Option Investor
Newsletter

Daily Newsletter, Monday, 04/08/2002

HAVING TROUBLE PRINTING?
Printer friendly version
PremierInvestor.net Newsletter                 Monday 04-08-2002
                                                  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/d08b_1.asp
=================================================================

In section one:

Market Wrap:      Interesting themes at play
Watch List:       ADBE, CUM, KSS, RYL, and more...
Play of the Day:  Rolling out the carpet

*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
      04-08-2002          High     Low     Volume Advance/Decline
DJIA    10249.08 - 22.56 10258.91 10120.87  1.10 bln   1834/1342
NASDAQ   1785.87 + 15.84  1786.40  1733.84  1.59 bln   1908/1647
S&P 100   563.95 -  0.07   564.02   557.19   Totals    3746/2989
S&P 500  1125.29 +  2.56  1125.41  1111.79
RUS 2000  503.01 +  5.25   503.02   493.76
DJ TRANS 2753.30 - 25.11  2776.86  2718.98
VIX        20.92 -  0.19    22.78    20.78
VXN        40.38 -  0.44    42.93    40.38
TRIN        1.16
PUT/CALL    0.91
*******************************************************************

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

Interesting themes at play

While this morning warning from computer giant IBM (NYSE:IBM) 
$87.41 -10% is concerning to many technology stocks, that may not 
necessarily mean that all computer stocks are headed for 10% 
drubbings or scheduled to warn on earnings.

After today's close of trading, PC-maker Compaq Computer 
(NYSE:CPQ) $9.59 +0.31% said it expects to meet or beat Q1 
expectations, with revenues for the quarter expected to be 
approximately $7.7 billion versus consensus estimates of $7.6 
billion.

Tonight's marginal upside guidance from Compaq (CPQ) follows last 
week's reaffirming Q1 guidance from fellow PC-maker Dell Computer 
(NASDAQ:DELL) $26.88 +1.74% and has many wondering if this 
morning's warning from IBM is just company specific, or more 
indicative that corporate customers still aren't willing/able to 
spend on some of the bigger ticket items like mainframe 
computers.

That type of thinking may then partially explain some of the 
relative bullishness that we pointed out in PC-disk drive maker 
Western Digital (NYSE:WDC) $6.76 +1.80%, which gave upside 
guidance Wednesday evening, saying it saw earnings per share of 
$0.08, which would be double the consensus estimates of analysts 
looking for earnings of $0.04 a share.

Perhaps some of the more bullish performance from the PC-space 
and stocks like Dell Computer (DELL) and Western Digital (WDC) 
(relative to mainframe maker IBM and larger storage device maker 
EMC Corp. (EMC)) are being found by spending at the individual 
consumer level.

But that doesn't necessarily mean that corporations aren't 
spending some of their money to keep things running.  One example 
might just be the office products arena.  Staples (NASDAQ:SPLS) 
$21.11 +2.27% closed at a new 52-week high today as fellow office 
supply retailer Office Depot (NYSE:ODP) $20.23 +1.09% challenged 
a 52-week high.

Staples Chart - Daily Interval



One could argue that investors are buying up shares of Staples 
(SPLS) as an early sign of revitalized smaller amounts of 
corporate spending, but also a play on the number of small 
businesses coming about from some employees kissing the corporate 
world goodbye and living their dream of starting their own 
business.  With a longer-term bullish count of $30.50, Staples 
(SPLS) still looks attractive for bulls with a stop just under 
retracement and rising 50-day MA near $19.00.

Office Depot (NYSE:ODP) was one of our bullish picks in our 
intraday commentary on September 17th, the first day of trading 
after the terrorist attacks.  ODP traded $11.00 at the open that 
day, closed at $12.15 and bulls appear committed to that stock.

S&P Retail Index Chart - Daily Interval



A couple of days ago we had a stop set "too tight" on a bullish 
play in Kohl's (NYSE:KSS) $72.50 +2.96% right at upward trend and 
now we're regretting it.  The broader S&P Retail Index (RLX.X) 
traded back above its 50-day moving average and seemed little 
concerned with IBM's earning's warning this morning.  Perhaps 
bears in the sector just aren't convinced of an economic slowdown 
and rushed for cover.  A break back above the $961 level, which 
served as resistance not long ago is the hurdle that bulls need 
to clear, but the technicals are starting to look somewhat 
similar to that found back in October/November when bears got 
trapped below the 50-day moving average and MACD hooked higher 
and got above it's signal.  A close back above the 961 level 
tomorrow could have many retailing stocks back in play for the 
bulls.  Today's bullish action in Kohl's (KSS) and new closing 
high gives hint we were "right on the stock" but too tight on our 
stop.

Things looked ugly for bulls at the open

While things looked quite ugly for bulls at the opening of 
trading, some of the things we talked about in Friday's wrap that 
an "economic bull" wanted to see hold (like the deeper cyclicals) 
did find some buyers today.

At the same time, the bullish bounce in many of the retailers 
shouldn't go unnoticed or be discounted and met with complacency 
by bearish traders, regardless of what group we're trading.

As discussed in today's 01:00 EST Update, bears should be locking 
in gains or tightening down some stops in their bearish trades, 
especially those that have performed well relative to the broader 
market averages.

Little economic data until Thursday

I have seen few news announcements that give insight into today's 
snapback in stocks other than today's 10:00 AM EST release of 
Wholesale Inventories data that showed inventories fell -0.7% in 
February, which was lower than consensus estimates of unchanged.  
The decline in inventories may have indeed had bears getting more 
aggressive with their short covering on the early morning 
weakness as the inventory levels continue to run lean, leaving 
room for further up-ticks in production levels.  February's -0.7% 
decline continued to show draw down from January's -0.2% decline.

The next dose of economic data doesn't come until Thursday, when 
Initial Jobless claims and Import/Export prices are released.

Then on Friday, things heat up as economic data becomes plentiful 
with PPI, Retail Sales and Preliminary University of Michigan 
Sentiment (see Market Watch section).

I'm in no way looking to be bullish broader technology names, 
especially those in longer-term downward trend or those close to 
52-week lows.  Yes, we may well see some short-covering by some 
bears locking in gains and there is a tendency for technology 
bulls to want to buy some of the beaten down names, but any 
earnings warnings or bad economic news can leave a tech bull 
holding the bag if the bears decide to stop covering and there is 
little bullish buying left to prop things up.

After hours news

Broadcom (BRCM) $33.89 +3.95% said it has entered into a 
definitive agreement to acquire Mobilink Telecom for 5.6 million 
shares.  The acquisition is expected to be neutral to slightly 
accretive in 2002.  Mobilink Telecom is a supplier of chipsets 
and reference designs for mobile phones, PDAs and cellular modem 
cards.  In after-hours trading shares of BRCM traded as high as 
$34.19. (see play update if short)

Apparel retailer Abercrombie & Fitch (NYSE:ANF) $30.80 +1.44% 
said same-store sales rose 2% in March.  Net sales for the period 
rose 29% to $133.9 million.

Software maker Citrix Systems (NASDAQ:CTXS) $16.26 fell in post-
market trading to $15.32 after the company said it expects Q1 
revenue and EPS to be $141-$143 million and $0.15-$0.16, versus 
consensus of $152.9 million and $0.17.  The company will hold a 
conference call today at 04:45 PM EST, accessible via webcast at 
www.citrix.com/investor.


Jeff Bailey
Senior Market Technician

==================================================================
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
---------------------------------


Adobe Systems - ADBE - close: 38.86 change: +0.99

WHAT TO WATCH: Software bulls finally got some relief today, as 
the GSO.X software index snapped its four-day losing streak.  
There may still be more shorts itching to cover some of last 
week's gains, especially after the GSO bounced from support near 
140.  ADBE looks like a good candidate to play a sector rebound 
because it weathered the recent decline better that most other 
software stocks.  Today's 2.6% gain followed a successful test of 
both its 50-dma and bullish p-n-f support.  Although the MACD is 
still downtrending, daily stochastics are beginning to curl 
higher from oversold.  Very short-term traders might want to 
consider scalping any move to the $41.50 level of resistance.  
More optimistic bulls might consider longer-term moves higher 
with a good stop from current levels but keep an eye on the GSO.X 
for guidance.  A good stock in a dropping sector still tends to 
fall.




---

Cummins Inc - CUM - close: 47.80 change: +0.44

WHAT TO WATCH: CUM has outperformed the broader market since 
putting in a near-term bottom at $44.60 two weeks ago.  The stock 
is now resting just below resistance at $48 and if the trend of 
relative strength continues we believe CUM could blow though that 
level.  Furthermore, the MACD is curling higher is close to 
signaling a bullish crossover.  Traders could consider entries if 
the stock closes above $48.  
  



---

Kohls - KSS - close: 72.50 change: +2.09

WHAT TO WATCH: Gone from our Play List, but certainly not 
forgotten.  We were stopped out of KSS last week after the retail 
sector got hit for several consecutive days of losses.  Strictly 
adhering to Murphy's Law, the stock proceeded to bounce sharply 
from the bottom of its ascending channel that started from 2002 
January's lows.  Shares added nearly 3% today, finally pushed 
through resistance at $72, and closed at an all-time high of 
$72.50.  The MACD and stochastics are looking bullish as well.  
In light of its technical strength, we think traders could go 
long on KSS at current levels in an attempt to capture the next 
leg higher.  Conservative traders may want to wait for a retest 
of $72.  However, be ready to take profits if the stock stalls at 
the top of the aforementioned channel near $73.50 (we doubt it, 
and shares should hit $75).  When gauging sector strength, look 
for retail index (RLX.X) to trade over resistance 960.  




---

Ryland Group Inc - RYL - close: 99.40 change: +4.76

WHAT TO WATCH: Solomon Smith Barney lit a fire under homebuilding 
stocks today, after they opined that the sector might still offer 
an attractive buying opportunity.  TOL, LEN, and CTX all saw 
large gains, while RYL tacked on 5% and closed at an all-time 
high of $99.40.  Given the positive momentum and bullish MACD 
crossover, we think the stock could test the top of its ascending 
regression channel at $105.  Aggressive traders could target 
intraday moves over psychological resistance at $100, while those 
who are more cautious may want to wait for a close over that 
level.  Alternatively, a pullback to previous resistance at $95 
could also offer an entry.






=============
MORE TO WATCH
=============

KO   - Coke spent the last two weeks consolidating its impressive
       gains from the February lows.  Today the broke out to a 
       new 52-week high, opening the door for further upside.

SSP -  Like many media stocks, SSP has been shooting higher
       recently.  Today's 3% gain was enough to push the stock
       to an all-time high.  A pullback to $84.25-$85.00 could 
       present aggressive traders with an entry.  SSP looks 
       overbought, but until the bullish momentum dissipates,
       it's anyone's guess as to how high it may go.

THQI - THQI has been strong relative to the GSO.X, and shot up
       over 4% today after announcing a deal with Marvel (MVL).   
       Shares closed over both psychological resistance at $50
       and the 200-dma at $50.07.  It looks like the stock could 
       lead a software rebound, but bulls will first have to
       conquer resistance near $52.50.



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

Mohawk Industries - MHK - close: 63.00 change: +1.20 stop: 58.49

Company Description:
Mohawk is a leading supplier of flooring for both residential and 
commercial applications and a producer of woven and tufted 
broadloom carpet, rugs and ceramic tile. The Company designs, 
manufactures and markets premier carpet brand names and a broad 
line of home products including rugs, throws, pillows and 
bedspreads. (source: company press release)




- ORIGINAL WRITE UP: April 5th, 2002 -

Why We Like It:
The housing boom has been very profitable for carpet maker 
Mohawk. The stock has done very well but shares have pulled with 
profit taking in the housing stocks through the month of March. 
It appears the stock has bottomed near its 50-dma, which 
coincides with the MACD beginning to curl into a bullish pattern 
near the zero line. We like the positive 2.4% gain on Friday that 
put the stock back above the $60 level of potential resistance. 
The next few months look good for MHK. Market commentators 
believe the Fed may be on hold for a while before they increase 
interest rates and with summer coming up, a prime time for home 
sales, the housing group is likely to continue its bullish pace 
with mortgage rates still relatively near historic lows. Of 
course with people buying and building new homes, there will be a 
growing need for carpet. We are initially going to target a move 
to the $70 level and start with a stop at $58.49.


- Play-of-the-Day Comments: April 8th, 2002 -

Solomon Smith Barney really had homebuilders moving this morning 
after they released positive comments on the group.  MHK 
benefited from the bullish sector sentiment and added nearly 2%.  
This move created a double-top buy signal on the p-n-f chart.  
The MACD and daily stochastics are looking bullish as well, and 
we think shares could be headed for a retest of the 52-week high 
at $68.10.  Entries can be considered from current levels if the 
sector (as gauged by the DJUSHB housing index) remains strong.  
Those who feel more comfortable buying dips may want to wait for 
a bounce from $62.  


Picked on April 5th at $61.80 
Gain since picked:      +1.20
Earnings Date        02/06/02 (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                  Monday 04-08-2002
                                                   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/d08b_2.asp
=================================================================

In section two:

NetBulls Tech Stocks
  Stop Adjustment Update:  BCE, ISSX (shorts)
  Triggered Bearish Play:  CSCO

StockBottom Non-tech Stocks
  Stop Adjustment Update:  OHP (long)

High-Risk/High-Reward Stocks
  Stop Adjustment Update:  QCOM (short)
  

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 Play Updates
===============

Short Play
Stop Adjustments
----------------


BCE Inc - BCE - close: 16.01 change: -1.59 stop: 16.65 *new*

Our successful short play received a shot in the arm today after 
BCE announced that VarTec Telecom had finalized its acquisition 
of Excel Communications' North American operations.  We didn't 
see any brokerages specifically weigh in on the news, but Wall 
Street's reaction was decidedly negative.  Shares lost 9.03% on 
high volume of 779K, which is more than double the average.  In 
response to today's decline we're tightening our stop to $16.65, 
which should protect a 14% gain or a move of $2.75.  We'll 
officially exit this play if BCE trades at or below our finalized 
profit target of $15.00.
 



---

Internet Security - ISSX - cls: 20.43 chg: +0.07 stop: 21.61*new* 

ISSX has been a decent short play thus far, but looks to be 
firming up near psychological support at $20.  Even though shares 
did hit a new relative low this morning they did rebound with the 
Nasdaq.  We're going to snug down our stop to $21.61.  This would 
be a 4.3% gain from our less than fortunate but original entry 
point - if you remember, we would have been filled on the gap 
down on March 26th, 2002.  
 




Triggered Short Play
--------------------

Cisco Systems - CSCO - close: 16.18 change: +0.18 stop: 16.70

CSCO was looking weak on Friday after selling off sharply from 
its 50-dma.  Bulls were defending support at $16, but that level 
gave way after this morning's IBM warning.  The stock gapped down 
below our trigger at $15.91, so we entered the play as of today's 
opening price at $15.74.  Shares moved higher with the NASDAQ as 
the session progressed, but only managed fractional gain for the 
day.  Our initial stop is $16.70 but more adventurous traders may 
want to stick their stop just above resistance at $17.00. 
 





=================================================================
AT Active Trader/Non-tech plays
=================================================================

===============
AT Play Updates
===============

Long Play
Stop Adjustments
----------------


Oxford Health - OHP - close: 41.96 change: +0.59 stop: 40.40*new*

OHP rallied with the HMO.X health provider index today and gained 
1.42%.  The latter actually traded another all-time high and is 
fast-approaching the top of its ascending channel near 530.  OHP 
is again threatening to break over resistance at $42.  This would 
be a positive development, but for now we're raising our stop to 
$40.40, just below last week's low.  This should protect a 4.8% 
gain.





==================================================================
High Risk / High Reward (HR) section
==================================================================

===============
HR Play Updates
===============

Short Play
Stop Adjustments
----------------


QUALCOMM - QCOM - close: 36.12 change: +0.21 stop: 37.36 *new*

QCOM gapped sharply lower this morning after the warning from Big 
Blue.  Shares hit an intraday low of $34.55, but participated in 
the afternoon tech rally.  The PI newsletter is currently up 8.5% 
on this play, and at this point it would be prudent to protect 
more of these gains.  The stock hasn't traded above its previous 
day's high for almost a week.  While we could tighten our stop to 
today's high we're going to give it a little more room and 
tighten our stop to $37.36, which is just above Thursday's high.





Editor's note:  
While our new HR short play in JNPR was in the email newsletter 
and on the front of the website, it didn't make it on to the PI 
play list.  This has been corrected.



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

BAC     Bank of America            69.48     +0.56
FMX     Fomento Economico          46.20     +0.54
RDN     Radian Group               49.95     +1.01
WL      Wilmington Trust Group     66.83     +0.95
MDU     MDU Resources Group        32.23     +0.73
TBL     Timberland Co              44.46     +0.90

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

OI      Owens Illinois Inc         19.19     +1.69
IIT     Indonesian Satellite       12.41     +0.98
TSA     The Sports Authority Inc   13.25     +1.40
SIE     Sierra Health Services     14.85     +1.42
SYPR    Sypris Solutions Inc       17.85     +1.85
NWRE    Neoware System Inc         10.73     +1.68

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

HIW     Highwoods Properties Inc   28.91     +0.60
AXL     American Axle & Mfg        30.87     +1.19
SSP     E.W. Scripps Company       85.53     +2.54
GPT     Greenpoint Financial Corp  47.75     +2.01
ACDO    Accredo Health Inc         60.08     +2.23
MEG     Media General              67.08     +2.19

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

IBM     Intl. Business Machines    87.41     -9.84
DNA     Genentech Inc              42.85     -1.85
ACN     Accenture Ltd              24.03     -1.13
EDS     Electronic Data Systems    51.11     -1.74
AIN     Albany Intl.               25.02     -4.93
CVTX    CV Therapeutics            30.90     -1.82

----------------------------------------- 
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