PremierInvestor.net Newsletter Tuesday 05-07-2002 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/e07b_1.asp ================================================================= In section one: Market Wrap: Fed Leaves Rates Unchanged Market Sentiment: Capitulation Coming? Play-of-the-Day: Jumping the Gap ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 05-07-2002 High Low Volume Advance/Decline DJIA 9836.55 + 28.51 9919.03 9810.53 1.35 bln 1394/1758 NASDAQ 1573.82 - 4.66 1594.57 1560.29 1.87 bln 1433/2076 S&P 100 518.22 - 1.26 523.31 517.90 Totals 2827/3834 S&P 500 1049.49 - 3.18 1058.67 1048.96 RUS 2000 498.98 - 3.93 504.07 498.97 DJ TRANS 2683.84 - 19.57 2723.17 2681.60 VIX 24.38 - 0.50 25.10 23.94 VXN 50.00 + 0.88 50.99 49.73 TRIN 1.22 PUT/CALL 0.75 ----------------------------------------------------------------- =========== Market Wrap =========== Fed leaves rates unchanged Today's FOMC decision was to leave the Fed funds rate unchanged at 1.75% and to leave the discount rate unchanged at 1.25%. All Fed policy members voted in favor of today's "non action." Comments from the FOMC has the policymakers making observation that economic activity has been receiving considerable upward impetus from a marked swing in inventory investment, but the degree of strengthening in final demand over coming quarter, an essential element in sustained economic expansion, is still uncertain. The policymakers added that although the stance of monetary policy is currently accommodative, the Committee believes that , for the foreseeable future, against the background of it long run goals of price stability and sustainable economic growth and of the information currently available, the risks are balanced with respect to the prospects for both goals. Just prior to today decision on interest rates, the major market averages had neared their best levels of the session, but by the close, market participants didn't seem to find any type of over- bullish comments from the FOMC about the economy to push stocks higher and stocks fell back near their session lows into the close. The Dow Industrials were the only major market average to finish in positive territory, gaining 28 points on the session to close at 9,836. Shares of defense contractor Honeywell (NYSE:HON) $37.80 +5% were the Dow's best performing stock, while consumer products maker Johnson&Johnson (NYSE:JNJ) $60.42 -2.7%. The S&P 500 finished down 3 points at 1,049.49 and closed at its lowest level since October 2nd. The broader NASDAQ-Composite (COMPX) had one of its better days in recent weeks, finishing down just 4.6 points at 1,573. Consumer credit up 4.5% in first quarter The Federal Reserve reported that consumer credit rose at an annual rate of 4.5% in the first quarter, down from a revised 8.9% rate in the fourth quarter of 2001. In March alone, consumer credit grew to $4.6 billion or an annual rate of 3.3%. February's growth was revised to $7 billion or 5.1%. Economists were looking for a $6.6 billion rise in consumer borrowing in March. The consumer credit report may have had a negative impact on stocks today. While it may be partially perceived as "good news" that consumers are "spending within their budgets" many feel (me included) that its the consumer that has really been carrying the economy. Growth in non-revolving credit slowed substantially in the first quarter from its rapid fourth-quarter pace, while growth in revolving credit, such as credit cards, remained modest. Revolving credit edged up 1.9% in the first quarter, following a revised 0.6% in the fourth quarter. Non-revolving credit, which comprises all other loans, including those for automobiles, mobile homes, camper trailers, jumped 6.4%, after a 15.1% jump in the fourth quarter. Mortgage loans are not included in the survey. Earlier today, the Cambridge Consumer Credit Index showed that Americans are more aggressive in paying off debt and less willing to run up their credit cards this past month than over the past several months. The consumer sensitive S&P Retail Index (RLX.X) 917.12 +1.70% was the strongest performing sector index today. Dow component Wal Mart (NYSE:WMT) $55.01 +1.02% along with other department store retailers Target (NYSE:TGT) $44.94 +2.13%, J.C. Penny (NYSE:JCP) $22.01 +3.3%, Sears (NYSE:S) $52.46 +2.02% and Kohls (NYSE:KSS) $71.15 +1.23% showed gains on the session. Deutch Bank Healthcare Conference attended by bears? I could not find any news on JNJ today to explain the stock's price action, but will note the company was scheduled to be a presenter at the Deutsche Bank Healthcare Conference and presented at 03:00 PM ET. However, shares of JNJ found sellers at the opening of trading and throughout the session. Other notable presenters at the conference were BMET $28.01 unchanged, CHIR $36.65 -0.81%, OHP $44.60 -1.5%, THC $73.52 -1.68%, ABT $51.68 -0.95%, LLY $64.85 -1.09%, FRX $71.09 -3.39%, GENZ $35.80 -0.7% MDT $42.63 -3.13% and CAH $69.51 -2.04%. I didn't pull up price quotes for all of the scheduled presenters, but will note that there must not have been anything overly bullish said as many traded lower on the session. Almost as if there's a "buyers strike" in the markets. Cisco jumps in after-hours after beating estimates After the close of trading, Cisco Systems (NASDAQ:CSCO) $13.08 +1.47% reported pro forma net income of $0.11 a share, which beat consensus estimates by 2-cents. Cisco said Q3 revenues came in at $4.82 billion versus consensus estimates of $4.85 billion. The company said bottom line results improved as gross margins grew to 63.6%, well above its goal of 60%, due to cost savings, including lower overhead and lower inventory levels. Cisco also said that their products continue to take market share from their top-ten competitors, with revenue growth growing 2% year-over- year versus a drop of 43% for their competitors. Looking forward, Cisco said it sees Q4 (July) revenues sequentially flat or up slightly (low single digits). Considering Q3 revenue was $4.82 billion, a 3% growth rate would have Q4 revenues at $4.96 billion compared to current consensus of $4.99 billion. The company said it expects gross-margins to remain near the lower end of the 60% range, with orders to be up 5% sequentially, give or take 2%. At the end of the recent quarter, the company's book-to-bill (orders received vs. orders shipped) was below one. The trend for the recently completed quarter was soft orders in February, in-line for March and April was better than expected. Cisco reminded investors that the third month was always ban end loaded. In after-hours trading, Cisco (CSCO) traded near the $15.00 level and is settling out at $14.75 as I write. Big tech gets a boost in after-hours Tonight's earnings from Cisco (CSCO) looks to have some tech bulls breathing a sigh of relief as many larger cap technology stocks see gains. Shares of Microsoft (NASDAQ:MSFT) $49.47 +1.74% trade higher at $50.78, Intel (NASDAQ:INTC) $26.15 +1.43% is edging higher at $26.99, Applied Materials (NASDAQ:AMAT) $22.32 are trading $23.10 and Dell Computer (NASDAQ:DELL) $22.33 -5.97% is seeing some activity at $23.06. Prudential tops estimates, updates guidance Insurance concern Prudential (NYSE:PRU) $31.16 -1.61% reported Q1 earnings of $0.58 per share, which was $0.11 better than the consensus estimates looking for $0.47 a share. Revenues rose 14.7% year-over-year to $5.06 billion versus the $5.19 billion consensus. Prudential said it expects earnings per share in the range of $2.10 to $2.30 for fiscal 2002 versus the current consensus estimate of $2.16 per share. SEC to impose new rules Tomorrow, the Securities and Exchange Commission will endorse new rules to clamp down on Wall Street research practices and said more changes will come as its formal inquiry into analysts' conflicts of interest continues. The new rules will no longer allow analysts to be supervised by the investment banking department and cannot have compensation tied to specific investment banking transactions. As well, investment banking personnel can only discuss a research report with an analyst before its publication if the conversation is monitored by compliance lawyers. Late this evening, Reuters reported that Merrill Lynch's (NYSE:MER) $40.80 -0.51% court appearance with New York Attorney General Eliot Spitzer has been pushed back until May 16 due to "productive discussions" between the parties. Energy shares could get a boost Energy shares may get a boost tomorrow morning after tonight's American Petroleum Institute (API) report revealed that crude stocks were down 4.495 million barrels for the week ended May 3. June Light, Sweet Crude Oil futures (cl02m) jumped 1.42% to $27.00 on the news. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Capitulation Coming? By Eric Utley My thinking was that we were going to get a big one or two day capitulation event before a trading rally. I'm starting to wonder if the slow bleed will continue. Although it feels as if we're on the edge of a major washout in the technology space. Several sentiment measures are reaching extreme levels that point towards that end. The Nasdaq-100 ($VXN.X) has entered into a near parabolic move higher during the last two days. Usually when you see fear increase at the rate at which the VXN has rallied in the last two days it signals that a short term bottom is around the corner. In today's session, the VXN traded up to its 200-dma, which hasn't been traded above since last November. At this point, however, the VXN is confirming the fear in the Nasdaq. It's not by itself signaling a bottom. What we need to see in the coming days is skepticism in the face on any rally attempt. Obviously if the VXN implodes on any signs of strength in NDX stocks, then we're still far off from any meaningful trading rally. But a VXN with "stick" in the face of strength in stocks may indeed confirm a turning point in the tech sector. Certainly the oversold nature of the Nasdaq-100 Bullish Percent ($BPNDX) lends to the possibility of a rally. But we must remember that the bullish percent is only a measure of market risk, and not necessarily a forecasting tool. We saw the BPNDX reach zero last fall, so it's also important to remember that the indicator can always grow more oversold. Still, a great deal of downside risk is now out of the NDX as measured by the low level of the NDX bullish percent. The notoriously early ARMS Index is trading in extreme ranges, specifically the shorter term measures of the indicator. The 5 and 10 day measures are now into the extreme territory, above the key 1.50 reading. Again, this indicator is historically early, but generally reliable in the bigger scheme of things. Anytime you see Mr. Arms on CNBC, as he was last week, you know that his index is in extreme territory. Whether or not we see a big one day capitulation event remains to be seen. That may not happen with the slow bleed that has taken place up to this point. Instead, we may have been experiencing a capitulation during the last two weeks judging by the way that some stocks have been trading, especially in the technology space. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 9837 Moving Averages: (Simple) 10-dma: 9955 50-dma: 10276 200-dma: 9919 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1049 Moving Averages: (Simple) 10-dma: 1078 50-dma: 1125 200-dma: 1126 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1159 Moving Averages: (Simple) 10-dma: 1238 50-dma: 1394 200-dma: 1478 Paper ($FPP) The FPP edged into the best performing sector spot again today with a measly gain of 0.68 percent on the day. Continued rotation into cyclical names boosted shares in the sector. Sector leaders included Louisiana Pacific (NYSE:LPX), Meadwestvaco (NYSE:MWV), Smurfit Stone & Container (NASDAQ:SSCC), International Paper (NYSE:IP), and Boise Cascade (NYSE:BCC). 52-week High: 381 52-week Low : 269 Current : 368 Moving Averages: (Simple) 10-dma: 356 50-dma: 363 200-dma: 335 Disk Drive ($DDX) The DDX under performed the broader market today to earn the day's worst performing sector spot. The index shed 2.87 percent on the day. PC related stocks such as Dell Computer (NASDAQ:DELL) traded poorly all day, playing into the weakness we observed in the disk drive space. Leaders to the downside included shares of Maxor (NYSE:MXO), Sandisk (NASDAQ:SNDK), Read Rite (NASDAQ:RDRT), Hutchinson (NASDAQ:HTCH), and Iomega (NYSE:IOM). 52-week High: 120 52-week Low : 59 Current : 82 Moving Averages: (Simple) 10-dma: 92 50-dma: 96 200-dma: 92 ----------------------------------------------------------------- Market Volatility The VIX ended higher in Monday's session, but fell back on today's strength in blue chip names. I'm watching for a retest of the overhead 200-dma now at 26.37 on any short term future weakness in the S&P 100. Fear is on the rise in the Nasdaq-100!! The VXN traded up to its 200-dma in today's session before easing intraday. Downside risk is becoming less and less in the NDX with fear levels rising in a near parabolic fashion. CBOE Market Volatility Index (VIX) - 24.38 -0.50 Nasdaq-100 Volatility Index (VXN) - 50.00 +0.88 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.75 690,185 517,539 Equity Only 0.69 579,955 401,684 OEX 1.01 19,815 20,065 QQQ 0.39 89,849 34,714 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 63 + 0 Bull Confirmed NASDAQ-100 17 - 2 Bear Confirmed DOW 47 + 0 Bear Confirmed S&P 500 58 - 1 Bear Alert S&P 100 51 - 1 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 1.56 10-Day Arms Index 1.52 21-Day Arms Index 1.43 55-Day Arms Index 1.27 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 1399 1776 NASDAQ 1443 2069 New Highs New Lows NYSE 102 78 NASDAQ 131 175 Volume (in millions) NYSE 1,360 NASDAQ 2,127 ----------------------------------------------------------------- Commitments Of Traders Report: 04/30/02 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 Commercials grew less bearish again during the most recent reporting period by adding more longs than shorts. It was the third week of decreased bearishness for the S&P commercials. Meanwhile, small traders grew less bearish by adding more short positions. Commercials Long Short Net % Of OI 04/09/02 320,101 411,075 (90,974) (12.4%) 04/16/02 322,578 411,245 (88,667) (12.1%) 04/30/02 340,936 421,673 (80,737) (10.6%) 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 04/09/02 151,237 47,678 103,559 52.1% 04/16/02 150,529 50,424 100,105 49.8% 04/30/02 153,158 56,372 96,786 46.2% 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 by adding a number of long positions last week. The group is still net bearish, but growing less so with each week. On the other side, small traders slipped from a net bullish to a net bearish position. Commercials Long Short Net % of OI 04/09/02 28,985 35,221 (6,236) (9.7%) 04/16/02 32,024 35,723 (3,699) (5.5%) 04/30/02 34,591 35,933 (1,342) (9.7%) 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 04/09/02 11,640 8,353 3,287 16.4% 04/16/02 12,458 10,572 1,878 8.2% 04/30/02 12,271 12,703 (432) 1.7% 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 Commercial traders reduced their net bullish position again during the most recent reporting period. The group grew less bullish by dropping more longs than shorts. Meanwhile, small traders went in the opposite direction by reducing their net bearish position. Commercials Long Short Net % of OI 04/09/02 19,393 13,445 5,948 16.7% 04/16/02 19,080 14,267 4,813 14.4% 04/30/02 17,275 13,341 3,934 12.8% 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 04/09/02 5,459 9,340 (3,881) (26.2%) 04/16/02 5,644 9,448 (3,804) (25.2%) 04/30/02 5,813 8,869 (3,056) (20.8%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- =============== PLAY-of-the-Day ((BULLISH play)) =============== Timberland Company - TBL - cls: 42.29 chg: +0.54 stop: 39.95 The Timberland Company makes shoes and clothing under the Timberland PRO and Mountain Athletics brands. The company primarily sells its products in department and fitness-related stores around the world. In May 2001, Timberland began selling its brands online, through timberland.com. (source: company press release) - ORIGINAL WRITE UP: May 3rd, 2002 - Like many retailers, Timberland has suffered during the current US economic slump. On April 18th, when the company last released its earnings, company management noted that the sluggishness in its business was not yet over and that future sales may be pressured. Not surprisingly, TBL suffered a 3.22 percent drop in its stock price, leaving a considerable gap in its price pattern. Since then, though, TBL has quietly consolidated and this past week the stock used the 50-dma as a firm support along with the psychological $40 level. Friday's performance was particularly impressive as the stock rose over 1% on a decidedly negative day. We currently believe that TBL can rally back toward the 46.00 level--perhaps rapidly--as it fills the price gap it left on April 18th. Our entry strategy is to buy the stock at current levels (41.89) or, preferably, on a modest pullback early next week to the 41.00 support region. Please be sure to use a sell stop on this position of 39.95, a level that is just below the 50-dma. Technical traders should be encouraged by the bullish developments in TBL's MACD, stochastics, RSI and Momentum oscillators. - Most Recent Update: May 7th, 2002 - The S&P Retail Index (RLX.X) moved nicely higher today, up 1.7%, and shoe/apparel maker Timberland rode its coat tails. We like the technical pattern on this stock quite a bit; it began a gentle advance off its 50-dma just a couple of days ago. Short term, we are looking for a nice pop in its price over the next few days. Our reasons are twofold. First, TBL is on the cusp of moving into a price gap which it left in mid-April. The gap runs from about 42.68 to 44.66. We believe that once TBL's price moves above 42.68 it will advance rapidly to the upper level of the gap, perhaps over just a day or two. The short term Stochastic Oscillator is overbought, which can be positive when other technical indicators, like the RSI, remain positive, and in the presence of a gap which seems to be begging to be filled. Traders will frequently enjoy a "Stochastic Pop," or a sharp spurt in price, when this indicator moves into its overbought region (before, obviously, it begins to deteriorate). Aggressive traders may wish to take profits if the gap is filled, since we will expect a modest pullback once this occurs. - Play-of-the-Day Comments: May 7th, 2002 - With CSCO's earnings likely to give the Nasdaq and most of the tech sector a needed boost at tomorrow's open, what's a trader to do who wants to be long....and isn't? Buy when everything gaps higher at the beginning of trading? Sure, that could work, but it's about as safe as sleeping under a bull dozer--with ear plugs. We prefer to take a slightly more prudent approach and suggest that active traders consider "sneaky" stocks like Timberland which may be initially overlooked at Wednesday's open. As we noted in tonight's update of TBL, there are plenty of positive technical reasons to expect that this stock could be an impressive short term performer. Its price is enjoying good upward momentum; it has a gap to be filled and is trading just below it; it has just begun to work higher after consolidating along its 50-dma. TBL looks like it will offer a nice combination of reasonable risk and good profit potential on a day (Wednesday) that might see all the averages sprint considerably higher most of the day. Picked on May 3rd at $41.89 Gain since picked: +0.40 Earnings Date 04/18/02 (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 Tuesday 05-07-2002 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/e07b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: SNE, TTN Bearish Play Updates: CA, TBH Stock Bottom / Active Trader Bullish Play Updates: CTX, DCX, GR, LTR, MHK, SII, RKY, TBL Bearish Play Updates: GCI, GDT, JPM, MER, V High Risk/Reward Bullish Play Updates: AMAT Bearish Play Updates: DOX Split Trader Stock Splits GGG: 3-for-2 split announcement YUM: 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 - SNE - close: 52.65 change: -1.35 stop: 51.25 If Sony's stock is able to enjoy any of the success of its recent "Spider-Man" motion picture, produced by subsidiary Columbia Pictures, then PI investors will indeed be pleased. Forbes reported on Monday that the newly released "Spider-Man" established a three-day record for gross revenue earned by a motion picture: $114 million. However, despite the positive news, Sony continues to ebb up and down with Japan's Nikkei--in fact, their chart patterns are (surprise!) very similar. Last night's 2% dive in the Nikkei put pressure on SNE, but we remain comfortable with the attractive technical pattern and support levels on the stock. Picked on April 4th at $53.01 Gain since picked: -0.36 Earnings Date 04/25/02 (confirmed) --- Titan Corporation - TTN - close: 22.44 change: +0.06 stop: 20.99 Last week we reported that TTN had acquired a new contract from the US Navy; this week it was announced that its same subsidiary, Titan Systems Corporation, had scored a repeat, this time with the U.S. Air Force. The new contract is worth a reported $21.5 million. Although the 23.00 level continues to offer a bit of frustrating resistance, we see nothing in TTN's technical pattern that changes our positive stance on the stock. However, investors considering new positions in TTN should probably wait until this resistance is taken out by a move over 23.00. Picked on April 15th at $21.26 Change since picked: +1.18 Earnings Date 04/25/02 (confirmed) -------------------- Bearish Play Updates -------------------- Computer Associates - CA - cls: 17.38 chg: -0.02 stop: 17.80 *new* With the release of CSCO's positive earnings on Tuesday evening, we have elected to lower the buy stop on our CA short position. Our thinking with respect to the CA short position is fairly simple: if CSCO earnings are still considered positive by the time the market opens on Wednesday morning (CSCO is up nearly 1.40 in after hours trading as of 5 p.m. EDT), we could be faced with a strong rebound in stocks like Computer Associates. It goes without saying that we would not encourage new short positions at this time. On the news front, CA announced this morning that Korea's leading Commercial Bank selected several Computer Associate software products to provide ebusiness management capabilities to the bank's next-generation financial system. Picked on April 18th at $18.49 Gain since picked: +1.11 Earnings Date 05/14/02 (unconfirmed) --- Telecom Brasil - TBH - close: 28.61 change: -0.52 stop: 30.20 *new* Technically, out telecom short play continues to look weak. We noted on May 3rd, when we first presented this play, that we were looking for a near term move down to the 27.50 level. So far, TBH remains few percent above this level. As long as TBH stays below 29.65 we'll feel comfortable. We have elected to lower the buy stop to the 30.20 level to reduce our risk in our hypothetical position in this stock. Picked on May 3rd at $29.83 Gain since picked: +1.22 Earnings Date N/A ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Centex Corp - CTX - close: 56.25 change: +0.74 stop: 54.89 Shares of CTX traded higher today ahead of the Fed announcement about short term interest rates. The decision to keep rates unchanged was expected, and Wall Street reacted with a collective yawn. The interest-rate sensitive homebuilding index maintained its previous gains and finished with a respectable 1.0% gain, while CTX outperformed with a gain of 1.3%. On Monday, shares bounced off the 50-dma, which happens to coincide with the 100- dma. As long as bulls continue to defend this level our stop under 55.00 will remain intact. If the market stages a rebound in the next few sessions we'll be looking for a move over 59.00, which so far has served as formidable near-term resistance. Picked on May 1st at $57.78 Gain since picked: -1.53 Earnings Date 04/23/02 (confirmed) --- DaimlerChrysler - DCX - close: 46.82 change: +0.01 stop: 44.66 We like the way that the big cap cyclical stocks, like the autos, continue to form attractive consolidation patterns as the broader market oscillates back and forth. We noted that a German industrial strike might crimp DCX a bit this week, but the stock remains nicely above its 50-dma. Conservative traders might be content to wait for the stock to break out above short term highs, above 48.09, which should then start DCX on a new multi- week upward price move. Picked on May 6th at $46.50 Gain since picked: +0.32 Earnings Date 02/20/02 (confirmed) --- Goodrich Corp - GR - close: 31.00 change: -0.02 stop: 30.74 Over the last 2 trading weeks, Goodrich's stock price has traded over, on and under its 50-dma. Tonight it closed under the 50- dma, but we are optimistic that support, in the 30.80-30.90 level will hold. The bearish challenge to our optimism is the news that the Pentagon, at the urging of Rumsfeld, is likely to cancel the $11 billion Crusader project, produced by UDI. Shares of UDI are reflecting the news and this could be a damper on the entire defense sector. As a counterweight to the news, tonight's suicide bombing in Israel might keep American investors focused on our own defense and they may be reluctant to sell current positions. Picked on May 3rd at $31.97 Gain since picked: -0.97 Earnings Date 04/24/02 (confirmed) --- Loews Corporation - LTR - cls: 59.80 chg: -0.96 stop: 58.45 A long position in Loews was triggered today when it dipped into the 59.90-60.50 region. We said Monday evening that a move into this region would put us in the trade. Accordingly, we are now long the stock at 60.50, and are using a sell stop of 58.45. LTR continues to trade just a bit above its 50-dma and this remains positive; we think a rebound off this moving average is likely within the next few days. Picked on May 7th, at $60.50 Gain since picked: -0.70 Earnings Date 05/09/02 (confirmed) ---- Mohawk Industries - MHK - close: 64.84 change: -1.66 stop: 62.98 Today's 2.5% decline in MHK was a bit disconcerting, considering that the homebuilding sector moved higher. Bulls were once again stymied by resistance at 68.00. MHK traded over this level on Monday but quickly succumbed to a wave of selling. If shares continue lower we'd expect the 50-dma at 63.35 to serve as support. Aggressive traders could consider new entries on a bounce at this level. Picked on May 3rd at $66.30 Gain since picked: -1.46 Earnings Date 04/15/02 (confirmed) --- Smith Intl - SII - close: 70.39 change: -0.98 stop: 68.95 Oil-related stocks weathered some selling yesterday after Iraq said it would end its 30-day oil embargo. The primary concern was that other Arab nations would join the embargo, and the price of crude (cl02m) declined after it became apparent that Saddam's ploy had failed. SII mirrored the sector action and dropped 1.3%. In this morning's trading, shares came within 16 cents of our stop-loss, but rebounded to finish above the 70.00 level. If the OSX (oil services index) continues lower we'll expect support to emerge at the psychological 100 level, at which the 50-dma resides. New entries in SSI can be evaluated if the stock continues to work higher off the 70.00 level. Picked on April 26th at $71.29 Gain since picked: -0.90 Earnings Date 05/02/02 (confirmed) --- Adolph Coors - RKY - close: 67.35 change: -1.19 stop: 63.89 Much like a warm beer, the RKY rally finally fizzled out today. Shares fell below 68.00 and finished with a loss of 1.7%. We'd been hoping bulls would defend this level, which had previously acted as resistance. On a more positive note, we like how the pullback in RKY has taken place on less volume compared to last week's ascent. This indicates a lack of bearish conviction. The stock is also still on a triple-top p-n-f buy signal. As long as the technical picture remains strong we think a rebound in the broader market should propel shares above 68.00. If shares continue to decline, aggressive traders can target entries on a bounce from the 50-dma at 64.79. Picked on May 2nd at $68.36 Gain since picked: -1.01 Earnings Date 04/25/02 (confirmed) --- Timberland Company - TBL - cls: 42.29 chg: +0.54 stop: 39.95 The S&P Retail Index (RLX.X) moved nicely higher today, up 1.7%, and shoe/apparel maker Timberland rode its coat tails. We like the technical pattern on this stock quite a bit; it began a gentle advance off its 50-dma just a couple of days ago. Short term, we are looking for a nice pop in its price over the next few days. Our reasons are twofold. First, TBL is on the cusp of moving into a price gap which it left in mid-April. The gap runs from about 42.68 to 44.66. We believe that once TBL's price moves above 42.68 it will advance rapidly to the upper level of the gap, perhaps over just a day or two. The short term Stochastic Oscillator is overbought, which can be positive when other technical indicators, like the RSI, remain positive, and in the presence of a gap which seems to be begging to be filled. Traders will frequently enjoy a "Stochastic Pop," or a sharp spurt in price, when this indicator moves into its overbought region (before, obviously, it begins to deteriorate). Aggressive traders may wish to take profits if the gap is filled, since we will expect a modest pullback once this occurs. Picked on May 3rd at $41.89 Gain since picked: +0.40 Earnings Date 04/18/02 (confirmed) -------------------- Bearish Play Updates -------------------- Gannett Company - GCI - cls: 71.50 chg: -0.71 stop: 72.37 *new* In our original statement on this trade, we noted that we thought GCI might decline, over a week or two, to the 78.6% Fibonacci retracement level (of the February-April advance), which was also near the 200-dma. In recognition of this, and the nice gains we've enjoyed thus far, we have decided to sharply lower our stop on this short position, as well as place a target price of 69.10 on the trade, a level which is just slightly above the 200-dma. Accordingly traders will close out the trade if Gannett 1) trades down to 69.10 or lower, giving us a 7% gain or 2) rebounds up to our new buy stop of 72.37 (giving us a smaller profit). Picked on May 3rd at $74.13 Gain since picked: +2.63 Earnings Date 04/16/02 (confirmed) --- Guidant Corp - GDT - close: 37.00 change: -1.50 stop: 39.01 *new* GDT shareholders are probably suffering a bit of heartburn today after the stock hit a multi-month low. Shares dropped nearly 4% and finished at levels not seen since September. It appears that last week's FDA approval of GDT's heart device was already priced into the stock; Shares are down over 10% from last Thursday's high. In intra-day trading GDT dropped below $36.95, which triggered our short play; we have tightened our buy stop on this trade, placing it at $39.01. This move also created a triple- bottom sell signal on the p-n-f chart. Now that this play is active, we're targeting a move to the next level of historical support at $34. We were hoping for a close under $37 but a move below today's low of $36.85 would help to confirm that the bears are in control. Cautious traders may want to wait for this to occur. Picked on May 7th at $36.94 Gain since picked: -0.06 Earnings Date 04/18/02 (confirmed) --- J.P. Morgan - JPM - close: 34.63 change: +0.23 stop: 35.56 *new* JPM recovered some of Monday's losses today, gaining 23 cents to close just under the 50-dma. The stock had been pressured in sort of a guilty by association with the news that Moody's would cut its debt rating on MER if the brokerage suffered a criminal indictment. It's hard to read too much into today's action, but we did like how JPM closed at the low of the day. On the other hand, shares have been trading in a trend of higher lows since April 11th. Watch for a move below Monday's low of $34.24 to verify a break of this trend. Note that we're tightening our stop to $35.56, which is two cents above today's high. More aggressive traders could probably get away with a stop just above the 200-dma at $36.46. Picked on April 24th at $35.40 Gain since picked: +0.77 Earnings Date 04/17/02 (confirmed) --- Merrill Lynch - MER - cls: 40.80 chg: -0.21 stop: 41.01 *new* Shares of MER tumbled on Monday after Moody's announced that a criminal indictment of Merrill would result in a downgrade of their long-term debt. The selling spilled over into today's session, as the stock lost half a percentage point. This represents bearish divergence from the fractional gain in the XBD.X broker/dealer index. Although MER continues to be weak, we think the odds may now be tilted in the bulls favor. The XBD is currently sitting at a level of historical support, which happens to coincide with the 50% retracement level from September lows to January highs. MER may also have its own support at $40. This level was successfully tested today. Furthermore, in after-hours news there was a report that the Thursday hearing into Merrill's research practices had been postponed. This could indicate a possible upcoming settlement, which would likely give the stock a boost. Our defensive strategy is two-fold: First and foremost, we're moving our stop to $41.01. This should protect a gain of 6%. Secondly, we're setting an exit price of $40.01. We'll close the play if shares trade at or below this level. Given the positive developments after hours, we think the first scenario is more likely. Picked on April 24th at $43.72 Gain since picked: +2.92 Earnings Date 04/17/02 (confirmed) --- Vivendi - V - close: 27.57 change: -0.69 stop: 27.91 *new* Sacre Bleu! Yet another 52-week low for V. Shares fell for yet another consecutive session today after S&P chopped its short- term rating on the company. The stock dropped as low as $26.75 in morning trading before rebounding to finish with a 2.4% loss. The PI Newsletter is now sitting on a 17.3% gain and we're going to protect more of those gains by moving our stop down to $27.91, a penny above today's high. We think this is a good placement for a stop because V has not traded above the previous day's high since last Wednesday. We're also setting a profit target of $26.06. If shares trade at or below that level, we'll close the play out for a 21% gain. Picked on April 24th at $33.35 Gain since picked: +5.78 Earnings Date 04/24/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Applied Materials - AMAT - close: 22.32 change: +0.20 stop: 20.89 AMAT has continued to display impressive relative strength when compared to the NASDAQ. Today's gain of 0.90% outperformed the Composite and the semiconductor index (SOX.X), both of which finished with losses. Traders still looking to go long AMAT may want to wait for a move over the 50-period MA on the 30-minute chart, which has acted as resistance for the past two sessions. Of course, if today's after-hours session is any indication, AMAT should gap above this level at tomorrow's open. Shares were trading above 23.00 after strong earnings from CSCO. This should buoy the entire tech sector tomorrow and may create a long- awaited short-covering rally. We're looking for AMAT to move over yesterday's high of 23.33 and test near-term resistance at 25.00. Picked on May 2nd at $22.99 Change since picked: -0.67 Earnings Date 05/14/02 (confirmed) -------------------- Bearish Play Updates -------------------- Amdocs Ltd - DOX - close: 18.00 change: -0.05 stop: 20.01 Bearish traders in DOX kicked the week off in style yesterday after the stock plummeted 8.5%. Selling volume was brisk, at 10.1M versus the 2.7M average. Due to the steep decline, we tightened our stop to 20.01. Today's trading was more subdued, as shares traded in an extremely narrow range near the 18.00 level for most of the day. Although the lack of buyers is encouraging, DOX will likely receive a shot in the arm tomorrow. We think the NASDAQ (including the oversold software sector) will rally on the news that CSCO reported strong-than-expected Q3 profits. Of course, any less than positive news from the CSCO camp before tomorrow's open--or negative brokerage opinions-- could quickly change the bullish outlook. If DOX does head lower we'll be looking for a move below today's low of 17.85. This would be a violation of today's "inside day." Note that because of the gap lower on Monday, our entry price is the opening price of 19.25, instead of our original picked price of 19.73. Picked on May 3rd at $19.25 Gain since picked +1.25 Earnings Date 04/23/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- Graco declares 3-for-2 stock split Graco Inc. (NYSE: GGG) announced this morning after the market opened that its Board of Directors had approved a 3-for-2 stock split. The split will be payable on June 6, 2002 to stockholders of record on May 21, 2002. GGG most recently split in February 2001, also a 3-for-2 offering. The stock has been steadily uptrending since September and YTD is up by more than 11%. The stock closed at $43.05 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=GGG About the company Graco Inc. supplies technology and expertise for the management of fluids in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid materials. (source: company press release) --- Tricon Global delivers 2-for-1 split. Cheesy bread not included. After the bell today, Tricon Global Restaurants Inc. (NYSE: YUM) announced a 2-for-1 stock split. The split will take the form of a 100% stock dividend and will be distributed on June 17, 2002 to shareholders of record on June 6, 2002. Split-adjusted trading will commence on June 18. YUM has benefited from bullishness in the restaurant sector and has gained 68% from its September lows. Shares are currently trading at multi-year highs. The stock closed at $62.95 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=YUM About the company Tricon Global Restaurants Inc, based in Louisville, Kentucky, is the world's largest restaurant company in terms of system units with over 30,000 restaurants in over 100 countries and territories. The company's brands -- KFC, Pizza Hut and Taco Bell -- are the global leaders of the chicken, pizza and Mexican-style restaurant categories, respectively. (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 EXC Exelon Corp 56.27 +0.87 DFS Department 56 Inc 19.10 +0.59 XMM Cross Media Marketing 13.35 +0.65 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change MGEN Micro General Corp 18.61 +1.13 AMZ American Medical Sec Inc 19.60 +2.10 MXWL Maxwell Technologies 14.50 +1.09 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change CTAS Cintas Corp 53.25 +2.30 EFX Equifax Inc 28.68 +1.17 FAST Fastenal Company 85.18 +1.49 WFMI Whole Foods Market Inc 49.70 +1.57 HSIC Henry Schein Inc 49.16 +1.90 COLM Columbia Sportswear Co 39.88 +1.55 FLM Fleming Companies Inc 24.83 +2.38 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change JNJ Johnson & Johnson 60.42 -1.68 DELL Dell Computer Corp 22.33 -1.42 SAP SAP Ag ADS 28.75 -1.10 TV Grupo Televisa Sa 43.18 -1.01 QCOM QUALCOMM Inc 24.80 -1.65 BRCM Broadcom Corp 24.72 -5.22 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change WLP Wellpoint Health Network 73.31 -2.66 ATH Anthem Inc 67.59 -1.91 MME Mid-Atlantic Med Service 33.36 -2.41 HUG Hughes Supply Inc 37.95 -3.26 CDI CDI Corp 28.90 -1.08 DP Diagnostic Products Corp 49.17 -0.64 ================================================================= 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.
Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.
Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.
To ensure you continue to receive email from Option Investor please add "email@example.com"
Option Investor Inc