PremierInvestor.net Newsletter Thursday 03-21-2002 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/c21b_1.asp ================================================================= In section one: Market Wrap: Oracle says, "visibility remains poor". Market Sentiment: Still More on the VIX ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 3-21-2002 High Low Volume Advance/Decline DJIA 10,479.84 - 21.73 10505.72 10354.74 1.3 bln 1627/1419 NASDAQ 1868.83 + 35.96 1870.16 1825.99 1.6 bln 2132/1332 S&P 100 582.44 + 0.27 583.43 574.86 Totals 3759/2751 S&P 500 1153.58 + 1.73 1155.10 1139.48 RUS 2000 505.44 + 6.40 505.45 497.91 DJ TRANS 2852.98 - 41.13 2900.63 2808.59 VIX 19.98 - .75 21.76 19.98 VXN 36.98 - 1.18 39.38 36.98 TRIN .98 CBOE Put/Call Ratio: .69 ----------------------------------------------------------------- =========== Market Wrap =========== Utilities were quite a shock! Months ago I must have set an alert at my trading station on the Utility Sector Index (UTY.X) at the 335 level and forgotten about it. It's not a group of stocks most associated with active trading and I can't remember the last time this sector actually showed up as a leading sector winner. Today's alert just drives home the point that each day is a new day and can be filled with new experiences or dynamics that always seem to present themselves in the markets. In today's 01:00 EST Update, my esteemed colleague and fellow trader Eric Utley discussed some stocks in this sector. He references an update I had written earlier in the day for OptionInvestor.com that mentioned the broader technicals that were unfolding in the group. For those subscribers to PremierInvestor.net that couldn't access that update here it is. I'm going to leave the comments unedited, but the UTY.X finished the session at 340.47 +2.56% and traded strong into today's close. I will also want you to notice the 61.8% retracement level at 354.67. Later in today's trading session, I noticed a rather obscure option trade for 350 contracts (35,000) at the April $355 strike. This type of trade may indeed be some type of "hint" that it is a near-term institutional target. This caught my eye! I had to slap my computer terminal a couple of times this morning to make sure the quote I was getting from the Utility Index (UTY.X) was correct as this sector was at the top of the leader board today. What surprised me is that I don't remember the last time I saw this sector as a leading gainer. When I pulled up a bar chart, this is what I saw. Utility Sector Index Chart - Daily Interval A nice little "cup and handle" break out has taken place in the Utility Index (UTX.X) today and the break comes right at my retracement resistance of 334 and the longer-term 200-day moving average. Near-term bullish targets would be the 344 and 354 levels. A stop to protect against weakness would be just under the "handle" at 324. Utility Index Chart - $4 box There's also some "electricity" sparking the supply/demand chart in the Utility Index (UTY.X) with a trade at 336. This breaks the downward trend. Using the bar chart and stop at $324 and a longer-term bullish vertical count of $392, there's some good risk/reward for bulls to be looking at. I need to try putting together a list of potential stocks. Like I said, this action has caught me a bit by surprise. No need to go off half cocked and get wiped out. There is plenty of time to get long. Q-charts has sector lists and I need to check both the "gas" and "electric" utility stocks. Each can move very independent of each other and we need to be in the best group. I do know that Enron won't be a candidate. Back to the present The point and figure chart ended up adding another "X" to the current column at 340 in the Utility Index (UTY.X) chart and this should now have us looking for a potentially longer-term bullish move to be taking hold. If we were to think about today's break higher at 336 in the scope of an index breaking out of a base, then the Utility Index (UTY.X) has just broken out of a 6-month base dating back to October (red A). That decline back in October was helped along by the Enron debacle that really began to unfold on October 18th. I didn't have to look very far through Eric's "Components" list in the 01:00 update to find a chart pattern in Ameren Corporation (NYSE:AEE) $41.69 +1.18% that offers what I feel an excellent risk/reward trade and may now just be gaining some momentum. Ameren Corp. (AEE) Chart - Daily Interval What I find compelling in the bar chart of Ameren (AEE) is the HUGE volume spike that took place on February 27th just above retracement support of $39.17. On February 27th, AEE raised roughly $500 million by pricing 5 million shares of common stock at $39.50 ($197.5 mill) and an addition convertible offering that carried a 9.75% dividend, which are convertible into common stock at $46.61. Several days later, we see the stock higher and another large volume spike. I'm thinking here that a bear may have tried shorting shares of AEE without the leverage of the underlying convertible and when the stock didn't discount (go below) the spot offering of $39.50, they may have called it quits up at $43. Subscribers that have been with us awhile will remember an update where I explained how shorts/bears will actually short some stocks where a convertible offering was placed. In fact, Adelphia Communications (NASDAQ:ADLAC) $21.81 +0.78% on our bearish play list is in part a play on such on offering that ADLAC did back on January 16th. This ADLAC convertible commentary was on February 19th and 01:00 update. http://www.PremierInvestor.net/archive/intradayupdates/021902_3.asp While the ADLAC convertible is still "underwater", the Ameren (AEE) isn't. What's compelling perhaps for bulls, is that as of February 8th, there was about 2.6 million shares short, which would take about 12 days to cover. This data is rather old, but it does give credence to the thought that there was a short looking for the door up at $43. If he/she isn't done, then the bullish action that looks to be developing in the group may just be the prod to step up some short covering once again. Before we fall asleep, please note that the retracement bracket is defined by lows and highs that were actually just 2 months in duration. In essence, this stock did trade from the $37.37 level to a high at $46.81 in a two-month period from October 27, 2000 to December 26, 2000. That's a 25% move in just two months. You can also see from the bar chart that this stock has had a tendency to make some decent 2-3 week runs. I see three days of recent upside and think there is more still to come. A break above $44 may well see a continued run up into the $45-$47 range. So what happened today? We saw some diverging markets today as the Dow Industrials had trouble all session and finished down 21 points at 10,479. While the Dow managed to recoup the bulk of earlier losses (-142 at its lows) the Philly Fed report for March was reported at 12:00 EST and its 11.4 reading was well below consensus of 17.8. The "bad news" in the report was that prices paid (input costs) rose above neutral to 3, the first positive reading since June. Prices received also moved in to positive territory, as the 0.7 reading was the highest since October 2000. The report went on to say that price pressures are beginning to show themselves as commodity prices rise from multi-decade lows and the manufacturing sector creeps out of a recession. While one can never be certain, I do think this Philly Fed report did spook some market participants and had them selling some gains from the blue chips that have made some nice bullish moves in recent weeks. Hardest hit were the deeper cyclicals that have been doing so well. I think the bearish action was a good case of jitters and profit taking. Conversely, the lagging NASDAQ Composite (COMPX) had a bullish day and finished up 1.96% at 1,868. Again, I think this was also attributed to some profit taking, but this time by bears buying the "bad news" found in the Philly Fed report. You'll see on our play list that we were stopped out of Brocade Communications (NASDAQ:BRCD) $25.73 +11.28% as profiled at $24.21. In quick review, we did the right thing by tightening down a stop. As discussed in Tuesday evening wrap, this stock had achieved a bearish vertical count of $22 and was close to doing it again. We protected a nice gain by cinching down a stop and this was good. Let me not just talk about our successes, but point out what I believe a terrible demonstration of risk/reward management. Let's talk about Emulex (NASDAQ:EMLX) $30.94 +7.65%. I'm not going to pound the table to hard here, but we should not have left our stop up at $32.31. At least I don't think we should have. On Monday evening, the stock closed at a low of $26.47 and we were sitting on a nice 9% gain from profile. Now you and I are looking at a loss of 5.4%. What "bugs" me about this trade is that the stock closed Monday evening at two potential levels of support. I've said before that there's an old saying among point and figure chartists that says "the first test of bullish support can be most painful for the bears." Emulex Chart - $0.50 and $1 box I don't like seeing a 9% gain ever turn into a loss and now I'm in no-mans land and looking for weakness at the open to get a move started back lower. If not, I've got to assess risk to $33 and then to $36. I don't want to "think" about either and would lower a stop to just above today's high. There's no economic news due out tomorrow, but earnings are starting to roll out. One earning's report that may work in a Celestica (NYSE:CLS) $35.85 +0.00% bear's favor was from fellow electronic contract manufacturer Solectron (NYSE:SLR) $8.25 -1.43%, when they reported Q2 earnings of $0.01 a share, which was a penny below consensus looking for $0.02 a share. Revenues for quarter were $2.97 billion versus estimates of $2.96 billion. Guides Q3 lower with revenue in range of $2.7-$3.1 billion versus consensus estimate of $3.37 billion, sees a Q3 net loss in the range of $0.06-$0.04 per share versus current consensus estimate for earnings of $0.06 per share. Stock traded some size (50K and 38K) at $8.20, and currently trades $8.11 in after hours. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Still More On The VIX By Eric Utley The CBOE Market Volatility Index (VIX.X) closed below the 20.00 level for the first time in a long time. Is it time to load up on out-of-the-money (OTM) distant month puts? Where's Austin when I need him? Before I get a slew of questions, let me answer what 'OTM' and 'distant month' mean. OTM is away from the market; lower. It varies from each trader and depends on individual risk preference. Distant month means not the front-month; it can mean as soon as May or as distant as January. Again, it depends on the individual. With that out of the way, let me observe. The VIX hasn't traded below 20.00 since August 2000. You can pull-up a chart of any major average to find out what happened to stocks following August 2000. It's important to note, however, that the VIX traded below 20.00 for about three weeks back in August 2000. Prior to that period, the VIX traded below 20.00 during the summer of '99. It did so for about four weeks. That's why the common mantra among traders is to use distant month puts, not the ones that expire in a few weeks, when adopting a bearish bias based upon a low VIX. Before I delve in further, let me step back. A VIX at or below 20.00 means that implied volatility is relatively low, using recent history as a guide. Implied volatility is the biggest contribution to premiums next to underlying price. Therefore, options are on sale. The discount means that buying options is a much better practice than selling options in terms of the risk trade-off. In other words, selling covered calls or naked puts is not smart in this market, at least in my opinion. What is smart is finding stocks at inflection points and using a straddle or strangle to take advantage of a big forthcoming move. Leverage, baby, it's great! To digress, there's been a lot of talk about the VIX recently. Some on Option Investor, coming from Austin and Mark, but also from other media outlets. Each offering different opinions and observations. Hopefully I can shed some clarity. But I hate to view the VIX from a micro standpoint, because it's really no that difficult to use. Nevertheless, at the request of more than one reader, I'm setting forth some levels and ideas for the VIX using a point and figure chart. There are two important levels to take away from the chart below, which employs a 0.50 point box. First, the current vertical count is 16.00. Yes, the VIX could work that low. Second, the current set-up won't generate a new buy signal (increased fear) until the 23.50 level, which would break a triple-top. Such a move may be more meaningful and reveal a heightened state of fear, something to watch for. VIX - 0.50 Point Box ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10480 Moving Averages: (Simple) 10-dma: 10564 50-dma: 10072 200-dma: 9998 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1154 Moving Averages: (Simple) 10-dma: 1161 50-dma: 1128 200-dma: 1145 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1489 Moving Averages: (Simple) 10-dma: 1504 50-dma: 1498 200-dma: 1547 Biotech ($BTK) The BTK was the day's best performing sector Thursday with its 3.87 percent pop. The BTK's gain narrowly out paced the 3.56 run in the Disk Drives ($DDX). Leader gainers in the biotech space included Protein Design Labs (NASDAQ:PDLI) with its 21.83 percent rally despite its seemingly bad news Wednesday night. Others included ImClone (NASDAQ:IMCL), Millennium (NASDAQ:MLNM), and Incyte (NASDAQ:INCY). 52-week High: 676 52-week Low : 382 Current : 535 Moving Averages: (Simple) 10-dma: 522 50-dma: 510 200-dma: 537 Paper ($FPP) The FPP was the worst performing sector in Thursday's session with its 1.88 percent drop. The cyclicals were the poorest performing broad group of stocks for the day, which was interesting because the group has been the market leader recently. Leading to the downside in the FPP included Louisiana Pacific (NYSE:LPX), Abitibi (NYSE:ABY), Weyerhaeuser (NYSE:WY)), and International Paper (NYSE:IP) 52-week High: 381 52-week Low : 270 Current : 367 Moving Averages: (Simple) 10-dma: 371 50-dma: 347 200-dma: 330 ----------------------------------------------------------------- Market Volatility WHOA! The VIX closed below the 20.00 level Thursday for the first time in 18 months. The late-day rally in stocks and earlier reversal in bonds contributed to the VIX's demise Thursday. Meanwhile, nothing new in the VXN. It traced another all-time low. CBOE Market Volatility Index (VIX) - 19.98 -0.75 Nasdaq-100 Volatility Index (VXN) - 36.98 -1.18 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.93 434,545 405,047 Equity Only 0.82 397,048 324,129 OEX 1.18 8,669 10,189 QQQ 0.72 34,965 25,172 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 63 + 0 Bull Confirmed NASDAQ-100 65 - 4 Bull Confirmed DOW 77 + 0 Bull Confirmed S&P 500 76 + 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 0.94 10-Day Arms Index 1.05 21-Day Arms Index 1.03 55-Day Arms Index 1.22 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 1666 1498 NASDAQ 2158 1359 New Highs New Lows NYSE 143 63 NASDAQ 149 25 Volume (in millions) NYSE 1,323 NASDAQ 1,429 ----------------------------------------------------------------- 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 ----------------------------------------------------------------- ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. 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PremierInvestor.net Newsletter Thursday 03-21-2002 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/c21b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: BBH, CSC Bearish Play Updates: CLS, EMLX, CHKP, CSCO Closed Bearish Play: BRCD Stock Bottom / Active Trader Bullish Play Updates: DOL, KSS, OHP, PSS High Risk / High Reward Bullish Play Updates: HIG, PVN Bearish Play Updates: ADLAC 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: 127.80 change: +3.55 stop: 119.45 It was a banner day for biotechs. The BTK.X biotech index rallied almost 20 points to close at 535 for a 3.87% gain. The sector is close to breaking out above its 200-dma, which would draw more attention from the bulls. The BBH biotech HOLDRs also had a great day with almost every stock in its basket posting strong gains. We list most of the leaders here: AMGN +1.93%, BGEN +2.48%, CHIR +3.22%, ENZN +4.21%, DNA +3.32%, GENZ +2.66%, GILD +3.00%, HGSI +5.76%, IDEC +3.78%, MEDI +3.88%, MLNM +8.03% and SEPR +5.67%. This sort of performance helped created a bullish engulfing candlestick pattern for the BBH, which is a positive sign. We would look for the up trend to continue but the group might see some profit taking tomorrow with the weekend ahead of us. Picked on February 20th at $120.00 Gain since picked: +7.80 Earnings Date N/A --- Computer Sciences - CSC- close: 51.00 change: -0.53 stop: 49.74 Did someone forget to tell CSC that the tech sector rallied today? Shares continued to fall back after profit taking hit the stock on Wednesday. The good news was CSC found support at the $50 level where one would have expected. Shares did rebound a full point by the close but it was not very impressive. Bulls looking for a new entry point could use today as a low-risk entry but we're more concerned by the stock's lack of participation in the broader market rebound. The MACD is about to produce a bearish crossover and the stochastics don't look so hot. We would recommend that bulls confirm both stock and market direction before committing any capital to the play. Fortunately, if you were to enter here our stop is only 2.4% away but there's no reason to enter if shares look weak tomorrow. No sense throwing away 2% for the fun of it. We'd rather be in Vegas. Picked on March 15th at $52.25 Change since picked: -1.25 Earnings Date 01/31/02 (confirmed) -------------------- Bearish Play Updates -------------------- Celestica - CLS - close: $35.85 change: -0.00 stop: 37.21 *new* The bearish trend continues for electronics manufacturer Celestica. The last couple of days continue to confirm our bearish indicators with the MACD actually producing a bearish crossover (and under the zero line we might add) while volume has been growing on these down days. The key move appeared to be CLS' break under the $36 level of support by Wednesday's close. The weakness continued today but the rebound in the markets lifted even the likes of beaten shares of CLS to finish with no change in price for the session. All in all things look okay for bears but the stock was beginning to look a little oversold and we might have been expecting a bounce soon. Yet no bounce is likely to occur. The reason was rival Solectron's earnings announcement today. SLR announced their Q2 numbers and the results were not good. Consensus estimates for SLR had been 3 cents a share and the company came in with 1 cent or a profit of just $8.3 million. Revenues were also down to $3 billion, which is 200 million less than the previous quarter and significantly less than the $5.4 billion from the year earlier. SLR's CFO was quoted in the conference call with this remark, "A broad sustainable recovery has been pushed out...none of us anticipated we would go this low and this long." With a poor Q2 results and no improvement on the horizon for Q3, the industry could see a flight of investors which should translate into a favorable environment for our CLS short play. CLS will get a chance to release their own earnings results in about three to four weeks. In the mean time we are going to lower our stop to $37.21, which is just over Wednesday's high. A more conservative trade could use a more efficient strategy and place their stop just above today's highs ($36.63). After all, if CLS can rally above the highs on very negative sector news then bears may want to look at a different stock to short. Very short- term traders are going to want to look for the exits if CLS approaches $34 while the rest of us are still looking for a profit target near $32. Picked on March 13th at $37.98 Gain since picked: +2.13 Earnings Date 04/17/02 (unconfirmed) --- Check Point Software - CHKP - cls: 32.81 chg: +2.63 stop: 34.15*new* If you missed your chance to short CHKP at $34 on Tuesday you may get your chance again real soon. Shares lost about 8.4% on Wednesday when fellow software security company Versign (VRSN) was hammered for a 9% loss over revealing details in their 10Q. The story uncovered news that VRSN had recognized some $38 million in barter revenue, or about 3.8% of its total sales in 2001 yet they did not recognize these sales in 2000 (source:CBSMW). The drop in VRSN's stock price is not surprising but it took the whole industry niche down with it and ISSX and CHKP both felt the selling pressure. CHKP closed just above support at $30. Unfortunately for the bears, the stock immediately shot up again on Thursday, paused to tackle the $32 level and continued higher. If I was an optimistic bear (is that an oxymoron?) then I can look at today's move and see that CHKP merely filled the gap from Wednesday's drop and is ready to roll over again. However, at this time we are not that optimistic and suspect that CHKP will retest $34 and possibly retest its 50-dma at $34.12. Therefore we are going to lower our stop to just above the 50-dma and place it at $34.15. The overall trend is still down and the MACD just produced a bearish crossover but the rebound in the Nasdaq actually awoke buyers in MSFT as well. If the software giant can start making gains it might inspire bulls to gamble on other software stocks like CHKP, VRSN and ISSX. Picked on March 14th at $33.28 Gain since picked: +0.47 Earnings Date 01/15/02 (confirmed) --- Cisco Systems - CSCO - close: 16.49 change: +0.47 stop: see text Shares of CSCO rebounded strongly this afternoon like most technology stocks but not before they pierced the $16 level this morning. It was mainly a moral victory for the bears as the stock seemed bound to the $16 level of support before the afternoon rally commenced. There seemed to be no lack for bad news on Thursday. SLR's negative earnings report could have a bearish influence on large hardware producers like CSCO. Also in the news were several reports that CSCO might lose another customer to bankruptcy. Velocita, a fiber-optic network builder, appears to be on the verge of bankruptcy. The company fired about 75% of its employees last month and Wall Street is speculating that CSCO could be left holding the bag. CSCO's exposure would be $200 million it invested in the company in addition to a $225 million in vendor financing that CSCO lent to Velocita to buy CSCO gear. CSCO spokesmen were quick to report that the networking giant had taken out reserves to cover the amount. We doubt this will have any serious impact on their business since CSCO has about $7.5 billion in cash or equivalents just sitting in the bank. However, this is just one more straw on the back of a camel that is already looking somewhat burdened. If you're not familiar with the fiber- optic networking industry, the markets have already seen Global Crossing Ltd and 360networks Inc. go belly up and another company, Williams Communications Group is considering bankruptcy as well. If we can, we'll include a detailed chart showing how CSCO is still under its 50% retracement level and still inside its descending trading channel. Whatever the case, until the stock trades through our trigger point at $15.90 we merely have to sit back and wait. Once we are triggered we'll start with a stop at $16.70. Picked on March xth at $xx.xx <- See text Change since picked: +0.00 Earnings Date 05/07/02 (unconfirmed) --- Emulex Corp. - EMLX - close: 30.94 change: +2.20 stop: 32.31 Uh-oh! EMLX had been moving in perfect unison with the view our crystal ball painted for us over the weekend. That was until this afternoon. The failed rally at $30 on Wednesday was exactly what we expected and shares remained under the $30 and 200-dma resistance level for most of Thursday until the last couple of hours when the rally in the tech sector was at its fullest. In the news we noticed that a broker or two has come out with some bullish calls saying the valuations on EMLX are attractive but that is nothing new for the tech markets. We do see a potential crossover in the MACD on the horizon but we are most disturbed by the close over $30. Bears should be monitoring and/or adjusting their stops and we would not be looking for new entries points at this time. If shares remain over $30 on Friday we might consider closing the play or adjust to a very tight stop. We would look for potential resistance at $32 but that's awfully close to our current stop of $32.31. Picked on March 14th at $29.25 Gain since picked: -1.69 Earnings Date 01/22/02 (confirmed) =============== NB Closed Plays =============== -------------------- Closed Bearish Play -------------------- Brocade Communications - close: 25.73 change: +2.61 stop: 24.21 Was that a double-bottom? It sure looks that way after BRCD added almost 11.3% today. Shares had hovered above February lows near $22 over the past couple of days but really caught fire today. A Bank of America analyst came out with positive comments on the stock based on overdone revenue concerns, and shorts may have been eager to cover their positions after the stock found new strength at the $22 level. Although conservative traders could have taken their money off the table near that level we were willing to take a little more heat to see if BRCD could break below $22. This morning the stock gapped up and marched higher throughout the day, but we were stopped out early at $24.21 for a 10% move. We wouldn't be surprised to see BRCD bump from the top of its descending channel near $28 and head lower again, but for now we'll step aside while the bulls see how far they can run the stock price. Picked on March 15th at $26.90 Gain since picked: +2.69 Earnings Date 04/17/02 (unconfirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Dole Food CO. - DOL - close: 30.33 change: +0.33 stop: 28.99 Finally, some decent upside movement from DOL. Today's 1.10% gain outperformed the negative Dow Jones and pushed the stock to its highest close since March 5th. Hopefully now that the stock has consolidated for the past two weeks we'll see another move higher. Traders may want to consider an entry if DOL closes above recent highs of $30.50. If this occurs the next hurdle will be the 52- week high at $31.46. We're looking for a move above that level to clear the way for a move to our profit target at $34. In late- breaking news, after the bell today DOL announced a quarterly dividend of .15/share, to be paid on June 13, 2002. Picked on March 1st at $30.94 Gain since picked: -0.61 Earnings Date 01/31/02 (confirmed) --- Kohls - KSS - close: 70.13 change: -0.78 stop: 66.75 The RLX.X retail index must've gotten dizzy after repeatedly butting its head on resistance at 980. Its 1.15% loss today underperformed the broader market, while KSS traded in tandem with the sector and lost 1.1%. Since moving over resistance at $70 last week the stock has consolidated on decreasing volume. Thus far we're encouraged by the way KSS has successfully tested this level - Its low today was exactly $70. Traders may find it interesting to view a 5-minute (interval) chart on KSS. Notice how the stock traded in a narrow range with support at $70? Whether or not this support holds may depend largely on what the RLX does. Look for the index to find support at 960. Extremely conservative traders who are feeling bullish on retail can take positions at current levels with a stop nestled near $69.75 after checking market direction first. Picked on March 15th at $ 70.50 Change since picked: -0.37 Earnings Date 03/05/02 (confirmed) --- Oxford Health - OHP - close: 41.53 change: +0.28 stop: 38.50 Broader market weakness this morning pulled the HMO.X healthcare index to within a point of support at 500 and then followed the Dow higher to finish with just a fractional loss. OHP also traded lower but actually closed in the green with a 0.67% gain. This marks the third day in a row that shares tagged a new all-time high. The Premier Investor newsletter is currently up 7.7% on this play. As long as the healthcare sector remains strong we feel confident that it can reach our profit target at $44.75. Intraday weakness down to the $41 level could be used as an entry point, while aggressive traders could use a move over today's high of $41.64. Editor's note: nothing moves in a straight line. So if you don't feel like chasing OHP odds are good it could produce a 3% to 5% pull back at any time. We recommend patience if your risk tolerance suggests a lower entry point. Fortunately for traders currently in the play the stock has not been that volatile over the last few weeks of March. Picked on March 8th at $38.55 Gain since picked +2.98 Earnings Date 02/05/02 (confirmed) --- Payless Shoesource - PSS - close: 62.29 change: -0.72 stop: 58.75 As mentioned above, retailers took some heat today after the retail index (RLX) failed to break above resistance. PSS appears to have its own resistance overhead near $65 and has spent the last two days pulling back from that level. There hasn't been much conviction behind the selling - Volume today was 113K versus the average of 147K, and yesterday's volume was just over half as much as today's. Watch for support to emerge near $61.50 - $62.00. New entries could be considered on a bounce from this level. If shares move higher without any additional pullback be sure to first confirm that the RLX has broken over resistance at 980 before jumping on. An event for the group was NKE's earnings announcement today. Revenues weren't so hot with only a 4.2% gain but profits grew by 30%. This might produce some positive influence for the industry but unfortunately NKE is seeing a "sell the news" effect in the after hours market. If this negativity continues tomorrow, then PSS might fall closer to the $60 to $61 level. Picked on March 15th at $61.74 Change since picked: +0.55 Earnings Date 02/22/02 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Hartford Financial Svc - HIG - cls: 66.65 chg: -0.19 stop: 64.95*new* HIG continues to trade in a narrow, albeit slightly-widening range. Today's trading saw a break below recent support at $67 as shares lost 0.28% on moderate volume. If we get a more substantial pullback, look for support at the 50-dma (roughly $65.25). HIG bounced sharply from this dma twice in the past two weeks. One of the smaller brokerages downgraded several insurance companies today, including heavy-hitters PGR and ALL. However, we didn't see much of a reaction to it. Actually, PGR hit a new high. Meanwhile it appears investors may have HIG trading sideways as they digest the impact of the company's current litigation issues. In the last couple of days we've noticed news reports that HIG and one of their affiliates might be at risk to losing a recent court case to Bancorp Services. HIG is expecting a potential $11 million impact in the Q1 at this time from the case but it could see additional costs in the future. We would be cautious and take a wait and see approach. If HIG can start to gain some positive momentum and close above $68 we might turn more optimistic again. We are going to bump up our stop half a point to $64.95. If shares break the 50-dma we'll probably want out. Picked on March 13th at $65.74 Change since picked: +0.91 Earnings Date 01/28/02 (confirmed) --- Providian Financial - PVN - cls: 6.15 chg: +0.25 stop: 5.39 *new* This high-risk play looks like it could be ready to move to the upside. We speculated in the most recent update that PVN seemed to be coiling near the $6.00 level. Shares tacked on 4.2% today and are now just $0.15 from setting a new near-term high at $6.30. The daily stochastics took a dip but are curling higher toward the upper range. Traders can target entries if the stock moves above this level. Alternatively, you could wait to see if shares dip back to the $5.70 to $5.85 level, which has supported the stock this week. Based on the fact that we are currently profitable on this play, we're going to move our stop up to $5.39. This allows us some breathing room, but ensures that we won't get caught in a failed rally. On a related note, we like how PVN has outperformed the BIX.X banks index, which dropped yesterday after failing to conquer resistance at 700. It's possible that PVN's appearance at the Banc of America Financial Services Conference on Monday, March 25th might produce some positive press for the stock. Unfortunately, some late breaking news out tonight might also depress it. A late night news article showed up and PVN has agreed to pay $38M to settle a 1999 shareholder lawsuit. The settlement still needs a judge's approval. While this settlement doesn't handle all the shareholder lawsuits outstanding the company does not expect it to affect its current turnaround efforts as the entire $38M is covered by insurance (source: AP). Traders definitely want to take a step back if you have yet to make a play and see how the market reacts tomorrow. Picked on March 8th at $5.71 Change since picked: +0.44 Earnings Date 02/07/02 (confirmed) -------------------- Bearish Play Updates -------------------- Adelphia Comm. - ADLAC - close: 21.81 change: +0.17 stop: 22.85 *new* Today was looking bright for the ADLAC bears until the NASDAQ rally rained on our parade. Shares pegged a low of $20.81 but added a full point to that amount before the day was over. Something we noticed today was the way COX bounced from its 50- dma and helped lead ADLAC and the group higher. When fine-tuning entry points it might be a good idea to take a look at how COX is performing. With this in mind, aggressive traders could consider an entry if the stock rolls over tomorrow at today's high near $22. In order to manage risk we're tightening our stop tonight to $22.85, which is just above the Mon/Tues/Wednesday highs for the week. This should protect a gain of almost 5%. Note: Last night we mistakenly gave April 27th as the date for ADLAC's Q4 conference call. As mentioned in an earlier update, this will actually occur next Wednesday, on March 27th. Perhaps curious reporters will take this opportunity to shine a glaring spotlight on the company's questionable cable swap with CMCSK again. Picked on March 12th at $23.99 Gain since picked: +2.18 Earnings Date 03/29/02 (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 DUK Duke Energy Corp 38.03 +1.57 CIN Cinergy Corp 35.29 +0.76 AYE Allegheny Energy Inc 39.40 +1.65 PWN Pinnacle West Capital 44.38 +1.03 GAS Nicor Inc 45.05 +0.98 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change LGND Ligand Pharmaceuticals 18.05 +1.53 GNTA Genta Inc 18.25 +1.20 HLYW Hollywood Entertainment 17.70 +1.24 UCI UICI 16.65 +1.10 TREE Lendingtree Inc 12.15 +1.15 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change PGN Progress Energy 49.10 +1.57 AYE Allegheny Energy Inc 39.40 +1.65 MEG Media General 62.20 +3.60 TKR Timken Co 23.65 +1.58 HYSL Hyperion Solutions 26.47 +1.99 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change IR Ingersoll-Rand Ltd 51.22 -2.16 WAG Waters Corp 29.20 -1.85 MYG Maytag Corp 42.63 -1.81 LEN Lennar Corp 51.12 -1.50 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change SDS Sungard Data Systems 33.15 -1.58 DOV Dover Corp 41.95 -1.09 ORI Old Republic Intl 31.17 -0.43 WBST Webster Financial Corp 36.47 -0.43 ================================================================= 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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