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Daily Newsletter, Wednesday, 03/19/2003

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PremierInvestor.net Newsletter                 Wednesday 03-19-2003
                                                  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:      Not So Calm Before the Storm
Watch List:       BAX, CD, FRX, MXIM, PENN, and more...
Play of the Day:  Pullback To Support

******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
03-19-2003                   High    Low     Volume Advance/Decl
DJIA     8265.45 + 71.22  8277.64  8141.50   1706 mln  1086/585
NASDAQ   1397.07 -  3.48   1401.24 1378.57   1679 mln  712/924
S&P 100   444.84 +  4.46    445.48  437.72   totals   1798/1509
S&P 500   874.02 +  7.57    874.99  861.21
RUS 2000  368.51 +  0.51    368.56  365.10
DJ TRANS 2149.15 +  20.13   2151.01 2121.02
VIX        36.18 +  0.40     36.39   34.87
VIXN       48.20 +  0.18     49.51   47.62
Put/Call Ratio 0.74
******************************************************************

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

Not So Calm Before the Storm
by Steve Price

With just hours to go before the deadline set by the U.S. for
Saddam Hussein to leave Iraq, or face military action, the
markets showed plenty of indecision early on. The techs found
sellers following Oracle's cautious guidance, while the Dow
headed higher, building on gains of the previous five sessions.
However, it wasn't long before war jitters took some shine off
the recent gains and bulls took some profits.

There have been may theories offered for the recent rise in the
markets.  I've heard that shorts began covering last week at the
conclusion of head and shoulders objectives and then
institutional money flowed in this week when war became imminent.
I've heard there was selling into the rallies overseas in case a
war does not go as quickly as some are predicting. I've heard
plenty of explanations, but it is interesting that with all the
reasons offered for movement, the recent movement continues to
find pivotal technical levels as support and resistance.

Granted, his morning's rally was fighting an uphill battle after
disappointing guidance accompanying Oracle's earnings release on
Tuesday night, but we did head into the green, stopping only at
levels that have continued to play a big part in the movement
over the past several months. We can conclude that the Dow, OEX
and SPX did form classic bearish head and shoulders formations
from October through January, resulting in a breakdown that
fulfilled their objectives last week. Our big bounce came when
the OEX and SPX hit their bearish objectives almost to the point.
Now that we have bounced much higher, we have run right into
bearish resistance on the point and figure charts.  Those charts
show bearish resistance in the Dow at 8300, SPX at 870 and OEX at
442.50 (on the 2.5 point box), while the OEX traditional chart
registers that resistance at 448.  Today's highs came in at Dow
8277, SPX 874.99 and OEX 445.48. We broke above that resistance
on a closing basis in the SPX and OEX and fully through it in the
OEX on the 2.5 point chart, although we are right up against it
on the traditional chart.  The SPX top at 874.99 came within 0.01
of a breakthrough.  The next box level is required for a complete
breakthrough, as can be seen on the chart below.

Daily Chart of the Dow


Point and Figure Chart of the SPX


The Nasdaq struggled to hold the achievement of the 1400 level it
made on Tuesday pretty much from the open.  After Oracle said
demand had softened near the end of the third quarter (fiscal)
due to anxiety over a war in Iraq, calling it a "wild card" for
customer demand, the reminder that the economy is still in
neutral weighed across most of the techs sectors.  What was also
a concern was that some of the profits that the company posted
were due to some outside issues, such as unusual cost of service
savings and currency translation to U.S. dollars and even the
estimate beat for the past quarter suddenly looks less
convincing.  In the afternoon rally that took the Dow, SPX and
OEX all to new highs, the COMP was still unable to hold its late
day test of 1400, eventually falling to 1397 on the close.

Chart of the COMP


In the area of conundrum, we got some results from Bear Stearns
that further muddy the equity waters.  Financial stocks are a
good place to start any rally - or any market drop.  BCS actually
seems to have found the best of both worlds.  It released
earnings that beat expectations, citing record profits from its
bond trading operations.  Those operations turned into a big
winner as investors fled the stock market and shifted back into
fixed income instruments. So if financial stocks are turning
profits on a market decline, will they lead us higher? Keep n eye
on the BKX, BIX and XBD as we get earnings tomorrow morning from
Goldman Sachs, Lehman and Morgan Stanley.  Those indices have all
bounced over the past week along with the broader markets, but
are within points of their 50-dmas, which coincide with
resistance from early and mid-February.

Speaking of bonds, it appears that much of last week's rally was
fueled by asset allocations between treasuries and stocks.
Watching yields, which are a good indicator for where stocks are
headed as they trade inversely to bonds (as bond prices rise, the
yields from the purchase of those bonds drops and vice versa),
also gave us a good indication of a possible market bottom last
week.   In fact, while the equities were testing July lows, and
the bond market was rallying with the cash flow out of equities
and into treasuries, yields had already dropped below July
levels.  The yields also took out their December and November
lows and headed toward October levels.  It was when the yield hit
the October low that the broad markets all bounced.  A look at
the weekly chart of the ten-year note index shows big reversal
off that level.  Now that we are on the upside, we are also
seeing some key levels tested by the yield. The five and ten year
yields both broke above their 50-dmas on Tuesday and then gapped
higher to start the day on Wednesday.  The early indications from
those 50-dma breaks are bullish. However, we are also entering
some heavy resistance on both yield charts that could be tough to
break.  That could indicate a reallocation back in the other
direction and should put bulls on alert.

Chart of the Ten Year Yield


One of the other indicators that I often use is the Market
Volatility Index (VIX). The VIX has been a reliable indicator of
market bounces and pullbacks at its extremes.  Readings of 40%
have indicated it is time for an equity bounce and readings of
34-35% have indicated it is time for a market pullback.  The last
decisive breakthrough of these levels came in January, when the
VIX was finding resistance at 35%, rather than support and
eventually took out that resistance on the head and shoulders
neckline break between Dow 8200 and 8300, depending on how you
draw the neckline (I have it at 8220).   We have now rallied all
the way back into that territory and once again the VIX is
testing 35%. If we do manage to breakthrough the recent bottom,
it will likely coincide with a move back above Dow 8300.  The
first close below 8300 was the domino that signaled a trip much
lower and a close back above it may signal a true reversal
higher.  However, note that a trade of 8350 will be required to
break through the bearish resistance line noted above on the
point and figure chart. What is interesting here is the
divergence in the VIX from the action in the equities.  Although
we saw a VIX decline early in the day, it was higher once again
by the close, in spite of late day gains in the equities. Usually
we see the opposite and it was the second time this week we've
seen this divergence. Obviously, there are plenty of institutions
holding up premium levels in the OEX that are still concerned
about the downside possibilities that a messy war could bring, or
the possibility that the rally is not for real. While the VIX is
at the low end of the recent range, it is still historically high
and if the big boys really thought we were headed higher, I would
expect them to take advantage of the high levels of premium by
shorting them.

Chart of the VIX


The crude oil futures, which have also been a reliable indicator
of equity action, with a consistent inverse relationship,
continued to drop further again today.  Certainly if the oil
fields in Iraq began flaming, we could see a reversal in that
market, where the per barrel price has fallen 21% since March 12.
I heard an analyst yesterday commenting that a drop in the price
of oil from $31 per barrel to $24 could amount to a 1% increase
in GDP from the fuel cost savings to Americans and U.S.
businesses.  That would seem to support the consistency we have
seen in the inverse relationship between the equities and oil
prices.

Let's see, what have I left out?  Oh, yes, the bullish percents.
The bullish percents - the number of stocks giving point and
figure buy signals in a particular index - have all been in free
fall mode since the middle of January. That is until the past
couple of days.  Each prior rebound attempt was not quite enough
to turn these indicators higher and they remained in oversold
territory in the Dow, SPX and OEX, with the NDX just making it to
the oversold line at 30%.  In the past couple of sessions we have
finally seen a rebound that was strong enough to reverse some of
the indicators. The Dow bounced from a reading of 10% all the way
up to a reading of 20%.  The NDX bounced from 30% to 44% and the
SPX which tends to lag because of the amount of stocks in the
index, has now bounced from 28% to 34%.   Those bounces should be
a warning sign to bears and may indicate the beginning of a move
higher, rather than an exhaustion of a bear market rally.   While
I am not ready to declare the bear market over, since these also
reversed up on other bear market rallies, I am conscious of the
fact that this bear market rally may still have some legs left in
it.  The rebounds from July and October took these percents up to
60% and 72% in the Dow; 50% and 82% in the NDX; and 58% and 68%
in the SPX.  So there is plenty of upside to this indicator if we
are able to continue the breakout. Once all of these reached
oversold territory, the risks began to shift out of the bears
favor and now that they are on their way up, they are no where
close to overbought at 70%.

Bullish Percent of the Dow


So we now have a number of technical indicators all converging at
the current levels.  The VIX, the bond market, the bearish
resistance lines, the head and shoulders breakdown levels - all
testing just how much strength the bulls have left after a gain
of almost 900 Dow points in 6 sessions. Combine that with the
possible start of a war in the next day or two and it appears
that the spring is wound awfully tight right now.  We saw bulls
in charge in the major indices, but the techs unable to overcome
the Oracle news. If the U.S. launches an attack tonight after the
8 p.m. deadline passes we should have a clearer picture of just
whether the pre-war rally will stick.  So far, it appears we will
get a quick war - that is if today's unsolicited surrender of 17
Iraqi soldiers is any indication.  There were also reports that
the U.S. had already conducted air strikes on Iraq artillery
that boosted the market late in the day. If the rally does
stick, then traders who have been on the sidelines may want to go
long if we complete those bearish resistance breakthroughs and a
move above resistance in the yields I highlighted above.  If we
fade, then a higher level of support that doesn't reverse the
bullish percents back down may also be a long entry point.
However, defining a pullback will be tough and we have to
remember that we have yet to see an economic recovery. After six
straight up days in the Dow there is bound to be a pullback at
some point, but wait for that pullback to show some support
before jumping in long. If the rally isn't for real, traders may
find themselves picking one bottom after another, all the way
back to last week's levels Trade what you see, and keep your risk
level comfortable.



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

Baxter Intl. - BAX - close: 21.00 change: +0.57

WHAT TO WATCH: Shares of Baxter moved sharply lower last week
after the pharmaceutical company said it expected to earn only
$2.10-$2.20 per share in 2003.  Analysts had been looking for a
result of $2.24 per share.  First-quarter estimates were also
reduced.  BAX largely blamed its shortfall on increased
competition in the blood plasma market.  The resulting sell-off
took the stock from $27.50 to $19.50 in a matter of days.  But
now that shares have started to rebound, aggressive bargain-
hunters might want to consider legging into bullish positions.
BAX has ample upside potential with a large fast-move region
created by the recent decline.  Rather than targeting a complete
retracement of last week's sell-off, we'd be aiming for a test of
psychological resistance at $25.00.




---

C.R. Bard - BCR - close: 61.40 change: +0.35

WHAT TO WATCH: BCR looks like a possible bullish play if it pulls
back to $60.00.  That level of stubborn resistance was finally
broken on Tuesday as shares rallied to new 52-week highs.  The
breakout created a quadruple-top buy signal on the point-and-
figure chart.  Bulls will now be targeting a retest of the all-
time highs just below $65.00.  Aggressive traders might want to
chase this one higher, but the most prudent strategy would be to
wait for a pullback and successful test of $60.00, which should
now provide support.




---

Cendant Corp. - CD - close: 13.05 change: -0.05

WHAT TO WATCH: Cendant provides services in both the real estate
and travel businesses.  Shares did not see a substantial reaction
to Wednesday's news that USAI Interactive (USAI) will buy out the
remaining shares of Expedia.com (EXPE).  Instead, CD traded an
Inside Day and held firm near its relative highs.  The weekly
chart shows an impressive multi-month uptrend that has taken the
stock above resistance at $13.00.  Overhead resistance looms lies
at $14.75 and $15.25.  Depending on your trading strategy, either
level would provide a reasonable short-term profit-target.
Longer-term traders could aim for an eventual retest of the 2002
highs near $20.00.  Point-and-figure chartists will note that a
trade at $13.50 would create a double-top buy signal.




---

Forest Labs - FRX - close: 53.10 change: +1.96

WHAT TO WATCH: On Tuesday FRX bulls won a key technical victory
when the stock powered through resistance at $50-$51 and the 50-
dma at $50.63.  Driving the breakout was news that Forest expects
the FDA to approve Lexapro, an existing anti-depressant drug, for
the additional treatment of general anxiety disorder.  This
breakout triggered a wave of short-covering that propelled FRX to
another 3.8% gain on Wednesday.  Now that shares are trading at
multi-month highs, the bulls will be aiming for a test of the
all-time highs near $56.50.  So how to play FRX?  As impressive
as the current wave of buying is, the stock does not have a
historical tendency to rise sharply for several days in a row.
Instead, we'd expect a pullback and test of previous resistance
at $51.00 before the uptrend continues.  This would pose an
attractive buying opportunity for traders looking to enter long
positions.




---

Maxim Integrated - MXIM - close: 39.56 change: -0.28

WHAT TO WATCH: All things considered, chip bulls can be pretty
happy with how the semiconductor index traded today.  Tech sector
weakness inspired by a sell-off in ORCL and the broader software
group dragged the SOX.X towards its 200-dma at 315.  Additional
profit-taking could have been expected in light of the past
week's steep gains.  However, buyers moved in above the 200-dma
and made their presence felt throughout the rest of the session.
The SOX.X finished near break-even after recouping its early
losses.  A renewal of bullish momentum could send the index
towards the next region of resistance at 340-350.  Such a move
would probably push MXIM above its own overhead resistance at
$40.00.  The stock shrugged off a brokerage downgrade today and
finished with a fractional loss.  A breakout through $40.00 would
clear the way for a possible test of the November/December highs
in the $44.00 range.  Maxim is currently showing a double-top buy
signal on the p-n-f chart.




---

Penn National Gaming - PENN - close: 18.26 change: +0.30

WHAT TO WATCH: Along with the rest of the market, gaming stocks
have been moving nicely higher over the past week.  Leading slot
machine maker IGT is trading at all-time highs, and sector giants
MGG and HET are looking strong as well.  PENN looks like an
attractive long play within the group because it's trading at
multi-month highs after breaking above resistance at $18.00. The
point-and-figure chart shows a number of bullish developments as
well, with shares moving above bearish resistance after a
successful test of ascending support.  The recent breakout
produced a double-top buy signal.  A glance at the daily chart
shows possible resistance at the late-November highs near $19.00.
But given enough time, PENN might be able to make it to the
$21.00 region.




---

Sealed Air - SEE - close: 39.59 change: +0.30

WHAT TO WATCH: That huge November 29th gap on SEE's daily chart
stemmed from a favorable court decision related to the company's
asbestos liabilities.  Since that move higher, the stock has
traded in a tight five-dollar range.  The past week's broader
market rebound led to a steep rally from support at $35.00.
Shares are now approaching resistance at $40.00.  This has set up
two scenarios that might provide action points.  Should SEE
continue its ascent, a move above $40.00 could trigger another
upward leg.  Other than the 200-dma at $42.91, there is no
substantial overhead resistance until the $46.00 region.  But
because SEE is already sitting on some large gains, buying a
breakout would be better suited to aggressive traders.  On the
other hand, a failed rally near $40.00 would offer a bearish
entry point.  A favorable risk/reward ratio could be created by
using a stop slightly above resistance.  We'd be targeting a
pullback to the 50-dma at $37.25.





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

Black Box - BBOX - close: 30.08 change: -0.74 stop: 28.69

Company Description:
Black Box is the world's largest technical services company
dedicated to designing, building and maintaining today's
complicated network infrastructure systems. Black Box services
clients through 117 offices in 132 countries throughout the
world. (source: company press release)

- ORIGINAL WRITE UP: March 18th, 2003 -

Company Description:
Black Box is the world's largest technical services company
dedicated to designing, building and maintaining today's
complicated network infrastructure systems. Black Box services
clients through 117 offices in 132 countries throughout the
world. (source: company press release)

Why We Like It:
As Albert Einstein once pointed out, opportunity can often be
found in the midst of great difficulty.  That piece of wisdom
applies particularly well to the recent trading in BBOX.  Shares
of the networking company lost roughly a third of their value on
March 12th after Black Box reduced its fourth-quarter earnings
expectations to 53-54 cents/share.  Analysts, on average, had
been expecting an EPS result of 74 cents.  Explaining the
shortfall, BBOX said "overcapacity in just about all vertical
markets...continues to have an impact on our business."  They
also cited the continued war and terrorism concerns as reasons
for the weakness, but of course that could be said for the entire
economy in general.  Investors were not pleased with these
bearish comments regarding IT demand.  BBOX gapped from $39.14 to
$26.78 on extremely high volume of 7.5 million shares.  The stock
continued to decline and bottomed out at $25.58 during the
following session.  Things were looking awfully bleak as BBOX
fell to multi-year lows, but the bears finally decided to call it
quits when they were confronted with Thursday's broader market
rally.

Although there have been no fresh news developments for Black Box
since last week's earnings warning, bargain-hunting and short
covering have pushed BBOX sharply higher over the past two
sessions.  Obviously yesterday's market rally played a big factor
in those gains.  Shares continued to trade strong on Tuesday and
outperformed the NASDAQ with a gain of 7.4%.  That relative
strength is a positive sign for the bulls.  Point-and-figure
chartists will also note that BBOX has reversed into a column of
"X."  And while a case could be made for some consolidation of
the recent bounce from the $26.50 region, we feel the stock is
poised to continue higher as it fills in the March 12th gap.  An
entire retracement of those losses would take BBOX to the $39-$40
area.  This might be a realistic goal for longer-term traders.
Because we have a shorter-term timeframe, our objective will be
to capture a rally to our official exit target at $34.94, just
below psychological resistance.  The action trigger to enter this
play is set at $30.86.  Should we be triggered, we'll use a stop-
loss at $28.69, five cents under today's low.  Those looking for
less downside risk might want to use a stop slightly below
$29.50, which acted as a price magnet during the middle of
today's session.

- Play-of-the-Day Comments: March 19th, 2003 -

BBOX extended its recent gains on Wednesday morning and quickly
reached our entry trigger at $30.86.  Shares initially moved
higher with the NWX.X networking index and briefly outperformed
the NASDAQ.  An intraday high of $31.38 was reached
before a wave of profit-taking dragged the stock back to
psychological support/resistance at $30.00, which acted as a
price magnet for the duration of the trading day.  On Thursday
we'll be watching for BBOX to move through intraday resistance at
$30.30.  A breakout above that level would give aggressive
traders an opportunity to enter new long positions.  Those who
are seeking more upside confirmation will want to wait for a move
above today's high.  Our stop for this play is set at $28.69.

Picked on March 19th at $30.86
Results since picked:    -0.78
Earnings Date         05/08/03 (unconfirmed)







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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

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Newsletter, or any Premier Investor Network newsletter please
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Copyright ) 2003  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter                  Wednesday 03-19-2003
                                                   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:

High-Risk/High-Reward
  Triggered Plays:     BBOX (bullish)


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

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

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

Black Box - BBOX - close: 30.08 change: -0.74 stop: 28.69

BBOX extended its recent gains on Wednesday morning and quickly
reached our entry trigger at $30.86.  An intraday high of $31.38
was reached before a wave of profit-taking dragged the stock back
to psychological support/resistance at $30.00, which acted as a
price magnet for the duration of the trading day.  On Thursday
we'll be watching for BBOX to move above intraday resistance at
$30.30 and move back towards $31.00.  Our stop for this play is
set at $28.69.







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

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.

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