PremierInvestor.net Newsletter Thursday 11-14-2002 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: Dell Rocks Play-of-the-Day: Soaring Software Market Sentiment: In a Pinch ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 11-14-2002 High Low Volume Advance/Decline DJIA 8542.13 +143.60 8545.11 8403.69 1.81 bln 2334/ 881 NASDAQ 1411.52 + 50.20 1411.63 1378.94 1.72 bln 2337/1078 S&P 100 461.14 + 10.43 461.32 450.61 Totals 4671/1959 S&P 500 904.27 + 21.74 904.27 882.53 RUS 2000 386.24 + 10.13 386.24 376.11 DJ TRANS 2339.12 + 48.20 2339.24 2291.42 VIX 32.60 - 3.68 34.64 32.06 VXN 52.40 - 2.06 50.61 49.86 Total Vol 3,706M Total UpVol 526M Total DnVol 3,144M 52wk Highs 112 52wk Lows 147 TRIN 0.44 PUT/CALL 0.58 ************************************************************* =========== Market Wrap =========== Dell Rocks The AMAT earnings after the bell yesterday were grim with guidance for another -20% drop in orders in the fourth quarter and a forecast for another 6-9 months of declining chip demand. Dell hit estimates which were raised twice in the quarter and said the fourth quarter was shaping up for another rise in revenue. Both companies are heavily dependent on the current economy but they appear to be living on different planets. Dow Chart - Daily Nasdaq Chart - Daily The AMAT news was grim but the chip sector soared to a huge gain on the bad news. The SOX was up +23.48 with many chip makers breaking out to a new recent high. Obviously if you want logic don't look in the stock market. The consensus appeared to be that the bad news was already priced in after the recent AMAT restructuring news and everybody expected worse. That leads us to the following assumption. Dell posted what could only be called a remarkable quarter. When everyone else was growing +2% Dell grew +22%. They said they were continuing to steal market share from HWP and GTW and their server and notebook business was soaring. The server side of the business gained +27% for the quarter. Michael Dell said the fourth quarter was shaping for another +10% gain over the third quarter. Dell said business spending had stabilized and was no longer dropping. This brought back memories of the Dell of yesteryear. Constant growth at the expense of others and continued branching out into other tech areas where its business model would give it the edge over competition. Dell said it was turning over inventory 99 times per quarter and that gave them a price and feature edge over the other box makers. The bottom line to this story is that Dell is firing on all cylinders and kicking box maker butt. This is a strong win for Dell but only Dell. The only positive thing Dell said about the market was that IT spending had quit falling. Dell is gaining share from rivals not from business expansion and increased capital spending. However, the news "should" be positive for Dell stock but it was trading down in after hours. Surprised? You shouldn't be. The strong gains Dell stock posted in the last month were based on Dell raising/affirming guidance twice during the quarter. The good news was already priced into the stock, which was trading at six month highs. In later news the COO said on the conference call that "we are not sure the industry is going to see a particularly strong Q4 and that is the big question mark in our outlook. "IF" we see better industry numbers then we could do better." He must have been listening to the IBM call yesterday. Now for the assumption. If AMAT trades up after posting a grim quarter AS EXPECTED then should DELL trade down after posting a strong quarter AS EXPECTED? Dell dropped -$1 in after hours and Nasdaq futures were down -4.50 in early trading. This is of course temporary and tomorrow is another story. With the extreme bullishness exhibited today I would be surprised if the "business spending has stabilized" comment did not fuel some more gains. Bad news equaled good news again. The bad news was that retail sales were flat for October. This was also good news because the bottom did not fall out as many analysts had expected. Autos were the major cause of the flat line as the biggest decrease in sales. Without the auto anchor consumer sales actually grew +0.7% with winter clothing leading the charge. Adding to this "bullish" news was a minor drop in initial jobless claims of -8,000. The markets roared off at the open and you would have thought the total jobless claims were 8,000. The key number was the +89,000 increase in continuing claims, which indicates the number of people out of work is still growing. Also, the weekly number, which got so much positive press, was not even a complete number. The Veteran's Day holiday caused some data to be left out and this number will be revised next week. There was also no allowance for the increase in temporary holiday jobs causing seasonal dips in the jobless claims. The bottom line again was that traders wanted an excuse to buy stocks and this was the best one available. Remember it was just yesterday that Greenspan said there were "no signs of appreciable vigor" in the economy and warned we were in a "soft spot". That soft spot hit Sprint, which announced another -1,600 job cuts and Lehman Brothers, which announced -500 cuts after the close. They said their chief investment strategist Jeffery Applegate was also fired. Economics for tomorrow include Business Inventories, PPI, Industrial Production, Capacity Utilization and Michigan Sentiment. The Industrial Production and Sentiment are going to be the most important. The markets ran up to stop just under resistance once again and the internal market indicators are showing very overbought conditions. The Dow has strong resistance at 8550 and closed at 8541. Nasdaq at 1425 and closed at 1410. The SPX/OEX are both within a couple points of critical resistance levels. With option expiration tomorrow there is a good chance we will see some pinning at critical levels like OEX 460, SPX 900, Nasdaq 1400, DOW 8500. The exception to this forecast would be a breakout based on the Dell earnings, which would make no sense other than some positive sentiment since it is a Dell only story. A breakout over those levels mentioned above could generate significant short covering. Enter Very Passively, Exit Very Aggressively! Jim Brown Editor =============== Play-of-the-Day (New BULLISH tech play) =============== Kronos Inc. - KRON - close: 39.99 change: +0.49 stop: *text* Company Description: Kronos Incorporated is a single-source provider of integrated human resources, payroll and labor management solutions. Kronos products and services help organizations align their people, processes and technology to improve individual productivity and boost overall business performance. (source: company press release) Why We Like It: Tech bulls have had a lot to cheer about over the past month. Well, maybe we should qualify that statement. The latest round of earnings was hardly impressive, and the fundamental weakness brought on by a lack of IT spending hasn't shown any signs of improving. But this hasn't prevented the NASDAQ from rising more than 25% from its October lows. Buyers have been ignoring bad news (such as last night's AMAT earnings) in hopes that the steep uptrend will continue. And so far, it has. The NASDAQ retraced roughly 38% of its October/November rally and now appears to be headed for a test of resistance at 1425. A move above this level would set the stage for a rally to the 200-dma at 1514. With sector leader MSFT looking strong, the GSO.X software index has rebounded from support at 100 and is moving towards an encounter with its own resistance at 110. Stocks like KRON have helped to push the sector higher. Unlike many of its competitors, Kronos actually boasts solid growth. The fourth-quarter earnings report in late-October featured an EPS of 57 cents, which was 11 cents better than analyst expectations. The upside surprise helped to launch KRON from the $30.00 area. Shares finally rolled over from resistance at $40.00 and pulled back to the 200-dma at $36.03. This pullback alleviated some of the overbought conditions on the oscillators and gave the bulls a chance to catch their breath. Shares rebounded and traded above $40.00 on Thursday en route to a new multi-month high. The rising daily stochastics (5,3,3) and uptrending GSO.X are indications that KRON will experience another breakout in the near future. By entering this play on a move above today's high ($40.50), we're attempting to capture a rally to the $45.00 area. Those who are a little more ambitious could aim for a retest of the May highs at $46.40. Possible resistance looms at the $41.25-$41.50 area. The double-top buy signal created by a trade at $41.00 should help to push KRON above that obstacle. If our play is triggered we'll use a stop at $37.98, just under Wednesday's low. More aggressive traders may want to use a stop under the 200-dma. Annotated chart - KRON: Picked on November xxth at $xx.xx <- see text Results since picked: +0.00 Earnings Date 10/29/02 (confirmed) ================ Market Sentiment ================ In a Pinch by Steve Price Let's see, Applied Materials (AMAT) predicts a 20% revenue decline in the first quarter, and the semiconductor stocks jump 7%. Retail sales were flat in October and the sector rises 3%. Confused? Bulls looking to get into the market can certainly interpret data any way they want. And if they are going to keep buying, in spite of data that does not look promising, then the bears should step back and get out of the way. The Dow close over 8500 should throw up a big red flag, although 8550 is also strong resistance. I talked about the possibility of another head and shoulders formation taking place in the Dow and S&P 500 several days ago, and in order to get that formation we needed a bounce to form the right shoulder. The top of the left shoulder is 8550, so we are not in all-out bullish territory just yet. In fact, we could rally all the way to below 8800 in the Dow (925 SPX), and still see significant downside risk. If we do roll over below 8550, then look for a neckline break around 8300 to land us back below 8000 (downside measuring objective of 7750). The current bearish vertical count on the Dow's point and figure chart is 7850. Of course, that's the bear's view of the current market situation. Bulls will point to the higher low on the recent pullback and rebound back above 8500. While a 50-point range seems a little tight to draw conclusions from, this 50-point range contains two significant levels. A breakout above 8550 should give the buyers fuel and we could see a run back to 8800. A drop back below 8500 will help form the aforementioned right shoulder. There was some good news this morning. Initial jobless claims for the week ended November 9 dropped 8,000 to 388,000. More importantly, the 4-week moving average fell below the 400,000 barometer most analysts use as an indication for a weakening or improving economy. The median home price in the U.S. also rose 7.2% to $161,800, indicating that buyers are still outstripping supply. After the bell, Dell released earnings that met expectations and said that next quarter should see an increase in revenue of 20% year over year. It pegged revenue at $9.7 billion, which was actually slightly below some expectations of $9.9 billion. When asked if the company had seen an increase in IT budgets, CEO Michael Dell said there had been more of a re-allocation than an increase. The stock traded down 0.90 after hours to $30.06. Gap Stores also reported after the bell and beat expectations by a penny. The retailer, which also owns Banana Republic and Old Navy, said that it would remain cautious going forward, though, until its business shows consistent results. It also said capex for the full year 2002 would be down in the low $300 million range, from previous estimates of $360 million. Tomorrow's economic plate includes PPI, business inventories and the preliminary University of Michigan Consumer Sentiment report. We should definitely get a feel for which direction the rally is headed. We haven't seen less than a 100-point intraday range in the Dow since the middle of September, so the chances of trading between 8500 and 8550 are fairly remote. Dow 8537.13 is where we ended last week, so for all the triple digit movement, we are up only 5 Dow points for the week. We are up 10 in the SPX. The Nasdaq is the big winner so far, up 52.24, after a gain of 50.18 today. With the COMP at 1411.52, a rally could once again test the August high of 1426. If we break that level, then it doesn't make sense to lean short, regardless of the action in the rest of the market. However, if we fail there, and at Dow 8500 (and SPX 900), then it appears that we can ride the range back down to 8300 for the short term and possibly much lower with a move under 8300. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10673 52-week Low : 7286 Current : 8542 Moving Averages: (Simple) 10-dma: 8534 50-dma: 8173 200-dma: 9237 S&P 500 ($SPX) 52-week High: 1176 52-week Low : 775 Current : 904 Moving Averages: (Simple) 10-dma: 899 50-dma: 867 200-dma: 992 Nasdaq-100 ($NDX) 52-week High: 1734 52-week Low : 795 Current : 1057 Moving Averages: (Simple) 10-dma: 1026 50-dma: 928 200-dma: 1140 ----------------------------------------------------------------- The Semiconductor Index (SOX.X): AMAT predicts a 20% revenue decline and says it sees no turnaround anytime soon in the chip sector - and the SOX jumps 8% to 319.13. If you listened only to the comments coming out of the sector, and viewed only the IT spending trends, you would short every chip stock on the board. If you looked only at the charts and completely ignored forecasts and comments about the industry, you'd be buying. Therefore, I am still struggling with jumping on board long to a sector that has no visible turnaround. However, shorting the sector, given the current buying and blast through resistance at 300 and 310, also seems foolish. I'm going to close short positions here until I see an appreciable downtrend, however I haven't quite convinced myself to hang on for a ride up yet, either. 52-week High: 657 52-week Low : 214 Current : 319 Moving Averages: (Simple) 10-dma: 308 50-dma: 270 200-dma: 417 ------------------------------------------------------------------ Market Volatility All of a sudden, everything is alright. A Dow rally over 8500 and the VIX drops into the low 30s. I wonder what will happen if we end up testing 8400 again. Actually, the big firms don't seem too worried about that possibility, since you don't get a 3.68 drop in the VIX without some institutional selling. If we continue upward tomorrow, we could see the VIX testing 30 on expiration Friday, as firms who sold November premium buy it back in for pennies and roll out to short December positions. November is no longer included in the VIX calculation, so a big drop in the December at the money premium levels could possibly even lead the VIX below 30. CBOE Market Volatility Index (VIX) = 32.60 -3.68 Nasdaq-100 Volatility Index (VXN) = 52.46 -2.00 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.58 884,857 514,447 Equity Only 0.50 567,203 284,752 OEX 1.07 54,009 57,729 QQQ 0.68 73,417 50,174 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 40 - 1 Bull Confirmed NASDAQ-100 66 - 1 Bull Confirmed Dow Indust. 67 + 4 Bull Confirmed S&P 500 55 + 0 Bull Alert S&P 100 64 + 2 Bull 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 1.34 10-Day Arms Index 1.20 21-Day Arms Index 1.10 55-Day Arms Index 1.25 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals Advancers Decliners NYSE 2120 634 NASDAQ 2219 1019 New Highs New Lows NYSE 22 43 NASDAQ 55 52 Volume (in millions) NYSE 1,796 NASDAQ 1,746 ----------------------------------------------------------------- Commitments Of Traders Report: 11/05/02 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 added 4,000 contracts to the short side, while increasing longs by 1,000. Small trader added 1,000 to the long side, while increasing short positions by only 500 contracts. Commercials Long Short Net % Of OI 10/15/02 429,448 449,138 (19,690) (2.2%) 10/22/02 432,775 463,827 (31,052) (3.5%) 10/29/02 437,565 468,557 (30,992) (3.4%) 11/05/02 438,546 472,384 (33,838) (3.7%) Most bearish reading of the year: (111,956) - 3/6/02 Most bullish reading of the year: ( 16,472) - 10/01/02 Small Traders Long Short Net % of OI 10/15/02 134,507 83,714 50,793 23.3% 10/22/02 134,641 72,681 61,960 29.8% 10/29/02 137,740 75,587 62,153 29.1% 11/05/02 138,604 76,032 65,572 30.5% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 114,510 - 3/26/02 NASDAQ-100 Commercials added 2,000 long contracts while adding 1,000 to the short side. Small traders added 30%, or 3,000 contracts to the long side, while increasing shorts by a similar amount. Commercials Long Short Net % of OI 10/15/02 45,578 51,969 (6,391) ( 6.6%) 10/22/02 48,954 54,088 (5,134) ( 4.9%) 10/29/02 47,837 55,261 (7,324) ( 7.1%) 11/05/02 49,128 56,121 (6,993) ( 6.6%) Most bearish reading of the year: (15,521) - 3/13/02 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 10/15/02 10,185 12,478 2,293 10.1% 10/22/02 10,202 8,892 1,310 6.6% 10/29/02 10,584 9,419 1,165 5.8% 11/05/02 13,355 12,903 452 1.7% Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 8,460 - 3/13/02 DOW JONES INDUSTRIAL Commercials added to both sides, increasing longs by 700 and shorts by 2,300. Small traders reduced long positions slightly, but dropped 2,300 from their short side, for a significant reduction in the overall short position. Commercials Long Short Net % of OI 10/15/02 20,914 9,630 11,284 36.9% 10/22/02 22,189 13,448 8,741 24.5% 10/29/02 21,800 13,337 8,463 24.1% 11/05/02 22,533 15,687 6,846 17.9% 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 10/15/02 6,040 10,329 (4,289) (26.2%) 10/22/02 4,445 9,270 (4,825) (35.1%) 10/29/02 5,602 11,090 (5,488) (32.9%) 11/05/02 5,089 8,735 (3,646) (26.4%) 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. 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PremierInvestor.net Newsletter Thursday 11-14-2002 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: Net Bulls New Bullish Plays: KRON Bearish Play Updates: IBM Stock Bottom / Active Trader Bearish Play Updates: BZH, DIA, SUP High Risk/Reward Bullish Play Updates: AHC, T Bearish Play Updates: HGSI Split Trader Stock Splits Split Announcement: CLBK: 5-for-4 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 Bullish Plays ----------------- Kronos Inc. - KRON - close: 39.99 change: +0.49 stop: *text* Company Description: Kronos Incorporated is a single-source provider of integrated human resources, payroll and labor management solutions. Kronos products and services help organizations align their people, processes and technology to improve individual productivity and boost overall business performance. (source: company press release) Why We Like It: Tech bulls have had a lot to cheer about over the past month. Well, maybe we should qualify that statement. The latest round of earnings was hardly impressive, and the fundamental weakness brought on by a lack of IT spending hasn't shown any signs of improving. But this hasn't prevented the NASDAQ from rising more than 25% from its October lows. Buyers have been ignoring bad news (such as last night's AMAT earnings) in hopes that the steep uptrend will continue. And so far, it has. The NASDAQ retraced roughly 38% of its October/November rally and now appears to be headed for a test of resistance at 1425. A move above this level would set the stage for a rally to the 200-dma at 1514. With sector leader MSFT looking strong, the GSO.X software index has rebounded from support at 100 and is moving towards an encounter with its own resistance at 110. Stocks like KRON have helped to push the sector higher. Unlike many of its competitors, Kronos actually boasts solid growth. The fourth-quarter earnings report in late-October featured an EPS of 57 cents, which was 11 cents better than analyst expectations. The upside surprise helped to launch KRON from the $30.00 area. Shares finally rolled over from resistance at $40.00 and pulled back to the 200-dma at $36.03. This pullback alleviated some of the overbought conditions on the oscillators and gave the bulls a chance to catch their breath. Shares rebounded and traded above $40.00 on Thursday en route to a new multi-month high. The rising daily stochastics (5,3,3) and uptrending GSO.X are indications that KRON will experience another breakout in the near future. By entering this play on a move above today's high ($40.50), we're attempting to capture a rally to the $45.00 area. Those who are a little more ambitious could aim for a retest of the May highs at $46.40. Possible resistance looms at the $41.25-$41.50 area. The double-top buy signal created by a trade at $41.00 should help to push KRON above that obstacle. If our play is triggered we'll use a stop at $37.98, just under Wednesday's low. More aggressive traders may want to use a stop under the 200-dma. Annotated chart - KRON: Picked on November xxth at $xx.xx <- see text Results since picked: +0.00 Earnings Date 10/29/02 (confirmed) =============== NB Play Updates =============== -------------------- Bearish Play Updates -------------------- Intl Business Machines - IBM - cls: 80.72 chg: +1.37 stop: 82.06 "Neutral" is probably the best adjective to describe IBM's analyst conference on Wednesday afternoon. The company touched on the familiar theme of a challenging IT environment but also reiterated its full-year estimates for 2003. With no major news coming out of the conference, shares were mostly at the whim of the broader market on Thursday. IBM traded in tandem with the Dow Jones and finished with a 1.7% gain. This was somewhat lackluster compared to the explosive 3.6% rally on the NASDAQ, but it was enough to push the stock above $80.00. We're not thrilled with the way shares moved above that level. Fortunately the bulls will face another obstacle at the descending 200-dma ($81.24). Whether this moving average actually provides resistance will probably depend on how the NASDAQ performs tomorrow. Another powerful rally would probably push IBM above our stop. Fellow big-cap tech DELL reported in-line earnings after the bell today and was trading slightly lower in after- hours. It's a bit early to say for sure, but it looks like the announcement won't be a big factor tomorrow. Although we wouldn't advise taking any new bearish positions in IBM at current levels, aggressive traders could consider shorting an intraday rollover from the 200-dma. Picked on November 7th at $78.95 Results since picked: -1.77 Earnings Date 10/16/02 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bearish Play Updates -------------------- Beazer Homes - BZH - close: 61.07 change: +2.17 stop: 64.06 While today's broader market rally was largely attributed to this morning's retail numbers, plenty of other sectors got in on the bullish action. The DJUSHB home construction index tacked on more than 3% and shot above near-term resistance at 290. BZH, which looked pretty weak on Wednesday when shares set a new relative low, bounced back with a 3.6% gain. The close above whole-number resistance at $60.00 isn't a positive sign for this play. From a "big-picture" perspective, some short covering could be expected after a week-long downtrend. The move higher seems to have been a result of positive sector momentum rather than any stock-specific strength. A one-day bounce isn't overly worrisome, but another strong performance by the DJUSHB might indicate that the bulls have regained control. We'll have a better idea of where BZH is headed after Friday's session. For the time being, we would not recommend entering any new short positions. Picked on November 12th at $59.94 Results since picked: -1.13 Earnings Date 11/05/02 (confirmed) --- Diamonds - DIA - close: 85.65 change: +1.05 stop: 87.06 The bulls have certainly been a tenacious bunch lately. After trying in vain to push the Dow Jones above 8550 for most of the week, this level of resistance finally gave way on Thursday afternoon. The index traded in positive territory for the entire session after gapping higher on better-than-expected retail sales data. "Better than expected" in this case was no change in retail sales compared to the estimated decline of 0.2%. Perhaps that says something about how uncertain investors are about the economy - The bar has been set so low that a lack of growth can be seen as a reason to buy! This also reflects the recent trend on Wall Street to ignore bad news. For instance, last night's earnings from AMAT was predominantly negative. Did that stop eager bulls from rushing into chip stocks? Nope. As far as this play in concerned, the Diamonds still face resistance in the 8600 area. The daily chart for the Dow also looks like it may be tracing a head-and-shoulders pattern, but we'll have to see a rollover before the right shoulder is formed. Tomorrow morning's Industrial Production and Preliminary Michigan sentiment data (estimated to come in at -0.3% and 82.0, respectively) will probably have a large impact on how the index trades tomorrow. A negative reaction could send the Diamonds back towards the $83- $84 area. Aggressive traders can consider adding short positions on a move below $85.00. Picked on November 7th at $85.89 Results since picked: +1.59 Earnings Date xx/xx/xx --- Superior Ind. - SUP - cls: 40.75 chg: +0.55 stop: 43.83 Superior filed its 10-Q with the SEC on Wednesday morning. Judging by the orderly trading, Wall Street didn't find any surprises contained in the Quarterly Report. Yesterday's action did produce a bearish technical development when shares fell below support at $40.00. Although this had the bears licking their chops in anticipation of a sell-off, SUP broke its five-day losing streak today and posted a 1.3% gain. Overall this rebound was not especially impressive. SUP underperformed the Dow Jones and gave back much of its intraday gains during the final hour of trading. On Friday we'll be watching for the stock to move to a new relative low. A negative reaction to tomorrow morning's Industrial Production and Michigan Sentiment data could provide the perfect catalyst for a breakdown. Traders looking to add short positions can watch for SUP to fall below $39.84. Picked on October 28th at $42.97 Results since picked: +2.22 Earnings Date 10/17/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Amerada Hess - AHC - close: 53.13 change: +1.88 stop: 49.38 Good news for AHC and a strong stock market helped boost our bullish play on this oil issue. It doesn't hurt to have a 144- point rally in the Industrials if you're long (most anything). What also helped push shares of AHC higher was a pre-morning-bell upgrade. The analyst at First Albany moved AHC from a "neutral" to a "buy" with a price target of $60.00. Sounds familiar doesn't it? Our price target is $59.94. The analyst cited some positive results from operations in the Rio Muni Basin and given the recent decline in share price felt the valuation was reasonable. They also bumped up their earnings estimates for 2002 by 75 cents to $6.20 and the 2003 estimates by 80 cents to $4.65. What is interesting and should be noted by sharp traders is the continuing decline in the oil per barrel. This would be a bearish pressure on the oil industry in general. The December contracts have continued to slip the last two sessions despite what appeared to be a potential bottom near the 200-dma. Given that the Iraqi war situation seems to produce daily headlines oscillating either direction ("yes, we will disarm. no, we won't," etc.) there does seem to be a growing consensus that a war with Iraq is imminent. Looking at a chart of the light, sweet crude oil contracts we do see two potential bullish signals. The price is approaching old support near the $24.25- 24.50 levels and the MACD is showing a bullish divergence in its histogram. Please see the chart below for more. Chart of CL02Z (December 02 oil futures) Picked on November 12th at $52.41 Results since picked: +0.72 Earnings Date 10/24/02 (confirmed) --- AT&T Corp. - T - close: 13.67 change: +0.20 stop: 13.38 *new* In a much-anticipated event, the FCC finally approved the AT&T Broadband and Comcast (CMCSA & CMCSK) merger, which will now be the country's biggest cable company. The new company will have almost 27 million cable customers equating to nearly 29% of the market. Now that the deal has been approved, the new combined company AT&T Comcast will replace Comcast in the S&P 500 starting on Monday with a new stock symbol COMCV. Since the approval was pretty much a foregone conclusion shares of AT&T did not react very sharply on Wednesday. The stock has actually continued to slip lower although it did bounce 20 cents in Thursday's session. We're growing concerned that the stock is loosing steam and could fall back to the $12.50 to $13.00 levels (the 50 and 200-dma are about to converge near $12.75, sounds like a good place to bounce). The MACD has produced a bearish crossover but the stochastics are valiantly trying to follow through on a bullish reversal. Given the market's erratic behavior the last couple of sessions we're going to tighten our stop on T to reduce our risk. Our entry price was hypothetically $13.40. Shares of T bounced there twice yesterday. We're going to set our new stop at $13.38. If AT&T can rally from here, near the bottom of its ascending channel, then great. If not, we'll be closed out of the play for almost nothing. Please see the accompanying chart for details. Chart of T (11/14/02): Picked on October 23rd at $13.40 Results since picked: +0.27 Earnings Date 10/22/02 (unconfirmed) -------------------- Bearish Play Updates -------------------- Human Genome Sciences - HGSI - cls: 8.63 chg: +0.13 stop: 9.51 Still looking weak. Following Wednesday's late-session selloff, HGSI moved to a new multi-year this morning. It took a powerful NASDAQ rally to prevent a more severe breakdown. The stock moved back into positive territory by the closing bell but wasn't able to match the 3.3% gain posted by the BTK.X biotech index. Shares have shown no signs of breaking out of the prolonged downtrend (see the 60-minute chart) and the p-n-f chart is showing a double-bottom sell signal. We think HGSI will be hard-pressed to avoid new lows if the market reverses course on Friday. In case you missed yesterday's comments, our stop has been lowered to $9.51. Traders looking to protect a gain (this play is currently up 9.0%) could consider taking profits if HGSI breaks above $8.70. We've also set an official profit-target at $7.51, slightly above the 1999 lows. Picked on November 1st at $9.49 Results since picked: +0.86 Earnings Date 10/29/02 (confirmed) ================================================================= Split Trader Stock Splits (ST) section ================================================================= Split Announcements ------------------- Commercial Bankshares Inc Announces 5-for-4 Split Traditionally this bank stock has been known to offer 21:20 stock splits or 5% dividends in the form of a stock split. This time the Board of Directors has increased it to a 5:4 split. Based in Miami, Florida, Commercial Bankshares, Inc. (NASDAQ: CLBK), released word that shareholders of record as of December 10th, 2002 will receive the extra share to be distributed on January 3rd, 2003. The company also announced a $0.19 cent cash dividend that will be paid on a post-split basis. Shares closed at $28.49 on Thursday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=CLBK About the company Commercial Bankshares, Inc. is the parent company of Commercial Bank of Florida, a $685 million, state-chartered, FDIC-insured commercial bank and a member of the Federal Reserve. The Bank operates 14 branches in Miami-Dade and Broward Counties, Florida. (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 EME Emcor Group 48.99 +1.05 EP El Paso 9.48 +1.48 BN Banta Corp 30.95 +1.36 NLS Nautilus Group 13.85 +0.64 CBE Cooper Industries 33.52 +1.05 MMS Maximus Inc 24.10 +1.10 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change IMCL Imclone Systems 13.44 +2.57 DCTM Documentum Inc 18.07 +1.22 AMAT Applied Materials 15.76 +1.06 CCRN Cross Country 15.87 +1.64 CURE Curative Health Services 15.74 +1.50 VOD Vodafone Group 18.81 +1.10 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change FRK Florida Rock Ind. 36.70 +1.09 SFNT Safenet Inc 23.61 +2.01 HYSL Hyperion Solutions 28.55 +1.91 ICOS Icos Corp 28.32 +4.01 SNPS Synopsys Inc 48.94 +3.79 SCOR Syncor Intl. 25.69 +2.81 NBIX Neurocrine Biosciences 48.00 +1.71 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change ABC Amerisourcebergen 63.80 -2.66 CW Curtiss Wright Corp 66.52 -2.33 ACS Affiliated Computer Svc. 42.25 -4.45 INTU Intuit Inc 49.23 -3.63 RTN Raytheon 27.39 -1.57 PGL Peoples Energy Corp 34.41 -1.59 HBC HSBC Holdings 54.20 -1.85 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change
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