PremierInvestor.net Newsletter Wednesday 05-08-2002 section 1 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/e07b_1.asp ================================================================= In section one: Market Wrap: How do you like them apples? Watch List: IGT, WLP, XOM, NOVN, AMZN, and VRSN Play of the Day: What Software Rally? ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 05-08-2002 High Low Volume Advance/Decline DJIA 10141.83 +305.28 10148.94 9847.96 1.50 bln 2021/1177 NASDAQ 1696.29 +122.47 1696.35 1625.73 2.39 bln 2465/1085 S&P 100 540.62 + 22.40 540.80 518.22 Totals 2486/2262 S&P 500 1052.67 + 20.76 1075.96 1052.65 RUS 2000 509.75 + 10.77 509.83 498.98 DJ TRANS 2753.01 + 69.17 2756.56 2684.57 VIX 23.16 - 1.41 24.09 22.28 VXN 45.85 - 4.27 49.16 45.85 TRIN 0.38 PUT/CALL 0.65 ****************************************************************** =========== Market Wrap =========== How do you like them apples? Now that's what equity traders call a rally. The Dow Industrials (INDU) jumped 305 points (+3.10%), the S&P 500 Index (SPX.X) gained 39 points (+3.75%) and the NASDAQ Composite (COMPX) surged 122 points (+7.78%), as stocks jolted to their most powerful daily performance of the year with some determination following better than expected earnings from Cisco Systems (CSCO). Bulls could care less what the "reason" was for today's rally was and they like their apples green, just like a Granny Smith. There was plenty of green to go around today and many of the sector gains were in the double-digit percentages. U.S. Market and Index Watch Only the Gold/Silver Index (XAU.X) 76.92 -0.74% and the DJUS Home Construction Index (DJUSHB) 382.29 -0.68% finished lower on the session. While Treasury YIELDS finished in the green, the higher YIELD in the 30-year ($TYX.X), 10-year ($TNX.X) and 5-year ($FVX.X) shows a major round of selling took place (YIELDS rise as price of the bonds fall) and most likely a great deal of the cash either found its way into stocks or becomes slated for buying some stocks on a pullback. Gold most likely pulled back as today wasn't really a day that bulls were looking to play defense. Homebuilders saw marginal weakness as the higher YIELDS in the 10 and 30-year YIELDS will make it difficult for mortgage rates to drift lower, as has been the case in recent weeks. But don't think that every market participant believes today's rally was anything more than short-covering from an oversold condition. Stephen Carl, head of U.S. equity trading at The Williams Capital Group, labeled Wednesday's action as "an aberration." Carl went on to say, "The market's been depressed for so long, particularly in the tech sector. People were looking for an excuse to buy, and Cisco's earnings report provided it." And there was some covering done, especially in Cisco Systems (NASDAQ:CSCO) $16.27 +24.38%. Cisco Systems Chart - Daily Interval Cisco's bar chart with retracement and regression overlaid is probably the best example of assessing risk/reward in a trade that can be found. We can perhaps see how bears were willing to risk a move to the upper end of regression and retracement at $15.27 for a potential climactic sell-off on bad news to the lower end of regression and retracement at $11.24. In yesterday's commentary at OptionInvestor.com, I pointed out that bears holding the stock short/put from the $15 level may want to lock in 1/2 position gains as risk/reward in the stock looked to be 50/50. When the stock gapped this morning and traded above the $15.27 level, it was time to call it quits and move to the sidelines. Cisco's chart is also an excellent example of how important "discipline" is when it comes to trading. Sure, the fundamentalist that is bearish is saying, "This is crazy! There's no way Cisco's earnings should have triggered such a market rally." Well, it seems crazy, but to a bear, it could become an excuse to be complacent and hope the stock pulls back. Today's earnings response makes about as much sense as the November 5th response when CSCO reported earnings of 4-cents a share and beat estimates by 2-cents and the stock jumped from the $18 level to $21.80 over the next couple of weeks. Then on February 6th, CSCO reported earnings of 9-cents a share and beat estimates by 4-cents. Just as it did little good for bulls to argue and scratch their heads as to the decline from February 6th, the MARKET sure didn't sit around and argue today. Bearish traders that were trading the regression trend into last night's close understood where a risk level was and when it was broken to the upside, it was time to remove the risk from the account. Even the beaten down GSTI Software Index (GSO.X) 130 +12.39% saw robust gains. In late April, the GSO.X had achieved our near- term bottom where we expected a rebound at the 130 level, but did fall further without much of a rebound. Well... until today. GSTI Software Index Chart - Daily Interval The GSTI Software Index (GSO.X) closed at its session high and hints that bears were locking in gains into the close. We're cautioning bears not to be complacent and underestimate the potential of a prolonged rally. The GSTI Software Index (GSO.X) is one of the "biggest" sector indexes as it relates to the number of stocks that comprise the index. Many have just 15 or 20 stocks in the index, but there are 52 stocks that comprise the GSO.X. While I can only show 39 of them (due to vertical size limitations), 51 of the 52 components finished the session with a gain. 39 volume leaders in the GSTI Software Index (GSO.X) A rising tide in technology lifted all boats in the GSO.X index today. Well, all but one. Poor little old Amdocs (NYSE:DOX) $17.74 -1.44%. Hey! What am I saying. That's one of our bearish plays on the play list! Amdocs Ltd. Chart - Daily Interval Today, Merrill Lynch downgraded Amdocs Ltd. (DOX) to "long-term buy" from "strong buy," saying that recent channel checks suggest there continues to be worrisome trends beneath the surface, such as 1) little traction in the 2.5G wireless billing market, 2) decline in size/number of new contracts, 3) customers demanding price adjustments, and 4) limited growth opportunities and expansion near-term in the wireline/3G/product via acquisition. Merrill also thinks that DOX management is still in the "denial phase" when it comes to revenue/EPS guidance, as they are guiding for 10% growth while Merrill estimates a 12-22% decline next year, which is 20% below the Street's consensus. One has to wonder.... why does Merrill wait until today to actually downgrade the stock? I went through some notes. On November 1 of last year, Merrill had removed DOX from its "Techfolio" list at $26.62. Then on January 23rd, when the stock was trading $32.60, Merrill was "cautious" on DOX, saying that sequential declines in revenues, deferred revenues, backlog, and license revenues, pointed to weak results. Speaking of Merrill Lynch (NYSE:MER) $43.95 +8.14%, traders should have been stopped out of this bearish play at the opening of trading at $43 for a small gain from profile. With MER being one of the company's under the SEC's watch, maybe one doesn't have to wonder why. Yes, we weren't the only ones looking short the stock and $44, and I don't think we'll be the only ones looking for another opportunity between $46 and $48. Merrill Lynch Chart - Daily Interval Was it Cisco's earnings or last night's news report from Reuters that Merrill Lynch's court appearance with the New York Attorney General Eliot Spitzer had been pushed back until May 16th due to "productive discussions" between the parties, or this morning's Wall Street Journal story that reported MER and the NY AG had arrived at a "framework" for a possible deal that could soon settle an investigation in to the firm's stock-research practices and prevent the AG from seeking civil or possible criminal charges, that had the stock rebounding today? If you said "Who cares?" then you're probably not in the minority. As usual, we'll look for the best trade setup, wait for things to settle down a bit, and if the stock rallies back to a level where we can control our risk better and MACD begins to roll over, you'll probably see "mother Merrill" on our bearish play list again. Can the rally last? One thing we monitored today was the action in the Treasury market. Treasuries sold off rather sharply today, and its a rather "rare" occurrence that the bond market would see such sharp selling due to an earning's announcement from ANY company (well, maybe a General Electric, but not CSCO). No, there's something else other than just Cisco's (CSCO) earnings from last night. Something that had MARKET participants willing to sell the safety/security of Treasuries. The deep cyclicals as depicted by the Morgan Stanley Cyclical Index (CYC.X) 580.15 +2.53% partially "confirmed" today's move in techs and now threatens to get back above the upward trend on our bar charts, currently at 580. I say "confirmed" as it pertains to my past thoughts of how this group of stocks needed to perform strong and act like a leader. Tomorrow's action in the CYC.X could well be a near-term key to just how bullish today's rally could get going forward, or fall back on its face. Tomorrow, I'll be watching the bond market and CYC.X closely. If Treasuries see further selling tomorrow and the CYC.X breaks back above the 580 level, then the "force" or "conviction" behind a move higher will most likely dictate what bears do in their bearish technology positions. It could also dictate what "new bulls" do with cash raised from today's cash raised from bond selling. In Friday's wrap, I discussed shares of FedEx (NYSE:FDX) $52.76 +5.71% as a stock I'd be monitoring closely this week for a bullish trade. If we were to see some weakness tomorrow, I'd look to trade long FDX on a pullback below $51, follow with a stop at $49.50 and target $58 as a bullish trade target. If we don't get a pullback, then I'd be willing to take 1/2 position long on a break above $53.25, stop $49.50 and target $58. Cyclical Index Components - Sorted by % daily gain FedEx (NYSE:FDX) is a stock we wanted to monitor this week. I like what I've seen and the stock was a "top performer" in the cyclicals. If the CYC.X breaks above the 580 level with some conviction tomorrow, the FDX is a good bullish candidate. Don't forget. In November and December of last year, there were a lot of fund managers criticized for "missing the move" off the bottom. Even with today's NASDAQ-100 (NDX.X) 10.6% gain, the NASDAQ-100 bullish percent is only showing a reading of 23% and still "bear confirmed" and would take a current chart reading of 46% to get back to "bull confirmed!" Bears are still carrying the bulk of the risk in the bigger technology. There's plenty of time to get long. Stay disciplined! Jeff Bailey Senior Market Technician PremierInvestor.net ================================================================== 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 --------------------------------- Intl Game Tech - IGT - close: 62.18 change: +0.21 WHAT TO WATCH: Attentive PI readers may recall that we shorted IGT last month (April 17th), but were stopped out for a small gain after the stock reached the bottom of its descending regression channel. Shares traded sharply higher after reporting strong earnings on April 23rd and have since moved to the top of the channel. Since IGT shows no signs of breaking over this level, we're looking for shares to head lower in the near-term. The oscillators support our bearish outlook, with the daily stochastic heading lower and the MACD beginning to level off near the baseline. Potential short entries could be evaluated on a move below the near-term low of $61.29, which is just below the 50-dma. We'd be targeting a move to the 200-dma at $58.11. --- Wellpoint Health Ntwk - WLP - close: 74.63 change: +1.32 WHAT TO WATCH: Those of you who trade with a "fade the crowd" mentality might be interested in shorting this HMO stock. WLP joined the HMO.X (Morgan Stanley Healthcare Index)in a mammoth rally that had the sector trading near all-time highs on almost a daily basis throughout March and April. During the index's two month ascent, we periodically forecasted (successfully, we might add) probable resistance levels using the "stacked channel" method. This involves taking an existing regression channel (in this case, the one in which the HMO index traded from the September lows to mid-April), and then "cloning" it and stacking it on top of the original channel. The index found resistance at the top of the "stacked" channel but eventually broke higher. When this happened we stacked a third channel on top of the second. The HMO ran headlong into the top of this channel and has since been dropping lower. You can view a picture of this stacked channel by visiting the website and clicking on tonight's watch list. A break of the HMO 600 level could open the door for a move to 550. WLP looks near-term overbought (the MACD just gave a bearish crossover) and may be a good way to short the index. Look for a bump off the all-time highs near 77.00 or a break below today's low of 71.88 as possible shorting trigger points. --- Exxon Mobil - XOM - close: 40.01 change: +0.91 WHAT TO WATCH: Shares of this Dow component have dropped nearly 10% from its April high and are now resting above an ascending trend line dating back to September. We think XOM is a good candidate for a dip-buying strategy because, in addition to staying above the historical uptrend, the shares have successfully tested bullish p-n-f support. A breakout in the price of oil (which is threatening a move to multi-year highs) may fuel a rebound in shares of XOM. Watch for a close above the 200-dma at 40.28 to offer a possible action point for bullish positions. --- Noven Pharmaceuticals, Inc - NOVN - close: 21.75 change: +0.75 WHAT TO WATCH: NOVN primarily manufactures prescription transdermal products, including delivery systems for use in hormone replacement therapy. We find this a potentially attractive long play for several technical reasons: 1) the RSI is rising nicely, as is our fast Stochastic; 2) the stock just moved above its 50-dma today, and used this as support; 3) the MACD just signaled a bullish crossover at the zero line; and 4) our longer term weekly chart shows that NOVN has just finished a two month consolidation, off of which it has started to advance. A modest pullback to 21.00 should offer an attractive entry point for active traders. The stock should possess short-term support at 20.50. Keep in mind that shares could have overhead resistance at the $23 and $24 levels. --- Amazon.com - AMZN - close: 17.32 change: +1.21 WHAT TO WATCH: Amazon broke its short term negative trend of declining prices during Wednesday's trading, and we like this stock as a potential long play. AMZN has created a support zone in the 16.36 region. After today's sharp advance, we would encourage active investors and traders to look for a dip as an opportunity to take long positions. Our expectation is that Amazon will dip on Thursday or Friday to the 16.36-16.88 region, and this could provide an entry opportunity for investors. Currently, AMZN just crossed the midline of its ascending channel (from the September lows) and we would probably target the top of the channel near $20.00. --- VeriSign - VRSN - close: 10.25 change: +1.37 WHAT TO WATCH: On April 25th, VeriSign presented less than impressive earnings, was downgraded by several brokerages and was confronted by analysts who predicted the company's revenue would be shrinking in coming quarters. With such unpleasantries abounding, was anyone really surprised when the stock received a nasty 45+% hair cut in its stock price? So why would we think this stock has potential as a long play? Yes, I said "long." This is a high risk, high reward play that would need to be traded with strong, unwavering discipline. Our thinking goes like this: Stock prices have a tendency to rebound quickly when they enter a previous downward "gap" or "fast move" area. VRSN will only be attractive if it actually begins moving into the huge gap region it left on April 25th. However, we can play the "fast move" area ahead of the gap and--for our trading purposes-- this fast move region begins at 10.50 and ends at $12.00. Once in such a trade, it is mandatory that traders use a tight sell stop and we would suggest something in the neighborhood of 9.96 or slightly lower. It is unclear how much of the gap VRSN might attempt to fill, but the first point at which to expect it to stall would be 11.90, which is 10 cents below the bottom edge of the true gap. Tops and bottoms of a gap or a window can be strong resistance. However, if VRSN can break above $12.00 it could trade to the top of the gap near $15.00 rather quickly. =============== Play-of-the-Day (Bearish) =============== Amdocs Ltd - DOX - close: 17.74 change: -0.26 stop: 18.51 *new* Amdocs is the world's leading provider of CRM, billing and order management systems to the communications industry. Amdocs has an unparalleled success record in project delivery of its mission- critical products. (source: company press release) - ORIGINAL WRITE UP: May 3rd, 2002 - Recently one of the hotly debated subjects at the PI office has been whether it's too late to short tech stocks. No doubt about it, the NASDAQ is looking oversold and the software sector has been hit even harder. The GSO.X software index has lost over 30% since early March and is just 9 points away from its all-time low at 112. Nonetheless, we're playing DOX because the stock is technically weak and there is no guarantee that the GSO will find support. After all, the SOX.X just fell below the 500 level that had provided support for several months. What grabbed our attention today was the way DOX dropped 3.6 percent on high volume and closed under support at $20. Shares have traded in a descending channel for most of the year and are just now dropping from the upper band. The downtrend has accelerated in recent weeks, following the April 23rd earnings announcement in which the company reported higher profits but guided lower for the year. This resulted in no less than three brokerage downgrades for DOX. Thanks for the head's up, guys. With the bears firmly in control, we're looking for a near-term move to the channel's midline at $18. This would be a move of nearly 9%. A complete breakdown in the sector could bring the stock even lower, but we'll evaluate our exit strategy if/when DOX trades near the $18 level (a move to the $17 or $16 area does not seem out of the question). Under normal circumstances we have no problem taking 10% risk with our stop on a high-risk play. However, given the sharply oversold sector, we're going to go with a 5% stop at $20.76. This will still force shares to trade over $20, which should now act as resistance. Traders with a more aggressive approach may want to place their stop above near-term resistance at $22. - Most Recent Update: May 7th, 2002 - 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. - Play-of-the-Day Comments: May 8th, 2002 - Now that's what we call relative weakness! DOX faded every other component of the GSO.X software index today and finished in the red. Shares were pressured by a downgrade from Merrill Lynch, and traded as low as 16.11 before finishing with a 1.4% loss. Although this bodes very well for our short play, we're going to lower our stop to 18.51, which is above today's high. This should protect a gain of 3.8%. If the tech rally fizzles out tomorrow we'd expect DOX to at least retest today's low. On the other hand, DOX may try to play "catch-up" with the rest of the sector if the NASDAQ continues higher tomorrow. Traders should verify market weakness before considering any new short position in this stock, and be aware that the bottom of the stock's descending channel (currently at 15.00) may provide support. Picked on May 3rd at $19.25 Gain since picked +1.51 Earnings Date 04/23/02 (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 Wednesday 05-08-2002 section 2 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/e07b_2.asp ================================================================= In section two: Net Bulls Closed Bearish Plays: CA Active Trader Non-Tech Stocks Closed Bullish Play: CTX Closed Bearish Plays: GCI, JPM, MER, V High Risk/Reward Stop Adjustments: AMAT (bullish), DOX (bearish) Long-Term Plays Closed Bullish Play: UNM Split Trader Stock Splits Split Announcement: APWR: 3-for-2 split announcement PRSP: 2-for-1 split announcement Split Update: FDC: Distribution date 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 Play ------------------- Computer Associates - CA - cls: 18.66 chg: +1.28 stop: 17.80 We enjoyed a nice gain in our CA short position of about 6% into yesterday's close. Naturally, we knew some of this would evaporate once this morning's CSCO-inspired opening sent most tech stocks considerably higher. By the time the dust cleared at the open, our gain in this short position had been cut in half, giving us a modest 2.7% gain. CA gapped up higher, and far more aggressively than expected, when the market opened at 9:30 a.m. EDT. Had this been an actual trade with a 17.80 buy stop, the trade would have likely been executed at the opening level of 18.00. It is always frustrating to lose a good chunk of your profit....but remember this: it is a heck of a lot more troubling to lose your money, and your shirt. Stops help you keep both. Picked on April 18th at $18.49 Gain since picked: +0.49 Earnings Date 05/14/02 (unconfirmed) ================================================================= Active Trader/Non-tech Stocks (AT) section ================================================================= =============== AT Closed Plays =============== ------------------- Closed Bullish Play ------------------- Centex - CTX - cls: 55.14 chg: -1.11 stop: 54.89 When CSCO said "jump" this morning, all the techs did, and so did tech investors. Unfortunately, investors apparently decided to sell one sector to help finance today's new positions in tech sectors...and one that was sacrificed was that of home building/construction. Although the Dow Jones US Home Construction Index (DJUSHB) lost only .68%, our position in this sector, CTX, lost nearly 2%. Centex essentially dropped right from the open, triggering our sell stop when it moved below our stop of 54.89 on its way to a daily low of 54.60. Picked on May 1st at $57.78 Gain since picked: -2.89 Earnings Date 04/23/02 (confirmed) -------------------- Closed Bearish Plays -------------------- Gannett Company - GCI - cls: 74.58 chg: +3.08 stop: 72.37 Tech stocks weren't the only ones to benefit from last night's strong CSCO earnings. Media stocks also caught a bid, with CCU, DIS, DJ, GCI, KRI all finishing solidly in the green. Fueling the sector rally may have been speculation that companies more willing to spend money on networking equipment will also consider spending more on advertising. Of course, on a day when the Dow jumped over 300 points it's difficult to find sectors that didn't experience a strong day. GCI opened strong this morning and quickly moved above our stop at $72.37. This closed out our play for a 2.3% gain. GCI may continue higher in the near-term, but there was no company-specific news to fuel today's move and we'd look for shares to falter near the 50-dma at $76.17. Picked on May 3rd at $74.13 Gain since picked: +1.76 Earnings Date 04/16/02 (confirmed) --- J.P. Morgan Chase & Co. - JPM - cls: 36.91 chg: +2.28 stop: 35.56 Today's sharp rebound in the market--and a hefty 6.5%+ advance in the Securities Broker Dealer Index (XBD.X)--caused immediate hardship for our short position in JPM. Our buy stop of 35.56 would probably have been executed (had this been an actual trade) at the opening price of 36.59, a full dollar above our stop level. Stops, as all investors should and better know, effectively become market orders that are executed at the first price once the stop has been triggered. The opening spike in JPM caused yesterday's modest profit in the position to disintegrate, leaving us with a loss of about 3%. Picked on April 24th at $35.40 Gain since picked: -1.19 Earnings Date 04/17/02 (confirmed) --- Merrill Lynch - MER - cls: 43.95 chg: +3.31 stop: 43.00 As we had anticipated, MER shot higher today following last night's news that a settlement with NY Attorney General Eliot Spitzer may be imminent. Shares gapped sharply higher and opened at $43.00. Since this was above our stop at $41.01, we closed MER at the opening price. That was still good for a 1.65% upside gain from our entry point. The stock trended higher with the rocketing Dow Jones for the remainder of the session and finished with an 8.1% gain. Due to the likely resolution of the NY investigation, we wouldn't recommend short positions at this time. Picked on April 24th at $43.72 Gain since picked: +0.72 Earnings Date 04/17/02 (confirmed) --- Vivendi - V - close: 29.07 change: +1.50 stop: 28.50 Au revoir, Vivendi. This play worked out better than we had hoped, as shares suffered losses, day after day, and traded to multi-year lows. Of course, nothing goes down in a straight line and the stock was overdue for a bounce. Today's monster rally in the Dow Jones provided the impetus for a 5.4% gain in V. Shares gapped higher this morning and opened at $28.50, above our stop- loss. Thus, our play was closed out at the opening price for a gain of 14.5%. Although V is still oversold and may continue higher in the near-term, the fundamental and technical weakness leads us to believe that the stock has not put in a "V-bottom" (no pun intended). We may revisit this play if shares roll over once reaching the $30-$32 level. It will be interesting to see if investors change their bias on the stock now that Vivendi has completed its deal to acquire USA Networks for $10.3 billion. Picked on April 24th at $33.35 Gain since picked: +4.85 Earnings Date 04/24/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== Stop Adjustments ---------------- Applied Materials - AMAT - cls: 25.56 chg: +3.24 stp: 22.49 *new* The chip sector exploded today after CSCO's positive earnings triggered a short-covering rally. The semiconductor index (SOX.X) gained 11.1%, and AMAT outperformed with a 14.5% gain. PI is now up 10% on this play, and cautious traders may want to consider heading for the exits if the rally tapers off tomorrow. We're willing to give AMAT more room to move, but are going to minimize our risk by moving our stop to 22.49. This would force the stock to fill in nearly all of this morning's gap, and we think this is unlikely to occur. Furthermore, we're setting a profit-target of 26.95. We'll close the play if shares trade at or above that level. Hopefully, the recent news about a growing expectation from analysts that AMAT is likely to meet or beat estimates and provide positive guidance will get shares to our profit target. In some of the news stories out recently you might see that Prudential has a $35 price target for AMAT while Lehman Brothers has a $27.50 price target. Our short-term profit target is just under the more conservative analyst number. More aggressive traders may want to target the current overhead resistance at $28.00 as their exit point (or something just short of it). AMAT is expected to announce earnings next Tuesday. --- Amdocs Ltd - DOX - close: 17.74 change: -0.26 stop: 18.51 *new* Every single component of the GSO.X software index finished in the green today...except for DOX. Shares were pressured by a downgrade from Merrill Lynch, and traded as low as $16.11 before finishing with a 1.4% loss. Although this bodes very well for our short play, we're going to lower our stop to $18.51, which is above today's high. This should protect a gain of 3.8%. ================================================================== LONG-TERM PLAYS (LT) section ================================================================== =============== LT Closed Plays =============== ------------------- Closed Bullish Play ------------------- UnumProvident Corp - UNM - close: 26.75 change: -0.15 stop: 26.89 After marching steadily higher in early-April, our long-term insurance play just couldn't seem find its footing. UNM stumbled early this week ahead of its earnings report and broke below near-term support at $27.50. On Tuesday the stock declined below our stop at $26.89, which closed this play for a loss of $1.59, or 5.5%. This made the Tuesday evening earnings announcement a moot point, but for those who are curious the company reported an EPS of 62 cents/share, versus the consensus estimate of 63 cents/share. UNM said its quarterly net profit fell by more than half, due to investment-related losses. This morning the stock traded sharply lower on the news but (thanks to the soaring Dow) was able to recoup most of these losses by the closing bell. Although shares may have established a near-term bottom today, at this point we think there are other stocks in the insurance sector that may offer more attractive long plays than UNM. Picked on April 5th at $28.48 Gain since picked: -1.59 Earnings Date 05/07/02 (confirmed) ================================================================= Split Trader Stock Splits (ST) section ================================================================= Split Announcements ------------------- AstroPower generates a 3-for-2 stock split Just as traders went to lunch today, AstroPower, Inc (NASDAQ: APWR) announced that its Board of Directors had authorized a 3- for-2 stock split. The split will come in the form of a 50% stock dividend and will be distributed on May 31, 2002 to shareholders of record on May 20, 2002. APWR has not split since it began trading in 1998. Shares closed 32.45 on Tuesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=APWR About the company AstroPower develops, manufactures, markets and sells a range of solar electric power generation products, including solar cells, modules, panels and our SunChoice(TM) pre-packaged systems for the global marketplace. (source: company press release) ----- Prosperity Bancshares sets 2-for-1 stock split Before the bell this morning, the Prosperity Bancshares, Inc. (NASDAQ: PRSP) Board of Directors announced a 2-for-1 stock split. The split will take the form of a 100% stock dividend and will be payable on May 31, 2002 to stockholders of record on May 20, 2002. This will be the first time PRSP has split since the stock began trading in late 1998. YTD, shares have risen by approximately 25%. Shares closed at $33.98 on Tuesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=PRSP About the company Prosperity Bancshares, Inc. SM, formed in 1983, is a $1.290 billion bank holding company headquartered in Houston, Texas. Operating under a community banking philosophy, Prosperity seeks to develop broad customer relationships based on service and convenience. (source: company press release) --- ================== Stock Split Update ================== At its annual shareholders meeting, First Data Corp.'s (NYSE: FDC) shareholders approved announced that it will now be able to complete a previously announced dividend stock split. Shareholders of record as of May 20, 2002 will receive one share of the company's common stock for each share owned. The distribution will occur after the close of business on June 4, 2002. ================== 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 BBT BB&T Corp 38.61 +0.53 UNP Union Pacific Corp 58.30 +1.50 GDW Golden West Financial 68.98 +0.59 APA Apache Corp 58.90 +0.57 MGA Magna Intl. Inc 74.90 +1.01 ABK Ambac Financial Group 63.81 +0.95 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change INGR Intergraph Corp 18.40 +1.40 KROL Kroll Inc 19.80 +1.26 SMTL Semitool Inc 15.18 +1.04 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change KO Coca-Cola Co 57.62 +2.11 UNH United Health Group Inc 89.61 +1.80 CCL Carnival Corp 34.58 +1.27 RIG Transocean Sedco Forex 37.20 +1.70 DGX Quest Diagnostics 94.75 +2.86 AU Anglogold Ltd 28.59 +1.77 BBI Blockbuster Inc 30.00 +1.40 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change ACE ACE Ltd 39.69 -3.83 PCAR Paccar Inc 68.30 -3.17 MRVL Marvell Technology Group 33.88 -2.12 SEE Sealed Air Corp 43.45 -1.22 SNPS Synopsys Inc 43.72 -1.39 BMS Bemis Co 51.76 -1.47 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change ... none ... ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. 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