PremierInvestor.net Newsletter 05-02-2002 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/e02b_1.asp ================================================================= In section one: Market Wrap: Factory orders up 0.4%, slightly better than expected Play-of-the-Day: Looking for a bounce Market Sentiment: A Tale of Two Markets ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 05-02-2002 High Low Volume Advance/Decline DJIA 10091.90 + 32.30 10117.50 10040.10 1363 mln 1831/1291 NASDAQ 1644.90 - 32.71 1695.07 1640.80 1849 mln 1705/1783 S&P 100 537.53 - 1.00 541.66 534.65 totals 3536/3074 S&P 500 1084.56 - 1.90 1091.42 1079.46 RUS 2000 513.37 + 2.54 514.17 509.80 DJ TRANS 2749.51 + 5.85 2773.98 2736.55 VIX 22.38 + 0.18 22.99 22.10 VIXN 44.52 + 0.70 45.03 43.11 Put/Call Ratio 0.93 ----------------------------------------------------------------- =========== Market Wrap =========== Factory orders up 0.4%, slightly better than expected Stocks showed some fairly significant divergence today, despite March factory orders that showed a 0.4% gain during the month of March, which was higher than economists' estimates of a 0.2% gain. Financials, paper products, home-builders and financials responded favorably, while broader technology traded lower. DJ US Home Construction Index Chart - Daily Interval Despite an overall March construction spending number released yesterday, which showed a decline of 0.9%, construction spending at the residential level was about flat, while commercial constructions spending fell. That "bit of DIVERGENCE" is the spending numbers had the Dow Jones Home Construction Index (DJUSHB) managing a close at a 52-week high today. Also helping the homebuilders today was Freddie Mac (NYSE:FRE) $65.75 +0.45%, saying the 30-year fixed rate mortgage averaged 6.78% for the week ending May 3, down from 6.88% a week ago. The 15-year loan took a similar tumble, 6.26% from 6.35%. Are we there yet? Some painful lessons are still being learned as even some of the "big names" of the NASDAQ continue to slide, and they're not declining on light volume either. The top three most actively traded stocks in the entire market saw shares of Sun Microsystems (NASDAQ:SUNW) $6.45 -7.46%, WorldCom (NASDAQ:WCOM) $2.03 -8.14% and Oracle (NASDAQ:ORCL) $8.55 -9.52% trade new 52-week lows and put a damper on the NASDAQ-100 Index (NDX.X), which slid -3.3% to 1,225. The NASDAQ-100 Bullish % ($BPNDX) from stockcharts.com has tonight's reading at 25% and still in "bear confirmed" status. This is our main risk monitoring tool for understanding "market risk" as it relates to the NASDAQ-100. Readings below 30% are considered "oversold" while readings above 70% are considered "overbought." Traders that understand the tool are able to associate it with how institutions will manage risk in their inventories. Here's a chart of the NASDAQ-100 Index (NDX.X) with retracement attached at the relative highs and relative lows that "defines a range" I've added some inflection points from the bullish percent chart so that we can better understand that bears are now carrying the bulk of the risk and looking for some type of sharp capitulation from the bulls to lock in gains. NASDAQ-100 Chart (NDX.X) - Daily Interval It's interesting to note the "levels" of retracement that have really come into play on a rather consistent basis on the move higher from September to December, and then back down again. What's also interesting and rather staggering is how well the bullish percent chart has done its job at indicating "overbought" and "oversold" levels of risk. Institutional market makers in the NASDAQ are usually buyers at oversold levels (below 30%) and sellers at overbought levels (above 70%). While the bullish percent chart shows levels of bullishness with X's and O's (X is upward movement, O is downward movement) and keeps track of the passage of time with numbers or letters to mark the first of each month (8=Aug, 9=Sep, A=Oct, B=Nov, C=Dec, 1=Jan, 2=Feb, 3=March, 4=April, 5=May) a trader can still compare a bar chart of the NASDAQ-100 with retracement and regression overlaid and compare it to the NASDAQ-100 Bullish % to better understand levels of bullishness and risk. NASDAQ-100 Bullish % Chart ($BPNDX) - 2% box At the end of today's session, only 25% (25 of the 100 stocks) of the stocks in the NASDAQ-100 are showing a point and figure buy signal on their point and figure charts. Levels below 30% are considered "oversold" and helps a trader/investor understand "market risk" as it relates to the NASDAQ-100 universe of stocks being a "market." A subscriber that will print out both charts and lay them side by side will begin to understand how an institutional trader may view "market risk" and control his/her inventory in stocks they make a market in. Usually, a market maker finds plenty of sellers in more oversold conditions as "panic" can take hold. It at times of "panic selling" that a market maker must step in and provide liquidity to the sellers (the market maker must buy when everyone else wants to sell). Conversely, when the market gets more "overbought" the market maker usually if finding a lot of buyers in the market and must therefore turn into a seller, in order to provide liquidity for all the buyers. How do market makers like Merrill Lynch, Lehman Brothers and the multitude of other market makers stay in business when the markets are going down? One way is from the commissions per share that they charge, but if you're only making 3-5 cents a share during your market making activity, that won't come close to making up for a stock that has fallen 30% if you hold 1,000,000 shares of the stock in your inventory. No, the only reason they're still in business is because they buy low and sell high and know how to monitor "market risk." It's now fairly evident that risk in the NASDAQ-100 was "high" for the bulls back in December (red C) and again in mid-March (after the red 3). Tie it in with Applied Materials! Today our bullish play list was triggered on a bullish trade in semiconductor equipment maker Applied Materials (NASDAQ:AMAT) $22.87 -6.27%. As mentioned a couple of days ago, this bullish trade was not for the weak at heart. It can be nerve-racking to buy a stock that has declined nearly 6% in a single session. However, as long as the trader is disciplined, the trader may begin to understand what we are looking for. Applied Materials (AMAT) is a component of the NASDAQ-100. Of the 25 stocks still showing a "buy signal" on its point and figure chart, AMAT is one of those stocks. After you have studied the NASDAQ-100 bullish % from above and the different "months" or time-periods on that chart, then there may actually be a reason we are looking to trade bullish this stock. Applied Material Chart - $1 & $0.50 box We've profiled a bullish trade in AMAT with a much tighter stop than where a point and figure sell signal would be generated if AMAT did trade the $20 level. AMAT is one of the 25 stocks in the NASDAQ still showing a buy signal on its point and figure chart, as the stock "created" the buy signal when it traded $25 back in early March (just after red 3). Do you see perhaps how that "buy signal" most likely contributed to the bullish % getting above 70% back in March? In March, the "risk was high" as it relates to the bullish %. Now we might understand that risk is "lower" as it relates to the NASDAQ-100 bullish %. Today's bullish entry in AMAT on weakness isn't a trade for everyone, unless you're comfortable with the "risk" in the trade and have some confidence in the point and figure charting system. It is imperative that a trader be disciplined with a stop and trade the stock on it own merits. If you're a trader that is holding a bunch of bearish trades from our play list, you may indeed have felt more "comfortable" with a bullish trade in AMAT, as that trade may eventually offset some bearish trades you hold in other weaker NASDAQ stocks that trade BELOW trend and have BEARISH vertical counts associated with their charts. My thoughts have always been, that strong stocks tend to gain first bullish sponsorship when a rally takes hold and that weaker stocks will lag the rally. With the NASDAQ-100 bullish percent at lower levels of bullishness, there has been a lot of risk reduced in the NASDAQ- 100. We're very early to be looking long, but at lower risk levels, the odds are in the favor of a bullish trade just above trend. If you like AMAT as a bullish trade, but just not comfortable with the stock's recent decline, then look for some firming in the NASAQ-100 (NDX) near the 1,200 level. It certainly will help a bull in an AMAT trade to see some type of "market firming" in the NASDAQ-100. Hey, if the weakest of technology stocks will find buyers, then the odds greatly increase for one of the stronger stocks to find buyers. Key technicals to watch for tomorrow! I've said before that the Dow Industrials (INDU) 10,091 +0.32% can have an impact on "investor psychology" and tomorrow could be an important day. The Dow managed to squeak out at 32-point gain today and now sits just below downward trend on the bar chart. A break much above the 10,120 level could spark a near-term rally in the Dow Industrials and also get some bears to get a little nervous in the NASDAQ. The Dow's action today really diverged from the NASDAQ and if it can lead higher, it might just pull the rest of the market up with it. We've tightened our stops in the play list and will be ready for whatever the MARKET deals out. May sure to check the play list for updates so you've got a plan in place. Jeff Bailey Senior Market Technician ========================= Play-of-the-Day (Bullish) ========================= Applied Materials - AMAT - close: 22.87 change: -1.53 stop: 20.89 Applied Materials, the largest supplier of products and services to the global semiconductor industry, is one of the world's leading information infrastructure providers. Applied Materials enables Information for Everyone(TM) by helping semiconductor manufacturers produce more powerful, portable and affordable chips. (source: company press release) - ORIGINAL WRITE UP: April 25th, 2002 - It has been days now that the Premier Investor Newsletter has been looking for and discussing a pull back in shares of AMAT as a preferable entry point to go long. The recent dip under the 50- dma and today's trading around $24.50 to $25.00 looks like a great dip to support at the bottom of its ascending regression channel (we would encourage you to use a standard regression channel from the September lows). It would seem now is the time to put our "money" where our mouth is (using a hypothetical portfolio of course). Previously, we had AMAT on the bullish tech stock play list but we were never triggered as shares never traded at $27.20 or above. Yet now that the sector has pulled back we believe traders might get a favorable entry point as AMAT slips with the sector movement. The challenge is that while buying AMAT between $24 and $25 looked good a few days ago, the deterioration in the SOX has suddenly soured our stomach on going long AMAT at this level. Investors should use a market, sector, stock focus when evaluating plays because the vast majority of a stock's movement is market and sector related. Yet AMAT is a good example of how a strong stock, who has seriously been out performing the sector, will still get dragged down as the group moves lower. The belief follows that when the sector turns around then AMAT will out perform to the upside. This all sounds well and good but both Jeff and I look at AMAT's chart and feel like we're about to try and grab a falling knife. Hence the move from the tech list to the high risk/reward list. This is our plan. We're going to set an entry range on AMAT and if shares trade anywhere inside it we'll "go long" but by doing so we have to give the stock some room to move if the SOX keeps slipping. Traders who follow this strategy have to be willing to take some heat or just sit back and wait for a bottom and turnaround to reappear. Given that the SOX had fallen five days in a row, today's less than 1 percent gain does not offer us a lot of confidence. The chip index is less than one point above its 200-dma. Is the group short-term oversold? Yes. Can it continue to breakdown? Absolutely. If the SOX moves lower tomorrow, then a re-test of the 500 level of support seems like a sure thing. Now how do we apply this to AMAT? With the expectation that the SOX is doomed to trade lower, then we are going to use an entry range of $22.99 to $22.00. Odds are good we'll get triggered at the $22.99 side of the range but when we do we'll start the play with a stop loss at $20.89, which is below the Feb. 22nd low. AMAT would have to cross its 200-dma before we got stopped out. Traders should feel comfortable adjusting the entry range to their own style. Maybe yours is between $22.49 and $21.50. Maybe you'd rather wait to see if AMAT trades to its 200-dma first. Whatever you do, we would suggest you look at a PnF chart of the SOX to give you perspective on the chip sector's strength. FYI: AMAT has set its earnings date for Tuesday, May 14th, 2002. - Most Recent Update: May 2nd, 2002 - It took two weeks and a change of strategies, but we're finally long on AMAT. En route to a loss of 6.2 percent, shares fell below our trigger price at $22.99. We think the timing of this play works in our favor. Had we been triggered when the SOX was still up at 525, there might have been enough potential sector downside to violate our stop. However, our odds are better now that the SOX is hovering near the critical 500 support level. We're expecting a bounce from this level to give AMAT a boost. However, caution is encouraged. Even though we are buying on the pull back, the chip sector's reaction to the fresh industry report out today is discouraging. The Semiconductor Industry Association (SIA) said that March semiconductor revenues dropped 20 percent but this was still the best year-over-year comparison in months. Gains in the chip sector this quarter were strongest in the DRAM and programmable chip industries. The 7.2 percent rise in sales over February is the largest month-over-month increase since 1986. Yet despite this positive news the SOX sold off again with what appears to be a very strong failed rally at its 200-dma (again). The real test will be to see if the 500 level will hold as support like many in the market expect it to. Those who are afraid of catching a falling knife and would like to see AMAT display some bullish conviction could wait for the stock to move back above $23.50. This level had provided support over the past week. Now that we've been triggered, our stop is set at $20.89. This will force AMAT to trade below the 200-dma - Play-of-the-Day Comments: May 2nd, 2002 - A sell-off in shares of AMAT brought the stock below our trigger price. With the SOX.X just above the critical 500 support level, we think a bounce in the chip sector is imminent. AMAT looks near-term oversold and has near-term upside to the $28 level. cautionary note: All bets are off if the SOX falls through 500. An intraday dip to 497-498 would be within the support range, but a solid break below that level would likely create another wave of selling in the group, including AMAT. Picked on May 2nd at $22.99 Change since picked: -0.12 Earnings Date 05/14/02 (confirmed) ================ Market Sentiment ================ A Tale of Two Markets By Eric Utley The major market averages finished mixed in Thursday's session. The blue chip heavy Dow Jones Industrial Average ($INDU) finished in positive territory. While the technology barometer in the Nasdaq-100 (NDX.X) finished much lower. The sector scorecard revealed a decidedly negative slant to the technology sectors. All eight of the tech sectors that I track finished decidedly negative. The Semiconductor Sector Index (SOX.X) earned the day's worst performing sector spot with its 4.39 percent plunge. What a reversal of role in that sector. It wasn't too long ago that the chips were the go to sector for the bulls, but not anymore. Meanwhile, the Paper Index (FPP.X), about as old economy as it gets, bolted higher to earn the day's best performing sector spot. It was the same story in the CBOE Market Volatility Index (VIX.X) yesterday, when fear imploded like it normally does during days of strength in stocks. Quite simply, there's no wall of worry for this market to climb. Without it, rallies are nothing more than opportunities to get short. We are starting to see a tick higher in the put/call data, but it seems that when the fear hangs around for a day or two, it inevitably collapses in the form of excessive call buying. Such as has been the case this year, the only major bullishness that I can find is due to the oversold nature of the market. The ARMS Index is creeping towards extreme territory. We're starting to see the longer term numbers move towards extreme oversold territory, which may be a harbinger of a bigger rally on the horizon. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10091 Moving Averages: (Simple) 10-dma: 10038 50-dma: 10282 200-dma: 9928 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1085 Moving Averages: (Simple) 10-dma: 1090 50-dma: 1126 200-dma: 1128 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1225 Moving Averages: (Simple) 10-dma: 1293 50-dma: 1406 200-dma: 1487 Paper ($FPP) Jefferson Smurfit (NYSE:JS), an Irish paper and packaging company, said that it was in talks to be acquired. That news sparked a rally in the paper sector, sending the FPP higher by 2.05 percent for the day. The sector was the best performing on my screen. Sector movers included Bowater (NYSE:BOW), Louisiana Pacific (NYSE:LPX), Weyerhauser (NYSE:WY), Boise Cascade (NYSE:BCC), and International Paper (NYSE:IP). 52-week High: 381 52-week Low : 270 Current : 360 Moving Averages: (Simple) 10-dma: 355 50-dma: 362 200-dma: 360 Semiconductor ($SOX) The SOX was the day's worst performing sector with its 4.39 percent drop. Micron's (NYSE:MU) formal withdrawal from buying Hynix induced another round of selling. Sector losers included Credence (NASDAQ:CMOS), KLA Tencor (NASDAQ:KLAC), Applied Materials (NASDAQ:AMAT), PMC Sierra (NASDAQ:PMCS), and Micron. 52-week High: 711 52-week Low : 344 Current : 504 Moving Averages: (Simple) 10-dma: 537 50-dma: 571 200-dma: 536 ----------------------------------------------------------------- Market Volatility Big surprise, the VIX continued imploding yesterday. It gained back a fraction today, but nothing really worth noting. We'll see if fear returns next week. Meanwhile, the VXN has a bit more stick too it, probably because of the wreck in the Nasdaq-100. CBOE Market Volatility Index (VIX) - 22.38 +0.07 Nasdaq-100 Volatility Index (VXN) - 44.43 +0.52 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.93 456,794 425,390 Equity Only 0.84 396,257 332,026 OEX 0.84 10,824 9,106 QQQ 0.60 50,024 30,023 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 63 + 0 Bull Confirmed NASDAQ-100 25 - 2 Bear Confirmed DOW 50 + 0 Bear Alert S&P 500 60 - 1 Bear Alert S&P 100 54 - 2 Bear Alert Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.31 10-Day Arms Index 1.42 21-Day Arms Index 1.38 55-Day Arms Index 1.24 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when the do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals Advancers Decliners NYSE 1844 1702 NASDAQ 1304 1773 New Highs New Lows NYSE 248 41 NASDAQ 216 96 Volume (in millions) NYSE 1,364 NASDAQ 2,060 ----------------------------------------------------------------- Commitments Of Traders Report: 04/16/02 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 The spread between S&P commercials and small traders narrowed during the most recent reporting period. Commercials added a few more longs than shorts, resulting in a small reduction in the group's net bearish position. Meanwhile, small traders added quite a few short positions, coming off of the group's yearly high in bullishness. Commercials Long Short Net % Of OI 04/02/02 313,294 406,337 (93,403) (13.0%) 04/09/02 320,101 411,075 (90,974) (12.4%) 04/16/02 322,578 411,245 (88,667) (12.1%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: ( 36,481) - 10/16/01 Small Traders Long Short Net % of OI 04/02/02 149,449 43,139 106,310 55.2% 04/09/02 151,237 47,678 103,559 52.1% 04/16/02 150,529 50,424 100,105 49.8% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 107,702 - 3/26/02 NASDAQ-100 Nasdaq commercials grew less bearish during the most recent reporting period. The group added a number of long positions, while maintaining last week's short position. Net, however, the group is still bearish. Small traders went in the opposite direction by adding more shorts than longs, for a decrease in the group's net bullish position. Commercials Long Short Net % of OI 04/02/02 26,211 31,840 (5,629) (9.7%) 04/09/02 28,985 35,221 (6,236) (9.7%) 04/16/02 32,024 35,723 (3,699) (5.5%) Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: 7,774 - 12/21/01 Small Traders Long Short Net % of OI 04/02/02 10,615 7,769 2,846 15.5% 04/09/02 11,640 8,353 3,287 16.4% 04/16/02 12,458 10,572 1,878 8.2% Most bearish reading of the year: (9,877) - 12/21/01 Most bullish reading of the year: 8,460 - 3/13/01 DOW JONES INDUSTRIAL Dow commercials grew less bullish during the most recent reporting period by reducing their number of longs and increasing their number of shorts. The group's net bullish position dropped by about 1,100 contracts. Small traders added slightly more longs than shorts for a reduction in the group's net bearish position. Commercials Long Short Net % of OI 04/02/02 18,717 12,549 6,168 19.7% 04/09/02 19,393 13,445 5,948 16.7% 04/16/02 19,080 14,267 4,813 14.4% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 04/02/02 5,192 9,007 (3,815) (26.9%) 04/09/02 5,459 9,340 (3,881) (26.2%) 04/16/02 5,644 9,448 (3,804) (25.2%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- ================================================================= 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. 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PremierInvestor.net Newsletter 05-02-2002 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/e02b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: SNE, TTN Bearish Play Updates: BRCM, CA, DPMI, SRNA Closed Bearish Play: KRON Stock Bottom / Active Trader Bullish Play Updates: CTX, RKY, SII Bearish Play Updates: JPM, MER, GDT, V High Risk/Reward Bullish Play Updates: AMAT Closed Bullish Plays: GNCMA Split Trader COH: 2-for-1 split announcement DBRN: 2-for-1 split announcement 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 =============== -------------------- Bullish Play Updates -------------------- Sony Corp (ADR) - SNE - close: 53.45 change: -1.35 stop: 51.25 Media and entertainment stocks were roughed up during Thursday's trading. EchoStar Communications (DISH) and Vivendi Universal (V) were both hit with selling, pushing closing prices down about 5% each. Although Sony did not escape the selling, it fared considerably better than either DISH or V. On the day, SNE dipped 2.46%, falling $1.35 to 53.45. The current pullback in the shares appears to be nothing more than normal profit-taking since the shares enjoyed a short-term peak of 56.44 on April 25th. Over the next few days it is possible that further profit-taking may occur, but we expect that 51.75-52.75 will serve as a rebound point for the stock. Traders can keep an eye on the rising 50- dma at $52.26, which should act as technical support as well. While you're at it, keep your eyes on the NIKKEI as a guide for overall investor sentiment for Japanese stocks. The NIKKEI gained 60 points on Thursday and closed back above the 11,500 mark. We did note that volume has been declining on the recent pullback. This might indicate a real lack of true sellers. Picked on April 4th at $53.01 Gain since picked: +0.44 Earnings Date 04/25/02 (confirmed) --- Titan Corp - TTN - close: 22.80 change: +0.10 stop: 20.99 On Wednesday, May 1st, Titan Corporation announced that one of its subsidiaries, Titan Systems Corp., had been awarded a contract with the US Navy. The contract was awarded by the Naval Air Warfare Center Aircraft Division and will provide Titan Systems with a cost-plus-fixed-fee contract, having a potential value of $188 million. Since hitting a short term low of 21.45 on April 25th, TTN has trended higher. Technically, TNN is experiencing a modest increase in its price momentum, as indicated by the RSI, and this should help the shares hold up in coming trading sessions. Despite the positive news and the momentum, we want to remind readers that the $23 level continues to act as resistance, which we outlined on the PnF chart in our initial write up. More conservative traders may want to consider waiting for a close over that level. Picked on April 15th at $21.26 Change since picked: +1.54 Earnings Date 04/25/02 (confirmed) -------------------- Bearish Play Updates -------------------- Broadcom Corp - BRCM - close: 32.23 change: -1.39 stop: 33.05 *new* The Semiconductor Index (SOX.X) was one of several technology- related indexes hit with selling during Thursday, and this helped our short position in Broadcom (BRCM), a component of that index. The SOX dropped 4.39%, closing at 504. Technically, the 500-510 region of the SOX is a potentially important support level and for this reason we have elected to tighten our buy stop on this position, setting the new stop at 33.05. The shares of Broadcom dropped slightly more than 4% during Thursday's trading and, like the SOX, BRCM is now sitting on top of a support region which runs from about 31.25-32.25. Additionally, William J. Ruehle, BRCM's president, is scheduled to speak next week at two high visibility technology conferences: JPMorgan H&Q Technology Conference (Wednesday, May 8th) and the Salomon Smith Barney Semiconductor Conference (Thursday, May 9th). Accordingly, we believe that a tighter buy stop will help protect our gains in the event that BRCM rebounds off support in coming sessions, or responds positively in advance to Mr. Ruehle's scheduled appearances for next week. Picked on April 24th at $34.84 Gain since picked: +2.61 Earnings Date 04/17/02 (confirmed) --- Computer Assoc. - CA - close: 17.85 change: -0.61 stop: 19.05 Thursday's sharp weakness in technology left few of the major tech stocks untouched, and that weakness easily extended to Big Board issues as well--to the delight of our short position in CA. Computer Associates was pulled down 0.61, or over 3%, with the shares nearly bumping up against their 50-dma before CA traded lower into the afternoon. CA has now declined to its key 61.8% Fibonacci retracement level (using Feb. lows to April highs) and we will be watching to see if the stock attempts to rebound at this level, or continues its lackluster performance. We did find it interesting that shares fell sharply in the last two hours of the day as if in reaction to a news event. Yet we could not uncover anything that may have spooked investors so quickly. Picked on April 18th at $18.49 Gain since picked: +0.64 Earnings Date 05/14/02 (unconfirmed) --- DuPont Photomasks - DPMI - cls: 35.77 chg: -1.98 stp: 37.51 *new* Shares of DuPont Photomasks (DPMI) fell over 5% today, producing a cumulative gain in this short position of 9.4% as of Thursday's close. With the shares closing the trading session at 35.77, we will be watching the behavior of our trade closely in the next few days. The 34.45 level represents a key retracement level (Fibonacci 161%, using the February lows to the April highs) at which sharply declining stocks will frequently attempt to rebound. In recognition of this technical observation, we have lowered our buy stop on DPMI to 37.51, which should protect a 5% gain in the play. While we consider this a prudent approach for the typical investor, more active traders may wish to consider an even tighter stop. Additionally, to round out our strategy, the SOX may bounce from the 500 level as many expect but we could get another dip lower first. With that in mind, we're going to institute an exit price of $35.50 on DPMI and will close the play for a profit if shares trade there or lower. The very strong volume today and the close under $36 hints that the selling may not be over yet for DPMI. Today's news report that the DuPont Photomasks will be presenting at the CIBC World Markets Annual Electronics Food Chain Conference (May 14th, 2002, 2:05 p.m. EDT) was unable to offer any meaningful support to its price. We noted on Tuesday that DPMI will also be presenting at the Merrill Lynch Hardware Heaven conference in San Francisco on May 2nd, 2002 at 11:15 a.m. PST. Picked on April 26th at $39.47 Gain since picked: +$3.70 Earnings Date 04/24/02 (confirmed) --- SERENA Software - SRNA - cls: 12.66 chg: -0.43 stop: 13.41 *new* We now enjoy a 15%+ gain in our Serena short. Even though we lowered our buy stop to 14.01 on Tuesday, we are going to lower it again today in order to ensure that we keep our hard won success. Our new stop is 13.41, which is just slightly above the 5 dma -- a very aggressive moving average we use when protecting profits. We have chosen to implement the tighter stop for a few technical reasons. The most obvious of these is this: SRNA is now very near a longer term support region, which formed about 7 months ago, and which is in the 12.50 region--virtually just below Thursday's closing price of 12.66. Using stops to lock in profits is an important component of our trading strategy; in the case of this trade, lowering our buy stop will help ensure we keep most of our gains regardless of SRNA's movement in coming days. Don't forget that we currently have a profit target to exit the play if SRNA trades to $12.51, which could happen early Friday morning. We would not consider new positions at this time. Picked on April 23rd at $14.94 Gain since picked: +2.28 Earnings Date 02/21/02 (confirmed) =============== NB Closed Plays =============== ------------------- Closed Bearish Play ------------------- Kronos Inc. - KRON - close: 42.00 change: +0.60 stop: *text* We noted on Tuesday that our effort to short Kronos had yet to be triggered. The reason: buyers seemed all too happy to consistently buy the stock near the $39 level during recent days. Tuesday's rally in the Nasdaq and software group, pushed KRON back over the $40 mark--very near the 200-dma. Healthy advances on both Wednesday and Thursday have only pushed the price of KRON higher despite a continuing decline in the GSO.X, with the stock experiencing a close of 42.00 today. Although we have removed this trade from our short play list, we are going to continue to monitor this stock closely, since its recent appeal to buyers, and improving RSI, may make it a candidate for a long play in the next several days. More persistent bears may also want to keep it on their list as shares are currently trading near the stock's descending trendline. You can see the trendline if you draw it from the late January high through the April highs and then extend the trendline forward. Picked on April xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/23/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Centex Corp - CTX - close: 58.18 change: +0.40 stop: $54.89 Another all-time high for the DJUSHB homebuilding index translated to a 0.69 percent gain in shares of CTX. The underperformance of the stock relative to the index (which gained 1.3 percent) could be attributed near-term resistance at $59, which kept a lid on an afternoon rally. Given the sector strength and uptrending stochastics, we believe CTX will plow through this level. We'll also be closely monitoring how the DJUSHB behaves at current levels. The index closed right at the midline of its ascending channel, which has acted as resistance since mid-March. A move over this level could have the DJUSHB trading as high as 420 in the near-term, which in turn could help to propel CTX to new all-time highs. Picked on May 1st at $57.78 Gain since picked: +0.40 Earnings Date 04/23/02 (confirmed) --- Adolph Coors - RKY - close: 68.76 change: +0.64 stop: 63.89 RKY moved higher today for the fourth straight session and continued to distance itself from previous resistance at $68. Within the first half-hour of trading shares, had moved over our trigger price of $68.36. This activated this long play with a stop at $63.89. Shares briefly traded over $69.00 before closing with a gain of almost 1 percent. The technical picture remains strong: Volume has been increasing over the past couple of days, and was particularly brisk today with a reading of 535K versus the 322K average. The MACD is on the brink of a bullish crossover, which bodes well for a continued rally. Traders still looking to go long could open bullish positions at current levels, although more conservative traders might want to wait for a pullback and successful test of previous resistance at $68. Picked on May 2nd at $68.36 Gain since picked: +0.40 Earnings Date 04/25/02 (confirmed) --- Smith Intl. Inc - SII - close: 73.30 change: +1.84 stop: 65.49 SII reported lower Q1 earnings this morning, owing to a decline in drilling activity in the Americas. Of course, the April earnings warning took most of the surprise out of today's announcement, and the Q1 EPS (ex-items) was in-line with estimates. SII traded higher by 2.57 percent on the news to close at an 11-month high. Helping to push the stock higher was a similar move in the oil service index (OSX.X), which also closed at near-term highs. Curiously, the price of crude oil (cl02m) slipped lower for the third straight session. Lately the OSX seems to be rising with little regard to what happens in the oil markets. As long as the sector remains strong, we think SII is well-positioned to move higher. Shares have followed through on the quadruple-top breakout of $70 and seem to be building upside momentum. A glance at the volume readings over the past week is encouraging for bulls, since volume has declined on days when SII pulled back. With a near-term upside of $80, we think traders still looking to go long could do so at current levels. The $80 level coincides with both psychological resistance and just above the top of SII's ascending channel. Picked on April 26th at $71.29 Gain since picked: +2.01 Earnings Date 05/02/02 (confirmed) -------------------- Bearish Play Updates -------------------- J.P. Morgan - JPM - close: 36.25 change: +0.75 stop: 38.01 Shares of JPM popped by more than 2 percent on Thursday after successfully testing the 50-dma earlier in the week. The stock was able to climb over near-term resistance at $36 but wasn't able to muster a test of the 200-dma at $36.56. Overall, we're not overly concerned about today's bounce. Shares may be catching up with the Dow Jones, which has gained nearly 200 points from the Tuesday low. The fate of JPM may rest on whether the Dow continues in its downward trend. The industrials are currently at the top of a descending channel dating back to mid- March. JPM would be hard-pressed to move higher if the index sold off from these levels. However, with the daily stochastics and MACD both looking bullish, we would wait for a move below today's low of $35.49 before considering new positions. Picked on April 24th at $35.40 Gain since picked: -0.85 Earnings Date 04/17/02 (confirmed) --- Merrill Lynch - MER - close: 42.94 change: +0.84 stop: 46.06 MER gapped higher this morning following an upgrade from fellow brokerage Solomon Smith Barney. Shares traded in a narrow range between $42.50-$43.00 for most of the session, ultimately finishing with a gain of nearly 2 percent. We mentioned in the most recent update that a rollover from $43 might provide an attractive entry point, and it looks like this may still be the case. More conservative traders could enter on renewed weakness with a stop above today's high above $43.06. In terms of sector performance, we'd look for a continued rise in the XBD.X broker/dealer index to peter out near the 200-dma at 475. In after-hours news, Merrill's Vice Chairman announced his resignation after 25 years. His timing is interesting, considering the recent SEC investigation into MER analysts. However, he denied that the probe was a factor in his departure. Picked on April 24th at $43.72 Gain since picked: +0.78 Earnings Date 04/17/02 (confirmed) --- Guidant Corp - GDT - close: 39.35 change: -0.15 stop: *text* The intraday chart of GDT looked a bit like a cardiogram after news of an FDA approval hit the wires this afternoon. Shares shot higher after the government green-lighted Guidant's heart failure treatment system. In earlier trading, shares had been gravitating near the $39.50. Buyers bid the stock as high as $41.50 on the news, but the rally was short-lived. GDT actually closed under where they were before the announcement. Overall, its hard to read too much into today's action. Since we're not triggered yet, we have the luxury of waiting to see how the market digests this recent development. Remember, we'll go short if GDT trades at or below $36.94. Picked on April xth at $xx.xx Gain since picked: +0.00 Earnings Date 04/18/02 (confirmed) --- Vivendi - V - close: 30.67 change: -1.59 stop: 32.36 *new* Pardon my French, but doesn't "Vivendi" roughly translate into "freefall"? That certainly seems to be the case, judging by the way V continued its high-volume decline today. Shares gapped down sharply and traded flat for most of the session. The stock finished with a loss of nearly 5 percent and hit yet another all- time low. In the "can it get any worse?" department, a French court ruled today that a voting malfunction had marred the results of the recent shareholders vote. The news came during the market and didn't seem to have much of an impact on the stock price, but really exemplifies the fundamental uncertainty that is causing V to drop. Also in the news was word that Vivendi may have to cough up $250 million to Herb Alpert, a famed trumpeter who sold his Rondor Music to Seagram for stock in August of 2000. Vivendi bought Seagram later that year and the agreement with Rondor came with it. Part of the agreement included a parachute of up to $250 million if V's stock falls under $37.50 for more than 10 straight trading days (source: CBSMW). As if investors weren't frustrated enough, this news about an additional $250M pay out could have more investors running for cover. Technically, the stock is approaching psychological support at $30. We expect the bulls to defend this level. A short-covering bounce seems likely, especially considering the steep decline over the past two weeks. In order to protect profits we're going to lower our stop to $32.36, a penny above yesterday's high. Short-term traders may want to strongly consider taking profits now. PI is currently up 8 percent on this play. Picked on April 24th at $33.35 Gain since picked: +2.68 Earnings Date 04/24/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Applied Materials - AMAT - close: 22.87 change: -1.53 stop: 20.89 It took two weeks and a change of strategies, but we're finally long on AMAT. En route to a loss of 6.2 percent, shares fell below our trigger price at $22.99. We think the timing of this play works in our favor. Had we been triggered when the SOX was still up at 525, there might have been enough potential sector downside to violate our stop. However, our odds are better now that the SOX is hovering near the critical 500 support level. We're expecting a bounce from this level to give AMAT a boost. However, caution is encouraged. Even though we are buying on the pull back, the chip sector's reaction to the fresh industry report out today is discouraging. The Semiconductor Industry Association (SIA) said that March semiconductor revenues dropped 20 percent but this was still the best year-over-year comparison in months. Gains in the chip sector this quarter were strongest in the DRAM and programmable chip industries. The 7.2 percent rise in sales over February is the largest month-over-month increase since 1986. Yet despite this positive news the SOX sold off again with what appears to be a very strong failed rally at its 200-dma (again). The real test will be to see if the 500 level will hold as support like many in the market expect it to. Those who are afraid of catching a falling knife and would like to see AMAT display some bullish conviction could wait for the stock to move back above $23.50. This level had provided support over the past week. Now that we've been triggered, our stop is set at $20.89. This will force AMAT to trade below the 200-dma at $21.56. Picked on May 2nd at $22.99 Change since picked: -0.12 Earnings Date 05/14/02 (confirmed) =============== HR Closed Plays =============== -------------------- Closed Bullish Plays -------------------- General Communication - GNCMA - cls: 9.40 chg: -0.44 stop: *text* We've given GNCMA plenty of time to prove itself, but the stock never lived up to our expectations. Specifically, we were looking for shares to trade above $10.31, which would have required a move above the 200-dma (currently at $10.10) and the near-term high at $10.26. Instead, the stock traded in a pattern of lower highs before dropping 4.4 percent during today's session. The plummeting telecom sector may have been too much for GNCMA to withstand. The technical picture has changed now that the stock has fallen below support at $9.50, so we're closing this play tonight without having been triggered. Picked on April xth at $xx.xx <- see text Gain since picked: +0.00 Earings Date 04/24/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- After nearly tripling since September, COH sets 2-for-1 split Minutes after the bell the market opened this morning, Coach, Inc. (NYSE: COH) announced that its Board of Directors had approved a 2-for-1 stock split. The split will be affected as a 100% stock dividend, to be payable on July 3, 2002 to shareholders of record on June 19, 2002. This marks the first time COH has split since it began trading in October 2000. Shares of many specialty retail companies have performed strongly in recent months, with COH leading the way: The stock is up 185% from its September lows. Shares closed at $55.59 on Wednesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=COH About the company Coach, with headquarters in New York, is a leading American marketer of fine accessories and gifts for women and men, including handbags, women's and men's small leathergoods, business cases, luggage and travel accessories, footwear, watches, outerwear, jewelry, furniture and related accessories. (source: company press release) ----- Dress Barn declares 2-for-1 stock split Following its fiscal Q3 earnings report, The Dress Barn, Inc. (NASDAQ: DBRN) announced this afternoon that its Board of Directors had declared a 2-for-1 stock split. The split will come in the form of a 100% stock dividend and will be distributed on May 31, 2002, to stockholders of record on May 17, 2002. This marks the first time DBRN has split since a 2-for-1 offering in 1987. YTD, the stock is higher by nearly 25%. Shares closed at $31.00 on Wednesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=DRBN About the company Dress Barn is one of the nation's leading specialty store chains offering value-priced women's career and casual fashions. The Company operates 760 stores in 43 states. (source: company press release) ================== 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. Ticker Company Name Close Change RD Royal Dutch Petroleum 53.69 +1.04 LEH Lehman Brothers Holdings 62.12 +2.12 UB Unionbancal Corp 49.60 +1.09 MGA Magna Intl. Inc 77.38 +2.48 RJR RJ Reynolds Tobacco 71.35 +1.05 BSC Bear Stearns Companies 63.19 +0.59 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change MCH Millennium Chemicals Inc 15.20 +1.50 TDY Teledyne Technologies 18.80 +1.05 NTBK Net.Bank Inc 17.04 +1.25 HOLX Hologic Inc 17.39 +1.30 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change WM Washington Mutual Inc 39.45 +1.29 RIG Transocean Sedco Forex 38.66 +1.46 CLX Clorox Co 46.39 +1.81 STJ Saint Jude Medical 84.09 +1.50 VFC VF Corp 45.33 +1.33 DO Diamond Offshore Drilling 33.20 +1.18 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change TM Toyota Motor Corp 53.70 -1.99 TEF Telefonica Sa 30.20 -2.30 FTE France Telecom 21.86 -2.68 SAP SAP Ag ADS 30.25 -2.10 V Vivendi 30.67 -1.57 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change CI Cigna Corp 104.00 -6.83 ================================================================= 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. 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