PremierInvestor.net Newsletter Tuesday 03-04-2003 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: House Fires and Car Bombs Market Sentiment: And the Walls Came Tumbling Down Play-of-the-Day: Not Looking Healthy ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 03-04-2003 High Low Volume Advance/Decline DJIA 7704.87 -133.00 7845.71 7704.31 1.42 bln 1136/2064 NASDAQ 1307.77 - 12.50 1321.34 1307.27 1.19 bln 1254/2024 S&P 100 415.36 - 6.82 422.64 415.32 Totals 2390/4088 S&P 500 821.99 - 12.82 835.43 821.96 W5000 7807.01 -113.40 7924.51 7806.26 RUS 2000 356.51 - 2.80 359.31 356.04 DJ TRANS 2034.36 - 31.70 2067.46 2033.98 VIX 36.58 + 2.49 36.58 35.19 VXN 44.97 - 0.86 46.59 44.84 Total Volume 2,756M Total UpVol 489M Total DnVol 2,211M 52wk Highs 186 52wk Lows 256 TRIN 3.37 PUT/CALL .90 ----------------------------------------------------------------- =========== Market Wrap =========== House Fires and Car Bombs It was not a pretty day for the markets. Housing sales went down in flames, auto sales crashed and Greenspan bombed the markets with words of caution about slower times ahead and the possibility of a slow down in consumer spending. Terrorists set off a bomb in the Philippines and the US said it may forget trying to get a UN resolution and proceed on its own. The markets did not react well to this attack from all sides. Dow Chart - Daily Nasdaq Chart - Daily Leading the batting order today was the Challenger Layoff report which showed a +5% rise in layoffs in February to 138,177. This is the second monthly gain and shows that corporations are still cutting employees due the weak outlook. The largest number of layoffs were in computer manufacturing, computer services and non-profit organizations. Rising energy prices are causing corporations to cut back even further to protect already skinny bottom lines. Chain Store sales rose slightly for the week at +2.0% but fell -1.0% compared to last year. There was no big rebound in the week after the blizzard in the Northeast and analysts are concerned that war worries are causing an increase in the cocooning process. Disney said today that business at their attractions dropped measurably and immediately when the orange alert was issued and has not come back. Airlines are seeing less traffic and restaurants are warning about slowing sales. The quadruple threat of war, terror, economy and gas prices are combining to squash consumer interest and being home alone has taken on a positive context. Lenar Homes announced a weaker than expected forecast for orders in the first quarter and JPM said the stock could fall -25% from its present level. Needless to say that began a massive haircut for the entire sector. Not to have his thunder stolen by JPM, Greenspan dropped a bomb this morning when he said he saw home sales slowing as well. This double whammy tanked builders, home improvement companies, appliance manufacturers and any other related industry. He was not done. He said consumers withdrew a record $700 billion in equity from homes in 2002 or 10% of all home equity available. He said this bubble brought about by the very low mortgage rates could not continue and could slow dramatically going forward. This would lead in his opinion to a slowing of consumer spending and weaker times ahead. Sounds like he had a bad nights sleep and got up on the wrong side of the bed. The markets really took this news badly and saw it as evidence that the current soft patch may be turning into quicksand. After posting disappointing sales numbers yesterday DB Securities cut GM and Ford to a sell. They said recent developments have led them to be increasingly pessimistic about the downside risk for automakers over the next few years. The firm said the annual pace of deflation could get worse and the lower demand and increased capacity by foreign automakers was going to provide a rocky road for automakers. They also said the risk of a prolonged economic downturn through 2005 is much greater than is commonly perceived. Oops! Anything related to autos and auto parts dropped significantly. Adding to the overall investor anguish was comments from Warren Buffet that stocks were over valued and the market would probably see some rough times ahead. Buffet said that sometimes the best action is no action and said he was on the sidelines until the circumstances played out and a better investing environment appeared. The Oracle of Omaha is followed by many investors as a successful predictor of market action. This prompted another round of selling by the retail crowd. On the war/terror front things are heating up fast. The US is "reportedly" preparing a 72 hour warning of imminent hostile action to allow people like diplomats, UN inspectors, humanitarian workers, etc, to evacuate the country. This warning could be issued according to undisclosed sources any time over the next ten days. Must be a pre-warning warning by leaking it early. The US is reportedly ready to withdraw the UN resolution instead of face a potential veto. According to analysts and commentators the US has decided to go it alone and go soon to avoid any other resolution prohibiting hostile action from coming to the floor. This is producing a speeded up time frame for the attack. 60,000 more troops were ordered to deploy from the US this week including the 1st Cavalry which was thought to be the confirming signal. There was not going to be a war until they were called up. There were multiple ships ordered deployed from Norfolk VA today with 8,000 marines and personnel. Get this, it was to an undisclosed location. Marines to an undisclosed location on assault ships? Something else heating up somewhere? The North Korea incident where fighters intercepted a US spy plane in international waters could be the last straw in the bluffing match. The US said it was using all diplomatic channels in dealing with the NK threats but, and this is a first, "we are not ruling out military action." With that one line the threat level for a real conflict with NK just went to critical status. NK has real weapons and an army 15 time the size of Iraq's. Unfortunately for NK there is water on two sides and no need to beg other countries for passage. In reality I do not expect a conflict and I think the US put the force card on the table to warn NK they had taken just about as much BS as they were going to take and the next time a fighter approached a US plane it might not come home. The US ordered some bombers deployed to Guam in order to "deter aggression by NK". Needless to say this was another straw on the markets back. This week is rushing full speed into a potential train wreck. With the news events mentioned above we are already on a down hill slide and with the Dow finishing at a five month low. The potholes in out immediate future are the Fed Beige Book on Wednesday, Factory Orders and the Intel mid-quarter update on Thursday and the Nonfarm Payrolls on Friday. Also on Friday is the UN inspector report to the UN Security Council. With planes, ships and troops leaving in huge numbers and at an increased pace it does not appear the US cares about the UN decision. This ramping up of the attack force could mean it has given up on help from Tony Blair and others and once that decision is made there is no reason to wait. I think we are approaching a critical timeframe. It appears the attack is imminent with the "72 hour" warning in the works. It appears the US will go alone. It appears the economy is tanking fast. It appears the war may only provide a brief bounce and once that excuse is gone the economy will take center stage and be exposed to the searchlight of truth. Based on today's auto and housing disasters that searchlight may find more imperfections than the laser fault finder on the "Are You Hot" reality show. As all of these events are fully considered by investors the end result may not be pretty. With the Dow closing at 7700 I think it is safe to assume a retest of the October low around 7200 is in our future. There is only one more speed bump ahead of us and that is the 7630 low from Feb-13th. Once that low is passed we will have wiped out any technical reason to justify disclaiming a retest of 7200. Bulls are slowly waking up to this fact an there was a distinct lack of buyers today. The volume was VERY light at only 1.4B for the NYSE and 1.2B for the Nasdaq. This may be total lack of conviction but ships can sink in calm seas. The lack of buy programs over the last two days has been very evident. There may not be a lot of sellers but they are winning the battle. The Nasdaq struggled to hold on to gains from last week and failed. It closed at 1307 and barely above the critical 1295-1305 low range. Intel will be the key on Thursday but it is unclear what a guidance affirmation would do. Just saying the times are tough but we are holding to our lowered estimates probably will not give investors much confidence. I had one reader ask me what SPX level was represented by Dow 7200. That equates to about 770 and the SPX closed at 822 today. Obviously we know what that trader is thinking and I would bet there are quite a few institutions that are thinking the same thing. The bets have been made and everybody is just waiting for time to expire on the clock. Cash is on the sidelines waiting for the next game to begin. That game could begin with a bang but it may end with a whimper as the April earnings season arrives. We are approaching earnings warning season already but it may be over shadowed by the start of the war leaving investors holding the bag when the actual earnings are announced in April. Enter Very Passively, Exit Very Aggressively! Jim Brown Editor ================ Market Sentiment ================ And the Walls Came Tumbling Down by Steven Price The breakdown from recent highs continued today - right down to another significant level of support. The bears, however, were not to be denied. The recent closing low in the Dow was 7749 on February 13. That day we dropped all the way down to 7628 intraday, but rallied over 100 points into the close. Today's morning low was 7750.81, where we found support and then traded sideways for a couple of hours, before rounding higher and making up some of the day's losses. The rally was short lived, however, eventually failing at 7800 and breaking down below the 7749 support level. The fact that we first found support and then took out the level underscores the bearishness of today's move. With bullish percents now reaching down into areas we last saw in October, the risk has shifted to the point where bears need to be aware that oversold conditions could lead to a rebound. That being said, we still have not been able to crack the Dow 8000 barrier on the last couple attempts and we also got bearish reversals on the point and figure charts into columns of "O" in the SPX and OEX, following that of the Dow. While those signals give us little reason to make the case for going long, we should be aware that the Dow bullish percent now sits on an ascending trend line from its recent lows in July and October. The other factor that seems to create problems for bears here is in the techs. While the Dow has sought out new daily lows, the Nasdaq Composite has refused to really give in. In fact, with the Dow, SPX and OEX all in negative territory most of the morning, the COMP made its way all the way back into positive territory mid-day. I have highlighted the support level at 1319, which was the November left shoulder pullback low of the head and shoulders pattern formed from October through January. That level remained tough today, with an intraday drop below it once again being bought and brought back to just above. In the end, it eventually failed and that could be a domino to a break below 1300. We could be seeing a similar support to resistance transformation to the one at Dow 7800. However, 1300 should again provide support, as it did on the last drop and the techs are still holding up relatively well compared to the industrials. The COMP closed on Monday at 1320, after a similar trip below that support. The news events that sent us lower this morning were the bombings in the Philippines. A bomb exploded at Davao City airport on Mindanao Island, killing 21 people and injuring 148. An hour later, a second bomb went off at a health center 30 miles away. Those events, as well as comments from Warren Buffet that his Berkshire Hathaway was doing little in equities and instead increasing investment in junk bonds, also sent investors to the sidelines. If Buffet now considers junk bonds less risky than stocks, it is hard to imagine the average retail trader looking to move back into equities. That was precisely what we saw today, but even those comments and the bombings were not enough to break that February 13 support. The Dow 7800 level had provided several bounces on the way back from those February 13 lows and today's drop below that level gives bears hope, as it did not provide the same bounce it did on February 26 and 27. It also showed some intraday resistance after the 7750 test, as the Dow moved sideways in a 50-point range for much of the afternoon. We can focus on 7800 now as the next resistance level, since it was previous support and now appears to have bears waiting with plenty of supply - at least enough to have overwhelmed the bulls. While we appear to be stair stepping our way down to successively lower levels, none of the recent moves have seen very high volume, which suggests traders are turned off from the market until we get some resolution on the international front. Russia threatened to use a veto on any U.S. proposal calling for military action in Iraq and the U.S. basically said it might not call for a vote unless it thinks it will get a favorable ruling. That doesn't mean it won't invade, it just means it will have to forgo a U.N. coalition and go in on its own, or at least with Britain. The Turkish Parliament's rejection of the U.S. plan to use its bases further complicates the matter. The theory goes that if the U.S. invades without global support, we may see an outflow of assets from foreign investors, further sinking the stock market. If we at least get a coalition, it reduces that effect and the market may see a relief rally once the invasion begins. For now, we should trade what we see and that direction remains down. I have a bearish position, but have tightened up my stop to chase the market in case we do get another bounce from these levels. The new relative closing low in the Dow is certainly a bearish sign and cannot be discounted. However, as bullish percents become more extended to the downside, be alert that any bounce can be significant and keep your stops nice and tight. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10673 52-week Low : 7197 Current : 7704 Moving Averages: (Simple) 10-dma: 7882 50-dma: 8222 200-dma: 8576 S&P 500 ($SPX) 52-week High: 1176 52-week Low : 768 Current : 822 Moving Averages: (Simple) 10-dma: 836 50-dma: 869 200-dma: 907 Nasdaq-100 ($NDX) 52-week High: 1734 52-week Low : 795 Current : 982 Moving Averages: (Simple) 10-dma: 997 50-dma: 1010 200-dma: 1007 ----------------------------------------------------------------- Dow Jones Home Construction Index (DJUSHB): Alan Greenspan said this morning that there is little risk of a housing bubble. Then it popped. Or at least that's the way it felt for anyone long the sector, following a speech in which the Chairman said, "Refinance and home-purchase originations peaked in the fourth quarter of last year. It is difficult to imagine that pace being maintained in the current quarter." He indicated that the economy would not be able to rely as much on consumer spending derived from this area and the housing stocks took it on the chin. The DJUSHB dropped 20 points, or 6%, following the comments and also news from Lennar (LEN - $3.91). LEN released its first quarter orders report that showed 7% year over year growth. JP Morgan came out and said it was well below their 23% estimate and a substantial deceleration from the fourth quarter's 38% growth. Morgan said the stock could lose 25% and the entire sector followed it down hill. 52-week High: 397 52-week Low : 260 Current: 298 Moving Averages: (Simple) 21-dma: 316 50-dma: 317 200-dma: 324 ----------------------------------------------------------------- The VIX bounced from 34% for the third time, as the Dow slid to its lowest closing level since last October. The VIX is derived from the OEX, which along with the SPX, has yet to break its February low, but is nonetheless testing the downside once again. With the move back over 35%, it appears there is plenty of downside room in the equities before the VIX reaches 40%, which has signaled at least a short term equity rally over the past few months. It finished the day at 36.58. CBOE Market Volatility Index (VIX) = 36.58 +2.49 Nasdaq-100 Volatility Index (VXN) = 44.97 -0.86 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.90 415,703 375,782 Equity Only 0.80 290,770 233,771 OEX 0.84 25,907 21,825 QQQ 0.83 23,907 19,810 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 39.2 - 0 Bull Correction NASDAQ-100 34.0 - 0 Bear Confirmed Dow Indust. 13.3 - 0 Bear Confirmed S&P 500 33.4 - 0 Bull Correction S&P 100 27.0 - 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 1.64 10-Day Arms Index 1.53 21-Day Arms Index 1.40 55-Day Arms Index 1.36 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals Advancers Decliners NYSE 901 1908 NASDAQ 1172 1948 New Highs New Lows NYSE 90 120 NASDAQ 86 113 Volume (in millions) NYSE 1,412 NASDAQ 1,192 ----------------------------------------------------------------- Commitments Of Traders Report: 02/25/02 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 made few changes to either side of the equation, resulting in a net change of 200 short contracts. Small traders added 2300 contracts to the long side. Commercials Long Short Net % Of OI 02/04/03 414,543 465,678 (51,135) (5.8%) 02/11/03 412,333 472,156 (59,823) (6.8%) 02/18/03 423,871 481,871 (58,000) (6.4%) 02/25/03 424,276 482,476 (58,200) (6.4%) 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 02/04/03 151,174 93,439 57,735 23.5% 02/11/03 161,126 95,618 65,508 25.5% 02/18/03 155,475 91,102 64,373 26.1% 02/25/03 157,790 91,083 66,707 26.8% 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 slightly to the long side and added 1,200 short contracts. Small traders left the long side alone and reduced shorts by 2,000 contracts. Commercials Long Short Net % of OI 02/04/03 40,934 50,992 (10,058) (10.9%) 02/11/03 39,412 53,818 (14,406) (15.5%) 02/18/03 38,486 50,501 (12,015) (13.5%) 02/25/03 38,787 51,745 (12,958) (14.3%) 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 02/04/03 25,573 8,648 16,925 49.5% 02/11/03 29,667 8,915 20,752 53.8% 02/18/03 25,482 9,425 16,057 46.0% 02/25/03 25,378 7,431 17,947 54.7% 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 the long side by 1,000 contracts and left shorts relatively unchanged. Small Traders reduced the long side by 700 contracts and left the short side alone. Commercials Long Short Net % of OI 02/04/03 17,596 11,232 6,364 22.1% 02/11/03 19,826 11,800 8,026 25.4% 02/18/03 18,812 11,939 6,873 22.4% 02/25/03 19,985 11,866 8,119 25.5% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 02/04/03 4,583 9,424 (4,841) (34.6%) 02/11/03 5,390 9,300 (3,910) (26.6%) 02/18/03 5,561 8,973 (3,412) (23.5%) 02/25/03 4,872 8,723 (3,851) (28.3% 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 BEARISH Active Trader/non-tech play)) =============== Universal Health Svcs. - UHS - cls: 38.04 chg: -0.56 stop: *text* Company Description: Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory surgery and radiation centers nationwide, in Puerto Rico and in France. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust. (source: company press release) Why We Like It: One glance at the daily chart for UHS lets you know that something went dreadfully wrong on Valentine's Day, when the stock gapped sharply lower and lost roughly one fifth of its value on monstrous volume of 17.5 million shares. The catalyst for this sell-off was the unexpected firing of Universal Health CFO Kirk Gorman. In a conference call, company officials said the split was due to "philosophical" differences but refused to give many specific details. Later on it became apparent that Mr. Gorman's termination stemmed from a dispute with UHS auditor KPMG. Letters released by Universal Health reveal that Gorman was reluctant to sign off on the company's financial reports, saying that he was "...personally unable to verify that all of our according is in accordance with General Accepted Accounting Procedures." Some Wall Street analysts speculated that Gorman's refusal might be an indication of accounting irregularities at UHS. If there are two words that investors hate to hear, it's "accounting irregularities." A slew of brokerage downgrades reflected the uncertainty and contributed to the overwhelmingly bearish reaction to Gorman's departure. In the days that followed, UHS managed to recoup some of its losses and fill in a large chunk of the February 14th gap. News of an informal SEC inquiry into the recent management shakeup did not have a substantial impact on the stock's price, which hovered in the $38-$40 range during the latter part of February. But after failing to push UHS through psychological resistance at $40.00, it looks like the bulls are growing increasingly impatient. Shares have drifted steadily lower over the past two sessions and are now threatening a violation near-term support at $38.00. If the weakening Dow Jones is any indication, that level could be taken out on Wednesday morning. Our trigger to enter this play is at $37.98. Our objective is to ride UHS back towards the mid-February lows. Other than possible support at the February 21st lows near $36.00 (which were formed when UHS gapped lower in reaction to news of the SEC inquiry), we don't see any substantial underlying support. In terms of specific downside targets, we'll exit the hypothetical trade if shares trade at or below $33.06. Once the play is activated we'll use a stop at $40.16, two cents above the relative high. Traders willing to give UHS a bit more breathing room could use a stop slightly above the descending 21-dma at $40.61. Annotated daily chart - UHS: Picked on March xth at xx.xx <- see text Results since picked +0.00 Earnings Date 02/13/03 (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. 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 ) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Tuesday 03-04-2003 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 Bullish Play Updates: CMVT, SLAB Bearish Play Updates: INFY Closed Bullish Plays: IBM Stock Bottom / Active Trader New Bearish Plays: UHS Bullish Play Updates: DHR, TOO Bearish Play Updates: APD High Risk/Reward Bullish Play Updates: AMGN, GLW Bearish Play Updates: AW, CTAC, IDPH Closed Bullish Plays: TECD Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================== Net Bulls (NB) Tech Stock section ================================================================== =============== NB Play Updates =============== -------------------- Bullish Play Updates -------------------- Comverse Technology - CMVT - cls: 9.62 chg: -0.08 stop: 9.39 Ouch! The last two days of broader market declines have come home to roost in shares of CMVT. After Friday's heavy volume breakout to the upside through resistance one would have expected a bit more tenacity from CMVT. Shares have pulled back to short- term support near $9.50. The short-term up trend remains in tact but we came very close to being stopped out when the stock dipped to $9.47 this morning. If you're an optimist, this is an entry point to leg into a position on the pull back. However, we would prefer to wait for some show of strength and hopefully see CMVT back over the $10.00 mark before committing any cash. If the Nasdaq composite breaks below the 1300 mark it probably won't matter as investors will be tempted to sell again to avoid the next big leg down. Meanwhile in the news, CMVT issued a press release stating that the company will be holding a conference call to review its fiscal 2002 Q4 results on Wednesday, March 12th. Picked on February 28th at $10.20 Gain since picked: -0.58 Earnings Date 11/26/02 (confirmed) --- Silicon Labs - SLAB - close: 26.52 change: +0.02 stop: 23.99 Last week as we watched the unfolding drama taking place in the tech world's daily soap opera "All My Chips", the $SOX chip index had made a valiant effort to breech the 300 level of resistance. In a cliffhanger episode last Friday (hey, it's not sweeps week) the SOX closed just points away from a new relative high above resistance. Alas, a bullish breakout was not to be. The SOX did trade higher on Monday morning, piercing the 300 level before being brutally shoved back into the rangebound trading that has bored us all but the day traders. From Monday's open the SOX has retreated all the way back to recent support near 280 and remains there, heavy hearted and listless. Meanwhile, our star of the show, SLAB has been hit hard by the weakness in the SOX. After trading as high as $28.00 in Monday's session the stock is back to bouncing off support near $26. Traders should keep an eye on both SLAB and the $SOX. The PnF chart of the SOX is currently on a buy signal but if it breaks the 280 level, not only will it be a technical breakdown on the daily chart but it will also show a technical sell signal on the PnF chart. SLAB is certainly much stronger but without support from the group it's going to have a hard time busting through its own PnF resistance just overhead. More conservative traders may want to start thinking about raising their stops to protect any gains and or limit exposure. In the news, SLAB's CFO is slated to present at the Deutsche Bank 2003 Information and Technology Hardware Conference in Scottsdale, AZ on March 11, 2003. Picked on February 20th at $25.74 Results since picked: +0.78 Earnings Date 01/22/03 (confirmed) -------------------- Bearish Play Updates -------------------- Infosys Technologies - INFY - cls: 60.05 chg: -0.95 stop: *text* News of a large explosion at an airport in the Philippines rattled the Eastern markets on Tuesday, including the Indian BSE 30, which finished with a loss of nearly 1%. This resulted in a small downward gap for shares of the U.S. ADR this morning. The stock drifted lower throughout the session and gave back 1.5%. On the daily chart, we see that the upward momentum from Friday's rebound quickly faded at the 200-dma ($62.42). That level continued to act as resistance on Monday. With INFY already retracing most of Friday's gains, it looks like shares could soon be trading at fresh multi-month lows. We're maintaining our action trigger for this paper trade at $59.49. If the play is activated we'll use a stop at $63.01, although a stop slightly above the 200-dma would be perfectly acceptable from a technical standpoint. Picked on February xxth at $xx.xx <- see text Results since picked: +0.00 Earnings Date 04/11/03 (unconfirmed) =============== NB Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Intl Business Mach. - IBM - cls: 76.70 chg: -0.63 stop: *text* The growing threat of war with Iraq has put the kibosh on any successful rally attempts for the markets and IBM is not showing any leadership to the upside. The Premier Investor Newsletter has not yet been triggered on this play and thus we drop it unopened. More aggressive traders might want to watch it for a bounce at support near $76.00 but we would encourage a pretty tight stop as the Dow Industrials looks close to breaking down into another leg lower. Meanwhile in the news, IBM announced it was recalling some 56,000 monitors that had a tendency to overheat and smoke, thus creating a fire hazard. We doubt this will have any affect on the stock price. Picked on February Xth at $xx.xx Results since picked: +0.00 Earnings Date 01/16/03 (confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ ----------------- New Bearish Plays ----------------- Universal Health Svcs. - UHS - cls: 38.04 chg: -0.56 stop: *text* Company Description: Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory surgery and radiation centers nationwide, in Puerto Rico and in France. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust. (source: company press release) Why We Like It: One glance at the daily chart for UHS lets you know that something went dreadfully wrong on Valentine's Day, when the stock gapped sharply lower and lost roughly one fifth of its value on monstrous volume of 17.5 million shares. The catalyst for this sell-off was the unexpected firing of Universal Health CFO Kirk Gorman. In a conference call, company officials said the split was due to "philosophical" differences but refused to give many specific details. Later on it became apparent that Mr. Gorman's termination stemmed from a dispute with UHS auditor KPMG. Letters released by Universal Health reveal that Gorman was reluctant to sign off on the company's financial reports, saying that he was "...personally unable to verify that all of our according is in accordance with General Accepted Accounting Procedures." Some Wall Street analysts speculated that Gorman's refusal might be an indication of accounting irregularities at UHS. If there are two words that investors hate to hear, it's "accounting irregularities." A slew of brokerage downgrades reflected the uncertainty and contributed to the overwhelmingly bearish reaction to Gorman's departure. In the days that followed, UHS managed to recoup some of its losses and fill in a large chunk of the February 14th gap. News of an informal SEC inquiry into the recent management shakeup did not have a substantial impact on the stock's price, which hovered in the $38-$40 range during the latter part of February. But after failing to push UHS through psychological resistance at $40.00, it looks like the bulls are growing increasingly impatient. Shares have drifted steadily lower over the past two sessions and are now threatening a violation near-term support at $38.00. If the weakening Dow Jones is any indication, that level could be taken out on Wednesday morning. Our trigger to enter this play is at $37.98. Our objective is to ride UHS back towards the mid-February lows. Other than possible support at the February 21st lows near $36.00 (which were formed when UHS gapped lower in reaction to news of the SEC inquiry), we don't see any substantial underlying support. In terms of specific downside targets, we'll exit the hypothetical trade if shares trade at or below $33.06. Once the play is activated we'll use a stop at $40.16, two cents above the relative high. Traders willing to give UHS a bit more breathing room could use a stop slightly above the descending 21-dma at $40.61. Annotated daily chart - UHS: Picked on March xth at xx.xx <- see text Results since picked +0.00 Earnings Date 02/13/03 (confirmed) =============== AT Play Updates =============== -------------------- Bullish Play Updates -------------------- Danaher Corp. - DHR - close: 63.75 change: -1.79 stop: 61.98 Hmm... previously we were pretty encouraged by DHR's ability to seemingly ignore the broader markets and climb higher with out them. Or so it seemed Thursday-Friday-Monday. Shares of DHR pulled back 2.7% today as the Dow Industrials lost 133 points. Is this market related profit taking? Or is this some how related to the hammering felt in the automotive group today? We doubt the latter as DHR doesn't seem to have too much exposure in the auto sector. We did note that shares of Sears (S) were down big today (-5.88%). Sears is DHR's biggest single customer. There didn't seem to be any significant news about Sears today, but the retail giant did have its credit downgraded on Friday. Back to DHR, the short-term trend remains intact despite the big drop today. Shares stalled near the 50-dma, but we would not be surprised to see the drop continue until the shares hit the $63.00 mark. If you're looking for new positions, sit back and wait for a bounce at $63.00. This should significantly reduce any exposure with a stop loss just under $62. Of course, if the broader markets continue to trade lower, we'd suggest avoiding any bullish trades period. Picked on February 26th at $64.36 Results since picked: -0.61 Earnings Date 01/30/02 (confirmed) --- TOO Inc - TOO - close: 14.86 change: -0.74 stop: 14.39 *new* Danger, Will Robinson, Danger! The Retail Index ($RLX) and shares of WMT took some big hits today as investors appear to be fleeing the retail group based on weak economic numbers and war jitters. It didn't help having Victoria's Secret lose their court battle (whether you believe they were right or not). Shares of TOO, which had been holding up on Monday gave in to the selling pressure today and lost 4.7%. The short-term uptrend appears to be compromised and despite our feelings that TOO still looks like a decent longer-term investment we're going to raise our stop loss. The new stop will be $14.39. More conservative traders may want to use $14.49, as the recent low was near the 14.50 mark. If the markets/retail sector don't bounce soon (like tomorrow) we'll plan on being stopped out. No new positions are recommended at this time. Picked on February 27th at $15.66 Gain since picked: -0.41 Earnings Date 02/19/03 (confirmed) -------------------- Bearish Play Updates -------------------- Air Products - APD - close: 38.14 change: -0.77 stop: 40.06 APD tried its best to break out of its multi-week descending trend. The stock staged a strong reversal from last Tuesday's multi-year low of $36.97 and by Monday morning shares had marched up to a short-term high of $39.52. However, Air Products was not able to power above its descending 21-dma at $39.67. Shares have distanced themselves from that moving average as the Dow Jones moved lower over the past two sessions. On Tuesday APD underperformed the Industrials and posted a 2.0% loss, settling just above $38.00. That level acted as support last week after the stock rebounded from its relative lows. A breakdown below $38.00 might present an opportunity to open new short positions, but remember that possible support lurks at $37.00. By the way, remember those bullish oscillators? The past two days of losses have led to a flattening of the daily stochastics (5,3,3) while also preventing a bullish MACD crossover. That's an encouraging technical development for the bears. Our stop-loss is set at $40.06. Traders looking to protect a small gain could use a stop just above the 21-dma. Picked on January 29th at $39.84 Results since picked: +1.70 Earnings Date: 01/22/02 (confirmed) ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== =============== HR Play Updates =============== -------------------- Bullish Play Updates -------------------- Amgen Inc. - AMGN - close: 54.12 change: +0.27 stop: 51.54 As much as we would have liked to see AMGN finally break through the $55 level, it is somewhat reassuring to know that the pattern of the past few weeks hasn't changed. Each time AMGN tags a new intraday high, it pulls back to confirm support at a higher level. Yesterday's push up to the $54.95 level brought about some selling and the stock proceeded to fall back before a slight rebound from the $53.50 level. That rebound just wasn't sustainable in the face of the broad market weakness on Tuesday and after finding resistance at a slightly lower high $54.76, AMGN pulled back to just above the $54 level. That's the long way of saying that AMGN is in the process of dipping back to test support again after another failure to break above $55. But it sill looks pretty strong in light of the broad market weakness and even the BTK index ending the day in the red. The ascending trendline we've been following has now risen to $52.70, so a dip and rebound from around $53 is likely to be our next solid entry into the play while we wait and watch for the stock to finally crack the $55 level. Conservative traders may want to place stops close to breakeven, just below $52.50. Picked on February 14th at $52.51 Results since picked: +1.61 Earnings Date 04/24/03 (unconfirmed) --- Corning Inc. - GLW - close: 5.02 change: -0.08 stop: 4.53 This long play was activated on Monday morning when GLW sliced through resistance at $5.00. The stock set a relative high of $5.21 before drifting lower with the NASDAQ. Today's action saw GLW give back another 8 cents while the Composite once again suffered from a lack of buyers. The 5-minute chart shows a bearish, albeit very orderly downtrend over the past two sessions. That's not too surprising, given the lack of broader market leadership. What's technically encouraging is the fact that GLW has attracting buying interest at $5.00, which now appears to be acting as support. Further sideways trading at this level would provide a good base from which the stock might be able rally. In after-hours news, Corning CFO James Flaws, speaking at a Morgan Stanley conference, reiterated the company's forward-looking expectations. Specifically, GLW is forecasting a return to profitability in the third quarter and a first quarter loss of $0.01-$0.04 per share. Flaws also said that the company's telecom segment expects to grow $300 million to $330 million of earnings improvement this year. This news had GLW ticking slightly higher in the extended trading session. Barring a strong market sell-off tomorrow, the stock looks like it could soon be trading at new relative highs. New entries can be targeted on a move above $5.21. However, we would not recommend chasing the stock if shares gap sharply higher tomorrow morning. Picked on March 3rd at $5.01 Results since picked: +0.01 Earnings Date 04/24/03 (unconfirmed) -------------------- Bearish Play Updates -------------------- Allied Waste - AW - close: 8.03 change: -0.09 stop: 9.03 The recent broader market weakness has made it awfully difficult for AW to retrace more than a small portion of its late-February losses. The stock ticked lower on Monday after failing to move above short-term resistance ($8.25) in the opening minutes of trading. Shares continued lower this morning and tagged a session low of $7.88 before gravitating back to the $8.00 region, where they traded for the rest of the day. Technically, it's hard to make much of this rangebound action. Volume continues to the significantly less than the volume that accompanied the rapid decline from $10.00. However, bears will be pleased to see that AW has traced a series of lower highs and lower lows over the past three sessions. It's also encouraging to see that the daily stochastics (5,3,3) are on the verge of producing a crossover to the downside. With Allied Waste having a tough time finding buyers, more weakness in the major equity indexes could be just the catalyst the bears need to push shares under the relative low of $7.65. Short-term traders might want to think about scaling out of positions if AW rebounds near that level. Our downside profit-target is still located at $7.06. Aggressive traders looking for new entries can watch for another failed rally near $8.25. Picked on February 20th at $8.54 Results since picked: +0.51 Earnings Date 02/13/03 (confirmed) --- 1-800 Contacts - CTAC - cls: 17.63 chg: -0.78 stop: 20.01 This wasn't the follow-through day that the bulls were hoping for. On Monday CTAC shrugged off late-session weakness in the major indexes and closed above the 100-dma. You'll recall that that moving average has given the bulls fits over the past week. However, any hopes for a continuation of those gains were crushed when CTAC moved sharply lower on Tuesday morning. The stock retraced a majority of Monday's intraday rally and traded to a low of $17.45. Shares then moved in the $17.50-$17.80 range for the remainder of the session before finishing with a loss of 4.2%. Looking at the daily chart, we see that CTAC traced an Inside Day. Tomorrow we'll be watching for the stock to fall out of this consolidation pattern and move towards support in the $17.00-$17.15 region. A move below $17.00 would clear the way for a possible decline to our downside target at $16.06. As for new entries, the recent sideways action (up one day, down the next) has made it more difficult to find action points. Speculative traders might be able to target entries on another failed rally near the rising 100-dma at $18.26. The PI newsletter currently has a gain of 6.2% in this paper trade, with a stop at $20.01. Those looking for a little less upside risk could use a stop just above last week's high of $19.25. Picked on February 20th at $18.80 Results since picked: +1.17 Earnings Date 02/18/03 (confirmed) --- IDEC Pharma. - IDPH - cls: 28.72 chg: -0.38 stop: 30.16 *new* Descending resistance at the 21-dma was put to the test on Monday afternoon when IDPH broke its recent trend of lower lows and moved through $30.00. But unfortunately for shareholders, the stock topped out mere cents below that moving average. The subsequent steep afternoon sell-off renewed the bears' resolve. IDPH gave back most of its morning gains and closed under the long-term descending trendline. Today's action saw relatively sedate trading until the final 10 minutes, when shares moved sharply lower with the BTK.X biotech index. A 15-minute chart reveals that IDPH has traced a series of higher lows ever since it bottomed out on February 25th. Bears will be watching for shares to violate that uptrend and fall towards the multi-month low of $28.26. A move under that level would present a possible shorting opportunity. Our stop has been bumped down to $30.16, slightly above yesterday's high and the 21-dma at $30.01. Picked on February 13th at $29.99 Results since picked: +1.27 Earnings Date 01/30/03 (confirmed) =============== HR Closed Plays =============== -------------------- Closed Bullish Plays -------------------- Tech Data - TECD - close: 21.75 change: -0.71 stop: 20.94 Tech Data announced this morning that it had acquired Soft Europe SA, a privately-held graphics software distributor. Although terms of the deal were not disclosed, investors seemed to react to the news with a clearly bearish bias. TECD suffered from selling pressure throughout the session and finished with a 3.1% loss. Meanwhile, the NASDAQ didn't even give back a full percentage point. Technically, we are not encouraged by the potential reversal pattern on the daily chart. TECD topped out at $23.21 (78 cents below our profit-target) on Monday morning and has since trended steadily lower. Coincidentally, the stock closed at $21.75 - exactly where we picked TECD two weeks ago. Bulls will point out that the stock is still holding above short- term support at $21.60 and hasn't yet broken the recent uptrend. But in light of the recent reversal, bearish daily stochastics (5,3,3), and weakening broader market, it looks like odds are stacked against a rally back to the relative highs in the near future. We've elected to close this paper trade at current levels. Traders willing to take some heat could maintain long positions with a stop slightly under last week's low of $20.95. Picked on February 18th at $21.75 Results since picked: +0.00 Earnings Date 03/17/03 (unconfirmed) ================== 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
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