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Daily Newsletter, Monday, 10/21/2002

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PremierInvestor.net Newsletter                 Monday 10-21-2002
                                                  section 1 of 2
Copyright  2002, 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:      Running On Empty
Watch List:       ABF, BUD, CEFT, DJ, PG, MMM, and more...
Play of the Day:  Time For A Pullback


******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
10-21-2002                  High    Low     Volume Advance/Decl
DJIA     8538.24 +  215.84 8547.83 8230.50   1701 mln  1401/279
NASDAQ   1309.67 +  21.81  1312.53 1267.76   1564 mln  1150/391
S&P 100   456.24 +   7.22  456.91  443.22    totals    2551/670
S&P 500   899.72 +  15.33  900.69  873.06
RUS 2000  368.63 +   5.26  368.63  360.59
DJ TRANS 2338.53 +  59.44 2339.50  2263.47
VIX        38.91 -   0.91   41.27   38.47
VIXN       52.34 -   2.99   57.60   50.71
Put/Call Ratio 0.73
******************************************************************


===========
Market Wrap
===========

Running On Empty

We saw a host of technical barriers fall today, and this bear is 
back in hibernation for the time being. We saw the Dow, S&P 500, 
Nasdaq Composite and OEX all break through support levels from 
the head and shoulders patterns they had formed on the way down 
from the end of August to beginning of October. They also broke 
through two Fibonacci retracement levels, of both recent rallies 
and declines.  They now look poised to test the shoulder tops of 
those previous H&S formations, which should provide the next 
level of resistance.  The Dow finished the day up 215.84, to 
close at 8538.24. The Nasdaq Composite was up 21.81 to close at 
1309.67.  So, why am I not more bullish at this point?  We 
cleared out resistance and rallied just far enough to find more. 
We may still have a couple hundred Dow points to the upside, but 
we are now heading into the next ceiling.  Whether it is made of 
glass, or concrete, is the big question. I am not going to stand 
in its way, but I haven't bought too many out of the money calls, 
either.  Another level to note is 900 in the S&P 500.  It was the 
S&P hitting its July low that seem to trigger the recent rally 
and if it cannot breakthrough 900 (the high today was 900.69), 
the rally could be ending before we even get to the levels 
highlighted below. 

Chart of the Dow


Chart of the SPX


Chart of the OEX


Chart of the COMPX


Last week, we saw a run up to the above mentioned resistance 
levels.  After reaching those levels, the broad market indices 
fell back slightly, regained their legs and then uncoiled to the 
upside this morning.  This looks bullish for the short term, at 
least until we hit those shoulder tops, outlined above.  What I 
am still having a hard time with, is the fact that the economic 
numbers are anything but outstanding.  Even those companies that 
are reporting earnings in line with expectations, or beating 
them, are giving cautious statements.  Here is a sample of some 
of the statements we've heard a third of the way into the fourth 
quarter.

From 3M, which met expectations and placed yearly earnings near 
the high end of previous expectations: "Looking ahead, there are 
no clear signs of improving global economic conditions."

From Microsoft CEO Steve Ballmer, which beat expectations last 
week and surged on higher than expected revenue: "We're not 
trying to say that we think the sales results of our first 
quarter will be sustainable, it is kind of a one time anomaly.  
We're still seeing business as being reasonably tough, at least 
compared to let's say the good old days, reasonably tough around 
the globe."

From EMC: CFO Bill Tueber said that there was "no indication that 
IT spending will recover in the short-term. In fact, I believe 
the IT spending environment eroded further at the tail end of 
(the third quarter) and that any optimism companies had about 
things getting better had dissipated by the end of the quarter."

From Sun Microsystems: CFO Steve McGowan said, "Given the 
uncertain economy, giving a relevant revenue forecast is 
difficult. We look to be profitable in the second half of fiscal 
year 2003."  CEO Scott McNealy said "I am out of the forecasting 
game," and that trying to evaluate revenue outlooks for SUNW was 
"wasted energy."  Sun just reduced its capex for 2003 by 75%.

Regarding automakers:  The head of the Center for Automotive 
Research in Ann Arbor, Michigan said," Over the last 30 or 40 
years, this is probably the most difficult time that they've had. 
It's very challenging.  What I think is most interesting is the 
speed with which things came apart on them ... It's just not 
something that you expect to see happen that quickly."  This 
statement came in spite of GM beating earnings expectations by 
$0.21.

We also have to keep the rally in perspective, much like the 
previous drop.  A common sense look at the almost 2000-point drop 
between August and October, leading up to the recent bounce, just 
"looked" oversold and due for a reversal, or at least an 
temporary one.  By the same token, the current rally looks 
awfully extended and seems due for a correction some time soon. 

A look at the bullish percentages now shows the market bounce 
looking awfully extended.  The Dow has rebounded from a low of 
8%, to a current reading of 50%.  The bearish resistance line for 
the Dow is just above, at 58%.   The SPX has rebounded from a low 
of 20%, to a current reading of 42%.  The NDX has bounced from 
14% to 46%.  While the extreme recent volatility has certainly 
caused big swings in these numbers, which represent the number of 
stocks in an index currently giving point and figure buy signals, 
the risk seems to have shifted from being short at oversold 
level, to being long after an exhaustive rally.

The Index of Leading Economic Indicators came out this morning, 
showing the fourth straight monthly decline. Five of the ten 
indicators fell, including stock prices, average weekly initial 
claims for unemployment insurance, interest rate spread, 
manufacturers' new orders for nondefense capital goods, and index 
of consumer expectations.  The Coincident Index was flat, but 
continues to show a weak economic recovery.

Why am I raining on the parade? The resistance levels were 
significant and only a market with a decent number of buyers 
could blow through these levels.  It appears that we are seeing a 
massive asset allocation from bonds into stocks. The bond market 
is seeing selling over the last week, while the Dow and other 
indices are rallying.  This may be due to pension funds and 
institutional investors getting back into stocks, as they reached 
their July lows and the valuations became more attractive.  
However, a look at the bond market shows the sell-off approaching 
support levels, so we should keep an eye on these points as an 
indication of when the allocation may pause, at the very least.

Chart of the 5-year Treasury


Chart of the 10-year Treasury


One sector to watch is the semiconductors. A look at the 
Semiconductor Sector Index (SOX.X), which is usually a good 
indication of tech demand, shows an impressive run.  The index 
has broken out of its descending channel and broken its 50-dma.  
While there is no doubt that there has been a trend line break, 
one of the more interesting developments has been the group's 
behavior in regard to its 50-dma. Back in August, this sector 
couldn't hold its breakthrough of that barrier, even though the 
Dow, S&P and Nasdaq all experienced continued runs after they 
broke out.  I saw that as a sign that all was not well back then 
and I may not get that same signal this time.  That does not mean 
that I think everything is fine, just that the charts may not 
bear me out.  Back in August, the SOX did break the 50-dma at 
that time, but was unable to hold it. It broke through once again 
today, and I think this sector will be a good indicator as to 
whether the rally will hold. If it does not, it could be the 
anchor that weighs down the rally, in addition to the action in 
the bond market. After the bell, Texas Instruments (TXN) said 
they expect sales to slide 10% in the current quarter.  This was 
far worse than expectations of a 1% drop and the stock, which 
closed at $17.12, was trading $14.02 after hours. I would expect 
the 50-dma to fail on the TXN warning and we'll look to see just 
how bad the failure is before predicting its effect on the 
broader markets. 

Chart of the SOX



Another issue that keeps showing its head is the pension plan 
problem.  GM has gotten plenty of publicity for its pension plan 
being underfunded by as much as $20 billion this year alone.  
However, a report in this weekend's Barron's suggested that 
almost half of the pension plans for the S&P 500 are underfunded, 
which seems to be a waiting time bomb, as companies are required 
to find cash to fund the programs.  Morgan Stanley estimated that 
there was a $300 billion shortfall in 2002, which is money these 
companies will have to come up with over the next few years and 
will come from corporate cash flow.  Many pension plans were 
heavily invested in the stock market and relied on continuing 
business as well.  In the current environment, this number could 
grow, turning into a rolling snowball.

I have avoided the Martha Stewart ongoing soap opera for some 
time now, as the file-in-the-cake recipe jokes have gotten a 
little old. However, it appears that the home economics queen is 
looking at some deeper trouble.  The SEC is apparently getting 
ready to file a civil securities lawsuit against Stewart, which 
may prevent her from serving as director of a publicly traded 
company, such as Martha Stewart Living Omnimedia (MSO).  On the 
positive side, if the SEC is concentrating its efforts on a civil 
suit, it would indicate they aren't seeking a criminal complaint 
involving jail time. 

United Airlines (UAL) announced another 1,250 job cuts today, as 
it struggles to avoid bankruptcy.  Airlines are currently seeing 
a wave of selling in airline debt securities, as well, making it 
that much more difficult for them to raise the cash they need.  
UAL has already warned that they may seek bankruptcy if it cannot 
get federal loan guarantees and wage concessions. J.P. Morgan 
increased its loss estimate for Northwest Airlines (NWAC) and 
narrowed its loss estimate for Continental (CAL).  JPM's analyst 
said that the airline industry lost $1.6 billion in the third 
quarter and that revenue trends have not shown much improvement.  

We have seen a convincing rally in the broader markets.  However, 
be careful of long positions here and keep your stops very close, 
as I am getting the feeling that we may be running out of steam 
soon. I say keep your stops close, because there is no reason to 
limit upside profits while the momentum is still heading that 
way.  Just make sure not to fight a sinking tide if it does turn.  
Enjoy the euphoria, but keep a few puts in your pocket just in 
case. 

Steven Price


==================================================================
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
---------------------------------

Airborne Inc - ABF - close: 12.61 change: +0.35

WHAT TO WATCH: Here's a possible play for all you aggressive 
traders.  ABF recently bounced back from its relative lows near 
$10.00, despite an earnings warning last week.  Rising fuel costs 
were blamed as one of the primary reasons for the reduced profit 
outlook.  With President Bush toning down his hawkish stance on 
Iraq, crude oil futures (cl02z) have started to fall from 52-week 
highs.  This development helped to send ABF above its 50-dma 
($12.43) on Monday.  Now that this resistance level has been 
cleared, the bulls may be able push shares up to the $14.50 area.  
Those with a shorter-term timeframe could target the September 
high at $13.82.  ABF announces earnings on October 31st.  




---

Anheuser Busch - BUD - close: 54.97 change: +0.92

WHAT TO WATCH: Alcoholic beverage stocks frothed higher today 
after RKY received a pair of brokerage upgrades.  Although the 
positive comments were not based on any improving sector 
fundamentals, shares of BUD traded higher with its competitor and 
tagged an all-time high.  Investors also appeared to be pleased 
with the company's announcement that it had increased its stake 
in China's Tsingtao Brewery.  This will put BUD in a better 
position to take advantage of the growing Chinese market.  
Technically, the ascending triple-top breakout on the point-and-
figure chart bodes well for a move to the $60 level.  Of course, 
the bulls will still have to deal with psychological resistance 
at $55.00, which was today's high.  Bullish entries can be 
considered on a move above this level.




---

Concord EFS - CEFT - close: 16.91 change: +0.56

WHAT TO WATCH: This NASDAQ-100 component has seen a steep rebound 
from the $12.50 support region, and shares are now trading just 
below the 50-dma at $17.07.  With CEFT already technically 
overextended, speculative bears can target short positions at 
current levels.  A rollover could lead to a retest of the $15.00 
level.  On the other hand, a move above the 50-dma might provide 
an entry point for aggressive traders.  Such a breakout would be 
accompanied by a triple-top buy signal on the p-n-f chart.  
Shares may already be overbought, but the sight of CEFT trading 
at relative highs might convince more shorts to cover their 
positions.  In terms of upside profit-targets, we'd be looking 
for a rally to the $19-$20 area.  




--- 

Dow Jones Co - DJ - close: 36.84 change: +1.21

WHAT TO WATCH: Publishing stocks have been trading strong over 
the past week, and DJ is no exception.  Shares have rebounded 
sharply from the relative lows near $30.  What makes this bounce 
really impressive is the fact that the company's October 10th 
earnings release featured declining profits and weak ad revenues.  
Judging by the way DJ has maintained its gains, investors seem to 
think that the future outlook may be rosier.  The stock is 
looking technically strong, with today's action producing a 
breakout above short-term resistance at $36.60.  A move above 
$37.00 would clear the way for a rally to the 50-dma at $39.57.  
However, be aware of possible resistance at $38.00.





---

Callaway Golf - ELY - close: 11.84 change: +0.30

WHAT TO WATCH: Shareholders of ELY suffered a painful gap lower 
on September 27th after the company lowered guidance for the 
third quarter.  These reduced estimates were slightly exceeded by 
last Thursday's earnings report.  This development, combined with 
an upgrade from AG Edwards, helped to push the stock above 
resistance on Friday.  With ELY now beginning to fill in its void 
on the daily chart, aggressive traders can think about going long 
on a move above $12.00.  Such a move would pave the way for a 
rally to the 50-dma at $13.26 (which also happens to be the top 
of the gap).  The upturning daily stochastics (5,3,3) indicate 
that shares will see more upside in the near-term.  Bulls can 
also be encouraged by the recent reversal on the point-and-figure 
chart.


 

--- 

Procter Gamble - PG - close: 92.19 change: +0.44

WHAT TO WATCH: PG has shown great relative strength over the past 
two months.  Shares held firm even while the Dow was tanking to 
new lows.  This may due to the fact that Procter's products are 
somewhat recession-proof.  After all, items like shampoo and 
toothpaste with always be in demand, regardless of the strength 
of the economy.  Now that the broader market climate has become 
more favorable for bulls, PG could soon be trading at 52-week 
highs.  Our own Jeff Bailey is feeling quite bullish on this one, 
and he suggests entries on a move above $92.50.  Although 
possible resistance looms overhead at $93.50 and $95.00, the 
rising oscillators indicate that a breakout could be imminent.  
P-n-f chartists will also note that a trade at $93 will create a 
double-top buy signal.  As far as upside targets are concerned, 
short-term traders could look for a move to the $100 level.  




---

3M Corp - MMM - close: 129.00 change: +3.69

WHAT TO WATCH: Triple-M pleased investors today with earnings 
that were in-line with analyst expectations and full-year 
guidance near the top of the previously announced range.  
Although the stock has already risen sharply from the recent lows 
near 112, a breakout to new highs could send MMM to the next 
level of psychological resistance at $140.  Long entries can be 
evaluated on a move above $131.  Alternatively, a pullback to 
$125 might also provide an action point.  Daily stochastics are 
pinned at overbought, but the bullish p-n-f chart indicates that 
MMM could continue to rise in the short-term.




--- 

Triad Hospitals - TRI - close: 39.81 change: +0.16

WHAT TO WATCH: TRI is a relatively slow mover, but shares may 
pick up speed if the $40.00 resistance level gives way.  There's 
little to prevent a rally to the $42.00 region if shares can make 
it above the relative high ($40.32).  This would provide a 
possible exit target for very short-term traders.  However, the 
point-and-figure chart indicates that TRI could eventually ascend 
to the $45.00 level.  The stock has broken about bearish 
resistance and is currently on a double-top buy signal.  Longer-
term traders can be encouraged by the rising action on the weekly 
stochastics.





=========================
Play-of-the-Day (BEARISH high risk/high reward play)
=========================

QLogic Corp - QLGC - close: 30.50 change: +1.89 stop: *text*

Company Description:
QLogic Corporation simplifies the process of networking storage 
for OEMs, resellers and system integrators with the only end-to-
end infrastructure in the industry, consisting of award-winning 
controller chips, host bus adapters, network switches and 
management software to move data from the storage device through 
the fabric to the server. (source: company press release)

Why We Like It:
There's been a lot of speculation that the semiconductor index 
(SOX.X) may have finally put in a bottom, but the bulls are going 
to have a heck of a time making their case if bad news continues 
to flow from the sector's leading companies.  Tonight it was 
Texas Instruments' turn to spook investors.  TXN reported 
earnings tonight that featured a solid increase in revenue and 
orders.  Sounds okay, doesn't it?  Unfortunately for shareholders 
the company also missed consensus estimates by one penny and then 
guided lower for the fourth quarter.  TXN said it anticipates 
revenue to fall by 10% in Q4, due in part to weakened demand for 
semiconductors.  They now expect a fourth quarter EPS of only 2 
cents - A painful reduction from the previous Wall Street 
estimates of 9 cents.  Shares were taken apart in after-hours 
trading and closed near $14.00, down nearly 18%.  Most of the 
other major chip stocks moved down in sympathy, leading us to 
believe that the SOX.X will gap lower on Tuesday morning.

And what about the SOX.X, anyway?  The past week saw the index 
finally break out of its descending channel.  This gave some hope 
to the bulls.  Today's close above the 50-dma (279) was another 
positive technical development.  However, a comparable breakout 
was seen in August (albeit with the SOX remaining in its channel) 
prior to a reversal and steep sell-off.  Tonight's bad news may 
lead to a similar rollover from the 50-dma.  Should this occur, 
we think QLGC offers one of the better shorting opportunities 
within the chip sector.  The stock shot higher last week after 
the company posted better-than-expected earnings and announced a 
stock buyback program.  That's fundamentally bullish, but we 
think shares are overextended at current levels.  QLGC has gained 
more than 50% in less than two weeks and looks ready to pull 
back.  With the stock sitting at the top of its descending 
regression channel and sector sentiment deteriorating after the 
TXN news, the bulls will have a very difficult time pushing QLGC 
higher.  Shares were already trading near $29.80 after-hours.  
Given the likely gap lower tomorrow, we're going to set an entry 
range for this play.  Our trigger will be set at $29.74.  
However, the play will not be activated if shares open below 
$29.25.  If we're triggered our stop will be set at $31.06, 
safely above the 50-dma.  More aggressive traders may want to use 
a stop just above bearish p-n-f resistance at $32.00.  Our 
initial profit-target will be in the $25.00 region, although we 
may lower that objective if the SOX begins to pick up bearish 
momentum.

Annotated chart - QLGC:



Picked on October xxth at $xx.xx <-- see text 
Results since picked:      +0.00
Earnings Date           10/16/02 (confirmed)







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The Premier Investor Network.
Do not duplicate or redistribute in any form.




PremierInvestor.net Newsletter                  Monday 10-21-2002
                                                   section 2 of 2
Copyright  2002, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================

In section two:

Stock Bottom / Active Trader
  Stop Adjustments:      SHFL  (bullish)
  Triggered Plays:       VIA.B (bullish)
  Closed Bearish Plays:  DIA, MAR, MWD

High Risk/Reward
  New Bearish Plays;     QLGC

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)


==================================================================
Stock Bottom / Active Trader (AT) section
==================================================================

===============
AT Play Updates
===============  

Stop Adjustments 
----------------

Shuffle Master - SHFL - cls: 23.15 chg: +1.25 stop: 22.39 *new*

SHFL launched higher by 5.7% today and reached a new multi-month 
high.  Shares are approaching our profit-target of $23.94, 
slightly below the April highs.  Today's strong performance 
indicates that this level will be reached within the next few 
sessions.  If the stock reverses course, our new stop at $22.39 
(just below intraday support) should protect a move of nearly 
+10% from our original entry point.





Triggered Plays
---------------

Viacom Inc - VIA.B - close: 46.50 change: +2.33 stop: 41.94

Our entry conditions for this play were met on Monday morning 
when shares reached our trigger at $45.11.  The stock trended 
higher for the rest of the session and finished with a 5.2% gain, 
solidly outperforming the broader market.  Although our initial 
stop is set at $41.94, conservative traders may want to use a 
stop just below Friday's low of $43.61.  With earnings 
approaching on October 24th, we would not reccomend new entries 
at this time.





===============
AT Closed Plays
===============

  --------------------
  Closed Bearish Plays
  --------------------

Diamonds - DIA - close: 85.42 chg: +2.32 stop: 85.01

The Dow Jones opened lower this morning, pressured by bad news 
from some index components.  Microsoft CEO Steve Ballmer 
commented that the strong uptick in Q1 sales was "a one-time 
anomaly."  Some had been hoping that these results were 
indicative of more sustainable growth.  Meanwhile, JNJ was 
dragged down after an arbitrator ruled that the company violated 
its license agreement with Amgen in the early '90's.  The Dow 
looked like it might finally be ready to rollover from its 50-
dma, but these bearish hopes were dashed by a powerful rally that 
occurred between 11:00-1:00.  Strength in shares of MO, JPM (up 
sharply on rumors that it might be bought out by ONE), HON, and 
HPQ helped to propel the Diamonds above resistance at $85.00.  
Our play was stopped out for a loss of $2.21, or 2.6%.  The 
modest volume behind today's rally suggests that a simple lack of 
sellers (rather than buying pressure created by institutions 
scaling into large positions) may have fueled the move higher.  
Regardless, the intraday dip-buying mentality is very bullish.  
Should resistance at 8600 fail, the Dow could eventually make a 
move to the 9000 region.

Picked on October 15th at $82.80
Results since picked:      -2.21
Earnings Date           xx/xx/xx 




---

Marriott Inc - MAR - close: 32.17 chg: +2.07 stop: 32.01

Quite a reversal of fortune for shareholders of MAR.  On Friday 
the stock was looking technically weak, having rolled over from 
the 50-dma.  The afternoon downtrend suggested that shares would 
continue to trade lower on Monday morning.  That's exactly what 
happened, as shares broke below $30.00 and moved under the 
previous session's lows.  Unfortunately all the selling was 
exhausted with the first hour of trading.  MAR followed the Dow 
Jones higher and sliced through the 50-dma.  Our play was closed 
for a loss of 4.1% when shares violated our stop at $32.01.  With 
shares breaking out of the descending regression channel, it 
looks like the bulls are firmly in control.  MAR is sitting just 
below bearish resistance on the p-n-f chart.  Shares might 
rollover from this level, but the rising daily stochastics are 
hinting at further upside.

Picked on October 15th at $30.74
Results since picked:      -1.27
Earnings Date           10/03/02 (confirmed)




--- 

Morgan Stanley - MWD - close: 38.38 change: +1.18 stop: 38.56

Morgan Stanley, we hardly knew ye.  This play was triggered on 
Monday morning at the opening price of $36.72.  Shares traded 
well under Friday's low but quickly rebounded with the broader 
market.  The overall financial sector seemed to benefit from 
rumors that Bank One (ONE) had targeted JPM as a take-over 
target.  This play was closed for a loss of 5.0% when MWD reached 
our stop at $38.56.  Bears can be encouraged that the stock 
pulled back at the end of the day and closed just below the 50-
dma ($38.39).  However, with the XBD.X broker/dealer index 
launching from resistance at 400, it looks like the overall 
sector may heading higher.  Traders still short may want to use a 
stop just above the $39.00 level, which acted as resistance this 
afternoon. 

Picked on October 21st at $36.72
Results since picked:      -1.84
Earnings Date           09/19/02 (confirmed)
 





==================================================================
HIGH RISK/HIGH REWARD (HR) section
==================================================================

=============
HR New Plays
=============

  ------------------
  New Bearish Plays
  ------------------

QLogic Corp - QLGC - close: 30.50 change: +1.89 stop: *text*

Company Description:
QLogic Corporation simplifies the process of networking storage 
for OEMs, resellers and system integrators with the only end-to-
end infrastructure in the industry, consisting of award-winning 
controller chips, host bus adapters, network switches and 
management software to move data from the storage device through 
the fabric to the server. (source: company press release)

Why We Like It:
There's been a lot of speculation that the semiconductor index 
(SOX.X) may have finally put in a bottom, but the bulls are going 
to have a heck of a time making their case if bad news continues 
to flow from the sector's leading companies.  Tonight it was 
Texas Instruments' turn to spook investors.  TXN reported 
earnings tonight that featured a solid increase in revenue and 
orders.  Sounds okay, doesn't it?  Unfortunately for shareholders 
the company also missed consensus estimates by one penny and then 
guided lower for the fourth quarter.  TXN said it anticipates 
revenue to fall by 10% in Q4, due in part to weakened demand for 
semiconductors.  They now expect a fourth quarter EPS of only 2 
cents - A painful reduction from the previous Wall Street 
estimates of 9 cents.  Shares were taken apart in after-hours 
trading and closed near $14.00, down nearly 18%.  Most of the 
other major chip stocks moved down in sympathy, leading us to 
believe that the SOX.X will gap lower on Tuesday morning.

And what about the SOX.X, anyway?  The past week saw the index 
finally break out of its descending channel.  This gave some hope 
to the bulls.  Today's close above the 50-dma (279) was another 
positive technical development.  However, a comparable breakout 
was seen in August (albeit with the SOX remaining in its channel) 
prior to a reversal and steep sell-off.  Tonight's bad news may 
lead to a similar rollover from the 50-dma.  Should this occur, 
we think QLGC offers one of the better shorting opportunities 
within the chip sector.  The stock shot higher last week after 
the company posted better-than-expected earnings and announced a 
stock buyback program.  That's fundamentally bullish, but we 
think shares are overextended at current levels.  QLGC has gained 
more than 50% in less than two weeks and looks ready to pull 
back.  With the stock sitting at the top of its descending 
regression channel and sector sentiment deteriorating after the 
TXN news, the bulls will have a very difficult time pushing QLGC 
higher.  Shares were already trading near $29.80 after-hours.  
Given the likely gap lower tomorrow, we're going to set an entry 
range for this play.  Our trigger will be set at $29.74.  
However, the play will not be activated if shares open below 
$29.25.  If we're triggered our stop will be set at $31.06, 
safely above the 50-dma.  More aggressive traders may want to use 
a stop just above bearish p-n-f resistance at $32.00.  Our 
initial profit-target will be in the $25.00 region, although we 
may lower that objective if the SOX begins to pick up bearish 
momentum.

Annotated chart - QLGC:



Picked on October xxth at $xx.xx <-- see text 
Results since picked:      +0.00
Earnings Date           10/16/02 (confirmed)





=================
  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 

PPD     Pre-Paid Legal             21.67     +1.51
CSC     Computer Sciences Corp     30.63     +0.79
CTXS    Citrix Systems              7.80     +0.65
RAH     Ralcorp Holdings           21.70     +0.56
PMI     PMI Group                  32.83     +0.95
ACAI    Atlantic Coast Airlines    13.17     +1.26

--------------------------------------- 
Breakout to Upside (Stocks $5 to $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

CREE    Cree Inc.                  16.08     +1.10
XRX     Xerox Corp                  6.98     +1.04
BPRX    Bradley Pharmaceuticals     9.97     +1.02
CHIC    Charlotte Russe            10.19     +1.19
ASMI    ASM International          11.19     +1.56
F       Ford Motor Co               9.55     +1.29
DCN     Dana Corp                  11.36     +1.13

--------------------------------------- 
Breakout to Upside (Stocks over $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

LXK     Lexmark Intl.              56.94     +1.19
IMN     Imation Corp               36.80     +1.20
RKY     Adolph Coors               68.00     +6.08
APPX    American Pharma.           21.39     +1.43
ARB     Arbitron Inc               34.20     +1.08
BG      Bunge Ltd                  25.20     +1.30
WFMI    Whole Foods Market         49.11     +2.38
PENN    Penn National Gaming       21.14     +1.48

------------------------------------------- 
Breakout to Downside (Stocks over $20) 
------------------------------------------- 
Ticker  Company Name               Close     Change 

DP      Diagnostic Products        43.98     -1.67
COO     Cooper Companies           53.60     -2.25
PQE     Proquest Co                26.50     -2.10
WEC     Wisconsin Energy           21.60     -1.73
WIT     Wipro Ltd                  30.05     -1.05
FII     Federated Investors        25.50     -1.97

----------------------------------------- 
Recently Overbought With Bearish Signals (Stocks over $20)
------------------------------------------- 
Ticker  Company Name               Close     Change 

FSBC    1st State Bancorp          24.53     -0.22




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