will be shaky at best. I'm not a psychiatrist, but even I have trouble right now telling an investor with a time horizon of more than 24-hours to step in and buy a stock right now and tell them "it won't happen with this stock." We're going to remain very aggressive with our stops in all positions bullish and bearish. Yes, we may get stopped out of a trade like we did yesterday in shares of Citigroup (NYSE:C). If you didn't notice, we got stopped out that the pinnacle of yesterday's high at $46.15. Subscribers may have walked away with a tiny gain, but that also raised cash in their account and in an uncertain market environment that isn't all that bad. Bulls locked in a nice gain in shares of Chico's FAS (NYSE:CHS) at our exit price of $34.75 for a 17% gain. It took a couple of weeks to get it, but that may well beat a year's return for the S&P 500 (up or down). Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Treading water. Russ Moore Enron hearings took the lead role on Wall Street today, leaving the markets with another narrow range, light volume session. The DOW was able to climb just over the breakeven mark with a gain of +0.1 percent. Both the NASDAQ and NDX ended with fractional losses of -0.8 percent. The NYSE saw 1.25 billion shares change hands while the NASDAQ moved 1.66 billion. On the NYSE it was losers slipping past winners by a margin of 16/15 and 21/14 on the NASDAQ. Oil service, gold, financial and natural gas posted green arrows on the broad markets. Tech action was weak across the board. The lack of volume is becoming a major concern for many Wall Street participants and analysts. The S&P investment policy committee noted in its daily research note, “While a short-term low may be close at hand, for a rally to have any staying power there must be a major improvement in up/down volume figures on both the NYSE and NASDAQ. Both volume measures are still in bearish configurations and for these indicators to turn bullish, there must be a 10-day period of accumulation by institutions. Until we see a change on both price and volume trends, the upside potential is limited”. Following commercial activity as shown below, we’ve seen little change in position over the last couple of months. In fact, the commercial/small spec spread has been close to current levels for the last six months. We follow the COT activity closely and when a move (accumulation) by the big boys/girls gets underway, you’ll be the first to know. VIX Thursday 02/14 close: 22.89 VXN Thursday 02/14 close: 42.14 30-yr Bonds Thursday 02/14 close: 5.42 Total Put/Call Ratio: .91 Equity Option Put/Call Ratio: .67 Index Option Put/Call Ratio: 1.78 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 36.88 Volume/Open Interest Maximum calls: 40/57,223 Maximum puts : 35/58,572 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: 567.13 Volume/Open Interest Maximum calls: 575/7,392 Maximum puts : 500/9,315 Moving Averages 10 DMA 559 20 DMA 565 50 DMA 578 200 DMA 595 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: 1116.48 Volume / Open Interest Maximum calls: 1150/23,048 Maximum puts : 1100/23,958 Moving Averages 10 DMA 1102 20 DMA 1113 50 DMA 1134 200 DMA 1160 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: 10,001.99 Volume / Open Interest Maximum Calls: 96/11,983 Maximum Puts 90/20,342 Moving Averages: 10 DMA 9,804 20 DMA 9,795 50 DMA 9,925 200 DMA 10,074 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: 503.09 Volume / Open Interest Maximum Calls: 520/604 Maximum Puts: 520/760 Moving Averages 10 DMA 493 20 DMA 505 50 DMA 547 200 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: 564.95 Volume / Open Interest Maximum Calls: 580/1,366 Maximum Puts: 540/ 740 Moving Averages 10 DMA 546 20 DMA 539 50 DMA 549 200 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: 379.49 Volume / Open Interest Maximum Calls: 390/690 Maximum Puts: 380/825 Moving Averages 10 DMA 374 20 DMA 375 50 DMA 379 200 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) ========================= Cabot Microelectronics - CCMP - cls: 59.29 chg: -2.82 stop: 63.01 Company Description: Cabot Microelectronics Corp., headquartered in Aurora, Ill., is the leading supplier of CMP slurries for polishing various materials used in semiconductor manufacturing processes. These products enable IC manufacturers to make smaller, faster and more complex devices and improve their production processes. (source: company press release) Why We Like It: We like CCMP as a short play mainly due to its technical breakdown in Thursday's session. Shares fell through support at $70 in late January after they announced disappointing earnings and lower revenues. Shares have not responded lately to the new interest in the semiconductor sector and have moved the opposite direction. The point-and-figure chart shows big investors selling the stock and a move to $59.00 would indicate a new double bottom breakout to the downside. Actually bears should be pretty enthusiastic about CCMP as recent chart history shows a real lack of buyers. The fallout from the earnings report on Jan. 24th took the stock to $60. Shares tried twice to rebound through its 200-dma between $66 and $67 but failed. Today's breakdown comes on big volume of two million shares versus the average of just one million. Traders should confirm the stock direction tomorrow but we are going to start with a stop at $63.01, which is one cent over today's high. Our initial target is $55 but CCMP might fall to $50 if given enough time. We're going to take a wait and see approach before setting an exit price but short-term traders looking for a quick move should consider an exit near $55. Picked on February 14th at $59.29 Change since picked: +0.00 Earnings Date 01/24/02 (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. 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PremierInvestor.net Newsletter Thursday 02-14-2002 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/7541_2.asp ================================================================= In section two: Net Bulls New Bearish Play: CCMP Bearish Play Updates: CLS, TWTC Stock Bottom / Active Trader Bullish Play Updates: ABF, HRB, PD, UNH Closed Bullish Play: CHS High Risk / High Reward Bullish Play Updates: GMST Split Trader announcement: GNWR Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================== Net Bulls (NB) / Tech Stock section ================================================================== ============ NB New Plays ============ ----------- New Bearish ----------- Cabot Microelectronics - CCMP - cls: 59.29 chg: -2.82 stop: 63.01 Company Description: Cabot Microelectronics Corp., headquartered in Aurora, Ill., is the leading supplier of CMP slurries for polishing various materials used in semiconductor manufacturing processes. These products enable IC manufacturers to make smaller, faster and more complex devices and improve their production processes. (source: company press release) Why We Like It: We like CCMP as a short play mainly due to its technical breakdown in Thursday's session. Shares fell through support at $70 in late January after they announced disappointing earnings and lower revenues. Shares have not responded lately to the new interest in the semiconductor sector and have moved the opposite direction. The point-and-figure chart shows big investors selling the stock and a move to $59.00 would indicate a new double bottom breakout to the downside. Actually bears should be pretty enthusiastic about CCMP as recent chart history shows a real lack of buyers. The fallout from the earnings report on Jan. 24th took the stock to $60. Shares tried twice to rebound through its 200-dma between $66 and $67 but failed. Today's breakdown comes on big volume of two million shares versus the average of just one million. Traders should confirm the stock direction tomorrow but we are going to start with a stop at $63.01, which is one cent over today's high. Our initial target is $55 but CCMP might fall to $50 if given enough time. We're going to take a wait and see approach before setting an exit price but short-term traders looking for a quick move should consider an exit near $55. Picked on February 14th at $59.29 Change since picked: +0.00 Earnings Date 01/24/02 (confirmed) =============== NB Play Updates =============== -------------------- Bearish Play Updates -------------------- Celestica - CLS - close: 39.00 change: +0.09 stop: 42.05 As our readers know, CLS happens to be a big OEM supplier to a lot of the larger hardware companies on Wall Street. Two of these big clients are HWP and DELL. HWP recently announced positive earnings, which could have been translated into positive news for CLS. If business is good for HWP then it should filter to CLS. That did not appear to happen as evidenced by the CLS stock price. The second big client above is DELL who announced earnings after the bell today. DELL said that PC sales were still lagging (that's bad) but they took marketshare from their rivals and made up for lost income to businesses by focusing on retail/personal consumers (that's good). However, that's only good for DELL as overall lagging PC sales are bad news for CLS. How Wall Street will react to DELL's numbers is unknown. Currently, the stock is trading up about 50-cents in after-hours but that doesn't mean that investors will still be buying two days from now. Of course we're interested in how this translates to CLS and we feel it will continue to be a negative for the company. The lack of strength in the Nasdaq today is a broad market sign that investors are not willing to re-invest in tech right now. Shares of CLS rallied to their 10-dma today before pulling back and the stock remains range bounce between $38 and $40. Conservative traders may want to consider creating new short positions near $40 with a very tight stop or wait for a breakdown under $38. We are waiting for that breakdown under $38 before adjusting our stop from above the 200-dma. Picked on February 5th at $39.40 Gain since picked: +0.40 Earnings Date 01/31/02 (confirmed) --- Time Warner Telecom - TWTC - cls: 8.15 chg: -1.20 stop: 8.54 *new* It has not been a good week for telecom stocks. Earlier in the week the group was pounded by negative news from Nortel Networks (NT) and today the sector was hit hard by Qwest (Q). News came out today saying that Q would use all of its $4 billion credit line when earlier reports had only stated they would use $1 billion. Q has been forced to turn to its credit line at the banks because Wall Street isn't interested in their short-term notes (no one is buying). This means they'll likely be paying a higher interest rate for these loans at the bank, which will hurt earnings. In response shares of Q dropped 12.8%. However, on top of this news, the group was also feeling pressure from more negative news on the optical/networking side of the equation. Reports that CSCO had been taking marketshare from JNPR pushed shares of JNPR to a 16% decline and a share price under $11. Nortel also fell an additional 6.3% today and selling hit our bearish play TWTC as well. TWTC broke through the $9 level and closed at its low for the day with a 12.8% loss. Today's close for Time Warner Telecom is below the previous lows from late October where shares found support at the $8.35 level. It now appears that bears are targeting the early October lows near $6.00. We still feel that short-term traders may want to target an exit near $7.50 and those willing to take a 14% gain should consider closing the play now at $8.15. The stock is very oversold but there doesn't appear to be any relief in sight at the moment. Therefore we are going to drop our stop to $8.54, which should protect a 10% gain in the play. We are also going to add an exit price of $6.00 on the slight chance that shares spike down during some further undisclosed bit of bad news in the industry. Picked on February 12th at $ 9.49 Change since picked: +1.34 Earnings Date 02/05/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) Non-tech stock section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Airborne Inc - ABF - close: 15.98 change: +0.04 stop: 14.95 I was discussing our play list with Jeff Bailey, our Senior Market Technician, and he reminded me that UPS' negotiations with the Teamster union may become a factor in our play on ABF. Here's what he told me but don't hold me to the details it is the general idea that matters. Currently, the Teamster's contract runs through July at UPS. Evidently, the union leadership is planning on a big fight for higher wages, Medicare costs, etc. I'm sure these negotiations are ongoing but consider this...if the Wall Street is starting to suspect a fight and a possible strike by Teamsters at UPS where would you, the local packing coordinator for corporate America start looking for a back up. Let's put it another way. If I'm looking ahead to the summer months I don't want any interruptions in my own business because UPS is dealing with a possible strike so I might start looking elsewhere like FDX, ABF and the U.S. Postal Service. We fully realize at this point it is pure speculation and doesn't have a lot of affect on our short-term play for ABF but longer-term investors in the stock may want to think about it (and check to see what ABF's relationship with the Teamsters are at and when the contract expires). In the mean time, shares of ABF continue to edge higher despite weakness in the Dow Transports today. Currently our target for this play is the $18 area. Picked on February 11th at $16.05 Change since picked: -0.07 Earnings Date 02/01/02 (confirmed) --- H R Block - HRB - close: 46.73 chg: -0.56 stop: 44.75 *new* There were a couple of press releases for HRB today but nothing that would affect the stock price. Instead, shares appeared to drift lower before spiking down under the $47 level near the end of the day. This move helped produced a bearish crossover in the MACD, which should have conservative traders on the defensive. The week-long resistance near $48 has been too tough for the stock but volume has been very light lately as well. We are expecting shares to pull back tomorrow but if HRB closes under $46 we'd become even more cautious and shy away from new positions. As a matter of fact, we're going to raise our stop to $44.75 as we believe the $45 level should act as strong support. Earnings for HRB should be come up in about two weeks. Picked on February 5th at $47.01 Gain since picked: -0.28 Earnings Date 02/27/02 (unconfirmed) --- Phelps Dodge - PD - close: 38.65 change: +0.57 stop: 34.75 We updated our PD play on Wednesday after the hg02h Copper futures rallied to the $0.75 level, which fueled a big move in shares of PD. We had been looking for a move to 74 cents for copper but the metal broke out to 75 cents and PD hurdled above its 200-dma and didn't look back. The copper futures pulled back some today but traders continue to pile into PD and shares added another 1.49%. Volume has been very strong the last two sessions supporting the rally and adding conviction to the move. Last night we created an exit price of $39.85 and if PD trades at or above it we'll close the play. We also raised our stop to $34.75, which remains below the trend line of higher lows from late January. However, more conservative traders can probably get away with a much tighter stop. If you feel the need, then consider stops at just under the 10-dma near $35.35, just under $36, which was previous resistance, or just under $37, which was resistance in early December. At this point shares of PD are very overbought short-term and could pull back soon. If they do we would look for new support or a bounce at $37.50 or $36.50. Picked on February 11th at $36.07 Change since picked: +2.58 Earnings Date 01/30/02 (confirmed) --- UnitedHealth Group - UNH - cls: 74.53 chg: -0.67 stop: 73.45 We're starting to worry again about our bullish play on UNH. Shares have slipped yet again to their rising 15-dma, which has been an area of support in the past. The new concern stems from the MACD, which just produced a bearish crossover today. If you were looking to buy at support then an entry here with a stop just under $74 might make sense but we'd prefer to see shares tackle the $76 level as a confirmation that investors are still buying healthcare. On a positive note, the company announced that its Board of Directors had approved both a dividend and a share buyback program. The dividend will be 3 cents per share to be paid on April 17th for shareholders on record of April 1st, 2002. The buyback program will be for a repurchase of up to 30 million shares which is almost 10% of UNH's outstanding common stock (which totals about 309 million shares). Picked on January 11th at $71.75 Gain since picked: +2.78 Earnings Date 01/24/02 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bullish Play -------------------- Chico's F A S Inc - CHS - cls: 32.40 chg: -0.83 stop: 32.49 Chico's turned in a very interesting performance in Thursday's session. We were unable to discern what lead to the gap up at the open but shares started at $34.90 and traded down from there. We glanced at the news as well as the news headlines for other major retailers and clothing stores and did not see anything that may have lead to the move higher. The RLX.X still looks bullish and has been able to maintain its recent breakout over the 940 level but the index looks a lot like a chart of WMT, it's biggest component (and about to become the biggest company in the world based on sales). Focusing back on CHS, the stock fell through out most of the day and actually pierced its 10-dma and price support at $32.00 before bouncing back by the close. Volume we high at just over 1 million shares. The candlestick pattern created today is negative as many investors might interpret it as a bearish engulfing pattern. We would have been stopped out at the $32.49 level had it not been for the gap up at the open. This allowed us to exit at our target price of $34.75 for a + $5.20 gain or +17.59% since we picked it on January 25th. Depending on how your good-til-canceled order was created you might have been able to get the $34.90 price as your exit. Picked on January 25th at $29.55 Gain since picked: +5.20 Earnings Date 03/05/02 (unconfirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Gemstar-TV Guide Intl. - GMST - cls: 19.22 chg: +1.30 stop: 16.49 In a welcome move for GMST shareholders, the stock gapped higher today on a number of positive developments and comments concerning its patent-dispute legal battle. Currently GMST has lawsuits filed against EchoStar (DISH), Scientific-Atlanta (SFA), Pioneer, and SCI Systems, a unit of Sanima-SCI Corp (SANM). The judge, one Paul Luckern with the U.S. International Trade Commision, stated he would issue a ruling by March 21st. What boosted shares today was news that the judge would drop or not hear closing arguments for the case. One analyst believes that this means the judge has already made up his mind. A number of positive comments from other analysts that felt the ruling would be in favor of GMST felt that the recent sell-off was overdone and represented an attractive buying opportunity for investors. Hey, we happen to agree with them. As we mentioned in earlier updates, GMST had dropped from early January due to negative comments from an ITC lawyer who felt that GMST would not win. We're encouraged with today's action as it confirms for us that GMST can trade to $20 or higher. The intraday high today was $20.27 or just above its 30-dma. Shares did fall back towards the close but still managed a 7.25% gain. We continue to see this as a high-risk play due to the opportunity for negative comments to surface about the lawsuit before the ruling is heard on March 21st. Only the most aggressive traders should considering holding over the decision date in case GMST does lose the case. Very short-term traders may want to consider putting the $20 level as their exit price in hopes of catching another spike up. More aggressive traders may want to consider our new strategy. We're going to create an exit or target price of $21.90 since we see $22 as potential resistance. If GMST continues to rally on the expectation that they will win the case, then great! If positive comments do surface and shares spike higher again we want to be ready to exit with our sell order in place. However, be aware that GMST could take time to fill the gap created today and that means traders may want to wait for the stock to dip back to $18. We are going to raise our stop to $16.95 since the recent low three days ago was only 17.14. Picked on February 8th at $18.11 Gain since picked: +1.11 Earnings Date 03/02 (unconfirmed) ================================================================== Split Trader - Stock Split (ST) section ================================================================== ============= Announcements ============= Train Co. Unloads Earnings & 3-for-2 Split This morning before the market open, Genesee & Wymoning Inc (NASDAQ:GNWR) released their Q4 and fiscal year end numbers ending Dec. 31st, 2001. Included in their earnings announcement was a 3-for-2 split announcement. The company's Board of Directors approved a 3:2 split of the common stock as a 50% stock dividend. The shareholder record date will be Feb. 28th, 2002 and will have a payable date of March 14th, 2002. The stock closed at $31.75 on Wednesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=GNWR About the company GWI is a leading operator of short line and regional freight railroads in the United States, Canada, Mexico, Australia and Bolivia, and provides freight car switching and related services to industrial companies that have extensive railroad facilities within their complexes. The Company operates in five countries on three continents over 7,700 miles of owned and leased track. It also operates over an additional 2,700 miles under track access arrangements. (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 KTC Korea Telecom Corp 19.22 +0.52 KYO Kyocera Corp 58.91 +1.81 UB Unionbancal Corp 37.50 +0.55 TLM Talisman Energy Inc 36.78 +0.98 DVN Devon Energy Corp 40.18 +1.00 RDN Radian Group 47.46 +0.84 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change GMST Gemstar-TV Guide Intl 19.22 +1.30 AW Allied Waste Industries 11.42 +1.47 PWR Quanta Services Inc 14.84 +1.40 HPLA HPL Technologies 16.49 +1.12 BONZ Interpore Intl 11.40 +1.25 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change K Kellogg Co 33.13 +1.12 BSX Boston Scientific Corp 24.75 +1.05 PKX Pohang Iron & Steel 26.38 +1.60 WFT Weatherford Intl Inc 42.35 +2.25 LLL L-3 Communications 107.11 +1.50 BBI Blockbuster Inc 21.98 +1.20 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change THC Tenet Healthcare Corp 62.05 -1.69 COX Cox Communications 34.00 -1.55 MCO Moody's Corp 36.65 -1.37 CVC Cablevision Systems 36.00 -3.06 PLCM Polycom Inc 26.31 -3.83 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change HE Hawaiian Electric 42.10 -0.48 CHH Choice Hotels Intl. 20.64 -0.73 ================================================================= 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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