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Daily Newsletter, Monday, 12/30/2002

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PremierInvestor.net Newsletter                 Monday 12-30-2002
                                                  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:      Token Gesture
Watch List:       HGSI, LUV, NEM, PSFT, QLGC, and more...
Play of the Day:  Weak Sector, Weak Stock


******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
12-30-2002                High    Low     Volume Advance/Decl
DJIA     8332.85 + 29.07 8364.74  8252.21  1702 mln   1155/538
NASDAQ   1339.54 -  8.77 1353.38  1329.64  1089 mln   1377/251
S&P 100   444.77 +  1.73  446.53  440.55   totals     2532/789
S&P 500   879.39 +  3.99  882.10  870.23
RUS 2000  382.23 -  1.93  384.39  379.67
DJ TRANS 2302.83 + 11.17 2308.68  2267.91
VIX        32.56 -  1.59   34.49  32.45
VIXN       46.49 -  0.22   48.45  46.45
Put/Call Ratio .72
******************************************************************

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

Token Gesture
by Steven Price

That big seasonal rally we have been waiting for remains on hold.
We tested new relative lows once again this morning and it
appears as though we will finish the year on yet another down
note.  We may have to adjust our thinking about a so-called Santa
Claus rally, which showed gains from November/December lows to
December/January highs, after breaking a 34-year streak, dating
back to 1968.   While we could certainly still see that streak
end in tact if we get the rally on the other side of New Year's
Eve, the series of lower lows heading into the end of December
makes it looks less likely with each passing day.   The Dow did
add 29 points after rallying more than 100 points intraday, but
the rally faded into the close and appears at this point to be
just another lower high.

The Dow sank into an area where it found strong support at the
end of October and beginning of November.  However, it remains in
a descending channel, with all but one recent high coming at a
lower level. That high came the day after Christmas and the
intraday 116-point gain faded quickly into the red by the close.
Even if we do get a rally over the next couple of days, it will
take a move back over 8650 to convince me that the rally has real
legs under it. Of course, if the recent action continues, that
analysis may not come for a while.

Chart of the Dow


The morning started out with what seemed to be positive news for
the tech sector. The Semiconductor Industry Association released
data showing that shipments rose 1.4% in the month of November
and sales were up 19.6% year over year.  Also on a year over year
basis, the three-month rolling average was up 25%, which was
slightly lower than the 26% improvement in October.  The downside
to the report, which was basically in line with expectations, is
that the 1% decrease from third to fourth quarter is well below
the 1998-2001 average sequential growth rate of  +4%.  J.P.
Morgan, in one of the more in-depth analyst statements of the
year (GRIN) said this was due to lack of end demand.  Wasn't it
just a few weeks ago that we heard several equipment makers
talking about the upturn in PC demand heading into the holiday
season?  Guess they overestimated. Wireless chips once again led
the pack, as demand for next generation cell phones seems to be
the only sustainable area of chip demand.  The data was taken
negatively with a sell-off in the chip sector, as the
Semiconductor Index (SOX) continued its month long slide, giving
up 2.21%.  The SOX has given up over 100 points from its high of
393 on December 2 and is getting close to its last pullback
level, just above 280. The afternoon bounce we got in the Dow and
SPX was encouraging for a January rally, but without this
sector's participation, it is unlikely that any rally will be
long-lived.

Chart of the SOX


It appears that all of the doom and gloom predictions for the
retailers came to pass, as we got more warnings this morning.
Wal-Mart re-iterated last week's comments that it would see a
total of 2-3% same-store sales growth for the 5-week holiday
season ending January 3.  That number includes a decline in same
store sales at its Sam's Club warehouse chain.  This number is
approximately one half of its traditional growth target of 4-6%
and a reduction of the previously announced target of 3-5%.  The
fact that it comes during the holiday season looks very bearish
for consumer spending, as the trend of lowering expectations
shows no sign of slowing.  If Wal-Mart is lowering growth into
the holidays, then what can we expect when the bargain hunting is
out of the way in the next couple of months?  We got even worse
news from Federated, which owns Macy's and Bloomingdale's.
Federated had refused to give guidance last week, citing a high
percentage of sales in the last week of shopping before Christmas
and the inability to predict how those sales would add up. I
questioned that reasoning last week and it appears the retailer
was just delaying the bad news.  Federated had been predicting
sales as coming in flat to down 2.5% for the holiday season, but
lowered those expectations this morning to a decline of 4.5%.
Bear Stearns also had some negative news about sales at Target,
saying that December same-store sales are well below plan and
could be flat to down in the low single digits. Bear says there
could be a 5-10% downside risk for Target's earnings estimates of
76 cents per share. December sales are on pace to increase by 1
percent, which would be the weakest year-over-year growth since
September 2001, according to the National Retail Sales Estimate.
If sales are down from a year ago, when consumers were still
recovering from the 9/11 attacks, then it's obvious we have a
long way to go before the country crawls out of the current
economic hole.   Investors may have been expecting even worse
numbers after wandering through half-empty malls for a majority
of the shopping season, as the initial dip this morning in the
Retail Index (RLX.X) eventually turned into a gain, finishing up
2.3% on the day.  The index had been beaten down the last week
and sat on the verge of breaking down below support at 260 before
today's rally took it back to 267.35. I would still hesitate to
buy stocks in this sector.  While the news could have possibly
been worse, the trend suggests it may still fulfill expectations
in the near future.  Merrill Lynch analyst Daniel Barry said, "We
believe most broadline retailers missed their Christmas sales
plans and we expect sales and profit warnings over the coming
weeks."

Chart of the Retail Index (RLX.X)


Existing home sales also took a hit with a drop of 3.5% in
November, which was far below expectations of a slight gain.
They were still up 5.9% from November 2001, but not what
homeowners were anxious to hear.  It also suggests that the
torrid pace of home buying spurred by low interest rates may be
cooling as we head into the winter months.  Some of this may be
seasonal, but the report was nevertheless worse than expected and
took its toll on the home building sector, with the Dow Jones
Home Construction Index (DJUSHB) falling 1.2%.

The Market Volatility Index (VIX) sunk on the afternoon rally,
but remained above 30.  I traded under 30 during the late
November rally and a move back under that level might indicate
that traders believe a rally is for real.  It would probably take
a Dow rally above 8600 to push it back below 30, which would also
break the trend of lower highs. If we get a move back into those
areas, then maybe Santa was just a little late and we'll still
get that unlikely rally.

Other indicators that have been somewhat reliable in their
relation to the Dow are oil, gold, the dollar and bond futures,
each with an inverse relationship to the equity markets.  Oil
futures and gold each finished down on the day, confirming the
move in equities. The dollar, on the other hand, sunk to new 52-
week lows, and bonds continued their move higher through
resistance. That move in the bond market would seem to cast a
long shadow on today's rally, as we didn't get the flow of assets
from stocks into treasuries that we normally see on sustained
rallies in the equity markets.

Chart of the 10-Year Treasury


After today's bounce, traders need to be careful of jumping in
long and picking a bottom.  The failure by the bond market to
confirm this afternoon's bounce in equities, when taken along
with the sinking dollar, throws up a red flag.  We also need to
be aware of the fact that although the traditional "Santa Claus"
rally has been remarkably consistent, all trends eventually come
to an end and the series of lower lows and lower highs indicates
that this may be the time for this one to end. We have fallen
through several levels in the major indices where a bounce could
be expected.  Although the Dow has remained above its support
level between 8200 and 8300, another trip below those levels may
not end until we re-test the July lows around 7500. If this rally
fails anywhere below 8550, traders can look to jump on short and
ride the market down to another lower low.


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

First Niagara Financial - FNFG - close: 26.05 change: -1.68

WHAT TO WATCH: Shares of this banking stock gapped below the 200-
dma ($27.21) this morning ahead of a shareholder vote (which was
held after the closing bell) that approved the company's merger
with Finger Lakes Bancorp (FLBC).  The strong volume behind the
stock's 6.0% decline indicates that investors don't have a
positive view of this merger.  Technically, it looks like FNFG
could reach the $24.00 area in the near-term if shares fall below
today's low of $25.95.  Additional volatility might result from
the upcoming merger, so conservative traders might want to look
elsewhere for a short play.




---

Human Genome Sciences - HGSI - close: 8.49 change: -0.41

WHAT TO WATCH: Biotech bulls really seem to be on the defensive
now that the biotech index (BTK.X) has started to retrace the
steep mid-October rally.  While PremierInvestor currently has a
short play within the sector (CEPH), HGSI looks like a good
lower-dollar bearish candidate.  The stock is in danger of
falling under its multi-year low of $8.15.  A violation of this
level might send shares tumbling towards the 1999 low of $7.18.
This would present a reasonable downside target for short-term
traders.  Those with a more extended trading timeframe could
target a move to the $5.00-$6.00 area.  FYI, a trade at $8.00
would create a double-bottom sell signal on the point-and-figure
chart.




---

Southwest Airlines - LUV - close: 13.80 change: -0.19

WHAT TO WATCH: Reports of falling revenues in the airline
industry helped the send the XAL.X sharply lower on December 18th
and 19th.  This downward move created a bearish triangle sell
signal on the point-and-figure chart.  But while the index has
traded sideways over the past week, LUV has continued to lose
altitude.  Shares of Southwest topped out in late-November and
rolled over from bearish p-n-f resistance.  The stock
underperformed the market today and broke through support at
$14.00.  If the XAL.X breaks down out of its sideways pattern the
bulls would be hard-pressed to prevent LUV from retracing a
larger chunk of its rapid mid-October gains.  Short entries can
be targeted either on a failed rally near $14.50 or a move below
$13.63.




---

Newmont Mining - NEM - close: 29.24 change: -0.49

WHAT TO WATCH: Shares of Newmont have followed the XAU.X
gold/silver index to multi-month highs.  The upward move in gold
can be attributed to defensive buying related to the rising price
of oil and growing geo-political uncertainty.  Interestingly,
both crude futures (cl03g) and the XAU moved lower on Monday.  If
this trend continues we'd expect NEM to come under more selling
pressure.  The stock has rallied up to resistance at $30.00 and
may be in the early stages of a rollover.  The extended MACD and
daily stochastics indicate that NEM may have run out of upside
momentum.  Bearish entries could be evaluated at current levels,
with a stop just over the relative high of $30.20.  Short-term
traders could target a move to the $27.00 region.




---

PeopleSoft - PSFT - close: 18.64 change: -0.60

WHAT TO WATCH: What looked like a burgeoning head-and-shoulders
formation prompted us to add PSFT to the Watchlist on Friday.  We
feel it's worth another mention now that the stock has broken
below its 200-dma at $19.17.  The stock underperformed the NASDAQ
today and didn't find any buyers until it reached the converging
20-day and 100-day moving averages near $18.50.  This move lower
helped to fortify the right shoulder of the H&S formation.  With
the oscillators drifting lower, it looks like PSFT will continue
to move towards the $17.00 support level.  Short entries can be
evaluated on a violation of today's low ($18.45), but bear in
mind that the p-n-f chart shows bullish support at $17.50.




---

QLogic Corp - QLGC - close: 35.00 change: -1.86

WHAT TO WATCH: Seemingly bullish news wasn't enough to prevent
the semiconductor index from falling to a new short-term low on
Monday.  The latest global chip sales data showed a 1.9% increase
in November and a 19.6% gain on a year-over-year basis.  While
any concrete evidence of growth in the beleaguered sector could
be seen as a positive development, investors may not be satisfied
with the relatively small growth rate.  Also of concern are
holiday sales, which were below expectations.  In any case, the
technical picture for the SOX.X is decidedly bearish.  The index
seems to be gravitating towards the next level of support near
282.  QLGC looks like a good chip short because it's already
fallen below every level of near-term support.  The stock showed
relative weakness today and fell by 5.0% on the strongest volume
in over a week.  This move created a triple-bottom sell signal on
the p-n-f chart.  Watch for a move under today's low ($34.80) to
clear the way for a possible test of the $30.00 area.  Chip bears
might also want to take a look at MU, which has fallen to multi-
year lows.




---

USA Interactive - USAI - close: 22.46 change: +0.45

WHAT TO WATCH: Short-term traders can watch USAI for a move below
support at $22.00.  The stock has been moving sharply lower ever
since it topped out near $30.00 last month.  Although the
oscillators are already oversold, further downside wouldn't be
out of the question if the stock breaks out of today's Inside Day
formation and falls under the relative low of $21.95.  We'd be
looking to capture a move to the next level of psychological
support at $20.00.




---

Univision Communications - UVN - close: 23.58 change: -1.36

WHAT TO WATCH: UVN gave back 5.4% today on relatively strong
volume.  There was no apparent news to explain this decline,
which created a double-bottom p-n-f sell signal.  Looking at the
daily chart, we see that UVN has also fallen below support at
$25.00.  There is a notable lack of additional support until the
$20.00 area.  While some traders may want to use a move below
$23.50 as a bearish action point, the most prudent strategy may
be to wait for a failed rally at $25.00.





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

Cephalon Inc - CEPH - close: 48.80 change: -0.22 stop: 52.64

Company Description:
Founded in 1987, Cephalon, Inc. is an international
biopharmaceutical company dedicated to the discovery, development
and marketing of innovative products to treat sleep and
neurological disorders, cancer and pain. (source: company press
release)

- ORIGINAL WRITE UP: December 27th, 2002 -

Why We Like It:
Cephalon has developed perhaps one of the most intriguing
"lifestyle" drugs to come down the pipeline in recent years. On
Monday the company submitted an application with the FDA to
market its Provigil drug, which is currently approved for use
with epilepsy patients, for treatment of "excessive sleepiness
associated with disorders of sleep and wakefulness in adults."
Studies have shown that Provigil has been effective in allowing
individuals to stay awake and alert for up to 48 hours without
any major side effects. Should Cephalon receive a green light
from the FDA, thousands of Americans would be eligible to receive
the drug. However, some have speculated that doctors may use a
broad interpretation of "sleep disorders" to prescribe the
treatment to anyone dealing with sleep deprivation. This brings
to mind images of pilots, truck drivers, and overworked grad
students regularly popping Provigil. Needless to say, this would
have a very positive effect on Cephalon's bottom line.

But as promising as Provigil is, we don't think the prospect of
an FDA approval is enough to keep CEPH afloat in the short-run.
For one thing, the agency probably won't make its decision for
several months. It's unlikely that the company's request will be
approved anytime soon. A more pressing issue for shareholders of
Cephalon is the recent weakness in the biotech sector. The BTK.X
biotech index is looking decidedly bearish after falling to new
relative lows on Friday. This breakdown produced a quadruple-
bottom breakdown on the p-n-f chart and also took the index below
bullish support. Not surprisingly, CEPH has also been subjected
to a large amount of selling pressure. The past two sessions saw
the stock rollover from its 50-dma ($52.31) and fall below the
200-dma at $50.54. Shares also violated the December low of
$49.30. The falling daily stochastics and MACD indicate that CEPH
could retrace a large chunk of its rapid October gains. In light
of the current sector weakness, we think shares could eventually
reach the $42-$43 area. As far as action points are concerned,
we'll enter this short play if/when CEPH falls under today's low
of $48.78. If we're triggered our stop-loss will be placed at
$52.64, above the relative highs and the rising 50-dma. More
conservative traders could use a stop just above the 200-dma at
$50.54.

- Play-of-the-Day Comments: December 30th, 2002 -

This short play was activated on Monday morning when CEPH reached
our entry trigger at $48.77.  Shares followed the BTK.X biotech
index lower and finished at a multi-week closing low.  While the
stock managed to find intraday support at the 100-dma ($47.81),
we're not anticipating a sustainable bounce from that level.  Not
only does CEPH look weak on its own technical merits, but the
sinking BTK.X (which has no clear support until the 305 area)
should provide additional downward pressure.  New entries can be
gauged on a move under today's low of $47.76.  If CEPH continues
slightly higher on Tuesday, more speculative traders could also
consider adding short positions on a failed rally near $50.00.
Our stop-loss is set at $52.64.

Picked on December 30th at $48.77
Results since picked:       -0.03
Earnings Date            11/06/02 (confirmed)







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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.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

*****************************************************************


Copyright ) 2002  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter                  Monday 12-30-2002
                                                   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
=================================================================

High Risk/Reward
  Triggered Plays:     CEPH (bearish)

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)


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

===============
HR Play Updates
===============

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

Cephalon Inc - CEPH - close: 48.80 change: -0.22 stop: 52.64

This short play was activated on Monday morning when CEPH reached
our entry trigger at $48.77.  Shares followed the BTK.X biotech
index lower and finished at a multi-week closing low.  While the
stock managed to find intraday support at the 100-dma ($47.81),
we're not anticipating a sustainable bounce from that level.  Not
only does CEPH look weak on its own technical merits, but the
sinking BTK.X (which has no clear support until the 305 area)
should provide additional downward pressure.  New entries can be
gauged on a move under today's low of $47.76.  If CEPH continues
slightly higher on Tuesday, more speculative traders could also
consider adding short positions on a failed rally near $50.00.
Our stop-loss is set at $52.64.





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

NUTR    Nutraceutical Intl         11.49     +0.69

---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------
Ticker  Company Name               Close     Change
POSS    Possis Medical             18.01     +1.01
RMHT    RMH Teleservices           10.33     +1.21
ATRS    Altiris Inc                15.79     +1.67
BEBE    Bebe Stores                13.48     +1.09

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

LTR     Loews Corp                 44.74     +1.86

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

BWS     Brown Shoe Co              23.83     -1.42
FNFG    First Niagara Fncl         26.05     -1.68
UVN     Univision Comm.            23.58     -1.36
RJF     Raymond James Fncl.        29.30     -1.03
TDS     Telephone Data Sys.        46.00     -1.55
AMWD    American Woodmark          47.00     -3.70

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

VCBI    Virginia CommerceBancorp   23.40     -0.10
NBP     Northern Border Partners   37.10     -0.31
KIM     Kimco Realty               31.00     -0.79




=================================================================
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.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

*****************************************************************


Copyright ) 2002  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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