PremierInvestor.net Newsletter Thursday 03-07-2002 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/c07b_1.asp ================================================================= In section one: Market Wrap: Things are starting to change. Market Sentiment: Cautious day on Wall Street. Play-of-the-Day: Riding the transports. ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 03-07-2002 High Low Volume Advance/Decline DJIA 10525.37 - 48.92 10606.88 10468.64 1.51 bln 1597/1564 NASDAQ 1881.63 - 8.77 1910.70 1865.06 1.86 bln 1875/1666 S&P 100 586.88 - 3.33 592.73 582.76 Totals 3472/3227 S&P 500 1157.54 - 5.23 1167.94 1150.69 RUS 2000 494.92 + 0.12 497.29 493.64 DJ TRANS 3020.27 + 5.74 3042.46 3016.13 VIX 21.88 - 0.16 22.78 21.88 VXN 43.76 + 1.03 44.73 43.21 TRIN 1.19 PUT/CALL 0.65 ----------------------------------------------------------------- =========== Market Wrap =========== Things are starting to change Today's impressive selling in the Treasury markets now makes it imperative for traders and investors to understand and use some of the tools at your disposal. It will also be imperative for our play-pickers and me to be doing the same. The selling in the Treasury MARKET is a near-term sign that the MARKET is further beginning to find the perceived "safety" of Treasuries less attractive and will begin looking elsewhere to begin putting some money to work. However, long gone are the days like the late 1990's when investors shunned risk analysis and only looked toward reward. The MARKET is a different place today than it was a couple of years ago. The market environment is also different for bearish traders/investors that have recently been able to pick on stocks as they felt capital was limited as the bulk was stashed away in the perceived safety of Treasuries. Bears that were able to short strong stocks in a weaker market environment and find success simply due to a lack of cash flowing toward the stock market, may now find a different market environment beginning to develop. What can take place right now is some good old-fashioned rotation. Many of our "bullish percent" indicators are now at "overbought" levels and risk for bulls on a broader scale is high. The key to for near-term bullish entry is to try and envision some more aggressive amounts of rotation. For example. A stock like Dow component Boeing (NYSE:BA) $47.98 -3.77%. Boeing (BA) - $1 box I've put some hypothetical quotes on the above charts to try and envision what "smart money" may be thinking in regards to Boeing (NYSE:BA) $48.03 -3.67% after the stock traded $50 today. I was nowhere "smart enough" to pick the bottom in shares of BA at $30, but may have been smart enough to buy some renewed strength at the "triple-top" at $38. "Smart money" undoubtedly bought the stock at $30, and like most smart institutions may have added to their positions in the mid-to-high 30's and that demand created the nice triple-top buy signal back in December (red C). Is Boeing (BA) the only game in town? Maybe its time to pay back our mutual fund shareholders with a nice little gain near $50 and look for another stocks that is going to offer some favorable upside and less downside risk. Diversify the holdings a bit, be smart, and take some profit off the table. After all, the Dow Industrials Bullish % ($BPINDU) is back near overbought levels and it might be wise to just turn into an "accumulator" of stock right now and begin drying out some powder. For you and I Most of us don't have the luxury of calling up the trading desk and telling the trader to "work me 500,000 shares at $29-$31 today." However, that doesn't mean we can't try and get inside the heads of some institutional traders/investors and try and see what they may have done, and then try and lay out a scenario for what they might be getting ready to do. If you had a 750,000 share position in BA with a cost basis of $32.67, what might you be doing at current levels. What's your upside potential reward, and what's your downside risk. Are there any other stocks in your universe that may offer a more favorable risk/reward? It's never certain what upside or downside remains in a stock, but if we think big (even though we may trade just 50 or 100 shares) then we put ourselves in the shoes of big money. Too often an individual will look at a bullish 50-share position in BA at $38 and say "at $48, I've only made $500." If you "think big" and say "from $38, I've got 250,000 shares and have profit of $2.5 million," then your thinking may change a bit as it relates to risk/reward. Competition Now bring in the "competition" factor that may indeed come from the cash coming out of the Treasury market. Some of this cash may have been hiding out in the bond market for the last 18- months or even longer. Where's it going to go? Will "smart money" go after a stock like BA that has jumped nearly 31% since giving a triple-top buy signal? Or will it look elsewhere in other stocks giving triple-tops, bullish triangles or bearish signals reversed where risk/reward is more easily defined or at least controlled with a stop that makes some type of technical sense. Just remember, it's a different market environment than that found in the late 1990's, and may well be a different market environment than that found in the past 2-years. We'll need to think both sides of the trade The playing field is now leveling out. The past couple of weeks we discussed that some of the economic reports were signaling strength, but some of the "accounting worries" most likely had bulls sitting on the pocketbook and just too uncertain and unwilling to pull the trigger. On the other side of things, we did warn bears that they couldn't get complacent and thing the pullback in stocks was taking place solely on economic growth uncertainty, but also in play was the lack of buyers in the market due to the accounting concerns. While I might argue that the "playing field" looks to be shifting to the bullish side as far as "accounting concerns" abating and economic data still showing some strength. But today's address by Mr. Greenspan and more bullish tone on an economic recovery underway didn't help a bear that had been shorting stocks with abandon on the thought that the economy was going in the tank. While accounting concerns somewhat abating (there will be those that argue we're nowhere close to the end of the accounting concerns) and a strengthening economic backdrop (there will be those that argue we're nowhere close to a recovering economy) has found the broader markets bullish, we are now at higher levels of bullish percent data, and with it comes risk. Our Strategy What I will be doing is thinking the following in each trade. 1) Who's got the profits and what are they looking to do? 2) Who's got the losses and what are they looking to do? I/you must put ourselves "into the trade" and set a disciplined course of action that includes a disciplined stop. One where we will enter the trade based on a technical entry point, where we feel that demand (for a bullish trade) will suddenly "turn" even more bullish and won't get pushed back down our throats by somebody with a large and profitable position that is looking to sell strength. Bullish trades must have some type of bullish vertical count associated with the trade that is bullish enough to keep the bears off our backs and actually get them to capitulate and run for cover as the stock breaks higher against them. For bearish trades, we will try and use the "overbought" nature of the bullish percent charts that tells us that market risk is running higher for the bulls. To find success, we've got to identify weak stocks (weak relative strength) that are giving some sell signals on their point/figure charts and have some bearish vertical counts that would have even the bullish of bulls questioning his/her holdings. A bull that's been holding a stock for 2-months and has seen his holding decline 20%, then rally back to break-even, and at the same time seeing a stock like Caterpillar (NYSE:CAT) jump from $52 to $58 in a seemingly "easy money" trade, becomes an eager seller of his/her holdings on any type of weakness. One of our strategies will have to include the scenario of rotation that includes stock-to-stock rotation. I think that stock-to-stock rotation will begin to pick up, instead of the "stock-to-bond" rotation that may have been more the norm in recent months. With cash really starting to come out of the Treasury market, there is now some competition for stocks. Mutual fund inflows are also rather robust in recent weeks, so fund managers may have some major amounts of capital to be putting to work. According to TrimTabs.com, mutual funds saw a $3.2 billion net inflow of cash into all equity mutual funds. While robust, these inflows were down from the prior week's $8.6 billion inflows. We'll remember our conversation from last week, that March marks the end of the first quarter for many mutual fund reporting periods. These mutual funds will want to dress up their portfolios in the coming weeks and most likely adding to their "favorites" that have been treating them well. The most "logical" entry points will be on pullbacks, but there is an emphasis to get the money invested. What I don't like I would be lying to each and every subscriber if I told you I "loved this market" for bullish trades. I can't say that, and I won't say that. The bullish percent data tells me that we're are at an overbought level. You know it, I know it, the bulls know it and the bears know it. But this is where the market technician, or technical analyst can attempt to stack some odds in his/her favor. Take last night's commentary as an example. Imagine you're a mutual fund manager and you've got about $300 million sitting in cash that you HAVE to put to work. Where are you going to put it? Can you sit an wait on a pullback in Caterpillar (NYSE:CAT) to $52? Or do you play the recovering economic scenario and put it to work in a stock like General Electric (NYSE:GE). I don't want to beat you over the head with GE, but since we talked about it last night and you've got some background on other thought, then lets talk about the "getting it shoved back down our throats" on profit taking. I will argue (from the institutional perspective) that there aren't many profits that can be shoved back down our throats in General Electric (GE), but there may be plenty of bears that are short the stock as the "bellwether" with global economic exposure that has been easy pickings on every rally to $42. General Electric Chart - $1 box General Electric (GE) has perhaps been the "favorite" short of bears that have been bearish on the economy, both here and on a more global view. Recent action in the currency markets hints that money is rotating back to Japan, money that may well be invested there as signs of economic recovery are starting to present themselves. But not all of the money is going into Asian stocks, some will most likely be put to work in US-based stocks, even if the bullish percent charts are overbought. One trading scenario that I like about GE if the stock trades $42, is that it provides a decision point by bearish traders that have been shorting the stock on every rally to $41.99 or lower on their true conviction of lingering recession. The $42 level in my mind is a clear and distinct level that a bear would look to cover his/her position. At that point, the bullish vertical count would become $57 and it could grow should the column of X continue higher. I've added the "volume" bars on the bottom of the chart to try and get a feel for where "profits" are from bulls that have been buying the stock. If I bought 3.9 million shares from $30-39 and have waited since October for the stock to break above $42 and see what happens on the triple-top, am I going to sell once I get the trade at $42? I'm thinking... "You've come this far, wait it out and see what happens." I've also marked a point on the chart as "shake-out." This is a pattern we've seen recently. In fact, we may have gotten caught in a similar pattern in a recently profiled bearish play in shares of Microsoft (MSFT) when that stock traded $58 and gave a "sell signal." But here are a couple of other charts that show similar action in the past that show up in the chart of GE. Take one of our bullish plays in Apache Corp. (NYSE:APA). Apache Corp. Chart - $1 box I think we talked about the potential for a shake-out to take place in shares of Apache (APA) before it happened. I've marked what certainly looks to have been a shake-out or bear trap on the stock that came just above bullish support trend. Volume was light and you get the distinct feel that the specialist pulled a little trick on "weak bulls" and even some "bears" to take the bait. Ideally, a bullish trader waiting for a buy signal would have taken the stock long at $50. We played it a little safer and waited for the stock to break to a new relative high and clearly away from the base at $51.57. "Better late than never!" Now we have the task of protecting a nice gain. (see play update). A classic? Go back up to the first chart and that of Boeing (NYSE:BA). See that little "dip" at $32 in November (red B), then the quick reversal back higher and the "triple-top buy signal" at $38? Shake, rattle and roll! We love the bears! Bears! Don't fret. We talked about a potential short in shares of Adelphia Communications (NASDAQ:ADLAC) back in February and set up a trade with a trigger for a break lower, but the stock didn't cooperate. Since that time, the stock has rallied back to the $24.44 level (up 30% from the lows) and with the bullish % data at "overbought" levels, it may be prime-time for some nervous bulls that bought the stock in early January near $26 (looking for a January rally that never came) and watched the stock get crushed to $19 look for the doors. Adelphia Communications Chart - Daily Interval It's decision time for that BIG volume spike from $27.20 to $25.27. The stock has rallied back to levels near that volume spike and a decision has to be made. We're looking at the point and figure chart with a bearish vertical count of $4. Given the current risk/reward setup, a bear may be willing to risk a couple of bucks and use the rolling 50-day moving average and 50% retracement as leverage to cast doubt in a bulls mind. If the stock is truly headed to $4 then this looks like a good trade for the bears. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Cautious day on Wall Street. by Russ Moore Friday’s employment data coupled with two mid-quarter earnings reports from Intel and Sun Microsystems put investors in a cautious mood, and the markets in the red. The after hours reports were released a short time ago and came in pretty much as expected. The news has had little impact on stock price to this point. Mr. Greenspan was in the spotlight once again, and this time he actually used the word expansion. The Fed chief has apparently grown more optimistic after the release of the last few economic goodies. The major indices were underwater most of the day with the DOW sinking a little further than the tech index. The last hour of trading saw the markets stage a mild recovery attempt leaving the boards red, but with only fractional losses. The DOW and NASDAQ dropped -0.5 percent respectively while the NDX shed -0.8 percent. Volume remained steady with 1.50 billion shares moving on the big board and 1.89 billion on the NASDAQ. Market breadth ended in a draw. Natural gas and retailers enjoyed strong gains while the gold and Internet sectors hit the skids. All eyes will be on tomorrow’s employment numbers with investors looking for signs of stabilization. The jobless rate is expected to show a slight increase, and that will probably be handled well by investors. What the bulls are hoping to avoid is another major shocker. Today’s initial claims numbers would seem to indicate that’s unlikely to happen. VIX Thursday 03/07 close: 21.88 VXN Thursday 03/07 close: 43.76 10-yr Bonds Thursday 03/07 close: 5.21 Total Put/Call Ratio: .65 Equity Option Put/Call Ratio: .57 Index Option Put/Call Ratio: 1.16 === NASDAQ 100 Index (NDX/QQQ) 52-Week High: 103.51 52-Week Low: 28.19 Current close: 37.68 Volume/Open Interest Maximum calls: 40/127,022 Maximum puts : 37/137,851 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: 586.88 Volume/Open Interest Maximum calls: 580/6,140 Maximum puts : 550/7,274 Moving Averages 10 DMA 572 20 DMA 565 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: 1157.54 Volume / Open Interest Maximum calls: 1100/47,814 Maximum puts : 1100/55,196 Moving Averages 10 DMA 1127 20 DMA 1113 50 DMA 1127 200 DMA 1150 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: 10,525.37 Volume / Open Interest Maximum Calls: 100/18,258 Maximum Puts 96/41,550 Moving Averages: 10 DMA 10,295 20 DMA 10,074 50 DMA 9,984 200 DMA 10,026 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: 506.59 Volume / Open Interest Maximum Calls: 520/953 Maximum Puts: 520/941 Moving Averages 10 DMA 491 20 DMA 493 50 DMA 521 200 DMA 540 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: 611.01 Volume / Open Interest Maximum Calls: 550/1,109 Maximum Puts: 500/1,584 Moving Averages 10 DMA 562 20 DMA 552 50 DMA 549 200 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: 387.12 Volume / Open Interest Maximum Calls: 400/550 Maximum Puts: 380/800 Moving Averages 10 DMA 386 20 DMA 381 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. =============== Play of the Day =============== USFreightways - USFC - close: 38.45 change: +0.26 stop: 36.49 Company Description: USFreightways provides comprehensive supply chain management services, including high-value next-day, regional and national less-than-truckload (LTL) transportation, logistics, domestic and international freight forwarding and premium regional and national truckload transportation. (source: company press release) - ORIGINAL WRITE UP: March 1st, 2002 - Why We Like It: Its no secret that we’ve been bullish on the transport sector and the Dow Transports (TRAN) have been very strong. The recent move over resistance at 2800 certainly didn’t change our minds. With that index approaching 3000, we’re adding another freight company to our Play List. USFC added over 5% during Friday’s session, and closed above $37.25. This level had been resistance since last July, and with that obstacle now out of the way we think shares are headed to $40 or higher. The transports have been large contributors to the Dow's gains and if this pattern continues USFC could trade to the $43-$44 area. Our trigger for bullish entries is $38.26, one cent above the highs for 2001. Why are we using a trigger point? The point-and-figure chart shows USFC just created a triple-top breakout. However, the $37.00 to $38.00 level has been resistance so long that it would create another triple top buy signal if it trade above $38.00 and by waiting until it trades above the old high we have some measure of conviction by the bulls. Personally, it wouldn't hurt to look for a pull back to the $37.00 level and then jump in on the bounce but the stock has been looking for a breakout for so long, that there could be a ton of shorts (who have probably done well always shorting near $37.00) that may decide to cover when the stock moves over $38.00. Once we are triggered we'll start the play with a stop under Friday's lows at $35.95. - Most Recent Update: March 7th 2002 - Transports continued their drive higher on Thursday and took USFC along for the ride albeit bulls seem to be in first gear after the explosive moves earlier this week. The TRAN managed a 0.19% gain on a day when the Dow Jones lost 48 points, and USFC did a bit better with a 0.68% gain on moderate volume. We think the trading pattern over the past two days is promising: Shares pulled back from recent highs at $39.20 and twice bounced from $38. If the broader market resumes its bullish stance tomorrow the TRAN could attempt another breakout over near-term resistance at 3050. Keep an eye on this level, as a move over resistance could see USFC heading towards $40, while another failed rally at 3050 could be a signal to take some profits. Ultra-conservative traders could try and get away with a much tighter stop than we have listed but be prepared to be stopped out if the TRAN sees any profit taking back under the 3000 level. - Play-of-the-Day Comments: March 7th, 2002 - The Dow Transports (TRAN) have been consolidating over 3000 and could break resistance at 3050 if the market turns higher. In a similar fashion, USFC has been consolidating over the $38 level. Shares bounced from that level two times in as many days, indicating a willingness of the bulls to buy the dips. Additionally, today's gain of 0.68% outperformed both the Dow Jones and the TRAN. If the transports do manage to break resistance at 3050, we think USFC is in good shape to lead the move higher. Confirm stock and market direction before considering any new positions! Picked on March 4th at $39.01 Gain since picked: -0.66 Earnings Date 01/30/02 (confirmed) ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. 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PremierInvestor.net Newsletter Thursday 03-07-2002 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/c07b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: BBH, RIMM Stock Bottom / Active Trader New Bullish Play: GE Bullish Play Updates: APA, CNF, COL, DOL, USFC High Risk / High Reward New Bearish Play: ADLAC Bullish Play Updates: CTX 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: 122.75 chg: -2.20 stop: 114.00 Today's disaster du jour came courtesy of SEPR, who got slammed for a 58% loss after the FDA announced plans to reject their allergy relief medication Soltara over safety concerns. SEPR is a component of BBH (albeit a relatively small one), but the HOLDRS were still down 1.76% today. This vividly illustrates the advantage of using the HOLDRS to invest in the biotech sector in a sector where individual companies are prone to FDA-related news events that can violently move their stocks up or down. Another recent example that comes to mind is IMCL, whose shares doubled in less than a week after a meeting with the FDA. Previous to today's drama, we were very pleased with the way the BBH had broken over the $123-$124 resistance level on Wednesday: Shares closed at $124.95, a level not seen since mid-January. We also like how the biotechs held up today. The BTK.X biotech index managed to hold above 500 after crossing that resistance level yesterday and the BBH closed above recent support at $122. The negative sector news could blow over quickly. After all, the SEPR news was company-specific. If biotech bullishness returns tomorrow we'd look for a move back over $124 before considering new positions. Or if you're feeling more conservative, wait for the BBH to close above its 200-dma again (essentially $125). FYI, traders may want to look at a point-and-figure chart of the BBH. The HOLDR actually pierced its upside bearish resistance line after several failed attempts. Now we just need a little follow through by the bulls. Picked on February 20th at $120.00 Gain since picked: +2.75 Earnings Date N/A --- Research In Motion - RIMM - close: 27.94 change: +0.62 stop: 25.60 As we suspected might be the case, RIMM continued higher this morning after closing over resistance at $27. The way shares rapidly moved up without support from the broader tech market supports our theory that nervous shorts may be moving out of this stock. Although it pegged a high of 28.54, RIMM joined the NASDAQ in some afternoon selling and finished the day with a 2.26% gain. We're encouraged by the way shares closed above the $27 level again, and traders still looking for an entry point could target dips to $27.0-$27.5. Alternatively a move over today's high could open the door for a test of the next level of resistance at $30. Another clue bullish traders can look at, and what drew our attention to it in the first place, was the strength of the point-and-figure chart. Today's move over $28.00 added another X to the column and confirmed the bullish triangle breakout. As you know, the probabilities for a successful bullish trade are pretty attractive on this sort of pattern. Editor's note: if you think the stock looks a little short-term overbought then you're not alone. This isn't a trade for everyone and the stock could retrace some of its recent gains back (just above) the $25.00 level without much change on the on the p-n-f chart. Waiting for a dip is not a bad strategy...but knowing when to jump in could be a tough call. Picked on March 6th at $27.32 Change since picked: +0.62 Earnings Date 04/09/02 (unconfirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ ---------------- New Bullish Play ---------------- General Electric - GE - close: 40.95 change: -0.60 stop: 39.79 Company Description: GE is a diversified industrial corporation whose products include appliances, lighting products, aircraft engines and plastics. GE also provides television, cable, Internet, distribution, engineering and financial services. Why We Like It: In a meeting last week here at the Premier Investor offices we were speculating why shares of GE seemed to be somewhat stagnant. Because of its exposure to just about every industry, GE is generally viewed as the "bellwether" stock that indicates the health of the US economy. If the outlook was really so positive, why were shares underperforming the market? This week's trading hasn't answered our question, but it seems that GE is finally gathering steam. The first positive development came on Monday, when shares closed over psychological resistance at $40. The stock proceeded to trade higher until running into the 200-dma at $41.40. From a fundamental perspective, the recent sell-off in bonds should benefit this play, as should end-of-quarter window dressing at the end of March at least for all the fund managers professing the economic rebound is upon us. As far as an entry goes we're going to wait for GE to prove itself. Not only is the 200-dma directly overhead, but resistance at $42 has put a lid on shares since September. For this reason we're going to start this play with a trigger at $42.05. Once we are triggered our initial stop will be at $39.79, just below Tuesday's lows. Picked on March xth at $xx.xx <- See text Change since picked: N/A Earnings Date 01/17/02 (confirmed) =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Apache Corp - APA - close: 55.80 change: +0.83 stop: 54.95 *new* The price of crude oil (cl02j) continued to move higher midday after breaking its 200-dma on Wednesday, fueling our APA play to levels not seen since last May. However, crude futures did close fractionally in the red and are starting to look tired. Fortunately, APA still managed a 1.5% gain and was able to close over historical and psychological resistance levels at $55. If you believe in head-and-shoulder patterns, then today's move in APA also breaks the neckline of a reverse head-and-shoulders that began last June (yes, this one has to right shoulders which is not that uncommon). Although we're encouraged by a close over the $55 level, at this point, with oil up so much without a pull back, we'd be expecting some profit taking in APA to the $52.50 to $53.00 area before shares continue higher. Traders who are still looking to go bullish on APA could evaluate a dip to those levels. If the price of oil continues to rise, a move up to $60 is not out of the question. Note that we're raising our stop to $54.95 tonight in order to protect a 6.5% gain from our entry price. Remember that a dip may be an attractive entry for the next leg up but we're going to protect our current move in the stock first. Picked on February 22nd at $51.57 Gain since picked: +4.23 Earnings Date 01/31/02 (confirmed) --- CNF Inc. - CNF - close: 34.06 change: +0.31 stop: 33.90 *new* Chalk up another positive day for the transport sector. The Dow Transports (TRAN) outperformed the broader market and closed over 3000 for the second day in a row and the third out of the last four sessions. This sector bullishness was reflected in CNF, which added 0.91% to close over $34 for the first time since mid- January. We continue to be pleased with the way shares have displayed relative strength versus the TRAN. However, with CNF now at our original profit target traders may want to consider taking some money off the table at current levels. Overhead resistance still remains directly overhead at the January highs of $34.50 and $35. On the other hand, if transport strength continues a move up to our current profit target at $36 isn't out of the question. We're updating our stop tonight to yesterday's high of $33.90, directly below current levels. Why the extra- tight stop? Premier Investor already has exposure to another trucking stock in USFC. We're not necessarily more bullish on USFC, but it looks a little less prone to profit taking than CNF. If our stop does get triggered, we'll gladly take our gains from CNF and still be able to benefit if the transport bullishness continues in USFC. Currently, Premier is up 12% in CNF and our stop at $33.90 should still protect more than a 10% move. Picked on February 22nd at $30.41 Gain since picked: +3.65 Earnings Date 01/28/02 (confirmed) --- Rockwell Collins - COL - cls: 24.04 chg: -0.01 stop: 21.74 *new* Slow and steady is the theme for COL, which pegged another 52- week high today before selling off with the broader market. Fortunately for the bulls, the selling ended quickly for COL and shares immediately bounced back to hover near the $24 level. Shares of COL haven't seen the same sort of dramatic rise that some of its defense counterparts have had, but have marched up steadily for almost a month. With another close over the stock's initial spin-off price of $23.50 on July 2nd, 2001, trader may suspect that level might now act as support. We're also encouraged by how shares outperformed the DFX.X defense index by 2.0% today. If defense weakness continues we'd look for COL to dip to $23-$23.25, at which point new long positions could be evaluated. Note that we're raising our stop tonight to $21.74, which is below the Feb. 26th low. We are also going to get aggressive with our exit target. If the stock truly has no overhead supply (this is up for debate considering how the stock was split off from Rockwell) then a confident close over $24 could have shorts in a panic and shares might start to move quickly. We're going to set an exit price of $27.75 then adjust it as we see the play progress. Picked on February 15th at $22.50 Gain since picked: +1.54 Earnings Date 04/17/02 (unconfirmed) --- Dole Food CO. - DOL - close: 30.00 change: -0.12 stop: 28.49 DOL continues to trade in a lackluster fashion after moving above $30 last week. Although it posted a small loss for today's session, we like how the stock moved up into the close to end the day at $30.00. What we'd like to see is for shares to move up off this level tomorrow and close above today's high of $30.50. Frankly, the increasing volume over the past three down days is a bit worrisome. In the news, a possible buyout of Chiquita (CQB) by a group of U.S. and Latin American investors has spurred speculation that DOL may respond with a counter-offer for the world's second-largest banana producer. We'll see how this pans out, but thus far it doesn't appear this story is having much of an impact on the stock. Regression channel enthusiasts might notice that the recent low today in DOL was a clean bounce off the bottom its ascending channel. A positive close tomorrow might be the time to pounce. Yet don't forget that stop! If DOL does make a bid for CQB the acquiring company normally drops in share price and we're not investing in DOL, just trading it. Picked on March 1st at $30.94 Gain since picked: -0.94 Earnings Date 01/31/02 (confirmed) --- USFreightways - USFC - close: 38.45 change: +0.26 stop: 36.49 Transports continued their drive higher on Thursday and took USFC along for the ride albeit bulls seem to be in first gear after the explosive moves earlier this week. The TRAN managed a 0.19% gain on a day when the Dow Jones lost 48 points, and USFC did a bit better with a 0.68% gain on moderate volume. We think the trading pattern over the past two days is promising: Shares pulled back from recent highs at $39.20 and twice bounced from $38. If the broader market resumes its bullish stance tomorrow the TRAN could attempt another breakout over near-term resistance at 3050. Keep an eye on this level, as a move over resistance could see USFC heading towards $40, while another failed rally at 3050 could be a signal to take some profits. Ultra-conservative traders could try and get away with a much tighter stop than we have listed but be prepared to be stopped out if the TRAN sees any profit taking back under the 3000 level. Picked on March 4th at $39.01 Gain since picked: -0.66 Earnings Date 01/30/02 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== ============ HR New Plays ============ ---------------- New Bearish Play ---------------- Adelphia Communications - ADLAC - cls: 24.40 chg: -0.29 stop: *note* Company Description: Adelphia Communications Corporation, headquartered in Coudersport, Pennsylvania, is the sixth largest cable television operator in the United States, serving over 5.5 million cable subscribers in more than 30 states. (source: company press release) Why We Like It: We're going to try this again. Readers know that we tried shorting ADLAC multiple times in the last three weeks but it would never trade through our trigger point to enter the play. Shares have been incredibly strong during that time... almost too strong. Only once during its recent trend did it ever trade below the previous day's close yet volume has been pretty even during this time with little fluctuation until today. The stock has rallied right to its previous support back in January at the $25.25 level. The stock immediately began to sell off once reaching this level while the rest of the market was actually bouncing this afternoon. Not only do we think the stock is short-term overbought but reporters are bringing more attention to the Comcast-Adelphia cable swap we mentioned a couple of weeks ago. Don't remember it? It's the cable swap where ADLAC labeled it worth $516 million but CMCSK labeled it worth $1.19 billion and no money changed hands. That's right, in a post-Enron era of accounting the kind of cable swap unveiled between these two companies "should" attract a lot of negative attention. Why the share price remains unaffected as this deal is uncovered is a mystery. Thus, we're going to try and short ADLAC again but we're sticking to our use of trigger points. We'll "enter" a bearish play on ADLAC if the stock trades at or below $23.99. If we are triggered we'll initiate the play with a stop at $25.31. We're putting this in the high-risk section because volatility could actually trigger us and stop us out all in the same day. Picked on February Xth at $xx.xx <-- see trigger Change since picked: +0.00 Earnings Date 03/29/02 (unconfirmed) =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Centex Corp - CTX - close: 60.54 change: -1.62 stop: 57.39 Homebuilding stocks did well on Wednesday, but paused again today to consolidate recent gains. RYL, TOL, and BZH all finished with small losses, while CTX lost 2.60%. Despite the loss, shares still closed above $60 for the second day in a row. We're encouraged by the ability of CTX to stay above this level and also like how the MACD is continuing higher after the initial bullish crossover last week. With this in mind, entries could be considered at current levels. Risk-averse traders could enter with a stop at $59.10 in order to avoid a breakdown below Wednesday's support but any profit taking in the broader markets could stop you out. Something we noticed today was the way bond yields headed higher while homebuilding issues saw some profit taking. This could just be a coincidence, but it stands to reason that higher yields could put a damper on the housing market. This isn't something that has us concerned, but we'll be keeping an eye on how CTX reacts to changes in the TNX.X 10-year treasury note. Picked on March 4th at $61.32 Gain since picked: -0.78 Earnings Date 01/23/02 (confirmed) ================== 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 NTT Nippon Telephone 19.61 +0.82 CVX ChevronTexaco 88.63 +0.73 BR Burlington Resources 40.29 +0.96 UST U S T Inc 37.01 +1.11 SHW Sherwin-Williams Co 29.33 +0.85 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change CPN Calpine Corp 12.07 +1.20 ROIA Radio One, Inc. 20.30 +1.09 MEE Massey Energy Co 15.60 +1.20 CGO Atlas Air Worldwide 14.15 +1.14 FSII FSI Intl. Inc 11.23 +1.08 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change JNJ Johnson & Johnson 63.62 +1.10 SNE Sony Corp 56.05 +2.65 GM General Motors Corp 61.41 +1.49 BBY Best Buy Co Inc 72.99 +4.42 TJX TJX Companies Inc 39.78 +2.23 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change ABT Abbott Laboratories 54.35 -1.67 GDT Guidant Corp 38.78 -1.72 CELG Celgene Corp 23.26 -4.51 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change CYTC CYTYC Corp 22.40 -1.69 HRB H&R Block Inc 47.40 -2.05 FRK Florida Rock Industries 40.90 -1.98 DIGE Digene Corp 30.65 -1.99 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. 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