PremierInvestor.net Newsletter Tuesday 03-26-2002 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/c26b_1.asp ================================================================= In section one: Market Wrap: Frozen In Time Market Sentiment: On Edge Play-of-the-Day: Sharpening Their Claws ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 03-26-2002 High Low Volume Advance/Decline DJIA 10353.36 + 71.69 10432.86 10276.76 1.19 bln 1953/1205 NASDAQ 1824.17 + 11.68 1843,96 1807.47 1.46 bln 1999/1566 S&P 100 575,17 + 3.50 580.14 571.67 Totals 3952/2771 S&P 500 1138.49 + 6.62 1147.00 1131.61 RUS 2000 501.66 + 5.27 501.74 496.39 DJ TRANS 2875.37 + 58.14 2878.05 2814.92 VIX 19.79 - 0.73 20.38 19.38 VXN 37.68 - 1.50 39.57 37.64 TRIN 1.10 PUT/CALL 0.66 ----------------------------------------------------------------- =========== Market Wrap =========== Frozen in time "Frozen in time" is kind of a weird title for a market wrap, but that seems to be appropriate today, Tuesday, March 26, 2002. It was 39-year ago today that I was born. It's a somber time where I can perhaps take a moment or two and reflect on what has been and what will hopefully be a pleasant life. In 1963 there was a lot going on. Things that looked to perhaps shape the world to come. In 1963 some of the world headlines were "France Bars Britain from European Common Market," "Soviet Missiles Pulled from Cuba," "Russia Puts First Woman in Space," "Khomeini Arrested During Iran Rioting," "Churchill Retiring After Long Political Caree" and "The Hotline Between the U.S. and the U.S.S.R is Established to Help Avert War!" My mom tells the story of me being awarded the "Biggest baby of the month" at a whopping 10-pounds 8-ounces, but I've never read anything about it other than the local newspaper of the town I was born in. I guess it was a near-term feat that was rather interesting to the community, but not sure that event was necessarily going to shape the course of world events. While "biggest baby of the month" was a feat my mother still grimaces over, it was an event that had little impact on many except perhaps one. My mom. Today's "largest monthly jump" in consumer confidence in over 25- years has more of an impact on market participants near-term, but it too will eventually have less of an impact on things as we move forward. While that 10/lb 8/oz kid took up some crib space at the hospital nursery and most likely increased formula demand during my brief stay, the following month there was a new kid born that tipped the scale at 10/lb 10/oz just six days later to ring in the month of April. I'm guessing I was shuttled out the door and the hospital nurses were left to gawk at the new kid that just posted a new number. 39-years ago to the day, who would have thought that today's consumer confidence reading of 110.2 would mark the biggest one- month gain in consumer confidence in over 25 years? Today's "largest monthly jump" in consumer confidence in over 25- years has a near-term impact on market participants, but it too will eventually have less of an impact on things as we move forward. Various opinions Joel Naroff, chief economist at Naroff Economic Advisors thinks, "Confidence is building and there is no reason to believe that spending will not follow. Rate hikes are coming. Only the timing is uncertain." While consumer confidence numbers were much stronger than expected, New York Fed President William McDonough said what happens with business investment remains one of the "great mysteries." "Capital spending remains the weakest sector," McDonough acknowledged, adding that firms may not do much more than restock inventories. The New York Fed president surmised that the corporate sector would begin to see improved profitability by around mid-year. Both of these gentlemen's comments seemed to come into play today and gives some insight into what the MARKET is trying to sort out at this time. It all comes down to the "great mysteries" that the future holds. It is still my view that the deeper cyclicals are the best areas for bulls to be placing their bets at this time. If one of the "great mysteries" is capital spending, then the deeper cyclicals should be the first to benefit from a recovering economic environment. When they do, then these are the company's that will eventually drive capital spending as the bottom line (earnings) begins to grow. Morgan Stanley Cyclical Index (CYC.X) - Daily Interval Of the sectors/indexes we feel investors/traders should be keeping an eye on is the Morgan Stanley Cyclical Index (CYC.X). From "basic materials" stocks like Alcoa (NYSE:AA) $37.84 +2.96% "aluminum", USX-US Steel (NYSE:X) $17.00 +3.03% "steel" and Phelps Dodge (NYSE:PD) $40.94 +2.47% "copper" to heavy machinery like Caterpillar (NYSE:CAT) $56.25 +0.55% and Deere (NYSE:DE) $44.07 +0.7% and many others, these are the company's the are considered the deep cyclicals. These are also many of the company's that have been hit hard by the recent recession that have been cutting costs in order to help prop up the bottom line, while in the meantime looking for an economic recovery to get the top line growing again. Once the earnings begin flowing to the bottom line, then budgets for further capital expenditures will come in order to create greater productivity measures. Right now, there's enough capacity in all of their systems that the "need to spend" on greater productivity measures may not necessarily offset the costs for the productivity gains received. In economic terms it has to do with what we learned in high school and college regarding marginal cost equaling marginal revenue. In essence, for every dollar spent on equipment, is the incremental gain in revenue or efficiency worth the dollar spent? If you've got plenty of capacity like many have right now, then spending may not be ramping up. Not yet at least. The recent break to a new 52-week high does at least hint that the MARKET is making some bets on the deeper cyclicals and money has been flowing to many of these stocks. In recent sessions, I'm thinking that bulls took some profits in these stocks. If that is the case, then the $550 level should become support. If that level were broken, then I begin to think the MARKET isn't seeing too robust of an economic expansion near-term. This morning's durable goods orders of 1.5% did beat consensus estimates looking for a 1.1% rise, but the bulk of the durable goods orders came from the big jump in commercial aircraft orders (+47% last month). In this morning's 09:00 Update we noted that durable goods orders would have actually fallen -1.3% if the more volatile transportation orders were excluded. The cyclicals did hold tough in early trading, but like the broader market the gains found were more than likely attributed to the consumer confidence numbers. Nonetheless, the Cyclicals (CYC.X) were able to hold onto the bulk of their gains, while some of the more budget/IT spending sectors faded a bit into the close. Telecom and telecom-related stocks continue to find weakness, or at least lack of buyers. In the end, that's all that really matters. Both telecom indexes, the Combined Telecom Index (IXTCX) 171.51 -1.06% and North American Telecom Index (XTC.X) traded "heavy" today. Both look to be suffering from the end-of- quarter liquidation by some institutions trying to get some stocks off the books so they need not explain the holding to their shareholders come April. Shares of telephone service provider WorldCom (NASDAQ:WCOM) $6.11 -6.28%, came within 7-cents (isn't that about the going rate for a long-distance phone call per minute?) of setting a new 52-week low when the stock traded $6.00 earlier in the session. I think it has been rather safe to say, "If it's telecom-related, Jeff doesn't like it." I won't argue with that. I like the risk/reward setup in shares of QUALCOMM (NASDAQ:QCOM) $39.87 +1.01% for bearish traders (see play profile). While this stock did find some buyers today, the 50-day moving average at $40.76 provided some formidable resistance and MACD is rolling. I'd note that MACD just crossed below the signal level today and a break of this morning's lows could see the stock trade the $35 level before weeks end. QUALCOMM Chart - Daily Interval Personally, I don't think a trader needs to sit around in shares of QUALCOMM (NASDAQ:QCOM) for weeks in order for something to happen. I'd be more inclined to put a "time limit" on this trade of several days and not necessarily several weeks. This one's a mover and gyrates as shorts come in and cover, which can really provide a short-term painful experience if you like to trade for profits. I think we're right at a major near-term "pivot point" at retracement of $39.84. If the stock breaks today's low of $38.58 and the MARKET responds negatively to tomorrow's economic data, the stock could easily trade the $35 level before weeks end. In after-hours trading, shares of QCOM slipped below our retracement level at $39.75. Tomorrow's economic data New home sales for February are due out at 10:00 AM EST and consensus estimates are for a number of 880,000. That's all the economic data that is due to be reported tomorrow. Adelphia Earnings Shares of Adelphia Communications (NASDAQ:ADLAC) $20.39 -3.18% traded "heavy" all session and the company is expected to report earnings tomorrow morning before the opening of trading. As described in Friday's play update, we wanted to play it safe and lock in gains as of tonight's close and not risk a 15% gain from bearish profile to some type of bullish upgrade or earnings surprise. I'm sure there may be a couple of us, uh I mean subscribers that held a portion overnight and looking for some negative news. I think that would have been a decent strategy. I'll look for Adelphia's (ADLAC) news before the bell and hopefully I they'll report before tomorrow's 09:00 EST Update is due out. Jeff Bailey ================ Market Sentiment ================ On Edge By Eric Utley The bulls appear a bit skittish. Monday's meltdown definitely snuffed a lot of optimism. But that good mood was found again this morning following the release of March's consumer sentiment number. The index shot up to 110.2, well above the market's expectations. It was the highest reading since last August's 114. The upside surprise resulted in a sharp, big rally in stocks early Tuesday, but something gave way later in the day. Stocks were unable to continue higher after the early buying spree, which some suggested was a combination of short covering and heavy futures buying. The necessary demand to carry stocks higher never materialized Tuesday afternoon. Instead, the bids disappeared and stocks headed lower. The Nasdaq-100 (NDX.X) slipped into negative territory before a last minute effort by the bulls lifted the tech-heavy index back into positive territory into the close. The daily sector winner and loser were about as bifurcated as sectors get. The recent run in the Gold and Silver Index (XAU.X) necessitated a pullback in Tuesday's session, leaving the XAU 2.78 percent higher. Meanwhile, the broader transport sector came roaring back, led by the 3.57 percent pop in the Airline Index (XAL.X). The energy, telecom, and drug segments of the market were especially weak. While financials, cyclicals, and technology led to the upside. The fear gauges of the market continued to tick lower, epitomized by the new yearly low in the CBOE Market Volatility Index (VIX.X). In my view, the longer the VIX trades below 20, the greater the downside risks grow. The put/call figures confirm the lack of fear in the marketplace as calls continue to swamp puts. The short-term ARMS reading is ticking towards an extreme, which reinforced the short-term oversold way of the market going into Tuesday's session. Coupled with the four consecutive down days in the Dow, Tuesday's consumer number may have been merely an excuse to cover shorts and blow-off some upside risk. Finally, the Nasdaq-100 Bullish Percent ($BPNDX) shed five more percent Tuesday to a reading of 59 percent. That move reinforces our bearish stance on technology shares and won't be shifted until we see some improvement in the indicator. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10353 Moving Averages: (Simple) 10-dma: 10488 50-dma: 10090 200-dma: 9988 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1138 Moving Averages: (Simple) 10-dma: 1153 50-dma: 1127 200-dma: 1143 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1440 Moving Averages: (Simple) 10-dma: 1475 50-dma: 1485 200-dma: 1541 Airline ($XAL) The XAL rebounded in Tuesday's session after a big down day Monday. The XAL finished 3.57 percent higher for Tuesday. Fears over pricing strategies were squelched when Delta Air Lines (NYSE:DAL) announced lowered fares for certain destinations. Leaders included Southwest (NYSE:LUV), Delta, Continental (NYSE:CAL), Alaska Air (NYSE:ALK), and United (NYSE:UAL). 52-week High: 153 52-week Low : 59 Current : 104 Moving Averages: (Simple) 10-dma: 106 50-dma: 97 200-dma: 103 Gold and Silver ($XAU) The XAU pulled back in Tuesday's session after hitting a new 52-week high Monday. The XAU finished 2.78 percent lower in Tuesday's session. Leading to the downside included Gold Fields (NASDAQ:GOLD), Harmony Gold (NASDAQ:HGMCY), Placer Dome (NYSE:PDG), and Anglogold (NYSE:AU). 52-week High: 70 52-week Low : 46 Current : 68 Moving Averages: (Simple) 10-dma: 65 50-dma: 64 200-dma: 57 ----------------------------------------------------------------- Market Volatility The VIX traced yet another new yearly low in Tuesday's session at the 19.38 mark. Tuesday's close was the third below 20 in the last four days. The VXN spiked higher in Monday's session following the steep drop in the Nasdaq-100 (NDX.X). It rolled over at the 10-dma in Tuesday's session. CBOE Market Volatility Index (VIX) - 19.75 -0.73 Nasdaq-100 Volatility Index (VXN) - 37.68 -1.50 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.66 398,033 268,367 Equity Only 0.59 345,232 205,205 OEX 0.79 11,245 8,840 QQQ 0.26 34,435 9,066 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 64 + 0 Bull Confirmed NASDAQ-100 59 - 5 Bull Correction DOW 77 + 0 Bull Confirmed S&P 500 74 - 1 Bull Confirmed S&P 100 76 + 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 1.25 10-Day Arms Index 1.20 21-Day Arms Index 1.06 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 1953 1205 NASDAQ 1999 1566 New Highs New Lows NYSE 163 44 NASDAQ 152 24 Volume (in millions) NYSE 1,199 NASDAQ 1,470 ----------------------------------------------------------------- Commitments Of Traders Report: 03/19/02 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 S&P Commercials maintained their relatively higher net bearish position in the prior week by dropping a significant number of longs and a small number of shorts. The group's % of OI, however, increased by a larger amount. Small traders maintained their yearly high net bullish position. Commercials Long Short Net % Of OI 03/05/02 361,254 445,989 (84,735) (10.5%) 03/12/02 396,050 483,606 (87,556) (9.9%) 03/19/02 322,938 410,494 (87,556) (11.9%) 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 03/05/02 161,711 60,941 100,770 45.3% 03/12/02 179,825 75,025 104,800 42.6% 03/19/02 145,262 43,066 102,196 54.3% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 104,800 - 3/05/02 NASDAQ-100 NDX commercials dropped a big chunk of their long position, resulting in a drastic climb in the group's net bearish stance. Small traders went the opposite direction by shedding a larger number of short contracts, establishing a firm net bullish position. Commercials Long Short Net % of OI 03/05/02 33,549 35,419 (1,870) (2.7%) 03/12/02 37,415 42,942 (5,527) (6.9%) 03/19/02 24,792 33,699 (8,907) (15.2%) 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 03/05/02 11,961 11,214 747 3.2% 03/12/02 14,571 13,045 1,526 5.5% 03/19/02 11,637 5,527 6,110 35.6% 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 commercials shed a significant number of both long and short positions. The result of their actions was a drastic drop in the group's net bullish position. Small traders reduced their total position, too, resulting in a modest drop in the group's net bearish position. Commercials Long Short Net % of OI 03/05/02 37,036 25,554 11,482 18.3% 03/12/02 35,080 23,204 11,876 20.4% 03/19/02 20,858 13,283 7,575 22.2% 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 03/05/02 6,589 13,057 (6,468) (32.9%) 03/12/02 6,400 13,070 (6,670) (34.3%) 03/19/02 4,651 10,367 (5,716) (38.1%) 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 =============== Check Point Software - CHKP - cls: 31.06 chg: -0.32 stop: 34.15 Company Description: Check Point Software Technologies is the worldwide leader in securing the Internet. It is the confirmed market leader of both the worldwide VPN and firewall markets. The company's Secure Virtual Network (SVN) architecture provides the VPN and security infrastructure that uniquely enables secure and reliable Internet communications. SVN solutions, as delivered in the company's Next Generation product family, secure business communications and resources for corporate networks, remote employees, branch offices and partner extranets. (source: company press release) - ORIGINAL WRITE UP: March 14th, 2002 - Why We Like It: It is no secret that the software sector has been one of the leaders to the downside during the last three sessions. Sector leaders like MSFT have also been trading lower and this trend continued today. A closer look of the last several sessions of the GSO.X software index shows how the sector rallied up to its 50 & 200-dma's and promptly rolled over. Today's trading ended with the index breaking under the 170 support level and is likely headed for a test of the 160 support level. More negative news from the likes of ORCL is not going to inspire buyers in the group either. We've had our eye on CHKP for a few days and put it in the watch list on Wednesday (yesterday). CHKP had also rallied to its 200-dma before rolling over and closing back under its own 50-dma. We have been using some fitted retracement levels from CHKP's September lows to its January highs and our trigger point was a move under $33.80. A glance at the point-and-figure chart also shows how CHKP had rallied near its descending bearish trend line before profit taking hit the share price. MACD on the stock is starting to roll over just under the zero line, which helps confirm our bearish perspective. We would expect some support near the $30 level but our goal is a retest of the February lows near $27.50. We're going to start the play with a stop just above Wednesday's high at $35.51. If you considering entry points you may want to look for any failed rally at $35.00 or a move under $33.00. We're willing to enter the play here. FYI, we don't think it has any affect on the stock price but we believe CHKP is based out of Israel and any increase in violence in the Mid East could be just one more sentiment factor hanging over CHKP's head. Editor's note: some traders may find it interesting or confusing that we have a short play on CHKP and a long play on MERQ, another software stock. We like MERQ and it has been showing a decent amount of relative strength against the sector and the Nasdaq while CHKP has not and continues to violate levels to the downside. We actually like the strategy of hedging our investments so if the market goes up we can benefit with leadership in MERQ and if the market goes down we can benefit from a lack of leadership in CHKP. Be sure to maintain good stop losses! - Most Recent Update: March 26th, 2002 - The software sector continues to slide lower. However, its largest component, MSFT, is approaching support at the $58 level. Optimistically, bulls will look for this to support the stock. Bears, of course, will be looking for a breakdown below it. If this occurs then the GSO.X will probably have no hope of maintaining its current perch on the 160 level. Fortunately for the bears reading the Premier Investor Newsletter, we're playing the security software stocks, which seem exceptionally vulnerable lately. One of CHKP's rivals, ISSX, was hammered for an 8.45% loss today on concerns over its current quarter. CSFB raised concerns that budgets by corporate CIOs for intrusion software, the kind that ISSX provides, have been slipping. This rationally translates into concerns that ISSX may not make their estimates this quarter. Another broker, Robertson Stephens also raised similar concerns and believes that ISSX may need to lower its June quarter guidance of 7% sequential growth. Negative news like this can directly translate to CHKP unless one has strong evidence that CHKP is taking marketshare away from ISSX. While we don't have any word on this speculation at the moment, slower sales for ISSX probably means slower sales for CHKP. We knew before hand that the $30 level would probably be support for CHKP but the growing concerns over IT spending should be able to give the bears enough of an edge to breakthrough this support. We are not adjusting our stop at this time but more conservative traders might be able to sneak by with something close to the $33.50 level. Currently, Premier is "up" more than 6% in CHKP. - Play-of-the-Day Comments: March 26th, 2002 - The GSO.X software index looks weak and security software stocks are leading the sector lower. CHKP rival ISSX took an 8.45% whipping today on concerns about Q2 guidance and revenue, while CHKP underperformed the NASDAQ and dropped 1%. If the GSO moves under 160, CHKP could break below support at $30 and quickly retest the February lows near $27. Picked on March 14th at $33.28 Gain since picked: +2.22 Earnings Date 01/15/02 (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. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Tuesday 03-26-2002 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/c26b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: BBH Bearish Play Updates: BCE, BRCM, CLS, CHKP, CSCO, ISSX, NVDA, STK Stock Bottom / Active Trader Bullish Play Updates: CAH, DOL, HRB, KSS, OHP, PSS High Risk / High Reward Bullish Play Updates: HIG Bearish Play Updates: CMOS, QCOM Closed Bullish Play: 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: 122.58 change: -0.30 stop: 119.45 Just when the BBH looked like it might make a run at $130, it quickly reversed course and returned to the bottom of its ascending channel. We'd been looking for the BTK.X biotech index to break over its 200-dma at 537 and push the HOLDRS higher, but both the index and holding stock sold off sharply yesterday. Although we were a bit surprised at the speed with which the BBH returned to the bottom of its channel, it certainly makes it easier to target entries. Whereas buying near $127 or $128 was wrought with the danger of overhead resistance, shares now have room to move. Strong support also lies just under current levels. The 50-dma at $121.45 coincides with the bottom of the ascending channel. Bulls will likely vigorously defend this level, as evidenced by today's low at $121.65. Furthermore, the BTK should have support at 500. Traders can consider bullish positions after confirming positive sector sentiment. Traders will want to be careful, as a move under the $122 level, while above the $120 support, would make us apprehensive. The indicators are not offering us any help as the MACD could roll over soon and the stochastics are already in retreat. The future trend of the BBH may very well depend on the Nasdaq and its ability to hold the 1800 level or not. In the absence of any major market movement or sector news most HOLDR components turned in a mixed performance today: AMGN +0.41%, BGEN -0.06%, CHIR + 0.67%, DNA -1.74%, and SEPR -1.62% just to name a few. Picked on February 20th at $120.00 Gain since picked: +2.58 Earnings Date N/A -------------------- Bearish Play Updates -------------------- B C E Inc. - BCE - close: 17.74 change: -0.96 stop: 19.41 *new* We suspected that the move late last week in BCE was only the beginning. There were probably a lot of stops both real and mental on the stock and if it ever traded under $20 investors were going to get out. With this in mind, the close under $20 on Friday was nothing but a dinner bell for the well fed bears prowling around the telecom sector. There was so much supply with everyone willing to sell and/or short the stock that BCE gapped down on Monday to open at $19.40. Thus, we have to take the open as our entry point. Volume was huge with nearly 2 million shares trading compared to the average of just 275K a day. The carnage continued on Tuesday as BCE gapped down again to open at $17.73. However, the stock quickly rebounded to run straight into new resistance at $19.00 before selling off again. Is this new support at $17.50? Or are bears merely pausing to catch the breath after such a thrilling chase? With the IXTCX combined telecom index dropping to the 170 level and producing a bearish crossover in the MACD we do not suspect a lot of buyers in the group right now. Still, shares of BCE are now short-term oversold and could bounce. The question is whether the intraday bounce to $19 today will suffice or will shares vacillate between $17.50 and $18.50 for another day or two. Currently, the point- and-figure chart is showing that the most current bearish price objective is pointing to a $14.00 price target. We are going add an exit price of $15.25. If shares of BCE trade at or below our exit price we'll close the play. In the mean time, we are going to lower our stop to one cent above our adjusted entry or $19.41. Picked on March 22nd at $19.40 Gain since picked: +1.66 Earnings Date 04/23/02 (unconfirmed) --- Broadcom Corp - BRCM - close: 35.11 change: +0.00 stop: 38.45 Wow! On a day like today, it is surprising to see BRCM with an unchanged share price. The up and down market action today had the indices all over the board. Strangely, while most of the tech sectors turned red intraday the chip sector was the one group showing strength. The late day bounce across the markets, including the chips, helped BRCM close unchanged and the SOX closed up about 12 points. Traders active in the chip sector will also find it interesting to note that AMAT was downgraded today from a "buy" to a "neutral" and received a 12-month price target of $55, which is only about 5% above current levels. Shares of AMAT managed to climb higher in face of this news, which may have attributed to some of the strength in the group. A closer look at BRCM reveals that shares did produce a lower high on the daily chart (like many tech stocks today) and we may have witnessed a failed rally at the $36.50 level today. We still like the stock here but traders looking for new positions may want to consider waiting for shares to trade back under the $34.50 level again. Picked on March 25th at $35.75 Gain since picked: +0.64 Earnings Date 04/23/02 (unconfirmed) --- Celestica - CLS - close: 34.48 change: +0.48 stop: 36.08 *new* The market sell off on Monday helped produced a nice 6.25% decline for shares of Celestica, which was good news for the bears as the stock had been trying to build on support near $36. With tech investors still in retreat and more and more concerns rising about business spending the market probably sees less and less reason to invest in CLS at the moment. Now all of this could change once we start to get some pre-earnings announcements and or the Q1 earnings reports that are due to start in a couple of weeks but hopefully we'll be out of this play by then. Speaking of hitting the exits, we are going to solidify our exit point for CLS. The recent late February and early March lows were $31.76 and $31.50. The recent lows these last two days have been near $34.75. Do you notice a trend? Traders tend to undercut support by about a quarter. Therefore we are going to set our exit price at $32.00. This way if everyone is aiming for the February lows we don't have to worry about missing the exits if they pull up short. We are also going to adjust our stop. We'll slide our stop down to $36.08, which should protect a 5% move in the play so far. If we had to speculate, today's move looked like a failed rally at $35.00 (give or take a quarter) and very short-term traders may want to consider plays below today's low. Be sure to watch the overall mood of the tech market if you're looking for new positions. Stochastics say CLS is already oversold while MACD just rolled over a few days ago. Premier is currently showing a move of $3.50 or +9% in CLS. Picked on March 13th at $37.98 Gain since picked: +3.50 Earnings Date 04/17/02 (unconfirmed) --- Check Point Software - CHKP - cls: $31.06 chg: -0.32 stop: 34.15 The software sector continues to slide lower. However, its largest component, MSFT, is approaching support at the $58 level. Optimistically, bulls will look for this to support the stock. Bears, of course, will be looking for a breakdown below it. If this occurs then the GSO.X will probably have no hope of maintaining its current perch on the 160 level. Fortunately for the bears reading the Premier Investor Newsletter, we're playing the security software stocks, which seem exceptionally vulnerable lately. One of CHKP's rivals, ISSX, was hammered for an 8.45% loss today on concerns over its current quarter. CSFB raised concerns that budgets by corporate CIOs for intrusion software, the kind that ISSX provides, have been slipping. This rationally translates into concerns that ISSX may not make their estimates this quarter. Another broker, Robertson Stephens also raised similar concerns and believes that ISSX may need to lower its June quarter guidance of 7% sequential growth. Negative news like this can directly translate to CHKP unless one has strong evidence that CHKP is taking marketshare away from ISSX. While we don't have any word on this speculation at the moment, slower sales for ISSX probably means slower sales for CHKP. We knew before hand that the $30 level would probably be support for CHKP but the growing concerns over IT spending should be able to give the bears enough of an edge to breakthrough this support. We are not adjusting our stop at this time but more conservative traders might be able to sneak by with something close to the $33.50 level. Currently, Premier is "up" more than 6% in CHKP. Picked on March 14th at $33.28 Gain since picked: +2.22 Earnings Date 01/15/02 (confirmed) --- Cisco Systems - CSCO - close: 16.65 change: +0.47 stop: see text We don't know what they have been smoking but the folks over at Lehman came out with a positive call on CSCO this Monday. They felt that CSCO should benefit from a "steadily improving" spending environment in the IT segment. We agree that CSCO will likely be a lead beneficiary when IT spending resumes but almost everywhere else we turn are cautious comments and warnings that there has been no turnaround yet for IT budgets. Just look at MROI as your example-du-jour. Obviously, Wall Street wasn't fooled and CSCO remains range bound between $16.00 and $17.00. Sometimes it makes you wonder if broker calls like this are just trying to beat the trend and be bold or are they just looking for an up tick to reposition their short positions. Of course if you do believe that the economy is rebounding then buying CSCO for a long-term position may not be a bad idea but why buy it here if you think you might get a better price at $14.00? Frankly, we're somewhat neutral on CSCO but the stock remains in its descending channel and until it breaks out to the upside we'd be pretty cautious on those longs. The 50-dma just produced a bearish crossover of the 200-dma a few days ago and both are sliding lower. We suspect that if CSCO can't stage a rally soon the 50- dma may be the descending elevator on the stock price and push it through support of $16.00. If and when CSCO trades through our bearish trigger at $15.90 we'll be happy to sit on our hands and wait. Optimistic bulls may want to look for a close over $17.25 or look for more confirmation with a move above overhead resistance at $18, which would also put the stock above its 50 & 200-dma's. FYI: in the news CIEN announced they would slash their staff in an effort to reach profitability while analyst grow more concerned over CIEN's sales expectations. Also in the news on Monday, rival-networking player JNPR received a downgrade from an "add" to a "hold". Picked on March xth at $xx.xx <- See text Gain since picked: +0.00 Earnings Date 05/07/02 (unconfirmed) --- Internet Security - ISSX - cls: 23.07 chg: -2.13 stop: 25.51 *new* Argh! We hate it when that happens. The stock analysts in the office debated over the weekend whether or not to add ISSX as a new play or not. We thought it looked good but lets see if it can trade under $25 again. Monday came and we got the dip under $25 but shares managed a weak rebound. We felt that looked good enough to add it but we'll use a trigger point to get a little confirmation first. The good news for the bears is that more than one broker came out today and raised their concerns over ISSX's upcoming quarter and sales expectations. The bad news is shares gapped down to $22.58, which is our new entry price. Due to the gap down we are going to lower our stop immediately to $25.51. Previously, we had it set at $27.51. The two brokers that voice their opinions on ISSX today were CSFB and Robertson Stephens. Together they served up an 8.45% drop in the stock price with concerns the current quarter was lagging behind expectations for ISSX. As mentioned in the CHKP write up, there appears to be no turnaround yet for IT budgets and no increase or up tick in spending for security software solutions. These analysts are concerned that ISSX may miss their estimates and further more Stephens felt ISSX may need to lower their June quarter guidance. In our original write up we had already mentioned that the $22 area was likely support and shares actually bounced intraday at a retracement level we had set near $21.70. If you're interested, our retracement was from the May 2001 highs to the late September lows, 100% to 0%, with the 61.8% level placed near the late January highs. This put the 23.6 Fibonacci level at $21.70. We would not be surprised to see ISSX fill the gap created today by trading back up into the $24.50 to $25.00 range. A failed rally here may be a good place to look for short entries. Likewise a move below today's low at $21.75 would also be attractive. We are expecting potential support at $20 merely due to its round number psychological support. This may be a good place to consider covering and taking profits. Picked on March 26th at $22.58 Gain since picked: -0.49 Earnings Date 04/16/02 (unconfirmed) --- NVIDIA Corp - NVDA - close: 47.00 change: +0.94 stop: 50.01 The selling continues for shares of NVDA and Monday's drop prompted us to lower our stop to $50.01 in the Monday night newsletter. As outlined in our original write up, we suspected that the $46 level might offer support even before shares reached the more traditional $45 level of psychological support/resistance. The good news for the bears my lie in the lower high and potential failed rally at the $48 level on Tuesday. Surprisingly, the chip sector was one of the stronger groups in the tech market today with positive performances by INTC and AMAT even though the latter faced a downgrade and less than inspiring price target. Shares of NVDA may continue to consolidate between $45 and $48 but as long as the highs continue to slip lower the bears are likely to crack support and we'll have a better chance of reaching our profit target near $41 to $40. Manage your stop well and keep an eye on the chip leaders to determine sector sentiment. Also keep an eye out for any news on the NVDA and the SEC investigation, which could move the stock big in either direction based on the spin. Picked on March 22nd at $48.57 Gain since picked: +1.57 Earnings Date 05/15/02 (unconfirmed) --- StorageTek - STK - close: 20.95 change: +0.07 stop: 22.05 The daily chart for STK probably doesn't paint the whole picture during the last couple of sessions as it may be hard to read. However, for the doubtful out there, the stock is still hitting new relative lows compared to the previous day. It's not much but the short-term trend still appears to be a negative one. Stochastics are in retreat and the MACD is about to produce a bearish crossover under the zero line. Unfortunately, for those of us that get impatient shares seem stuck trading sideways. We would probably wait for STK to close under $20.50 or maybe even $20.00 if you'd like more confirmation of the bearish move. There is no need to rush into a position with so many other attractive plays out there. Enter STK on your own terms and wait for it to move before committing capital. As a newsletter, we're hypothetically "in" the play already and more aggressive traders can join us but use wise stop placement to protect yourself. The overall lack of strength in the market should be comforting if you have a bearish outlook. Our original observation that shares appear to be rolling over now that they have retraced a majority of their losses from late February still seems to apply. Picked on March 22nd at $20.91 Gain since picked: -0.04 Earnings Date 04/23/02 (unconfirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Cardinal Health - CAH - close: 69.27 change: +0.56 stop: 67.49 Last Friday we went long on CAH after the stock closed above resistance at $70. Unfortunately, shares weren't able to maintain that level. CAH followed the HMO.X health provider index lower Monday and closed at $68.71, below the 200-dma. Fortunately, the HMO.X resumed its strength today and pulled the stock back above the 200-dma. Entries can be considered if the HMO remains above 500 and CAH trades above recent highs at $70.35. Conservative traders may want to also wait for the HMO to break over its recent high at 510. Buying dips could be tricky due to the possible resistance at $70, but another bounce from the 200-dma at $69 might work for the more adventurous. Picked on March 22nd at $70.05 Gain since picked: -0.78 Earnings Date 04/23/02 (unconfirmed) --- Dole Food CO. - DOL - close: 30.83 change: +0.19 stop: 28.99 DOL followed the Dow Jones higher today after a small pullback on Monday. Thus far we're encouraged with the way shares have behaved after moving back over the $30 level last week. Yesterday's 146-point decline on the Dow was only good for a $0.11 retreat in DOL. Did we mention how we like the way the stock continues to move higher from support at $30? The MACD is showing a nascent bullish crossover, which suggests that DOL may attempt to break over near-term highs at $31.46. Shares will first have to move over $31, which has acted as resistance over the past two sessions. Aggressive traders looking for a head- start may want to consider an entry if the stock closes above $31.00, while others may want to just wait for a close above $31.46. If you were looking for a low volatility play, we think DOL should be near the top of your list. Picked on March 1st at $30.94 Gain since picked: -0.11 Earnings Date 01/31/02 (confirmed) --- H&R Block Inc - HRB - close: 43.99 change: -0.02 stop: 42.75 Yesterday's triple-point decline on the Dow Jones weighed heavily on HRB, which pulled back to near-term support at $44. Fortunately the 100-dma at $43.26 has been acting as support. Traders who want to buy this dip can do so with relatively little risk by placing their stop just under the 100-dma, while we're giving it another 50 cents of room below that level. The bad news for the bulls is that shares have failed at the 10-dma three times in as many days. If attempting to buy strength, wait for a move over $45.05 to confirm that this trend has been broken. Also watch for potential overhead resistance at $46.60, where the 50-dma is located. There is no need to rush into a position. Let HRB confirm it is actually recovering before committing any capital. You may want to try using a trigger point to leg you into a position. Picked on March 22nd at $45.23 Gain since picked: -1.24 Earnings Date 05/29/02 (unconfirmed) --- Kohls - KSS - close: 69.25 change: +0.79 stop: 66.75 Is KSS breaking down or merely consolidating? At this point it's hard to tell, but Monday's failure to maintain support at $70 has us a bit concerned. Shares have been weak since failing to move over resistance at $72 and traded to a low of $68.40 yesterday before finding buyers. In all fairness to KSS, the RLX.X retail index has also been weak in recent sessions. We like how KSS outperformed the RLX today, but would be reluctant to go long until KSS puts in another close over $70. To be perfectly honest we expected retailers to benefit a lot more from the blowout consumer confidence data (110 versus the expected 97) this morning. We would've been really worried if the index had actually traded down on the news, but fortunately it found support at 950. Looking closer at the RLX, the group may need to pull back to its 50-dma again near 940 before it can mount another rally. Hopefully, if that occurs KSS can maintain support near $68. Regular readers know that we like to follow the point-and-figure charts and KSS was an optimistic play as the stock showed a bullish triangle breakout on the PnF chart a couple of weeks ago. Traditionally, these types of breakouts on the PnF chart have a very high percentage of success. What we may be witnessing is one of those uncommon occurrences where the pattern is thwarted by broader market weakness. If considering an entry in KSS, you may want to look for the RLX to confirm bullishness by trading over 965 and or a bounce at 940. Picked on March 15th at $70.50 Gain since picked: -1.25 Earnings Date 03/05/02 (confirmed) --- Oxford Health - OHP - close: 41.22 change: +0.48 stop: 39.90 As much as we'd like to see OHP hit all-time highs on a daily basis, nothing goes up in a straight line. We speculated in the most recent update that OHP could pull back to previous $40.50- $41.00 and that's what happened yesterday as shares declined with the Dow Jones to consolidate some of last week's gains. Today the HMO.X health provider index traded moved back over resistance at 500 and OHP regained 1.17%. The close over 500 in the index is a promising development for this play and traders still looking to go long may want to consider positions if the index remains strong. Look for a move over the recent highs between $42.00 and $42.75, but when calculating potential risk/reward scenarios be aware of our initial profit target at $44.75. Yours may be higher. Picked on March 8th at $38.55 Gain since picked +2.67 Earnings Date 02/05/02 (confirmed) --- Payless Shoesource - PSS - close: 60.25 change: +0.62 stop: 58.75 Just when we were getting ready to throw in the towel on PSS, the stock halted its four-day skid today and tacked on 1.03%. The gain isn't anything to write home about but nonetheless it was nice to see a close back over the $60 level. The RLX.X retail index has been trending down in recent sessions but managed a bounce from 950 today. Consumer confidence came in stronger than expected this morning and retailers traded flat on the news. Is this a sign that all the good economic news is already priced into retail stocks? It's hard to say, but let the RLX be your guide when determining sector strength. It's very possible that traders may let the RLX fall to its 50-dma again near 940 before mounting another retail rally. If PSS trades higher, very conservative traders could consider entries at current levels with a stop at $59.49, just under today's low (hey, only 76 cents or risk). Hoewever, oscillators are still bearish. The MACD is showing a bearish crossover, while the daily stochastics are just now beginning to hit the oversold range. Picked on March 15th at $61.74 Gain since picked: -1.49 Earnings Date 02/22/02 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Hartford Financial Svc - HIG - cls: 66.45 chg: +0.30 stop: 64.45 The dreadfully slow consolidation in shares of HIG continues this week, as the stock remains apparently unaffected by the market volatility both Monday and Tuesday. As long as HIG remains above the $66 level we're probably okay. The 50-dma is rising up to meet it. In the past this has been an entry point for bulls to attempt new rallies for the stock. Traders interested in scoping out new entry points might want to consider dips to $66.00 or $65.75 and conservative traders could use a tighter stop than ours just under the 50-dma near $65.50. Personally, I'd like to see some strength in shares of HIG first and a move over the $68 level looks like a good start. Picked on March 13th at $65.74 Change since picked: +0.71 Earnings Date 01/28/02 (confirmed) -------------------- Bearish Play Updates -------------------- CMOS - Credence Systems - close: 20.66 change: +0.47 stop: 21.01 Things were looking good for our semi short this morning when CMOS spiked sharply below our trigger at $19.94. Just as dollar signs and visions of easy first day gains started flashing in our eyes, reality reared its ugly head and shares rebounded from $19.64. The stock shot back up as quickly as it had dropped, traded in tandem with the SOX.X for the remainder of the day, and finished with a 2.32% gain. Speaking of the SOX, todays bounce confirmed support at 570. A break below this level could lead to heavy selling in the sector. As for CMOS, low-risk entries can be evaluated on failed rallies at the $21 level. Our stop is just a cent above this level, but a more aggressive approach could yield a stop at $22, location of substantial resistance on the p-n-f chart. If the stock reverses course and heads lower, traders could consider shorting a move below today's low at $19.64 if you prefer to hop on the train once it is already moving. Picked on March 26th at $19.94 Gain since picked: -0.72 Earnings Date 02/20/02 (confirmed) --- QUALCOMM - QCOM - close: 39.87 change: +0.40 stop: 42.05 The NASDAQ rebound from support at 1800 gave QCOM a boost today, but it wasn't enough for a close over $40. Although the stock actually rallied as high as $40.95 today, it was unable to stay over the 50-dma. The broader telecom sector continued its weak ways today with a 1% loss. The sector weakness and inability of shares to stay over $40 bodes well for our play, as does the double-bottom sell signal on the p-n-f chart and bearish MACD. We think short entries can be considered from current levels, while more conservative traders may want to wait for a move under today's low of $38.58 (we said the same thing yesterday for a move under $39). A NASDAQ breakdown below 1800 could also be used as an entry point. Things could get very ugly for tech bulls if this level is abandoned by the COMPX. Sector watches can keep tabs on the IXTCX, which barely bounced off support of 170. The MACD for the IXTCX produced a bearish crossover today. Picked on March 25th at $39.47 Change since picked: -0.40 Earnings Date 04/24/02 (unconfirmed) =============== HR Closed Plays =============== ----------- Closed Long ----------- Adelphia Comm. - ADLAC - close: 20.39 change: -0.67 stop: 22.85 We outlined our exit strategy in the most recent update but were hoping to squeeze some more gains out of ADLAC before moving on. Shares faded the broader tech strength today and finished with a 3.18% loss. Not a bad way to close out this play! The weakness may be attributed to nervous investors bailing out before tomorrow's earnings. On the same token, we didn't want to risk an upside surprise and thus locked in gains at today's close of $20.39. The stock didn't quite reach our profit target at $19, but we're certainly not going to complain about a +15% move. Picked on March 12th at $23.99 Gain since picked: +3.60 Earnings Date 03/27/02 (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 DB Deutsche Bank 64.90 +0.95 OI Owens Illinois Inc 16.25 +0.73 MDU MDU Resources Group 30.41 +0.53 FDP Fresh Del Monte Produce 19.10 +0.90 GLYT Genlyte Group Inc 37.00 +1.62 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change DRRA Dura Automotive Systems 18.50 +3.57 XICO Xicor Inc 10.53 +1.27 USLB US Laboratories Inc 13.41 +1.02 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change APOL Apollo Group Inc 51.62 +3.92 ZION Zions Bancorp 57.44 +1.78 VVI Viad Corp 27.88 +1.05 MCY Mercury General Corp 45.79 +1.14 NVR NVR Inc 322.25 +22.00 FMC FMC Corp 41.10 +2.35 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change EDS Electronic Data Systems 57.96 -4.04 STJ Saint Jude Medical 76.55 -1.95 NET Network Associates 22.23 -2.77 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change ROOM Hotel Reservations Ntwrk 60.00 -8.59 DLX Deluxe Corp 45.25 -2.13 SWY Safeway Inc 44.19 -0.79 DRE Duke Realty Corp 25.89 -0.09 COX Cox Radio Inc 28.50 -0.69 ================================================================= 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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