PremierInvestor.net Newsletter Tuesday 03-05-2002 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/c05b_1.asp ================================================================= In section one: Market Wrap: Warning on earnings has tech under pressure. Market Sentiment: Taking a breather. ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 03-05-2002 High Low Volume Advance/Decline DJIA 10433.41 -153.41 10596.09 10425.05 1.53 bln 1586/1544 NASDAQ 1866.30 + 6.98 1886.15 1849.75 2.04 bln 1900/1689 S&P 100 581.95 - 4.57 588.64 581.40 Totals 3486/3233 S&P 500 1146.14 - 7.70 1157.74 1144.78 RUS 2000 487.59 - 0.41 490.95 486.08 DJ TRANS 2980.60 - 69.36 3050.30 2979.63 VIX 21.81 - 0.27 23.02 21.46 VXN 42.28 + 1.49 42.81 40.76 TRIN 1.33 PUT/CALL 0.71 ----------------------------------------------------------------- =========== Market Wrap =========== Warning on earnings has tech under pressure Stocks traded mixed today as the major market averages had trouble extending the recent two-day's gains. Only the broader NASDAQ Composite (COMPX) managed to put in an upside performance with a 7-point gain at 1,866 (+0.37%), while the Dow Industrials (INDU) gave back 153 points to 10,433 (-1.44%), the S&P 500 (SPX.X) edged down 7 points to 1,146 (-0.66%) and the smaller cap Russell 2000 Index (RUT.X) fell less that one point to 487 (-0.08%). Tonight's earning's warning from storage maker McData (NASDAQ:MCDT) $15.93 -12% has many hardware-related technology stocks under some pressure in after-hours trading and begins to paint a rather bleak picture for tomorrow's open. McData (MCDT) said it would have to lower its first-quarter 2002 forecast to a loss of 2 to 4-cents a share, which was lower than previous guidance given of break-even to 2-cent a share gain. MCDT also lowered guidance on revenues to a range of $73-$78 million from previous guidance of $85-$95 million. McData cited the continuing cautious approach to IT storage related infrastructure investment in the early months of 2002 as the reason for this quarter's revisions. Sector peers Emulex (NASDAQ:EMLX) $37.27 -1.92% saw its shares fall to $34.20 (-8.23%) in after-hours trading, QLogic (NASDAQ:QLGC) $47.73 +3.64% fell to $44.70 (-6.3%), Brocade (NASDAQ:BRCD) $26.31 -1.6%, declined to $23.85 (-9.3%) and Network Appliance (NASDAQ:NTAP) $21.74 +5.94% fell to $20.36 (-6.3%) after McData's warning. Back to reality It can be rather amazing how a nice two-day rally in some technology stocks can have "old bulls" coming out of the woodwork, but tonight earnings warning from McData (MCDT) seems like old news to many. Even our play list saw some success from the bearish side be quickly erased if disciplined stops weren't used over a two-day span as bears stepped up their short- covering. The risk for bulls in the technology space is what happens when some "bad news" hits the group and the short- covering comes to and end. It's still our thought, and somewhat confirmed by McData, that a true turnaround for many technology stock's bottom-lines won't be seen for several months. Of the stocks mentioned above, shares of Network Appliance (NTAP) look rather bullish, but I'd prefer a pullback to the $17.50 level for entry. Tonight's "bad news" from McData (MCDT) now becomes the news we test against. We will want to monitor the stock on any pullback, but if volume is lighter on the pullback than it was on the advance, then that sets up a rather handsome risk/reward trade to the upper band of retracement. Network Appliance Chart - Daily Interval The "current market environment" may well be identical to what traders found in late October of last year. The internals for the NASDAQ-100 as indicated by the NASDAQ-100 Bullish Percent ($BPNDX) were turning bullish, yet there was still some negative earnings announcements. At that time, shares of NTAP had made a strong move off the bottom, but pulled back from the $18.75 level on rather light volume into support at $14.90, then rocketed to the upper-end of retracement. If the economic data we're currently seeing is not just a reflection of inventory building, then we'll want to keep an eye on NTAP near-term. We will also monitor shares of McData (MCDT) near-term to see how bad the selling is over the next couple of sessions. If that stock can firm up near the $10 level and not break to new lows, then that would be a plus for NTAP and the storage networking stocks. Economic data still strong While the economic data continues to come in strong, many feel that much of the "good news" may have been factored into stocks near-term and for further bullishness to prevail, some of the employment data needs to start showing signs of recovery. Today's much stronger than expected ISM non-manufacturing reading of 58.7% was a strong showing at the consumer level, but the MARKET wanted to sell the strength of that number in the retailing stocks as depicted by the S&P Retail Index (RLX.X), which closed right on its upward trending 50-day moving average at 928 (-3.32%). Retail Index Chart - Daily Interval Today's "close at the lows" for the retailers doesn't bode well near-term. While the recent economic data at the manufacturing level has been more robust, the more consumer sensitive retail sector didn't fair well with today's more "consumer-related" ISM non-manufacturing report and market participants seemed rather eager to sell into the strength of that report. I'll be watching the still trending higher 50-day moving average tomorrow and any break of that could see a decline to the 900 level of retracement. On Thursday and Friday, the MARKET will get some jobs data to look at. Strong numbers and signs of a rebound in employment should bode well for the retail sector, and today's selling may simply be a squaring of positions and some profit taking ahead of those numbers to lock in some gains just in case the jobs data is weak. In recent market commentary, we've mentioned that the MARKET may question the stronger-than-expected economic data at the industrial level as a knee-jerk inventory re-building phenomena. One of Fed Chairman Alan Greenspan's concerns was if the consumer would continue to spend and drive demand for product. The employment data later this week will give some important insight into the potential strength of the consumer. Last week we profiled a bullish trade in shares of Costco Wholesale (NASDAQ:COST) when the stock was trading just above its longer-term 200-day moving average at $40.75 and since that time we were stopped out for a small loss and the stock did violate that key moving average on a closing basis today with a close at $39.04 -4.75%. This is bearish in my book. Shares of Home Depot (NYSE:HD) $47.50 -4.8% are sitting just above its still trending higher 200-day MA of $46.92 and should this stock violated its 200-day MA, then we'll get more concerned on this sector. Both Goldman Sachs and UBS Warburg downgraded building products retailers Home Depot (HD) and Lowes (NYSE:LOW) $41.65 -3.81% today, both feeling that there was little that either company could do on the earnings front to surprise the market on the upside for earnings. Maybe UBS Warburg likes the "earnings surprises" that McData (MCDT) had for investors tonight? I'll monitor some of the retailing stocks near-term. It's still one of the sectors that has had "more predictable" earnings of late. There may be some downside near-term, but I don't think big money is going to just abandon the group and throw money at every technology stock looking for a surprise. Vote "yes" for H-P/Compaq merger Late today, Institutional Shareholder Services (ISS) is telling investors to "vote yes" in regards to voting their shares on March 19th toward the Hewlett Packard (HWP) and Compaq (CPQ) merger scheduled for vote on March 19. The ISS advises more than 700 clients on how to vote on corporate-governance issues and tonight's decision by the ISS could swing 23% more of the votes toward the H-P/Compaq merger. While tonight's ISS decision has little impact on technology stocks, other than those in the personal computer/server space, Hewlett Packard (HWP) $20.06 +0.24% is a component of the Dow Industrials. In late-night trading, shares of HWP fell about 3% to $20, while shares of Compaq (CPQ) $10.58 -0.65% rose 5% in after-hours trading to $11.10. "We recommend that H-P shareholders vote for the H-P/Compaq combination," said the ISS. "While Mr. Hewlett makes a credible case that the risks associated with the transaction are real and material, we believe that management's upside scenario is achievable." Hewlett Packard (HWP) management has said that the merger will make HWP No. 1 in the personal computer market, the Linux and Unix server markets, and the high-end storage market. It is supposed to result in $2.5 billion in cost savings, add 13% to per-share earnings by 2003, and raise the value of HWP shares. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Taking a breather. by Russ Moore Not a big surprise on Wall Street today, as investors decided to take some profits off the table and give the markets a chance to catch their breath. The blue chips took most of the heat with the DOW dropping -1.4 percent while the NASDAQ escaped with a fractional gain of +0.4 percent. The big cap NDX added +0.3 percent. Volume was solid for the second day in a row with 1.53 billion shares trading on the big board and 2.04 billion on the tech index. Despite the negative action on the DOW, market breadth was actually positive. Winners edged losers by a 16/15 count on the big board and 19/17 on the NASDAQ. Chips and networkers provided the upside support for the NASDAQ while utility, brokerage and natural gas sectors were riding high on the broad markets. Today’s economic news added another nail to the bear’s coffin with the service sector component of the ISM coming in at a surprisingly strong 58.7 reading. In addition, planned job cuts fell 40 percent in February to the lowest level since June. The current bullish optimism will be short lived unless the corporate side can deliver the goods on the earnings/guidance front. Stock prices are ramping up on speculation, and that’s okay, provided we see some hard evidence that business’s are actually experiencing growth. Friday’s closing may turn out to be an important barometer of future market action. Market participants hoping the two steps forward, one step backward scenario is in play will be disappointed if the week ends on a sour note, and may decide this was just another head-fake. VIX Tuesday 03/05 close: 21.81 VXN Tuesday 03/05 close: 42.28 10-yr Bonds Tuesday 03/05 close: 5.01 Total Put/Call Ratio: .71 Equity Option Put/Call Ratio: .57 Index Option Put/Call Ratio: 1.56 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 37.42 Volume/Open Interest Maximum calls: 40/126,839 Maximum puts : 37/133,461 Moving Averages 10 DMA 35 20 DMA 35 50 DMA 37 200 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: 581.95 Volume/Open Interest Maximum calls: 580/6,651 Maximum puts : 510/6,882 Moving Averages 10 DMA 565 20 DMA 561 50 DMA 573 200 DMA 590 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: 1146.14 Volume / Open Interest Maximum calls: 1100/47,888 Maximum puts : 1100/54,709 Moving Averages 10 DMA 1113 20 DMA 1106 50 DMA 1126 200 DMA 1151 Fibanocci Retracements Relative High: 1176.97 (01/07/02) Relative Low: 1077.78 (02/06/02) 38% 1115.67 50% 1127.37 62% 1139.27 == DJIA (INDU) 52-Week High: 11,518.83 52-Week Low: 8,235.81 Current close: 10,433.41 Volume / Open Interest Maximum Calls: 100/18,283 Maximum Puts 96/41,494 Moving Averages: 10 DMA 10,162 20 DMA 9,986 50 DMA 9,963 200 DMA 10,030 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: 487.31 Volume / Open Interest Maximum Calls: 520/953 Maximum Puts: 520/931 Moving Averages 10 DMA 487 20 DMA 489 50 DMA 523 200 DMA 541 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: 613.90 Volume / Open Interest Maximum Calls: 550/1,176 Maximum Puts: 500/1,581 Moving Averages 10 DMA 545 20 DMA 545 50 DMA 545 200 DMA 545 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: 384.12 Volume / Open Interest Maximum Calls: 400/550 Maximum Puts: 380/800 Moving Averages 10 DMA 384 20 DMA 380 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, 03/01. Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts on the Chicago Board Of Trade. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs are not. Extreme divergence between each signals a possible market turn in favor of the commercial trader’s direction. S&P 500 Commercials Long Short Net %Change 02/12/02 355,276 412,868 (57,592) 6.6% 02/19/02 355,905 772,569 (60,759) 5.5% 02/26/02 366,258 432,258 (66,000) 9.0% Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: (41,144) - 5/1/01 Small Traders Long Short Net %Change 02/12/02 126,730 59,902 66,828 4.7% 02/19/02 130,856 63,311 67,545 1.1% 02/26/02 139,183 62,087 77,096 14.1% 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 02/12/02 32,712 34,841 (2,129) (30.1%) 02/19/02 33,871 35,690 (1,819) (14.6%) 02/26/02 33,589 34,091 (502) (72.0%) 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 02/12/02 9,009 7,415 1,594 (29.0%) 02/19/02 9,966 8,073 1,893 18.8% 02/26/02 9,517 11,416 (1,899) 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 02/12/02 26,811 16,488 10,323 5.3% 02/19/02 29,606 17,953 11,653 12.9% 02/26/02 33,322 21,110 12,212 4.8% 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 02/12/02 4,562 10,038 (5,476) 15.0% 02/19/02 4,654 10,431 (5,777) 5.5% 02/26/02 6,333 12,547 (6,214) 7.5% 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 +77,096 +67,545 -66,000 -60,759 Total Open Interest % (+38.30%) (+34.79%) (-8.26%) (-7.86%) net-long net-long net-short net-short Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -6,214 -5,777 +12,212 +11,653 Total Open interest % (-32.91%) (-38.29) (+22.43%) (+24.50) net-short net-short net-long net-long Small Spec Commercials NASDAQ 100 (Current) (Previous) (Current) (Previous) Open Interest Net Value -1,899 +1,893 -502 -1,819 Total Open Interest % (-9.07%) (+10.49%) (-.74%) (-2.61%) net-short net-long net-short net-short What COT Data Tells Us ---------------------- Indices:.Commercials and Small Specs were moving in opposite directions this week as the big players added to their net-short positions while the Small Specs increased their long exposure. With bullish economic data becoming more prevalent, it’ll be interesting to follow Commercial activity over the coming weeks. If we don’t see some commitment from these players I would be extremely suspect of a sustained rally taking place. Gold:.. 02/05 58,180 contracts net-short 02/12 62,223 contracts net-short 02/19 60,054 contracts net-short 02/26 56,409 contracts net-short Data compiled as of Tuesday 02/26 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. 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PremierInvestor.net Newsletter Tuesday 03-05-2002 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/c05b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: BBH Stock Bottom / Active Trader Bullish Play Updates: APA, CNF, COL, DOL, USFC Closed Bullish Play: IBI, ZLC High Risk / High Reward Bullish Play Updates: CTX Closed Bullish Plays: AMZN Split Trader - none - Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================= Net Bulls (NB) section ================================================================== =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Biotech HOLDRs - BBH - close: 120.22 chg: -2.23 stop: 114.00 While many tech sectors saw enormous rallies on Monday, the biotechs were somewhat tepid. The BTK.X biotech index did show a decent gain but was unable to crack stubborn resistance at 500. Today, the largest components of the BBH all saw the same orderly selling that was the theme for the day across the broader market: some of the leaders in the group AMGN -1.56%, BGEN -1.20%, DNA -0.60%, and IDPH -2.70%. The BBH continues to have trouble with resistance near $123, a level that has frustrated bulls for almost two months. With the 200-dma also overhead at 124.65 traders may instead want to target dips to the $118 or $115 level when considering new positions. The last two or three weeks have allowed nimble investors the chance to play the trading range on the BBH without much variance. Until these holders move through the top or bottom of the range there is no reason to do otherwise. Picked on February 20th at $120.00 Gain since picked: +0.22 Earnings Date N/A ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Apache Corp - APA - close: 53.88 change: -0.12 stop: 49.95 The oil group followed the broader market higher on Monday, pushing the OIX.X oil index above resistance at 313. The price of oil also continued higher in anticipation of the OPEC meeting next week and closed at $23.35/barrel, just above the 200-dma. APA mirrored the Dow Jones by trading to new near-term highs on Monday, and then fell back slightly today on decreased volume. With the $55 resistance level looming overhead and the market digesting a huge move, traders may want to target dips to $52 before initiating new long positions. If oil stocks continue to be strong and APA resumes its journey higher some traders may want to wait for a close above $55 to confirm a break over resistance. FYI, we noticed that intraday today the $54 level was tough resistance for APA but volume was not that significant overall. If we don't get a dip to $52, consider a dip to its 10- dma at $52.50 as a potential entry point. Picked on February 22nd at $51.57 Gain since picked: +2.31 Earnings Date 01/31/02 (confirmed) --- CNF Inc. - CNF - close: 33.12 change: -0.43 stop: 31.94 The Dow Transports (TRAN) had a stellar run over the past two weeks and were definitely overdue for a breather. Yesterday’s close over 3000 was a positive development, but the temptation for profit-taking was just too much and the index lost 2.27% or almost 70 points to close at 2980. CNF actually outperformed the TRAN, and only shed 1.28%. This relative strength bodes well for our play, and if bullishness returns to the group tomorrow we’d be looking for shares to move over recent highs at $33.95. If the selling continues, investors could take a low-risk position if CNF bounces from the 50-dma at $32.21, which is just above our stop at $31.94. Short-term traders may actually want to consider taking profits since our original profit targets were resistance at $34 and then a move to $36. Premier is currently up 8.9% in CNF. Picked on February 22nd at $30.41 Gain since picked: +2.71 Earnings Date 01/28/02 (confirmed) --- Rockwell Collins - COL - close: 23.06 change: -0.47 stop: 20.49 Defense stocks took a break today to consolidate some of their recent gains. HON, LMT, and GD all suffered some profit-taking, and COL traded in a similar fashion as it lost 2% on very light volume of 284K versus the 525K average. The lack of bearish conviction is encouraging, but we're going to need to see some serious sector strength to move COL above its all-time high of $23.88. We think the more likely scenario would be for shares to pull back some more before attempting to crack that level, and would look for a dip to $22.50 to offer a possible entry. Picked on February 15th at $22.50 Gain since picked: +0.56 Earnings Date 04/17/02 (unconfirmed) --- Dole Food CO. - DOL - close: 30.55 change: -0.65 stop: 28.49 In Friday’s write-up for this play we discussed the likelihood of DOL pulling back to consolidate some of that day’s 5% gains. That’s exactly what happened today, as shares dropped from Monday’s highs of $31.46 until finding support near $30.50. We think this small move down is a positive development for our play, especially considering that it took place on very light volume of 175K versus the average of 298K. Now that we’ve gotten the pullback we were looking for, entries can be evaluated if DOL bounces from $30.00-$30.50. However, be sure to keep an eye on the broader market to confirm bullish sentiment before opening new positions. We would probably turn cautious if DOL actually traded under the $30 level again. Picked on March 1st at $30.94 Gain since picked: -0.39 Earnings Date 01/31/02 (confirmed) --- USFreightways - USFC - close: 38.35 change: -0.60 stop: 36.49 As mentioned above, transportation-related issues saw some selling today and USFC was no exception. Shares fell from recent highs of $39.20 and closed exactly at Monday's low of $38.35. We're encouraged by both its relative strength versus the Down Transports (TRAN) and the way it seems to have found near-term support at current levels. As was the case last week, new economic data that indicates an economic upturn could power the transports higher. The schedule for economic reports this week is relatively light, but the Jobless Claims release on Thursday and Non-Farm Payrolls on Friday are potential market-moving numbers. Renewed bullishness in the sector could push USFC above $39.20, making way for a move to $40. On the other hand, if the selling continues from current levels, we'd consider new positions if USFC bounces from former resistance at $37. Please note that our stop was moved up last night, due to the fact that our play was triggered at a higher level than we had anticipated. Traders should not be surprised if USFC trades down to the $37.85 level to fill the gap created on Monday's open. A bounce there would not be a bad entry either, of course a dip to $37 would allow for a smaller amount of capital at risk with our stop at $36.49. Picked on March 4th at $39.01 Gain since picked: -0.66 Earnings Date 01/30/02 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Intimate Brands - IBI - close: 19.10 change: -0.85 stop: 18.89 We were looking for IBI to continue its move over resistance at $20, but the market had other plans. The first signs of trouble appeared yesterday, when the retail index (RLX.X) only managed a small half-percent gain on a day when the Dow rallied 217 points. IBI closed under $20, which apparently scared the bulls away. Shares were weak from the get-go this morning, and sold off until finding support just under our stop of $18.89. We were also looking for a move higher in parent company LTD, which has been trading in tandem with IBI. Shares of that retailer saw a similar selloff from its own resistance at $19 but settled near its 30-dma for a 4.87% loss. The major catalyst in the retail sector today was a number of downgrades by Credit Suisse First Boston. CSFB claims that higher valuations and slowing earnings growth may make retailers a group to avoid at these levels. Some of the stocks mentioned were ANF, BBBY, FDO, JCP and ZLC, which leads us to our next closed play. Picked on March 1st at $20.17 Gain since picked: -1.28 Earnings Date 02/28/02 (confirmed) --- Zale Cp - ZLC - close: 42.21 change: -2.78 stop: 42.89 Well, this one didn’t turn out like we hoped. Although it appeared that yesterday’s close just under $45 was a precursor to a move over that level, shares gapped down slightly this morning and sold off sharply until finally bouncing near $42. This high- volume move violated our stop at $42.89, but fortunately our trigger at $45.05 wasn’t hit and we never entered the play. The purpose of this trigger was to confirm bullish conviction and avoid a sell-off such as the one that occurred this morning. ZLC has almost doubled since September, and some profit-taking at this point certainly isn’t surprising. The cause of the profit taking for Zales was a downgrade from CSFB prior to the open. CSFB's retail analyst hit several stocks with a downgrade, many were moved from buy to hold but Zales was demoted from a "strong buy" to a "buy". The analyst actually had positive things to say about the company but cited valuation concerns for the rating adjustment. A Reuters article made an interesting observation: ZLC is trading at a forward P/E ratio of 12.8 compared with a P/E of 8.0 in November of 2000. They also noted that ZLC trades at a 46% discount to the S&P 500 currently up from a 66% discount back in Nov. 2000. Near-term we’d look for $42 to continue to offer support, but with the RLX.X retail index looking weak after dropping 3.3% today, a move back to $40 isn’t out of the question. Take note that the RLX has fallen to its 50-dma, which has been support recently and a breakdown below it would be pretty negative. Picked on March xth at $xx.xx <- See text Gain since picked: N/A Earnings Date May /02 (unconfirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Centex Corp - CTX - close: 59.90 change: -1.42 stop: 57.39 We were hoping to see CTX continue to rise after breaking through resistance at $60, but shares fell back below that level after traders decided to take some money off the table today. Considering that CTX has risen sharply in the past week, some profit taking is to be expected. Its homebuilding counterparts traded in a similar fashion: BZH, DHI, PHM, and TOL all saw some selling today. We're not too thrilled with the close below $60, but with this level already broken once, shares shouldn't have a difficult time bouncing back. Traders targeting new bullish positions may want to wait for CTX to close back above the $60 level. However, we wouldn't be surprised to see another day of selling in the group. If this turns out to be the case a bounce from Friday's high of $59 could provide a favorable entry point. If the stock really pulls back then shares could dip to the $58 level, which should be decent support. Picked on March 4th at $61.32 Gain since picked: -1.42 Earnings Date 01/23/02 (confirmed) =============== HR Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Amazon.com - AMZN - close: 15.97 change: -0.51 stop: 15.84 AMZN has performed quite nicely since we picked it last week but alas, all good things must come to an end. Nimble traders may have been able to exit on strength this morning when the stock bounced from $15.90 to almost $16.70, but shares quickly topped out at $16.68 and sold off again until bouncing just under our stop, which we raised last night in order to protect recent gains. This took us out of our play at $15.84 for a 10% move. The Internet index (IIX.X) added about 15% during the last two sessions, which helped fueled the move in AMZN. At this point, it appears some consolidation may be in order before the Internet index and the Nasdaq can continue heading higher. We would not be surprised to see AMZN consolidate near the $14.75 to $15.00 levels but bulls should be cautious while the broader market pulls back a bit. Of course the BIG news for AMZN came after the bell when news hit Wall Street that CFO Warren Jenson would be leaving the .com firm. AMZN immediately began to trade lower in after hours while investors and analysts scurried to find out if there were any underlying reasons for his departure they needed to know about. Jenson didn't offer much reason for his resignation, which will take place later this year. He did say that he was brought on board to bring AMZN to profitability and now that this has been accomplished it's time he moved on. Picked on February 26th at $14.40 Gain since picked: +1.44 Earnings Date 12/13/01 (unconfirmed) ================== 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 WMB Williams Companies Inc 19.10 +2.49 DYN Dynegy Inc 29.40 +0.67 MTG M G I C Investments 69.56 +0.53 CVC Cablevision Systems 37.74 +0.99 PMI The PMI Group Inc 73.37 +0.76 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change ISLE Isle of Capris Casinos 19.40 +1.50 NTBK Net.B@nk Inc 15.97 +1.14 RBMG Resource Bancshares 18.00 +1.20 SYXI IXYS Corp 11.45 +1.15 ORB Orbital Sciences Corp 8.08 +1.29 SWTX Southwall Technologies 10.50 +2.38 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change FOX Fox Entertainment Group 24.71 +1.55 LLTC Linear Technology Corp 46.15 +1.70 AFL Aflac Inc 28.17 +1.62 SDS Sungard Data Systems 34.65 +1.35 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change TGT Target Corp 41.50 -1.90 COST Costco Wholesale 39.04 -1.95 MCK McKesson Corp 30.81 -1.38 ODSY Odyssey Healthcare Inc 26.64 -2.16 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change WMT Wal-Mart Corp 60.76 -2.22 SCHS School Specialty Inc 26.98 -0.82 SAFM Sanderson Farms Inc 22.00 -2.31 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. 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