PremierInvestor.net Newsletter Thursday 05-23-2002 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/e23b_1.asp ================================================================= In section one: Market Wrap: Inchworm or Anaconda? Play-of-the-Day: Whats This? "A Triangle." Market Sentiment: Rally of Substance? ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 05-23-2002 High Low Volume Advance/Decline DJIA 10216.10 + 58.20 10216.10 10087.00 1180 mln 1988/1150 NASDAQ 1697.63 + 24.18 1697.77 1651.89 1536 mln 2028/1417 S&P 100 547.57 + 5.65 547.57 538.73 totals 4016/2567 S&P 500 1097.08 + 11.06 1097.10 1080.55 RUS 2000 501.24 + 7.33 501.34 490.85 DJ TRANS 2762.50 + 46.30 2762.94 2715.04 VIX 20.35 - 1.23 22.21 20.24 VIXN 43.20 - 1.75 45.74 42.75 Put/Call Ratio 0.62 ----------------------------------------------------------------- =========== Market Wrap =========== Inchworm or Anaconda? Wow! In our 01:00 Update we thought there might be some "anchoring" in the tail of the technology inchworm as both the Biotech Index (BTK.X) and GSTI Software Index (GSO.X) were trading rather firm and perhaps setting up some bullishness in technology. But a NASDAQ-100 Trust (AMEX:QQQ) 32.03 +2% surge into the close? That wasn't an inchworm we were monitoring, it was more like an Anaconda! It was the biotech's and the Biotechnology Index (BTK.X) 431.24 +7.4% that surged in the final two hours of trading that had the QQQ's surging higher into the close. There have been reports of the Anaconda devouring small children in the flooded marshes, and there may be a few bears feeling the squeeze at the end of today's session. The catalyst looks to have been Biogen (NASDAQ:BGEN) $40.32, which was halted for trading all day today, ahead of a U.S. advisory panel's review for its Amevive drug. I must confess, I didn't even know Biogen (BGEN) had been halted for trading, but perhaps our observations at 01:00 didn't make that necessarily important. We at least observed the slight bullishness taking place in the group and perhaps got some exposure with a QQQ trade. In the end, the advisory panel gave its backing for Biogen's (BGEN) Amevive, a drug to treat the hard-to-cure skin disease psoriasis. Once the news favorable news was released, the Biotech Index (BTK.X) surged into the close. Spectacular was the trading in the Biotech HOLDRS (AMEX:BBH) $102.25 +7.57%. With Biogen (BGEN) halted, one way for institutions to get some exposure to the stock was through this security. Biotech HOLDRS since 12/31/01 - weighting It's fully noted that while today's "good news" came from the halted Biogen (BGEN) $40.32, which didn't trade a share all day, bullishness abounded in the group. I've tried to sort the Biotech HOLDRS (BBH) by "cost" to reflect how this basket of stocks would have been weighted at the end of last year. I've grouped together (**) AMGN and IMNX as these two companies are scheduled to merge. Recently, ABI and CHIR were split apart from the original Applera Corporation to reflect their different business units and biotechnology expertise. In the far column to the right, I've added a QQQ to show which stocks are actually part of the NASDAQ-100 Trust (AMEX:QQQ). We performed a similar exercise in the GSTI Software Index (GSO.X) not too long ago. As you can see from the "P/L %" column, it's been a relatively rough 2002 for the biotechs. Only Gilead Sciences (NASDAQ:GILD) 38.00 +7.64% is showing gains since the end of last year. The "Total" row for "value" and "P/L%" is going to be invalid as my q-charts portfolio shows a $0.00 value and -100% loss for BGEN because the stock didn't trade today. What most likely happened with the Biotech HOLDRS was that institutions along with investors that wanted or needed exposure bullish exposure to Biogen (NASDAQ:BGEN) and the good news, most likely turned to the BBH as a security to get some exposure. The impact was noticeable as the BBH traded 3.7 million shares, more than 3-times its normal daily volume. When I say "needed exposure" to Biogen (BGEN) I'm talking in regards to those traders/investors that were most likely short the stock prior to today's announcement. Biogen Chart - $1 box Shares of Biogen (BGEN) recently achieved their bearish vertical count of $40 from the point and figure chart. We're never certain, but the bearish action in the stock may well have been the MARKET'S way of removing risk from the stock and discounting a potential negative outcome from today's Amevive drug review. The MARKET never got a chance to respond to today's outcome as trading in BGEN was halted all session. Tomorrow is when things get interesting. Especially for subscribers that may have bought some QQQ's from today's 01:00 update. Here's why. Let's face it. Today's bullishness in the QQQ, broader tech indexes and even in some of the major market averages was mostly due to the biotechs and any exposure to the group. We can find some confirmation from that by the number of Biotech HOLDRS that are part of the QQQ (12 to be exact). There are actually 18 stocks in the QQQ that can be classified as "biotech." The 6 not listed in the BBH are (ABGX, BMET, CEPH, IMCL, IVGN, PDLI). Now, just as the biotechs were perhaps one of our "key" sectors that turned us onto the QQQ as a bullish play, then we will want to look at the BBH for some levels to look for resistance. Right now, you and I are trading a little blind as we have no clue how Biogen (BGEN) is going to open for trading, or what impact it may have on things, but the MARKET did tip its hat a bit from the bullishness in the biotech index so this is an area of concentration right now. Biotech HOLDRS Chart - Daily Interval Near-term, the BBH looks to have upside to the $108 level. It's interesting to say the least at how this basket of stocks has traded in relation to conventional retracement. We get a decent "tie-in" with the 50-day moving average at the $108 level too. However, I think there's a good possibility that the BBH could achieve the $114-$115 level in the not-to-distant future. The upward trend on the chart goes back to the 03/22/01 and the low found there at $92.51 (just undercut recently at $90). I will also note that according to Dorsey/Wright and Associates, this group of stocks is "bull alert" at 28%. In essence, this group is still quantitatively "oversold" with only 28% of the stocks in the biotech "universe" showing a point and figure buy signal on its chart! While $114 may seem unreasonable, I will note that in March of last year, when the BBH found its then bottom of $92.51, two months later the BBH was trading as high as $142. I think there are most likely some shorts in these stocks that aren't going to be sleeping too well tonight. Tomorrow will be a very "emotionally" filled day in the biotechs. Anything can happen and it's not a bad bet that it's most likely going to be to the upside. Away from the biotechs While the bulk of my focus today was what was taking place in the semiconductors, biotechs and software sectors, I was also monitoring the good old Dow Transports (TRAN) 2,762.50 +1.7% and the Morgan Stanley Cyclical Index (CYC.X) 592.41 +1.04%. Both of these economically sensitive groups hung tough during the earlier market declines and both are approaching key technical levels that could further bolster a market rally. The "key" level to watch for the CYC.X is a break above $600, which would be new 52-week highs. They're just 8 points away and all heck can still break loose to the upside here. The Dow Transports (TRAN) key level in my mind is the 2,810 level. Here we see the rounding lower 50-day moving average and extension of old upward trend from the September lows. If this group gets back on that upward trend, then another piece of the strong economic puzzle falls back into place. A break above 2,810 could then set the stage for a retest of the March highs near 3,050. Folks, that about an 8.5% potential move. First things first and bulls need a break above 2,810. Also economically sensitive are the homebuilders. The Dow Jones Home Construction Index (DJUSHB) 376.28 +2.07% also traded strong today as the economic data from this morning kept this group above its starting to round flat 50-day moving average of 364. I don't really see a "key" level of resistance here, but the longer the group stays above its 50-day moving average, the more concerned any bears in the group will become. It was a wild day in the Treasury market and action there was somewhat similar to what we saw in stocks. The morning started out with some brief selling in Treasuries, but then buyers showed up on concerns about the Middle East. But as the session progressed, YIELDS whipped around (selling in Treasuries) and before you knew it, YIELDS were at their session highs. Selling peaked right about the time that "rumor" started circulating that Biogen (BGEN) was going to get a favorable decision on its Amevivie drug. Today's action in the Treasury market really looks suspicious. There's really little reason that such an economically or geopolitical type instrument should have traded the way it did today. This has me further believing that there was a heck of a lot of buying in the biotechs today, and perhaps hedge fund activity was the highest. This is the "perfect" type of trading action that a hedge fund short a bunch of biotechs would do. If they've been shorting biotechs down the scale and all of a sudden you get some potentially favorable news in a large biotech stock, I could easily see some hedges coming off in short positions, and some rotation out of Treasuries (where the money from short sales had been parked). More economic data! Tomorrow morning at 08:30 AM EST, we'll get a look at Q1 preliminary Gross Domestic Product (GDP). Economists are looking for a healthy rate of 5.8%. Then at 10:00 AM, April New Home Sales are scheduled for release. Analysts are looking for 883,000. Jeff Bailey Senior Market Technician ========================= Play-of-the-Day (BULLISH play) ========================= Crane Corporation - CR - cls: 28.55 chg: +0.34 stop: 26.94 Company Description: Crane Company is a diversified industrial conglomerate that manufactures products for several market sectors: aerospace, engineered materials, fluid handling controls and merchandising systems. (source: company press release) - ORIGINAL WRITE UP: May 17th, 2002 - Why We Like It: Cranes company description, above, creates more questions than it answers about the firm's actual business. But to us, Crane can be viewed as this: a huge manufacturing, cyclical company producing capital goods for the corporate sector. Meaning? CR is the kind of company likely to see good price appreciation in its stock as the economy improves and as Dow-type stocks attract investor money flow. And this is precisely the environment we see today: slowly improving conditions for both the economy and the major market averages. Since April 10th, CR has been in a meandering sideways consolidation between roughly $26.00 and $28.00. This has been healthy; rests always are. Within the last week, however, the stock used its rising 50-dma as a springboard for what appears to be the beginning of a new (potentially) multi-week advance. The last time CR broke out of such a consolidation, in February of this year, the stock advanced 30% before resting. We think a similar move is possible in coming weeks. Technically, CR's weekly RSI has just recently begun rising; the Stochastic Oscillator is on the verge of giving a buy-signal cross over; and the MACD is in a solid, positive up- trend. The daily technicals don't look bad either. The MACD just produced a bullish crossover on Friday after basing near the zero line. We did note that volume was lighter than we would have preferred for the positive move over the $28 level on Friday but it looks like an entry point for bulls. There is potential resistance at $28.50 and again near $29.00 but we expect these to be mere speed bumps on the way up. A much more significant level of resistance to watch for is the $30 mark. Just for kicks, print a chart and draw a trendline from the December high and extend it through the April highs. You'll see it connect near the $30 area. Short-term traders may want to consider taking profits here. A study of the weekly chart will show long-term overhead resistance can be found at the $32.00 to $32.50 area. Premier is going to aim just below this level and our profit target will be $31.00 to $31.50. Fortunately, the PnF chart also shows a bullish breakout above bearish resistance. We're going to start the play with a stop at $26.94. - Most Recent Update: May 23rd, 2002 - No news is good news and Crane bulls seem to find comfort in the company's quiet behavior. CR essentially followed Thursday's oscillations in the Dow, declining early in the trading day with the big cap average, then rebounding as the Dow clawed its way back into positive territory. The stock closed just a penny below its high for the day on rising volume. With today's intraday reversal, Crane has broken out of a short one-week consolidation and remains nicely above its rising 50-dma. New long positions in Crane can be initiated at current levels as we expect shares to breakout above current resistance at $29.00. - Play-of-the-Day Comments: May 23rd, 2002 - The resistance level at $29 is looking awfully fragile. CR has broken out of a triangular consolidation pattern on rising volume. Shares finished strong today, closing just under the highs for the day. Traders can evaluate entries at current levels, although more cautious types should wait for the stock to trade above $29. Picked on May 17th at $28.22 Gain since picked: +0.33 Earnings Date 04/18/02 (confirmed) ================ Market Sentiment ================ Rally of Substance? By Eric Utley Do the last two late day ramps portend a summer rally? Or were they just more of the same? That is, short covering. Well, by my estimation, the late day rallies were nothing more than short covering. I surmise that much by the blatant display of emotion in the upside movement; the fear to the upside on the part of the shorts. That kind of buying isn't the type that bottoms are built on, but what's new? We've been noting that sort of thing for quite a while now. Meanwhile, my favorite gauge into the market's sentiment, the CBOE Market Volatility Index (VIX.X), imploded, again, in the last two days. Once again, without fear of the downside on the part of longs, there's no wall of worry -- a necessary aspect of a bull market -- to climb higher. The lack of stick in the VIX tells me that the crowd still believes, err, hopes in the rally. Meanwhile, the ARMS Index numbers are moving off of extreme levels thanks in part to the general strength in stocks in the last two days. The longer term measures are now closer to an extreme overbought level than the shorter measures. Market internals were not as pretty as the picture in the averages. Decliners outpaced advancers on both the NYSE and the NASDAQ, but it was only by a fractional amount on the former. The new high/new low line, however, improved during the day by a wide margin especially on the NYSE. Volume was less than active. As for bullish percent, well the Nasdaq-100 reading has been all over the map recently because of the increased volatility. It's back in bull correction mode, below the 50 percent level, which is not as bullish as bull confirmed. But hey, did you know the week following Memorial Day is most bullish based on history? ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10216 Moving Averages: (Simple) 10-dma: 10194 50-dma: 10215 200-dma: 9901 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1097 Moving Averages: (Simple) 10-dma: 1088 50-dma: 1110 200-dma: 1119 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1287 Moving Averages: (Simple) 10-dma: 1279 50-dma: 1346 200-dma: 1454 Biotech ($BTK) The BTK exploded by more than 7 percent Thursday ahead of the ruling on Biogen's (NASDAQ:BGEN) psoriasis drug. Biogen got approval and the BTK earned the day's best performing sector spot. The upside movement in individual equities was even more impressive. The day's best performing individual components included Human Genome Sciences (NASDAQ:HGSI), MedImmune (NASDAQ:MEDI), Sepracor (NASDAQ:SEPR), Protein Design Labs (NASDAQ:PDLI), and Abgenix (NASDAQ:ABGX). 52-week High: 676 52-week Low : 375 Current : 431 Moving Averages: (Simple) 10-dma: 409 50-dma: 458 200-dma: 509 Fiber Optic ($FOP) A completely different news event was responsible for the day's worst performing sector: Ciena's (NASDAQ:CIEN) talk. A component of the FOP, Ciena weighed on the group to the tune of 0.65 percent in the index. The FOP was the worst performing sector for the day. Leading individual downside movers included Ciena, Corning (NYSE:GLW), Finisar (NASDAQ:FNSR), MRV Communications (NASDAQ:MRVC), Alcatel (NYSE:ALA), and Vitesse (NASDAQ:VTSS). 52-week High: 139 52-week Low : 65 Current : 69 Moving Averages: (Simple) 10-dma: 72 50-dma: 81 200-dma: N/A ----------------------------------------------------------------- Market Volatility Hey, guess what? The VIX is trading with a 20 handle. Shocking! The VXN is trading near the lower end of its ascending channel. I would view a breakdown as confirmation of the recent strength in stocks. CBOE Market Volatility Index (VIX) - 20.34 -1.25 Nasdaq-100 Volatility Index (VXN) - 43.28 -1.42 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.90 482,992 434,205 Equity Only 0.71 403,203 288,899 OEX 1.14 17,797 20,344 QQQ 0.77 46,002 35,202 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 63 + 0 Bull Confirmed NASDAQ-100 41 - 1 Bull Correction DOW 67 + 0 Bear Correction S&P 500 64 + 0 Bull Confirmed S&P 100 66 + 0 Bear Correction 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 0.93 10-Day Arms Index 1.08 21-Day Arms Index 1.26 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 2006 2025 NASDAQ 1155 1417 New Highs New Lows NYSE 107 23 NASDAQ 82 63 Volume (in millions) NYSE 1,183 NASDAQ 1,759 ----------------------------------------------------------------- Commitments Of Traders Report: 05/14/02 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 reverted to their bearish commitments by reducing their longs and adding to shorts. Small traders grew more bullish by adding a large amount of longs; small traders are 3,000 contracts away from their most bullish reading of the year. Commercials Long Short Net % Of OI 04/30/02 340,936 421,673 (80,737) (10.6%) 05/07/02 348,019 422,801 (74,782) (9.7%) 05/14/02 343,941 424,893 (80,952) (12.1%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: ( 36,481) - 10/16/01 Small Traders Long Short Net % of OI 04/30/02 153,158 56,372 96,786 46.2% 05/07/02 154,664 59,583 95,081 44.4% 05/14/02 163,035 58,587 104,448 49.8% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 107,702 - 3/26/02 NASDAQ-100 Nasdaq commercials shifted to a decidedly bullish position last week by adding longs and dropping shorts. Commercials are net long more than 5,000 contracts. Small traders meanwhile went in the opposite direction by establishing a position that was net short more than 5,000 contracts. Commercials Long Short Net % of OI 04/30/02 34,591 35,933 (1,342) (9.7%) 05/07/02 38,338 39,152 (814) (1.1%) 05/14/02 40,858 35,761 5,097 (5.5%) Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: 7,774 - 12/21/01 Small Traders Long Short Net % of OI 04/30/02 12,271 12,703 (432) 1.7% 05/07/02 13,229 13,161 68 0.3% 05/14/02 11,920 17,479 (5,559) 8.2% Most bearish reading of the year: (9,877) - 12/21/01 Most bullish reading of the year: 8,460 - 3/13/01 DOW JONES INDUSTRIAL Dow commercials added a few more longs than shorts for an increase in the group's net bullish position. Small traders went in the opposite direction by reducing their longs and adding to their shorts. Commercials Long Short Net % of OI 04/30/02 17,275 13,341 3,934 12.8% 05/07/02 19,967 14,045 5,922 17.4% 05/14/02 21,080 14,725 6,355 14.4% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 04/30/02 5,813 8,869 (3,056) (20.8%) 05/07/02 5,124 9,831 (4,707) (31.5%) 05/14/02 4,930 10,899 (5,969) (25.2%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. 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PremierInvestor.net Newsletter Thursday 05-23-2002 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/e23b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: SNE Bearish Play Updates: BRCD, CLS, TBH Stock Bottom / Active Trader New Bullish Play: RIG Bullish Play Updates: CR, DCN, DCX, GR, HRB, MHK, RKY Bearish Play Updates: BA, DHR, TSG High Risk/Reward Bullish Play Updates: INVN, LU, PVN Split Trader KSWS: 2-for-1 split announcement MHO: 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: 59.70 change: +0.14 stop: 58.31 *new* We continue to like the short-term and longer-term technical indicators on SNE. The stock has enjoyed a very productive two- week period, rising nearly $7 in price. It is not unrealistic to expect the stock will soon consolidate, and the $60 region could be where its next short term pause will occur. Please remember that we have now set an official profit-target of $62.49 on this trade. If you are a very aggressive trader, you may want to wait for a potential move to the $65 level. We have raised our sell stop to 58.31 in order to protect at 10% gain in this position. Picked on April 4th at $53.01 Gain since picked: +6.69 Earnings Date 04/25/02 (confirmed) -------------------- Bearish Play Updates -------------------- Brocade - BRCD - close: 20.30 change: +0.16 stop: 21.26 Our short position in BRCD was initiated on Wednesday when the stock traded down to the trigger price of $19.35. The stock was able to rebound with the Nasdaq late on Thursday afternoon. We'll be watching BRCD's $21 region in coming days, an area of limited resistance for the stock. BRCD continues to trade well below its declining 50-dma, which currently sits at $24.17 (and well above our stop). Picked on May 22nd at $19.35 Gain since picked: -0.95 Earnings Date 04/15/02 (confirmed) --- Celestica - CLS - close: 31.30 change: +0.10 stop: 33.21 UBS Warburg initiated coverage of Celestica today with a "hold" rating. The stock responded with a long yawn to the lukewarm rating. CLS continues to trade just below its declining 50-dma, and this remains positive for our short position. As CLS has drifted downward over the last 5 trading sessions, volume has trended downward, suggesting to us that sharp selling pressure has not yet started to affect the stock. We would not initiate new short positions until CLS trades back down below our entry point of $30.94. Picked on May 21st at $30.94 Gain since picked: -0.36 Earnings Date 04/17/02 (confirmed) --- Telecom Brasil - TBH - close: 28.05 change: +0.35 stop: 30.01 Our new short position in TBH struggled today. The telecom sector rebounded from yesterday's downgrading of Qwest's debt to junk status. The rebound may have been associated with an announcement by Qwest executives who said that the company was disappointed in the downgrade by Standard and Poor's, feeling that S&P had no basis for the action. The company also reassured Qwest bondholders that they would get paid. The Combined Telecom Index (IXTCX) rebounded along with Qwest; the index added about 1/2%. TBH continues to trade well below its declining 50-dma, and the stock has fairly healthy resistance between $29.00 and $29.65. We expect this resistance to stall any advance on Friday. Interested traders in TBH might be curious to check out the other overseas telecom stocks. They aren't doing that well. Check out DT, FTE, and NOK. Picked on May 22nd at $27.70 Gain since picked: -0.35 Earnings Date N/A ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT New Plays =============== ---------------- New Bullish Play ---------------- Transocean Inc. - RIG - cls: 39.26 chg: +0.66 stop: 36.84 Company Description: Transocean is the world's largest offshore oil and gas drilling contractor. Its major business is to provide contract drilling rigs, equipment and workers to the oil and gas industry. The company owns a large fleet of drillships, jack-up rigs, drilling barges, and platform-drilling rigs. Why We Like It: The Oil Services Index (OSX) has been in a short-term but volatile consolidation since May 3rd. As part of its consolidation the index has successfully bounced off its rising 50-dma for the past week; we think this index is now ready to begin its next meaningful advance. As a major member of this industrial sector, we have selected to play RIG on the long side. Fundamentally, we think the continuing improvement in the US economy, exemplified by Thursday's report that durable goods have risen for five consecutive months, will only help the stock price of companies like RIG whose earnings expand (and contract) with the economy. Recent analyst recommendations on this stock have been consistently very positive, including Wachovia's April 30th "strong buy" and Salomon's May 1st "outperform" statements. We had a difficult time deciding whether we should play RIG, or a number of other related stocks like AHC, OXY, ARA, and HAL. In the end, though, we elected to go long that stock possessing the most bullish, yet least over-extended technical chart pattern on both our daily AND weekly charts. The technical situation for RIG is impressive, too: volume has been advancing for the last several days as it has successfully broken out of a triangular consolidation, while the RSI, MACD, Stochastics and Bollinger Bands (5-ma, 1.7 sd) are all rising on both daily and weekly charts. RIG was up 1.7% today, and we would not be surprised to see the stock dip over the next day or two before it begins moving higher. Our official buy point will be at current levels, though patient traders may wish to wait and see if the stock pulls back to the $38.50 region. Our profit target is $44.00, which we think can be reached within the next four weeks. Our sell stop on this trade has been set at $36.84, which is both below Wednesday's low, and a near-term region of support. Picked on May xth at $39.26 Gain since picked: +0.00 Earnings Date 04/30/02 (confirmed) =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Crane Corporation - CR - cls: 28.55 chg: +0.34 stop: 26.94 No news is good news and Crane bulls seem to find comfort in the company's quiet behavior. CR essentially followed Thursday's oscillations in the Dow, declining early in the trading day with the big cap average, then rebounding as the Dow clawed its way back into positive territory. The stock closed just a penny below its high for the day on rising volume. With today's intraday reversal, Crane has broken out of a short one-week consolidation and remains nicely above its rising 50-dma. New long positions in Crane can be initiated at current levels as we expect shares to breakout above current resistance at $29.00. Picked on May 17th at $28.22 Gain since picked: +0.33 Earnings Date 04/18/02 (confirmed) --- DaimlerChrysler - DCX - close: 49.87 change: -0.73 stop: 44.66 DCX gapped higher on Wednesday morning and traded to a 52-week high of $50.77. Investors may have been cheering the company's new plan to cut costs in logistics, marketing, IT, and salary payments. Shares appeared to be poised for a test of the 2001 high of $52.72. However, the ADR opened under the $50 level this morning following a lackluster session on the German DAX. Today's 1.4% decline was backed by strong volume, which is normally considered bearish. We actually think this is a bullish indicator, due to the fact that shares finished at the high of the day and closed above the opening price. It's also encouraging to see DCX outperform GM, which has been trending lower for over a week. If the broader market closes out the week on a strong note, we'd expect DCX to move back above the $50 level. Aggressive traders can consider bullish positions if shares move above $50.00 or $50.77. Picked on May 6th at $46.50 Gain since picked: +3.37 Earnings Date 02/20/02 (confirmed) --- Dana Corp. - DCN - close: 22.26 change: -0.06 stop: 20.44 Shareholders of DCN enjoyed a strong rally last week, so it isn't surprising to see some consolidation of those gains. The stock has been pulling back on declining volume while remaining above near-term support at $21.75. The location of this support may not be a coincidence; our retracement on the hourly chart (from the May 10th low to May 17th high) shows that shares have pulled back to the 38.2% level--a typical retracement after a sharp gap- laden advance. The way DCN has maintained this level is very bullish, and we're anticipating a move higher in the near future. New entries can be considered on a move above today's high of $22.55, although conservative traders may want to place their stops just under the relative low of $21.72. Picked on May 17th at $22.26 Change since picked: +0.00 Earnings Date 04/17/02 (confirmed) --- Goodrich Corp - GR - close: 33.58 change: unch stop: 30.97 GR just can't seem to release from the bottom of its ascending channel. Of course, "ascending" is the operative word here. As long as it keeps uptrending, the stock has a shot at breaking over the multi-month high of $34.45. A move over this level would clear the way for a test of the channel's midline at $36. The catalyst for a breakout could be provided by a rally in the DFX.X defense index, which successfully tested support today. Our outlook for the immediate future is continued consolidation between $33-$34, although entries can be evaluated on a pullback to the 50-dma at $32.22. Picked on May 3rd at $31.97 Gain since picked: +1.30 Earnings Date 04/24/02 (confirmed) --- H&R Block - HRB - cls: 46.25 chg: +0.25 stop: 44.49 Technically, HRB is still trying to break out of its reverse head and shoulders pattern that goes back to mid-March. It still needs to move above $47.40 to "activate" this positive technical formation. We were encouraged by today's action, which had HRB closing very near its intraday high. In our May 21 update on HRB we noted that a rebound off the $45.00 - $45.50 area might be an attractive entry point for new long positions, and the stock gave us a chance such an entry on Wednesday, when it traded down to a low of 44.94. Picked on May 17th at $46.88 Gain since picked: -0.63 Earnings Date 06/12/02 (unconfirmed) --- Mohawk Industries - MHK - cls: 68.94 chg: -0.71 stop: 64.87 The homebuilding sector turned in a strong performance today. RYL, CTX, TOL, and KBH all finished with respectable gains, while the DJUSHB (Dow Jones Home Building Index) bounced near its 50- dma and tacked on 2%. MHK, however, bucked the trend and declined by 1%. The combination of 1) psychological resistance at $70 and 2) the midline of MHK's ascending channel are proving to be a formidable challenge for the bulls. A break above resistance could have the bears running scared - especially if the housing sector remains strong. With this in mind, traders can use the all-time high of $70.60 as a possible action point to go long unless you prefer to play the bounces at $68.00. Picked on May 3rd at $66.30 Gain since picked: +2.64 Earnings Date 04/15/02 (confirmed) --- Adolph Coors - RKY - close: 68.55 change: +0.05 stop: 63.89 Although shares of RKY closed with a gain of just 5 cents, we think the technical picture has improved. The stock closed over $68 for the second day in a row (after trading to an intraday low of $68.00) and extended its weeklong trend of tracing higher highs. This bodes well for a test of the near-term high at $69.25. However, a glance at the oscillators reveals that RKY may face further consolidation before it makes a run at the 52- week high of $69.25. While the MACD has gone flat, the daily stochastics (5,3,3 setting) are beginning to drop from the upper band. This could portend a retest of Monday's low ($67.29) or even the rising 50-dma at $66.25. Traders could use a bounce from the 50-dma as a new entry point. Picked on May 2nd at $68.36 Gain since picked: +0.19 Earnings Date 04/25/02 (confirmed) -------------------- Bearish Play Updates -------------------- Boeing Company - BA - close: 44.15 change: -0.26 stop: 45.80 We initiated a short position on Boeing at yesterday's open. The stock has struggled since then, dropping noticeably early in each trading session then clawing its way back to recoup some of its losses by each close. Boeing may have picked up buyers late today as investors began to concentrate on the good Durable Goods report from this morning, which showed a nice gain of 1.1%, the fifth monthly gain in a row. Traders might want to keep an eye on the news for BA. There has been a bunch recently. We noticed that BA expects to build 8 fewer wide-body jets for its 2003 production schedule as the company grows more concerned about traffic for the jumbo jet products. BA's CEO was in the news on Wednesday with dire news for the Airlines business. He does not expect air travel to pick up anytime soon. He was quoted as saying it will take a "relatively long time" for air travel to get back to pre Sept. 11th levels. J.P. Morgan also chimed in on their concerns for BA's revenues related to the wide-body plane cut back. More bad news for BA and good news for bears was word that BA might take additional writedowns for its satellite unit. The satellite business has been rough and their division reported a loss in their latest quarter that was characterized by launch delays and product repairs. In contrast to these concerns, bulls might attempt to focus on BA's positive news. This afternoon a report came out that BA could sell hundreds of unmanned combat drones to the U.S. as technology progresses to use drones for a variety of tasks. We will be looking for BA to stall near $45 should it to try to rebound on Friday. Picked on May 21st at $44.35 Gain since picked: +0.20 Earnings Date 07/18/02 (unconfirmed) --- Danaher Corp. - DHR - close: 70.90 change: +1.39 stop: 73.01 DHR traded higher today in lock step with the Dow. The stock closed below its flat 50-dma, which now sits at $71.70. We want to see the stock remain under this average, since a close above it will be negative for our short position. New short positions in DHR might be best initiated on a move back below $69.03, the point at which this trade was initiated. Picked on May 13th at $69.03 Gain since picked: -1.87 Earnings Date 04/18/02 (confirmed) --- Sabre Holdings Corp - TSG - cls: 38.04 chg: +0.27 stop: 40.01 Travel-related Internet stocks were reasonably strong today, with Expedia (EXPE) gaining 4% and ROOM (Hotels.com) adding 1.5%. In this environment, a rising tide seemed to lift all boats and TSG was able to move higher in the wake of the good performance enjoyed by its competitors. Although TSG advanced about 0.75% today, it did so on lack-luster volume and this helps support our bearish position on this stock. TSG looks like it may try to rebound a bit further in the next couple of trading sessions, but we will expect resistance in the $39.00 area to stop any advance. Picked on May 13th at $39.74 Gain since picked: +1.70 Earnings Date 04/18/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- InVision Technologies - INVN - cls: 24.18 chg: -0.83 stop: *text* INVN was hit for a 3.3% loss today after the FAA approved a competitor's explosive detection system. Shares gapped lower this morning and never approached our entry trigger at $25.21. S.G. Cowen defended INVN, based on its belief that the company will soon receive FAA certification of a similar system. From a technical perspective, some consolidation of the past two days of gains could be expected. The pullback on lighter volume and close over the 200-dma suggests that the bulls may make another run at the $25 level. If this play is triggered, our stop will be located at $23.08. Picked on May xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/23/02 (confirmed) --- Lucent Technologies - LU - close: 4.80 change: -0.01 stop: *text* LU continues to trade in a narrow range between the 50-dma at $4.53 and resistance at $5.00. In the absence of any significant news over the past two sessions, the stock has not tested either of those extremes. LU did drop today after Q had its debt-rating cut to "junk" by S&P, but recovered those losses by the closing bell. As long as LU can stay above the 50-dma, we'll be content to keep this potential play open. Our trigger to go long remains set at $5.05. Picked on May xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/22/02 (confirmed) --- Providian Financial - PVN - cls: 7.72 chg: -0.16 stop: 6.99 Our long play in PVN was activated on Wednesday after shares moved above the near-term high of $7.65. The stock rose steadily throughout the session before closing at a relative high. Today's action was more subdued, as a failed test of the $8.00 level gave way to a 2% loss. After the market closed, Fitch Ratings downgraded PVN's senior debt from a B+ to a B. At this point in the evening we are not sure the downgrade will materially affect the shares on Friday, or if Fitch's action had already been integrated into PVN's current share price. Today's failure at the $8.00 level suggests that new entries be deferred until PVN moves over resistance at $8.00. However, in light of our profit-target, such a strategy is best left to those who are anticipating a break over a second resistance level at $8.50. We'll be bailing out with a 10% gain if shares trade at or above $8.45. Picked on May 22nd at $7.66 Gain since picked: +0.06 Earnings Date 05/06/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- K-Swiss declares 2-for-1 split, boosts dividend After the market closed today, K-Swiss Inc. (NASDAQ: KSWS) announced that its Board of Directors had declared a 2-for-1 stock split. The split will be payable on June 21, 2002 to shareholders of record on June 7, 2002. Post-split trading will commence on June 24, 2002. The Board also approved an increase of the quarterly cash dividend, from 3 cents/share to 4 cents/share. The dividend will be payable on July 15, 2002 to shareholders of record on June 28, 2002. KSWS last split in 1999, and has gained 36% in 2002. Shares are currently trading near all-time highs. The stock closed at $45.49 on Thursday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=KSWS About the company K-Swiss Inc. designs, develops and markets an array of athletic footwear for high performance sports use, fitness activities and casual wear under the K-Swiss brand. The Company also designs and manufactures footwear under the Royal Elastics and National Geographic brands. (source: company press release) --- Schottenstein Homes constructs 2-for-1 stock split Prior to the opening bell this morning, M/I Schottenstein Homes, Inc. (NYSE: MHO) announced a 2-for-1 stock split. The split will be distributed on June 19, 2002 to shareholders of record on June 5, 2002. This marks the first split for MHO since it began trading in 1993. The stock has more than doubled from its September lows, reflecting sector-wide bullishness in the homebuilding group. Shares have risen 28% YTD. MHO closed at $63.88 on Thursday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=MHO About the company M/I Schottenstein Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 50,000 homes. The Company's homes are marketed and sold under the trade names Horizon, M/I Homes and Showcase Homes., physician and dental offices, laboratories and clinics. (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 E Eni Spa ADS 77.73 +0.61 STI Suntrust Banks Inc 69.97 +1.22 OXY Occidental Petroleum 30.67 +0.53 HAL Halliburton Co 19.40 +1.40 MLI Mueller Industries Inc 34.91 +0.59 OII Oceaneering Intl 31.38 +1.16 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change UTHR United Therapeutics Corp 14.71 +1.06 CPTS Conceptus Inc 18.71 +2.81 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change MDT Medtronic Inc 47.45 +1.41 RY Royal Bank of Canada 37.14 +1.25 AZO Autozone Inc 81.30 +4.63 CCR Countrywide Credit 50.04 +1.17 WSM Williams Sonoma Inc 32.12 +3.09 PDCO Patterson Dental 47.35 +1.85 OSI Outback Steakhouse Inc 39.08 +2.18 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change TM Toyota Motor Corp ADS 55.15 -1.01 HD Home Depot 42.90 -1.35 GSK GlaxoSmithKline 46.39 -1.56 DGX Quest Diagnostic 84.96 -1.07 TER Teradyne Inc 28.00 -1.06 NVDA NVIDIA Corp 35.73 -2.32 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change BF.B Brown-Forman Corp. Class B 77.00 -1.66 RCII Rent-A-Center Inc 58.85 -2.68 GTK GTech Holdings 59.18 -0.82 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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