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.
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