PremierInvestor.net Newsletter Tuesday 03-19-2002 section 1 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/c19b_1.asp ================================================================= In section one: Market Wrap: Fed bias now "neutral" Market Sentiment: Healthy Bulls. Play-of-the-Day: More On The VIX. ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 03-19-2002 High Low Volume Advance/Decline DJIA 10635.25 + 57.50 10673.10 10577.48 1.24 bln 1707/1421 NASDAQ 1880.87 + 3.81 1891.51 1873.17 1.35 bln 1827/1710 S&P 100 592.09 + 2.46 594.02 589.62 Totals 3534/3131 S&P 500 1170.29 + 4.74 1173.94 1165.55 RUS 2000 504.73 + 1.93 504.97 502.56 DJ TRANS 2930.64 - 17.25 2951.06 2908.22 VIX 20.35 - 0.40 21.38 20.21 VXN 38.99 + 0.24 40.01 37.77 TRIN .85 PUT/CALL 0.65 ----------------------------------------------------------------- =========== Market Wrap =========== Fed bias now "neutral" The Federal Reserve held the Fed Funds interest rate at 1.75%, while still cautioning investors that it was still too early to declare that the fragile economic recovery is here to stay. The Federal Open Market Committee (FOMC) said, "The degree of strengthening in final demand over coming quarters, an essential element in sustained economic expansion, is still uncertain." The 1.75% Fed Funds rate reflects the rate that banks charge each other on overnight loans. It influences other interest rates that are crucial to U.S. economic growth. The Fed bias shift from "accommodative" to today's "neutral" stance was derived from various economic numbers that has the centrals banks saying, "The economy, bolstered by a marked swing in inventory investment, is expanding at a significant pace." While the Fed left interest rates alone, the FOMC hinted that it moved its so-called bias to "neutral" from an "accommodative" stance for the first time in 15 months. In theory, that means the central bank is neither leaning toward raising interest rates nor lowering them. For those that believe the Fed as well as markets move in cycles, the bias to a more positive "neutral" stance, signals that the Fed is gearing up to nudge rates higher if U.S. growth accelerates. The Fed funds futures market, for instance, is pricing in about a 60% chance of a quarter-point rate hike at the May 7 meeting, which is down from about a 75% chance immediately before the Fed's announcement. Stocks finished mixed to higher Stocks achieved their best levels of the session just before today's decision on interest rates and gains faded for the most part into the close. The Dow Industrials (INDU) were able to hold onto the bulk of their gains with a 57 point increase by the close to finish at 10,635. Dow component American Express (NYSE:AXP) $42.53 +1.38% closed at a post September 11th high, while shares of Procter & Gamble (NYSE:PG) $89.94 +2.6% close at a 52-week high. Consumer products giant Johnson & Johnson (NYSE:JNJ) $65.49 +1.28% closed at an all-time high. The broader S&P 500 Index (SPX.X) 1,170 +0.4%, managed to hold onto gains, but once again fell short of breaking the 1,175 level, which has been a level of resistance since early December. S&P 500 Index Chart - Daily Interval "You can only trade what the MARKET gives you," is a well-known axiom. If the S&P 500 is "the market" then there hasn't been a whole lot of action taking place in the past two weeks. The S&P 500 looks rather range-bound between the 1,144 and 1,175 levels. There is what I would call two negative at play in the S&P 500 right now. One "negative" is that the S&P 500 Bullish Percent ($BPSPX) is above the "overbought" level of 70%, with a current reading of 77%. This is a level of bullishness not seen since January of 1999. How can this much "bullishness" be a negative you ask? As mentioned before, the bullish % charts give us a very good understanding of risk. Right now, bulls carry the bulk of the risk and at the 1,170 level, the technical resistance at 1,175 may have bulls more hesitant to put further capital at risk until some type of further clarity is revealed from upcoming earnings reports. The second "negative" is the resistance found at/near the 1,175 level, which may have bulls sitting on their hands until that resistance is broken. S&P 500 Bullish % ($BPSPX) - 2% box The bullish % is not necessarily a good indicator of market direction, but it does a remarkable job of helping us understand risk. Some call the bullish % a contrarian indicator, where higher levels of bullishness actually depict bearishness. After all, if 100% is ultimate bullishness, then how much bullishness is left to be had at 77% bullish? In terms of bullish %, the answer would be 23% bullishness. If that's the case, then an ultimate bearish reading of 0% helps explain risk/reward currently at play in the S&P 500. Bearish list showing gains While some of the broader market averages are showing gains on a daily basis, it is our bearish play list that appears to be showing more consistent gains in recent sessions. In recent weeks/months, we've pulled very few punches on just how vulnerable we feel telecom or telecom-related stocks are. One stock we want to move a tight stop down on are shares of Brocade Communications (NASDAQ:BRCD) $22.40 -3.03% as subscribers have a handsome 16% gain in this bearish play in just 4 trading sessions. Brocade Communications Chart - $0.50 and $1 box In late February, shares of Brocade Communications (BRCD) achieved its bearish vertical count of $22, but recent action in the telecom areas had us thinking the stock might just exceed that bearish vertical count. With Lucent (NYSE:LU) $4.30 -10.04% and Nortel Networks (NYSE:NT) $4.54 -2.57% cutting new 52-week lows, it appears fund managers can't get out of some holding soon enough as the first-quarter comes to an end. We've said before that bears should not be complacent and the market has been rather bullish as depicted by the bullish % charts, but there's also some risk that is being systematically removed. Our hopes are still high that there's more downside left in Brocade (BRCD), but we want to protect our gains. If the stock wants to continue to fall as the first quarter comes to and end we don't want to get in the way of that happening, and a trailing stop (see play update) will allow us to still give the trade further time to work. Economic data for tomorrow Housing starts and building permit numbers are due out tomorrow morning at 08:30 AM EST. Economists are looking for February housing starts to come in at 1.63 million, which is down from January's reading of 1.678 million. Building permits are expected to come in at 1.650 million, which would also be fractionally lower than January's reading of 1.706 million. DJ U.S. Home Construction Index Chart - Daily Interval The lower Treasury YIELDs found in September/October/November in the benchmark 10-year ($TNX.X) and even the 30-year Treasury ($TYX.X) had mortgage rates falling to multi-year lows. That helps make new and existing home mortgages more affordable and helped spur further spending in durable goods (big ticket items that last more than 3-5 years) like washing machines. Economic bulls want to see a strong number to help "assure" that the recent higher mortgage rates are not putting a damper on economic growth at the base level of the economy. Some feel that the "American Dream" is to own a home. Tomorrow's housing starts and building permits will give some insight into just how strong the "American Dream" of a strengthening economy is. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ More On The VIX By Eric Utley The themes that we've been focusing on continued into Tuesday's trading. Fear measures fell lower while Bullish Percent data ticked higher. The Nasdaq-100 Bullish Percent ($BPNDX) did shed two stocks Tuesday, but other measures remained flat or slightly increased. The weekend piece concerning the CBOE Market Volatility Index (VIX.X) sparked a lot of questions and criticism. Several readers suggested that the VIX could be establishing a new, lower trading range in which volatility remains low. Others pointed out the low levels of the VIX prior to the go-go years, which in a way supported the first thesis. I acknowledge that the VIX could be slipping into a lower trading range. That's certainly a possibility. Anything is possible in the market. But recent history -- the last five years, or so -- suggests that relatively low levels of complacency lead to extended weakness in stocks. Until proven otherwise, that's what I'm operating with when using the VIX. Away from the VIX, other indicators point to complacency, or call it confidence, maybe even greed. The Total and Equity Only put/call ratios are trading at low levels. The one thing to keep in mind concerning the ratios is that we're coming off of a triple witch, which may temporarily artificially impact the numbers. With that said, the ratios show a lot more calls trading than puts. Plus the Bullish Percent data remains high, with major averages near key resistance levels, such as the S&P 500 (SPX.X) at 1175. With all of the aforementioned indicators, however, we have to remember that psychology can trump all else in the short- term, but not indefinitely. If the buyers are willing to buy, they'll do so regardless of where the VIX is trading. The Fed's shift to a neutral bias didn't derail the bulls' enthusiasm over the recovering economy. Whether or not profits follow remain to be seen in the next quarter. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10635 Moving Averages: (Simple) 10-dma: 10575 50-dma: 10059 200-dma: 10002 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1170 Moving Averages: (Simple) 10-dma: 1163 50-dma: 1128 200-dma: 1146 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1505 Moving Averages: (Simple) 10-dma: 1513 50-dma: 1505 200-dma: 1550 Box Makers ($BMX) The BMX earned the day's best performing sector spot with its 1.99 percent gain, edging out the Brokers' (XBD.X) 1.88 percent gain. The market's reaction to the Hewlett/Compaq news certainly impacted the sector. Compaq (NYSE:CPQ) was the best performing component with its 7.52 percent ramp. Other performers included Veritas (NASDAQ:VRTS), Gateway (NYSE:GTW), Sony (NYSE:SNE), and Dell (NASDAQ:DELL). 52-week High: 146 52-week Low : 74 Current : 107 Moving Averages: (Simple) 10-dma: 107 50-dma: 104 200-dma: 106 Airlines ($XAL) The XAL was the poorest performing sector in Tuesday's session. The index lost 3.89 percent. Delta (NYSE:DAL) said that it expected to post a loss of about $365 million during its first quarter. Movers to the downside included Continental (NYSE:CAL), America West (NYSE:AWA), United (NYSE:UAL), Southwest (NYSE:LUV), and Delta. 52-week High: 153 52-week Low : 59 Current : 106 Moving Averages: (Simple) 10-dma: 110 50-dma: 96 200-dma: 104 ----------------------------------------------------------------- Market Volatility The VIX continued to a new relative low in Tuesday's session, but did not fall below the magical 20.00 level. Meanwhile, the VXN traced another low, but managed to close fractionally higher. The Nasdaq-100 (NDX.X) closed fractionally lower. CBOE Market Volatility Index (VIX) - 20.35 -0.40 Nasdaq-100 Volatility Index (VXN) - 38.99 +0.24 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.65 512,853 332,062 Equity Only 0.57 459,729 262,182 OEX 1.60 5,105 8,160 QQQ 0.33 18,466 6,117 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 63 + 0 Bull Confirmed NASDAQ-100 69 - 2 Bull Confirmed DOW 77 + 0 Bull Confirmed S&P 500 77 + 0 Bull Confirmed S&P 100 78 + 0 Bull Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.16 10-Day Arms Index 1.00 21-Day Arms Index 1.08 55-Day Arms Index 1.23 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when the do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals Advancers Decliners NYSE 1707 1421 NASDAQ 1827 1710 New Highs New Lows NYSE 253 28 NASDAQ 168 27 Volume (in millions) NYSE 1,481 NASDAQ 1,683 ----------------------------------------------------------------- Commitments Of Traders Report: 03/12/02 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. 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 tend to be wrong. S&P 500 Attention!! Commercial traders continued to build their net bearish position while small traders reached an extreme bullish position. Commercials Long Short Net % Of OI 02/26/02 366,258 432,258 (66,000) (8.3%) 03/05/02 361,254 445,989 (84,735) (10.5%) 03/12/02 396,050 483,606 (87,556) (9.9%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: ( 36,481) - 10/16/01 Small Traders Long Short Net % of OI 02/26/02 139,183 62,087 77,096 38.3% 03/05/02 161,711 60,941 100,770 45.3% 03/12/02 179,825 75,025 104,800 42.6% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 104,800 - 3/05/02 NASDAQ-100 Nasdaq commercial traders added a number of short positions for a big increase in the group's net bearish position. Meanwhile, small traders grew slightly more bullish. Commercials Long Short Net % of OI 02/26/02 33,589 34,091 (502) (0.7%) 03/05/02 33,549 35,419 (1,870) (2.7%) 03/12/02 37,415 42,942 (5,527) (6.9%) Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: 7,774 - 12/21/01 Small Traders Long Short Net % of OI 02/26/02 9,517 11,416 (1,899) (9.1%) 03/05/02 11,961 11,214 747 3.2% 03/12/02 14,571 13,045 1,526 5.5% Most bearish reading of the year: (9,877) - 12/21/01 Most bullish reading of the year: 8,460 - 3/13/01 DOW JONES INDUSTRIAL Dow Jones commercial traders dropped both long and short positions, while maintaining their net bullish position. Small traders dropped a number of longs and added a small number of shorts of an increase in their net bearish position. Commercials Long Short Net % of OI 02/26/02 33,322 21,110 12,212 22.4% 03/05/02 37,036 25,554 11,482 18.3% 03/12/02 35,080 23,204 11,876 20.4% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 02/26/02 6,333 12,547 (6,214) (32.9%) 03/05/02 6,589 13,057 (6,468) (32.9%) 03/12/02 6,400 13,070 (6,670) (34.3%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 =============== PLAY-of-the-Day =============== Oxford Health - OHP - close: 41.18 change: +0.72 stop: 38.50 Company Description: Founded in 1984, Oxford Health Plans, Inc. provides health plans to employers and individuals in New York, New Jersey and Connecticut, through its direct sales force, independent insurance agents and brokers. Oxford's services include traditional health maintenance organizations, point-of-service plans, third party administration of employer-funded benefits plans and Medicare plans. (source: company press release) - ORIGINAL WRITE UP: March 8th, 2002 - Why We Like It: We've been looking to go long on a health care stock for a little while and it looks like we've found one worth playing. OHP has displayed impressive relative strength versus other companies in the group such as UNH and THC, both of which we were though also looked attractive. The sector as a whole has put in a pretty good move in recent sessions and the HMO.X healthcare index bounced near its 50-dma while spending three days at new support of 465. Currently the HMO.X looks to be heading for a test of resistance at 500. In a similar fashion, OHP recently bounced off $36 (just above its own 50-dma) and moved up until bumping into the 20-dma today. The oscillators also look favorable with the stochastics moving up and MACD beginning to curl higher just above the zero line. As far as entries, a move above today's high of $38.96 could be the last obstacle until resistance at $40-$41 or a dip back to $38 looks pretty favorable. $40.95 is the 52-week high from February, but we think this level can be broken if the sector continues to be strong. The point-and-figure chart has a bullish price objective near $70. Thus, we don't feel we're out of line with an initial target near $45. We're starting this play with a stop at $35.90. - Most Recent Update: March 19th, 2002 - On Monday the HMO.X healthcare index shot above resistance at 500 and closed at an all-time high of 507.30. It's nice to see a sector that's really outperforming in a market that's been trading sideways for a few weeks. OHP followed the index higher today and closed at its own all-time high of $41.18. The close over $41 is significant because that was where shares topped out in mid-February. With that level out of the way and the HMO.X also over resistance we think our near-term profit target at $45 could be attainable. If the sector strength continues, entries can be considered at current levels but it wouldn't hurt to look for dips to $40 either (but you probably had that chance on Monday). PI is currently up 6.9% on this play and tonight we're tightening our stop to $38.50 in order to minimize risk. Right now we'll add an exit price of $44.75 and if shares trade there intraday we'll close the play. - Play-of-the-Day Comments: March 19th, 2002 - OHP has been steadily rising all month and broke to an all-time high today. The HMO.X health provider index is leading the way higher and also closed at an all-time high. Now that shares have closed over resistance at $41, we suspect that there may be some additional short-covering in store for us. However, if the stock retraces we'd look for a dip to $40 as an entry point. Picked on March 8th at $38.55 Gain since picked +2.63 Earnings Date 02/05/02 (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. 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. 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PremierInvestor.net Newsletter Tuesday 03-19-2002 section 2 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/c19b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: BBH, CSC, RIMM Bearish Play Updates: BRCD, CLS, CHKP, EMLX Stock Bottom / Active Trader Bullish Play Updates: DOL, KSS, OHP, PSS High Risk / High Reward Bullish Play Updates: HIG, PVN Bearish Play Updates: ADLAC Closed Bullish Play: IKN Split Trader PGR: 3-for-1 split announcement FULT: 5-for-4 split announcement Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================= Net Bulls (NB) section ================================================================== =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Biotech HOLDRs - BBH - close: 127.39 change: -0.81 stop: 119.45 We've been waiting for quite awhile for the BBH to break over resistance near $123-$125. Our patience was rewarded Monday, as HOLDR components AMGN, CHIR, DNR, and SEPR all put in solid days and pushed the BBH over $128. We're pleased with this development, but at this point traders looking for fresh entries may want to wait for a dip to the $125 level. The biotech index (BTK.X) has resistance overhead at January highs of 545, which also coincides with the 100-dma (the BTK.X is still battling with its 200-dma as well). The BBH also faces congestion near the $130 area. In case you missed it, we raised our stop last night to $119.45. More conservative traders may want to place their stop just under recent lows at $124. Today's noteworthy biotech news was the FDA's rejection of Picovir, VPHM's cold drug. That shouldn't have much of an impact on the sector, but here's hoping someone eventually comes up with a cure for the common cold! Picked on February 20th at $120.00 Gain since picked: +7.39 Earnings Date N/A --- Computer Sciences - CSC- close: 52.81 change: -0.04 stop: 49.74 The NASDAQ has spent the last week confined in a narrow 50-point range. While there have no doubt some tech movers that bucked the recent trend, CSC seems to be content to let the broader market dictate direction. As a listed stock, it isn't as volatile as many of its tech counterparts on the NASDAQ. C.S. First Boston issued a reiterated buy on CSC today with a price target at $55. The stock traded flat on the news and lost 0.07%. The $53 level seems to be keeping a lid on CSC, but we do like how shares have traded in a pattern of higher lows over the last week. Look for a move over $53.30 or dips to $50-$52 to offer a possible entry point. Picked on March 15th at $52.25 Change since picked: +0.56 Earnings Date 01/31/02 (confirmed) --- Research In Motion - RIMM - close: 27.40 change: -0.09 stop: 26.49 Try as they might, the bears just can't push RIMM below support at $27. Shares have bounced at or just below this level five times since Friday. Readers familiar with this play may recall that $27 had previously acted as resistance and is also the location of a retracement level. We like how this level has been retested but not broken. The stock may be consolidating before making another crack at $30. Oscillators paint a bit of a mixed picture: The fast daily stochastic line looks to be curling up from oversold, but the MACD looks like it's about to give a bearish crossover. In contrast, the hourly MACD is looking pretty bullish. Given the support at $27, traders who would like to bet on a move back to recent highs at $29.55 can do so at current levels with a relatively favorable risk/reward setup. More cautious traders could snug their stops closer to support, but we're giving it some breathing room with our stop at $26.49. Note that RIMM announces earnings in three weeks. Picked on March 6th at $27.32 Change since picked: +0.08 Earnings Date 04/09/02 (confirmed) -------------------- Bearish Play Updates -------------------- Brocade Comm. - BRCD - cls: 22.40 chg: -0.70 stop: 24.21 *new* Two big volume days and steep losses are exactly what bears want to see for stocks like BRCD. Shares have dropped four days in a row and fallen through multiple support levels. Prior to the market open today a couple of brokers tried to defend the stock saying the selling was overdone or that they would be buyers at these levels. It looks like the market is going to give them a better entry point and some liquidity for their big purchases. BRCD's MACD has rolled over and produced a bearish crossover and shares are very close to the late February lows near $21.60. A glance at the intraday chart shows what appears to be a failed rally today at the $23.80 level. Therefore we are going to cinch our stop to $24.21, which should protect a 10% move in the play. The stock does appear oversold at this level but nothing says it can't trade to $20 before buyers begin to support it again. New plays might be considered but only if you have a relatively tight stop (suggestions $23.85 to $24.21). Sector leader EMC is trading at new relative lows and the close under $11 is not good for bulls expecting any leadership. If EMC has support at $10 and a breakdown under this level could be a big weight on other stocks in the group. Currently, Premier is up 16.7% in BRCD. Picked on March 15th at $26.90 Gain since picked: +4.50 Earnings Date 04/17/02 (unconfirmed) --- Celestica - CLS - close: $36.30 change: -0.60 stop: 39.10 *new* The selling in CLS continues to slowly erode away at the stock price but buyers are currently supporting the stock at $36.00. CLS has fallen three days in a row but volume has also been drying up. The stock's MACD appears to be rolling over just under the zero line but has not yet produced another bearish crossover. Another indicator we like to follow is the 5-dma vs. the 15-dma. When the 5-dma crosses under the 15-dma it can be a bearish clue that more consolidation is forthcoming and that's exactly what we see today for CLS. Chart readers may also note that there should be new overhead resistance between the $38.00 and $38.50 levels. More conservative traders may want to consider adjusting their stops appropriately. We are going to lower our stop to $39.10, which was the March 13th high. New entries can be considered on failed rallies at $38 or a move under $36 if you prefer action points. Picked on March 13th at $37.98 Gain since picked: +1.68 Earnings Date 04/17/02 (unconfirmed) --- Check Point Software - CHKP - cls: 32.95 chg: -0.34 stop: 35.51 The software index has been able to post a two day rally despite a lack of real leadership in MSFT which is battling with its 50- dma. Likewise CHKP has also had a bullish bent but if you read our weekend update it is moving as we expected. The failed rally at $34 today looks like an entry point for new shorts. The MACD has still not produced that bearish crossover but it could happen soon. Traders may want to wait for a move under $32 but we like the stock as a short here. More conservative traders could tighten their stop now that we have confirmed resistance at $34. We did note the positive mention of CHKP in a recent news article... you may have read it. They mention that CHKP is in great financial health with about $1 billion in cash equivalents and no debt. We agree that CHKP is a strong company for potential long-term investment but short-term the market seems be leaning towards the bearish camp on the stock price. Therefore, if you're looking for an entry point to add CHKP to your IRA you might get a chance to buy it at $25 or less in the future. However, our current target price for our short-term trade is only $27.50. Keep an eye on the Nasdaq and the GSO.X if you're trading CHKP. Picked on March 14th at $33.28 Gain since picked: +0.33 Earnings Date 01/15/02 (confirmed) --- Emulex Corp. - EMLX - close: 28.46 change: +1.92 stop: 32.31 So far so good. We encourage you to check out our weekend update on EMLX if you missed it. Toward the end of the update we speculated on how trading in EMLX might play out given the current state of its stock price and the patterns we see on the point-and-figure chart. The decline on Monday was anticipated and was the third decline in a row. Shares closed Monday at $26.54. The rally or shall we say oversold bounce on Tuesday was also part of our crystal ball projection but we find it interesting that bulls couldn't get the stock back over the $28.63 level, which happens to be a retracement level for us using September lows to January highs. We would still expect the stock to potentially trade up to the $30 level and then traders can look for a failed rally as a potential bearish entry point. Yet traders need to be prepared if stock rolls over at $29. Stocks are rarely this predictable. As we mentioned in the BRCD update, the sector leader, EMC, has not been very strong and closed today near relative lows. If EMC breaks down under what should be very strong support of $10 it could be a very bad sign for the group as a whole. Editor's note, EMLX's 200-dma at $30 should make this level of resistance a tough one to crack. Picked on March 14th at $29.25 Gain since picked: +0.79 Earnings Date 01/22/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Dole Food CO. - DOL - close: 29.95 change: +0.06 stop: 28.99 The market traded slightly higher in anticipation of today's fed meeting and responded with a collective yawn when the decision was released. DOL traded in a similar manner and finished the day with a 0.20% gain, closing just under $30. We were looking for another close over that level, but did find it interesting that the stock traded all the way up to $30.50 earlier in the day. That's the highest tick since shares failed at that level on March 7th. A close over $30.50 could be a good time to evaluate bullish positions. Because of the recent tendency of shares to gravitate to $30, jumping on any earlier could be risky. Traders may also want to sit on the sidelines another day just to see if there is any reaction to the news that Chiquita Brands Intl. Inc (NYSE:CQB), the second largest banana producer, had reappeared from its Chapter 11 bankruptcy with a new restructuring plan. A Reuters article made mention of CQB's troubles in the early 1990s with a trade dispute over banana exports with the European Union. Now that the dispute is resolved they will attempt to compete again with market leader DOL. Picked on March 1st at $30.94 Gain since picked: -0.99 Earnings Date 01/31/02 (confirmed) --- Kohls - KSS - close: 70.46 change: -1.29 stop: 66.75 Our KSS play was triggered last week after the stock broke over resistance at $70. Retail stocks performed well after Friday's consumer sentiment numbers and KSS almost traded to $72 before pulling back. Monday saw another failed attempt to break this resistance level as the stock posted a high at $71.95. It appears the lack of bullish conviction at this level may have been the catalyst for some profit taking, and today the stock lost 1.79%. Based on how the broader market is behaving this pullback may offer an attractive entry point. We'll be closely watching the RLX.X retail index for a breakout over 980. This could portend a quick move up to 1000, much like the index moved higher after its recent breakout over 960. Picked on March 15th at $ 70.50 Change since picked: -0.04 Earnings Date 03/05/02 (confirmed) --- Oxford Health - OHP - close: 41.18 change: +0.72 stop: 38.50 *new* On Monday the HMO.X healthcare index shot above resistance at 500 and closed at an all-time high of 507.30. It's nice to see a sector that's really outperforming in a market that's been trading sideways for a few weeks. OHP followed the index higher today and closed at its own all-time high of $41.18. The close over $41 is significant because that was where shares topped out in mid-February. With that level out of the way and the HMO.X also over resistance we think our near-term profit target at $45 could be attainable. If the sector strength continues, entries can be considered at current levels but it wouldn't hurt to look for dips to $40 either (but you probably had that chance on Monday). PI is currently up 6.9% on this play and tonight we're tightening our stop to $38.50 in order to minimize risk. Right now we'll add an exit price of $44.75 and if shares trade there intraday we'll close the play. Picked on March 8th at $38.55 Gain since picked +2.63 Earnings Date 02/05/02 (confirmed) --- Payless Shoesource - PSS - close: 63.29 change: +0.41 stop: 58.75 Retailers still seem to be basking in the glow of last week's positive economic data. The retail index (RLX.X) traded to a new multi-year high of 979.80 today before pulling slightly back into the close. PSS has seen some decent gains this week as well. The stock added about 1% on Monday and topped out today at $64.70. That might not be a coincidence - Shares were trading at $64.59 on July 3rd before dropping precipitously on bad news. We like how volume has been slowly increasing over the past three sessions of gains. The continued buying interest in a positive sign, and aggressive traders could try to jump on if PSS moves above $64.70 and the RLX.X breaks over resistance at 980. However, we'd prefer to wait for dip to $62 before targeting new entries. The candlestick formed today may indicate that a day or two of profit taking is before us. Picked on March 15th at $61.74 Change since picked: +1.55 Earnings Date 02/22/02 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Hartford Financial - HIG - close: 67.26 change: -0.40 stop: 64.45 Like the broader market, HIG has been trading in a narrow range lately. Since Friday shares have bounced between $67, bolstered by the 20-dma, and $68. However, insurance stocks have been rather strong lately as a group, which bodes well for a move higher. PGR, MMC, CINF, and ORI are all breaking to new near- term highs. As a matter of fact, PGR even announced a 3-for-1 split today. As long as these stocks continue to be strong we think HIG has a good shot at $70 or higher. Its recent range makes entries a cut-and-dry proposition: Entries can be considered on dips to $67 or a break above $68 although a dip to $66 is still not out of the question. End-of-quarter window dressing could give the insurance sector a lift over the next week and a half as fund managers snap up shares of stronger stocks, which might be the catalyst needed to boost HIG over resistance. Picked on March 13th at $65.74 Change since picked: +1.52 Earnings Date 01/28/02 (confirmed) --- Providian Financial - PVN - close: 5.95 change: unch stop: 4.85 Are we about to see a big move in PVN? Recent price action indicates that might be the case. The stock has traded in an increasingly narrow range over the past three days. It's not surprising to see PVN see some consolidation after such a steep ascent over the past few weeks. Bulls and bears appear to be duking it out over the $6 level and when the stock finally breaks up or down the move could be sharp. Based on the strong sector, we think that the odds are better for a break higher. The BIX.X banks index is trading at multi-year highs and threatening to break over 700. Today's interest rate decision could've thrown a wrench in the sector but the switch to a neutral bias was expected and shouldn't negatively impact financial stocks. As far as entries, wait for a move over $6.20 to confirm a breakout from the current pennant formation. More aggressive traders could use the "inside-day" technique and take a bullish position if PVN trades over $6.05. Picked on March 8th at $5.71 Change since picked: +0.24 Earnings Date 02/07/02 (confirmed) -------------------- Bearish Play Updates -------------------- Adelphia Comm. - ADLAC - close: 22.55 change: +0.22 stop: 24.76 In the weekend update for ADLAC we discussed how shares appeared to be consolidating at historical support near $22. This week shares have traded in a narrow range above that level...not surprising considering the NASDAQ has also been range-bound. If ADLAC starts moving, a break above today's high at $22.81 could lead to a bounce to the $24 level, while a break below $22 may signal a resumption in the stock's downward trend. Traders looking for new entries could consider going short if shares drop below Friday's low of $21.80. Keep an eye on the MACD, which is just a hair away from producing a bearish crossover. On a related note, readers may want to take a look at shares of COX. We suspect that if this heavy-hitter in the cable industry completes a double-top at $40 it could lead the entire sector lower. However, if it breaks out it may inspire buyers to speculate on ADLAC again as well. Traders should also note that ADLAC announces earnings later this month and will hold a Q4/year-end conference call on April 27th. Traders may want to adjust their stops accordingly in advance of this event. Picked on March 12th at $23.99 Gain since picked: +1.44 Earnings Date 03/29/02 (unconfirmed) =============== HR Closed Plays =============== ----------- Closed Long ----------- Ikon Office Solutions - IKN - cls: 10.99 chg: -0.78 stop: 11.74 Shares of IKN dropped sharply on March 11th, two days before news that the company's CEO would be resigning became public. Without any other discernable negative catalyst for the drop, we went long on the premise that the selling had been overdone. The stock had managed to find support at $12 but dropped though that level during Monday's session. Today's 6.62% decline came on high volume (1.6M versus the 628K average) and dropped IKN far below our stop at $11.74, thus ending this play with a $0.62 loss. We couldn't find any news to explain this steep decline. Nervous investors may be bailing out after shares broke $12. Or perhaps Wall Street knows something we don't? Regardless of the reason, the continued weakness exemplifies why these type of speculative plays are considered high-risk endeavors that demand the use of expendable capital only. Picked on March 14th at $12.36 Change since picked: -0.62 Earnings Date 01/25/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- Progressive Declares 3-for-1 split Thirty minutes before the opening bell, The Progressive Corporation (NYSE: PGR) announced that its Board of Directors had declared a 3-for-1 stock split, in the form of a stock dividend. This is the second 3-for-1 stock split in ten years with the last split occurring in late 1992. Shares had previously traded near the $170 level in early 1999 before succumbing to profit taking and then the bear market later in the year. The shareholder record date for the stock split will be April 1st, 2002. The payable date will likely be Friday, April 19th since the company expects shares to be distributed Monday, April 22nd and thus shares should begin trading at their new split price on that Monday. Investors should also note that the company is publishing their 2001 Annual Report on their website later this afternoon. PGR closed at $160.43 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=PGR About the company Progressive, with headquarters in Mayfield Village, Ohio, is one of the nation's largest private passenger auto insurance companies. In business since 1937, the Company provides all drivers with competitive rates and 24-hour, in-person and online services. (source: company press release) -------- Fulton announces 5-for-4 stock split During regular trading hours, Fulton Financial Corp. (Nasdaq: FULT) announced that its board had given the go-ahead on a 5-for-4 stock split. The split will come in the form of a stock dividend and will be payable on May 20th, 2002 to shareholders of record on April 24th. FULT has a strong history of offering stock split dividends and in the last few years has seen a 5:4 split in 1998, an 11:10 split in 1999, a 21:20 split in 2000 and another 21:20 in 2001. Shares have added 12.6% YTD. The stock closed at $24.59 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=FULT About the company Fulton Financial Corporation is a $7.8 billion financial holding company based in Lancaster, PA. The Corporation operates 188 banking offices in Pennsylvania, Maryland, Delaware and New Jersey. (source: company press release) ================== Trading Ideas ================== This section contains stocks that meet criteria which may make them of interest to long and short side traders. These are not recommendations, nor have they been reviewed by PremierInvestor editors for investment potential. However, each of them has technical and fundamental characteristics that make them worthy of further review by traders and investors looking for fresh ideas. New stocks will appear daily following the market close. --------------------------------- Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change TMX Telefonos De Mexico 41.05 +1.00 AHC Amerada Hess Corp 77.74 +1.83 MIR Mirant Corp 13.80 +0.54 FMX Fomento Economico Mex 45.06 +0.70 BJS BJ Services Co 34.99 +1.21 MUR Murphy Oil Corp 91.32 +1.30 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change DG Dollar General Corp 16.99 +1.62 MDR McDermott Intl. Inc 16.05 +1.40 VPI Vintage Petroleum Inc 14.25 +1.33 GYMB Gymboree Corp 14.76 +1.07 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change PG Procter & Gamble Co 89.94 +2.28 PGR Progressive Corp 162.60 +2.17 AVP Avon Products Inc 55.31 +1.25 FO Fortune Brands Inc 49.33 +1.18 PCAR Paccar Inc 75.80 +2.61 NBR Nabors Industries Inc 42.88 +1.07 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change FE Firstenergy Corp 32.25 -2.80 DOX Amdocs Ltd 24.40 -1.37 ADVP AdvancePCS 29.62 -1.97 LE Land's End Inc 44.70 -1.18 KRON Kronos Inc 43.64 -2.65 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change HNI Hon Industries Inc 27.63 -0.86 SCOR Syncor Intl. Corp 27.15 -0.65 BDG Bandag Inc 38.01 -0.49 ================================================================= 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. 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