Option Investor
Newsletter

Daily Newsletter, Wednesday, 03/27/2002

HAVING TROUBLE PRINTING?
Printer friendly version
PremierInvestor.net Newsletter              Wednesday 03-27-2002
                                                  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/c27b_1.asp
=================================================================

In section one:

Market Wrap:      Frozen?  Or Starting To Thaw?
Watch List:       CTX, GD, STJ, THC, and more...
Play of the Day:  A healthy breakout


************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************      
      03-27-2002          High     Low     Volume Advance/Decline
DJIA    10426.91 + 73.55 10453.90 10337.86 1.17 bln   2113/1033
NASDAQ   1826.75 +  2.58  1832.01  1811.64 1.45 bln   1923/1543
S&P 100   577.49 +  2.32   579.24   573.16   Totals   4036/2546
S&P 500  1144.58 +  6.09  1146.95  1135.33             
RUS 2000  505.85 +  4.19   506.05   501.16
DJ TRANS 2906.67 + 31.30  2913.68  2863.15
VIX        19.25 -  0.50    20.40    19.23 
VXN        37.16 -  0.52    39.66    36.75
TRIN        0.82 
Put/Call    0.53
************************************************************

===========
Market Wrap
===========


Frozen?  Or starting to thaw?

There are certain days that have been etched in my mind that have 
had great impact on me and my observance of just how dynamic the 
markets can be.  Today is one of those days.  It also drives home 
the fact that it is always best to trade/invest with stops as 
things can change fast.

I will say right now, that today's action in Adelphia 
Communications (NASDAQ:ADLAC) $16.70 -18.09% will be a 
trade/observation I will not soon forget.  Earlier this morning 
at OptionInvestor.com I was going through the top winners and 
losers in the NASDAQ-100 (NDX.X) and the NASDAQ-100 Trust 
(AMEX:QQQ).  At the top of the leader board (#1 spot) was shares 
of Adelphia (ADLAC) when it was trading up more than 9%.  I did 
think there was something wrong with the computer when my "alert" 
went off that I had set at a new 52-week low for the stock at 
$18.90, but there wasn't anything wrong with the computer.  
Something was happening, and the newswires were hush.

I've covered this stock enough in recent commentary and the play 
was taken off our play list last night as the plan was to not 
hold over earnings.  That was a "good thing" as the stock would 
have triggered a stop most likely set above yesterday's highs 
anyway, but today's action just drives home the point that we 
should never underestimate just how quickly things can change.

Adelphia Communications Chart - Daily Interval




I can't "second guess" the way we handled our bearish trade as 
profiled on PremierInvestor.net.  I did get a couple of e-mails 
from subscribers that did hold some partial positions and were 
going to use the regression channel as their stop.  With that 
said, I'd also "pull down" my retracement bracket.  Since we 
spent some time explaining the convertible that was placed near 
the $25.50 level, I would want to "honor" that level.  It was 
also a point where the February rally now seems to have come to a 
screeching halt.

Today's sudden reversal was a "revelation" that Adelphia 
Communications (ADLAC) had guaranteed $2.3 billion of Rigas 
family debt.  Salomon Smith Barney came out in defense of the 
stock when the stock was getting pounded at the $18.65 level 
saying that the Rigas Family debt guarantee was already known 
about.  While "Solly" may have known about the debt guarantee, it 
doesn't appear that some bulls knew about it, or liked it for 
that matter.  The revelation came during the company's quarterly 
earnings conference call.

After holding the #1 gainer slot in the NASDAQ-100 earlier in 
today's session, the stock finished as the worst performer.  Just 
an observation of why stops are an important part of any 
trading/investing discipline.  A stop placed at the 52-week low 
for a bull would have helped save some pain today.  We're now 
left to wonder just what those holders of that convertible are 
doing as the stock drifts farther away from the $25.50 level.  My 
guess is they'll be trying to hedge it by shorting the underlying 
common stock until they find out for sure where Adelphia (ADLAC) 
is going to come up with $2.3 billion to guarantee the Rigas 
family debt.

"Bullseye" on healthcare

Today's move in the Morgan Stanley Health Provider Index (RXH.X) 
327 +1.91% looks impressive and this is an area of the market 
we've commented on in recent weeks.  This sector looks ready to 
rock and bulls dressing up their institutional portfolios look to 
be getting aggressive.  The stock that "mimics" this sector on 
our bullish play list is shares of Cardinal Health (NYSE:CAH) 
$70.60 +1.96%.  

Morgan Stanley Health Provider Index (RXH.X) - Daily Interval




The RHX.X looks ready to rock and that should help our bullish 
play in shares of Cardinal Health (NYSE:CAH).  This sector and 
group of stocks tends to be one that gets on a trend and can 
stick with it over a period of time.  There's no such thing as an 
easy trade, but the $340 level looks like it is achievable in the 
next week.  A torrential run to the 360 level isn't out of the 
question either.  If we look to the left of the chart we see this 
index ran from the 282 level to 358 with little periods of 
consolidation.  Today's move looks like she's ready to go.

Cardinal Health Chart - Daily Interval




We profiled shares of Cardinal Health (CAH) as bullish back on 
03/22/02 at $70.05.  As previously mentioned in commentary, this 
stock set off a bullish "buy signal" at the $68 level, which was 
a triple-top buy signal.  With the "sector" looking like things 
are heating up, I'd have CAH as a bullish candidate if not 
already holding some long in the account.

Kohl's trades 52-weeker!

Shares of department store/retailer Kohl's (NYSE:KSS) $72 +3.97% 
is doing well for bulls on our play list as the stock closed at 
an all-time high today.  This is a stock we thought might just 
get painted to a new high into the end of the first quarter so 
fund managers can point to a stock in their portfolio and show 
their board of directors what astute investors they are.  You can 
hear them now.  "With consumer confidence recently spiking to a 
reading of 110, we felt long ago this company was well positioned 
to benefit from a strong consumer in a recovering economy."

Well... between you and I, what we need now is for the group to 
get in the act.  Once again we see some good correlation between 
Kohl's (KSS) and the corresponding S&P Retail Index (RLX.X) 959 
+0.27%.

S&P Retail Index Chart - Daily Interval




If the Retail Index (RLX.X) is the "proverbial snake," then our 
thinking is that Kohl's (KSS) is one of the leaders in the group, 
therefore at the "head of the snake."  That's fine and dandy and 
it looks like the head (KSS) is trying to lead higher.  The best 
moves come when the entire snake moves in unison.  Tomorrow I 
want to see the RXH.X get above the 960 level and really pound 
out a nice gain to the upside.  There's still some room to the 
all-time closing highs of 1,022.78 and if the index will get 
there in the next couple of weeks, then I would think Kohl's 
(KSS) should get some good tidal wave action to the upside.  If 
the group falters, then we'll get more aggressive with our stop 
in Kohl's (KSS).

More economic data tomorrow

At 08:30 AM EST, traders will get fourth-quarter GDP final 
numbers.  This was already reported as 1.4% and the final number 
is expected to be the same.  Also due out at that time is jobless 
claims for the week March 23.  Forecast here is for 375,000.

Then at 10:00 AM EST, the University of Michigan will report its 
final consumer confidence number.  The final number is expected 
to be near the 94.3 level.  This is a different number than the 
consumer confidence reported Tuesday of 110.

Perhpas the most closely watched number besides jobless claims 
will be the Chicago ISM (formerly Purchasing Management Index).  
Economists are looking for a reading of 54.0%.  Stock bulls want 
a higher number, while bears want to see a lower number.

My thought is... "if you're short a weak stock and the numbers 
are weak, you should do well.  If your short a weak stock and the 
numbers are strong, you've still got a chance."  On the other 
side of the trade "if you're long a weak stock and the numbers 
are weak, you might feel some pain.  If your long a strong stock 
that's been getting some sponsorship, then there's a chance the 
stock find buyers on weakness, that provides support and holds 
things together."

Our play list is full of candidates (bull and bear).  The short 
list is filled with "tech-like" shorts, while the bullish 
candidates are those that are "boring," but seem to be attracting 
the bulk of institutional capital.  

Personally, I'd like to see a much tighter stop in place on our 
bearish play in shares of Check Point Software (NASDAQ:CHKP) 
$31.03 -0.09%.  We've been sitting in this trade for more than a 
week and she's traded sideways.  Capital is precious and I'd want 
to move my stop down to break even.  If she's going to crater 
then let's get on with it and don't let a $2.25 (+6.7%) gain turn 
into a loss.

Jeff Bailey


==================================================================
WATCH LIST
==================================================================

The PremierInvestor.net watch list is not designed to be read
as full fledged stock picks.  Rather we would prefer to offer
it as an extra tool in today's investor toolbox.  Think of it
as a radar screen with your own radar operator pointing out
interesting developments, technical patterns or potential plays
that you may or may not have seen on your own.  Due to time
constraints we do glance at the news but rarely do we have 
time to fully read pertinent news stories, due background 
research and other necessary screens that investors should do
before making a decision.  A common exercise is to read the
entry, glance at the sector and other stocks in that industry
and then compare what's happening in the stock to what's 
happening in the broader market indices.  We hope you enjoy
the Watch List and that it proves to be a useful tool for your
own trading success.

STOCKS WORTH WATCHING
---------------------------------


Centex Corp - CTX - close: 52.98 change: -1.49

WHAT TO WATCH: Homebuilding stocks had quite a run in late-
February/early-March but lately it seems that sector is losing 
its luster.  Profit-taking hit the group recently even as record 
new home sales were announced.  The "sell-on-the-news" mentality 
was visible today, as homebuilders like CTX, TOL, and RYL 
declined after new home sales showed a 5.3% gain.  CTX has been 
one of the weaker stocks in the sector and looks like it could 
break lower.  Shares have found support at the 100-dma, currently 
at 52.  This level has also been historical support over the past 
three months.  Traders may want to consider shorting a break 
below this level.  Support could emerge at $50 or recent lows at 
$51.26, but the weak oscillators indicate the bears may have the 
upper-hand.  Watch the DJ housing index (DJUSHB) to gauge sector 
sentiment.




--- 

General Dynamics - GD - close: 95.24 change: 1.98

WHAT TO WATCH: Just when we thought the defense index (DFX.X) may 
have topped out, it turned in an impressive 2.72% gain and is now 
threatening to break over near-term highs.  Our scan of the 
defense sector turned up several strong stocks (LMT and COL come 
to mind), but GD really stood out as a possible play.  Shares 
rallied over 2% today and in the process tagged a new all-time 
high at $96.80.  This created a quadruple-top breakout on the p-
n-f chart.  Additionally, the daily stochastics look bullish and 
the MACD is beginning to curl higher.   Given the positive 
technicals, we think GD could see a test of the critical $100 
level in the near-future.  Look for a close over $96 or a move 
over today's high to evaluate bullish positions.  Investors 
continue to respond to the steady flow of contracts from the U.S. 
government.  On Tuesday GD was awarded a $30M contract and today 
they collected a $18M contract.




---

ST. Jude Medical - STJ - close: 77.24 change: +0.69

WHAT TO WATCH: PI has been bullish on healthcare stocks recently, 
based on the strong performance of the HMO.X health provider 
index.  We've had some success playing this sector (check out OHP 
on the Play List) and think other health-related issues could be 
attractive as well.  If the outlook is bright for health 
providers, it stands to reason that medical equipment stocks 
should also perform well.  Wall Street seems to concur: The RLX.X 
healthcare index shot over resistance near 322 today and closed 
at levels not seen since September.  The next resistance is up at 
the pre-9/11 levels near 340.  STJ in particular looks like a 
good way to capitalize on a rally in the RLX.  The stock recently 
pulled back to support at $76-$77, which is backed by the 100-
dma.  $77 also corresponds to support on the p-n-f chart.  STJ 
has some room to move to the upside, and we think it could head 
to $81 if the sector remains strong.  Watch for a move over 
today's high of $77.50 to consider a long position.  




--- 

Tenet Healthcare - THC - close: 66.41 change: +0.88

WHAT TO WATCH: On Monday the HMO.X health provider index fell 
under previous resistance at 500.  This gave us a bit of a scare, 
since CAH and OHP (two other HMO's) are featured on our current 
Play List.  Fortunately bulls were quick to defend this level.  
Today the HMO tacked on nearly 2% and closed at an all-time high 
of 511.  We like the successful retest of the 500 level and 
wouldn't be surprised to see the index head up to 520 in the 
near-term.  In addition to the two current plays, THC is another 
strong HMO that you might want to check out.  The stock has 
performed strongly over the past week and broke over resistance 
at $66 today.  Traders could evaluate an entry if shares trade 
over $67.  This would trigger a triple-top on the p-n-f chart.




--- 

MORE TO WATCH:

ATK  - Another strong defense stock that broke over resistance 
       today.  Today's close over 100 bodes well for the bulls.  
       The P-n-F chart is also showing a triple-top breakout.

CVC  - Traded lower today on ADLAC news.  A break below February 
       lows near $31.50 may be worth playing.

NTBK - Has been outperforming INX.X internet and closed over 
       resistance at $17.  MACD and stochastics are also looking 
       bullish.  May want to target entries at current levels.

NUE  - Shares broke explosively over resistance at $60.  Wouldn't 
       want to chase it higher, but look for a pullback to $62-
       $63 to consider a long position.




===============
Play-of-the-Day  (bullish)
===============


Cardinal Health - CAH - close: 70.60 change: 1.36 stop: 67.49

Company Description:
Cardinal Health is a leading provider of products and services 
supporting the health care industry. Cardinal Health companies 
develop, manufacture, package and market products for patient 
care; develop drug-delivery technologies; distribute 
pharmaceuticals, medical- surgical and laboratory supplies; and 
offer consulting and other services that improve quality and 
efficiency in health care. (source: company press release)



- ORIGINAL WRITE UP: March 22nd, 2002 -

Why We Like It:
As you may know from recent Watch Lists, we've been bullish on 
CAH for over a week. The HMO.X Health provider index has been on 
fire recently, and actually set an all-time high this week. CAH 
has also been strong but had some trouble with resistance at $70. 
We wanted to see a close over that level before adding it as a 
play, and that's exactly what happened today. Now that we're 
finally long, our initial profit target will be the October highs 
at $77. In looking for entries, traders can consider jumping on 
if the HMO.X trades back above 500. The index actually fell below 
that level today. A dip to the 200-dma near $69 could also yield 
an entry point. We're starting this play with a stop at $67.49, 
which is less than 5 rom current levels. In case you p-n-f fans 
were wondering what the chart looks like, CAH is currently on a 
triple-top breakout signal. Strategically, it looks like fund 
managers might be moving back into defensive stocks or more 
traditional safe havens and CAH is a primary candidate. With the 
recent inflows into mutual funds those managers are going to have 
to put that money to work somewhere. CAH has an extremely 
reliable history of returning very solid earnings growth and 
we've noticed a few articles recently re-advertising this well-
known fact. Prudential recently started the stock with a "buy" 
and put an $83 price target on it.

- Most Recent Update: March 26th, 2002 -

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.


- Play-of-the-Day Comments: March 27th, 2002 -

After a successful retest of previous resistance at 500, the HMO.X 
health provider gained 1.91% today.  That's a new all-time high.  CAH 
mirrored the sector strength and closed over resistance at $70.  With 
that obstacle out of the way we think CAH could see the upside of $72 
in the near future.  Entries can be evaluated at current levels if the 
sector remains strong, while a pullback to $70 could also yield an 
entry point.

Picked on March 22nd at $70.05
Gain since picked:       +0.55
Earnings Date         04/23/02 (unconfirmed)
 






=================================================================
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                Wednesday 03-27-2002
                                                   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/c27b_2.asp
=================================================================

In section two:

NetBulls Tech Stocks
  Closed Bearish Play:  CMOS
  Bearish Play Update:  CHKP


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 Tech Stocks (NB) section
=================================================================

===============
NB Closed Play
===============

   ----------------
   Closed Bearish
   ----------------

Credence Systems - CMOS - close: 21.06 change: +0.40 stop: 21.01

This short play was triggered yesterday when CMOS spiked below 
our action point at $19.94.  Unfortunately, the bears decided to 
step aside after taking the stock down to $19.64 and shares 
actually finished the day with a 2.3% gain.  Our hopes for a 
pullback from the $21 level were dashed today on continued 
strength.  Despite the 0.74% loss on the SOX.X semiconductor 
index, CMOS added on another 1.9% and rose above our stop at 
$21.01, thus ending this play with a 5% loss.  The MACD and 
stochastics are flat and don't give any clear indication as to 
what direction the stock will head next, although traders who 
still feel bearish on CMOS may want to consider shorting another 
failed rally to $22.  Shares face heavy resistance on the p-n-f 
chart on this level.  Also note that two other semi shorts (BRCM 
and NVDA) can be currently be found on our Play List.

Picked on March 26th at $19.94 
Gain since picked:       -1.07
Earnings Date         02/20/02 (confirmed)





===================
Bearish Play Update
===================

Check Point Software - CHKP - cls: 31.03 chg: -0.03 stop: 33.28 *new* 

If Jeff feels a little uncomfortable that CHKP has yet to 
collapse for the bears then we will nudge our stop down to our 
entry point at $33.28. We are encouraged that the stock is still 
producing lower highs as the 10-dma is putting pressure on the 
stock (a.k.a. shares are meeting selling pressure at this level). 
A move under $30 still looks like a decent entry point for a new 
position.






==================
  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  

CVX     ChevronTexaco              90.50     +1.50
NCC     National City Corp         31.01     +0.56
UNP     Union Pacific Corp         61.58     +1.28
CMA     Comerica Inc               63.34     +0.81
HAL     Halliburton Co             17.13     +0.78

--------------------------------------- 
Breakout to Upside (Stocks $5 to $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

VRC     Varco Intl                 19.78     +1.28
X       U.S. Steel                 18.25     +1.25
FCX     Freeport Mcmoran           17.70     +1.25
PDE     Pride Intl. Inc            15.98     +1.55
RSC     Rex Stores Corp            18.25     +1.20

--------------------------------------- 
Breakout to Upside (Stocks over $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

KSS     Kohl's Corp                72.00     +2.75
ROH     Rohm & Haas Co             42.15     +1.60
APOL    Apollo Group Inc           53.30     +1.68
NUE     Nucor Corp                 65.18     +2.83
COL     Rockwell Collins Inc       25.50     +1.50

------------------------------------------- 
Breakout to Downside (Stocks over $20) 
------------------------------------------- 
Ticker  Company Name               Close     Change 

EMR     Emerson Electric Co        58.44     -3.51
GENZ    Genzyme Corp               43.37     -5.42
CVC     Cablevision Systems        33.25     -1.25
DLX     Deluxe Corp                44.13     -1.12
CVTX    CV Therapeutics Inc        35.99     -1.91

----------------------------------------- 
Recently Overbought With Bearish Signals (Stocks over $20)
------------------------------------------- 
Ticker  Company Name               Close     Change 

        ... none ...






=================================================================
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.




DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives