PremierInvestor.net Newsletter Tuesday 05-14-2002 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/e14b_1.asp ================================================================= In section one: Market Wrap: Banner Day For Bulls Market Sentiment: Full Steam Ahead? Play-of-the-Day: Boring sector, compelling stock! ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 05-14-2002 High Low Volume Advance/Decline DJIA 10298.14 +188.48 10304.44 10119.34 1.41 bln 2207/ 984 NASDAQ 1719.05 + 66.51 1722.26 1691.42 2.60 bln 2432/1119 S&P 100 545.42 + 11.84 545.89 534.66 Totals 4639/2103 S&P 500 1097.28 + 22.72 1097.71 1074.56 RUS 2000 511.40 + 12.00 511.99 499.72 DJ TRANS 2767.70 + 64.73 2770.04 2702.12 VIX 21.89 - 1.62 22.90 20.81 VXN 44.34 - 1.78 46.61 44.01 TRIN 0.57 PUT/CALL 0.57 ----------------------------------------------------------------- =========== Market Wrap =========== Banner day for bulls This morning's stronger than expected retail sales numbers had stock surging for a second consecutive session as bulls and bears did some aggressive buying. Bulls most likely were concentrating in those sectors of the market that were most impacted from good economic news, while bears were hard at work covering some positions just in case tonight's after-hours earnings from tech bellwether's Applied Materials (NASDAQ:AMAT) $26.64 +4.14% or Hewlett-Packard (NYSE:HPQ) $20.50 +2.6% held any bullish surprises. The Dow Industrials (INDU) jumped 188 points (+1.86%) to 10,298 as traders pushed the Dow back above its 50-day moving average. Shares of semiconductor-maker Intel (NASDAQ:INTC) $30.15 +5.71%, building products retailer (NYSE:HD) $47.98 +5.17% and discount retailer Wal-Mart (NYSE:WMT) $57.39 +4.26% lead the Dow's gains, while consumer products maker Philip Morris (NYSE:MO) $54.91 - 1.48% and Johnson & Johnson (NYSE:JNJ) $61.04 -1.29 along with fast food giant McDonalds (NYSE:MCD) $29.98 -1.41% traded lower. The broader NYSE Composite (NYA.X) gained 9.47 points (+1.65%) to 582.65 on volume of 1.4 billion shares. Breadth was positive with gainers handily outpacing decliners by a 2 to 1 margin. One of the decliners had just-removed from the S&P 500 Index U.S. Airways (NYSE:U) $2.85 -4.36% breaking to a new low on volume of 13.6 million shares. The equally broad NASDAQ Composite (COMPX) mounted an impressive 66.51 point gain (+4.02%) to 1,719.05 as 2,433 stocks advance while 1,117 issues decline and 251 stocks finished unchanged. Volume on the NASDAQ was heavy at 2.6 billion shares. NASDAQ-listed WorldCom (NASDAQ:WCOM) $1.24 -13.88% set a single day volume record with over 670 million shares traded. Normally this type of volume would be exciting, but considering the stock is trading at just $1.24, not all that impressive. WorldCom (WCOM) was removed from the S&P 500 (SPX.X) today due to lack of representation. That's a polite way for Standard & Poor's to say, "the stock doesn't matter anymore. I'm wondering if any S&P 500 Index mutual fund holders are viewing today's S&P 500 adjustments with a wrinkled brow? With WorldCom (WCOM) trading at all-time lows, I guess the phrase "buy low and sell high" doesn't hold here. Keep this in mind later in the year if you're thinking about any type of S&P 500 indexed mutual fund investment for your retirement account at work, a child's college fund or any other investment. Lots of capital losses were REALIZED today by index funds. I apologize if this sounds a little cynical, but two years ago, some mutual fund "analysts" were saying that an investor was wasting his/her time to buy any mutual fund other than an "index mutual fund." However, it is interesting to note that both of the replacements for WCOM and U were trading at substantially lower prices 2-years ago in BJ Services (NYSE:BJS) $38.65 +0.75% and Apollo Group (NASDAQ:APOL) $37.56. What investors have learned in the past two years and are still learning is "risk" and that it needs to be managed. For any index fund, "market risk" is not necessarily managed in an index fund. In 1999-2000, index funds were all the rage as they handily beat other stock mutual funds where the fund managers there were actually monitoring and making investment decisions with some thought to risk. Sure, many "value" equity funds under-performed the S&P 500 during that time, but boy have some of those value funds or individual fund managers that were monitoring and controlling "market risk" beating the pants off the S&P 500 in the past 18 months. Speaking of risk! Membership does have its privileges I was in a pretty good mood at the end of today's trading session, until I saw our play list. I'll make this point one last time and I surely hope subscribers understand what took place, as I don't think all of us at PremierInvestor.net fully understood Friday's commentary regarding the NASDAQ-100 Bullish % ($BPNDX) and what it was saying about "BEARS are carrying the bulk of the risk in the NASDAQ-100." Bearish traders in Qualcomm (NASDAQ:QCOM) $30.68 +5.46% and Broadcom (NASDAQ:BRCM) $28.35 +7.42 got their fingers chopped today. BOTH STOCKS comprise the NASDAQ-100 (NDX.X) 1,305.55 +5.15%. I think BOTH STOCKS also benefited from a more "oversold" NASDAQ-100 market environment where the odds of a bearish trade working in the favor of a bearish trader were relatively low. Friday's NASDAQ-100 Bullish % reading on the chart was 28%. Any guess what it is at the end of today's trading? How about 48%! NASDAQ-100 Bullish % Index ($BPNDX) - 2% chart That green addition of X's was today's damage. Now I'm going to drive home the point of risk and how dangerous it could be to be "complacent." I'll tell you this. Over the years, I've heard it all. "Yes, but...." There are not "buts" about it. The bullish % is a very good indicator of risk and more times than not, if you try and trade against the odds, chances are your going to lose. What "sold" me on point and figure charting was LEARNING from past mistakes and reviewing trades. While many investment sites talk only about their successes, it is perhaps most important to admit and understand your failures. I'm not beating on the play picker for the profiled trade in Qualcomm (QCOM), but lets at least understand that the NASDAQ-100 Bullish % was "bull alert" when we tried to short QCOM. Now, lets look at the point/figure chart and look at the trade purely from a risk/reward standpoint. Question. At what point would QCOM give a "buy signal" and contribute to the NASDAQ-100 bullish %? Current Answer: $41 Question. Is the "risk" for a bear to the "buy signal" ($41) worth the potential reward of the bearish vertical count? Current Answer: No. The bearish vertical count is $25. From profiled $26.80, risk/reward based on point/figure for bear was risking $14.20 to potentially make $1.80. While bearish vertical counts can be exceeded to the downside, what might a market maker in the stock be doing with the NASDAQ-100 Bullish % in "bull alert" status? Odds are, buying. Qualcomm Chart - $1 box The point and figure chart of Qualcomm (QCOM) was NOT used when selecting/profiling QCOM as a bearish candidate. If it had, then perhaps the stock would not have been profiled as bearish. I dare say, the stock would probably NOT have been profiled as bullish either. Seconds anyone? We went back for "bearish seconds" in shares of Broadcom (NASDAQ:BRCM) $28.35 +7.42% and got served a plate full of crow. To be honest here, the ONLY thing that would have kept a bear away from a BRCM short Monday morning was the NASDAQ-100 Bullish % being bull alert. Lesson: Friday night I mentioned we were trying to avoid NASDAQ stocks because "tricky market makers" could suck a trader into a trade and I wanted to AVOID such a chance. Maybe I'm just paranoid, but Monday morning's early trade just below Friday's low of $24.41 looks to a "trick" by market makers. Heck, we tried to protect against just blatantly shorting the stock and set a trigger on the trade. Lesson: Sometimes, no matter how well you set up a trade, precautions taken, etc. the trade will go against you. When that happens, it is best to cut the trade, take the loss, and move on. Broadcom Chart - $1 and $0.50 box I think we took just about every type of precaution in the Broadcom (BRCM) bearish trade that we could. If there was one stock in the NASDAQ-100 that looked ready to crater, then BRCM was the candidate. At time of profile, the bearish vertical count of $14 gave us the reason to be thinking the stock was further vulnerable to lower lows. $29 was the "first sign of trouble" for the bears and we had profiled a stop lower than that at $27.01, so profiled risk/reward was risking $2.50 to potentially make $10.49. The point/figure chart risk/reward by itself was risking $4.50 to potentially make $10.49. Now, one thing more I'll mention is how you and I can use trade size to control risk in our accounts. When the NASDAQ-100 Bullish % is in a column of X like it is/was, then bearish traders can still be looking to short some stocks, but by establishing just 1/4 or 1/2 positions, then experiences like we just had in BRCM and QCOM are still painful and unpleasant, but not as unpleasant as full positions. To further drive home this point, remember recent conversations from commentary regarding market makers beginning to square their inventories from bearish to "neutral" if not more bullish. Bearish traders from our play list are not the only ones that were holding some BRCM short at today's open. I'm willing to bet that the bulk of institutional market makers are net-short in the stock. However, be very careful if you're a bear that did not honor your trading stop at today's open. While I disliked today's experience with BRCM, think about the market makers that may be short million's of shares. You and I don't know what a market makers order flow was like today in BRCM. This is our disadvantage compared to a market maker. He/she has a much better feel for the stock as it relates to a "buy" or "sell" side bias in their order flow. It's not your job It's not your job to assess risk/reward in the plays we profile, but for those that subscribe to also try and learn about trading/investing and to measure risk/reward using point and figure charting, then hopefully the above commentary helps us understand these two stocks and why those trades didn't work out. If we learn some reasons "why" something may have happened, then we're better prepared in the future to avoid these types of trades. The bull had some bite In today's 01:00 update, we mentioned that the Morgan Stanley Cyclical Index (CYC.X) 587.83 +2.47% was trying to get back on upward trend on its bar chart. At that time the CYC.X was trading 585.11 so there was some continued bullishness into the close and this to me now has me thinking that today's broader- market action was "just short covering." Despite continued price gains in oil, the Dow Jones Transports (TRAN) 2,768.24 +2.39% had a strong day. The 2.39% gain in the TRAN wasn't entirely due to a rebound in the beaten down Airlines either as the Airline Index (XAL.X) 82.08 +2.76% didn't outperform the TRAN by all that much. On the energy front, today's action in the Light, Sweet Crude Oil futures (cl02m) surged to an intra day high of $29.45 to close at $29.36 (+3.45%). Traders site there was an unwinding of short positions in the crude oil futures market ahead of tonight's American Petroleum Institute report on stockpiles. With good reason too. Tonight's API report showed that U.S. crude stocks fell 7.357 million barrels. U.S. gasoline stocks were up 2.073 million barrels, while U.S. distillate stocks were up 1.649 million barrels. U.S. refinery runs were 92.5% versus 93.2% last week. AMAT beats by a penny Tonights long-awaited earnings from Applied Materials (NASDAQ:AMAT) $26.64 +4.14% had the semiconductor equipment maker beating estimates by a penny. Revenues fell 45.9% year-over-year to $1.16 billion, but better than consensus of $1.04 billion. New orders of $1.69 billion for the second fiscal quarter of 2002 increased 51.1% from $1.12 billion for the first quarter of 2002, and increased 25% from $1.35 billion for the second quarter of 2001. The new orders number of $1.69 billion figure for Q2 was higher than most estimates looking for $1.3-$1.4 billion; high estimate was Salomon Smith Barney at $1.5-$1.6 billion. In the company's conference call, "Momentum increased in the second quarter as customers expanded capacity for their leading- edge technology applications," said James C. Morgan, chairman and chief executive officer. "We are seeing strong demand for our advanced products and service solutions as the semiconductor industry begins to recover and customers increase their capital spending." "While we believe that further improvement in worldwide economic conditions is necessary to drive the next phase of recovery for the semiconductor industry, we are encouraged by the current technology expansions. As applications for semiconductors continue to increase and electronics products become available to more people around the world, the long-term prospects for the semiconductor industry remain strong. With industry-leading products and services designed to help our customers bring new chips to market more quickly, Applied Materials is well-positioned to capitalize on the opportunities ahead," concluded Morgan. In after-hours trading, shares of AMAT were active at the $27.93 level. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Full Steam Ahead? By Eric Utley As it turned out, we were a few days early on the tepidly bullish market call last Thursday. But our trusted indicator didn't let us down. It was, after all, right again! The Nasdaq-100 Bullish Percent ($BPNDX) reversal into bull alert mode, below the 30 percent level we might add, last Thursday foreshadowed what we've seen in the technology sector so far this week. So where do we go from here? To me, there appears to be more upside in this rally from Tuesday's close. But that's not based upon Applied Materials' (NASDAQ:AMAT) perceived bullish earnings report after the bell today. Rather, I see room to the upside in key technology measures. Certainly enough room to trade. If you're still bearish on technology, I think you're better off waiting for a better entry point at higher prices until the bulls run their course. I've seen a significant shift in several of my indicators that suggests the upside is where the risk lies. But looking out past this recent upside, I do see some troubling signs as they relate to the intermediate term. Namely the lack of stick in the CBOE Market Volatility Index (VIX.X). For whatever reason, investors continue to believe in every rally that even hints towards carrying stocks higher over the short term. What we need to see in order for a rally to last over the intermediate to long terms is a wall of worry to form. That way to monitor for that wall is through the volatility measures. I just don't see it yet. An interesting study of a wall of worry can be found in the Gold and Silver Index (XAU.X). Readers can examine the trading of puts versus calls on the XAU.X, and the relationship with price in the index, to observe what a wall of worry looks like, and how an asset's price climbs that wall. Nevertheless, over the short term, it appears that the easier direction to trade is the bullish direction. Until we see a significant shift in the indicators, most accurately the $BPNDX, the bears will likely remain on the run, while the bulls will press ahead. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10298 Moving Averages: (Simple) 10-dma: 10323 50-dma: 10261 200-dma: 9907 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1097 Moving Averages: (Simple) 10-dma: 1074 50-dma: 1120 200-dma: 1122 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1306 Moving Averages: (Simple) 10-dma: 1226 50-dma: 1378 200-dma: 1468 Software ($GSO) The GSO.X was the best performing sector in today's technology led rally. The sector edged past other tech sectors such as the SOX, BTK, and INX to earn the top spot. The GSO.X gained 6.40 percent for the day. Top movers included Novell (NASDAQ:NOVL), Veritas (NASDAQ:VRTS), Agile Software (NASDAQ:AGIL), Ariba (NASDAQ:ARBA), and BEA Systems (NASDAQ:BEAS). 52-week High: 246 52-week Low : 112 Current : 133 Moving Averages: (Simple) 10-dma: 124 50-dma: 148 200-dma: 162 Gold ($XAU) The tech led rally Tuesday caused a shift out of defensive sectors of the market. And gold is as defensive as it gets. The XAU.X earned the day's worst performing sector spot with its 5.49 percent drop. Movers to the downside included Meridian Gold (NYSE:MDG), Agnico Eagle Mines (NYSE:AEM), Newmont Mining (NYSE:NEM), and Harmony Gold (NASDAQ:HGMCY). 52-week High: 81 52-week Low : 49 Current : 76 Moving Averages: (Simple) 10-dma: 78 50-dma: 71 200-dma: 60 ----------------------------------------------------------------- Market Volatility The VIX imploded Tuesday following Monday's move lower. The fear gauge isn't revealing much of that emotion with the return of the bulls. There's no wall of worry here. After kissing its 200-dma for the second time last Friday, the VXN headed lower on the strength of tech shares during Monday's session. Tuesday, the VXN lost another 3.85 percent. CBOE Market Volatility Index (VIX) - 21.89 -1.62 Nasdaq-100 Volatility Index (VXN) - 44.34 -1.78 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.57 896,455 508,222 Equity Only 0.49 748,853 364,059 OEX 0.76 44,887 34,322 QQQ 0.66 69,759 45,755 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 62 + 0 Bull Confirmed NASDAQ-100 28 + 1 Bull Alert DOW 53 + 0 Bear Confirmed S&P 500 57 - 1 Bear Alert S&P 100 53 - 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 1.15 10-Day Arms Index 1.31 21-Day Arms Index 1.32 55-Day Arms Index 1.25 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 2228 986 NASDAQ 2433 1117 New Highs New Lows NYSE 139 28 NASDAQ 170 55 Volume (in millions) NYSE 1,419 NASDAQ 2,598 ----------------------------------------------------------------- Commitments Of Traders Report: 05/07/02 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 S&P commercials eased further from their extreme bearish positioning. The group added more longs than shorts for a reduction to their net bearish position. Small traders backed off from their most bullish reading by adding more shorts than longs. Commercials Long Short Net % Of OI 04/16/02 322,578 411,245 (88,667) (12.1%) 04/30/02 340,936 421,673 (80,737) (10.6%) 05/07/02 348,019 422,801 (74,782) (9.7%) 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 04/16/02 150,529 50,424 100,105 49.8% 04/30/02 153,158 56,372 96,786 46.2% 05/07/02 154,664 59,583 95,081 44.4% 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 stayed on the fence during the most recent reporting period. The group's net position is short 814 contracts; not much conviction there. Same thing with small traders; they're long a full 68 contracts. Commercials Long Short Net % of OI 04/16/02 32,024 35,723 (3,699) (5.5%) 04/30/02 34,591 35,933 (1,342) (9.7%) 05/07/02 38,338 39,152 (814) (1.1%) 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 04/16/02 12,458 10,572 1,878 8.2% 04/30/02 12,271 12,703 (432) 1.7% 05/07/02 13,229 13,161 68 0.3% 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 remained flat during the most recent reporting period. The group added a few longs and shorts. Small traders grew more aggressive on the bearish side by bringing their net position to short 4,700 contracts. Commercials Long Short Net % of OI 04/16/02 19,080 14,267 4,813 14.4% 04/30/02 17,275 13,341 3,934 12.8% 05/07/02 19,967 14,045 5,922 17.4% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 04/16/02 5,644 9,448 (3,804) (25.2%) 04/30/02 5,813 8,869 (3,056) (20.8%) 05/07/02 5,124 9,831 (4,707) (31.5%) 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 ((new BULLISH play)) =============== Shaw Group - SGR - cls: 34.29 chg: +0.94 stop: *see text* Company Description: The Shaw Group provides piping systems and engineering to the power generation industry. For the six month period ending in February, 2002, the Shaw Group generated $1 billion in sales, with a net profit up 68% from its previous period, of $40 million. Why We Like It: The Shaw Group may sound like it operates a horrifically boring business and, well, that may just be the case. But we find the company and stock attractive at this point in time for a variety of fundamental and technical reasons. With a PEG ratio (PE/growth rate) of just .68, this stock is trading at a substantial discount to its growth rate, and this situation frequently allows good upside potential for prices. Perhaps this was part of the reason that Frost Securities initiated coverage of SGR on May 6th with a "strong buy" rating. Most important for us, fundamentally, is the recognition that SGR is the kind of stock which will generate more revenue, and more profit, in an improving economy. And this is the environment in which we believe the US market now finds itself. At a technical level, SGR is demonstrating good price strength in all our major weekly momentum indicators like the RSI, Stochastics and MACD. Our strategy will be to buy SGR on a move above the modest resistance it has 35.75; once this trade is in play, we'll use a sell stop of 31.95. Picked on May xxth at $ xx.xx <-see text Gain since picked: +0.00 Earnings Date 04/15/02 (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. 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PremierInvestor.net Newsletter Tuesday 05-14-2002 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/e14b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: SNE, TTN Bearish Play Updates: TBH Closed Bearish Plays: BRCM, VZ Stock Bottom / Active Trader New Bullish Plays: SGR Bullish Play Updates: DCX, GR, LTR, MHK, RKY, SII, TBL Bearish Play Updates: DHR, IGT, TSG Closed Bearish Plays: HD High Risk/Reward Closed Bearish Plays: DOX, QCOM Split Trader Stock Splits FOSI: 3-for-2 split announcement GBTS: 11-for-10 split announcement Split Updates GG: 2-for-1 split confirmation 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: 55.60 change: +0.60 stop: 52.99 *new* Sony fired the first shot today in what may become a summer price war between makers of electronic games. SNE slashed $100 off the price of its popular PlayStation2, front-running an expected move by Microsoft to do the same with its Xbox. Investors greeted Sony's competitive strategy positively and its stock enjoyed strong buying on the day. Our technical indicators continue to support higher prices. We have raised our sell stop to 52.99, just below a near-term region of support, in order to enhance the protection of this position. Picked on April 4th at $53.01 Gain since picked: +2.59 Earnings Date 04/25/02 (confirmed) --- Titan Corporation - TTN - cls: 22.99 chg: +0.10 stop: 21.99 Titan is at it again, pulling in new government contracts. The company announced Tuesday that it has received a $26 million cost-plus-fixed-fee contract to assist with the Navy's implementation of the "Affordable Weapon Systems Program" at the Office of Naval Research (ONR). With the Dow hinting that it may be ready to begin a serious advance, we like stocks like Titan which should be able to ride the strength of the big cap sector, as well as that of defense-related stocks. The technicals on TTN remain healthy, with TTN remaining well above its 50-dma and 200- dma, which are on the verge of crossing--a positive technical indicator. We just wish this stock could finally close above that $23 level of resistance! Picked on April 15th at $21.26 Change since picked: +1.73 Earnings Date 04/25/02 (confirmed) -------------------- Bearish Play Updates -------------------- Telecom Brasil - TBH - close: 27.30 change: +0.65 stop: 28.35 *new* The North American Telecom Index (XTC.X) has been attempting to rebound over the last two days. The index was up about 3% today, and our TBH short rebounded with the index. The combined telecom index (IXTCX) is also turning in a similar performance and may have put in a bottom (at least short-term) at the 130 level. A move over the 140 level for the IXTCX, currently at 138, could mean a bullish reversal is underway. We have elected to lower our buy stop on this short position to $28.35. This will protect a 5% profit in this short position and, importantly, provide us with the opportunity for further gains should this stock head lower after its brief rebound effort. Our charts are showing potential overhead resistance that bears may use to their advantage at the 5-dma (near $27.90) and the 50-hour ma (near $28.23). More conservative traders may want to use a tighter stop to protect larger gains. We would not encourage new entries at this time due to broader market bullishness although more aggressive traders could look for shares to put in another failed rally. However, we have to admit we have a dissenting vote on our analyst team and his is casting his lot in with the bears despite the strength in the sector recently. His belief that more weakness is in store for TBH rests on the use of modified Bollinger Bands, and Fibonacci retracements. It has been our experience that when sharply declining stocks rebound, their first bounce will typically stall at 1) their (declining) Bollinger Band ma and/or 2) the 38.2% Fibonacci retracement. Sharp delcines off these levels subsequently result in many cases. As of this evening, the ma sits at $27.97 and our 38.2% retracement is at $27.63. Since we use a 5-day ma, rather than the standard 20-day ma, our Bollinger Bands are much more sensative--and better able to anticipate short term moves-- than traditional Bollinger Bands. Picked on May 3rd at $29.83. Gain since picked: +2.53 Earnings Date N/A =============== NB Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Broadcom Corp. - BRCM - close: 28.35 change: +1.96 stop: 27.01 Nasdaq weakness during Monday morning caused our shorting trigger of $24.49 to be activated on BRCM. A rally later in the day, which buoyed the chip sector, had BRCM reversing, flying higher by over 7%. Today, the stock simply gapped up at the open--aided by a "buy" rating from Pacific Crest Securities--unfortunately triggering our 27.01 buy stop, which covered the short in BRCM, kicking us out of this trade. BRCM will probably continue its short-term volatility, especially on the heals of AMAT's Tuesday evening earnings release. It is always difficult to get "whipsawed" so sharply on a trade; hopefully we can all learn from such frustrations...learn that stops help us to control the pain, and losses. Picked on May 13th at $24.49 Gain since picked: -2.52 Earnings Date 04/17/02 (confirmed) --- Verizon Comm. - VZ - close: 42.16 change: +1.22 stop: 40.06 On Friday, May 10th, we said we wanted to short VZ, but only if it dipped below a trigger level of $38.61. Since then the stock has rallied forcefully, in unison with the broader market, and it is now nearly 10% away from out trigger; as such, we have elected to drop this untriggered short play at this time. Picked on May xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/23/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============= AT New Plays ============= ---------------- New Bullish Play ---------------- Shaw Group - SGR - cls: 34.29 chg: +0.94 stop: *see text* Company Description: The Shaw Group provides piping systems and engineering to the power generation industry. For the six month period ending in February, 2002, the Shaw Group generated $1 billion in sales, with a net profit up 68% from its previous period, of $40 million. Why We Like It: The Shaw Group may sound like it operates a horrifically boring business and, well, that may just be the case. But we find the company and stock attractive at this point in time for a variety of fundamental and technical reasons. With a PEG ratio (PE/growth rate) of just .68, this stock is trading at a substantial discount to its growth rate, and this situation frequently allows good upside potential for prices. Perhaps this was part of the reason that Frost Securities initiated coverage of SGR on May 6th with a "strong buy" rating. Most important for us, fundamentally, is the recognition that SGR is the kind of stock which will generate more revenue, and more profit, in an improving economy. And this is the environment in which we believe the US market now finds itself. At a technical level, SGR is demonstrating good price strength in all our major weekly momentum indicators like the RSI, Stochastics and MACD. Our strategy will be to buy SGR on a move above the modest resistance it has 35.75; once this trade is in play, we'll use a sell stop of 31.95. Picked on May xxth at $ xx.xx <-see text Gain since picked: +0.00 Earnings Date 04/15/02 (confirmed) =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Adolph Coors - RKY - close: 65.89 change: -0.29 stop: 63.89 Although retailers moved sharply higher today, the trading in consumer stocks was somewhat tepid. RKY finished the session with a 29-cent loss for its lowest close of the month. With the 50-dma just less than 50 cents away, we're looking for shares to firm up at current levels. Daily stochastics (using 5,3,3 as the setting) have bottomed, which indicates that near-term selling may be exhausted. On a related note, it's interesting to note the trading action in BUD, which lost another 3% today. Although RKY could be dragged lower by a continued decline in BUD, the relative strength is encouraging. On a news-related note, RKY will hold its annual Shareholder Meeting on Thursday, May 16th. Picked on May 2nd at $68.36 Gain since picked: -2.47 Earnings Date 04/25/02 (confirmed) --- DaimlerChrysler - DCX - close: 47.99 change: +0.09 stop: 44.66 Strikes continue to roil the German metals and electronics industries, but there's optimism that Wednesday's wage talks between union and corporate officials will bring the conflict-- which has the ability to affect DCX--to a conclusion soon. DaimlerChrysler continues to hold up well in the face of this challenge and that of a volatile US market, with the stock eking out modest gains in recent days. Technically, all systems remain a go: our weekly RSI, Stochastic Oscillator and MACD are rising, portending higher prices in coming weeks. Picked on May 6th at $46.50 Gain since picked: +1.49 Earnings Date 02/20/02 (confirmed) --- Goodrich Corp - GR - close: 32.73 change: +0.61 stop: 30.97 The Chairman and CEO of Goodrich Corporation will address CSFB's Aerospace & Defense Finance Conference in New York City on Wednesday, May 15, 2002 at 9:15 a.m. EDT. Ahead of this presentation, GR advanced nearly 2% on Tuesday. The stock spent the early April to early May period consolidating; since that time we have seen GR's price move up, and we like the renewed strength in its technicals, particularly the RSI and MACD. Within just the last four trading sessions, GR's 50-dma has become a sturdy support for the stock and we now look for it to begin rising consistently off this support. Additionally, one of our own analysts pointed out that the 5-dma just produced a bullish crossover of the 15-dma, which can be used as a short-term indicator of trend. Picked on May 3rd at $31.97 Gain since picked: +0.76 Earnings Date 04/24/02 (confirmed) --- Loews Corporation - LTR - cls: 59.71 chg: -0.67 stop: 58.45 Loews moved down today after announcing that it would be paying a $0.445 dividend to holders of its Carolina Group (CG) subsidiary. Dividend payments effectively represent a distribution of corporate profits, so it was only natural that the stock declined today. Since April 4th, LTR has been able to find support at, and rebound off of, its 50-dma. Additionally, since Friday LTR has been bouncing off this level on a daily basis, and trading on either side of it, and we believe this "dance for support" will give rise to an attractive near-term rebound in the stock. A slightly clearer picture can be seen on the 30-minute interval chart. Traders will notice that the $59.00 level has been support and more conservative traders may want to wait for shares to close over the $61.00 mark before committing any capital. Our technical indicators are offering some mixed signals. While stochastics (using the default setting of 14,1,3) have rebounded from oversold, they have stalled with today's decline. Patience is the best tool for this play right now. Picked on May 7th at $60.50 Gain since picked: -0.79 Earnings Date 05/09/02 (confirmed) ---- Mohawk Industries - MHK - close: 66.15 change: +1.96 stop: 62.98 This morning's strong retail numbers kicked off a triple-digit rally in the Dow Jones that spread to the homebuilding sector. The DJUSHB home construction index bounced vigorously from the bottom of its ascending channel and finished the day with a 4.5% gain, while MHK moved higher with the sector and tacked on 3%. In the short-term, we're expecting the DJUSHB to retest the midline of its channel near 400 and propel MHK to a test of resistance at $68. A move over this level could clear the way for a move to psychological resistance at $70 and hopefully beyond. Picked on May 3rd at $66.30 Gain since picked: -0.15 Earnings Date 04/15/02 (confirmed) --- Smith Intl - SII - close: 76.14 change: +0.08 stop: 71.29 Although the price of oil (cl02m) shot to another relative high today, the OSX.X oil service index finished with a fractional loss. The index has risen nearly 7% over the past week and may face some additional consolidation before attempting a move over the multi-month high of $112.74. SII traded higher this morning following an upgrade from Bear Stearns, but finished with only a fractional gain. Premier Investor is currently up 6.8% on this play, and short-term traders may want to consider reaping gains at current levels. We're expecting an eventual move to the $80 level and will likely initiate an exit price if shares move much higher. SII looks technically stronger than the OSX.X because it actually traded to a near-term high today. Please note that we did raise our stop to breakeven in the Monday night email. Picked on April 26th at $71.29 Gain since picked: +4.85 Earnings Date 05/02/02 (confirmed) --- Timberland Company - TBL - cls: 42.66 chg: +1.08 stop: 39.95 This morning's retail sales report presented investors with hefty gains--up 1.2% compared to an expected .7% increase--and the US Commerce Department noted that consumer spending was particularly brisk in autos and building materials. Shoe and apparel maker Timberland climbed on top of the report and rode it hard into the close, advancing more than 2%. We are particularly optimistic about the short-term performance of TBL. Shares have rebounded nicely off the 50-dma and the MACD looks like it's about to make a big bullish crossover near the baseline. The stock has a price gap just above the $42.75 level, and we will be looking for TBL to advance quickly once it is able to gain a foothold in this gap and fill it. The gap runs up to $44.83, where short-term traders may wish to take profits. With that said, we continue to feel that TBL has the ability to move well beyond $44.83 in coming weeks - at least to more pronounced overhead resistance at $46. Picked on May 3rd at $41.89 Gain since picked: +0.77 Earnings Date 04/18/02 (confirmed) -------------------- Bearish Play Updates -------------------- Danaher Corp. - DHR - close: 71.21 change: +1.83 stop: 73.01 Our short play in DHR was triggered yesterday after the stock gapped below our trigger price. Shares moved higher today with the broader market and closed above the $70 level. If the stock continues higher, the 50-dma at $71.78 should act as resistance. Bears will be watching for a move below yesterday's low of $69.01. A break of this level could lead to a test of psychological support at $65. Traders may want to wait for shares to fall back under the $70 level before considering new short positions. Picked on May 13th at $69.03 Gain since picked: -2.18 Earnings Date 04/18/02 (confirmed) --- Intl Game Tech - IGT - close: 63.59 change: +0.29 stop: *text* IGT moved higher with the gaming sector yesterday after JPM reaffirmed their "buy" rating on HET, which is also in the gaming sector. Today's trading was more subdued, as shares ignored a strong rally in the Dow Jones and turned in a small 29-cent gain. From a technical perspective, the stock is threatening to break out of its descending channel. If this occurred we would no longer be willing to go short. After all, the premise of the play was to capture a move to the bottom of the channel. For now we're keeping our trigger set at $61.24, although we'll probably close the play (untriggered) if IGT moves above $65. Picked on May xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/23/02 (confirmed) --- Sabre Holdings Corp - TSG - cls: 38.74 chg: -1.31 stop: 42.01 A nice start for this short play! After being triggered on Monday, TSG faded today's rocketing Dow Jones and NASDAQ. Driving the stock lower may have been news that EXPE (one of TSG's direct competitors) received positive comments from Morgan Stanley. It stands to reason that if the outlook for EXPE is improving, it may be at the expense of TSG. Shares lost 3.2%, traded briefly at a multi-month low, and closed under the 200- dma. Volume was brisk, coming in at nearly 3M versus the 937K average. Furthermore, the stock broke though bullish support on the p-n-f chart. The relative weakness and technical damage created by today's move bodes well for the bears--including us. Bulls may defend the lows for the year (2002) at $36.85, but given enough time we think TSG will reach the $35 level. Aggressive short-term bears can target new entries on a move below today's low of $37.60 or a failed rally under $40. Picked on May 13th at $39.74 Gain since picked: +1.00 Earnings Date 04/18/02 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Home Depot - HD - close: 47.98 change: +2.36 stop: 47.51 Retail stocks exploded this morning after WMT and JCP reported better-than-expected earnings. Adding fuel to the bullish sector sentiment was a 1.2% increase in April retail sales, which nearly doubled the expected gain of 0.7%. Shares of HD gapped higher on the news but pulled back just one cent shy of our stop at $47.51. It wasn't until later in the session that shares rose above this level, at which point our play was closed for a loss of 4.4%. Shares finished the day with a 5.1% gain, just under the 50-dma at $49.19 but above its 200-dma. Given the litany of bullish retail news today, we wouldn't be surprised to see the sector continue higher in the near-term. Technically speaking, HD should find resistance near $50. A failed rally at this level might be worth taking a look at if the sector bullishness fades away. Picked on May 10th at $45.50 Gain since picked: -2.01 Earnings Date 05/21/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Amdocs Ltd - DOX - close: 17.85 change: +0.55 stop: 17.51 The pattern of relative weakness in DOX led to some nice gains for short-term bears, but shares finally responded to the NASDAQ rally and strung together two consecutive positive sessions. Although DOX was only about half as strong as the GSO.X software index today, it still managed to violate our stop-loss at $17.51. This closed out our short play for a gain of 9.0%. As long as the stock continues to be weak versus the software sector, DOX remains an attractive short candidate. We'd be watching for shares to falter at the $18 level. Of course, the ability of bears to drive DOX lower will likely depend of the behavior of the GSO.X. Even weak stocks tend to move higher when their sector is rallying. Picked on May 3rd at $19.25 Gain since picked +1.74 Earnings Date 04/23/02 (confirmed) --- QUALCOMM - QCOM - close: 30.68 change: +1.59 stop: 30.01 QCOM started off the week on a positive note after UBS Warburg raised its rating on the company to "buy" from "hold." Although the stock gained more than 5% on Monday, it was unable to muster a test of the $30 level. That all changed this morning after positive economic numbers and an INTC upgrade sent futures rocketing higher. Since QCOM opened above our stop at $30.01, this play was closed as of the opening price at $30.53. Although QCOM has risen sharply in the last two sessions, the bullish MACD suggests that the stock may have more upside potential. We wouldn't recommend any short positions at this time, but a failed rally at the $33-$34 level (near the top of QCOM's channel) would renew our interest. Picked on May 3rd at $26.80 Gain since picked -3.73 Earnings Date 04/24/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- No bones about it...Fossil announces 3-for-2 stock split Concurrent with its earnings announcement before the bell this morning, Fossil, Inc. (NASDAQ: FOSL) announced that its Board of Directors had declared a 3-for-2 stock split. The split will take the form of a 50% stock dividend and will be payable on June 7, 2002 to shareholders of record on May 24, 2002. FOSL most recently split in 1999; also a 3-for-2 offering. The stock has more than doubled since September and has risen 32% YTD. Shares closed at $27.70 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=FOSL About the company Fossil is a design, development, marketing and distribution company that specializes in consumer products predicated on fashion and value. The Company's principle offerings include an extensive line of watches sold under the FOSSIL and RELIC brands as well as complementary lines of small leather goods, belts, handbags, sunglasses and jewelry and FOSSIL brand apparel. (source: company press release) --- Gateway Financial sets 11-for-10 stock split After the market closed today, Gateway Financial Holdings, Inc. (NASDAQ: GBTS) announced that its Board of Directors had approved an 11-for-10 stock split. The split will take the form of a 10% stock dividend and will be payable on June 5, 2002 to stockholders of record on May 22, 2002. GBTS has not split since it began trading in June 2001. The stock trades on very low average volume of 4,800 shares/day and in recent months had been rangebound between $9.00-$9.50. Shares closed at $9.80 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=GBTS About the company Gateway Financial Holdings, Inc. is the holding company for Gateway Bank, a full service community bank with offices in Elizabeth City, Edenton, Plymouth and Roper, North Carolina and Virginia Beach, Virginia. (source: company press release) Split Updates ------------- GoldCorp Confirms 2 for 1 stock split Canadian-based Goldcorp announced today that its shareholders gave final approval for a 2 for 1 stock split on March 21, 2002. Shares of GG will begin trading at their new split price on May 29, 2002. http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=GG ================== 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 BAC Bank of America 75.88 +0.88 BMY Bristol-Myers Squibb 30.20 +1.83 DUK Duke Energy Corp 36.97 +0.67 NCC National City Corp 32.47 +0.55 CI Cigna Corp 104.17 +1.03 UB Unionbancal Corp 49.00 +0.82 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change AMZN Amazon.com Inc 18.81 +1.49 BEAS BEA Systems 11.20 +1.22 TIBX Tibco Software Inc 7.99 +1.14 ABGX Abgenix Inc 15.11 +1.36 EXTR Extreme Networks 11.47 +1.33 OMX OfficeMax Inc 7.75 +1.27 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change WMT Wal-Mart Stores Inc 57.39 +2.35 BLS Bellsouth Corp 31.09 +1.23 AMGN Amgen Inc 51.79 +3.83 KSS Kohl's Corp 73.00 +3.25 FOX Fox Entertainment 25.70 +1.85 WY Weyerhauser Co 67.61 +2.62 S Sears Roebuck & Co 54.89 +2.89 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change BUD Anheuser-Busch Cos Inc 49.10 +1.54 WLP Wellpoint Health Network 70.35 -1.62 TSG Sabre Holdings Corp 38.40 -1.31 WW Watson Wyatt & Co 22.50 -1.35 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change STJ Saint Jude Medical Inc 81.95 -1.80 ATH Anthem Inc 64.95 -1.05 STZ Constellation Brands Inc 28.73 -1.42 KMX Circuit City/Carmax Group 30.42 -2.15 ATN Action Performance Cos 42.49 -1.64 WLS William Lyon Homes 27.10 -2.60 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. 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