PremierInvestor.net Newsletter Monday 05-06-2002 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/e06b_1.asp ================================================================= In section one: Market Wrap: IBM breaks to multi-year lows Watch List: SFAM, MCD, BRCD, SSCC, OATS Play of the Day: No P.O.D - Fed meeting tomorrow ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 05-06-2002 High Low Volume Advance/Decline DJIA 9808.04 -198.59 10023.86 9807.69 1.12 bln 1038/2130 NASDAQ 1578.48 - 34.56 1622.83 1577.93 1.77 bln 1178/2373 S&P 100 519.48 - 11.04 531.88 519.27 Totals 2216/4503 S&P 500 1052.67 - 20.76 1075.96 1052.65 RUS 2000 502.91 - 9.41 513.07 502.51 DJ TRANS 2703.94 - 40.15 2749.21 2702.48 VIX 24.88 + 1.65 24.92 22.75 VXN 49.12 + 2.86 49.12 46.02 TRIN 2.38 PUT/CALL 0.77 ****************************************************************** =========== Market Wrap =========== IBM breaks to multi-year lows Dow component International Business Machines (NYSE:IBM) $76.00 -7.06% broke to multi-year lows today and sent technology and the Dow Industrials (INDU) 9,808 -1.98% trading lower today. Analyst's cautioned investors that building inventory levels at the computer giant would have "big blue" aggressively cutting prices in both hardware and software offerings and could negatively impact other names competing against IBM. The Dow Industrials fell 198 points and now sits very close to the bearish vertical count of 9,800 from its point and figure chart. Again, bearish counts can be exceeded to the downside, but are used to help assess further downside. The S&P 500 Index (SPX.X) fell 20 points (-1.93%) to 1,052 as financials and technology woes drug this index lower. A break of the 1,050 level then has the SPX vulnerable to its bearish vertical count of 980. The tech-heavy NASDAQ Composite (COMPX) continues to lead the more heavily followed averages lower, losing 34 points (-2.14%) to 1,578. Further downside risk is difficult to ascertain in this broader market average as the $50 box chart had the bearish vertical count at 1,700, which was achieved in September. The $100 box (not conventional scale) would have the current bearish vertical count at 500. While this may seem unrealistic to some, this same box size did show a bearish vertical count of 1,900 back in October of 2000. When IBM broke the multi-year lows of $80.00, other stocks found noticeable selling as tech-psychology took another hit to the downside. International Business Machines Chart - Weekly Interval The weekly interval chart of IBM gives the trader/investor the observation of a major break of support in IBM today. IBM had not traded below the $80.00 level since it broke above that level on November 23, 1998. Current support looks to be near the $66.50, a level that served as resistance back in August and September of 1998. Exacerbating losses in IBM were comments from JP Morgan Chase saying that channel checks in the disk/drive sector showed a build in inventory and that April demand was sluggish. JP Morgan saw IBM as being very competitive on pricing in the hardware area in order to try and boost demand for the building inventories. JP Morgan lowered current quarter estimates on Maxtor (NYSE:MXO) $5.99 7.84%, Western Digital (NYSE:WDC) $5.10 -14.28% and Hutchinson Technology (NASDAQ:HTCH) $16.76 -6.78%, but said it did think valuation were attractive for MXO and WDC, trading between 0.4-0.5 times sales and 15-20 times earnings. The Disk Drive Index (DDX.X) 84.57 -5.06% was the second largest percentage looser today, trailing only the Biotechnology Index's (BTK.X) 386.16 -5.06% loss. PC-makers under pressure Word that PC-makers may be experiencing a slow April had shares of Gateway Computer (NYSE:GTW) $4.97 -4.23% and Dell Computer (NASDAQ:DELL) $23.75 -2.34% under pressure. Shares of Hewlett- Packard (NYSE:HPQ) $18.22 +4.47% bucked the broader-market trend today, sporting its new stock symbol (HPQ) on the first day of trading for HP since buying Houston-based Compaq Computer. Dell Computer Chart - Daily Interval Word of a potentially "slow April" and competitive pricing in the desktop PC area had shares of Dell Computer (NASDAQ:DELL) $23.75 -2.35% under pressure today. A break below the $23.55 level could see a sharp decline to $21.92 near-term. Look for resistance to be building at $25 with heavy overhead supply above that level. Financials dragged the Dow lower too! It wasn't just IBM's 7% decline that weighed on the Dow Industrials today. Financial components like Citigroup (NYSE:C) $42.43 -4.19% and JP Morgan (NYSE:JPM) $34.40 -3.58% did their part. Not a single stock in the AMEX Securities Broker/Dealer Index (XBD.X) 436.19 -4.63% closed the session in positive territory. Weighing on things was Moody's saying that investigations of investment banks that lead to criminal indictments of individual firms could lead to negative rating actions. These rating actions may range from rating outlook changes to rating downgrades, depending on circumstances, and if the course of the investigation turns very negative for a particular firm, then multiple notch downgrades are possible. The Moody's press release listed the following investment banks: Bear Stearns (NYSE:BSC) $60.32 -4.05%, CS First Boston, Goldman Sachs (NYSE:GS) $75.16 -4.31%, Lehman Bros. (NYSE:LEH) $59.99 -2.24%, Merrill Lynch (NYSE:MER) $41.01 -5.35%, Morgan Stanley (NYSE:MWD) $45.05 -6.14% and Citigroup's (NYSE:C) $42.43 -4.19% Salomon Smith Barney Unit. FOMC meets tomorrow Tomorrow at approximately 02:15 PM EST, the Federal Open Market Committee is expected to announce its decision on interest rates. Economists look for the Fed to keep the Fed Funds rate right where it is at, at 1.75%. Treasuries were little changed today with the 5-year YIELD ($FVX.X) rising marginally to 4.38%. Both the 10-year ($TNX.X) and 30-year ($TYX.X) YIELDS edged higher at 5.078% and 5.549% respectively. Economic data before the opening bell Tomorrow morning at 08:30 AM EST, traders will get a look at the first quarter productivity data where economists are looking for productivity to surge to 6.8%. In December, Q4 productivity gained a robust 5.2%, giving the Fed some breathing room to keep rates lower. Productivity gains are a key indicator that the Fed likes to keep track of as productivity gains are often times associated with lower rates of inflations as manufacturers are able to produce goods more efficiently and at a lower cost. Then after the bell Tech traders are expected to show some jitters ahead of tomorrow's after the bell earnings from communications networking giant Cisco Systems (NASDAQ:CSCO) $12.88 -1.97%. Consensus estimates among analysts are for the company to earn $0.09 a share. It's my view that CSCO will most likely be the catalyst on Wednesday for one of two things. One being "total capitulation for technology bulls to throw in the towel, or two being an opportunity for a massive short covering rally in technology. It's so difficult to every predict a market response. However, It's been my view the continued cuts in IT spending among corporations and telecom service providers will still have Cisco (CSCO) giving a cautious outlook going forward. Stay disciplined! I feel bearish traders should continue to implement the systematic approach of snugging stops lower in their bearish trades in the technology arena. Bullish traders need to be very selective in their bullish technology plays, opting for "strong stocks" that have pulled back to a level of support, where downside risk can be minimized with a tight stop loss. While our bullish profiled play in Applied Materials (NASDAQ:AMAT) $22.12 -0.22% traded with a 4% gain during today's session after Deutsche Banc Alex Brown said it expected AMAT to report a strong April quarter next week and perhaps beat estimates by 2-cents, IBM's break below the $80.00 did negatively impact the stock's trade as it witnessed selling from its best levels of the session. 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 --------------------------------- SpeedFam-IPEC, Inc - SFAM - close: 3.15 change: +0.15 WHAT TO WATCH: SpeedFam-IPEC manufactures chemical mechanical planarization (CMP) systems. Some of the company's products are designed for use in the semiconductor industry. Recent volatility in the stock has left an upside gap, and down side "fast move region", either of which could spur sharp short term price action in the stock. Accordingly, traders may want to consider playing SFAM on the short side if it drops into the gap below 2.95, or buy it for a long play if it advances into its fast move region above 3.16. The positive bounce back above the 200-dma on stronger volume and the bullish pattern developing in the MACD look encouraging. --- McDonald's Corporation - MCD - close: 29.10 change: -0.19 WHAT TO WATCH: Over the weekend, we offered a brief note on McDonald's, saying that MCD seemed to be moving off a longer term bottoming process, while establishing new short-term highs. We have added MCD to our Watch List because we continue to like its price action. MCD was up briefly today, before fading with the market. But we still like the short-term consolidation pattern. Watch for MCD to attempt to find support in the 28.50-28.75 region before edging higher again. --- Brocade Communications - BRCD - close: 21.89 change: -0.49 WHAT TO WATCH: Over the past two months BRCD has traded in a trend of lower highs, and is currently on the verge of breaking below the $21.75-22.00 support level. The pivotal CSCO earnings coming tomorrow night could provide the catalyst for BRCD to fall below support. P-n-f chartists may be interested to know that a trade at $21 will create a spread-triple sell signal. The $22 level also happens to coincide with the bearish vertical count. Another storage stock that looks like a good short is EMLX, which could see some substantial selling if it breaks support at $25. --- Smurfit-Stone Container - SSCC - close: 16.86 change: +0.46 WHAT TO WATCH: Unlike most components of the NASDAQ-100, SSCC has been trading higher in recent sessions. Last week the stock bounced from the bottom of its ascending channel and has since shown impressive relative strength versus the broader market. Shares also came within one box of testing bullish p-n-f support at $15.00. The MACD has just signaled a bullish crossover, which bodes well for a continued rally. Watch for a short-covering rally in the NASDAQ-100 to power SSCC over resistance at $17.50. This could clear the way for a move to the top of the regression channel near $19.00. We would be remiss if we failed to mention SSCC does have historical price resistance at $18.00. --- Wild Oats Markets, Inc. - OATS - cls: 13.95 change: +3.15 After consolidating for the last 5 weeks, OATS broke out hard today. Although its pattern looks like it will move higher in coming weeks, very aggressive traders may want to short this stock, perhaps on a low volume advance to the 14.20-14.35 area, in the next day or two. It would be essential to use an extremely tight buy stop. A drop from today's high of 14.33 to 12.65 would represent a normal retracement, and the point at which a short position could be covered. Bullish traders may want to consider long positions should shares pull back to the $12.00 to $12.65 levels. ============= MORE TO WATCH ============= Intl Business Machines - IBM - close: 76.00 change: -5.78 WHAT TO WATCH: We're still kicking ourselves for not adding Big Blue to the Play List. We strongly considered doing so this weekend, but figured that the stock may be due for a bounce off the $80 level (thus our weekend watch list comments for a potential long play). Of course, that support level never materialized. Shares shed over 7 percent today and closed at multi-year lows. IBM is well below all its MA's and does not have historical support until $68-$70. Negative news from the CSCO camp tomorrow night could send the stock even lower. However, keep in mind that the most recent bearish counts (bearish PnF price targets) were to the $73 to $70 levels. --- Pacific Sunwear of California - PSUN - cls: 23.52 chg: -1.19 PSUN broke a 6-month up trend in the last few days and its price momentum, as measured by the RSI, has broken down as well. Aggressive traders may want to short the stock on a weak rebound to its breakdown region of 24.22. --- Kroll, Inc. - KROL - cls: 21.15 change: +1.41 Kroll is a worldwide provider of investigation and security services. The stock consolidated sideways from Jan. 2002 until late last week. Kroll appears to be preparing for a longer-term advance and should be viewed as a potentially attractive long candidate. =============== Play-of-the-day =============== We are not listing a play-of-the-day for Tuesday due to the FOMC meeting tomorrow. The opportunity for high volatility should they surprise or the stronger possibility of very low volatility as the market waits does not lend itself to any one particular play that would stand out as our best pick for that day. ================================================================= 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 05-06-2002 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/e06_2.asp ================================================================= In section two: Net Bulls Closed Bearish Play: BRCM Active Trader Triggered Play: DCX (bullish) Trigger Adjustments: LTR (bullish) High Risk/Reward Stop Adjustments: DOX (bearish) Split Trader ALC: 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 Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Broadcom - BRCM - close: 29.94 change: -0.06 stop: 31.26 A brief jaunt below the $30 level this morning turned out to be a buying opportunity for intraday bulls, which would seem pretty brave given the declines in the Nasdaq today. The stock bounced higher and violated our stop at $31.26. This closed our short play for a gain of $3.58, or 10.2%. BRCM appears to have further downside (it closed under $30), but at this point we'd expect a potential bounce. The SOX.X is also severely oversold and could experience a short-covering rally at any time. Picked on April 24th at $34.84 Gain since picked: +3.58 Earnings Date 04/17/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== Triggered Long Play ------------------- DaimlerChrysler - DCX - close: 46.81 change: -0.52 stop: 44.66 On Friday, May 3rd, we presented our positive view of DaimlerChrysler and indicated that we wanted to go long this stock if it dipped to an attractive buy level early this trading week. DCX dropped at the open this morning, putting us in this trade with a buy price of 46.50, which is in an area of short term support. We continue to like the consolidation pattern forming on DCX; any rebound in the big cap averages this week should benefit long positions in DaimlerChrysler. We have set our sell stop at 44.66, just below both another region of support as well as the 50-dma. Picked on May 6th at $46.50 Gain since picked: +0.31 Earnings Date 02/20/02 (confirmed) BULLISH PLAY UPDATE ------------------- Loews Corporation - LTR - cls: 60.76 chg: -1.05 stop: *see text* On Friday, May 3rd, we said that we wanted to go long Loews Corporation on a modest pullback to the 60.50+- level. We did not quite reach that level today (the low was 60.70), but expect that we may be able to reach lower levels within the next few days. Please note that we have decided to slightly alter our buy level to accommodate a stronger dip or perhaps even an opening gap--and, hence, a more attractive buying level. Accordingly, traders should use a buy trigger of 59.90-60.50. If our trigger range is hit, we will use a sell stop of 58.45. Picked on May xxth, at $xx.xx <--see text Gain since picked: xx.xx Earnings Date 05/09/02 (confirmed) ================================================================== High Risk / High Reward (HR) section ================================================================== =============== HR Play Updates =============== Stop Adjustments ---------------- Amdocs Ltd - DOX - close: 18.05 change: -1.68 stop: 20.01 *new* Not a bad start for this software short. DOX sank 8.5 percent today, backed by heavy volume of 10M shares. We searched for news to explain the decline, but came up empty-handed. It appears that investors may simply be throwing in the towel following the break of support at $20. Although DOX may drop to the bottom of its descending channel at $16, we're going to tighten our stop to $20.01. Short-term traders may want to consider taking gains ahead of Tuesday evening's CSCO earnings. ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- Alltrista sets 2-for-1 stock split Before the bell this morning, Alltrista Corp. (NYSE: ALC) released its Q1 earnings report and announced a 2-for-1 stock split. Shareholders of record on May 20, 2002 will receive the additional shares on or about June 3, 2002. This is expected to coincide with the change of Alltrista's name to Jarden Corp. The name change is subject to a shareholder vote on May 30, 2002. ALC has not split since it began trading in 1993, but the stock has more than doubled since January 1st. Shares closed at $36.04 on Friday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=ALC About the company Alltrista Corporation is a leading provider of niche consumer products used in home food preservation. Tilia's FoodSaver® line is the U.S. market leader in home vacuum packaging systems and accessories. (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. Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change PTV Pactiv Corp 22.41 +0.87 PMI The PMI Group Inc 84.84 +1.34 JOSB Jos A Bank Clothiers 19.90 +1.59 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change OATS Wild Oats Markes Inc 13.95 +3.15 MXWL Maxwell Technologies 13.41 +2.12 TENT Total Entertainment Rest 12.98 +1.23 ANFI American National Fincl 13.02 +1.02 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change WY Weyerhauser Co 63.70 +1.09 MCO Moody's Corp 47.18 +2.41 DORL Doral Financial Corp 36.71 +1.23 CHD Church & Dwight Co Inc 31.59 +2.05 CUB Cubic Corp 29.10 +1.65 PECS PEC Solution Inc 26.32 +1.82 KROL Kroll Inc 21.15 +1.41 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change STT State Street Corp 46.56 -3.02 AYE Allegheny Energy Inc 38.40 -1.28 TMPW TMP Worldwide Inc 22.88 -1.38 MRX Medicis Pharmaceutical 49.80 -3.05 ENZN Enzon Inc 30.74 -3.41 SLAB Silicon Laboratories Inc 24.50 -2.60 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change PSUN Pacific Sunwear 23.52 -1.19 NCS NCI Building Systems 22.91 -1.64 FDP Fresh Del Monte Produce 23.02 -0.68 POG Patina Oil & Gas 35.30 -0.98 ================================================================= 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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