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.
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