PremierInvestor.net Newsletter Weekend Edition 02-22-2002 section 1 of 3 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/022202_1.asp ================================================================= In section one: Market Wrap: Dow's late rally good enough for a weekly gain Play-of-the-Day: Drilling For Profits Watch List: Drugs, Auto Parts, Oil & Much More! Market Sentiment: An hour of excitement ------------------------------------------------------------------ U.S. Market Numbers ------------------------------------------------------------------ MARKET WRAP (view in courier font for table alignment) ------------------------------------------------------------------ WE 2-22 WE 2-15 WE 2-8 WE 2-1 DOW 9968.15 + 65.11 9903.04 +158.80 9744.24 -163.02 + 67.18 Nasdaq 1724.54 - 80.66 1805.20 - 13.68 1818.88 - 92.36 - 26.46 S&P-100 554.04 - 5.61 559.65 + 2.37 557.28 - 12.07 - 5.79 S&P-500 1089.84 - 14.34 1104.18 + 7.96 1096.22 - 25.98 - 11.08 W5000 10179.29 -136.19 10315.48 + 66.16 10249.32 -240.85 - 86.35 RUT 465.07 - 4.18 469.25 + 2.58 466.67 - 13.37 + .69 TRAN 2725.65 + 41.42 2684.23 + 24.29 2659.94 - 99.39 - 20.59 VIX 24.89 + .80 24.09 - 1.38 25.47 + 2.60 + .94 VXN 48.57 + 3.58 44.99 - 4.29 49.28 + 6.20 - 2.59 TRIN 1.33 1.89 .64 1.44 TICK +1044 -128 +957 +652 Put/Call .94 .90 .73 .67 ------------------------------------------------------------------ WE= week ended =========== Market Wrap =========== Dow's late rally good enough for a weekly gain The last two hours of trading in recent sessions has been where most of the action seems to take place and today was little different. On a day where most stocks looked to be edging lower, there was just enough bullishness in some of the old boring cyclicals to push the broader market averages into the green by session's end. The most widely quoted market average in the world in the Dow Jones Industrials (INDU) traded in the green for the bulk of the session and added 133 points to 9,968 late in the day to squeak out a 65 point gain for the week and that leadership helped pull the tech-heavy NASDAQ Composite (COMPX) out of its daily slump with an 8 point gain, but not nearly enough to repair a -4.5% weekly decline. The S&P 500 (SPX.X) also benefited from some of the bullishness brought on by the Dow's performance as it managed to claw its way back above the 1,085 level to close with an 8-point gain (+0.82%) to 1,089. This weeks trading once again found technology bulls on the losing end of things as many of the technology-related sectors we follow found losses that exceeded 4.5%. Hardest hit this week were Fiber Optic (FOP.X) -9.2%, Software (GSO.X) -9.0% and Semiconductors (SOX.X) -8.1%. This week's action wasn't entirely bearish. Some of the more "defensive" areas and sectors that would most likely benefit from an economic recovery showed some gains. The energy sectors did well again for the second week in a row as the Oil Service Index (OSX.X) lead sector winners with a 4.6% weekly gain, with 2.15% coming in today's session. The Natural Gas Index (XNG.X) edged higher with a 2.6% weekly gain, while the Oil Index (OIX.X) edged up 1.3% on the week. In recent months we've commented on what role the energy stocks might play as it relates to the MARKET tipping its hand at economic recovery. It's worth noting that the Oil Index (OIX.X) is now unchanged on the year, while the Oil Service Index (OSX.X) is now showing a 3.2% gain for 2002. Those stocks that derive the bulk of their revenues from natural gas, as depicted by the Natural Gas Index (XNG.X) are still showing an 8.7% year-to-date decline. There is an interesting report in the "Media Center" section of the American Petroleum Institute we site http://api- ec.api.org/intro/index_noflash.htm dated February 13th that mentions U.S. production rebounded for the month of January by 3% compared to January 2001. Alaska production of 1.032 million barrels per day was 5.3% higher than a year ago. What this has done is lowered the US's dependency on foreign oil to the 57.3% level from 60.7% in January of last year. I'm left to speculate of why this may be happening. Is domestic output on the rise due to Middle-east tensions and a U.S. Government strategy to get some production gains going just in case there is some type of future event that has foreign imports cut off. Or is it simply President Bush's initiative to have the U.S. less dependent on foreign sources of energy? I'm not sure. On Thursday, there was "market rumor" during a round of selling that the U.S. had troops in Iraq. That rumor was squashed by the Pentagon, but it does make one wonder perhaps why production increases are being seen on the domestic front. Maybe its just in advance of a stronger economy. The production increases certainly aren't coming from the demand side of things. The report goes on to mention that demand, as measured by how much refined product was delivered to the industry's marketplace, continued to be weak with 18.83 million barrels per day distributed from refineries, storage terminals and imports, which was a 5.4% decline compared to a year earlier. If you want more statistics (some of them quite interesting) you may want to read that report. Here's one last number that seems pretty interesting. Kerosine jet fuel deliveries were up by 60,000 barrels per day from December, but still resulted in a 9.5% decline from a year ago. The report also mentions various inventory levels of different products. All totaled, inventories from the report showed gains, with Kerosine jet fuels showing a decline of 7.9% at 40.1 million barrels in inventory. Weekly market averages/sector performance Jet fuel draw downs and increase production. Hey! Those airline stocks as a group (Airline Index (XAL.X)) are showing a gain of 11.4% since December 28, 2001. What the heck is that? The Dow Transportation Average (TRAN) is also showing a decent gain of 3.1% year-to-date. Is it economic growth, or just a dead cat bounce? I'm still thinking economic growth. We've mentioned for some time that we didn't think that the technology stocks were the place for bulls to focus on prospects of economic growth. Instead, bulls should focus more in the area of the deeper cyclicals. Airlines, Transportation, Oil, Natural Gas, Forest/Paper, Chemical, Heavy Machinery and those types of sectors are areas that young bulls looking for economic growth should be looking for strength. While gains/losses from December 28th (far right column from above) are by no means indicative of what the future holds, those right column should stick out as to where a young bull should focus. Yes, there will be periods when the tech stocks rally and there's some good trading to be had, but if your trying to build back an account and have been trading tech stocks in recent weeks from the bullish side, odds are you're having some trouble. I have heard a couple of "analysts" say that the next economic boom will come from technology. If that's the case, then some of those "new economy" guys need to change their tune about an economic recovery. I just don't see the technology market pulling the U.S. out of economic slowing. The pocketbooks reside at the deeper cyclicals. Those are the ones with the IT budgets that spend on technology. If you look where I've placed the green arrow and the red arrows, try telling anyone that hopes of economic recovery or bullishness is going to come from the technology space. Last week the Semiconductor Index (SOX.X) showed a 3% gain year-to-date and that got wiped clean this week. There were some analyst downgrades in the sector late this week on "visibility concerns," but what I think happened was that some tech bulls holding some of their loved telecom and networking stocks that are now down about 25% on the year, looked at some of their semiconductor gains and pressed the sell button. How fortuitous was last week's mention and bearish play in PMC- Sierra (PMCS) $16.00 -5.49%. We've mentioned this one several times in our market wrap beginning near the $24 level. Last weekend our play writer's couldn't resist that tasty bearish triangle from the point/figure chart and breaking of a sizeable wedge. PMC Sierra Chart - Daily Interval PMCS got crushed from last Friday's close of $20.71 to today's close of $16.00 for a nice bearish gain of 22%. From here, the trade becomes pretty easy to manage. The first level we thought might find some market maker support has been cleared at $18.89 and today's 5.49% decline came in the face of a late NASDAQ rebound. You get the feeling there's no bullish interest in this one. If we look back to August/September of last year, all we have to do now is follow with a stop just above the previous day's high and let the stock tell us when to cover. Read tonight's play update, as we'll want to move our stop lower to reduce risk in the trade. Hopefully you and I are on the same page as far as some of this "technology stock" stuff goes. There's going to be rallies and you and I both know it. But.... look at the weekly losses for many of those indexes we follow and see if you're willing to step in front of the southbound train. I'm not. Don't fret tech bulls! Your day will come again so be patient. I'm noting that the Biotech Index (BTK.X) fell -2.6% this week. While I hate losses, this is the group that "techies" should be keeping an eye on for some bullishness. If it's going to happen then we've got some exposure in our play list with the Biotech HOLDRS (AMEX:BBH) $117.85 +0.38%. Our thinking for bullishness is based off of several things. The technicals are holding together and we don't feel this group will be as "economically" sensitive and other portions of technology. Even if you initiate some bullish trades in some computer-related technology stocks during a short-term bullish phase, keep monitoring the biotechs. What I'd be looking for is some type of bullishness to be presenting itself in the group. What I think helps determine a "short covering rally" from a true bullish rally is that a group you've identified as trading more bullish during a decline, should show bullishness if the broader markets show gains. It's so tough to put a time limit on things. For instance, I think we're in the last leg down of the recent decline for technology stocks right now. As I pointed out last night, some heads are turning and it's the selling in some of the technology stocks like Cognos (NASDAQ:COGN) $24.99 +1.62% and Storage Technology (NASDAQ:STK) $18.10 -7.08% of late that indicates to me that some of the winners are finally being sold. The strong are usually the last to fall, especially when they are associated with a sector that is under pressure. I'm trying to draw off of observations made in September and October where the biotechs showed relative strength gains versus broader technology during their climactic selling. What we saw then was a biotech firming and then the move higher from the biotechs that seemed to help spark the recovery in the semiconductors and then broader technology. Hopefully you don't think I'm trying to "imagine" these things. If I look at the weekly numbers, I see the Biotech Index (BTK.X) was down -2.6% this week, while other technology sectors saw bigger gains. Both ends of the snake While I may classify the biotechs as being the stronger group for technology bulls to be monitoring right now, lets not forget about our "inchworm" or "snake" analogies where we want to be monitoring some of he weaker stocks for strength. Let's face it. Telecom is probably the weakest area of the market. Our subscribers that shorted Time Warner Telecom (NASDAQ:TWTC) $7.00 +7.69% closed out their bearish trade with a handsome gain at $7.08 on Tuesday. Here we are on Friday and the stock is trading right near our profiled drop price. This is a rather short-term type of observations, but the "tail" looks to be trying to anchor itself or at least firm up. Even Qwest Communications (NYSE:Q) $8.27 -1.89% showed a weekly gain of 9% this week. A 9% gain from a company that wasn't able to sell short-term notes in the market and had to access it bank credit facility. I have no bullish thoughts on Qwest (Q). All I want to do is monitor some of these stocks for signs of stability at the lower end of the inchworm to give hint the sellers are drying up. It's my thought that if the MARKET stops selling some of the weak ones, they will most likely stop selling the strong stocks. When that happens is when the buying from bulls really will show through and a stronger rally takes hold. Speaking of strong stocks Last weak I put a checkmark in our Dow portfolio's by shares of United Technologies (NYSE:UTX) $69.70 +0.79% and Honeywell (NYSE:HON) $35.09 +3.05%. Both stocks managed to show some gains this week with UTX edging up 0.62% and HON trading up 4.3% for the week. I wish I could tell you I was "well connected" and knew of today's bear hug by Northrop (NYSE:NOC) and announcement it wants to buy fellow defense company TRW Inc. (NYSE:TRW) $50.30 +26.38% for $47 per share. The reason that TRW closed at $50.30 per share is that the offer was somewhat shunned by TRW as the company felt that NOC was trying to buy the company on the cheap and that the $47 offer may have to be sweetened for TRW to consider such a merger. This revelation of merger activity in the defense sector actually helped subscribers that took our bullish play in fellow defense stock Rockwell Collins (NYSE:COL) $23 +4.35%. Rockwell Collins Chart - Daily Interval Our bullish play in defense manufacturer is a bit of a sector play on what we observed last Friday as bullishness building in the defense stocks. We'll take all the rumor and speculation of consolidation in the defense sector the market will give us in this one, but the technicals were just too bullish to not give the stock and the sector a look. I really like the way the stock seems to peg the levels of retracement and it looks like the institutions are working the stock with a buy side bias. I like the two volume spike in January and that to me hints of an institution taking some stock and building a chart. Today's close above the 61.8% retracement of $22.53 and MACD crossing above the signal should now have some momentum players taking a look at the stock. If we can get a sustained move above the $23.10 level then the last technical hurdle is $23.88, which was the all-time high for the stock when it was originally listed on the NYSE. One thing I personally like about this stock is that it is a "new issue." A long time ago, a senior trader taught me this pattern. It can be powerful and is based off the simple belief that, those that got the stock in the Initial Public Offering (IPO) or in COL's case spin-off and most likely own the stock at a ridiculously low level and they're the ones that are actually selling some of their shares to create the IPO. I was taught a technical analysis pattern called "the new issue breakout." What can happen is that soon after the offering is traded, there is further selling immediately following in the open market and the stock begins to trade lower. Institutions that are "believers" in the longer-term will let the stock pull back and then begin accumulating positions. At the same time, you've got bears coming in and shorting the stock with the belief that the new issue lacks "sponsorship" as only those institutions that wanted it in the first place already got theirs in the IPO. Where the bullishness can come from is when the new issue exceeds its first day of trading high. At that point, the thought is "there isn't a share that's owned any higher than this and that means there's no overhead supply in the way." This break higher can also have institutions that have been accumulating the stock really starting to hammer at the offer and get the stock going to bring in momentum players. The gains can be impressive. Now, this is more educational than anything, but it is something to think about if you're a supply/demand believer like me and something to think about as it relates to the potential opportunity at hand with COL. Here's a chart of an Internet stock that I traded for clients back in December of 1998. We knew nothing about the company for the most part, but it was an Internet stock and it was setting up the "new issue breakout" pattern. What happened surprised even me. It's a trade I'll never forget. uBid Chart - Daily Interval Now, Rockwell Collins (COL) isn't an Internet stock, but it is a new issue that looks like it may be on its way to breaking to a relative high. During the hay days of the Internet bubble, some of my more aggressive clients would take a portion of their account and play some Internet stocks based on the "new issue breakout." For short-term traders, speculation and 52-week highs can become the ingredient for some pretty good trades. There's no thought in my mind that a break to a new 52-week high in our bullish play for Rockwell Collins (COL) is going to have the stock doubling in three days like uBid did back in 1998 from the break at $60.50, but a "pop" to the upper end of retracement near $27-$28 isn't out of the question. Especially if there's some "speculation" that there may be some consolidation and potential mergers in the defense sector. I will note that Rockwell Collins (COL) trade profile was not picked based on "speculation" of merger activity. It was based purely on technical bullishness that correlated with some things we were seeing in fellow Dow components United Technologies (UTX) and Honeywell (HON) from last week. Next week We're starting to see some volatility come into the markets this week and this is a sign of disagreement. The turns up and down are getting a little more frequent and what we want subscribers to do is to protect some of the bearish gains they may have in some stocks. Try to put things in perspective about the bullish triangles we pointed out from weeks ago in Celestica (NYSE:CLS), PMC Sierra (NYSE:PMCS), Altera (NYSE:ALTR) and others. While we often quote Professor Davis' study of how powerful and profitable those bearish triangles can be for a bearish trader, we don't necessarily want to see 10-15% gains that have come in a short period of time, simply go "poof" due to a short-covering rally. The reason we're getting some volatility isn't because bears have a firm belief that the economy is going in the tank. 200-point swings in the Dow don't just happen. Bulls and bears trying to make each other pay for their complacency and greed. I think it is true that bulls are struggling with some firming economic data, but troubled by continued news of some accounting concern or investigation into accounting practices. I think it is also true that bears are struggling with the same issues. I can't speak for you, but for me, I am struggling with these same issues. I can't just sit back and do nothing. I want to make money, for you and for myself. The way I think we continue to do it is to stay bullish on some stodgy stocks like we have been doing where the technicals hint that bulls are present and bears are void. Then, from time to time, add a little spice with the biotechs as their relative strength improves and we can control our downside risk with a tight stop. To satisfy my bearish tendencies, I want to try and play the probabilities that present themselves in the point and figure charts. The reason the "bearish triangle" works so well in my mind is that the "wedge" that is creating builds the pressure for some type of short-term capitulation by those that were buying on the belief of good fundamentals, but in the backs of their minds, the bulls were thinking that the weakness unfolding on the break of the triangle must be a sign that some type of bad news is about to present itself, so they cave in and the selling has the stock heading south. Our trading discipline and technical analysis has worked very well in my opinion, but you and I can't get comfortable with the gains found from closed positions and be complacent with those still open. As I look back on things, it was almost "easier" to trade the market immediately after the terrorist attacks than it is today. In the latter part of last year, the economy was slow and investor psychology was in the tank. Today we've got this accounting concern, which I really don't know that anyone has a handle on. I've said before that I used to be a "fundamentals" investor. I'd crunch numbers on spreadsheets until the late hours of the night to find those stocks with growing gross margins, accelerating revenues and earnings and buy those stocks. Those that lacked the fundamentals I deemed as important were short candidates. Eventually I came to understand that there was usually somebody smarter or somebody that knew the "real story" before I did and the move was already over by the time it showed up in the fundamentals. Perhaps today's accounting issues shouldn't impact the technical trader like I've become, but what this accounting issue has done is it has placed an emphasis on just how psychological the market is right now. I will confess a weakness here. I can pose some psychological scenarios that look to be in play in certain sectors or stocks by the technicals that I find, but I can't say for fact that a certain type of psyche is indeed present. The mental game that comes into play is what takes place in the technicals. We can use breakouts to the upside to our advantage, but there has to be some type of measurable upside that has seller either void in the stock, or looking to cover their short positions as they're just as uncertain that they may be on the wrong side of things due to some economic data that shows strengthening. Conversely, we can use a bull's psychology against them too. Stocks that reside in groups where we've seen some type of accounting concerns raised or even poor fundamentals that are breaking down and have some good downside to support levels will have bulls thinking "oh no, here we go again, so I'm getting out." All sum, it really goes back to what we try and teach or talk about on a consistent basis. Trade bullish in strong stocks in strong sectors and you will most likely find success. Institutional bears don't short strong stocks in strong sectors unless they have some type of knowledge that something bad is about to happen. If I've got my stop placed properly at a level just below technical support, then my thinking is the stock shouldn't get stopped out unless I'm wrong. If I'm wrong, then I need to move to the sidelines and figure out where I was wrong. Yes, there will be times that the stop was set a little too tight. The other night I looked at a bearish play we had profiled in shares of Pharmaceutical Resources (NYSE:PRX) at $27.30 back on January 12th. We were stopped for an 8.1% loss on January 17th at $29.51. Today the stock trades $16.70 and boy wouldn't I like to have that one back. We know too well though that had we not used a stop and stuck with it, that silly bugger would have run to $40 and we wouldn't have been able to take a trade in Time Warner Telecom (TWTC) or Celestica (CLS) or even PMC Sierra (PMCS) or any other bearish play because we blew ourselves up in the last trade. It is so encouraging for me to get e-mail from subscribers saying that they sold profits too soon, or bought profits back in a short position a little too early. All that matters is that you're making a profit that you find satisfactory and that meets you investment/trade goal. The traders/investors that get blown up in the stock market are the ones that don't have profit targets or stop losses on their trades. Long winded I start "rambling" about trading discipline, but it is so important. Let's take a quick look at what lies ahead. The economic calendar is going to be full and the market is going to be bombarded with economic data. Existing home sales, consumer confidence, durable goods orders, new home sales, gross domestic product, jobless claims, Chicago PMI, personal income/spending, ISM, construction spending, consumer sentiment and domestic vehicle sales. Wow! That's a lot to chew on. The recent economic data that has been released in the past couple of weeks has actually had many economists beginning to predict a stronger rebound than many had expected a few months ago. Fed Chairman Alan Greenspan will deliver his semiannual testimony to Congress on Wednesday. Many Fed watchers believe Mr. Greenspan will continue to advise caution toward economic recovery, but economic data released on Monday (existing home sales and consumer confidence) and Tuesday's (durable goods orders and new home sales) and Wednesday morning's (GDP, jobless claims and Chicago PMI) would impact Mr. Greenspan's comments on his outlook for the economy. Mr. Greenspan likes to talk to the nation's business leaders about how things are going for business, but the recent Enron debacle has many business executives painting the canvas rather bleak. Many business executives feel it is now better to be pessimistic/conservative, so they won't get accused of misleading investors at a later date if things don't pan out. Some feel that these conversations with business leaders will have Greenspan issuing words of caution. While Greenspan loves to plow through economic numbers, he also trusts business leaders and listens to what they have to say. Mr. Greenspan isn't a dummy. Like you and I, he will listen to what others have to say and weigh that against the hard numbers. If the economic data early in the week shows some upside surprises, then I expect his testimony will mimic the economic numbers. Have a great weekend and get plenty of rest! Next week is going to be busy! Jeff Bailey Senior Market Technician ========================= Play-of-the-Day (Bullish) ========================= (( this is a new non-tech play for the weekend )) Apache Corp - APA - close: 51.57 change: +0.17 stop: 48.99 Company Description: Apache Corporation is a large oil and gas independent with operations in the United States, Canada, Egypt, Western Australia, Poland, China and Argentina. (source: company press release) Why We Like It: We suspect that the recent uptrend in the oil and oil service stocks is just the beginning of a larger move. We saw several really attractive stocks that looked great for potential long plays and it was a real challenge to pick just one to play this weekend. The two we liked the most were APA, more of an oil producer and SLB, more of an oil service stock. The OSX.X oil service index has already had a decent week so the OIX.X oil index could be right behind it. However, both charts of APA and SLB look similar. Actually, I preferred SLB but we chose to put it on the watch list. We picked APA because it was an oil producer and its relative strength versus SLB was stronger. Besides, the price of oil appears to be building a bullish pattern on its own and is currently trading around $21 a barrel. It has resistance at $22 but might be able to break over it if the economy does continue rebounding and we do see military action against Iraq. Short-term we would look for a move up to the $54 to $55 level. This should be possible with shares rising on growing volume lately. However, if the stock can breakout above $54/$55 then it would be a break of the neckline of its reverse head-and-shoulders. This pattern on APA just happens to have two right shoulders which is not uncommon. This would indeed be a powerful move. Bulls can take comfort in the point- and-figure chart as well since the stock has rebounded strongly off its bullish support line recently and produced a double-top breakout. We're going to start the play with a stop at $48.99, which is 5% from its current share price. Picked on February 22nd at $51.57 Change since picked: +0.00 Earnings Date 01/31/02 (confirmed) ================================================================== WATCH LIST ================================================================== The PremierInvestor.net watch list is not designed to be read as full fledged stock picks. Rather we would prefer to offer it as an extra tool in today's investor toolbox. Think of it as a radar screen with your own radar operator pointing out interesting developments, technical patterns or potential plays that you may or may not have seen on your own. Due to time constraints we do glance at the news but rarely do we have time to fully read pertinent news stories, due background research and other necessary screens that investors should do before making a decision. A common exercise is to read the entry, glance at the sector and other stocks in that industry and then compare what's happening in the stock to what's happening in the broader market indices. We hope you enjoy the Watch List and that it proves to be a useful tool for your own trading success. STOCKS WORTH WATCHING --------------------------------- BULLISH CANDIDATES ------------------ DRUGS. The DRG.X has been relatively strong lately and may have reversed out of its recent bearish trend. The move on Friday was very positive but we still see overhead resistance at the 390 level. However, there are a couple of drug stocks we like and are worth watching. Johnson and Johnson - JNJ - close: 59.40 change: +1.40 WHAT TO WATCH: JNJ added 2.4% on Friday and broke above the $59 level which had been resistance for it over the last week. The $60 level is a tougher hurdle for shares to overcome but if JNJ can breakthrough then we'd consider a bullish play on it. This may take a few days to accomplish as shares slowly build up a series of higher lows before finally breaking out or it could just power through it if investors flee to the drug sector. --- Abbot Laboratories - ABT - close: 57.61 change: +0.46 WHAT TO WATCH: Shares of ABT have been in a long-term major up trend for months with buyers stepping in at the 50 or 100-dma since October. This time the stock is poised to breakout above the $58 resistance level that has thwarted its advance since mid- January. We'd look for that breakout as a potential trigger event to evaluate a bullish play on ABT. --- St. Jude Medical - STJ - close: 81.13 change: +1.53 WHAT TO WATCH: STJ is not a drug stock but still in the healthcare sector which is also seen as a defensive haven during tough markets. This is another equity that has been in a long-trending climb which has recently broken out above significant resistance at the $80 level. The move came on strong volume of 1.19 million shares complimented by a bullish crossover in the MACD. We'd consider a bullish play in STJ now with a stop under the $76 level. However, traders can watch for a pullback to $80 as a slightly better entry point. AUTO PARTS & SERVICE. We've noticed that a number of auto parts stocks and related companies appear to be drawing investor interest and several have some very bullish chart patterns that traders will want to watch for potential trades. Arvinmeritor Inc - ARM - close: 27.00 change: +1.06 WHAT TO WATCH: Shares of this auto parts producer added another 4% on Friday and honestly the stock looks pretty overbought. However, the stock has been very strong and most of the advances are coming on heavy volume, which would indicate institutional buying. We're not suggesting you go long on the stock today but waiting for an appropriate pull back may be a good plan to catch the next move up. The $30 level might be round-number price resistance and a signal for investors to take profits. Be careful. --- Borg Warner Inc - BWA - close: 58.85 change: +0.93 WHAT TO WATCH: BWA is another auto parts company who's stock has been incredibly strong the last several months. The last month has seen BWA breakout above significant resistance at $55 and barely pause to stop and consolidate. Shares are definitely overbought but as long as the trend continues why fight it. Definitely one where you need to follow up on stop loss placement. The $60 level could be resistance so waiting for a possible pull back to $55 might be a good plan (if it occurs). --- Autozone Inc - AZO - close: 70.01 change: +1.11 WHAT TO WATCH: The auto parts retailer has turned in an amazing twelve months for investors and after peaking at the $80 level pulled back to consolidate near $65. It now appears that the consolidation is over and the stock is beginning to trade higher again on rising volume. We're not suggesting a play in the stock right now as AZO is expected to announce earnings on Feb. 26th. If Wall Street's reaction to the earnings is favorable then we might look for an entry on an attractive pull back. Otherwise, investors might use the earnings as an excuse to take profits which has been a very common occurrence lately. OIL & OIL SERVICE. The oil and oil service sectors look very attractive right now and we've seen a number of stocks that could be great plays for both active and patient investors. We did choose one stock to play in the newsletter this weekend and that was APA. Schlumberger Ltd. - SLB - close: 57.35 change: +1.91 WHAT TO WATCH: SLB was our second choice for a potential oil-stock play but in the end Apache won out. This doesn't mean that SLB isn't a great play candidate and it could be a winner for traders next week. We like it for both its bullish point-and-figure chart and its bullish breakout on the daily chart. The stock has broken out above long-time resistance at $57 on strong volume. Look for confirmation and use a stop. --- Anadarko Petroleum - APC - close: 50.61 change: +1.19 WHAT TO WATCH: This is another oil stock that has broken out above heavy resistance on increasing volume and looks like it could trade to its 200-dma near $55. --- Devon Energy - DVN - close: 42.38 change: +1.18 WHAT TO WATCH: Yet another oil stock that has broken out above resistance on strong volume and looks to be starting a multi- session leg higher. However, traders need to watch out for the 200-dma at $44 as potential resistance. MORE BULLISH CANDIDATES ----------------------- ITW - We highlighted ITW on last weekend's watch list for a break over the $72.50 level. It has done so on extremely strong volume and looks very bullish. A pull back to $72.00 or $72.50 might be a good entry point. PH - This is another manufacturing company that has been making gains on rising volume. Friday's move put it above the $50 resistance level on extremely heavy volume. It looks like a possible play. ROH - Nothing like playing cyclicals when the techs are down. This chemical maker has been relatively strong the last week and Thursday and Friday put it above resistance of $38 on strong volume. Could be worth your attention. YUM - Several stocks in the restaurant group look very attractive for possible bullish plays and Tricon is one of them. Friday produced a bullish candlestick pattern and a new closing high. DRI - Not to be out done, Darden also looks very bullish but we'd probably wait for a pull back before considering a long position in this stock. A bounce at $40 might be an entry. MORE BEARISH CANDIDATES ----------------------- MONE - The recent breakdown under the 200-dma and the subsequent breakdown under the $12 level has this stock looking very bearish. We would consider a trigger under $10 to capture a move to its next support at $8.00. HWP - Concerns over lagging PC sales and other hardware, plus more uneasiness about its merger with CPQ have pushed HWP under the $20 level. A move under $19 could produce a follow through move to $16.75. FDC - First Data has broken a long-term up trend and failed to rebound over the $80 level of support. Another failed rally may be a good shorting opportunity with a target near its 200-dma at $70. NOK - The telecom and wireless sectors have been under heavy selling pressure for months. NOK's drop under the $20 level is very foreboding and we could see a retest of $15. ================ Market Sentiment ================ An hour of excitement by Russ Moore The week ended with another late day flurry, this time to the upside. Volatile swings are becoming commonplace of late, putting the longer-term investor in a tough position. The DOW tested both sides of the breakeven line before heading north for good in the late going, en-route to a +1.4 percent gain. The NASDAQ experienced a more difficult journey but did manage to close in the green with a gain of +0.5 percent. The NDX added +0.6 percent. Advancers lead decliners by a margin of 20/12 on the big board and 19/16 on the tech index. Volume showed no signs of improvement coming in with 1.39 billion shares on the NYSE and 1.82 billion on the NASDAQ. Brokerages, banks, retail, gold and airlines were the weak spots on the broad markets while oil and oil service sectors were the top performers. Over on the tech side, software was off slightly while all remaining sectors enjoyed fractional gains. Taking a look at this week's COT data, we see that the Commercial position has barely budged. We keep looking for a shift in sentiment from the big players and that just isn't happening. If there were a market turnaround coming in the second half of 2002 we'd expect to see a gradual move into an accumulation phase (bullish) over the next couple of months. Failure to do so could mean the much-touted recovery may be postponed VIX Friday 02/22 close: 24.89 VXN Friday 02/22 close: 48.57 30-yr Bonds Friday 02/22 close: 5.34 Total Put/Call Ratio: .94 Equity Option Put/Call Ratio: .79 Index Option Put/Call Ratio: 2.23 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 33.65 Volume/Open Interest Maximum calls: 40/128,154 Maximum puts : 37/137,468 Moving Averages 10 DMA 35 20 DMA 36 50 DMA 38 200 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: 554.04 Volume/Open Interest Maximum calls: 580/5,704 Maximum puts : 520/6,079 Moving Averages 10 DMA 558 20 DMA 560 50 DMA 574 200 DMA 593 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: 1089.84 Volume / Open Interest Maximum calls: 1100/39,149 Maximum puts : 1150/44,990 Moving Averages 10 DMA 1100 20 DMA 1104 50 DMA 1128 200 DMA 1156 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: 9,968.15 Volume / Open Interest Maximum Calls: 100/20,267 Maximum Puts 96/38,042 Moving Averages: 10 DMA 9,875 20 DMA 9,824 50 DMA 9,915 200 DMA 10,057 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: 487.32 Volume / Open Interest Maximum Calls: 520/950 Maximum Puts: 520/932 Moving Averages 10 DMA 498 20 DMA 496 50 DMA 536 200 DMA 543 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: 508.95 Volume / Open Interest Maximum Calls: 550/1,543 Maximum Puts: 500/1,068 Moving Averages 10 DMA 541 20 DMA 542 50 DMA 545 200 DMA 548 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: 384.23 Volume / Open Interest Maximum Calls: 400/300 Maximum Puts: 380/500 Moving Averages 10 DMA 379 20 DMA 376 50 DMA 378 200 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, 02/22. 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 02/05/02 347,583 401,569 (53,986) (4.3%) 02/12/02 355,276 412,868 (57,592) 6.6% 02/19/02 355,905 772,569 (60,759) 5.5% 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 02/05/02 128,235 64,404 63,831 1.1% 02/12/02 126,730 59,902 66,828 4.7% 02/19/02 130,856 63,311 67,545 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 02/05/02 32,357 35,405 (3,048) 2.5% 02/12/02 32,712 34,841 (2,129) (30.1%) 02/19/02 33,871 35,690 (1,819) (14.6%) 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 02/05/02 10,416 8,173 2,243 58.2% 02/12/02 9,009 7,415 1,594 (29.0%) 02/19/02 9,966 8,073 1,893 18.8% Most bearish reading of the year: (1,028) - 1/02/01 Most bullish reading of the year: 8,460 - 3/13/01 DOW JONES INDUSTRIAL Commercials Long Short Net %Change 02/05/02 21,868 12,068 9,800 25.9% 02/12/02 26,811 16,488 10,323 5.3% 02/19/02 29,606 17,953 11,653 12.9% 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 02/05/02 5,764 10,528 (4,764) 24.2% 02/12/02 4,562 10,038 (5,476) 15.0% 02/19/02 4,654 10,431 (5,777) 5.5% 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 +67,545 +66,828 -60,759 -57,592 Total Open Interest % (+34.79%) (+35.81%) (-7.86%) (-7.50%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -5,777 -5,476 +11,653 +10,323 Total Open interest % (-38.29%) (-37.51%) (+24.50%) (+23.84) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value +1,893 +1,594 -1,819 -2,129 Total Open Interest % (+10.49%) (+9.71%) (-2.61%) (-3.15%) net-long net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.Commercial and Small Spec positions remain virtually unchanged this week. Gold:.Ditto for the gold market as Commercials continue to hold a good supply of net-short contracts. Gold has come off its highs but still remains relatively strong. In the past, Commercial activity has been reasonably accurate in determining the price movement on the precious metal however, this time we're stumped. 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 02/19 60,054 contracts net-short Data compiled as of Tuesday 02/19 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. 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PremierInvestor.net Newsletter Weekend Edition 02-22-2002 section 2 of 3 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/022202_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: BBH Bearish Play Updates: CLS, CHKP, MSFT, PMCS Stock Bottom / Active Trader New Bullish Plays: APA, CNF Bullish Play Updates: ABF, COL, FRX, HRB Bearish Play Updates: C, LEH High Risk/Reward Bearish Play Updates: ADLAC Split Trader - none - ================================================================== Net Bulls (NB) Tech Stock section ================================================================== =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Biotech HOLDRs - BBH - close: 117.85 chg: +0.45 stop: 114.00 The overall weakness in the tech sector and the Nasdaq continues to dominate our bullish play in the biotech sector. The group is trading closely with the Nasdaq, which doesn't bode well for bullish traders. The Nasdaq continues to drop today but found support at the 1700 level that stopped its fall. Likewise the BTK.X biotech index found support near 480 and the BBH found support near $115. The late day rally in the Dow Jones Industrials help lead the Nasdaq higher and the biotechs higher but the overall pattern remains bearish. The 10K level will be tough resistance for the Dow and if the Dow rolls over then the Nasdaq will likely succumb to its current bearish trend which in turn will be a drag on the biotechs. Thus we see no reason to initiate new bullish plays in the BBH until it can convincingly close above the $120 level. If you were curious the leaders in the biotech basket were BGEN +3.7%, ICOS +2.6%, CHIR +2% and GENZ +2%. Frankly speaking, if the BBH breaks $115, we'd expect it to trade to $110. Jeff disagrees with me and suggests leaving the stop at $114. I would probably cinch mine up to $114.95. Picked on February 20th at $120.00 Gain since picked: -2.15 Earnings Date N/A -------------------- Bearish Play Updates -------------------- Celestica - CLS - close: 32.64 change: -0.43 stop: 34.05 *new* An early morning rally in CLS failed at the $34 level and the stock quickly traded towards $32. Shares appeared to be headed for a sub-$32 close before the afternoon rally in the Dow Jones that helped breathe life back into the Nasdaq also lifted shares of CLS. The bad news for the bulls is that the afternoon rally fizzled again at the $34 level for CLS and the stock traded lower into the weekend. Volume has been very strong the last few sessions which could be a convincing clue for those speculating that CLS may eventually retest its September low. We're not expecting that deep of a sell-off but we do suspect the stock will fall to the $26 level. On Thursday we lowered our exit price to $27.50 in an attempt to get out before any sizeable bounce might occur. We still expect some support for the stock between $30 and $31 but overall the picture is pretty gloomy. On the subject of a bounce, the stock could turn in a violent short- term move higher at any time as bears move to cover but right now we would look for new overhead resistance near $34.50 to $35.00. Now having said that you may be surprised when we lower our stop to $34.05. The stop loss strategy where you use the previous day's high as a guide for stop placement can work well on trending stocks. It doesn't work all the time but it would have worked well for CLS during the last several sessions. We're going to apply it tonight with a new stop just 10 cents above Friday's intraday high. This new stop should protect a gain of $5.35 or 13.5%. Picked on February 5th at $39.40 Gain since picked: +6.76 Earnings Date 01/31/02 (confirmed) --- Check Point Software - CHKP - cls: 28.43 chg: +0.95 stop: 30.05 This play update for CHKP is pretty short. The late day rally was due to the bounce in the Nasdaq. As you know the bounce in the Nasdaq was due to a rally in the Dow Jones. Even though buyers or bears covering shorts ahead of the weekend lifted shares of CHKP it was still a lower high, which was a steady trend all week. More confident traders may want to consider this an entry point but we wouldn't be surprised to see CHKP rally to the $29.00 or $29.50 level before rolling over again. A failed rally in this area might be a great low-risk entry with our stop at $30.05. The short-term target is $25.00 with our ultimate target unchanged near the $20 level. If you're trading software stocks you'll want to keep an eye on the GSO.X software index and of course MSFT since it is the largest component of the group. Picked on February 21st at $27.48 Gain since picked: -0.95 Earnings Date 01/15/02 (confirmed) --- Microsoft - MSFT - close: 57.99 change: -0.06 stop: 61.01 The Dow Jones may have turned in a 133-point rally but Dow- component MSFT still closed in the red by six cents to end a very negative week. We already mentioned Thursday how the stock had been under a lot of selling pressure and how the most recent rally attempt was met with renewed selling. The breakdown under the $60 and $58.75 levels were pretty bearish for traders and volume has been picking up the last two sessions. Why the $58.75 level? We would encourage readers to try putting a retracement bracket on a chart of MSFT. We used the September low near $47.50 as the bottom and the $70 resistance level as the top. It is amazing how the stock can trade to the different retracement levels (oh, if you can try adding the 23.6% Fibonacci level to your retracement tool to see the correlation between the price resistance at $65 in late January). The point-and-figure chart is on a new column of O's and the vertical count leads us to believe our ultimate target near $50 is achievable. Short-term traders may want to look for an exit at possible support of $55 but don't be surprised if MSFT rallies back to the $59 level during a market bounce next week. Taking a step back from the technical picture someone brought up the question about investor confidence and MSFT. MSFT is such a large company that some investors might wonder how long will it be before someone says "let's look at their accounting". I think this is just speculation and the folks at MSFT are no dummies and they'll probably come out just as strong and fast as GE did when the accounting question began to surface. The growing economic data that is beginning to show the recession is over should help stocks like MSFT in the long run but right now it may be the lingering cloud of lagging PC sales. Observant investors probably heard some positive comments on PC sales from the likes of DELL and other hardware guys but those comments were based on retail sales to individuals not corporate America. It would appear that the drawstrings are still pretty tight on the IT budgets across the country. Picked on February 21st at $58.05 Gain since picked: +0.06 Earnings Date 01/17/02 (confirmed) --- PMC Sierra - PMCS - close: 16.00 change: -0.93 stop: 17.26 *new* It's been a very tough week for PMCS. It started with a downside breakout from its pennant formation on both its daily and point- and-figure charts. Once the bears grabbed a hold of it they haven't looked back. The stock continued to get hammered as negative news with CIENA's comments, the downgrade on Intel and the two new downgrades on JDSU undermining any fragment of investor confidence left in the telecom/optical/chip sector industries. The additional 5.49% drop today came on rising volume which is not what current shareholders want to see. The stock is extremely short-term oversold but it's anyone's guess whether the $16 level will hold as interim support or whether bears will drag the stock down to $15, which might act as round-number psychological support. We're not changing out exit price of $14.15 but we are lowering our stop loss. In the CLS play update above we mention one stop placement strategy of using the previous day's high. That same plan, which I will repeat doesn't always work, would have worked well on PMCS this week. If you're looking ahead to Monday then the previous day's high is Friday's $17.20. We're going to place our stop at $17.26. This should help protect a gain of $3.45 or 16.6%. Overall it would appear that PMCS' lack of participation in the late day rally today may be a clue that the bears aren't ready to cover yet on this stock. Don't let your profits evaporate by not adjusting your stop! Picked on February 15th at $20.71 Gain since picked: +4.71 Earnings Date 01/24/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT New Plays =============== ----------------- New Bullish Plays ----------------- Apache Corp - APA - close: 51.57 change: +0.17 stop: 48.99 Company Description: Apache Corporation is a large oil and gas independent with operations in the United States, Canada, Egypt, Western Australia, Poland, China and Argentina. (source: company press release) Why We Like It: We suspect that the recent uptrend in the oil and oil service stocks is just the beginning of a larger move. We saw several really attractive stocks that looked great for potential long plays and it was a real challenge to pick just one to play this weekend. The two we liked the most were APA, more of an oil producer and SLB, more of an oil service stock. The OSX.X oil service index has already had a decent week so the OIX.X oil index could be right behind it. However, both charts of APA and SLB look similar. Actually, I preferred SLB but we chose to put it on the watch list. We picked APA because it was an oil producer and its relative strength versus SLB was stronger. Besides, the price of oil appears to be building a bullish pattern on its own and is currently trading around $21 a barrel. It has resistance at $22 but might be able to break over it if the economy does continue rebounding and we do see military action against Iraq. Short-term we would look for a move up to the $54 to $55 level. This should be possible with shares rising on growing volume lately. However, if the stock can breakout above $54/$55 then it would be a break of the neckline of its reverse head-and-shoulders. This pattern on APA just happens to have two right shoulders which is not uncommon. This would indeed be a powerful move. Bulls can take comfort in the point- and-figure chart as well since the stock has rebounded strongly off its bullish support line recently and produced a double-top breakout. We're going to start the play with a stop at $48.99, which is 5% from its current share price. Picked on February 22nd at $51.57 Change since picked: +0.00 Earnings Date 01/31/02 (confirmed) --- CNF Inc. - CNF - close: 30.41 change: +0.53 stop: 28.99 Company Description: CNF is a $4.9 billion management company of global supply chain services with businesses in regional trucking, air freight, ocean freight, customs brokerage, global logistics management and trailer manufacturing. (source: company press release) Why We Like It: Before we begin, we hope you took the time to look at a chart of CNF. When you do come back and we'll talk... okay, looked at a chart? Good, now you're probably wondering "why are they bullish on CNF? The chart looks kind of bearish." Excellent observation. The recent trend in the stock has been bearish as shares have dropped from their January highs above $34 back to their support level near $30. That is the key but first a little broader market analysis. Part of ancient Dow theory suggests that the markets can't sustain any sort of meaningful rally if the Transports don't confirm the move higher. This would appear to be even more true if we're coming out of a recession. Now it's just theory but the transports (TRAN) have been inching higher the last few sessions. The Dow Transports aren't taking off but the recent bounce at the 200-dma may be a good sign and is a higher low. The group still has significant resistance at the 2800 level but the MACD appears like it could turn bullish at any moment. Now jump back to CNF. The stock has bounced between $29.50 and $30.00 three times since the 8th of February. The trend still looks bearish but the strong move on Friday has sparked some hope that it will join up with the rest of the transport group. Besides, if investors will start to listen to the recent economic reports that are starting to show a rebound from the recession then maybe they will begin to place new bets on companies like CNF who stand to benefit from the turnaround. This week is chock full of more economic data due to be released and could add more fuel to any fire for the bulls. Third, we feel that initiating a play here, where the stock is so close to its support level, means we can limit our risk while trying to capture the majority of any rally attempt higher. More conservative traders may attempt to go long with a tight stop under $29.50 but we are going to give ourselves a little bit more cushion and place our stop at $28.99, which is just under the 200-dma. The point-and-figure chart isn't the most exciting as the stock is currently in a column of O's but the vertical bullish count is projecting a price target of almost $60. We're not looking for a move that high but 15% to 20% sounds attractive. Picked on February 22nd at $30.41 Change since picked: +0.00 Earnings Date 01/28/02 (confirmed) =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Airborne Inc - ABF - close: 16.60 change: +0.62 stop: 14.95 After two weeks of waiting and watching ABF slowly inch higher we finally begin to see the move we have been expecting all along. The Transports have been bullish the last few sessions and could continue to be leaders in a weak market, which should draw money to the group. Rival FDX is looking bullish and about to breakout above resistance but ABF has beat it to the punch and scored a new 52-week high. Shares of Airborne had been struggling with the $16.50 level but the late-day rally in the Dow Jones help spur the final push in ABF and shares took off on strong volume. As one of the "cyclical" style stocks that Bailey talks about in his wrap this weekend we think ABF will continue to attract investor support so bulls probably need to start looking for new entries if you've been waiting for the breakout. Picked on February 11th at $16.05 Gain since picked: +0.57 Earnings Date 02/01/02 (confirmed) --- Rockwell Collins - COL - close: 23.00 change: +0.96 stop: 20.49 Bullish attention to the defensive sector didn't let up on Friday. Actually, the whole group got a big lift higher when Northrop Gruman (NOC) made a bid for TRW, who has a sizeable defense-oriented unit. Shares of COL benefited from the attention as investors began to speculate about further consolidation in the industry. We are encouraged that shares closed at the $23 level, which is current resistance from the late January high. Even more encouraging was the very strong volume of almost one million shares fueling the 4.3% move on Friday. I know that Jeff mentioned his theory about a new issue breakout over the offering price. If you didn't read the wrap this weekend I would encourage you to check it out. Anyway, if COL can make it to the $24 mark it would be a new all-time high for the stock and shares should not have any overhead supply to weight it down. Thus any advances could be exaggerated to the upside. Of course it never hurts to play defensive stocks when the threat of war looms so near with strong words from the White House against Iraq. Shares look good from here but it would hurt to consider a dip back to $22 as a potential entry either. Picked on February 15th at $22.50 Gain since picked: +0.50 Earnings Date 04/17/02 (unconfirmed) --- Forest Labs - FRX - close: 79.28 change: -0.89 stop: 77.49 The DRG.X drug index posted another strong day and it looks like it is about to break out to the upside over current resistance at $385. However, if it does, it will have to overcome another hurdle with its 200-dma residing near the $390 level. Drug stocks helping lead the sector higher are JNJ and ABT, which both look attractive if they breakout over their own resistance levels. In contrast, shares of FRX are not looking so hot. It would appear that investors are still worried about the bad news the company announced with its latest ML-3000 tests this last Wednesday. The moves we saw on Wednesday and Thursday could have just been a bounce from the sharp drop on Tuesday. Personally, I would probably be very cautious about any positions in FRX and would not look to be adding to it at this time. With other, stronger candidates for our money it doesn't hurt to wait and see if FRX will bounce again at $78 or breakdown under development worries and drug delays. Look for JNJ and ABT on the watch list this weekend. Picked on February 15th at $82.58 Gain since picked: -3.30 Earnings Date 04/16/02 (unconfirmed) --- H R Block - HRB - close: 48.73 chg: -0.27 stop: 47.01 *new* We mentioned in the Thursday update that HRB might slip back to the $48 level before moving higher and it looks like the dip to $48.25 on Friday may be as close at it gets. The stock begin to trade higher again into the close and with earnings expected this Wednesday there may be some pre-earnings excitement for the stock. We still have not yet decided if we're willing to take the extra risk and hold over the earnings report after the bell on Wednesday. The safer play would be to close the position ahead of the report and we're leaning that direction now. Considering that the stock really hasn't moved as much as we'd expected it would not hurt to move your stop up to just under $48 to protect at least a small gain. We're going to move our stop to breakeven at $47.01 just to protect our capital from any surprises. Picked on February 5th at $47.01 Gain since picked: +1.70 Earnings Date 02/27/02 (confirmed) -------------------- Bearish Play Updates -------------------- Citigroup Inc - C - close: 42.40 change: -0.40 stop: 45.05 As the confidence crisis continues on Wall Street investors are choosing not to hold on to banking giant Citigroup in hopes of avoiding any further exposure the company hasn't told us about yet. The financial behemoth is already suffering from its exposure to the Argentina melt-down and now as the Enron microscope begins to broaden its scope Citigroup could be next to face government scrutiny. We already knew that a list of who's who in the banking group had been part of the shady LJM partnerships in which Enron did a lot of the off-balance-sheet transactions. JPM and Citigroup were both part of the LJM deal. This week J.P. Morgan has come under the gun for its offshore entity called Mahonia, which traded oil and gas with Enron. Well, at least they said they traded oil and gas. According to the press, JPM never received any fuel for its money and insurers are claiming those "trades" should be relabeled as loans. Currently, JPM is going to court with its insurers over these deals. It would not take very much for Wall Street and the government to swivel or widen its focus to include Citigroup as they continue to ferret out every Enron rabbit hole. Shares of C fell almost one percent on Friday while its banking compatriot JPM fell to three year lows from its negative attention. Right now the trend is down and volume is picking up steam again for Citigroup. Picked on February 21st at $42.80 Gain since picked: +0.40 Earnings Date 01/17/02 (confirmed) --- Lehman Brothers - LEH - cls: 55.44 chg: -0.41 stop: 58.03 *new* Yet another analyst has scaled back their earnings expectations for the brokerage industry and this was the likely culprit for LEH's early morning weakness. The stock fell to new relative lows of $53.59 before bouncing back above the $55 level. We glanced at the rest the sector and a lot of the big boys on Wall Street continue to look weak. This has us thinking that the XBD.X broker/dealer index could easily breakdown under the 450 support level in the next few sessions. The last couple of days have produced some interesting developments on the point-and- figure chart for LEH. The rebound back above the $58 level created a three-box pull back which has promptly been surpassed by a new column of O's and a new low. We are going to initiate an exit price of $50.25 so we'll be ready if shares spike down on any high-powered sell-off. We're counting on enough support at the $50 level to slow any further descent for several sessions. Secondly, we are going to lower our stop to breakeven at $58.03. Once LEH finally closes under the $55 level we'll lower our stop again. Picked on February 15th at $58.03 Gain since picked: +2.59 Earnings Date 12/20/01 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bearish Play Updates -------------------- Adelphia Communications - ADLAC - cls: 21.30 chg: +0.68 stop: *note* One might think that the last two days of strength we see in ADLAC might discourage us from our bearish perspective. Actually, we still subscribe to the trading strategy we submitted on Thursday. Shares may have rallied higher during Friday's session but failed to trade above Thursday's high or above the $22 level. It is this $21.50 to $22.00 level, bolstered by the 10-dma, that is acting as over head resistance. Volume has been declining the last two days which does not communicate conviction on part of the bulls. However, we will concede to the bulls that the MACD is about to turn positive, which may be a cautionary flag for less aggressive traders. If you look at the point-and- figure chart the picture is a little bit clearer. The bounce higher has produced a three-box pull back. The question traders are asking is "is it the start of a true rebound?" or "is it merely an oversold bounce so bears can do a little short covering and reposition for the next leg down?" Until shares trade above $22.00 we're going to play with the strategy that it's just a bounce. Aggressive traders can consider shorts here with a stop just above $22 but the newsletter is still going to wait for the move under $18.74 before we initiate a position. Picked on February Xth at $xx.xx <-- see trigger Change since picked: +0.00 Earnings Date 03/08/02 (unconfirmed) ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Weekend Edition 02-22-2002 Section 3 of 3 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/022202_3.asp ================================================================= In section three: Market Watch for Week of February 25th - Major Earnings - Stock Splits - Economic Reports 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) ================================================================= ================================================== Market Watch for the week of February 25th ================================================== ------------------------ Major Earnings This Week ------------------------ Symbol Company Date Comment EPS Est ------------------------- MONDAY ------------------------------- CPRT Copart Mon, Feb 25 After the Bell 0.14 TV Grupo Televisa, S.A. Mon, Feb 25 -----N/A----- 0.60 LOW Lowe`s Companies Mon, Feb 25 Before the Bell 0.25 MVSN Macrovision Mon, Feb 25 After the Bell 0.20 PRHC Province Healthcare Mon, Feb 25 After the Bell 0.30 SKYW SkyWest Mon, Feb 25 Before the Bell 0.20 WMC WMC Mon, Feb 25 -----N/A----- N/A ------------------------- TUESDAY ------------------------------ NDN 99 CENTS Only Tue, Feb 26 Before the Bell 0.31 AX Asia Glbl Crosing Ltd. Tue, Feb 26 After the Bell -0.28 AZO AutoZone Tue, Feb 26 After the Bell 0.49 BMO Bank Of Montreal Tue, Feb 26 -----N/A----- N/A BTI British Am Tobacco Tue, Feb 26 Before the Bell N/A BNL Bunzl PLC ADS Tue, Feb 26 -----N/A----- N/A CCU Clear Channel Comm Tue, Feb 26 After the Bell -0.45 EV Eaton Vance Tue, Feb 26 Before the Bell 0.47 FD Federated Dept Stores Tue, Feb 26 Before the Bell 1.86 HD Home Depot Tue, Feb 26 -----N/A----- 0.28 NBG National Bank Greece Tue, Feb 26 -----N/A----- N/A AHM Nycomed Amersham Tue, Feb 26 Before the Bell N/A ORLY O`Reilly Automotive Tue, Feb 26 After the Bell 0.30 OKE Oneok Tue, Feb 26 After the Bell 0.30 PLL Pall Tue, Feb 26 After the Bell 0.20 PDE Pride International Tue, Feb 26 After the Bell 0.09 PUK Prudential PLC Tue, Feb 26 -----N/A----- N/A RCI Renal Care Group Tue, Feb 26 After the Bell 0.40 SMTC Semtech Tue, Feb 26 After the Bell 0.11 TRLY Terra Lycos, S.A. Tue, Feb 26 -----N/A----- -0.05 TOL Toll Brothers Tue, Feb 26 Before the Bell 1.05 URI United Rentals Tue, Feb 26 -----N/A----- 0.33 WMI Waste Management Tue, Feb 26 -----N/A----- 0.25 ----------------------- WEDNESDAY ----------------------------- ASX Adv Semi Engineering Wed, Feb 27 -----N/A----- 0.05 BLI Big Lots, Inc. Wed, Feb 27 Before the Bell 0.49 CED Canadian Nat Resources Wed, Feb 27 -----N/A----- 0.30 SRV Service Corp Int Wed, Feb 27 After the Bell 0.04 TLD TDC Wed, Feb 27 Before the Bell N/A TEO Telecom Argentina STET Wed, Feb 27 After the Bell 0.11 TEM Telefonica Moviles Wed, Feb 27 -----N/A----- 0.04 TJX TJX Companies Wed, Feb 27 Before the Bell 0.56 TMBR Tom Brown Wed, Feb 27 After the Bell -0.01 ------------------------- THURSDAY ----------------------------- DISH Echostar Comm A Thu, Feb 28 Before the Bell -0.02 FIA Fiat SPA ADR Thu, Feb 28 -----N/A----- N/A NMGa NMGa Thu, Feb 28 Before the Bell 0.50 NOVL Novell Thu, Feb 28 After the Bell -0.01 PDLI Protein Design Thu, Feb 28 After the Bell -0.06 SHPGY Shire Pharm Group Thu, Feb 28 -----N/A----- 0.40 SYT Syngenta AG Thu, Feb 28 -----N/A----- N/A TGT Target Corporation Thu, Feb 28 -----N/A----- 0.72 TEF Telefonica, S.A. Thu, Feb 28 During the Market N/A IPG The Interpublic Group Thu, Feb 28 After the Bell 0.30 TIF Tiffany Co Thu, Feb 28 Before the Bell 0.56 ------------------------- FRIDAY ------------------------------- CCI Crown Castle Int Fri, Mar 01 Before the Bell -0.43 RANKY Rank Group Limited Fri, Mar 01 -----N/A----- N/A REP Repsol YPF, S.A. Fri, Mar 01 Before the Bell 0.21 ------------------------------- Upcoming Stock Splits In The Next Two Weeks... ------------------------------- Symbol Company Name Ratio Payable Executable CEBC Centennial Bank 21:20 02/22 02/25 ACS Affiliated Computer Svcs 2:1 02/22 02/25 FINB First India Corp 5:4 02/26 02/27 FBCI Fidelity Bancorp 3:2 02/28 03/01 CCBN Central Coast Bancorp 5:4 02/28 03/01 NJR New Jersey Resources 3:2 03/01 03/04 RMCF Rcky Mtn Chocolate Factry 4:3 03/04 03/05 TRR TRC Companies 3:2 03/05 03/06 GILD Gilead Sciences 2:1 03/07 03/08 -------------------------- Economic Reports This Week -------------------------- We have a full week of economic reports this week, which may help turn investor sentiment around. Although last week's positive reports did little to lift investor confidence. This week the Consumer confidence numbers on Tuesday, the GDP numbers for Q4 on Thursday, and the personal spending and income numbers on Friday will be in the spotlight. Monday, 02/25/02 ---------------- Existing Home Sales (DM) Jan Forecast: 5.20M Previous: 5.19M Tuesday, 02/26/02 ----------------- Consumer Confidence (DM) Feb Forecast: 98.0 Previous: 97.3 Wednesday, 02/27/02 ------------------- Durable Orders(BB) Jan Forecast: 1.0% Previous: 1.7% New Home Sales (DM) Jan Forecast: 925K Previous 946K Thursday, 02/28/02 ------------------ Initial Claims (BB) 02/23 Forecast: N/A Previous: N/A GDP-Prel. (BB) Q4 Forecast: 0.6% Previous: 0.2% Chain Deflator-Prel. (BB) Q4 Forecast: -0.3% Previous: -0.3% Chicago PMI (DM) Feb Forecast: 47.0 Precious: 45.1 Help Wanted Index (DM) Jan Forecast: N/A Previous: 46 Friday, 03/01/02 ---------------- Truck Sales (NA) Feb Forecast: N/A Previous: 7.1M Auto Sales (NA) Feb Forecast: N/A Previous: 5.3M Personal Spending (BM) Jan Forecast: 0.4% Previous: -0.2% Personal Income (BM) Jan Forecast: 0.1% Previous: 0.4% Mich Sentiment-Rev. (DM) Feb Forecast: 91.0 Previous: 90.9 ISM Index (DM) Feb Forecast: 51.0 Previous: 49.9 Construction Spending(DM)Jan Forecast: 0.1% Previous: 0.2% Definitions: DM= During the Market BB= Before the Bell AB= After the Bell ================== 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 CVX ChervonTexaco Corp 83.70 +1.59 COC Conoco Inc 27.32 +0.70 HAL Halliburton Co 16.49 +0.70 BR Burlington Resources Inc 37.05 +1.35 DVN Devon Energy Corp 42.40 +1.20 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change SKS Saks Holdings Inc 11.25 +1.53 DDS Dillard's Inc 18.70 +1.42 LPX Louisiana-Pacific Corp 9.25 +1.05 SNS The Steak N Shake 13.65 +1.10 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change XOM Exxon Mobil Corp 40.72 +1.57 BUD Anheuser-Busch Companies 50.01 +1.45 AZO Autozone Inc 70.01 +1.11 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change MDT Medtronic Inc 45.92 -1.45 GD General Dynamics 87.70 -4.47 GDT Guidant Corp 41.45 -4.70 BBY Best Buy Co Inc 67.61 -3.04 DOX Amdocs Ltd 28.80 -1.11 CDWC CDW Computer Centers 47.94 -2.38 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change MFC Manulife Financial 25.58 -0.91 MNY The Mony Group Inc 37.50 -0.65 CBL CBL & Assoc Properties 34.23 -0.78 ================================================================= 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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