PremierInvestor.net Newsletter Monday 04-29-2002 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/d29b_1.asp ================================================================= In section one: Market Wrap: Bulls have little fight left Watch List: ADBE, CIEN, ISSX, QLGC, T, and more... Play of the Day: Immediate Results ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 04-29-2002 High Low Volume Advance/Decline DJIA 9819.87 - 90.85 9937.09 9811.57 1.26 bln 1402/1742 NASDAQ 1656.93 - 6.96 1678.56 1640.97 1.82 bln 1437/2104 S&P 100 526.84 - 5.53 534.08 525.78 Totals 2839/3846 S&P 500 1065.45 - 10.87 1078.95 1063.62 RUS 2000 500.54 - 0.96 502.34 498.08 DJ TRANS 2694.70 - 27.79 2751.79 2719.47 VIX 26.11 + 1.47 26.36 24.59 VXN 45.12 + 2.88 45.12 41.77 TRIN 2.40 PUT/CALL 0.80 ****************************************************************** =========== Market Wrap =========== Bulls have little fight left While I'd argue that bulls have not thrown in the towel as "capitulation" has yet to take place, it's looking like bulls are definitely looking to their corners to see just how much longer they need to endure the slow methodical beating until the bell rings. In our April 18th wrap "Pass the smelling salts!" we mentioned the market action that day Not long ago I wrote a market update on how that day's trading was very similar to a couple of prize fighters dancing around the ring, where at certain parts of the trading session, each fighter (bull and bear) had their moments. However, as each day passes, almost like a boxing match has "rounds" the bears certainly have the upper hand and things are starting to get rather ugly. I'm not sure how many "critical levels of support" have been broken in the NASDAQ Composite, but evidently, the television reporter on CNBC said that one was broken today. Now he's looking for "critical support" at another level. For me, "critical support" for the NASDAQ Composite was the February 22nd relative low of 1,696.55. That level was violated on a closing basis on Friday and this morning's "rally" had about as much punch in it as that of "Carrot Top" (you know, the wild red haired looking guy that does the AT&T commercials on TV) taking on AT&T's other spokesperson "Mr. T." If you still can't make the comparison, the let's schedule a fight against Olive Oil and Godzilla, where Godzilla is the monster fighting for the bears. So what does "Carrot Top" and "Mr. T" have to do with anything? Telecom, that's what. One area of the market I keep "expecting" some type of large short-covering rally is in the telecom sector, but a recent rally in both of these sectors has found both back at new 52-week lows. I've explained before that rallies are often times depicted by both a "leadership" and "laggard" group trying to anchor themselves and create a rebound. However, the current action taking place is that bears suddenly lock in gains for a day or two, then step back and see just what kind of bullish buying takes place to support things. Recently, the bulls have stood around with their hands in their pockets is if to say. "Are you buying? I'm not buying!" And this has a slow methodical drift lower continuing to take hold. 1-800-CALL-ATT Tonight I'll be watching the Colorado Avalanche take game 7 from the Los Angeles Kings in their pursuit of a second straight Stanley Cup championship (I live in Denver, CO and like the Avalanche). At some point I expect the AT&T commercial staring either Carrot Top or Mr. T to come on. Today's action in AT&T (NYSE:T) $12.86 -3.3% will most likely have AT&T (T) bulls dialing 911 instead. AT&T Chart - Daily Interval Lately, it doesn't seem to matter "who you are." When a stock breaks to a new 52-week low, some stocks have gotten flushed lower. While I want to monitor what I feel are "strong stocks" for weakness that can be created by bulls selling their winners, I also want to monitor weaker stocks like AT&T (NYSE:T) to see how aggressive the bears are. Under current market conditions, it would take a "brave bull" to step in and be a buyer of T. The only buyers I think are around are bears looking to lock in gains. Simply looking at a "fitted" retracement as that on the above chart of AT&T, I see bears targeting the $11.92 level near- term. If the stock drops sharply like other stocks breaking to new lows, then that's a sign to me that bears aren't all that eager to be locking in gains. AT&T's (T) bearish vertical count from its point and figure chart is $11.50. As mentioned earlier today, another "telecom giant" in WorldCom (NASDAQ:WCOM) $2.35 -28% ended the day as the most actively traded with 265.1 million shares traded. In the past 6 trading session, shares of WCOM have lost roughly 60% of their value. Looking for support As Dow component AT&T (T) breaks to a new 52-week low, the apparent "lack of buyers" in AT&T also presents itself in the broader market action and has the S&P 500 Index (SPX.X) looking vulnerable to the 1,051 level. Today the SPX broke its February lows and this sets up a test of the 1,051 level. A 14-point decline may not seem like much, but that's a 1.4% decline from current levels. While that doesn't seem like much, imagine a boxer that's taken a couple of punches to the kisser and is "holding on" until the bell rings for the end of the round. S&P 500 Index Chart - Daily Interval Back in March, we took a more "cautious" approach for bullish traders as the S&P 500 bullish percent ($BPSPX) had reached a higher level of bullish % at 76%, but the SPX just couldn't muster a close above the 1,175 level (61.8% retracement). With a current reading of 62% for the bullish%, we've seen a pullback in this indicator, but nowhere near an "oversold" reading of 30% and there's still plenty of risk that could be reduced in this market. Technically speaking, I could never come up with a "level" at the 1,051 level to "explain" the technical support at 1,051 back in October, other than it may have simply been a level where institutional inventories "turned over" and gave a "buy side" influence to this broader market average. As such, retracement support looks to be the 1,015 level, but I'm expecting some buy programs to kick in near the 1,051 level should we see a test near term. Technical resistance on the S&P 500 (SPX) becomes alarmingly strong right now at the 1,130 level. That's our 50% retracement and also right where we have the 50-day and 200-day moving averages. To me, the current risk/reward near-term for aggressive shorting is becoming unfavorable. The only traders I feel should be doing further full position shorting right now are those that have built some gains in their account (from locking in gains on shorts or trailing bearish positions with tight stops to help assure profitability). A trader might use the 1,051 SPX support level as a correlation point near-term to look for some computer generated buy programs in stocks they're trading short that are nearing levels of technical support. Cablevision Systems Chart - Daily Interval Shares of Cablevision Systems (NYSE:CVC) 22.47 -5.18% are trading right near the lower end of our regression channel. The stock did see a bit of a pick up in volume today and that may "correlative" with news that came after the close of trading. Late this afternoon, the Yankees Entertainment & Sports Network (YES Network), which controls the broadcasting rights to the New York Yankees baseball team, filed a federal lawsuit against CVD, alleging antitrust violations. The brunt of the lawsuit has the YES Network accusing CVC of misusing its control of cable access to 3 million households in the New York Area to harm YES and to provide an anti-competitive advantage to its own regional sport networks, MSG and Fox Sports. Conversely, CVC argues , it has balked at paying $72 million annually for the broadcasting rights, saying it would have to hike monthly rates by $2 to cover the costs and that the bulk of its subscriber's don't want to pay the additional costs. CVC claims it has made "fair and reasonable" proposals to YES, including one to carry YES in the same way that Cablevision has carried the Yankees for years. Under the CVC proposal, YES would be offered as a premium channel on the same cable systems that carry MSG as a basic channel, YES would also be offered on the basic tier. However, YES has rejected that proposal. Well... we (PremierInvestor.net) didn't profile CVC as a bearish play on this news, but a bear will take it if he can. What we will do is lower stops (see play update) to try and assure gains. One never knows for sure if "smart money" was leaning on the stock short at/near $28.96, just prior to our bearish profile of $25.80 and if they're going to be looking to cover on the "bad news." We're going to stick with disciplined trading and simply let the MARKET determine the outcome. Economic data tomorrow The recent economic data has had little bullish impact on trading, but the two economic pieces of information due out tomorrow could have an impact on things. At 08:30 AM EST, Consumer Confidence for April is scheduled for release. Economists are looking for an April reading near 108.7, versus the March reading of 110.2. The more closely watched numbers will be the Chicago Purchasing Managers (Chicago PMI) at 10:00 AM EST, with economists looking for a 55.0% reading, which would be slightly below March's 55.7%. 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: 37.22 change: -2.07 WHAT TO WATCH: The GSO.X software index is quickly approaching support at 115-120. A retest of these September lows could trigger a multi-day relief rally in the sector. With this in mind, it might be a good time to start looking at some of the stronger software stocks. ADBE certainly fits the bill when it comes to relative strength: Shares are down only 6.5 percent since April 1st, compared to the 21 percent decline in the GSO. We also like how ADBE is currently sitting near the bottom of its ascending regression channel. This creates a favorable risk/reward setup. If software does get a bounce, long positions can be considered on a move above $38 but there is plenty of technical resistance between $40 and $41. --- CIENA Corp. - CIEN - close: 7.23 change: -0.27 WHAT TO WATCH: CIEN is currently trading at multi-year lows and is in danger of breaking support at $7.00. A move below this level would create a triple-bottom breakdown on the p-n-f chart, which could lead to a test of psychological support $5.00. Speaking of p-n-f, CIEN has a bearish vertical count of $0.50. We're not expecting the stock to drop that far in the near-term, but it's certainly interesting to see just how much potential downside remains. Aggressive traders could target a move below $7.00, but with the NWX.X networking index 10 points away from testing support at 200, be sure to confirm negative sector sentiment before opening new positions. You may also want to wait for sector giant CSCO to break below its near-term low of $13.88. It would prove difficult for networkers to stage any sort of rally when their leader is sinking toward its September lows. Keep in mind that CSCO has earnings on May 7th. --- Internet Security - ISSX - close: 18.32 change: -0.95 WHAT TO WATCH: Premier Investor has recently had a good deal of success with shorting software security stocks. As a matter of fact, ISSX (closed April 12th) was featured as a short play until it found support at the $20 level. Shares have since plummeted to near-term lows and show no signs of finding buyers. The next clear level of support is at $17, the MACD is rolling over, and today's 4.9 percent loss triggered a double-bottom p-n-f sell signal. We think bearish positions can be considered at current levels. However, due to the oversold nature of the software sector, shorting ISSX is best left to aggressive traders. We would aggressively be targeting a move to $15 if we were short. --- Qlogic Corp - QLGC - close: 43.22 change: -0.64 WHAT TO WATCH: Shares of QLGC have lost over 10 percent since April 19th and appear to be headed for a test of the February lows near $36. Today the stock briefly traded below the 200-dma at $42.80 and triggered a double-bottom p-n-f breakdown. Watch for a move below today's low of $42 to clear the way for a test of even-number support at $40. Those who choose to short QLGC should be aware that the SOX.X is approaching support at 500. The index could very well break through this level, but keep those stops tight to prevent getting caught in a rapid short- covering rally. Alternatively, you could keep QLGC on your watch list and if the SOX bounces then QGLC could rebound towards the $50 level. --- AT&T - T - close: 12.86 change: -0.44 It seems like every day there's another piece of news that drags the telecom sector further into the abyss. Today's disaster du jour was the announcement that Q was being investigated by several states for cutting secret deals with rivals. Also weighing on the sector was a 19 percent loss from WCOM, which is being plagued by continued concerns of its financial viability. T has been moving lower with the group and is currently at 52- week lows. Odds are good that shares of T will likely gravitate to their Q4 2000 lows near $11.90 to $12.00. Aggressive traders could try to capture the move lower, especially now that it has broken support at $13, but do so carefully, as a short-term oversold rally could appear at any time (although we doubt it would last). ============= MORE TO WATCH ============= Biotech HOLDRS - BBH - close: 98.05 change: -2.55 The biotech sector continued to plummet today, and the BBH is in danger of breaking its all-time low at $92.51. Shares may find support at this level, but short-term traders could try to jump on now and ride the BBH lower. For more bearish biotech possibilities, check out special section in this weekend's Watch List (4/26/02). --- QUALCOMM - QCOM - close: 29.22 change: -1.43 Much like T, QCOM is trading at 52-week lows and it appears it may get worse before it gets better. Look for a failed rally at $30 or a move below today's low of $28.56 to offer short entries. =============== Play-of-the-Day (bearish) =============== DuPont Photomasks - DPMI - cls: 37.09 chg: -2.38 stop: 40.01*new* Company Description: DuPont Photomasks is a leading global provider of microimaging solutions. The company develops and produces advanced photomasks, a key enabling technology used in the manufacture of semiconductor and other microelectronic devices, and pellicles, the protective covers for photomasks. Headquartered in Round Rock, Texas, DuPont Photomasks operates a global network of manufacturing facilities serving semiconductor makers and other electronics producers around the world. DuPont Photomasks posted worldwide sales of approximately $408 million in fiscal 2001. (source: company press release) - ORIGINAL WRITE UP: April 26th, 2002 - Why We Like It: With only one semiconductor short on the play list, we felt it wouldn't hurt to add another now that the SOX is in a free fall to the 500 mark. Granted that isn't very far away, no one says it can't break that support level. We're not expecting it to so this could be a brief play in DPMI if the sector can rally significantly versus a lingering consolidation at support. DPMI announced its Q3 earnings report on April 24th and the numbers were not that great. With a large drop in earnings over the previous year, the company cited that demand remains weak. A less than enthusiastic conference call for the coming Q4 sparked at least one downgrade and share have since broken through their 200-dma level of support. Friday's close under $40 is also key in breaking another level of resistance and DPMI could fall to the $35 to $30 levels in the next few weeks. Bears may want to wait and see how the market opens on Monday as the Nasdaq is very oversold and due for a bounce. If this occurs, traders might get an opportunity to short DPMI near its 200-dma around the $41.40 to $41.50 level. We're going to start the play with a stop at $43.41 or 11 cents above Friday's high. Due to the development in the SOX we'll consider closing this for a quick in-and-out trade if DPMI find support at $35 during a stall in the SOX at 500. - Play-of-the-Day Comments: April 29th, 2002 - Over the weekend we added DPMI to our Play List, and the stock quickly cooperated with a 6 percent loss. Not bad, considering the SOX.X actually finished in the green. In light of the large move, we're going to tighten our stop to $40.01. This decreases our risk, but will still force DPMI to trade above both Friday's low and the psychological resistance level at $40. More aggressive traders may want to use a stop above today's high of $40.70. New entries can be evaluated on a below today's low of $36.51 or a failed rally at the $38 level. Today's relative weakness bodes well, but keep an eye on how the SOX behaves as it approaches the 500 support level. Picked on April 26th at $39.47 Gain since picked: +2.38 Earnings Date 04/24/02 (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 04-29-2002 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/d29b_2.asp ================================================================= In section two: Net Bulls Stop Adjustments: CA, DPMI (bearish) High-Risk/High-Reward Stocks Closed Bullish Play: AMZN, PVN Stop Adjustments: CVC (bearish) Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================== Net Bulls (NB) Tech Stock section ================================================================== =============== NB Play Updates =============== Bearish Plays Stop Adjustments ---------------- Computer Associates - close: 17.70 change: -0.30 stop: 19.05*new* CA continues to distance itself from the $20 level. Today the stock dropped 1.6 percent to close at near-term lows but this time it is back under the $18 level. Shares could be headed for a retest of the February lows, but at this point we're going to inch our stop down to $19.05. This will force CA to trade above the 10-dma, which has pressured the stock for over a week. --- DuPont Photo - DPMI - cls: 37.09 chg: -2.38 stop: $40.01 *new* Over the weekend we added DPMI to our Play List, and the stock quickly cooperated with a 6 percent loss. In light of the large move, we're going to tighten our stop to $40.01. This decreases our risk, but will still force DPMI to trade above both Friday's low and the psychological resistance level at $40. More aggressive traders may want to use a stop above today's high of $40.70. ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Amazon.com - AMZN - close: 16.18 change: -0.73 stop: 15.90 Try as it might, AMZN just couldn't shake the broader tech weakness for another session. Shares had been strong following the company's strong earnings report and closed out last week's trading with an impressive display of relative strength. Profit- takers finally moved in today, hitting the stock for 4.3 percent loss. Shares violated our stop at $15.90 (the intraday low), which closed out this play for a move of $1.55 or 10.8 percent. Although we wouldn't be surprised to see some additional consolidation near $16.00, a tech rebound could push AMZN to the top of its ascending channel near $19. Traders looking to capture this move could target a close over resistance at $17.00 Picked on April 17th at $14.35 Gain since picked: +1.55 Earnings Date 04/23/02 (confirmed) --- Providian Financial - PVN - cls: 6.95 chg: -0.45 stop: *text* Shares of PVN got whacked today after an article in this morning's edition of USA Today claimed that less affluent consumers were falling behind on their credit card payments. The prospect of an increase in uncollectable debt didn't sit well with investors, who hit PVN for a 6 percent loss. The stock actually rebounded from an intraday low of $6.20, but was unable to close over previous support at $7.00. Now that this level has been violated, we have no desire to go long. We're dropping this un-triggered play tonight. Picked on April xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 05/06/02 (confirmed) =============== HR Play Updates =============== Bearish Plays Stop Adjustments ---------------- Cablevision - CVC - close: 22.47 change: -1.23 stop: 23.51 *new* Another sharp decline in shares of CVC means it's time for another stop adjustment. Today the stock dropped over 5 percent and bounced (barely) from the bottom of its descending channel at $22. We're targeting a move to $20, but now would certainly not be a bad time to take profits. We're moving our stop to $23.51, which should be sufficient to protect a hypothetical 10 percent gain from our original entry point. In after-hours news, the YES Network filed a lawsuit against CVC, alleging antitrust violations. This is likely to add additional pressure to the stock on Tuesday and our target of $20 could come quicker than expected. ================== 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 SWX Southwest Gas Corp 24.02 +0.97 GMRK Gulfmark Offshore Inc 43.44 +0.57 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change NUS Nu Skin Enterprises 13.92 +1.14 CBZ Cobalt Corp 17.35 +1.35 PCIS Precis Inc 15.95 +1.02 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change BA Boeing Co 43.63 +2.12 DLTR Dollar Tree Stores Inc 38.58 +1.78 TGH Trigon Healthcare Inc 98.87 +14.62 PII Polaris Industries Inc 75.65 +1.84 MME Mid-Atlantic Medical Srvcs 36.07 +1.12 MOVI Movie Gallery Inc 20.02 +1.24 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change AMGN Amgen Inc 51.88 -1.96 USAI USA Networks Inc 29.03 -1.07 COF Capital One Financial Corp 58.75 -3.30 AT Alltel Corp 48.27 -2.05 BVF Biovail Corp 36.80 -9.65 SNPS Synopsys Inc 44.20 -1.40 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change ACF Amercredit Corp 38.20 -3.08 SKO Shopko Stores Inc 20.26 -1.72 VITL Vital Signs Inc 38.37 -0.85 ================================================================= 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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