PremierInvestor.net Newsletter Thursday 06-06-2002 section 1 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/f06b_1.asp ================================================================= In section one: Market Wrap: Intel Updates At Low End Of Forecast Play-of-the-Day: Give It To Me Straight, DOC Market Sentiment: Oh, Intel =========== Market Wrap =========== Intel updates at low end of forecast A lower trading session on Wall Street found stocks lower in after-hours trading after the worlds largest semiconductor maker Intel (NASDAQ:INTC) $27.00 -4.18% said it saw Q2 revenues coming in between $6.2 and $6.5 billion, which was below the current consensus among analysts of $6.7 billion, blaming the softer than expected demand in Europe. Intel (INTC) said Q2 gross margin percentage (often associated with pricing pressures) is expected to be approximately 49%, plus or minus a couple of points, compared to the previous range of 53%, primarily due to the lower than expected revenue and product mix. Using the mid-points of Intel's (INTC) guidance for revenue and gross margins, Q2 earnings would be closer to $0.11 a share, which would be below current consensus of $0.15 a share. Intel (INTC) said it still expects a seasonally stronger second half, but that didn't seem to appeal to many traders in after- hours trading. Trading was rather "wild" as after-hours trading found Intel (INTC) trading as low as $24 and as high as $27. As I write (06:00 PM EST) shares of INTC are trading $24.24, down 10% from today's regular session close. As always, it is difficult to say how the stock will open tomorrow morning, but it does look lower. In tonight's market monitor at OptionInvestor.com, I did note the sudden "spike" to the $27 level in after-hours. I'm not sure what took place then. I did review the trades and all time stamps were at that current level and were not "tagged" with any type of "out of order" trade designation that would have indicated those trades around the $27 level were from normal market hours. Similar action was seen in semiconductor equipment maker Applied Materials (NASDAQ:AMAT) $20.92 -6.39% in after hours trading. Here too the stock got hit to the downside at $19.40 in after- hours trading, but then spiked to the $21 level just as Intel (INTC) traded $27. As I write (06:08 PM EST) shares of AMAT are trading $19.40, down 7.26% from today's regular session close. It was interesting, to look at the trades which took place at the higher levels in both AMAT and INTC. Several trades of greater than 25,000 shares were at the higher levels, while the smaller 100 and 1000 share traders were at the lower end of the ranges mentioned. What this has me "speculating" is that the institutional investor is perhaps covering short positions on the bad news, or willing to pay a higher price for needed liquidity. For instance, an institutional short in AMAT calls his/her market maker and says "buy in 50K net $21" (meaning, buy me 50,000 shares and I'm only willing to pay $21) and the market maker places a bid at $20 and takes stock from retail traders (you and I) at $20 (or already has some long inventory he/she can sell to the client at $21) puts together a block of 50K shares and prints the 50K at $21. The "logic" behind my thinking the higher prints were buy-side (either short covering or bullish investor seeking exposure) is that if I were a market maker and a client called me looking to sell 50K shares at $21, I'd tell him/her to go fly a kite as AMAT is trading $19.40 and I'm not going to buy from you at $21 when I can get stock at $19.40. After all, I'd have to carry that risk overnight and into tomorrow morning's open. Who knows what can happen between then and now? In all, I've said before that what really matters is what takes place during normal trading hours when all market participants have equal opportunity to trade. Intel Chart - Daily Interval For me, Intel (INTC) was about the only large-cap technology stock I felt had a chance at bullishness, thus my bullish profile for 1/2 bullish position the morning of May 24th. After hours trading does look as if this trade will be stopped out for a loss if INTC opens at current levels of $24.24. I will continue to monitor INTC in the coming sessions as a loss if stopped out at $25 or lower, will be confirmation perhaps of just how negative the market is right now toward technology stocks. Again, it has been my observation that the semiconductor sector was the strongest sector of technology, and that Intel (INTC) was the best risk/reward trade in the semiconductor sector. Therefore, if the MARKET will sell the stock at $25, then there are other stocks, further away from any proverbial "money pot" or down the food chain that will have further downside too. That's right... Cisco! I wouldn't consider Cisco Systems (NASDAQ:CSCO) $15.46 -2.88% a semiconductor stock, but Intel's (INTC) lowered guidance from tonight did have a negative impact on previously bearish profile CSCO as this stock trades $14.77 in after hours trading. Cisco Systems Chart - Daily Interval My bullishness in Intel (INTC) was perhaps offset with bearishness in Cisco Systems (NASDAQ:CSCO) $15.46 -2.88% as a representative of the Networking Index (NWX.X) 176.33 -4.71%, which broke to a new 52-week low. Those short CSCO from previous commentary can lower stops to just above the 50-day MA of $15.55, say $15.75. Near-term target to lock in gains would be the mid- point of regression at $14 as a bear looks for the 05/07-05/08 gap to get partially filled to the downside. Psychology in play Tonight news from Intel also shows just how poor a bull's psychology may be and how that negativity spreads at what seems almost "senseless" proportions. Amgen (NASDAQ:AMGN) $42.79 -5.97% broke to a 52-week low today, but even after Intel's news, this biotech giant's stock saw further selling in after-hours trading at $41.20. I'd argue that AMGN has very little to do with Intel's news on the semiconductor sector, but after-hour's trading has everything to do with "tech" psychology. Biogen (NASDAQ:BGEN) $47.70 -3.51% also saw further declines to $46.00 in after-hours trading. Some of this "senseless" trading in after-hours is sign of near- term capitulation from the market. Why would a bull in AMGN or BGEN decide to sell their stock in after-hours trading based on tonight's INTC news? Unless of course they're psychology is so damaged that they've simply had had enough and just want out. Market Internals Yesterday, our more longer-term indicator of true market bullishness/bearishness turned lower in the NYSE Bullish Percent ($BPNYA) from www.stockcharts.com. This is a much broader sampling of stocks than the more volatile and faster changing NASDAQ-100 Bullish Percent ($BPNDX). As pointed out in today's 01:00 Update, this now has all of the major bullish percent charts in a column of O and showing market internals are really starting to erode as more and more stocks generate sell signals on their charts. Tonight's close shows 57.05% of the stocks listed on the NYSE having a "buy signal" still associated with its point and figure chart. NYSE Bullish % Chart - 2% box Wow! Over 8.5 years of bullish % data can be viewed on the NYSE Bullish % ($BPNYA) from www.stockcharts.com. This tells us that this broader market indicator is a slower and more methodical mover. While it is a "slow mover" yesterday's reversal is another negative that shows market internals on the more institutionally held NYSE Composite (NYA.X) 555.90 -0.71%. The NYSE Composite is what many call "the true market" as the stocks listed there as opposed to the NASDAQ Composite (COMPX) 1,568 - 1.64% are less influenced by some of the gyrations that market makers can have on stock price action. For now, yesterday's reversal in the NYSE Bullish % ($BPNYA) become a 1,000 lb. gorilla that will almost act like a pillow that smothers near-term rallies. Traders will now note, that a comparison of the quicker moving NASDAQ-100 Bullish % ($BPNDX), which currently reads 27% bullish is at "opposite ends" of bullishness. This is an important observation to understand when it comes to BEARISH trading. Equity BEARS should now start turning their attention to 1,2 and 3-lettered stocks that are breaking below upward trends and generating sell signals, or looking to short 1,2 and 3-lettered stocks that trade below trend and have perhaps rallied to levels of resistance. In essence, these types of stocks should provide better risk/reward trading near-term as it relates to the bullish %. I need to stress! Below trend and generating sell signals. Too often, a trader will simply think they can find success in a bearish trade "just because" the bullish % reverses lower. Yet often times, a stock in an upward trend that is still on a buy signal buck the broader market decline and outperforms to the upside or performs relatively better than other trades that could have been taken. NASDAQ-100 Bullish % Chart - 2% box Today's action has found a net loss of 3-stocks to sell signals in the NASDAQ-100 (NDX.X) 1,157.62 -3.17% as the NASDAQ-100 Bullish % ($BPNDX) chart shows just 24% (24 of the 100 stocks) having a buy signal associated with its chart. Applied Materials (NASDAQ:AMAT) was one of the stocks that did finally generate a sell signal (column of O exceeding a previous column of O) on its point and figure chart when the stock traded $21 on Monday. You can see from the above chart that we only can view about 1-year's worth of bullish % data in the NASDAQ-100 bullish %, and it seems to "react" to the oversold (below 30%) and overbought (above 70%) levels on a more frequent basis. There are perhaps two reasons for this as compared to the NYSE bullish %. One reason is that there are only 100 stocks in the NASDAQ-100 bullish %, while there are over 3,000 stock listed on the NYSE. The second reason is that NASDAQ listed stocks are often times more volatile as you have market makers constantly assessing and managing risk/reward in their inventories. Tomorrow morning, bearish traders that are looking to short some NASDAQ stocks need to be careful that they don't chase a gap lower and short, then find the stock they shorted that may be more overextended to the downside on its chart get a bounce from short covering as those that "took the risk" to hold a short position ahead of tonight's Intel update, buy some weakness on a gap lower at the open. NASDAQ-Composite Bullish % Chart - 2% box The broader NASDAQ-Composite Bullish Percent ($BPCOMPQ) gives the trader/investor a more "worldly" view of the NASDAQ internals and risk in that market, while the NASDAQ-100 Bullish % ($BPNDX) gives a view of larger-cap NASDAQ stocks. Combined with the NYSE Bullish Percent ($BPNYA), a trader/investor pretty much has things covered. Investors/traders still need to honor stops in bullish/bearish trades, despite what they may be hearing about "oversold" conditions. When you look at the NYSE and NASDAQ bullish percent charts, these two broader market indicators are nowhere near "oversold" levels as it relates to their bullish % charts. Lots of trader's wonder why the NASDAQ Composite Bullish % ($BPCOMPQ) doesn't get up to the 70% level like the S&P 500 Bullish % ($BPSPX) and NYSE Bullish % ($BPNYA) will on occasion. The only explanation I've been able to come up with based on conversations with point and figure analysts is that NASDAQ listed stocks aren't as "institutionally held" as are NYSE listed stocks. An when higher levels of market bullishness are found, mutual funds tend to prefer NYSE listed stocks over NASDAQ listed stocks. Often times we will see stocks change their listing from the NASDAQ and move over to the NYSE. Perhaps now we know why. Emulex Corporation (NASDAQ:EMLX) $30.41 -1.2% recently announced it would switch to the NYSE, which will take place later this month on June 25th. EMLX said "moving to the New York Stock Exchange will increase Emulex's visibility with a wider base of investors in domestic and international markets." You see? Membership does have its privileges! At least Emulex seems to think so. Personally, I think EMLX simply got tired of their stock price being jerked around from market maker influence and was looking for some stability. I'm also going to make a prediction, but this will take some more research. Over time, I've seen some NASDAQ listed stocks, switch their listing from NASDAQ to NYSE prior to a merger with a larger NYSE listed stock. While this is not a reason to speculate bullishly, I'm going to start keeping a closer eye on EMLX. The stock has held up rather well in the past couple of months, relative to other stocks in the data storage/networking area. I'm not an expert on merger/acquisitions, but it might make sense for an IBM / EMLX type of partnership. I also thought of and EMC / EMLX partnership, but with EMC stock down at $7.28, EMC looks to have enough problems on their hands without trying to worry about a merger integration. Jeff Bailey Senior Market Technician ========================= Play-of-the-Day (New BEARISH play) ========================= Amdocs Ltd - DOX - close: 17.81 change: -0.33 stop: 18.86 Company Description: Amdocs is the world's leading provider of CRM, billing and order management systems to the communications industry. Amdocs has an unparalleled success record in project delivery of its mission- critical products. (source: company press release) Why We Like It: Much like the plummeting NASDAQ, the GSO.X software index has given bulls a severe case of heartburn in recent weeks...and a break under its September lows could be downright nauseating. Thus far DOX has held up relatively well versus the sector, but that could work to our favor. With so many software stocks looking ridiculously oversold, it's difficult to find short candidates that aren't begging for a short-covering rally. DOX is not as overextended, and has ample room to move to the downside. The recent sideways trading has also set up the technical basis for this play. DOX is currently trading at the top of its descending regression channel. Shares haven't broken out of this range for five months, and given the overall tech weakness, we doubt it's going to happen this time either. It's also interesting to note that the stock has just broken out of its triangular consolidation, which is characterized by a pattern of higher lows and lower highs. We're going to initially target the $15 level (which coincides with the channel's midline), although we may consider exiting the play if shares bounce from the relative lows near $16. Although DOX will probably gap lower with the tech sector tomorrow, it's a listed stock and thus not likely to gap as much as its NASDAQ counterparts. We'll also be closely monitoring the GSO.X to see how it behaves at the 112 level, near the September lows. A break of this level could lead to a quick test of 100, while a strong bounce could spell trouble for sector bears. Our initial stop is placed at $18.86, just above the Wednesday high. Picked on June 6th at $17.81 Gain since picked: +0.00 Earnings Date 4/23/02 (confirmed) ================ Market Sentiment ================ Oh, Intel By Eric Utley Intel's (NASDAQ:INTC) lowering of guidance after the bell Thursday changed the market's sentiment in one quick swoop. Not to say that it was even remotely bullish ahead of the chip maker's mid quarter update. But any hope that was left before the close of another tough day in the market was most likely dashed after the close. Judging by the way that the PC sensitive stocks were trading in after hours, as well as the futures market, we're in for an ugly opening tomorrow morning. We wondered Tuesday night if Intel could provide the catalyst for the bulls to turn around the oversold nature of the technology heavy Nasdaq market, and spark a short term rally in tech shares. Intel sure enough provided a catalyst, but it wasn't of the type that we had speculated. Tonight, we're wondering if Intel's news will provide the catalyst to spark a short term washout in the market. Let's take a look at the sentiment figures. The sector scorecard wasn't all too surprising Thursday. Every technology sector on my screen was bleeding red, led by the Fiber Optic Index (FOP.X) and Biotechnology (BTK.X). What really stuck out to me was the weakness in the banks, which had been holding up very well prior to the last two days of blood letting in the broader markets. The KBW Bank Sector Index (BKX.X) finished off by more than 2 percent, which is a pretty big move for that index. Two of the lead banks in the sector, Citigroup (NYSE:C) and Bank of America (NYSE:BAC), both look pretty ugly. On the other side, the defensive natured gold stocks were back to their rally. The internals of the market were as ugly as I can remember in a long time. Decliners swamped advancers, volume was relatively heavy, and there were a whole lot of new lows traced during Thursday's session, especially on the Nasdaq market. Not too many new highs were hit. To reiterate what we observed Tuesday night, the short-term ARMS Index indicators are still in extreme oversold readings above the 1.50 level. Both the 5-day and 10-day are now in oversold readings above 1.50. And then there's the fear gauges of the market, the CBOE Market Volatility Index (VIX.X) and the Nasdaq-100 Volatility Index (VXN.X). Both are revealing heightened states of market fear, and both are poised to stage big follow through breakouts during tomorrow's session. We'll see if both can hold above their respective technical levels, or if they pullback on any strength in stocks. The bullish percent data was very active Thursday. The NYSE Composite reversed into bull correction mode, which was probably the most important development because of the broad nature of the index. Meanwhile, the Nasdaq 100 fell down to 24 percent. That index should lose a few more stocks tomorrow, and by doing so grow much more oversold. And the Dow reversed into a bear confirmed mode as well. With several indicators pointing to a very oversold market, I wouldn't be surprised by a washout event tomorrow thanks to Intel. Be prepared to trade either side, though, as the volatility should produce plenty of profit opportunities. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 9625 Moving Averages: (Simple) 10-dma: 9941 50-dma: 10116 200-dma: 9879 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1029 Moving Averages: (Simple) 10-dma: 1062 50-dma: 1093 200-dma: 1112 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1158 Moving Averages: (Simple) 10-dma: 1213 50-dma: 1298 200-dma: 1434 Gold and Silver ($XAU) The shiny stuff was back in the spotlight Thursday. The XAU reclaimed the best performing sector spot after its recent slide. The sector finished 0.77 percent higher Thursday, pathetically earning the day's best performance. Leading to the upside included Gold Fields (NYSE:GFI), Agnico Eagle Mines (NYSE:AEM), Harmony Gold (NASDAQ:HGMCY), Barrick Gold (NYSE:ABX), and Placer Dome (NYSE:PDG). 52-week High: 89 52-week Low : 49 Current : 84 Moving Averages: (Simple) 10-dma: 85 50-dma: 77 200-dma: 63 Fiber Optic ($FOP) The FOP was back in the dog house, falling 5.03 percent for the day. It barely edged out the BTK for the worst performing sector spot for the day. Leading to the downside included shares of Nortel Networks (NYSE:NT), Vitesse (NASDAQ:VTSS), JDS Uniphase (NASDAQ:JDSU), Alcatel (NYSE:ALA), Lucent (NYSE:LU), and ADC Telecommunications (NASDAQ:ADCT). 52-week High: 139 52-week Low : 57 Current : 57 Moving Averages: (Simple) 10-dma: 63 50-dma: 76 200-dma: N/A ----------------------------------------------------------------- Market Volatility The VIX traded above the 28 level Thursday, slightly above its intraday high traced Tuesday. We should see some follow through into Friday's session. But will have to wait to draw any conclusions over the weekend, when we see where the VIX closes Friday. The VXN penetrated its 200-dma to the upside Thursday, but couldn't manage a close above despite the weakness in the Nasdaq-100 (NDX.X). Intel's (NASDAQ:INTC) news should inspire a breakout and close above Friday. CBOE Market Volatility Index (VIX) - 27.36 +2.65 Nasdaq-100 Volatility Index (VXN) - 49.83 +1.81 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.73 365,435 266,163 Equity Only 0.55 306,482 169,056 OEX 1.01 15,482 15,750 QQQ 0.40 27,820 11,267 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 57 - 1 Bull Correction*** NASDAQ-100 24 - 3 Bull Correction DOW 50 - 3 Bear Confirmed S&P 500 52 - 1 Bear Confirmed S&P 100 51 - 1 Bear Confirmed 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 1.68 10-Day Arms Index 1.57 21-Day Arms Index 1.32 55-Day Arms Index 1.36 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 993 2192 NASDAQ 965 2477 New Highs New Lows NYSE 63 110 NASDAQ 44 194 Volume (in millions) NYSE 1,611 NASDAQ 1,622 ----------------------------------------------------------------- Commitments Of Traders Report: 05/28/02 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercials grew more bearish last week by adding about 5,000 contracts to their net bearish position. They did so by adding more shorts than longs. Listen up! Small traders reached their most bullish position in over a year by adding a big number of long positions to total more than 114,000 net long contracts. The spread here between commercials and small traders has widen considerably over the last two weeks! Commercials Long Short Net % Of OI 05/14/02 343,941 424,893 (80,952) (12.1%) 05/21/02 354,039 429,803 (75,764) (9.7%) 05/28/02 362,607 442,845 (80,238) (9.9%) 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 05/07/02 154,664 59,583 95,081 44.4% 05/14/02 163,035 58,587 104,448 49.8% 05/21/02 172,313 57,803 114,510 49.8% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 114,510 - 3/26/02 NASDAQ-100 Nasdaq commercials grew less bullish last week by reducing their longs more than their shorts. Small traders went in the opposite direction by growing less bearish, reducing their net position by about 3,000 contracts. Commercials Long Short Net % of OI 05/14/02 40,858 35,761 5,097 (5.5%) 05/21/02 51,448 45,375 6,073 (6.3%) 05/28/02 49,669 44,900 4,769 (5.0%) 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 05/14/02 11,920 17,479 (5,559) 8.2% 05/21/02 12,567 19,899 (7,332) 22.6% 05/28/02 12,562 16,969 (4,407) 14.9% 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 were flat on a week over week basis. Their net position lost less than 100 contracts. Small traders grew less bearish, though, by adding a number of long positions. Commercials Long Short Net % of OI 05/14/02 21,080 14,725 6,355 14.4% 05/21/02 20,173 15,317 4,856 13.7% 05/28/02 20,289 15,513 4,776 13.3% 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 05/14/02 4,930 10,899 (5,969) (25.2%) 05/21/02 3,661 9,585 (5,924) (44.7%) 05/28/02 5,709 9,180 (3,471) (23.3%) 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 06-06-2002 section 2 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/f06b_2.asp ================================================================= In section two: Net Bulls Bearish Play Updates: AT, CLS, CMCSK, NET, TBH Closed Bearish Plays: BRCD Stock Bottom / Active Trader Bullish Play Updates: DCX, OHP, RJR, THC Bearish Play Updates: BA, BSTE, DHR, FBN High Risk/Reward New Bearish Plays: DOX, SFY Bullish Play Updates: PVN Bearish Play UPdates: INMT Split Trader KRB: 3-for-2 split announcement SII: 2-for-1 split announcement PNRA: 2-for-1 split approval ================================================================== Net Bulls (NB) Tech Stock section ================================================================== -------------------- Bearish Play Updates -------------------- Alltel Corp - AT - close: 49.29 change: -2.00 stop: 50.24 *new* Our short position in this wireless telecom company finally began spurting a smidgeon of green ink for us with today's sharp decline. Now comes the hard part: AT's low today represented the key 61.8% ($49.00) retracement of its recent May 13th - May 24th rise. Although we could see a bit more down side, to the 78.6% level ($48.27), a reversal at $49.00 is not out of the question. Accordingly, we're going to adjust our stop in order to protect this position from an unexpected reversal, lowering the buy stop to $50.24. This level is just above near term resistance--the lows since May 22. Very aggressive traders might want to consider new short positions in AT as long as it continues trading under the new stop level ($50.24) Picked on June 4th at $49.94 Change since picked: +0.65 Earnings Date 04/25/02 (confirmed) --- Celestica - CLS - close: 26.90 change: -0.28 stop: 27.82 *new* After Tuesday's lowered guidance from competitor Flextronics-- which whacked both FLEX and CLS, some analysts have said that they believe CLS will not follow suit. Even with this as a backdrop for the stock, CLS moved lower today along with the rest of the tech sector and the Nasdaq Composite. We still think that CLS can decline to either its 127% or 161.8% Fibonacci retracement (of its May 7-May 17 advance); these levels are $23.45 and $20.82 respectively. New short positions can be entered on a break below yesterday's low of $26.32. Please note that we have lowered our buy stop again to $27.82, which is just above our declining Bollinger Band 5-dma, and yesterday's high. Picked on May 21st at $30.94 Gain since picked: +4.04 Earnings Date 04/17/02 (confirmed) --- Comcast Corp - CMCSK - cls: 25.58 chg: -0.12 stop: 26.89 *new* Our price target for this short position remains at the $24 level, which would have CMCSK declining to at least the 127% retracement of its April 30 - May 22 advance. We have elected to lower our buy stop again to $26.89 in order to protect profits in this trade. This new buy stop level is just above yesterday's high as well as slightly above our sharply declining Bollinger Band 5-dma. New positions should probably be deferred until CMCSK trades below today's low of $25.17. Picked on June 3rd at 27.89 Gain since picked: +2.31 Earnings Date 05/01/02 (confirmed) --- Network Associates - NET - cls: 17.27 chg: -0.90 stop: 18.77 *new* After three days of trading in the $18.00 - $19.25 range, NET began hitting new short-term lows today. Technically, today's action, which occurred on a sharp volume spike, turned our Bollinger Bands (5-dma, 1.7sd) in a decidedly downward direction. This is clearly supportive of our short position. We are tightening our stop to $18.77, which is above today's high as well as our declining Bollinger Band 5-dma. Our short-term price target is $17.25, which represents the 78.6% Fibonacci retracement level of NET's May 7 - May 20 advance. Aggressive traders may want to be a bit slow to pull the trigger at this level, though, as long as the stock does not try to rebound quickly. The reason: if the 78.6% level fails, the next stop in coming weeks could be to the 127% level, or $13.61. Picked on May 31st at $19.35 Gain since picked: +2.08 Earnings Date 04/11/02 (confirmed) --- Telecom Brasil - TBH - close: 25.90 change: -1.50 stop: 26.49 *new* On Tuesday we briefly discussed the technical pattern forming on TBH, and the reasons we felt that the stock was preparing for a sharp, quick decline. If you do not recall our discussion about triangles that form at the bottom of declines, you may want to revisit our June 4th update on TBH. Triangular breakdowns produce some of the sharpest, quickest declines, and TBH is giving us a textbook example of why these are excellent price patterns to short. If you use Stochastics in your trading, please be sure to look at TBH's daily Stochastic (5,3,3); it presently sits in solidly oversold territory. Some traders seem to feel that a patently oversold Stochastic is a warning that prices are ready to rebound--or that it is signaling an entry point for a long position. This is an incorrect and potentially dangerous interpretation, and TBH is a very good example of this. When stocks have experienced sharp declines like TBH, an oversold Stochastic simply re-affirms that prices are likely to CONTINUE to close near their daily lows. Some of the sharpest declines in prices occur when the Stochastic is pinned in its oversold region. It's like driving a frisky Porsche 1988 911 Turbo at 180 MPH. Just because you let off the accelerator a bit does not mean you are going to slow down much--or go in reverse. You're still traveling at 155-- and that's serious speed. The same is true with declining stocks. We said recently that our current target for this short position was either $26.00 and, perhaps, even $25.00. Since we have now declined to the key 127% retracement of the May 13 - May 30 advance, which is just a few pennies below our first profit target of $26.00, aggressive traders may not want to take some gains rather than waiting for a potential decline to the 161.8% level ($24.85). Our feeling is that TBH will either simply collapse further over the next couple of days, or begin a sharp rebound. With this in mind, we've decided to really tighten our buy stop to $26.49, which is just slightly above the May 13th low of $26.35. Picked on May 22nd at $27.70 Gain since picked: +1.80 Earnings Date N/A =============== NB Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Brocade - BRCD - close: 19.77 change: -0.23 stop: 20.26 EMC reaffirmed guidance to analysts today, saying that it still sees single-digit sequential revenue expansion in its current quarter; the networker also indicated that they would match analysts' $0.02 EPS estimate. Competitor Brocade was initially helped by this marginally positive announcement, climbing to a high of $20.36 intraday, before dipping lower in afternoon trading. Unfortunately, the morning advance was enough to stop us out of this trade, giving us a 4.5% loss. Picked on May 22nd at $19.35 Gain since picked: -0.91 Earnings Date 04/15/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- DaimlerChrysler - DCX - cls: 48.19 chg: +0.48 stop: 46.72 Following a successful test of the 50-dma, DCX moved higher with the broader market on Wednesday. This must've scared off some of the bears, because the stock continued to move up today despite a triple-digit decline on the Dow Jones. The recent bounce is encouraging, but it'll take a real concerted effort by the bulls to power DCX above the relative high of $50.88. This makes entries at current levels a sticky proposition. The best strategy would probably be to wait for either another dip to the 50-dma (currently $46.94) or a move over $50.88. Picked on May 6th at $46.50 Gain since picked: +1.69 Earnings Date 02/20/02 (confirmed) --- Oxford Health - OHP - close: 47.60 change: -0.45 stop: *text* OHP briefly showed signs of bullishness this morning, coming within 18 cents of our entry trigger at $48.64. The rally was short-lived, however, and shares proceeded to gravitate towards the $48 level for the rest of the session. With no new technical developments (and a nice display of relative strength versus the Dow Jones), we still believe that OHP will trade on the north side of $50.00 in the near-future. Remember that if/when we do get triggered, our stop will be set at $46.48. Picked on June Xth at $xx.xx <- see text Change since picked: +0.00 Earnings Date 05/01/02 (confirmed) --- RJ Reynolds - RJR - close: 68.71 change: -1.08 stop: 67.94 On Wednesday afternoon RJR announced that it would be increasing its quarterly cash dividend by 8.6%, to $0.95 per common share. The dividend will be payable on July 1, 2002 to stockholders of record on June 18, 2002. This news did little to bolster the stock, as shares joined the broader market in an afternoon selloff. Today's action was much the same, with the bears dominating afternoon trading. Although the recent trend of lower lows is somewhat concerning, the stock has held up relatively well versus the Dow. We'd expect the 50-dma at $68.18 to offer support if the decline continues. Lower-risk entries could be considered on a bounce from this level. Picked on May 30th at $70.34 Change since picked: -1.63 Earnings Date 04/18/02 (confirmed) --- Tenet Healthcare - THC - close: 73.30 change: -0.06 stop: 69.33 After turning in an impressive performance on Wednesday, the HMO Index (Healthcare Index) paused to catch its breath. Although it posted a small decline, sector bulls have got to be pleased with today's action. The index maintained support at 620 and outperformed the Dow Jones, which shed 1.7%. THC moved with lower as well but dropped only six cents. We'll see how the market reacts to tonight's negative INTC news, but a heavy selloff in the NASDAQ could very well result in money rotating back to the healthcare sector. Traders looking for entries should continue to watch for a bounce from the 50-dma ($71.56) or a move above the all-time high of $75.45. Picked on May 29th at $72.98 Change since picked: +0.32 Earnings Date 04/02/02 (confirmed) -------------------- Bearish Play Updates -------------------- Boeing Company - BA - cls: 41.96 chg: -0.58 stop: 43.55 In the absence of any major news, shares of BA spent the last two sessions trading in a narrow range. The stock found support at the $42 level, while bears would not allow a move above $42.80. Although the daily stochastics (5,3,3) remain pinned in the oversold range, there seems to be little buying interest at current levels. Traders looking to open new short positions can continue to wait a break under the 200-dma at $41.53. An alternate strategy would be to short failed rallies at the 10-dma ($42.82), which for the past two weeks has provided resistance. Premier Investor is currently up 5.3% on this play. Picked on May 21st at $44.35 Gain since picked: +2.39 Earnings Date 07/18/02 (unconfirmed) --- Biosite, Inc. - BSTE - close: 26.80 change: -0.63 stop: *text* Our short play in BSTE remains un-triggered. The stock has roughly mirrored the action on the Dow Jones, following the index higher on Wednesday and dropping 2.3% today. Shares came within 21 cents of our action point at $26.29 but finished well above that level. As you might recall from last night's write-up, we're expecting BSTE to break under the relative low and fill in the rest of the April 23rd gap. That hasn't happened yet, but with the 50-dma looming overhead we'd be surprised to see shares advance beyond today's high. If the play is activated, our stop- loss will be placed at $27.94. This is a slight adjustment from our original stop, reflecting the upward movement in the 50-dma. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/22/02 --- Danaher Corp. - DHR - cls: 68.70 chg: -0.48 stop: 71.65 We're still waiting on that breakdown. DHR isn't exactly a bastion of bullishness, but it's held up pretty well versus the declining Dow Jones. If the stock does move higher, we'd expect the 50-dma at $71.17 to provide resistance. It's also interesting to note that shares have traced a pattern of higher lows since May 30th. While at first glance this is a bullish development, a break below this trend could lead to another round of selling. To this end, aggressive traders could evaluate new bearish positions on a break of today's low ($68.04.) The more prudent approach would be to wait for a move under the near-term low at $67.31. Picked on May 13th at $69.03 Gain since picked: -0.33 Earnings Date 04/18/02 (confirmed) --- Furniture Brands Int. - FBN - cls: 35.58 chg: -0.53 stop: *text* FBN could be coiling for a big move. The stock has moved in an increasingly narrow range and traded its second consecutive inside day on Thursday. Volume was tepid, coming in at less than half the daily average. If the recent downtrend is any indication, odds are good that the move will be painful for the bulls. Due to FBN's coiling behavior (and its inability to rebound to the $37 level), we're going to adjust our entry strategy. Rather than trying to short a failed rally, we're going to go short once the stock breaks below yesterday's low of $35.13. If the play is triggered our stop-loss will be placed at $36.66, just above the Tuesday high. Although bears should be aware of the uptrending daily stochastics (5,3,3), we suspect that a break below the current range could lead to a quick test of the 200-dma near $32. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/24/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ============= HR New Plays ============= ----------------- New Bearish Plays ----------------- Amdocs Ltd - DOX - close: 17.81 change: -0.33 stop: 18.86 Company Description: Amdocs is the world's leading provider of CRM, billing and order management systems to the communications industry. Amdocs has an unparalleled success record in project delivery of its mission- critical products. (source: company press release) Why We Like It: Much like the plummeting NASDAQ, the GSO.X software index has given bulls a severe case of heartburn in recent weeks...and a break under its September lows could be downright nauseating. Thus far DOX has held up relatively well versus the sector, but that could work to our favor. With so many software stocks looking ridiculously oversold, it's difficult to find short candidates that aren't begging for a short-covering rally. DOX is not as overextended, and has ample room to move to the downside. The recent sideways trading has also set up the technical basis for this play. DOX is currently trading at the top of its descending regression channel. Shares haven't broken out of this range for five months, and given the overall tech weakness, we doubt it's going to happen this time either. It's also interesting to note that the stock has just broken out of its triangular consolidation, which is characterized by a pattern of higher lows and lower highs. We're going to initially target the $15 level (which coincides with the channel's midline), although we may consider exiting the play if shares bounce from the relative lows near $16. Although DOX will probably gap lower with the tech sector tomorrow, it's a listed stock and thus not likely to gap as much as its NASDAQ counterparts. We'll also be closely monitoring the GSO.X to see how it behaves at the 112 level, near the September lows. A break of this level could lead to a quick test of 100, while a strong bounce could spell trouble for sector bears. Our initial stop is placed at $18.86, just above the Wednesday high. Picked on June 6th at $17.81 Gain since picked: +0.00 Earnings Date 4/23/02 (confirmed) --- Swift Energy - SFY - close: 13.70 change: -0.80 stop: *text* Company Description: Swift Energy Company develops and operates oil and gas wells. Its major focus concerns onshore oil and natural gas reserves in Texas and Louisiana, and onshore oil and natural gas reserves in New Zealand. Swift owns or has interests in 1,235 wells; 854 of these wells represent 95% of its proven reserves. Why We Like It: Since October of 2000, SFY has been in an extended bear market. The price of its stock has declined from a high of $43.50 to today's new 52 week low of $13.70. This decline has been unrelenting in recent months and, more particularly, in recent weeks. It is unclear to us why this stock has failed to respond, even remotely, to the more positive movement of the XOI (Oil Index), OSX (Oil Services Index) or even recent spikes in the price of crude oil over the last couple of years. The current turbulence surrounding other oil/energy related companies like Enron and Williams Company has no doubt hurt the Swift as well. As if all this is not tragic enough for the stock, AG Edwards downgraded SFY on May 31st; this followed a similar downgrade on May 1st by both JP Morgan and Lehman Brothers. The bottom line on Swift is this: SFY stock is fundamentally about as ugly as a two-headed, bucktoothed rat, and its technical condition is no less disturbing. From May 7th through June 5th, SFY had been attempting to consolidate sideways, between roughly $14.00 - $16.00. That effort seems to have failed today-- miserably--with the stock dropping nearly 5% in the absence of any news. We are interested in shorting it because of its current technical weakness and because we believe that the price of crude oil is on the verge of a sharp drop, perhaps from the current $25.00 range to something near $21.00 over the next couple of weeks. We will enter a short position once SFY has traded below today's low of $13.70. Once this short play is triggered, we will use a very, very tight stop. Why? Technically, we think that SFY's price should simply collapse lower without any meaningful rebound. If this scenario does not occur, though, we will have to acknowledge that reversal in price is possible and we do not want to be short under such circumstances. With this in mind, our buy stop will be just above near-term resistance at $14.26. Our short-term price target is $12.15, which represents the 161% retracement of the Feb. 20th - April 2nd advance. From a reward/risk perspective, we are risking a 4% loss in the hope of receiving a fairly quick 11% gain (at a minimum), providing a nice reward/risk ratio of just about 3:1. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 05/01/02 confirmed =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Providian Financial - PVN - cls: 7.31 chg: -0.25 stop: 6.99 In the last 3 trading days PVN has begun to technically deteriorate. Of immediate concern to us is the failure of the stock to remain above a trend line that runs under PVN's series of rising lows, which it has since May 6th. With PVN's last three closes under this trend line--and with today's close 2% under the 50-dma--aggressive traders may wish to use an "unofficial" sell stop of $7.22; this level, just below today's low, would close this long trade with 5.5% loss IF it were to be hit. Picked on May 22nd at $7.66 Gain since picked: -0.35 Earnings Date 05/06/02 (confirmed) -------------------- Bearish Play Updates -------------------- Intermet Corp. - INMT - cls: 9.04 chg: -0.50 stop: 9.61 *new* Our new play in Troy, Michigan-based Intermet was triggered this morning at the opening price of $9.48. This new short position enjoyed a nice one-day gain of nearly 5%, and its plunge in price was accompanied by a healthy surge in volume. INMT is now trading well below its 50-dma and has successfully pushed our lower Bollinger Band into a deep slide--always a good technical indicator for a short position. We're not going to take any chances with this trade, and have elected to immediately lower our buy stop tonight to $9.61. There is a chance that INMT might try to find support at the $8.50 level, and aggressive traders may wish to take profits here if 1) INMT stalls at that level or 2) moves modestly below $8.50 and then begins to rebound. If INMT can successfully drive below the $8.50 level, then we'll likely target $6.50 as an official profit target. Picked on June 6th at $9.48 Gain since picked: +0.44 Earnings Date 04/11/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- MBNA Corporation announces 3-for-2 stock split Bank holding company MBNA Corporation (NYSE: KRB) announced a 3- for-2 stock split after the market opened for trading today. The split will take the form of a 50% stock dividend and will be issued on July 15, 2002 to shareholders of record on July 1, 2002 Furthermore, the Board of Directors expects to declare a uarterly dividend of $.07/share in mid-July, payable on October 1, 2002. This would represent a 5% (split-adjusted) increase over the urrent dividend. KRB most recently split in 1998; also a 3-for-2 offering. Shares have rallied sharply from the September lows near $23.00 but YTD have posted only a fractional gain. The stock closed at $35.65 on Wednesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=KRB About the company MBNA Corporation, a bank holding company and parent of MBNA America Bank, N.A., a national bank, has $98 billion in managed loans. MBNA, the largest independent credit card lender in the world, also provides retail deposit, consumer loan and insurance products. (source: company press release) --- Smith International sets 2-for-1 stock split Prior to the opening bell this morning, Smith International, Inc. (NYSE: SII) announced that its Board of Directors had declared a 2-for-1 stock split. The split will be effected as a 100% dividend and will be distributed on or about July 8, 2002 to shareholders of record on June 20, 2002. Shares of SII have not split in over 20 years. Today's announcement comes after a rise of more than 100% from the stock's September lows. SII closed at $68.56 on Thursday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=SII About the company Smith International, Inc. is a leading worldwide supplier of premium products and services to the oil and gas exploration and production industry, the petrochemical industry and other industrial markets through its four principal business units - M-I, Smith Bits, Smith Services and Wilson. (source: company press release) Split Updates ------------- After the market closed today, Panera Bread (NASDAQ: PNRA) announced that the previously announced 2-for-1 stock split had recieved shareholder approval. The split will be payable on June 24, 2002, to stockholders of record on June 10, 2002. ================================================================= 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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