PremierInvestor.net Newsletter Tuesday 02-18-2003 section 1 of 2 Copyright ) 2003, 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: Retail Sales Soar Market Sentiment: No Weakness Play-of-the-Day: Short-Circuited Bears ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 02-18-2003 High Low Volume Advance/Decline DJIA 8041.15 +132.40 8076.02 7909.30 1.39 bln 2341/ 908 NASDAQ 1346.54 + 36.40 1346.92 1319.52 1.28 bln 2216/1131 S&P 100 431.48 + 8.91 432.71 422.57 Totals 4557/2039 S&P 500 851.17 + 16.28 852.87 834.89 W5000 8051.71 +154.80 8061.00 7896.94 RUS 2000 364.53 + 6.03 364.59 358.50 DJ TRANS 2140.65 + 38.10 2140.65 2100.67 VIX 35.56 - 1.54 37.06 35.25 VXN 48.40 + 0.02 49.63 47.71 Total Volume 2,871M Total UpVol 2,467M Total DnVol 378M 52wk Highs 113 52wk Lows 16 TRIN 0.45 PUT/CALL .81 ----------------------------------------------------------------- =========== Market Wrap =========== Retail Sales Soar At least at Wal-Mart where sales of duct tape, plastic, batteries, flashlights and other survival necessities helped overcome weak Valentine sales due to the snowstorm in the north. No kidding. I mentioned this possibility last week that the terror alert would revive retail sales and Wal-Mart is the first major chain to admit it. Don't tell Greenspan or we will have weekly terrorist alerts to boost the economy. Dow chart - Daily Nasdaq Chart - Daily While Wal-Mart may have seen a benefit from the alert most other businesses were not seeing anything due to the white out on the east coast. The traditional mid-winter sale over the President's Day weekend fell flat with many stores closing for much of the weekend. The retailers depend on the holiday sale to dump the rest of their leftover Christmas merchandise and the rest of winter apparel to make room for spring merchandise. With the money already spent for the traditional advertising flurry last weekend there is a shortage of budgets to do it again. This was a serious blow for retailers in the north. It was also a blow to the struggling airline industry. Most airlines had to cancel the majority of flights to the north east both inbound and outbound. Holiday travelers stayed home by the millions and equipment shortages hampered routes all across the nation. Planes snowbound in the north were not available to complete routes in the south and west. On Monday alone AMR cancelled 627 flights and UAL cancelled 380. Multiply this across all the airlines and the multiple days of the weekend and you can see the problem. The NY State Manufacturing Survey came in at only 1.1 for February, which was down from 20.7 last month. This is a huge drop and showed a huge drop in unfilled orders, -10.6, prices received -14.4 and inventories -3.8. The switch from robust to barely positive in only one month is not encouraging. One analyst said it indicated relatively stable conditions. And what drug was he smoking? The Semiconductor book-to-bill numbers came out at 6:PM today and the number fell to .92 in January from .94 in December. Remember this is a three month moving average so the real drop was much steeper. Orders fell -10% and shipments dropped -9%. The semi sector may be improving on the surface but the BTB tells the real tale. You can book all the orders you want but the real number is in the shipments. You can cancel outright or defer orders for months once placed. When both numbers fall it is an indication of trouble ahead. Wednesday we have the Chain Store Sales again, Mortgage Applications, Residential Housing Starts and the NAHB Housing numbers. These should not be market movers unless the trend changed in the housing sector. The dividend fever is becoming contagious. GDT announced that they would begin paying a quarterly dividend of 8 cents with the 2Q. They had suspended the dividend in Nov-1998. Given the strong cash flow and financial position it is appropriate to offer a dividend at this time according to the CEO. Last week QCOM announced a 5 cent dividend and MSFT also announced a token dividend. BRL decided to issue a dividend in the form of a 3:2 stock split. This was the 7th split for BRL. Most investors would rather see splits than nickels and dimes as that extra share of stock, even though the three shares are technically the same value as two, seems to accumulate value faster than the pocket change from dividends. Ask anybody who held for the last six BRL splits. MSFT stock gained +.81 cents on its first day of trading post split at $24.05. I profiled a play on MSFT in the Editors Plays last Sunday. ANF announced earnings after the bell and beat the street but said the outlook for the rest of the year was cloudy. They said they were being cautious in their planning for spring merchandise. That means lower inventory levels and fewer items. This will mean lower sales if retail explodes again but also lower losses if it fizzles. Darden Restaurants warned that earnings would be less than expected because of increased marketing and insurance costs. They said the economic downturn was causing lower sales as fewer people ate out. They were spending more in advertising to attract a smaller audience. I can't do a market wrap without touching on the Iraq news. Remember the unconditional approval to allow U2 spy planes to fly over Iraq? Inspectors finally agreed to Iraq's demands to notify Iraq at least 48 hours in advance of the exact route each plane would take. Think about it. I doubt they will find anything under those conditions. Also, they found several dozen of the "illegal" missiles and 380 long range missile engines Iraq had imported illegally in the last four years in defiance of the current UN restrictions. The inspectors said they were going to "ASK" Iraq to destroy them as a show of cooperation. I assume they will actually watch to see if they are really destroyed and not just take Iraq's word for it. Is it just me or does it seem like the inspectors are on the wrong side? In breaking news tonight the Iraq commission to search out weapons that may have been overlooked along with important papers that may have been stored in private residences announced that they have been unable to find anything. That is reassuring. I am sure the inspectors are relieved. The markets rallied for about 30 min today. That was how long it took for the Dow to race to 8035 and then hover within 35 points of that level for the rest of the day. There was an attempt to sell off at 3:PM that took the Dow back down to 8000 but the attempt failed when short covering and general buying appeared at the close. The Dow ended back at the 8041 level where it had spent most of the day. The Nasdaq finally posted back-to-back positive days, a feat not seen since late January. The Nasdaq closed at 1346 and well out of the month long trend channel. The nearest resistance is now 1360 that dates back to Jan-29th. Most tech leaders showed strong percentage gains with gap open spikes that indicate short covering rather than pent up buying demand. The Dow at 8041 is still about 110 points below the top of our recent trading range. We cannot get excited about the "rally" until we break that 8150 level to the upside. It will take more than short covering to make that happen. Using the largest measure of market strength the Wilshire 5000, the rally stalled exactly at the top of the down trend channel. Wilshire 5000 Chart - 60 min The Iraq problem has not gone away and the rhetoric is continuing. According to the latest comments it appears the US is still planning on an attack around March 3rd, maybe as late as March 17th. As this watched pot comes to a boil the markets are not going to just ignore it. The rally came on indications that the war might fade away and today is became clear that it was still on the calendar. Until the Dow breaks 8150 we are still in a down trend. Ignore either event at your own risk. Enter Very Passively, Exit Very Aggressively! Jim Brown Editor ================ Market Sentiment ================ No Weakness by Steven Price The bulls are back in town! At least for the moment. I highlighted the oversold bullish percents last week, with the risk shift less in favor of the bears. However, those indicators were still falling and could hardly of predicted a rally of more than 400 points in the Dow off of Thursday's lows. However, after testing support levels and ratcheting lower for the past month, it appears that the bears have taken their profits and gotten out of the way. It is still no easier to predict global events, but the technical indicators still show the end result of whatever the motivating factors are and give us a good idea of the likelihood for reversals, at least on an intermediate basis. The Dow and OEX both slid into oversold territory last week, in spite of the rallies on Thursday and Friday. I term Thursday a rally since we had such a powerful intraday move, although we actually ended in the red that day. It is apparent in hindsight that it was the beginning of a sentiment shift that has continued through Tuesday, in spite of anti-aircraft weapons being stationed around national targets of terrorists, and still no decisive move on Iraq. The rumor this morning that Saddam Hussein was looking to flee through Iran into Russian exile certainly seems to be the logical reason for the continued rally, as well as the possibility of further delays on Iraq based on European consensus, but with a market that had sold off dramatically in the past month, it may have simply been time for bargain hunting bulls to step back into the ring. While we are concentrating on technicals here, there are a couple of signals that suggest Iraq is still the motivating factor. We saw a slight pullback in oil and gold futures continue their nosedive, both of which indicate that the market expects war to be delayed, or at least the possibility is not growing nearer. The drop in gold could also be the result of strength in the dollar today and a move out of defensive stocks and back into equities on a value basis. We saw a powerful enough reversal to register our largest point and figure reversal since we rolled over in January, but are right back into resistance zones from the consolidation that took place before the recent drop. None of the major indices have registered buy signals, so we are left to determine whether to short the rally at resistance, or put faith in the big reversal giving us an indication of a trend change. Note the bullish percents, although off their lows, have not yet reversed up and remain in columns of "O." Looking back at the past few trend reversals, on either an intermediate or longer-term basis, depending on your trading window, we see a similar pattern to the last three days. October 29 shows a big morning drop that looked like the continuation of a downtrend over the previous few days, followed by a big afternoon rally and a close near the opening price (Doji star), then a big rally the following day. We then continued higher all the way to Dow 8800, from the October 29 morning low of 8198, for a 600-point rally. On November 13, we got another dip that looked like a continuation, followed by a close near where we opened, another Doji (not exactly a Doji, but similar) with a low of 8298, followed by a big rally the next day. That rally took us all the way to Dow 9000. On December 31, we got the Doji after a low of 8242, followed by a big next day rally and ended up at Dow 8069. It is getting harder to rely on history repeating itself as we get closer to a possible war and the timeframe for the threat is different. There are now almost daily announcements that change the potential for an invasion, as opposed to a cloud hanging over us pointing to a likely war sometime in the future. That means any move is more subject to a sudden reversal from what appears to be a trend. However, a look at the intraday chart of the Dow is still giving a bullish appearance. The average rallied up as high as 8076, before getting slammed. It ticked back below 8000 and at the time (late in the day) it appeared as though we had finally gotten a blow-off rally and the move appeared about to reverse possibly in favor of the bears. But the pullback reached only as low as 7995, before gaining a second wind and heading back to 8041. What appeared to be a rollover now looks like a pullback to a higher level of support at 8000. While the action certainly looks attractive to bulls, we are back into a consolidation range that held us at the end of January and beginning of February, with a solid top at Dow 8150-8160 and SPX 865-870. It is hard to imagine a rally of over 500 points (which it would be at that level) not taking a break and those levels would seem the likely resistance now that we have broken previous resistance at 8000 and found intraday support there. I'll be targeting possible bearish plays from those levels, since I still believe the overall trend is down. However, if we do break through, then I'll be watching the previous head and shoulders neckline break at roughly Dow 8200 and 50% retracement of the Jan-Feb drop at 8250 for signs of a more convincing trend reversal to jump on long, even if that reversal is only an intermediate one. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10673 52-week Low : 7197 Current : 8041 Moving Averages: (Simple) 10-dma: 7901 50-dma: 8356 200-dma: 8685 S&P 500 ($SPX) 52-week High: 1176 52-week Low : 768 Current : 851 Moving Averages: (Simple) 10-dma: 834 50-dma: 882 200-dma: 919 Nasdaq-100 ($NDX) 52-week High: 1734 52-week Low : 795 Current : 1014 Moving Averages: (Simple) 10-dma: 971 50-dma: 1017 200-dma: 1019 ----------------------------------------------------------------- The Semiconductor Index (SOX.X): Just when I had been considering that the SOX was no longer the same reliable indicator it has been for the broader markets, the action in the sector turned me into a believer. When it bottomed at 260, refusing to break down beyond that level, I saw the major indices, COMP included, continuing their downtrends. However, in hindsight, the SOX may have been forecasting a short-term bottom, with its reluctance to sink. That certainly seems to be the case after the last three days. The flat lining in the chip stocks preceded the reversal higher in the Dow, SPX and COMP, and the SOX has now gained more than 10% since February 7. Currently trading at 291, it is approaching the key 300 level, which has acted as a magnet in the recent past and coincides closely with the 50-dma at 299. A move back through those levels would suggest a run at the descending 200-dma, currently at 337. 52-week High: 641 52-week Low : 209 Current: 291 Moving Averages: (Simple) 21-dma: 277 50-dma: 299 200-dma: 337 ----------------------------------------------------------------- The VIX has sunk back to recent support at 35%. The volatility measure never managed a break above 40% and the resistance at that level indicated institutions were selling premium at those levels, rather than buying it. That was a bullish sign for equities and now that we are at support, the action on Wednesday should give us an indication if the equity run is running out of steam or has some legs. A move below 35% could indicate more bullishness, while a hold above that level may indicate the premium buyers are back, forecasting a pullback after the recent run. CBOE Market Volatility Index (VIX) = 35.56 -1.54 Nasdaq-100 Volatility Index (VXN) = 48.40 +0.02 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.81 572,696 463,455 Equity Only 0.70 379,517 265,624 OEX 1.58 36,651 47,742 QQQ 1.29 52,584 67,609 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 40.3 - 0 Bull Correction NASDAQ-100 33.0 + 1 Bear Confirmed Dow Indust. 16.7 + 4 Bear Confirmed S&P 500 34.6 - 0 Bull Correction S&P 100 29.0 + 1 Bear Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.10 10-Day Arms Index 1.32 21-Day Arms Index 1.38 55-Day Arms Index 1.33 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 2125 741 NASDAQ 2127 1048 New Highs New Lows NYSE 45 35 NASDAQ 61 49 Volume (in millions) NYSE 1,392 NASDAQ 1,297 ----------------------------------------------------------------- Commitments Of Traders Report: 02/11/02 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercials slightly decreased long positions, while increasing shorts by a more significant amount. The net result was an increase of 8700 on the short side. Small traders increased longs by 10,000 and shorts by 2,000. Commercials Long Short Net % Of OI 01/21/03 415,028 456,885 (41,857) (4.8%) 01/28/03 422,232 468,586 (46,354) (5.2%) 02/04/03 414,543 465,678 (51,135) (5.8%) 02/11/03 412,333 472,156 (59,823) (6.8%) 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 01/23/03 148,227 95,356 52,871 21.7% 01/28/03 142,734 85,567 57,167 25.0% 02/04/03 151,174 93,439 57,735 23.5% 02/11/03 161,126 95,618 65,508 25.5% 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 reduced longs by 1,500 and increased shorts by 3,000, for a 6% increase in overall short position. Small traders increased the long side by 4,000 contracts, while leaving shorts close to unchanged. Commercials Long Short Net % of OI 01/23/03 37,174 49,789 (12,615) (14.5%) 01/28/03 37,955 49,321 (11,366) (13.0%) 02/04/03 40,934 50,992 (10,058) (10.9%) 02/11/03 39,412 53,818 (14,406) (15.5%) 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 01/23/03 25,852 6,764 19,088 58.5% 01/28/03 25,814 7,576 18,238 54.6% 02/04/03 25,573 8,648 16,925 49.5% 02/11/03 29,667 8,915 20,752 53.8% Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercials increased long positions by 2,000 contracts and shorts by 600. Small traders took a similar approach with an increase of 800 to the long side and a small decrease to shorts. Commercials Long Short Net % of OI 01/23/03 16,901 11,031 5,870 21.0% 01/28/03 16,013 11,574 4,439 16.1% 02/04/03 17,596 11,232 6,364 22.1% 02/11/03 19,826 11,800 8,026 25.4% 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 01/23/03 5,120 8,282 (3,162) (23.6%) 01/28/03 4,838 7,836 (2,998) (23.7%) 02/04/03 4,583 9,424 (4,841) (34.6%) 02/11/03 5,390 9,300 (3,910) (26.6%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- =============== PLAY-of-the-Day ((new BULLISH tech play)) =============== Silicon Labs - SLAB - close: 25.62 change: +1.02 stop: *text* Company Description: Silicon Laboratories Inc. designs, manufactures, and markets proprietary high-performance mixed-signal integrated circuits (ICs) for a broad range of communications markets. Silicon Laboratories is an ISO9001-certified manufacturer and has applied for more than 161 patents on its mixed-signal technology. (source: company press release) Why We Like It: In recent months, semiconductors that power wireless devices have provided one of the few bright spots in the chip industry. So far investors haven't been given much evidence of a pickup in demand for the beleaguered tech sector. With neither businesses nor consumers rushing out to upgrade PC's, companies such as Intel and AMD have yet to see a notable pickup in orders. But in sharp contrast to this lack of growth, stronger worldwide demand in the wireless market has created a favorable climate for companies such as Silicon Labs. Taiwan Semiconductor, the world's largest semiconductor foundry, reported recently that orders for wireless chips were very brisk. This may have played a large role in INTC's decision to roll out its own communications chip. SLAB's January 22nd earnings announcement also reflects the fundamental gains that the sub-sector has experienced. Citing growing acceptance of its wireless products, the company reported fourth-quarter income that was four cents better than Wall Street expectations. SLAB also differentiated itself from many of its chip brethren by not forecasting a decline in revenue during the first quarter of 2002. These developments helped SLAB to display incredible relative strength while the semiconductor index drifted steadily lower over the following weeks. From January 22nd to its multi-month low on February 10th, the SOX.X lost 11.6%. SLAB actually posted a small gain over the same time period. Now that index has actually found a bid, SLAB is powering ahead to levels not seen since December. On Tuesday the stock added 4.1% and moved above resistance at $25.00 and $25.50. With both the daily stochastics (5,3,3 setting) and MACD curling higher, we think SLAB is poised to retrace its early-December losses and move towards the $30.00 level. Our trigger to enter this paper trade is set at $25.74, one cent above today's high. The daily chart shows that the 21- dma ($23.85) has provided support over the past two weeks. If the play is activated we'll use a stop at $23.24. This is also below the descending 200-dma. Traders seeking to minimize downside risk might want to use a stop a penny or two below the 21-dma. Annotated daily chart - SLAB: Picked on February xxth at $xx.xx <- see text Results since picked: +0.00 Earnings Date 01/22/03 (confirmed) ================================================================= 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. 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PremierInvestor.net Newsletter Tuesday 02-18-2003 section 2 of 2 Copyright ) 2003, 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: SLAB Stock Bottom / Active Trader Bearish Play Updates: APD, GWW, JWN Closed Bearish Plays: WHR High Risk/Reward Bullish Play Updates: AMGN, CYTC, TECD Bearish Play Updates: IDPH Split Trader / Stock Splits Split Announcements: BRL: 3-for-2 split announcement Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ============ NB New Plays ============ ----------------- New Bullish Plays ----------------- Silicon Labs - SLAB - close: 25.62 change: +1.02 stop: *text* Company Description: Silicon Laboratories Inc. designs, manufactures, and markets proprietary high-performance mixed-signal integrated circuits (ICs) for a broad range of communications markets. Silicon Laboratories is an ISO9001-certified manufacturer and has applied for more than 161 patents on its mixed-signal technology. (source: company press release) Why We Like It: In recent months, semiconductors that power wireless devices have provided one of the few bright spots in the chip industry. So far investors haven't been given much evidence of a pickup in demand for the beleaguered tech sector. With neither businesses nor consumers rushing out to upgrade PC's, companies such as Intel and AMD have yet to see a notable pickup in orders. But in sharp contrast to this lack of growth, stronger worldwide demand in the wireless market has created a favorable climate for companies such as Silicon Labs. Taiwan Semiconductor, the world's largest semiconductor foundry, reported recently that orders for wireless chips were very brisk. This may have played a large role in INTC's decision to roll out its own communications chip. SLAB's January 22nd earnings announcement also reflects the fundamental gains that the sub-sector has experienced. Citing growing acceptance of its wireless products, the company reported fourth-quarter income that was four cents better than Wall Street expectations. SLAB also differentiated itself from many of its chip brethren by not forecasting a decline in revenue during the first quarter of 2002. These developments helped SLAB to display incredible relative strength while the semiconductor index drifted steadily lower over the following weeks. From January 22nd to its multi-month low on February 10th, the SOX.X lost 11.6%. SLAB actually posted a small gain over the same time period. Now that index has actually found a bid, SLAB is powering ahead to levels not seen since December. On Tuesday the stock added 4.1% and moved above resistance at $25.00 and $25.50. With both the daily stochastics (5,3,3 setting) and MACD curling higher, we think SLAB is poised to retrace its early-December losses and move towards the $30.00 level. Our trigger to enter this paper trade is set at $25.74, one cent above today's high. The daily chart shows that the 21- dma ($23.85) has provided support over the past two weeks. If the play is activated we'll use a stop at $23.24. This is also below the descending 200-dma. Traders seeking to minimize downside risk might want to use a stop a penny or two below the 21-dma. Annotated daily chart - SLAB: Picked on February xxth at $xx.xx <- see text Results since picked: +0.00 Earnings Date 01/22/03 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== =============== AT Play Updates =============== -------------------- Bearish Play Updates -------------------- Air Products - APD - close: 39.81 change: -0.58 stop: 42.01 We applaud APD's new corporate responsibility website, which they announced today. Unfortunately, Wall Street didn't seem to respond very well to the news. Aside from the positive opening, which was more of a follow through on Friday's late day rally, the stock spent most of the day in a steady descent. Bears can be encouraged by the close under the $40 level but this isn't the first time this has occurred. Traders looking to open new positions need to keep their fingers limber, as this could be an entry point. However, conservative traders may feel better about going short once APD trades below the recent lows of $39.30. We did note that volume on today's decline was pretty decent at 1.6 million shares. The next level of support should be the $35 area. If the broader indices see a pull back soon then APD's decline could pick up speed. Picked on January 29th at $39.84 Results since picked: +0.03 Earnings Date: 01/22/02 (confirmed) --- Grainger - GWW - close: 47.12 change: +0.95 stop: 47.56 Ouch! The follow through on Friday's strong rally actually had shares of GWW gapping higher at the open this morning. While we have not yet been stopped out at $47.56, we would expect to be stopped out tomorrow should the rally continue. Keep in mind that GWW still has overhead resistance at $48.00 and the 200-dma currently near $48.40. Unfortunately for the bears, by the looks of the MACD, this stock's rally may have more oomph left. Check out the PnF chart. The descent stopped right on its bullish support trend (yup, the same one we highlighted in the original write up for GWW). Picked on February 7th at $45.59 Results since picked: -1.59 Earnings Date 01/29/03 (confirmed) --- Nordstrom Inc - JWN - cls: 17.70 chg: +0.39 stop: 18.01 Dow component Wal-Mart took the center stage this morning with its quarterly earnings report. The retail giant reported a 10.7% increase in year-over-year revenue and beat analyst estimates by one cent. In terms of forward-looking guidance, WMT said it expected full-year EPS results of $2.00-$2.05. This was also in- line with expectations. With no major upside surprises for investors, the bulls didn't have enough fuel to push WMT above its 50-dma. The stock experienced an intraday reversal and finished in the red. In other retail news this morning, Bears Stearns came out with comments that suggested the sector would continue to experience revenue challenges during the first half of the year. The firm said geo-political and economic uncertainty would continue to pressure the group. Of course, the same thing could be said about almost any other sector/industry. Investors showed their skepticism by pushing the RLX.X retail index to a 1.1% gain. Meanwhile, shares of Nordstrom outpaced the RLX.X and powered ahead to a 2.2% gain. That relative strength is an indication that JWN could continue towards the $18.00 level. However, a 5-minute chart shows that shares continually found intraday resistance near $17.60. We'd expect JWN to retrace its recent gains if that level continues to thwart the bulls. A rally through overhead resistance would probably lead to a violation of our (almost) break-even stop-loss at $18.01. After the bell today, Nordstrom announced a quarterly divided of 10 cents/share. The dividend will be payable on March 14th to shareholders of record on February 28th. Picked on January 27th at $17.98 Results since picked: +0.28 Earnings Date 02/20/02 (confirmed) =============== AT Closed Plays =============== -------------------- Closed Bearish Plays -------------------- Whirlpool Corp. - WHR - close: 51.57 change: +1.15 stop: *text* Shareholders of Whirlpool have been granted a reprieve by the latest broader market short-covering gains. Last week WHR was looking vulnerable to heavy selling after breaking below support at $50.00. The lack of additional support until $45.00 bolstered the negative technical picture. But just when it seemed the stock would be headed for new relative lows, the bulls were rescued by a wide-based equity rally that helped WHR to reclaim the $50.00 level. On Friday we decided to give the bears at least one more session to prove themselves, knowing that any negative geo-political events over the long weekend could quickly reverse the market's gains. Instead, Wall Street came to the conclusion that the U.N. meetings over the weekend effectively pushed back the timeframe for the beginning of hostilities in Iraq. The resulting 1.6% gain in the Dow Jones was bested by WHR, which tacked on 2.2%. Bears will note that the stock is still under resistance near the 50-dma ($52.60). However, with the MACD and daily stochastics (5,3,3) showing bullish reversals, we're not willing to modify our entry strategy in order to capture a rollover. We've parting ways with WHR tonight, having never been triggered in this short play. Picked on February xxth at xx.xx <- see text Results since picked: +0.00 Earnings Date 02/05/03 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Amgen Inc. - AMGN - close: 53.62 change: +1.02 stop: 50.49 Continuing its rebound from the ascending trendline (now at $51.65) that began with the September lows, AMGN dragged the Biotechnology index (BTK.X) higher throughout the day on Tuesday. If this is a reversal for the BTK, it looks like AMGN is going to lead the way. The critical test will be at the $54.00 resistance level, which turned back the bulls last week. The BTK did manage to close just above the 10-dma for the first time in over a month and that is definitely a positive sign. But there is still some stiff resistance to contend with in the $327-330 area before we'll know if it is truly a trend change in progress. AMGN is looking much stronger than the BTK, after the gains of the past two days, and the bulls are likely to challenge that $54 level tomorrow, market permitting. Traders that took advantage of last week's weakness to enter the play are looking good tonight, while those still waiting on the sidelines can either enter on a pullback near the $52.50 support level or on a breakout over $54.00. If entering on a breakout, look for confirmation from the BTK in the form of a push through the 330 level. Conservative traders might want to use a stop slightly below $51.00, under last week's low. For the time being we'll maintain a stop at $50.49. Picked on February 14th at $52.51 Results since picked: +1.11 Earnings Date 04/24/03 (unconfirmed) --- Cytyc Corp. - CYTC - close: 12.97 change: +0.45 stop: 11.99 *new* Late last week it looked as if the bulls might be getting fatigued. Cytyc experienced a rapid rise from the $12.00 level, and by Thursday the stock had started to underperform the major indices. Thus, we were quite pleased to see how CYTC responded to the continued market gains on Tuesday. Shares tacked on 3.5% and closed near the highs of the day, easily outperforming the Dow Jones and NASDAQ. We'll now be watching for the bulls to dispatch whole-number resistance at $13.00. A move above this level (which kept a ceiling on CYTC during today's trading) would present a possible action point for aggressive traders looking to add to long positions, but remember that this play will be closed if CYTC trades at or above $13.94. Longer-term traders can be targeting an eventual move to the $15.00 area. At this time we're going to bump our stop-loss up to $11.99, slightly below break-even. Traders seeking to protect a 5% gain could use a stop at $12.72. In the event CYTC retraces some of today's gains, we'd be looking for buyers to emerge at short-term congestion in the $12.60-$12.75 region. Picked on February 11th at $12.12 Results since picked: +0.85 Earnings Date 01/28/03 (confirmed) --- Tech Data Corp. - TECD - close: 21.95 change: +0.44 stop: 20.49 No overhead resistance and a broader market rally proved to be a potent combination for TECD on Tuesday. Our play was activated at the opening trade of $21.75 when shares gapped above our entry point. The stock topped out slightly below $22.00 during the first five minutes of trading before pulling back into negative territory for several hours. But as soon as intraday resistance at $21.60 was broken with two hours left in the session, the bears decided to call it a day. Shares closed near the highs of the day after tagging a high of $22.00. This created a three-box reversal on the point-and-figure chart. On the daily chart we see that TECD is continuing to fill in its February 7th gap, accompanied by a nice upward-curling MACD. In light of this technical strength, we think odds are good that shares will eventually reach our upside target at $23.99. New entries can be evaluated on either a move above $22.00 or a pullback to $21.60, which should now provide some measure of support. The latter strategy is better left to more aggressive traders. Our stop for this play is set at $20.49. Those looking for a little less downside risk could use a stop just below $21.00. Picked on February 18th at $21.75 Results since picked: +0.20 Earnings Date 03/17/03 (unconfirmed) -------------------- Bearish Play Updates -------------------- IDEC Pharma. - IDPH - close: 30.65 change: +0.75 stop: 32.82 Back above $30.00. The bears appeared to be firmly in control last week when IDPH sank below that support level and reached levels not seen since early-2000. However, the past few sessions of broad market gains have created a very inhospitable climate for short traders. Tuesday's action saw shares of IDEC follow the NASDAQ to a 2.5% gain. The biotech index, meanwhile, only squeezed out a 1.9% gain. Sector bears will be encouraged by the fact that the BTK.X has not yet broken above its descending regression channel. Similarly, IDEC is still mired in a multi- week trend of descending lows. At this point there are few signs that the stock will be able to break out of this trend without some additional help from a continued NASDAQ rally. Conservative traders can maintain a stop at $31.35. Our stop remains at $32.82. Given the fact that IDPH is more than two points above its relative lows, we would not be looking to target new short entries at this time. Speculative traders, however, could think about adding to bearish positions if IDPH moves back under $30.00. Picked on February 13th at $29.99 Results since picked: -0.66 Earnings Date 01/30/03 (confirmed) ================================================================= Split Trader / Stock Splits (ST) section ================================================================= Split Announcements ------------------- Barr Labs To Offer 3-for-2 Stock Split Shortly after the market closed this afternoon, Barr Laboratories (NYSE: BRL) announced that its Board of Directors had authorized a 3-for-2 Stock Split. The split will be distributed on or about March 17th to shareholders of record as of February 28th. This will mark the fourth stock split for BRL over the past seven years. Today's announcement comes on the heels of a powerful multi-month uptrend that has seen the stock gain more than 37% from its November lows near $55.00. Shares have spent the past two sessions moving towards the 52-week highs near $80.00 after rebounding sharply from the 50-dma at $71.65. BRL closed at $76.08 on Tuesday. For a current quote, click here: http://user.financialcontent.com/pin1/quote.cgi?account=pin1&ticker=BRL About the company Barr Laboratories, Inc. is a specialty pharmaceutical company engaged in the development, manufacture and marketing of generic and proprietary pharmaceuticals. (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 CTX Centex Corp 56.45 +2.82 GDW Golden West Financial 74.72 +0.56 DRL Doral Financial 30.48 +0.98 BAY Bayer Aktien 17.74 +0.81 LUX Luxottica Group 11.95 +0.55 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- Ticker Company Name Close Change ELBO Electronics Boutique 14.30 +1.80 DIGE Digene Corp 16.65 +1.11 NTES Netease.com 14.64 +1.64 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- Ticker Company Name Close Change GRMN Garmin Ltd 33.02 +2.15 SPF Standard Pacific 27.02 +1.20 RYL Ryland Group 42.50 +2.18 ECL Ecolab Inc 49.10 +1.70 DF Dean Foods 42.33 +1.45 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change LLL L-3 Communications 37.35 -1.85 ODFL Old Dominion Freight 26.30 -3.05 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- Ticker Company Name Close Change
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