PremierInvestor.net Newsletter Thursday 06-13-2002 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 ================================================================= In section one: Market Wrap: Adobe Beats Estimates, But Trades Lower Play-of-the-Day: Take the Money, En-Ron Market Sentiment: ImCloned ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 06-13-2002 High Low Volume Advance/Decline DJIA 9502.80 -114.90 9625.40 9491.86 1.36 bln 1059/1895 NASDAQ 1496.86 - 22.30 1526.41 1495.64 1.54 bln 1282/2172 S&P 100 501.16 - 4.86 509.26 501.41 Totals 2341/4067 S&P 500 1009.56 - 10.70 1023.47 1008.12 RUS 2000 455.98 - 7.01 463.90 455.78 DJ TRANS 2704.82 - 1.90 2731.44 2702.78 VIX 28.73 + 1.72 28.81 27.08 VXN 54.30 + 1.44 55.81 53.51 TRIN 1.14 PUT/CALL 0.84 ************************************************************* =========== Market Wrap =========== Adobe beats estimates, but trades lower After-hours news from various stocks are getting some rather bearish reactions and most likely finds some technology stocks under pressure tomorrow morning. That won't be too different than what traders saw today as the broader market averages whipsawed throughout the day, only to finish lower. After the bell, desktop software maker Adobe Systems (NASDAQ:ADBE) $36.19 -3% reported second quarter pro forma earnings of $96.4 million, or $0.27 a share, which beat consensus estimates of $0.25 on revenues of $317.4 million, which was also above consensus estimate of $312.6 million. The company said GAAP (generally accepted accounting principles) net income was for the quarter were $0.22 a share, based on 247.7 million weighted average shares. Shares of Adobe traded lower at $33.75 (-6.7% from its close) in after-hours trading when the company said it saw Q3 revenues in the range of $300-$320 million, versus current consensus of $324.8 million, and earnings of between $0.24 and $0.27 a share versus consensus of $0.26. President and CEO Bruce Chizen said, "Despite a continuing soft economy, we had a solid quarter with a strong release of Photoshop. Strategically, we took steps to realize the large Acrobat opportunity in the enterprise with the closure of our Accelio acquisition and our new SAP relationship." Adobe Systems Chart - Daily Interval Adobe Systems (ADBE) is a tough stock to try and trade. For whatever reason, the stock gets whipped around and can have a trader pulling his/her hair out. Nonetheless, tonight's earnings and after-hours reaction hints that some software stocks may be under some selling pressure tomorrow morning. Tonight's negative market reaction looks to be in response to what analysts were looking for in the upcoming third quarter. The apparent shortfall related to analyst's revenue forecast may have analysts lowering some revenue forecasts for other software makers in the coming weeks. Growth collapsed, so did stock Just when a Genesis Microchip (NASDAQ:GNSS) $12.24 +2.85% bull thought things couldn't get any worse, they did, when the company reduced its Q1 revenue outlook to $41-$43 million from prior forecast of $60 million (consensus was for $58.1 million). The flat panel display manufacturer blamed the shortfall on a recent drop in orders, which the company attributed to customers working off their inventories that were built up in anticipation of continued strong unit growth in the flat panel market. The company believes that growth has collapsed due to sector-wide LCD panel manufacturing constraints, but does not believe the revenue shortfall was due to greater-than-expected price declines for its products in the quarter. Genesis Microchip Chart - $0.50 and $1 box In our 09:00 EST Update on May 30th, we made mention of Prudential's comments prior to the market open and trading was heavy at the $20.12 level. You can see from the long column of O's that the stock was under heavy distribution. Tonight we find out why. Stock to trade bearish One stock I'd have a "bearish eye" on for a trade tomorrow would be shares of graphics processor maker NVIDIA Corporation (NASDAQ:NVDA) $27.66 -1.03%. My thinking here is if things are "as bad" as it seems at Genesis (GNSS) and the flat panel display market, then things may not be that good at a graphics chip maker either. The technicals seem to support that thought also. NVIDIA Corporation - Daily Interval Shares of NVIDIA (NVDA) are trading $27.50 in after-hours and may provide a short-term trade to the downside. A trader can use the "inside day" trading technique to set up the trade with, using a break below today's low of $26.77 as a trigger for the stock to pick up steam to the downside. I have had retracement on the above chart set at the 52-week high and a relative low dating back to December 2000 (52-week low was $22.66 on October 2nd). On Wednesday, NVDA broke to a new relative low on heavy volume. Tonight's news out of GNSS may be "the final straw" and provide a bearish trader a good trade setup in NVDA. Yesterday, RBC Capital downgraded NVIDIA (NVDA) to "sector perform" from "outperform," citing the Taiwan Computex Computer show indicating that inventory levels of PC motherboards remain above seasonally normal levels in the channel. Biogen volatile in after-hours Biopharmaceutical maker Biogen (NASDAQ:BGEN) $39.44 +0.63% was back in the news yet again tonight and its shares were trading volatile in after-hours action when the company said the FDA had requested "clarification and information related to data Biogen previously submitted" on its highly anticipated Amevive drug, which is an application for psoriasis treatment. The stock originally fell as much as -6% from its closing tick as investors first feared the FDA news was calling for a new clinical trial, but once cleared up and the full press release was read, it turns out that the FDA was only looking for clarification from the previously completed study and also proposed post-marketing clinical studies to "further define the safety and effectiveness of Amevive." Trading then found the stock rebounding to the $40.14 level. 10-year YIELD breaks below 4.967% The main technical action that I witnessed in the market today was the benchmark 10-year YIELD ($TNX.X) breaking below the 4.967% YIELD level we had been monitoring and this is a sign that "bond bulls" are becoming more aggressive from the buy side, thus driving YIELD lower. YIELDS across all the major maturities were lower today and depicts a continuing defensive posture from the market. 10-year YIELD chart - Daily Interval According to TrimTabs, which monitor cash inflows and outflows among mutual funds, the past two weeks has seen net outflows from equities of $12.6 billion ($4.3 billion this past week), compared to net inflows to bond funds of $200 million in the latest week and $1.4 billion the week prior. International equity funds have also seen net outflows of $900 million in the latest week, down slightly from net outflows of $1 billion the week earlier. However, this "math" doesn't necessarily equate when comparing stock outflows to bond fund inflows. This has me thinking that what might be happening is that some money from foreign investors cash accounts may perhaps be moving back to the U.S. and "parking itself" back into Treasuries near- term. I can't conclusively say that this is happening, but the June U.S. Dollar Index (dx02m) shows the U.S. $ has been firming against the major foreign currencies over the past week at 111.15. Remember, the U.S. Dollar Index (dx02m) was near 120.00 back in March. The main thing I think a bearish equity trader needs to be careful of and monitor closely is this. In recent weeks, we've noted that some of the foreign equity markets have performed well versus the major U.S. market averages. This may now have some foreign investors "seeking out" perceived value as U.S. stock prices have declined, and we could be seeing some cash come back to the U.S. that may have left earlier this spring. Near-term, U.S. equity bears may want to keep an eye on the U.S. $. Be alert for any renewed strength, that may further hint of U.S $ buying, which may be created as foreign currencies are converted/exchanged to U.S. $. While that type of action could be hint of money coming back to the U.S., often times the first step is for the money to be "parked" in a Treasury bond, until a firm "stock purchase desicion" is made. Should we see further strengthening in the U.S. $, coupled with selling in Treasuries (higher YIELD as a result) that could be the "heads up" for U.S. equity/stock markets to rebound. Right now, YIELDS continue to fall, so it certainly appears that money is being parked in Treasuries, not in stocks. It is also noted that the market internals as depicted by the S&P 500 Bullish Percent ($BPSPX) from www.stockcharts.com continues to erode with 47.4% of the stocks now showing "buy signals" on their point/figure charts. Remember, in early June, this indicator was at the 58% level. Jeff Bailey Senior Market Technician ========================= Play-of-the-Day (New high-risk/reward BEARISH play) ========================= PPL Corporation - PPL - close: 31.86 change: -1.35 stop: *text* Company Description: PPL Corporation generates and sells electricity in the northeastern and western parts of the United States and in Canada. Why We Like It: PPL possess a 20-month topping pattern that looks suspiciously like a sloppy head and shoulders, with prices sitting atop the last bastion of support before falling off a cliff. Normally, that would be enough to grab our attention and cause us to salivate like Pavlov's dogs. But today's news, in combination with sell signals on the weekly MACD, Stochastic Oscillator and RSI, make this an irresistible short play. Pennsylvania energy regulators claimed today that PPL Corp. had unfairly manipulated prices in its Mid-Atlantic power market. The Pennsylvania Public Utilities Commission said that it has determined that the PPL's actions "damaged wholesale and retail markets and the public's confidence in them." In an era of Enron, Williams Company, ImClone and Tyco, this is the kind of corporate impropriety that can be devastating to a stock's price. And we'd like to profit from such devastation. We want to short PPL on a move below $31.65, with this one qualification: if PPL gaps down below $30.50, we will not short it, preferring to wait for a more attractive entry point. Once the trade is triggered, we'll use an initial buy stop of $34.18. We think this stock is capable of falling briskly through its "fast move region," declining over several weeks to its next major support at the $24.00 region. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 7/18/02 (unconfirmed) ================ Market Sentiment ================ ImCloned By Eric Utley Was it the Congressional hearings Thursday afternoon that tanked the market, or the consumer? Maybe it was a little bit of both. It felt like Enron all over again. The same cast of characters were asking the questions, only a different frightened bunch of suits were in the hot seat. I remember back during the Enron hearings that the market got a little jumpy just seeing those guys on CNBC. Could be a repeat with ImClone. Of course the sales report from the Commerce Department this morning kicked the day off on a sour note, which again brought up a familiar debate: Will the consumer hold on? I'm not smart enough to know, but I do know that the retail sector has shown signs of weakness over the last several weeks. The market seems very on edge right now, and so do the major averages. It feels like we're on the brink of a major washout, but I've been saying that for quite a while now. Most oscillators show an increasingly oversold market, but that doesn't mean it can't grow more so. And earnings are just not what they were expected to be noting tonight's most recent blow ups in Adobe and Genesis. All of this has the making for a throw in the towel sort of session, followed by a sustainable and tradable rally. There are just so very many risks to the bulls right now that no one wants to be the first to try and buy this market. The political events around the world, combined with this probe and that probe into new companies every day, and the lack of earnings or quality earnings all mix for a recipe to avoid stocks. The bond market has been benefiting from these risks to stocks as witnessed by the further upside in Treasuries today. All in all, the market is likely to remain on the defensive as no discernible catalyst for a rally has emerged just yet. At the same time, we haven't had the short term washout to clear the path for a tradable rally. We could get there tomorrow, and there are some things to watch for. For starters, we need to see a decliners swamp advancers during the day. And we need a very heavy volume total on the NYSE and NASDAQ markets, which we haven't gotten yet, not by a long shot. And finally, we need to see the fear gauges of the market rise and close above key levels. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 9503 Moving Averages: (Simple) 10-dma: 9662 50-dma: 10024 200-dma: 9857 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1010 Moving Averages: (Simple) 10-dma: 1033 50-dma: 1081 200-dma: 1109 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1107 Moving Averages: (Simple) 10-dma: 1151 50-dma: 1266 200-dma: 1423 Oil Service ($OSX) The OSX was the day's best performing sector. The index traded higher for the second consecutive session Thursday, finishing the day better by 1.07 percent. Leaders to the upside included Tidewater (NYSE:TDW), Baker Hughes (NYSE:BHI), Transocean (NYSE:RIG), Cooper Cameron (NYSE:CAM), and Nabors (NYSE:NBR). 52-week High: 126 52-week Low : 58 Current : 97 Moving Averages: (Simple) 10-dma: 98 50-dma: 103 200-dma: 88 Disk Drive ($DDX) The DDX, an unfamiliar name to the sector spotlight, was the worst performing sector during Thursday's sell off. The index finished the day lower by 4.70 percent. Leading the way to the downside included Read Rite (NASDA:RDRT), Quantum (NYSE:DSS), M Systems (NASDAQ:FLASH), Sandisk (NASDAQ:SNDK), and Maxtor (NYSE:MXO) 52-week High: 120 52-week Low : 59 Current : 70 Moving Averages: (Simple) 10-dma: 77 50-dma: 90 200-dma: 92 ----------------------------------------------------------------- Market Volatility My good buddy Mark Phillips wrote in an e-mail today that the VIX needs to close above 30 before signaling a capitulation that leads to a tradable short-term rally. I don't need to say anything more. Make that 60 for the VXN. CBOE Market Volatility Index (VIX) - 28.81 +1.80 Nasdaq-100 Volatility Index (VXN) - 54.27 +1.41 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.84 471,438 397,139 Equity Only 0.74 363,520 270,959 OEX 0.91 20,963 19,068 QQQ 0.59 28,694 16,926 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 54 - 1 Bull Correction NASDAQ-100 19 + 1 Bull Correction DOW 47 + 0 Bear Confirmed S&P 500 47 - 2 Bear Confirmed S&P 100 48 + 0 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 1.28 10-Day Arms Index 1.48 21-Day Arms Index 1.35 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 1229 1960 NASDAQ 1271 2137 New Highs New Lows NYSE 63 101 NASDAQ 42 167 Volume (in millions) NYSE 1,398 NASDAQ 1,572 ----------------------------------------------------------------- Commitments Of Traders Report: 06/04/02 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 brought in a few of their shorts last week and added a few longs. Small traders grew slightly less bullish, but not by a meaningful amount. Commercials Long Short Net % Of OI 05/21/02 354,039 429,803 (75,764) (9.7%) 05/28/02 362,607 442,845 (80,238) (9.9%) 06/04/02 369,298 440,027 (70,729) (8.6%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: ( 36,481) - 10/16/01 Small Traders Long Short Net % of OI 05/14/02 163,035 58,587 104,448 49.8% 05/21/02 172,313 57,803 114,510 49.8% 06/04/02 167,713 58,885 108,828 48.0% 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 quite a bit more bullish last week by bringing in a large number of short positions. Small traders meanwhile grew increasingly bearish with their addition of a number of short positions, to just off of their yearly high in bearishness. Commercials Long Short Net % of OI 05/21/02 51,448 45,375 6,073 (6.3%) 05/28/02 49,669 44,900 4,769 (5.0%) 06/04/02 47,875 39,100 8,775 (9.3%) Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: 8,775 - 06/04/01 Small Traders Long Short Net % of OI 05/21/02 12,567 19,899 (7,332) 22.6% 05/28/02 12,562 16,969 (4,407) 14.9% 06/04/02 12,162 21,420 (9,258) 27.2% 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 shorts than longs last week for a reduction in their new bullish position. The small traders were much more active with a significant drop in their bearish position. Commercials Long Short Net % of OI 05/21/02 20,173 15,317 4,856 13.7% 05/28/02 20,289 15,513 4,776 13.3% 06/04/02 20,564 16,169 4,395 11.0% 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 05/21/02 3,661 9,585 (5,924) (44.7%) 05/28/02 5,709 9,180 (3,471) (23.3%) 06/04/02 7,114 9,639 (2,525) (14.7%) 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. 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PremierInvestor.net Newsletter Thursday 06-13-2002 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/f13b_2.asp ================================================================= In section two: Net Bulls New Bearish Plays: NVDA Bearish Play Updates: TEK, IBM Closed Bearish Plays: BLDP, CLS Stock Bottom / Active Trader Bullish Play Updates: DGX, KCP, OHP, THC Bearish Play Updates: ACV, DHR, FBN Closed Bearish Plays: BSTE, FO High Risk/Reward New Bullish Plays: BGEN, CNXT New Bearish Plays: PPL Bullish Play Updates: INTC, JCI Bearish Play UPdates: MVK, MYG Closed Bearish Plays: DOX, SFY Split Trader ERES: 3-for-2 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 New Plays ============= ----------------- New Bearish Plays ----------------- NVIDIA Corp - NVDA - close: 27.66 change: -0.29 stop: *text* Company Description: NVIDIA Corporation, located in Santa Clara, CA, is the global leader in advanced graphics and multimedia processing technology for the consumer and professional computing markets. Its 2D, 3D, video and multimedia capabilities make NVIDIA one of the premier semiconductor companies in the world. NVIDIA offers a wide range of products and services, delivering superior performance and crisp visual quality for PC-based applications such as manufacturing, science, e-business, entertainment and education. (source: company press release) Why We Like It: In a bold move (or foolish, depending on your perspective), NVDA recently decided to enter into direct competition with INTC. The leading graphics processor (GPU) manufacturer has created a partnership with AMD to produce motherboards with built-in NVDA technology. Only time will tell whether the company gets systematically dismantled by the 900-lb semiconductor gorilla, but investors seem to have a decidedly negative view of this strategy. NVDA has been trading in a declining regression channel for most of the year and is threatening a retest of its September lows near $22. Shares were hit with heavy selling on Wednesday after RBC Capital Markets downgraded the company based on poor X-box sales and what appears to be an increasing market share for INTC's own GPU. If NVDA's technical signals are any indication, we're inclined to agree with this bearish forecast. The bearish vertical count of $19 on the point-and-figure chart suggests that there's certainly a lot more downside potential. The oscillators also portend more selling, with the daily stochastics (5,3,3) plummeting towards the oversold band and MACD rolling lower from under the baseline. Our action point to go short on NVDA will be at $26.66, just under Wednesday's low. If triggered, our stop will be placed at $29.01. More conservative traders could probably get away with a stop just above today's high of $28.68. We're going to initially target the $20 level. This is somewhat optimistic, because it assumes that shares will break under the September lows. We're basing this sunny outlook on the bearish vertical count at $19. However, if NVDA does find support at those lows (near $22.50), we won't hesitate to take our gains off the table. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 05/22/02 (confirmed) -------------------- Bearish Play Updates -------------------- Intl Business Mach - IBM - cls: 75.60 chg: +0.95 stop: 77.41 *new* Our short play in IBM was triggered on Wednesday when shares declined below our action point at $74.94. Although the broader market was negative most of the trading day, IBM was able to remain in positive territory. Two brokerage-related comments were behind IBM's positive day. SG Cowen raised Q2 EPS estimates based on the company's restructuring actions. UBS Warburg chimed in with support of Big Blue's restructuring as well, saying that the restructuring eliminates businesses which have frustrated IBM's earnings and competitiveness. Warburg maintains a price target on IBM of $120, well above its current $75.00+- trading region. IBM's short-term technicals have turned positive as a result of today's advance. Although IBM did see green ink today, it closed below our declining Bollinger Band 5-dma. We're going to take advantage of this to tighten our stop, particularly in light of today's brokerage enthusiasm. We've set the new buy stop at $77.41, just above today's high and just below the declining 10-dma. Please remember that our profit-target is at $65.26, representing the bottom of IBM's regression channel. Picked on June 12th at $74.94 Gain since picked: -0.66 Earnings Date 04/17/02 (confirmed) --- Tektronix - TEK - cls: 18.86 chg: -0.43 stop: 19.46 *new* TEK traded lower nearly the entire day, but most of our short- term technical indicators bumped higher before edging lower again, and we're tightening our buy stop once again. You may recall that in Wednesday's "Market Wrap" we said that the Dow and NASDAQ were both likely to enjoy short but brisk rebounds in coming days. These bounce-rallies have failed to hold but we don't want to risk too much in TEK. TEK is now presenting indications that it is going to bounce with--or without--the stock market at the $18.50 level. With these considerations in mind, our new buy stop has been placed at $19.46, just above today's high. Here's why: the last few sessions have shown a trend of lower highs. Aggressive players who used the previous day's high as their stop would have remained in the play while reducing risk. We're going to do the same thing here. If we are stopped out at this level, we'll essentially be breakeven with a 9-cent gain. Fortunately for the bears, the 5-minute chart is looking like a failed rally and we like the close back under the $19.00 level. This does contradict some of our indicators and is part of the reason for our cautious stop placement. Picked on June 7th at $19.55 Gain since picked: +0.69 Earnings Date 06/20/02 (confirmed) =============== NB Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Ballard Power - BLDP - cls: 17.52 chg: +0.41 stop: 17.69 Last night we moved our buy stop down for BLDP, to $17.69. We felt that BLDP was either going to crack, turning much lower, or that it would attempt to follow the rest of the market as it rebounds in coming days. Although BLDP started the morning off weak, it soon rebounded and moved high enough to hit our buy stop. We are now out of this trade with a nice 7.8% gain. Picked on June 7th at $19.19 Gain since picked: +1.50 Earnings Date 04/29/02 --- Celestica - CLS - cls: 24.80 chg: -0.95 stop: 25.92 Last night we tightened our buy stop on CLS to $25.92--a level just above CLS's high of its final hour of trading on Wednesday. The stock was fairly volatile in Thursday's session. This may have been the result of the company's re-affirmation of guidance for Q2, generally a positive element in the current market environment. This was countered, though, when Kaufman Brothers initiated coverage of the stock with a "Hold," hardly a huge vote of confidence. In the process of flailing between a low of $24.52 and a high of $26.22, our stop was hit. This short position was closed with a nice gain of $5.02, or 16.2%. Since June 7th, CLS has been attempting to form a bottom; daily Stochastics and MACD have both started to turn positive. We'll take the money and run, so to speak. We would not encourage new short positions at this time, except for aggressive traders who see the close under the $25 mark as the next turning point on its journey to the $20 level. Picked on May 21st at $30.94 Gain since picked: +5.02 Earnings Date 04/17/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Quest Diagnostic - DGX - close: 88.27 change: -0.95 stop: 86.49 We're beginning to get a little concerned about DGX. The stock reversed course after setting a near-term high on Tuesday and has weathered two days of losses. Today's 1% decline was enough to violate the 50-dma ($88.78), and shares closed well under that level. We'd been hoping that DGX would consolidate above the 50- dma. The downtrending daily stochastics (5,3,3) are also somewhat worrisome. On a more bullish note, DGX has retraced roughly 61% of the recent rally (May 28th lows to June 11th highs). The bulls did not seem willing to relinquish this level today. It's also worth noting that today's decline was probably a result of the declining broader market and not indicative of stock-specific weakness. However, due to the technical uncertainty we would not recommend entries at this time. Picked on June 7th at $90.93 Change since picked: -2.66 Earnings Date 04/18/02 (confirmed) --- Kenneth Cole - KCP - close: 28.15 change: +0.11 stop: 26.24 Moving contrary to the Dow Jones, KCP posted a small gain today. That relative strength bodes well for a move back to the near- term high at $29.60. Although the daily stochastics (5,3,3) have started to fall from the overbought region, it's interesting to note that the recent consolidation has come on lighter-than- average volume. We'll be watching for volume to pick up again and carry KCP to the $30 level. Of course, KCP will have a hard time getting over the $30 level if the broader market continues to decline. In terms of new entries, traders may want to wait for a bounce from the 50-dma at $26.86. Picked on June 7th at $27.50 Change since picked: +0.65 Earnings Date 05/01/02 (confirmed) --- Oxford Health - OHP - close: 49.70 change: -0.54 stop: 46.48 After an impressive multi-day rally, the HMO Health Provider Index was due for some consolidation. A veritable flood of positive sector news had propelled both the HMO and OHP to all- time highs. Despite posting a loss today, the stock traced a higher-high and higher-low, compared to Wednesday's trading range. This bodes well for an eventual test of the all-time high at $51.94. New entries can be evaluated on a close above $50.00 or a bounce in the range from $48.00 to $48.50, but remember that we'll be exiting the play if OHP reaches $54.89. Picked on June 7th at $48.64 Change since picked: +1.06 Earnings Date 05/01/02 (confirmed) --- Tenet Healthcare - THC - cls: 76.14 chg: +0.04 stop: 71.72 Bulls should be pretty pleased with the way THC has traded since it spiked higher earlier this week. The stock posted a fractional gain today after bouncing from what appears to be near-term support at $75.70. That's not too shabby, considering the Dow Jones was hit for a triple-digit loss. THC mirrored the action on the RXH, the Healthcare Index, which also finished with a small gain. If the broader market manages a strong rebound on Friday we'd expect THC to make a run at it's near-term high of $78.00. Aggressive traders can consider going long if the stock rallies from current levels, but remember that we will exit this play if THC trades at or above $79.94. Picked on May 29th at $72.98 Change since picked: +3.16 Earnings Date 04/02/02 (confirmed) -------------------- Bearish Play Updates -------------------- Alberto Culver - ACV - close: 52.03 change: -1.21 stop: *text* ACV just doesn't want to cooperate with our bearish outlook. The stock never dropped below our trigger at $51.14, and actually trended higher in recent sessions. However, just as we were ready to give ACV to heave-ho, the stock was hit for a 2.2% loss. This created a reversal in the fast daily stochastic (5,3,3) and prevented what appeared to be an imminent bullish MACD crossover. Because of these developments, we're willing to give ACV at least one more day to perform. Its on very thin ice, though...if the stock doesn't decline on Friday we'll probably drop this play. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 05/25/02 confirmed --- Danaher Corp. - DHR - cls: 63.08 chg: -1.37 stop: 63.44 *new* We're getting close to our goal! Shares of DHR dropped for the fourth consecutive session today and set a new multi-month low, closing just above the worst levels of the day. Premier Investor is currently up 8.6% on this play, and conservative traders shouldn't hesitate to take profits if the stock rebounds from current levels. We're feeling optimistic about a continued decline, and fully expect to see a test of the 200-dma at $62.84. Because this moving average keeps rising, we're going to bump our official profit-target up to $62.91. We're also challenging the stock with a very tight stop at $63.44. This strategy should ensure that we won't see too many of our gains go up in smoke if DHR manages a bounce. Picked on May 13th at $69.03 Gain since picked: +5.95 Earnings Date 04/18/02 (confirmed) --- Furniture Brands - FBN - cls: 34.39 chg: -1.09 stop: 36.76 *new* We're pretty pleased with today's price action in FBN. After falling through near-term support at $35.00, the stock accelerated to the downside and fell below intermediate-term support near $34.50. At this rate we wouldn't be surprised to see FBN test its 200-dma ($32.18) within the next few trading sessions. Technically speaking, we're encouraged by the daily stochastics (5,3,3,), which are dropping toward the oversold region. Entries could be considered on a failed rally at the $36 level or a break under $34.00, with the latter strategy lending itself to a more aggressive short-term approach. To minimize risk, we're going to inch our stop down to $36.76, just above the Tuesday high. Picked on June 7th at $35.12 Gain since picked: +0.73 Earnings Date 04/24/02 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Biosite, Inc. - BSTE - close: 24.40 change: -0.62 stop: 25.20 In order to avoid getting caught in a possible short-term broader market rally, we lowered BSTE's stop to $25.20 last night. Our play was closed for a gain of 4.1% after the stock sneaked above this level in early-morning trading. On a technical basis, BSTE continues to look weak. The stock wound up doing a 180 and finishing the day with a 2.4% loss. That's another near-term low. If shares continue to decline we'd expect support to emerge in the $23-$24 region. Picked on June 7th at $26.29 Gain since picked: +1.09 Earnings Date 04/22/02 (confirmed) --- Fortune Brands - FO - close: 53.38 change: +0.88 stop: 53.32 Last night we elected to minimize our upside risk in FO by moving our stop down to $53.32. In hindsight, it's a good thing we did! FO traded higher by 1.6% today after the company raised its Q2 and full-year earnings outlook. Shares plowed right through the 50-dma and traded to an intraday high of $54.67. Our play was closed at the opening price of $53.40, which represents a loss of 3.0% from our original entry point. With the good news likely to cast a positive aura on FO for the next few sessions, we're more than happy to be out of this play. Picked on June 10th at $51.83 Gain since picked -1.49 Earnings Date 04/18/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ============= HR New Plays ============= ----------------- New Bullish Plays ----------------- Biogen - BGEN - close: 39.44 change: +0.25 stop: *text* Company Description: Biogen, Inc., winner of the U.S. National Medal of Technology, is a biopharmaceutical company principally engaged in discovering and developing drugs for human healthcare through genetic engineering. Headquartered in Cambridge, MA, the Company's revenues are generated from international sales of AVONEX® (Interferon beta-1a) for treatment of relapsing forms of multiple sclerosis, and from the worldwide sales by licensees of a number of products covered under patents controlled by the Company (source: Company website) Why We Like It: Our selection of Biogen is closely related to our current market view. And that is this: the stock market remains very weak longer term (looking out over the summer) but short term we think there exists the prospect of a sharp snap-back rebound. As such, we currently only wish to assume long positions in those equities most likely to advance quickly during such a short market rebound. Technically, the kind of price pattern most consistent with our goal is the price gap. Biogen has left two nearby gaps on its chart in the last 3 weeks, and both run from about $43.00 to $47.00. Our interest is very simple: we only want to be long BGEN as it moves into the gap. We're optimistic that tonight's positive FDA news on Biogen's psoriasis drug (Amevive)--as well as recent upgrades by AG Edwards on June 10th and SG Cowen on June 3rd--will conspire to push BGEN into its gap in the next several days. Our strategy is this: first, we will only go long BGEN once it moves into it's gap, above $43.00. Second, we WILL NOT buy BGEN if is gaps up into this gap; we want to buy it as it simply trades into this region. Finally, once triggered, we will use a sell stop of $41.10, which is just below a region of support on our hourly charts. We'll be looking for BGEN to advance all the way to the top of the gap, at about $47.00. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 7/18/02 (confirmed) --- Conexant Systems - CNXT - close: 5.00 change: +0.08 stop: *text* Company Description: Conexant Systems, Inc. is a worldwide leader in semiconductor system solutions for communications applications. Conexant leverages its expertise in mixed-signal processing to deliver integrated systems and semiconductor products through three separate businesses that address the wireless communications, broadband access and Internet infrastructure markets. (source: company website) Why We Like It: CNXT has seen better days. The stock has been marching steadily lower since topping out near $18 in late December and is currently trading at all-time lows. So what makes us want to attempt a long play? Quite simply, we're looking for a short- covering rally to give us a quick pop back to the $6.35-$6.50 area. The recent consolidation near $5.00 indicates that the near-term selling may be exhausted. This perspective is supported by the daily stochastics, which are beginning to curl higher from the extreme oversold region. We're also encouraged by the bullish action on the MACD histogram. A similar oversold case could be made for the semiconductor index (SOX.X), which has recently found support near 420. Our specific entry/exit strategy is as follows: We won't enter this play until CNXT trades above the near-term high of $5.40. If we get triggered we'll use a stop-loss at $4.99. However, be advised that we won't enter the play if CNXT gaps above $5.45. Our profit-target will be set at $6.39, which would be a gain of roughly 18% from our entry point. Picked on June xth at xx.xx <- see text Change since picked: +0.00 Earnings Date 04/17/02 (confirmed) ----------------- New Bearish Plays ----------------- PPL Corporation - PPL - close: 31.86 change: -1.35 stop: *text* Company Description: PPL Corporation generates and sells electricity in the northeastern and western parts of the United States and in Canada. Why We Like It: PPL possess a 20-month topping pattern that looks suspiciously like a sloppy head and shoulders, with prices sitting atop the last bastion of support before falling off a cliff. Normally, that would be enough to grab our attention and cause us to salivate like Pavlov's dogs. But today's news, in combination with sell signals on the weekly MACD, Stochastic Oscillator and RSI, make this an irresistible short play. Pennsylvania energy regulators claimed today that PPL Corp. had unfairly manipulated prices in its Mid-Atlantic power market. The Pennsylvania Public Utilities Commission said that it has determined that the PPL's actions "damaged wholesale and retail markets and the public's confidence in them." In an era of Enron, Williams Company, ImClone and Tyco, this is the kind of corporate impropriety that can be devastating to a stock's price. And we'd like to profit from such devastation. We want to short PPL on a move below $31.65, with this one qualification: if PPL gaps down below $30.50, we will not short it, preferring to wait for a more attractive entry point. Once the trade is triggered, we'll use an initial buy stop of $34.18. We think this stock is capable of falling briskly through its "fast move region," declining over several weeks to its next major support at the $24.00 region. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 7/18/02 (unconfirmed) =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Intel Corp. - INTC - close: 21.11 change: -0.47 stop: *text* Our long play in INTC has yet to be triggered but we remain optimistic that it will be initiated within the next few days. News from other semiconductor stocks--both KLAC and AMAT both confirmed guidance today--remains generally positive. INTC has a gap above $22.75, and our strategy is to simply take a quick trade in the stock as it fills the gap. As noted last night, we won't go long until shares trade at or above $22.77. And we WILL NOT enter the play if INTC gaps above $23.00. Our initial profit target will be at the $26.00 level. If the play is triggered we'll manage our risk with a relatively tight stop at $21.69, just below the June 7th low. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 10/15/02 (unconfirmed) --- Johnson Controls - JCI - close: 82.57 change: -0.83 stop: 79.94 Johnson Controls' workers at four of its plants went on strike Wednesday, claiming anti-union acts and unfair labor practices on the part of JCI. The labor dispute has now forced General Motors and DaimlerChrysler to stop auto production at two of their factories. Technically, JCI has formed a small triangle at the bottom of its May 24th - June 7th decline. Prices currently sit at the lower boundary of this consolidation. We'll be watching to see if it can rebound, once again, off this tend line. Picked on June 7th at $83.31 Gain since picked: -0.74 Earnings Date 07/18/02 (confirmed) -------------------- Bearish Play Updates -------------------- Maytag Corp - MYG - close: 44.12 change: -1.15 stop: 46.01 *new* Our short position in Maytag was triggered on Wednesday, June 12th. We shorted it as it gapped up at the open, selling it short at the opening price of $44.50. Although the stock moved higher on Wednesday than we anticipated, it has subsequently behaved just as we expected, pulling back sharply since hitting its Wednesday's intraday high of $46.45. Now that we are in the green on this trade, we've lowered our buy stop to a level just above the 50-dma and resistance, at $46.01. Our initial price target is $38.75. If MYG is unable to rebound at this level, and sharply pierces through it, a decline to $33.00 is very possible over the next few weeks although we will keep a wary eye on the 200-dma near the potential psychological support level at $35.00. Picked on June xth at $44.50 Gain since picked: +0.38 Earnings Date 07/16/02 confirmed --- Maverick Tube - MVK - cls: 13.75 chg: -0.30 stop: 14.01 *new* Our short position in Maverick Tube was triggered today as MVK traded up to an intraday high of $14.45. As PI readers may recall, our strategy with MVK was to short it on a rebound to $14.15, expecting resistance in the $14.00 - $14.50 region to then turn the stock downward. This is precisely the sequence of events that occurred today, giving us a healthy one-day gain of about 3%. We're going to set a tight stop on this trade now, using 14.01--a level just above intraday resistance and the declining Bollinger Band 5-dma. Picked on June 13th at $14.15 Gain since picked: +0.40 Earnings Date 07/18/02 confirmed =============== HR Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Amdocs Ltd - DOX - close: 16.28 change: +0.02 stop: 16.44 DOX scampered up, then down today, hitting our recently tightened stop of $16.44. While we still think this stock has more downside left in it, we're content to take our nice 6% short term gain and re-evaluate subsequent shorting opportunities at a later date. Technical indicators for DOX are now mixed, with at least one of these--the Stochastic Oscillator--giving a short-term bullish signal as it moves out of oversold readings. We'd prefer not to be in DOX if it begins to sharply reverse upward in coming days. Picked on June 6th at $17.50 Gain since picked: +1.06 Earnings Date 4/23/02 (confirmed) --- Swift Energy - SFY - close: 14.26 change: +0.37 stop: 13.90 Our newly tightened buy stop was hit during today's trading, closing out this trade with a 1.5% loss. Disappointing, yes; but that's the nature of trading--cut losses quickly but let profits run. Unfortunately, we had to do the former rather this time rather than the latter. With all of the short term technical indicators now turning positive on SFY--RSI, Stochastics, MACD-- we're not likely to revisit SFY with new short positions anytime soon. Picked on June 7th at $13.69 Gain since picked: -0.21 Earnings Date 05/01/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- eResearch announces 3-for-2 stock split During the lunch hour today, eResearchTechology, Inc. (NASDAQ: ERES) announced that its Board of Directors had authorized a 3- for-2 stock split. The split will be distributed on July 16, 2002 to shareholders of record on June 25, 2002. This will be the first split for ERES since it began trading in 1997. The stock is currently trading near its all-time highs and has nearly doubled in 2002. Shares closed at $21.86 on Thursday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=ERES About the company Based in Philadelphia, PA, eResearchTechnology, Inc is a provider of technology and services to the pharmaceutical, biotechnology and medical device industries on a global basis. The company is a market leader in providing centralized core-diagnostic electrocardiographic (ECG) services to evaluate cardiac safety in clinical development. The Company is also a leader in providing technology and services to streamline the clinical trial process by enabling its customers to automate the collection, analysis, and distribution of clinical data in all phases of clinical development. (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 DUK Duke Energy Corp 31.00 +0.87 EP El Paso Corp 22.55 +0.65 APA Apache Corp 54.52 +1.19 FDP Fresh Del Monte Produce 25.50 +0.55 WGOV Woodward Governor Co 57.00 +1.43 HBHC Hancock Holding Co 60.18 +0.64 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change CENT Central Garden & Pet Co 16.27 +1.07 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change BMS Bemis Co Inc 51.24 +1.40 LPNT Lifepoint Hospitals 39.55 +1.19 USPI UTD Surgical 31.14 +2.39 ATU Actuant Corp 41.80 +1.02 WTFC Wintrust Financial Corp 31.30 +1.60 JASA Jo-Ann Stores Inc 26.96 +1.96 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change TEF Telefonica Sa 26.37 -1.12 STM STMicroelectronics 21.96 -1.41 EDS Electronic Data Systems 46.55 -2.73 BBY Best Buy Co Inc 41.67 -1.52 WPPGY WPP Group Plc ADR 45.31 -1.99 MHP McGraw-Hill Companies 57.10 -2.18 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change HCBK Hudson City Bancorp 39.40 -0.60 ALAB Alabama National Bancorp 42.34 -0.86 ================================================================= 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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