PremierInvestor.net Newsletter Tuesday 02-19-2002 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/021902_1.asp ================================================================= In section one: Market Wrap: Even gold lost its shine Market Sentiment: Give me a reason. ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 02-19-2002 High Low Volume Advance/Decline DJIA 9745.14 -157.90 9899.38 9734.90 1.19 bln 1017/2116 NASDAQ 1750.61 - 54.59 1791.01 1745.05 1.73 bln 1051/2498 S&P 100 549.22 - 10.43 559.65 548.85 Totals 2068/4614 S&P 500 1083.34 - 20.84 1104.18 1082.24 RUS 2000 459.98 - 9.27 469.25 459.47 DJ TRANS 2672.40 - 11.83 2694.01 2671.82 VIX 26.21 + 2.12 26.37 25.32 VXN 47.23 + 2.24 47.58 46.01 TRIN 2.35 PUT/CALL 0.84 ----------------------------------------------------------------- =========== Market Wrap =========== Even gold lost its shine Despite this morning strong housing number, bears reined supreme today as buyers were hard to find. Even gold stocks as depicted by the Gold/Silver Index (XAU.X) which has been this year's best performing group were shunned by investors after Germany's Bun Bundesbank President Welteke, said that Germany wanted to "slowly sell" some of its gold reserves and move into assets that offer a return beyond potential capital appreciation. April Gold Futures (gc02j) - Daily Interval News out of Germany that Bundesbank may be selling some gold had the commodity under pressure today, but it is worth noting that the Washington Accord of 1999 limits gold sales by European central banks to 400 tons a year. Given that information, bulls don't need to think the sky is falling on their recent party, but should perhaps understand just how fitted retracement on the April Gold futures contract may have been traded by Bundesbank as gold edged into the upper level of a fitted retracement bracket that could well have been deemed a near-term "zone of distribution." If you think Bundesbank has a crystal ball telling them where gold prices are headed, then think again. Traders are traders and they'll use retracement techniques like we teach here. Look for some price firming at the $290 level. Industry analysts felt today's action was purely based on some "overbought" technicals, and while I'm not an industry analyst, I (Jeff Bailey) can't argue with the "overbought" technicals. A week ago I thought traders/investors in the group should be snugging up some stops in the group to help assure profitability and would continue to do so here. Just as 10,000 is a psychological level for the Dow Industrials, the $300 level is psychological for gold. With MACD on the daily interval starting to roll in the April futures market, I'm looking for a pullback to the $290 level near-term. The Gold/Silver Index lead sector losers today with a 5.1% decline to the $63.95 level. Sean Darby of Hong Kong-based Nomura International issued a research report on Monday saying "gold's recent rally reflects the problems the global economy and financial markets are having dealing with a deflationary environment and the consequent undermining of credit quality." Although Darby sees spot gold prices as "overbought," he did change his suggested asset allocation to favor holding gold over the U.S. dollar. As of Friday, Comex gold inventories were flat at 1.29 million ounces. Silver stockpiles (also deemed a hedge against inflation and/or currency woes) were unchanged at 101.32 million ounces. Playing the "credit quality" game In Friday's wrap we did mention the phrase "all is fair in love and war" as it related to some bearish trades we had profiled in shares of Qualcom (NASDAQ:QCOM) and Time Warner Telecom (NASDAQ:TWTC) that may have been plays on "credit concerns" that are plaguing the market (the technicals were also weak). At the same time, I mentioned that many a bearskin rug was made from a complacent bear and lately; our bearish trades have just been too easy. That is, too many of them are working in our favor and that's often when the markets can get a reversal of fortune. Lehman Brothers (LEH) - $1 box Shares of Lehman Bros. (NYSE:LEH) $55.43 -4.48% helped the Broker/Dealer Index (XBD.X) in its 4.2% decline today, but the trade at $56 also has shares of LEH trading at a bearish price objective from a vertical count dating back to January (red 1). While stocks can exceed their bearish vertical counts like LEH did back in September, just after the terrorist attacks that nobody predicted, we want subscribers that are short the stock to move down their stops (see play update). If we were to see the stock trade down at the $52 level ($1 above the bottom end of our channel) we'd be happy to lock in some bearish gains if we weren't stopped out before then. Cabot Microelectronics Chart - $1 box Today's trade at $55 has Cabot (CCMP) trading right at the bearish vertical count dating back to January 11th sell signal and eventual vertical count. When I start seeing some stocks pegging their vertical counts and hovering there, I become suspicious and don't want to be complacent with my bearish trades. Maybe I'm just paranoid, but what keeps eating on me is that the economic data isn't all that bad and I still feel that the recent market action is due to accounting worried (warranted or not I just don't know). One stock that is really eating on me is Qualcomm (NASDAQ:QCOM) $37.32 -0.21%. Why in the name of Charles Dow is this stock still hanging around the $37 level? I remember commenting on February 11th in the 01:00 update, http://www.PremierInvestor.net/archive/intradayupdates/021102inde x.asp that Qualcom (NASDAQ:QCOM) had just hit the $37 level and for bearish traders from our "High Risk/Return" section to be lowering stops to that level. With the stock still hovering near $37, I make the observation that this stock has seen little decline since that time, despite broader market weakness and sector weakness. While there is nothing in Qualcomm's (QCOM) chart that has me wanting to consider the stock as a long, I just want to make sure we're observing some of the bearish vertical counts that are in play and moving down our stops when targets are reached. Other vertical counts But not all stocks are close to achieving their bearish vertical counts. Unfortunately for some tech bulls, there are two stocks that I consider "key" technology stocks that are nowhere close to achieving their bearish counts. Shares of Microsoft (NASDAQ:MSFT) $58.83 -2.32% is still about 20% away from achieving a bearish vertical count on its point/figure chart of $47. If Microsoft (MSFT) is going to $47, then I've got to believe that other technology stocks still have some rough times ahead of them. Not that MSFT is invincible, but this stock has an uncanny nature of pegging bullish and bearish vertical counts in recent years. The first sign of trouble for a bearish trader would be a trade at $63. It may be a coincidence, but MSFT's September low was $47.50. If you're going to try and trade tech (long or short) keep an eye on this one. A trade at $58 presents further bearishness and would represent a spread triple-bottom sell signal. International Business Machines' (NYSE:IBM) $99.54 -3.25% got a little bearish today as this stock gave a double-bottom sell signal and that now puts in place a preliminary bearish vertical count of $88. With the bullish support trend down at $95, this stock looks lower still. It seems like yesterday that we were alerting traders that the stock had achieved a bullish vertical count of $122 and to be raising stops to assure profitability. First sign of trouble for the bears would be at $110, a double- top buy signal. Sector to watch/monitor In September, the Biotech's were "too good" and predicting the then bottom and I think this will be the case again. The group got hit today as the Biotech Index (BTK.X) fell 4.14% after SG Cowen revised earnings and revenue lower for Protein Design Labs (NASDAQ:PDLI) $16.99 -18.3%. It is interesting to note though that the Biotech HOLDRS (AMEX:BBH) traded down "just" 2.65% to $116.18 as PDLI is NOT a component of the BBH. What I'm looking for here is some type of intraday drop and a rally into a session close to signal a bullish trade for this group. The "key" stock to monitor is shares of Amgen (NASDAQ:AMGN) $56.91 -2.2% as this stock continues to find support in the $54- %55 range. At this moment, the only tech group I'm vaguely interested in are the biotechs and this is the first place I'm looking for any signs of a tech rebound. Treasury bonds Treasury bonds remain stuck in a range and the 10-year YIELD finished today's session at 4.883%. Here we see some divergence beginning to take place as it relates to stocks. While the broader market averages for stocks are seeing selling, we're not seeing a rush toward the bond market. Why is this? So far, I think it is because the economic data continues to show promise of an economic bottom and potential recovery. Aside from consumer confidence coming in lower than expected last week, the economic data hasn't been bad enough in my opinion to drive stock action like we've seen. I'm willing to play the "accounting concerns" so far in our bearish trades, but not willing to say "short every stock in the market because the economy is going in the tank." For now, I don't see the bond market saying "the economy is going into the tank." A close in the 10-year YIELD below 4.8% will have me beginning to think differently, but right now I'm not seeing the rush back into bonds. So where's all the cash going? I'm not positive, but the Transports (TRAN) while still showing some weakness are also showing some relative strength. The Dow Transportation Average (TRAN) still trades just above its still rounding 200-day moving average (200-day at $2,649) and trades at $2,672.40 as of today's close. They're still trading below that longer-term downward trend dating back to May 1999, so I'm still rather cautious as it relates to our scenario that this group gives hint of economic growth. It is worth noting that we haven't seen a company in this group get flagged with the "accounting concerns" and its ability to not having been clobbered to the downside still hints that some bullishness is in play. Critical near-term support level remains the $2,588 level. A break above $2,840 would most likely raise some eyebrows from the bullish camp. Market Internals The bullish percent data has not changed much in the past two sessions. Suffice it to say we haven't seen any strengthening in the internals, but we haven't seen a great deal of weakening either. The move volatile NASDAQ-100 bullish % ($BPNDX) from www.stockcharts.com remains in "bull alert" status at 36%, while the broader S&P 500 bullish % ($BPSPX) is in "bull correction" status at 57.6% bullish. For the S&P 500 ($SPX.X) itself, the $1,080 level looks to be a critical level of near-term support. The SPX.X closed at $1,083.34 today and with a bullish % reading still rather high at 57.6% bullish, there's still some downside risk that could be removed. A close below the $1,080 level most likely will have bulls pulling the plug and trying to protect to the $1,055 level. We did see a rebound from current levels back on February 6th that then saw a rally to the $1,125 level last Thursday. Tomorrow could be a pivotal day for trading over the remainder of the week. Economic data tomorrow There has been very little sign of inflation in the economic numbers and tomorrow we'll get economic data on two important pieces of inflation related data. At 08:30 AM EST, the Consumer Price Index (CPI) data is expected to show a modest increase of 0.2% and the CPI core rate (excluding food and energy) is also expected to rise a modest 0.2%. Last weeks Producer Price Index (PPI) data showed very little increase, so most traders aren't looking for any surprises here. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Give me a reason. by Russ Moore Investors continue to sit on the sidelines, unable to find a reason to buy. Investors appear more interested in going to Wal- Mart than Wall Street, to do their bargain shopping. The major averages struggled throughout the session despite another solid showing in the real estate market. The DOW dropped -1.6 percent while the NASDAQ slid -3.1 percent and the NDX -3.5 percent. Today’s NYSE volume of 1.18 billion shares was 10 percent below its’ 3-month daily average. The NASDAQ recorded 1.74 billion shares changing hands. Losers pummeled winners by a margin of 21/10 on the big board and 25/10 on the tech index. The XAL (airline index) was the lone sector to post a green arrow. Gold, biotech, brokerages and financials were the hardest hit sectors on the broad markets. Tech action was very weak, a victim of IBM accounting concerns. Hardware and software posted the largest declines in the tech arena. There’s no secret to the market’s malaise; accounting issues have rocked the bull’s boat, making any rally attempt an exercise in frustration. The corporate side has taken a hands-off approach, unwillingly to pick up the ball and run. With an absence of buyers the bias will be to the downside with only modest oversold rallies thrown in for good measure. VIX Tuesday 02/19 close: 26.21 VXN Tuesday 02/19 close: 47.23 30-yr Bonds Tuesday 02/19 close: 5.39 Total Put/Call Ratio: .84 Equity Option Put/Call Ratio: .71 Index Option Put/Call Ratio: 2.13 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 34.68 Volume/Open Interest Maximum calls: 40/122,471 Maximum puts : 37/167,750 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: 549.11 Volume/Open Interest Maximum calls: 580/4,846 Maximum puts : 520/5,253 Moving Averages 10 DMA 557 20 DMA 563 50 DMA 576 200 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: 1083.21 Volume / Open Interest Maximum calls: 1100/38,050 Maximum puts : 1100/41,432 Moving Averages 10 DMA 1099 20 DMA 1109 50 DMA 1132 200 DMA 1159 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: 9,745.14 Volume / Open Interest Maximum Calls: 100/18,051 Maximum Puts 98/41,432 Moving Averages: 10 DMA Unavailable 20 DMA 50 DMA 200 DMA 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: 479.31 Volume / Open Interest Maximum Calls: 520/922 Maximum Puts: 520/932 Moving Averages 10 DMA 491 20 DMA 502 50 DMA 542 200 DMA 544 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: 534.82 Volume / Open Interest Maximum Calls: 550/ 405 Maximum Puts: 500/1,064 Moving Averages 10 DMA 545 20 DMA 541 50 DMA 548 200 DMA 550 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: 376.36 Volume / Open Interest Maximum Calls: 400/300 Maximum Puts: 380/500 Moving Averages 10 DMA 375 20 DMA 375 50 DMA 379 200 DMA 389 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, 02/15. 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 01/29/02 345,583 401,923 (56,340) 9.0% 02/05/02 347,583 401,569 (53,986) (4.3%) 02/12/02 355,276 412,868 (57,592) 6.6% 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 01/29/02 128,826 63,127 63,127 5.1% 02/05/02 128,235 64,404 63,831 1.1% 02/12/02 126,730 59,902 66,828 4.7% 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 01/29/02 31,577 33,651 (2,974) (13.3%) 02/05/02 32,357 35,405 (3,048) 2.5% 02/12/02 32,712 34,841 (2,129) (30.1%) Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: (1,825) - 1/02/01 Small Traders Long Short Net %Change 01/29/02 9,709 8,293 1,416 (54.2%) 02/05/02 10,416 8,173 2,243 58.2% 02/12/02 9,009 7,415 1,594 (29.0%) 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 01/29/02 19,956 12,171 7,785 9.0% 02/05/02 21,868 12,068 9,800 25.9% 02/12/02 26,811 16,488 10,323 5.3% 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 01/29/02 5,872 9,709 (3,837) 11.1% 02/05/02 5,764 10,528 (4,764) 24.2% 02/12/02 4,562 10,038 (5,476) 15.0% 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 +66,828 +63,831 -57,592 -53,986 Total Open Interest % (+35.81%) (+33.13%) (-7.50%) (-7.21%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -5,476 -4,764 +10,323 +9,800 Total Open interest % (-37.51%) (-29.24%) (+23.84%) (+28.88) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +1,594 +2,243 -2,129 -3,048 Total Open Interest % (+9.71%) (+12.07%) (-3.15%) (-4.50%) net-long net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.We mentioned on Thursday that we’ll need to see some accumulation by the big players if a rally is going to get underway. We’re not seeing any signs yet, as the Commercial players held on to their net-short positions while the Small Specs added to their net-longs. Gold: Commercial activity has been a little puzzling of late. Gold has been enjoying a solid run over the last few weeks and yet, the big players have been adding to their net-short holdings (bearish). We’re going to dig a little deeper and see if we can provide an explanation for their behavior. 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 02/12 62,223 contracts net-short Data compiled as of Tuesday 02/12 by the CFTC. ================================================================= 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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PremierInvestor.net Newsletter Tuesday 02-19-2002 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/021902_2.asp ================================================================= In section two: Net Bulls Bearish Play Updates: CCMP, CLS, PMCS Closed Bearish Play: TWTC Stock Bottom / Active Trader Bullish Play Updates: ABF, COL, FRX, HRB, UNH Bearish Play Updates: LEH Closed Bullish Play: PD High Risk / High Reward Bearish Play Updates: ADLAC Closed Bullish Play: GMST Split Trader Announcement: MKC: 2-for-1 split announcement. 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 =============== -------------------- Bearish Play Updates -------------------- Cabot Microelectronics - CCMP - cls: 55.03 chg: -3.38 stop: 55.53*new* Investors continue to sell stocks as accounting uneasiness has traders thinking better safe (or short) than sorry. The SOX chip index declined again and the Nasdaq hit new relative lows not seen since November. With all of this positive reinforcement, shares of CCMP fell almost 6% to the $55 level. This is great news for bears but also a time to be cautious. When we originally wrote about CCMP we noted the possible double-bottom breakdown in the point-and-figure chart. This bearish signal came to pass on Friday's session. We looked at the p-n-f chart again today and noticed that the bearish vertical count was pointing to a price target of $55. It is not uncommon for stocks to move above (or below) their price targets but now that CCMP has reached its we want to be more cautious with our stops. Therefore, we are moving our stop to $55.53. This gives CCMP 50 cents of room to maneuver and if shares are going to collapse under $55 tomorrow then it might be enough space to do it. Lowering our stop should also protect a move of $3.76 or 6.3%. Meanwhile we are also going to set an exit price of $51.00 if shares do fall tomorrow and we'll be ready to exit on the move down before potential support at $50. A move down is certainly possible given the condition of the Nasdaq and the SOX could fall to its previous February low near 512 or its January low near 500. Keep an eye on both if you're trading CCMP. We would not recommend new positions at this time in CCMP. Picked on February 14th at $59.29 Change since picked: +4.26 Earnings Date 01/24/02 (confirmed) --- Celestica - CLS - close: 36.02 change: -1.88 stop: 39.40 *new* The negativity in the tech sectors today was pretty tough to stomach for some investors and CLS felt it as shares tumbled almost 5%. This was the true breakdown beneath the $38 level but more importantly it is the breakdown through its bullish support trendline on its point-and-figure chart. We now expect shares to fall to the $34.50 to $35.00 level of support. Short-term traders may want to consider covering their positions there. We are going to look for a bit more of a move and we'll place our exit price at $31.50. We're using a retracement tool from the September lows to the early December highs to identify potential risk/reward levels that money managers might use. The last couple of sessions have been on stronger than average volume but there is still a chance for an oversold bounce tomorrow. Therefore we are going to lower our stop to cost at $39.40. This may be a bit wide for some traders and more conservative players can probably get away with a stop just over the $38 level. Picked on February 5th at $39.40 Gain since picked: +3.38 Earnings Date 01/31/02 (confirmed) --- PMC Sierra - PMCS - close: 18.92 change: -1.79 stop: 20.75 *new* Traders recognized the breakdown of the pennant formation from Friday in PMCS and bears took control again come Tuesday. Shares ended the day down 8.6% and closed below both the $20 and $19 levels. Bears are now looking at potential price support at $18 from the mid-December low. Remember that our initial target is $18, which would be a 13% move. Short-term traders may want to consider covering there if PMCS continues its descent. Longer- term players may want to look for a potential move to the $15 level. Considering that this is only the second day of the downside breakout we're going to just let PMCS run and see how far the initial downward plunge will go. We will lower our stop to four cents above Friday's close ($20.75). A failed rally at $20 would be another attractive entry point but we don't really expect shares to rebound that strongly tomorrow. FYI, some point- and-figure chart readers might interpret the recent move as a downside breakout of a triangle formation, which would be very bearish indeed. Picked on February 15th at $20.71 Gain since picked: +1.79 Earnings Date 01/24/02 (confirmed) =============== NB Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Time Warner Telecom - TWTC - cls: 6.60 chg: -0.22 stop: 7.08 Initially, shares of TWTC traded lower this morning but as we suspected shorts began to cover and by 11:00 the stock had surged back above the $7.00 level. The break higher came suddenly but ran out of steam at $7.42. When bears realized that the Nasdaq was headed for a new relative low they just let TWTC fall with it. To us, the biggest risk in TWTC now is a strong short- covering rally but the current market environment is still favoring the bears. We were stopped out at $7.08 for a move of $2.41 or +25.39%. If the market continues to slip then TWTC should retreat to the $6.00 level. Picked on February 12th at $ 9.49 Change since picked: +2.41 Earnings Date 02/05/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Airborne Inc - ABF - close: 15.72 change: -0.47 stop: 14.95 We saw the first sign of real weakness in ABF today during its four-week rally. Shares fell from their perch above the $16 level and closed below its 10-dma. We don't see the 2.9% drop as one with conviction as volume was pretty light at 219K. However, if shares fall below $15.50 tomorrow then we'll begin to worry. The bad news is the Dow Jones looks like it's about to confirm the roll over it produced today and that could really weigh heavily on shares of ABF. Be sure to confirm stock direction if you're considering a play. Personally, we'd prefer to sit out tomorrow unless ABF trades back above $16. Picked on February 11th at $16.05 Gain since picked: -0.33 Earnings Date 02/01/02 (confirmed) --- Rockwell Collins - COL - close: 21.85 change: -0.65 stop: 20.49 A 157-point pull back in the Dow Jones can deflate almost any rally and it certainly slowed the advance for defensive stocks today. Shares of COL slipped 2.8% to close back below the $22 level. We see this as a normal pull back and a potentially better entry point than the $22.50 it closed at on Friday. As a matter of fact, if shares continue to dip, we'd look for a bounce at $21.50 to $21.40 as an entry point (the key word there is bounce). We'd obviously be concerned if shares traded under the $21.00 mark. A quick glance at other defensive players shows that most produced similar performances today. Picked on February 15th at $22.50 Gain since picked: -0.65 Earnings Date 04/17/02 (unconfirmed) --- Forest Labs - FRX - close: 78.25 change: -4.33 stop: 77.49 Shares of FRX were hammered today for a 5.24% loss fueled by a news release this afternoon that a recently concluded European study with ML-3000 by FRX did not meet all the necessary efficacy requirements needed for approval by the U.S. FDA. If I'm not mistaken an efficacy study is to observe and document the effectiveness of a certain drug during clinical trials. This will likely necessitate further efficacy studies, which in turn will push back any potential FDA progress for this potential osteoarthritis treatment to 2004 (according to Forest Labs press release). The stock fell to a low of $77.80 and closed just above its recent support level at $77.65. Honestly speaking, we would expect to be stopped out tomorrow. If shares break this support level then the stock would likely fall to the $75.00 mark, which is supported by the 200-dma. Picked on February 15th at $82.58 Gain since picked: -4.33 Earnings Date 04/16/02 (unconfirmed) --- H R Block - HRB - close: 46.98 chg: +0.45 stop: 45.95 HRB bounced today for a fractional gain while the rest of the markets sank. If nothing else this is a sign of relative strength but we're still not enthusiastic about initiating new long positions at this time. In the news today, HRB confirmed that they would announce their Q3 earnings report on Wednesday, Feb. 27, 2002, after the market close. The company also put out a press release refuting a claim by an NBC affiliate that said the HRB TaxCut software had an error in it as to calculating the Rate Reduction Credit. HRB claims there is no bug and the software calculates the credit correctly. Volume today was pretty strong at 1.1 million shares and we still have hope that that there may be some buying interest ahead of the earnings report but if we don't see a rally attempt soon we might abandon ship. Picked on February 5th at $47.01 Gain since picked: -0.03 Earnings Date 02/27/02 (confirmed) --- UnitedHealth Group - UNH - cls: 73.81 chg: -0.50 stop: 73.45 We continue to be cautious on shares of UNH. The stock is still looking weak after its bullish run from early January. Shares slipped another 50 cents today and continue to dance less than a quarter away from our stop. The MACD has begun to roll over and looks bearish, which confirms the stock may be running out of energy to keep the rally going. The only bullish clue we could find was the declining volume on these last two trading sessions with today's being very light at 680K. If the market slides again tomorrow we'd plan on being stopped out of UNH by the end of the trading session. Picked on January 11th at $71.75 Gain since picked: +2.06 Earnings Date 01/24/02 (confirmed) -------------------- Bearish Play Updates -------------------- Lehman Brothers - LEH - cls: 55.43 chg: -2.60 stop: 58.46 *new* A big sell-off in the XBD broker/dealer index was lead by losses in most of the major brokers. Big boys like GS fell under support at $80, MWD fell under support of $48, BSC fell under support of $55 and our bearish play LEH dropped to our initial target of $55 as we expected. Normally we would suspect the $55 level as a place of support because of its round-number psychological impact. The stock had also bounced here a couple of times back in October on its rally higher. However, what leads us to believe shares will continue to fall are a couple of clues. First of all the big brokers above who fell below significant support levels could easily lead the XBD.X ($456) below any support it might have at the 450 level. Secondly, the heavy volume from the past two declining sessions indicates a lot of conviction in the selling pressure. If you read this evening's market wrap by Jeff Bailey then you'll see his analysis of potential support for LEH. Therefore we are going to issue an exit price of $52.00 for this play. If shares spike down intraday we'll be ready and prepared to close it. However, we are also going to lower our stop to just over today's high at $58.46. LEH is short-term oversold and the stock could rally back to the $58 level before moving lower again. Picked on February 15th at $58.03 Gain since picked: +2.60 Earnings Date 12/20/01 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Phelps Dodge - PD - close: 36.65 change: -2.05 stop: 37.50 The rally in PD came to an abrupt end today when the price of gold took a multi-point dive and drug copper prices along for the ride. Copper fell to the 70 cents level, which pulled PD for a 5.2% loss. We were stopped out when shares traded to $37.50 and we managed to close the play for a +$1.43 move. By the end of the day, PD was trading just above its 200-dma. This could be a level of support but we'd be very cautious about considering new long positions. Investors still bullish on the sector may want to look for the $36 level to act as support for PD before evaluating new plays. Picked on February 11th at $36.07 Gain since picked: +1.43 Earnings Date 01/30/02 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bearish Play Updates -------------------- Adelphia Communications - ADLAC - cls: 19.78 chg: -0.19 stop: *note* The Nasdaq started the week off with new relative lows not seen since early November. Thus, we're not surprised that ADLAC traded down to the $19 level and actually hit $18.91. We are surprised that the stock rebounded strongly back towards the close to end with a loss of less than 20 cents. The stock's inability to reclaim the $20 level is probably seen optimistically by bears looking for a failed rally to start new short positions. They may be right. However, for the Premier Investor Newsletter, the low today was not enough to trigger our own bearish position. We want to see ADLAC hit $18.74 before we'll short it. Other stocks in the group that we mentioned over the weekend, COX, CHTR, and CVC all traded lower today as well so we don't see any strength in this segment. Wait for the move and if we are triggered, then we'll start with a stop at $21.01. Picked on February Xth at $xx.xx <-- see trigger Change since picked: +0.00 Earnings Date 03/08/02 (unconfirmed) =============== HR Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Gemstar-TV Guide Intl. - GMST - cls: 17.31 chg: -0.99 stop: 16.95 The 3% decline in the Nasdaq today was just too much for GMST to handle and investors dumped shares in a prolonged bout of selling. The daily chart now looks like it's headed for the $16 level again where GMST will likely find support again. Tuesday's drop to $16.85 was enough to stop us out even though volume was lighter than normal. If you're still interested in following GMST, remember that part of the risk is any negative news regarding their patent lawsuit could tank the stock price. Likewise, if there is positive news then shares could take off again, at least temporarily. Picked on February 8th at $18.11 Gain since picked: -1.16 Earnings Date 03/02 (unconfirmed) ================================================================== Split Trader (ST) section ================================================================== =============== Announcement =============== Adding Some Spice with a 2-for-1 Split - MKC Just after the market close today, McCormick & Company, Inc. (NSYE: MKC) released word that their Board of Directors had approved a 2-for-1 stock split of its common stock. The shareholder record date will be March 25th, 2002. The payable date for the split is effective as Friday, April 5th, with shares be distributed on Monday, April 8th, 2002. The stock closed at $46.58 on Tuesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=MKC About the company McCormick & Co., Inc. is the global leader in the manufacture, marketing and distribution of spices, seasonings and flavors to the entire food industry - to foodservice and food processing businesses as well as to retail outlets. In addition, the packaging group manufactures and markets specialty plastic bottles and tubes for personal care and other industries. (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 DD Dupont 45.51 +0.61 EQT Equitable Resources Inc 31.20 +0.55 AFCI Advanced Fibre Comm. 16.89 +0.63 TBCC TBC Corp 13.35 +0.74 WLS William Lyon Homes 23.05 +0.99 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change COTT Cott Corp 18.89 +1.05 UAL UAL Corp 12.95 +1.59 BONZ Interpore Intl. 12.22 +1.12 SHRP Sharper Image Corp 13.98 +2.03 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change ITT ITT Industries 56.38 +1.05 TVLY Travelocity.com 24.91 +5.71 CCRN Cross Country 30.05 +1.84 AMRI Albany Molecular 26.20 +2.70 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change C Citigroup 42.22 -1.91 IBM Intl. Business Machines 99.54 -3.35 MWD Morgan Stanley Dean Witter 47.04 -2.84 FTE France Telecom 24.48 -2.10 V Vivendi Universal 37.55 -2.11 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change WMT Wal-Mart Stores 59.29 -0.74 TXN Texas Instruments Inc 29.94 -1.56 PRU Prudential Financial 30.26 -1.24 TROW T.Rowe Price 36.97 -1.07 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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