PremierInvestor.net Newsletter Tuesday 06-18-2002 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/f18b_1.asp ================================================================= In section one: Market Wrap: Quiet Session Got Lively In After-hours Market Sentiment: Tech Bears Be Careful: Bull Alert Play-of-the-Day: Taking A Toll On Da Bears Watch List: Near-term Market Uncertainty ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 06-18-2002 High Low Volume Advance/Decline DJIA 9706.12 + 18.70 9721.75 9636.96 1.13 bln 1486/1500 NASDAQ 1542.96 - 10.30 1567.99 1542.77 1.51 bln 1567/1919 S&P 100 516.73 + 0.55 518.41 513.00 Totals 3053/3419 S&P 500 1037.14 + 0.97 1040.83 1030.92 RUS 2000 460.71 - 1.03 474.64 469.49 DJ TRANS 2733.68 + 3.80 2743.86 2720.35 VIX 27.33 - 0.27 28.57 26.93 VXN 54.55 - 0.43 55.39 53.93 TRIN 0.95 PUT/CALL 0.96 ----------------------------------------------------------------- =========== Market Wrap =========== Quiet session got lively in after-hours It was a rather quiet trading session today as the major averages finished relatively unchanged. The Dow Industrials (INDU) managed to eek out an 18-point advance to close at 9,706. Gains in Caterpillar (NYSE:CAT) $49.45 +2.93% and General Electric (NYSE:GE) $31.15 +2.09% helped offset losses in Home Depot (NYSE:HD) $37.60 -2.33% and Intel (NASDAQ:INTC) $22.02 -2.39%. The broader S&P 500 Index (SPX.X) gained 1 point to 1,037 as gains in sub-sectors like the Gold/Silver Index (XAU.X) 76.39 +3.72%, Home Construction (DJUSHB) 369 +2.1% and Health Payers (HMO.X) 654 +1.55% offset weakness in Networking (NWX.X) 166 -3.57%, Fiber Optic (FOP.X) 52.29 -3.14% and Wireless (YLS.X) 45.65 -2.08%. Notable weakness was found in telecom-equipment maker Tellabs (NASDAQ:TLAB) $7.10 -11.25% as the stock broke to a new 52-week low. This comes just one-day after its CEO Richard C. Notebaert left the company to occupy the newly opened CEO roll at Qwest Communications (NYSE:Q) $5.14 +2.8%. News in after-hours trading had Ciena (NASDAQ:CIEN) $4.40 -8.3% and ONI Systems (NASDAQ:ONIS) $3.09 -9.91, both trading lower at $4.07 and $2.92 respectively, after the telecom equipment companies announced that shareholders of both companies approved the merger announced on February 19. The companies expect the transaction will become effective this Friday, June 21, 2002. ONI's stock (ONIS) will trade through the close of trading on Friday. Oracle beats estimates, but environment remains difficult Software maker Oracle (NASDAQ:ORCL) $8.93 -2.93% reported earnings after the close of trading and said earnings for its fourth-quarter came in at $0.14 a share, which was 2-cents better than consensus. The company said revenues fell 15.7% year-over- year to $2.77 billion, but managed to beat analysts' estimates of $2.57 billion. The stock jumped above the $10 level in post-market trading, but quickly reversed those gains to trade at the $9.35 level (+4.7% from close) after the company guided lower for its upcoming Q1 (ending August). The company said it sees EPS of $0.07, which is 2-cents shy of consensus for $0.09 a share, adding that Q1 "should continue to be a tough environment" for software sales. Oracle Corporation Chart - Daily Interval In Oracle's (ORCL) conference call, it said it sees very little pickup in tech spending for six months or more assuming a gradual improvement in the economy. To me, shares of Oracle (ORCL) look to be "dead money" for the next few months and would take a break above its 50-day moving average on volume of more than 100 million to get me interested on the buy side of things. Apple Computer and Advanced Micro Devices both warn Other computer-relates stocks had Apple Computer (NASDAQ:AAPL) $20.15 -1.89% warning on upcoming earnings, saying it sees its Q3 earnings coming in closer to the $0.08-$0.10 per share mark, which is below the consensus estimates of $0.13 a share. The computer box maker said revenues would also be lower that the consensus $1.61 billion mark, and closer to $1.45 billion. Apple (AAPL) executives cited weakness in the consumer markets, especially among new college graduates that may have delayed new purchases as the labor market remained weak. Apple Computer Chart - Daily Interval Often touted for its ease of use, shares of Apple Computer (AAPL) have been difficult to own for bulls in recent weeks. Apple computers are popular among desktop publishing professionals and individuals who like a more "user friendly" desktop computer that "looks like a jelly bean." Subscribers holding some bearish positions should look to lock in some partial gains should the stock open near the 80.9% retracement level of $16.83. With a bearish vertical count hinting at $10, look to short rallies near the $19 level, stop above $20.32 and trade for profits. The recent steep decline has me thinking that tonight's earning's warning wasn't a complete surprise to the market. Also warning on earnings tonight was chipmaker Advanced Micro Devices (NYSE:AMD) $10.30 -4.62%. On Monday, the stock jumped higher after Prudential upgraded the stock to "hold" from "sell" due to valuation, citing the shares traded at a 10% discount to book value of $10.30, which is thought to be reasonable versus historical trough levels and that the risk of a potential Q2 rev/EPS miss was already priced into the shares. Prudential's bullish target was a "loft" $10.00 per share. Advanced Micro Devices Chart - Daily Interval I've said before that I personally would never own a share of Advanced Micro Devices (AMD). Not that they don't make a good computer chip, but that the company's management has had a difficult time giving analysts accurate guidance and that has had institutions tending to opt for semiconductor exposure in rival Intel (NASDAQ:INTC) $22.02 -2.39%. Tonight, AMD reduced it outlook saying it sees Q2 sales in the range of $620-$700 million, versus current consensus of $845 million. The company added that it expects to report a "substantial operating loss" for Q2. AMD did not release a specific net loss estimate (see paragraph above), but analysts were looking for a loss of $-0.09 a share. AMD's CFO Robert J. Rivet said, "As we have seen in previous statements from a number of other companies, there is broad weakness in the personal computer market and it is adversely affecting AMD." Seize the DELL! With a less than bullish near-term outlook from Intel (NASDAQ:INTC) $22.02 back on June 6th, and warnings from chipmaker Advanced Micro Devices (AMD) and computer box maker Apple Computer (AAPL), I'm looking for bears to be active in shares of box maker Dell Computer (NASDAQ:DELL) $26.71 +0.11% tomorrow morning. Dell Computer Chart - Daily Interval I will be the first to admit that shares of Dell Computer (NASDAQ:DELL) $26.71 +0.11 have traded very strong relative to the market, and this would currently keep me from getting "too bearish" the stock and going overboard with a short. In after- hours trading, the stock edged lower at $26.27 and this may still provide the bearish trader with an opportunity to not have to "chase" a severe gap lower. While after-hours trading is not an indication of how things will open up in the morning, it sure looks as if AMD and AAPL are going to open near their 19.1% retracement levels. Bearish trader's targets would be outlined from retracement above. A short-term trader would most likely look to target the $23.55 level. However, such a target would probably have the trader using a stop just above today's high of $26.93, say $27.05. More of a "swing-trader's" target that doesn't mind holding positions over sever days if not weeks would look to target a level near $21.92, or the $22.27 level from the spike lower on May 7th. The bearish trader that is really "going for the throat" and looking for DELL to perhaps duplicate some type of earnings warning as AAPL did tonight, would target the $19.27 level longer-term. It should be noted that DELL trades above trend on its point and figure chart. While the bearish vertical count is hinting at $17, it would most likely take some type of negative pre- announcement out of DELL to get the stock below the $21.92 level. Once again, technology bears need to keep in mind that the NASDAQ-100 Bullish % ($BPNDX) has been "oversold" below the 30% level in recent weeks. Today's action now has the tech-heavy NASDAQ-100 (NDX.X) 1,138.47 -0.99% and the NASDAQ-100 Bullish % ($BPNDX) from www.stockcharts.com showing that 23 of the 100 stocks in this market now have "buy signals" associated with their charts. NASDAQ-100 Bullish % Chart - 2% box Monday evening's reading showed the NASDAQ-100 Bullish % at 19%, that wasn't enough for a 3-box reversal higher. Today's action however found an additional 4 stocks generating "buy signals" on their point and figure charts, and that was enough to have the NASDAQ-100 Bullish % ($BPNDX) reversing into "bull alert" status. The "bull alert" status for the NASDAQ-100 is simply characterized by the bullish % reversing up (X) from below the 30% or "oversold" level. The actual reversal to the upside suggests most lows have been made and the probability for an upside move is building. Aggressive bulls can be taking positions in this market, but with caution, and trading for profits when gains of 10% to 15% are seen as re-testing of lows before the establishment of a base is formed can be common. At the same time, the reversal up in the bullish %, hints that institutional bears are and have been getting more aggressive with their short-covering. Based on the above chart of the NASDAQ-100 Bullish % ($BPNDX), it would currently take a reading of 52% to have this market (NASDAQ-100) in a "bull confirmed" status. Semiconductor Equipment book-to-bill rises to 1.26 Late this evening, the Semiconductor equipment industry book-to- bill ratio rose to 1.26 in May from a revised 1.22 in April. This means that for every order shipped/billed, 1.26 orders were received in May. It is noted that Prudential's estimates for May was 1.23, so tonight's report appears to be a bit better than expected. Total dollar value of bookings rose to $1.08 billion from a revised $996 million in April (these are rolling 3-month averages). What was Prudential thinking? Tomorrow morning, I would avoid any type of trade in Advanced Micro Devices (AMD), unless it were to lock in a profit on a bearish trade. My thinking here is that Prudential seems to be "on the mark" as it relates to the book-to-bill numbers, and who knows, but they may also have been "on the mark" with their thoughts on AMD from above. What I would do over the next several sessions, is simply monitor AMD to see if the stock can hold its recent lows. I still feel/believe that Intel (NASDAQ:INTC) is the first stock to look for bullishness in the chipmaker space. There's an old investor's/trader's saying that "all the bad news comes out at the bottom." While I'm not sure we're at a true "bottom" in the semiconductors, there has been enough "bad news" in the group in recent weeks, and again tonight to choke a horse, let alone a bull. On the chip-equipment side, Applied Materials (NASDAQ:AMAT) $20.46 -2.75% is the stock to watch for bullishness here. Today's rally to $21.73 stopped dead in its tracks as the now flat 200-day MA provided resistance. Ideally, I'd like to see the stock re-test its recent lows of $19, then look for bullish entries on a reversal higher. A break back above the 200-day moving average ($21.67) on strong volume of +50 million would be bullish. Jeff Bailey Senior Market Technician ================ Market Sentiment ================ Tech Bears Be Careful: Bull Alert By Eric Utley The Nasdaq-100 Bullish Percent ($BPNDX) reversed into bull alert Tuesday. The reversal came from the 16 percent level. To put the recent level of the $BPNDX into perspective, it was through Friday's session the most oversold since September. Just where the NDX and its components go from here is unknown. But what we do know is that short term risk in the NDX has shifted to the upside, the bears know that and so do the bulls. The bears are going to be much more conservative about putting on new short positions with the $BPNDX in bull alert at the 23 percent level. There's room for 77 percent of the NDX stocks to turn bullish, while only 23 percent more to zero on the downside. With the upside risk now nearly three times that of the downside, obviously bears are going to be more inclined to run for cover than press to the downside. After all, they have some mighty fine profits captured during the last month. The bulls in technology will start getting a bit more aggressive to the long side, using the stronger names in the NDX, the ones already on buy signals, emerging from short-term bases. The charts to use as references for what the bulls might be looking for are Microsoft (NASDAQ:MSFT) and eBay (NASDAQ:EBAY). Both stocks are trading relatively well versus the NDX, and both are on buy signals. So let's keep this short and simple, if you're bullish, the better bets are in NDX names. If you're bearish, there's better downside risk, read that as potential, in the NYSE and S&P (ex-tech) names given the higher readings of the bullish percent data. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 9706 Moving Averages: (Simple) 10-dma: 9616 50-dma: 9987 200-dma: 9847 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1037 Moving Averages: (Simple) 10-dma: 1026 50-dma: 1075 200-dma: 1106 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1138 Moving Averages: (Simple) 10-dma: 1136 50-dma: 1251 200-dma: 1417 Gold and Silver ($XAU) The XAU was back at it again Tuedsay, charging higher. The index earned the day's best performing sector spot once again. It finished 3.72 percent higher for the day. The usual suspects were on the leader board Tuesday, including Harmony Gold (NASDAQ:HGMCY), Gold Fields (NYSE:GFI), Anglogold (NYSE:AU), and Agnico Eagle Mines (NYSE:AEM). 52-week High: 89 52-week Low : 49 Current : 76 Moving Averages: (Simple) 10-dma: 78 50-dma: 78 200-dma: 63 Fiber Optic ($FOP) The FOP was knocked down again Tuesday. The index shed 3.16 percent, earning the day's worst performing sector spot. Leading losers included Tellabs (NASDAQ:TLAB), who lost its CEO to Qwest Communications (NYSE:Q), another component of the FOP. Others included ONI Systems (NASDAQ:ONIS), which is being acquired by CIENA (NASDAQ:CIEN), Applied Micro Circuits (NASDAQ:AMCC), and CIENA. 52-week High: 139 52-week Low : 49 Current : 52 Moving Averages: (Simple) 10-dma: 54 50-dma: 70 200-dma: N/A ----------------------------------------------------------------- Market Volatility The VIX was lower by a fractional amount Tuesday. It appears to be resting near its 10-dma, just above the 200-dma. I didn't like the lower VXN in light of the 10 point drop in the Nasdaq. I wish it were a little higher, but it's not. CBOE Market Volatility Index (VIX) - 27.49 -0.11 Nasdaq-100 Volatility Index (VXN) - 54.65 -0.33 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.96 442,008 424,082 Equity Only 0.77 350,441 268,994 OEX 1.06 26,647 28,358 QQQ 0.79 31,945 25,190 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 53 + 0 Bull Correction NASDAQ-100 23 + 4 Bull Alert DOW 43 + 0 Bear Confirmed S&P 500 46 + 1 Bear Confirmed S&P 100 47 + 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 1.03 10-Day Arms Index 1.23 21-Day Arms Index 1.33 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 1667 17411554 NASDAQ 1565 1879 New Highs New Lows NYSE 97 38 NASDAQ 68 82 Volume (in millions) NYSE 1,178 NASDAQ 1,588 ----------------------------------------------------------------- Commitments Of Traders Report: 06/11/02 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 S&P commercials continued to position less bearish in the last week by adding more longs than shorts. Small traders went in the opposite direction by reduing their net bullish position by about 4,000 contracts. Commercials Long Short Net % Of OI 05/28/02 362,607 442,845 (80,238) (9.9%) 06/04/02 369,298 440,027 (70,729) (8.6%) 06/11/02 388,751 457,018 (68,267) (8.1%) Most bearish reading of the year: (111,956) - 3/6/01 Most bullish reading of the year: ( 36,481) - 10/16/01 Small Traders Long Short Net % of OI 05/28/02 172,313 57,803 114,510 49.8% 06/04/02 167,713 58,885 108,828 48.0% 06/11/02 174,357 69,464 104,893 43.0% 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 reached a second consecutive yearly high in bullishness!!! Small traders reached their most bearish position in over a year!!! Commercials Long Short Net % of OI 05/28/02 49,669 44,900 4,769 5.0% 06/04/02 47,875 39,100 8,775 9.3% 06/11/02 45,946 36,878 9,068 10.9% Most bearish reading of the year: (15,521) - 3/13/01 Most bullish reading of the year: 9,068 - 06/11/01 Small Traders Long Short Net % of OI 05/28/02 12,562 16,969 (4,407) 14.9% 06/04/02 12,162 21,420 (9,258) 27.2% 06/11/02 14,561 25,330 (10,769) 27.0% Most bearish reading of the year: (10,769) - 06/11/01 Most bullish reading of the year: 8,460 - 3/13/01 DOW JONES INDUSTRIAL Dow commercials continued to ease out of their net bullish position last week. The group added a few more shorts, and dropped a few longs. Small traders were flat for the week. Commercials Long Short Net % of OI 05/28/02 20,289 15,513 4,776 13.3% 06/04/02 20,564 16,169 4,395 11.0% 06/11/02 20,369 17,172 3,197 8.5% 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 05/28/02 5,709 9,180 (3,471) (23.3%) 06/04/02 7,114 9,639 (2,525) (14.7%) 06/11/02 7,500 9,925 (2,425) (13.9%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- =============== PLAY-of-the-Day ((new Active Trader BULLISH play)) =============== Toll Brothers - TOL - close: 29.52 change: +0.61 stop: *text* Company Description: Toll Brothers builds and finances single-family homes in middle- income and high-income residential communities. They have communities in 21 states. Why We Like It: Better than expected Housing Starts data released before the opening bell this morning sent housing stocks--typified by the Dow Jones US Home Construction Index (DJUSHB)--spiking higher. Toll Brothers was a beneficiary of the housing report and strong sector action, enjoying a 2% advance on an otherwise dreary, quiet trading day. TOL was also still wearing its halo from Legg Mason's reaffirmation of a "buy" rating on Monday. As PI readers may know, we have recently been of the opinion that the housing sector was a bit toppy, and that still may be the case. However, TOL is exhibiting the kind of technical formations that lead to attractive price breakouts, and we believe there is more reward to this play than risk. The attached chart shows that TOL has just recently moved back above its rising 50-dma after spending nearly 6 weeks in a normal, uneventful consolidation. Although prices have yet to break above their declining trend line, TOL's RSI has accomplished this. Since the RSI is a leading indicator--it frequently breaks out or breaks down a day or two before prices--we feel that TOL is nearing the point at which it will begin an attractive advance. Our strategy will be to go long TOL once it moves above near-by resistance; that is, we'll go long on an advance above $30.35. Our initial sell stop will be placed below the lows of the past several weeks, at $26.87; we'll move this up quickly once TOL has broken out. We are targeting an advance to the $34.00 over the next few weeks. Picked on June xx.xx at $xx.xx Change since picked: +0.00 Earnings Date 05/29/02 (confirmed) ================================================================== WATCH LIST ================================================================== The PremierInvestor.net watch list is not designed to be read as full fledged stock picks. Rather we would prefer to offer it as an extra tool in today's investor toolbox. Think of it as a radar screen with your own radar operator pointing out interesting developments, technical patterns or potential plays that you may or may not have seen on your own. Due to time constraints we do glance at the news but rarely do we have time to fully read pertinent news stories, due background research and other necessary screens that investors should do before making a decision. A common exercise is to read the entry, glance at the sector and other stocks in that industry and then compare what's happening in the stock to what's happening in the broader market indices. We hope you enjoy the Watch List and that it proves to be a useful tool for your own trading success. STOCKS WORTH WATCHING --------------------- * Earnings from ORCL, warnings from AMD and AAPL, book-to-bill ratios, and a triple witching expiration week could all conspire to make the next three sessions extremely volatile. Rather than adding a host of new plays in this uncertain environment, we've put together a bonus Tuesday Watch List for your perusal. * Aetna, Inc. - AET - close: 50.87 change: +1.03 WHAT TO WATCH: Although there's no longer an index to gauge the collective performance of the insurance group, a quick glance at some of the larger stocks (ALL, AIG, CB, CNA, SPC) reveals a notable lack of strength. Some are in the midst of a multi-week selloff, while others are mired in a more serious downtrend. AET, on the other hand, is actually threatening to break to multi-year highs. Short-term traders looking to capture the breakout could target a move over $51.00. This would clear the way for a rally to the next level of psychological resistance at $55. --- Alliant Techsys - ATK - close: 70.40 change: +0.86 WHAT TO WATCH: Aggressive short-term traders may want to take a look at ATK. The stock split 3-for-2 on June 10th and has since behaved in a very bullish fashion. Shares pulled back slightly last week before rocketing to an all-time high on Monday. Helping to drive the stock higher was a powerful rally in the DFX.X defense index, which seemed to benefit from the Bush Administration's hawkish rhetoric towards Iraq. ATK continued higher today with another 1.2% gain, closing over the psychologically important $70 level. With no overhead supply, traders can consider bullish positions on a break above today's high of $70.77. We'd be looking for a near-term move to the $75- $80 region. --- Electronic Arts - ERTS - close: 65.62 change: +0.41 These days it isn't easy to find a software stock that's trading near 52-week highs, but this video game producer fits the bill. ERTS has just broken out of an extended consolidation period and is currently on a double-top p-n-f buy signal. With the MACD about to produce bullish crossover, a test of the 52-week high ($66.92) appears likely. Entries can be considered on a move above this level, while more cautious types may want to wait for a pullback to the $63-$64 area. --- Philip Morris, - MO - close: 54.94 change: +0.00 Big Mo is looking pretty tired....BUT. Since February, MO has used its 50-dma as a point from which to start new upward advances. MO has been closing on or around its 50-dma for the past three days. While that sounds bullish--and it might be--its weekly chart is less convincing. This is one of those stocks that's sitting right on a fence. If you go long, a close below the 50-dma should be telling you a mistake might have been made. If you short it, and it starts closing above the 50-dma, you also have a problem. Wait a day or two and see if we get any more guidance from the technicals. --- Patina Oil & Gas - POG - close: 36.16 change: +0.71 WHAT TO WATCH: We strongly considered adding POG to our Play List tonight, but were dissuaded by the fact that the stock has risen four days in a row. Other than the possibility of some short- term consolidation, POG looks like a technical winner. Shares have plowed above both the 50-day and 20-day moving averages, the latter of which had acted as resistance for almost a month. The oscillators are encouraging as well, with the MACD on the verge of a bullish crossover and daily stochastics shooting towards the overbought. Our positive outlook for POG is bolstered by the OSX.X oil service index. It's been trending higher since September and recently bounced from the bottom of its regression channel. The OSX also boasts a bullish MACD. If the sector continues to move higher, we'd expect POG to make a near-term move to the $40 region. Entries can be evaluated at current levels (that would be the aggressive approach) or on a pullback to the 50-dma at $35.03. --- TXU Corp - TXU - close: 52.19 change: +0.61 WHAT TO WATCH: TXU has rebounded nicely from its 200-dma and is displaying a bullish MACD. Although the 50-dma at $53.34 may provide resistance, aggressive traders could target a move over today's high ($52.49). If the recent uptrend continues, shares could stage a near-term rally to the $56 level. ------------- MORE TO WATCH ------------- Autodesk, Inc. - ADSK - close: 14.00 change: +0.42 ADSK was up strong on a day when everything else struggled. It has now moved into a fast move region, above $14.00, which has the potential for advancing to $15.50 within a few days. --- SpeedFam - SFAM - close: 4.84 change: +0.19 SFAM has formed a very nice triangular consolidation over the last 6 weeks. The stock trades above its 50-dma and has positive technicals (RSI, Stochastics, MACD). With a little help from a rising NASDAQ, this stock could break out. Wait until it is above its upper boundary, at $4.92, before diving in. Please note that this is a stock that may only trade 50k - 100k per day. --- Shako Stores, Inc. - SKO - close: 20.43 change: +0.77 After consolidating for nearly 7 weeks, SKO shot up to its 50-dma today, closing just beneath it on good relative volume. Once above $20.72--which is also above the 50-dma--the stock will be in a breakout from its declining trend line. Its RSI has already begun its breakout. This looks like a good long once triggered. ================================================================= 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 Tuesday 06-18-2002 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/f18b_2.asp ================================================================= In section two: Net Bulls Bullish Play Updates: MSFT Stock Bottom / Active Trader New Bullish Plays: TOL Bullish Play Updates: KCP, N, OHP, THC Bearish Play Updates: ACV, CBE, FBN High Risk/Reward Bullish Play Updates: AMZN, BGEN, INTC, JCI, KSWS Bearish Play UPdates: PPL, RATL Closed Bullish Plays: CNXT Split Trader Stock Splits SBCF: 3-for-1 split announcement Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================== Net Bulls (NB) Tech Stock section ================================================================== =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Microsoft - MSFT - close: 55.99 change: +0.31 stop: 52.93 Our long play in MSFT was triggered yesterday at $55.66. Following a strong performance that saw shares hitting a multi- week high of $56.44, today's performance was more subdued. Shares traded in a relatively narrow 94-cent range and finished the day with a 0.55% gain. Of course, that isn't too shabby when you consider the NASDAQ posted a small loss. In addition to this relative strength, it's also encouraging to see that MSFT continues to distance itself from the top of its descending regression channel. The uptrending RSI, MACD, and daily stochastics suggest that MSFT could make a near-term move the $58 level. New entries can be gauged on a move over $56.44 or a dip to the 50-dma at $53.47. How the market reacts to tonight's earnings report from ORCL will likely have an impact on MSFT tomorrow. The world's second-largest software company--Oracle (ORCL)--was trading higher in after-hours on better-than-expected Q4 results. Barring any unforeseen developments (negative conference call, brokerage downgrades, etc), we'd expect this news to lend a bullish bias to the software sector on Wednesday. Of course the negative earnings news from AMD (the chipmaker) and Apple could outweigh any bullish sentiment from ORCL. Traders looking for new positions may want to sit back and wait to see how the market reacts tomorrow. Picked on June 17h at $55.66 Change since picked: +0.33 Earnings Date 07/15/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============= AT New Plays ============= ----------------- New Bullish Plays ----------------- Toll Brothers - TOL - close: 29.52 change: +0.61 stop: *text* Company Description: Toll Brothers builds and finances single-family homes in middle- income and high-income residential communities. They have communities in 21 states. Why We Like It: Better than expected Housing Starts data released before the opening bell this morning sent housing stocks--typified by the Dow Jones US Home Construction Index (DJUSHB)--spiking higher. Toll Brothers was a beneficiary of the housing report and strong sector action, enjoying a 2% advance on an otherwise dreary, quiet trading day. TOL was also still wearing its halo from Legg Mason's reaffirmation of a "buy" rating on Monday. As PI readers may know, we have recently been of the opinion that the housing sector was a bit toppy, and that still may be the case. However, TOL is exhibiting the kind of technical formations that lead to attractive price breakouts, and we believe there is more reward to this play than risk. The attached chart shows that TOL has just recently moved back above its rising 50-dma after spending nearly 6 weeks in a normal, uneventful consolidation. Although prices have yet to break above their declining trend line, TOL's RSI has accomplished this. Since the RSI is a leading indicator--it frequently breaks out or breaks down a day or two before prices--we feel that TOL is nearing the point at which it will begin an attractive advance. Our strategy will be to go long TOL once it moves above near-by resistance; that is, we'll go long on an advance above $30.35. Our initial sell stop will be placed below the lows of the past several weeks, at $26.87; we'll move this up quickly once TOL has broken out. We are targeting an advance to the $34.00 over the next few weeks. Picked on June xx.xx at $xx.xx Change since picked: +0.00 Earnings Date 05/29/02 (confirmed) =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Kenneth Cole - KCP - close: 29.36 change: -0.04 stop: 26.95 *new* KCP rallied sharply with the broader market on Monday and spent most of today's session consolidating those gains. It's hard to make much of a 4-cent loss, but we do like how the stock found support at $29.00. On a technical note, we also like how the daily stochastics (5,3,3) are once again trending higher. If KCP continues to rise this week, bulls may face resistance near the 52-week high at $30.50. Aggressive traders looking to go long may want to wait for a move above this level. A pullback to the 50-dma $27.33 would also present a possible buying opportunity. Remember, we're shooting for an eventual move to the top of KCP's regression channel near $33. Conservative (or short-term) traders might want to consider taking their gains off the table if shares are unable to conquer psychological resistance at $30.00. Premier Investor currently has a 6.7% gain in this play. To reduce our risk in this long position, we've increased the sell stop to $26.95, just under the rising 50-dma. Picked on June 7th at $27.50 Change since picked: +1.86 Earnings Date 05/01/02 (confirmed) --- Inco Ltd. - N - close: 21.77 change: +0.27 stop: 20.99 We initiated this play with a relatively tight stop, based on our belief that the 50-dma would continue to act as support. Lo and behold, N successfully tested that level on Monday. The bounce continued into today's session, as shares posted a 1.2% gain. Nomura Australia commented today that Inco's Voisey Bay nickel deposit was large enough to create a worldwide surplus of the metal, thus driving its price down. The news did not seem to have a negative impact on N. Monday's bounce from the 50-dma ($21.19) is just what we wanted to see from this play. Today's bullish action has turned the daily stochastics (5,3,3) positive. If this oscillator is any indication, N is set up for a near-term move to the $23 level. Traders can target new entries on another pullback to the 50-dma, or alternatively, an intraday move over $22.00. Picked on June 14th at $21.42 Change since picked: +0.35 Earnings Date 04/16/02 (confirmed) --- Oxford Health - OHP - close: 50.95 change: +0.65 stop: 46.48 Nice reversal! On Friday we were feeling cautious on the HMO.X health provider index. It was displaying bearish oscillators and trending lower from what seemed to be a double top. A pullback to the 600-620 level seemed likely. Fast-forward two sessions, and what do you know? It's another all-time high for the HMO. This week's action has also reversed the downward trends in the index's MACD (which looked to be headed for a bearish crossover) and daily stochastics. OHP traded higher with the sector and is now within striking distance of the all-time high at $51.94. Shares have closed over $50.00 for two days in a row, which bodes well for an eventual rally to the $55 level. Bullish positions can be considered if OHP moves over $52.00 or bounces from the $49-$50 region. We're looking for the $50 level to now act as support. Although the official sell stop is at $46.48, a more conservative stop could be placed at $48.30 Picked on June 7th at $48.64 Change since picked: +2.31 Earnings Date 05/01/02 (confirmed) --- Tenet Healthcare - THC - cls: 76.54 chg: +1.84 stop: 72.83 *new* Last Friday we discussed the likelihood that THC would retest its 50-dma at $72.84. This outlook was based on the stock's downtrending oscillators and relative weakness versus the broader market. Our near-term view seemed to be confirmed by yesterday's failure to rally with the Dow Jones. This morning THC announced that it had agreed to pay $55 Million to settle allegations of inflated billing practices. Given the recent lack of strength, this news could have really tanked the stock. Instead, THC defied the bears' expectations and posted a 2.4% gain. That was enough to erase the previous four days' losses. The bullish price action also created reversals in the MACD and daily stochastics. This suggests that shares may soon rise above the all-time high at $78.00. At this time we're going to set an official exit price of $79.94. We'll close this play if shares trade at or above that level. Also note that we've bumped our stop up to $72.83, below the 50- dma. More conservative traders could use at stop just under $74.00. Picked on May 29th at $72.98 Change since picked: +3.56 Earnings Date 04/02/02 (confirmed) -------------------- Bearish Play Updates -------------------- Alberto Culver - ACV - close: 52.82 change: -0.08 stop: 53.01 Talk about cutting it close! ACV missed our stop-loss by just one cent yesterday. Fortunately the bears would not allow the stock to trade over $53.00. (On a related note, this provides a good example of why we usually place our stops a penny or two above/below obvious resistance/support levels. It really pays to give a stock that extra bit of breathing room!) ACV traded in a narrow 40-cent range today, ultimately posting a fractional loss. For some insight into what might be keeping a lid on the stock, take a look at the 20-dma. This level has acted as resistance over the past week, leading to a near-term trend of lower highs. If this trend keeps up the bulls will be hard-pressed to keep ACV above the relative low of $50.85. Given the stock's proximity to our stop-loss, lower-risk short positions could be considered on continued weakness below $53.00. Picked on June 14th at $51.14 Gain since picked: -1.68 Earnings Date 05/25/02 (confirmed) --- Cooper Industries - CBE - close: 42.45 change: +1.00 stop: *text* It's been an eventful news week for CBE. First came Monday's announcement that Standard & Poor had affirmed its credit rating on CBE, reflecting the company's "above-average competitive positions in moderately cyclical business, and a solid financial profile." Moody's and Fitch both followed suit on Tuesday, giving positive ratings to the $300M in senior unsecured notes that Cooper recently sold. The net result of all this news was a two-day gain in shares on CBE. The stock extended yesterday's bounce from the 200-dma and moved as high as $42.50 in intraday trading. Because CBE has not traded below Friday's low ($39.82), our play has yet to be triggered. Because we still think a break below this level could lead to some heavy selling, we'll leave our trigger in place for the time being. If the play does get activated, remember that our stop will be located at $41.87. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 04/23/02 (confirmed) --- Furniture Brands - FBN - cls: 35.75 chg: +0.17 stop: 36.76 Shares of FBN traded higher on Monday following last week's test of the 200-dma. This morning the stock traded within 10 cents of our stop at $36.76 before petering out and trading under the $36 level for the rest of the session. The oscillators are mixed-to- bullish, with the MACD leveling out in the oversold region and daily stochastics (5,3,3) beginning to curl higher. Due to the technical uncertainty and lack of any clearly defined action points, we would not recommend new positions at this time. What we'll be watching for is a close under $34.00 within the next few sessions. This could portend an eventual violation of the 200- dma at $32.27. Picked on June 7th at $35.12 Gain since picked: +0.63 Earnings Date 04/24/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Amazon.com, Inc. - AMZN - cls: 18.78 chg: +0.37 stp: 16.19 Amazon is still trying to corner the market on all consumer goods and its new ploy could just help it accomplish that goal. The Internet-based merchandiser said that it will now ship all orders over $49.00 for free to customers. Heck, I can stay home in my PJs and order everything I need now: no gas, no traffic hassle, no more speeding tickets! Previously, AMZN only shipped orders without a fee if customers spent over $99. Top Amazonian Jeff B. did his hype on CNBC tonight, after the stock posted an attractive 2% gain today in an otherwise lackluster market. Our initial profit target remains at the $22 level, although trigger happy traders may wish to grab gains if the stock suggests any hesitancy at the $20.00 resistance region. Our offical sell stop remains at $16.19. However, if you're a risk-adverse investor, you might wish to use a higher stop--$17.66--capable of protecting at least a 5% gain. Picked on June 14th at $16.82 Gain since picked: +1.96 Earnings Date 04/23/02 (confirmed) --- Biogen - BGEN - close: 42.90 change: -1.11 stop: 41.10 The Biotechnology Index (BTK) took a breather today, and so did BGEN. USB Warburg threw a bit of water on the stock's recent sizzle by initiating coverage with an uninspiring "hold" rating. Today's dip left us down on this short position with a nominal 1.5% loss so far. We still look for BGEN to advance all the way to the top of its gap in the $47.00 - $48.50 area. However, we'll need to see the stock find some support over the next few days, in the $41.50-$41.80 region, if we are too keep the faith. Picked on June xth at $43.60 Gain since picked: -0.70 Earnings Date 7/18/02 (confirmed) --- Intel Corp. - INTC - close: 22.02 change: -0.54 stop: 19.84 *new* After the markets closed today, INTC looked pretty perky, rebounding after hours on ORCL's good earnings report. But then AMD preannounced lower EPS estimates for this quarter; Apple did something similar; then--jeezel pete, guys, give us a break will ya--INTC said it would take a 100 million dollar charge in order to exit the web hosting business. The last bit of cross current came when the Semiconductor Book-to-Bill for May was reported. It cranked in at a reading of 126, the highest level in nearly two years. Hopefully this last bit of information will be the item that sets the tone for tomorrow's trading in INTC. Our long play in INTC was initiated today when the stock moved above our trigger of $22.77. We've set an initial sell stop at 19.84, just below support. If you are really nervous about this market, you might elect to use a higher level, at $20.89. Please remember that our profit target remains at the $26.00 level. Picked on June 18th at $22.77 Gain since picked: -0.75 Earnings Date 10/15/02 (unconfirmed) --- Johnson Controls - JCI - close: 85.94 change: +0.59 stop: 79.94 JCI continues to move higher after the resolution of a short strike at 4 of its plants late last week. The stock is within spitting distance of pressuring its slightly declining 50-dma ($87.66) with today's intraday high of $87.10. If you are particularly bearish on this market, you may want to consider taking profits soon. With that said, the daily technicals on JCI continue to look quite healthy. The MACD is on a buy signal; the RSI is rising, as is the Stochastic Oscillator. New positions should probably be deferred until the 50-dma is decisively smashed. Picked on June 7th at $83.31 Gain since picked: +2.63 Earnings Date 07/18/02 (unconfirmed) --- K-Swiss Inc. - KSWS - close: 48.04 change: +2.03 stop: 44.71 Our $46.61 trigger was hit as K-Swiss spiked upward about 4% during Tuesday's trading. There was no news to explain this move, but we think it may have been related to KSWS's June 24th 2-for-1 stock split. If that's the case, we could be in for more of the same over the next couple of days....and we like that! Today's advance was on lower volume and that is a bit of a concern. For the time being, though, we're not going to whine. Traders should remember that there exists some resistance at $48.00; aggressive traders may want to take new positions as long as KSWS continues to trade nicely above this level. Although there is psychological resistance at the $50.00 level, we've estimated that KSWS can move to the $52.00-$53.00 region before experiencing another of its 4-6 week consolidations. Picked on June 18th at $46.61 Change since picked: +1.43 Earnings Date 07/25/02 (unconfirmed) -------------------- Bearish Play Updates -------------------- PPL Corporation - PPL - close: 31.04 change: +0.76 stop: *text* PPL keeps sneaking around us like a slippery piglet. Last night we announced a revised approach to attempting to short: we'll wait for the sneaky think to move up into the $31.60 - $32.50 region; we'll only short it if PPL trades into this region. So far we've not been triggered. Once--and if--the trade is finally triggered, we'll use a buy stop of $33.22. As we said last week, we think this stock is capable of falling briskly over several weeks to its next major support, which is in the $24.00 region. Traders may recall the Public Utilities Commission on Pennsylvania has indicated it is investigating PPL for price gauging. Picked on June xth at $xx.xx <- see text Gain since picked: +0.00 Earnings Date 7/18/02 (unconfirmed) --- Rational Software - RATL - cls: 10.80 change: -0.53 stop: *text* The Software Index (GSO) was down less than 1% today, while Rational Software was hit hard for a 5% loss. A downgrade from JPM Securities was behind this proportionally greater weakness, and today's action continues to support our interest in shorting this stock. We are still waiting for RATL to move below our trigger point, which remains at $9.94 (or lower). Once we are short we'll employ a tight stop at $10.37. Although RATL may attempt to find support at the $9.00 level, we believe that a much deeper decline, to the $7.50-$8.00 region, is likely. Picked on June xxth at $xx.xx <- see text Change since picked: +0.00 Earnings Date 04/24/02 (confirmed) =============== HR Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Conexant Systems - CNXT - close: 4.69 change: -0.05 stop: *text* We've been waiting for several days for Conexant to move above out trigger point before going long. That trigger was at $5.40-- and is now quite far from CNXT's Tuesday closing price. Accordingly, we are dropping this play without if having ever been initiated. Might we consider it in coming weeks? Perhaps. Picked on June xth at xx.xx <- see text Change since picked: +0.00 Earnings Date 04/17/02 (confirmed) ================================================================== Split Trader (ST) section ================================================================== Split Announcements ------------------- Seacoast Offers 3-for-1 Stock Split After the opening bell this morning, word came from Seacoast Banking Corp. of Florida (NASDAQ: SBCF) that its Board of Directors had approved a 3-for-1 stock split. The additional shares will be issued on July 15, 2002 to stockholders of record on July 1, 2002. This marks the second split for SBCF since it began trading in 1983. SBCF closed at $48.08 on Monday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=SBCF About the company Seacoast Banking Corporation of Florida has approximately $1.2 billion in assets. It is one of the largest independent commercial banking organizations in Florida, headquartered on Florida's Treasure Coast, one of the wealthiest and fastest growing areas in the nation. (source: company website) ================== 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 TXU TXU Corp 52.19 +0.61 VLO Valero Energy 39.43 +0.66 SGR The Shaw Group Inc 32.35 +0.64 HOV Hovnanian Enterprises 35.28 +1.08 POG Patina Oil & Gas 36.16 +0.71 ISLE Isle of Capris Casinos 19.06 +1.76 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change HDL Handleman Co 13.89 +1.69 BLI Big Lots Inc 18.90 +1.04 IMCL Imclone Systems 11.08 +1.40 CENT Central Garden & Pet Co 17.10 +1.10 USNA Usana Health Science Inc 7.66 +1.02 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change BPOP Popular Inc 33.11 +0.66 FDP Fresh Del Monte Produce 28.79 +1.79 LMT Lockheed Martin Corp 68.25 +1.49 INTU Intuit Inc 48.34 +1.44 CTX Centex Corp 55.30 +1.65 CVH Coventry Health Care Inc 34.20 +2.74 SIE Sierra Health Services 21.55 +1.57 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change BBY Best Buy Co Inc 39.01 -3.25 FMX Fomento Economico Mex 40.46 -1.04 PYPL Paypal Inc 20.50 -1.90 USTR United Stationers Inc 33.98 -2.03 RLRN Renaissance Learning Inc 25.46 -1.48 KEX Kirby Corp 25.15 -1.75 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change NOVN Noven Pharmaceuticals 25.27 -2.18 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. 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