PremierInvestor.net Newsletter Tuesday 07-08-2003 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: Better Than Monday Watch List: BEAS, VRSN, AMAT, NTAP and more! Market Sentiment: Surprising strength, puzzling options ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 07-08-2003 High Low Volume Advance/Decline DJIA 9223.09 + 6.30 9236.39 9162.94 1.91 bln 1807/1412 NASDAQ 1746.46 + 25.80 1747.44 1713.76 2.02 bln 2106/1144 S&P 100 506.34 + 0.84 507.06 502.52 Totals 3913/2556 S&P 500 1007.84 + 3.42 1008.92 998.73 W5000 9687.14 + 47.10 9697.35 9592.61 RUS 2000 473.97 + 8.26 474.13 465.13 DJ TRANS 2565.12 +107.00 2569.67 2466.08 VIX 21.40 - 0.65 22.31 21.11 VXN 33.49 - 0.02 34.79 32.91 Total Volume 4,170M Total UpVol 2,807M Total DnVol 1,282M 52wk Highs 975 52wk Lows 22 TRIN 1.01 PUT/CALL 0.63 ================================================================= =========== Market Wrap =========== Better Than Monday No, we did not put more points on the board but we did exceed Monday's volume by a fair amount. Is this a good thing for a day where the Dow barely broke even? That $64 billion question will be answered on Wednesday when the market will have to meet a much higher standard just to break even. Dow Chart - Daily Nasdaq Chart - Daily Economically the day was a pass with no material economic reports and profit taking from Monday a much bigger concern. The leading report Tuesday morning was Weekly Retail Sales which rose +0.7% to a new high for this cycle. The sales were boosted by the July 4th promotions but traders could have cared less. This is not a real market mover under normal circumstances and today was no different. This weekly snapshot will take a backseat to the real monthly numbers on Thursday. We will get to see if the high inventories have burned off from the heavy discounting and what stores are looking at for the balance of the summer. With consumers getting a chunk of extra cash on their paychecks from the recent tax cut, retailers will be slashing prices and running big ads to get their share. Those same consumers ran up their debt over the month of May with a bounce in consumer credit to $7.3 billion from the consensus estimates of $5.2 billion. However April was revised down to $7.8B from the previously reported $10.7B. The biggest jump was in auto debt which was prompted by continuing big incentives from the major manufacturers. These gains were despite a refinance index that is 400% higher than it was this time last year. Some consumers are paying off debt at a record pace while others are going deeper in debt due to unemployment. The most positive report for the day was the Richmond Fed Survey which came in positive, only +1 but we can't complain. This was the first gain in five months and the first time the shipments index has been positive since January. Unfortunately new orders were flat and backlogs were severely negative at -15. The ISM showed a minor contraction in June and this survey is only showing a very minor improvement in the Richmond Fed region. The good news is that we are not seeing an increase in the contraction but signs, however slight, of continued improvement. Traders are unsure if the minor improvements will be enough to maintain earnings through the 3Q until the second half recovery begins. The big story was the multiple merger/takeovers announced today. The biggest impact to the market averages came from the Yellow Roadway acquisition. The +$16 bounce in ROAD sent the Dow Transportation index soaring +107 points and probably had a lot to do with the positive mood on the Dow. While the indexes are not directly related they are intertwined on a sentiment basis. The Dow normally has trouble when the Transports fail to move in the same direction. Traders seeing the large numbers on the TRAN today could have gotten that warm fuzzy feeling about the market in general. If so they did not get it until after 3:PM. You wonder how many earnings warnings were ignored due to the three takeovers and the positive press they received? If EMC thinks LGTO is a bargain then are all techs a bargain? While I doubt it that was the sentiment running rampant on Tuesday. The Nasdaq roared to another +25 point gain and a high near 1750. Yes, 1750. It is amazing that just a couple weeks ago we were agonizing over a 1685 top and the potential for a drop below 1600 as a critical event. Just yesterday FILE, SGP, WEN, RITA, SMG, SYBN and BMC Software warned on earnings and this morning they were joined by BMS and SCHL but the warning pace slowed dramatically as we move into the earning cycle. The first Dow component announced tonight and Alcoa beat the street by +3 cents. This is not likely to cause a runaway market on Wednesday but traders hope it could become contagious. The hopes are for better than average comparisons due to the very weak Q2 in 2002. With over 55% of the S&P already warning for the 2Q it is clear the load will have to be carried by a very few stocks. Earnings for the rest of the week include DNA and YHOO Wednesday, ABT, JNPR, MTCH, MTIC, PEP, PWAV, PLUM, PTNX, SONS and SNUS on Thursday. Friday we will get the big gun, GE, and traders are not afraid they will miss but afraid they will say something negative in their guidance. Economic reports are still slim until Friday when we get the PPI. Next week we will get a strong pickup in both earnings and economic reports and the market will have plenty to mull over. Microsoft made news at the bell by announcing they would no longer give employee stock options as incentives. They are going to establish a plan to award actual stock which will vest over a set period of time. While the incentive to employees is approximately the same the impact to MSFT books is substantial. The stock grants will be expensed on MSFT financials in a dramatic departure from the current practices of major companies. MSFT said the new plan would take effect in September and be shown on the June-2004 end of year financials. They said they would also expense the value of previously granted stock options and restate past results to show the impact of those changes. They also said employees with options priced over the current stock price could now sell those options to JP Morgan which effectively ends the current option program for everyone. By taking this step MSFT is waging war on the other major tech companies who have refused to expense options in the past. Many of these companies would have never reported a profit if the cost of their options had been included. It has been rumored that Cisco earnings would be reduced by more than half if their options were expensed. All the big techs will be under fire including CSCO, DELL, INTC, AMZN, EBAY, YHOO and ORCL if their earnings suddenly take a 50% dive. With the standards board already coming up with an expensing rule this is a preemptive step by MSFT to blunt the damage. MSFT said expensing options in the 1Q would have cost $656 million and reduced earnings from 25 cents to 20 cents. MSFT has an advantage because they are so profitable. All the other companies have earnings that are a fraction the size of MSFT but the options expenses are still very high. This will be very interesting to see how it plays out. Did PE values just double or will stock prices adjust? I think investors will rationally consider the earnings in light of the expensing but those PE numbers are going to be a constant eyesore for years to come. There were several news events impacting sentiment today. The July-7th survey of newsletter writers showed that the number bearish was at a 12 year low. The ratio of bulls to bears had improved only slightly from the week before where conditions were at the worst level seen since October 1987 and the week before the crash. This is despite the PE on the S&P hitting 32 in recent weeks. That is the same level it was in March of 2000 when the bubble began to burst. Merrill Lynch said today that this was the weakest recovery period on record. Makes you wonder what the earnings are going to look like next week. Despite all the negative news bond yields continue to rise. On June 16th the yield on the ten year note was 3.08%. Today it traded at 3.75% despite a 25 basis point Fed cut in the middle. The Fed wanted to keep rates down and bragged constantly about all the tools at their disposal to do this. Did they lose the toolbox? The almost panic reversal in bonds has puzzled many traders. Despite the gains on Monday the bond money has not been finding its way into equities. Some yes, but only a fraction of the money being raised. Where is it going and why? Traders are now worried that the sell off will take a life of its own and the Fed will not be able to slow the rate increase. While the short-term inflow of some bond cash is positive for the markets the long term impact of rising rates will be very detrimental. We have had the equivalent of three 25-point rate hikes in the last two weeks and the market is still climbing. Or is it? The volume on Monday was anemic considering the magnitude of the market bounce. In reality the bounce was mostly short covering produced by a giant bounce in the Asian markets and no terrorist attack over the weekend. Retirement cash inflows supposedly made up the rest. If you look at the chart below you can see the Dow peaked at 10:25 in the morning at 9261 and has been down trending ever since. Volume today was strong but that volume came on a flat day for the Dow. Actually the Dow did not turn positive until 3:30 this afternoon. That means the high volume was on a down day. The Nasdaq was the exception. Despite tech earnings warnings and the impending potential for negative earnings surprises techs just continue to gain. The Nasdaq is up nearly +150 points since July 1st. Does anybody think that is excessive? Volume on the Nasdaq was over 2B shares. Today was a market full of divergences that ended well. Tomorrow is the key to the week. Dow Chart - 10 min We begin to see real earnings accelerate and a slight pickup in economic reports. These are real potential problems for stocks. We are also likely to see the recent highs on the Dow and S&P retested and that retest will be at the end of a multiple month advance. It will also come at the same time as the typical July peak. Nobody knows if the retest will fail or be successful but the danger is real. In trading all the stars are aligned for a major event. Not necessarily a crash but a consolidation period of several weeks once the excitement of the current rally runs its course. The S&P is up +27% from the March lows of 789. +27% in a little over three months. That kind of gain is similar to the gains in the S&P in 1998 which was not a recession year. You can see what happened in 1998. The upward spike into the July earnings is very similar. SPX Chart - Daily We are rapidly careening into the July earnings event and the outcome is very uncertain. Even if earnings are good will they be good enough to satisfy the huge gains since March? Will the 2Q retirement cash flow indefinitely? Will the bond market slow the current crash or will the rapid escalation of interest rates produce stock market uncertainty? Will the Fed appear any day now and wave their magic wand to knock rates back into the cellar. Do they know which wand to use since the last one had the reverse effect. Somebody call Harry Potter because there is a good chance we are going to need some real magic soon. Either way be sure you have the right spell in place as we approach the end of the week to protect yourself against any unplanned retracements. Enter Very Passively, Exit Very Aggressively! Jim Brown ================================================================== 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 --------------------------------- BEA Systems - BEAS - close: 12.26 change: +1.01 WHAT TO WATCH: There was no news to attribute today's nearly 9% gain to, other than the stock playing catch-up with the rest of the Technology sector. BEAS has been trading in a fairly narrow range for months now, and today's close above $12 (its first since January) looks like the beginning of a breakout. There could be some mild resistance enroute to the $14 level and then the stock looks like it could take a run at major resistance near $16. --- VeriSign, Inc. - VRSN - close: 15.84 change: +0.96 WHAT TO WATCH: Throughout its rally from March-June, we kept waiting for VRSN to give us a decent pullback for entry, to no avail. Over the past few weeks though, the stock pulled back nicely to consolidate and rebound from above the 50-dma. Tuesday's session saw a strong 6.45% gain and it looks like a breakout is just around the corner. On a break above the June highs, look for a rally to extend up to the $18 area as an initial target. --- Applied Materials - AMAT - close: 17.80 change: +0.17 WHAT TO WATCH: The Semiconductor index (SOX.X) is once again leading the NASDAQ higher and ended on Tuesday just below the critical $400 resistance level. A breakout from that level could generate some powerful short-covering. AMAT is right at a critical resistance level as well and a breakout over $18 could see a strong rally up to the $20 as earnings season gets underway. --- Network Appliance - NTAP - close: 18.69 change: +0.49 WHAT TO WATCH: Like the Energizer Bunny, NTAP just keeps on running. We had some fun with the stock on its way to the $18 level and after a healthy looking pullback near the 50-dma, the stock is once again showing strong buying interest. A breakout over $19 (just above Tuesday's intraday high) looks like it could usher in a another strong wave up towards the $21-22 area, which served as strong resistance in March of last year. --- =================== On the RADAR Screen =================== COH $56.16 - While it is too extended to play right now, COH's impressive breakout today demands consideration. Look for Tuesday's euphoric 6% gain to relax somewhat in the days ahead and target bullish entries on a rebound from the $53 area. KSS $54.89 - This retailer has had a habit of underperforming both the Retail index and the overall market in recent months and after the current round of short-covering has run its course, we're looking for that pattern to reassert itself. KSS is coming up on stiff resistance at the descending trendline from the December and April highs, along with the 200-dma. Wait for the reversal to commence and then ride the stock back down to the $50 area. MSTR $42.00 - MSTR is definitely back from the dead, as the stock has been on a tear for the past several months. We had a bit of fun with the bullish trend a while back, but clearly punched out way to soon, as the stock then pushed above $42.50. Since that first foray into that area in early June, MSTR has been turned back on two other occasions. From the looks of today's strong 10.43% ramp on news of a lucrative deal with the US Postal Service, the stock looks like a definite breakout candidate. Trigger entries on a breakout over $42.75 and look for a strong subsequent rally as the shorts run for cover. =============================== Market Sentiment =============================== Surprising strength, puzzling options Jonathan Levinson Today's session felt like the usual post flagpole rally rangebound drift, where the buyers run out of either courage or money, and the bears, emboldened by a return to relative normalcy, begin to press. Except that the Nasdaq drifted higher throughout the day, punctuating its move with an end of day ramp, while the SPX and Dow were relatively weaker, the Dow held back by GE in particular, which closed lower by 1.61%. It was nevertheless a green day for all the indices following yesterday's impressive gains. The put to call ratio stuck to the middle of its neutral range for most of the session, while the volatility indices were positive until the last half hour for the NDX and COMPX. The VIX was negative throughout. This action is puzzling, as the stronger indices should have shown negative volatility, while the weaker should have been higher. Instead, we saw the reverse. The only explanation I can propose is that the moves higher on the NDX and COMPX were accompanied by relatively higher levels of option buying, and the moves higher in the SPX and INDU were less so. Is it because some of the Nasdaq bullish speculation was being executed with long option plays at an institutional level? Or were institutions buying in their short contracts, willing to pay extra for them? We'll find out in tomorrow's session. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9353 52-week Low : 7197 Current : 9223 Moving Averages: (Simple) 10-dma: 9087 50-dma: 8866 200-dma: 8400 S&P 500 ($SPX) 52-week High: 1015 52-week Low : 768 Current : 1007 Moving Averages: (Simple) 10-dma: 983 50-dma: 958 200-dma: 894 Nasdaq-100 ($NDX) 52-week High: 1299 52-week Low : 795 Current : 1299 Moving Averages: (Simple) 10-dma: 1227 50-dma: 1183 200-dma: 1051 ----------------------------------------------------------------- More of the same. The VIX remains in its horizontal range of investor complacency. The VXN has actually continued its bounce from the 30 level but may be setting a lower high. CBOE Market Volatility Index (VIX) = 21.37 -0.68 Nasdaq-100 Volatility Index (VXN) = 33.49 -0.02 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.63 655,944 414,796 Equity Only 0.48 561,053 268,383 OEX 1.18 15,133 17,860 QQQ 2.35 14,588 34,349 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 72.6 + 1 Bull Confirmed NASDAQ-100 79.0 + 3 Bull Correction Dow Indust. 86.6 + 3 Bull Confirmed S&P 500 78.8 + 1 Bull Confirmed S&P 100 83.0 + 2 Bull Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.02 10-Day Arms Index 0.98 21-Day Arms Index 1.07 55-Day Arms Index 1.10 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 -NYSE- -NASDAQ- Advancers 1672 2004 Decliners 1164 1056 New Highs 334 438 New Lows 10 11 Up Volume 1086M 1555M Down Vol. 751M 426M Total Vol. 1873M 1996M M = millions ----------------------------------------------------------------- ***NEW COT DATA and COMMENTARY*** Commitments Of Traders Report: 07/01/03 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 There doesn't appear to be much change in the commercial or small traders positioning since the previous week's big move. Big money remains net short while retail traders remain heavily net long. Commercials Long Short Net % Of OI 06/10/03 456,967 455,024 1,943 0.2% 06/17/03 519,887 501,401 18,486 1.8% 06/24/03 405,382 447,526 (42,144) (4.9%) 07/01/03 415,976 453,005 (37,029) (4.3%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 18,486 - 6/17/03 Small Traders Long Short Net % of OI 06/10/03 199,356 185,403 13,953 3.6% 06/17/03 202,040 184,028 18,012 4.6% 06/24/03 159,405 85,182 74,223 30.3% 07/01/03 150,232 75,937 74,295 32.8% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 Sometimes it is amazing how the relationship between commercial traders and small traders continue to play out. Traditionally, institutional traders (commercials) are historically on the right side of the trend week in and week out. Despite this success the small trader is generally on the opposite side. This time big money is showing their most bullish reading in quite some time while the small traders is the complete opposite and marking their most bearish reading in many a month. Commercials Long Short Net % Of OI 06/10/03 270,359 543,221 (272,862) (33.5%) 06/17/03 306,279 661,114 (354,835) (36.6%) 06/24/03 150,208 201,724 (51,516) (14.6%) 07/01/03 175,893 216,993 (41,100) (10.5%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: (41,100) - 07/01/03 Small Traders Long Short Net % of OI 06/10/03 498,999 49,689 449,310 81.9% 06/17/03 466,837 70,609 396,228 73.7% 06/24/03 84,081 44,347 39,734 30.9% 07/01/03 57,639 67,449 9,810 7.8% Most bearish reading of the year: 9,810 - 07/01/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 It looks like the commercials have been caught off guard. They are growing increasingly bearish on the NDX, which is hitting new 52-week highs. Either institutions are expecting a reversal soon or this has been a painful bout of denial as tech stocks continue to rally higher. Commercials Long Short Net % of OI 06/10/03 42,877 45,793 (2,916) (3.3%) 06/17/03 60,964 65,561 (4,597) (3.6%) 06/24/03 28,780 47,425 (18,645) (24.4%) 07/01/03 28,662 48,265 (19,603) (25.5%) Most bearish reading of the year: (19,603) - 07/01/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 06/10/03 14,759 7,761 6,998 31.1% 06/17/03 29,400 23,232 6,168 11.7% 06/24/03 24,519 7,064 17,455 55.3% 07/01/03 26,777 8,498 18,279 51.8% 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 The action in the INDU futures remains somewhat dull after watching the big moves in the e-minis above. As expected small traders are fading the commercials who are net long. Commercials Long Short Net % of OI 06/10/03 17,368 15,263 2,105 6.5% 06/17/03 20,625 18,593 2,032 5.1% 06/24/03 19,373 11,565 7,808 25.2% 07/01/03 20,504 11,871 8,633 26.7% 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 06/10/03 7,968 8,316 ( 348) ( 2.1%) 06/17/03 9,092 9,398 ( 306) ( 1.6%) 06/24/03 5,950 7,442 (1,492) (11.1%) 07/01/03 5,799 6,822 (1,023) ( 8.1%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. 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. 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PremierInvestor.net Newsletter Tuesday 07-08-2003 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 ================================================================= Play of the Day: Not So Slow Closed Plays: DHI, HGSI 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) ================================================================= Play-of-the-Day (bullish) =============== Borders Group, Inc. - BGP - close: 18.60 change: +0.07 stop: 17.25 Company Description: Borders Group, Inc. operates book, music and movie superstores, including mall-based bookstores, through its subsidiaries, Borders, Inc., Walden Book Company, Borders U.K. Limited and Borders Australia Pty Limited, among others. As of January 26, 2003, the company operated 434 superstores under the Borders name, including 17 in the United Kingdom, nine in Australia, two in Puerto Rico and one each in Singapore and New Zealand. The company also operated 778 mall-based and other bookstores primarily under the Waldenbooks name in the United States and 37 bookstores under the Books etc. name in the United Kingdom. Why we like it: What should have been a rather bullish holiday-shortened session got bushwhacked by some anomalous action in the futures pits, sending the broad markets on a wild, if brief ride lower and then back higher just over an hour into the day. While it may have caused consternation for some, it did us the favor of providing a decent entry point on our BGP play. The stock dipped just below $17.60 before the buyers re-emerged and the stock spent the rest of the day steadily working higher, ending with only a loss of a nickel and still very close to that $18 resistance level. We've been expecting a pullback from the upper Bollinger band (currently $17.98) and the fact that the pullback delivered on Thursday was so shallow is encouraging. Traders that took advantage of that brief entry point are looking good here, with the possibility of a breakout next week above $18 providing more aggressive entry opportunities. Conservative traders will still want to focus on intraday dips near the $17.50 area as a lower-risk entry. Why This is our Play of the Day Our initial expectations had been for BGP to gradually work higher over the next few weeks, eventually reaching the $19.75-20.00 level. The stock has clearly exceeded our expectations so far, as it is already up more than 6% from where we initiated coverage just over a week ago. Even a consolidation day in the overall market couldn't keep the bulls from fractionally extending BGP's gains to the $18.60 level on Tuesday. While momentum traders may be able to do well with new entries above the $18.75 level, we aren't advocating such a strategy here due to the fact that BGP is above its upper Bollinger band. If taking a momentum entry, make sure there is strong follow-through on the volume side. It looks like a mild pullback is in order, and we want to take advantage of that as an entry point. Look for support in the $17.35-17.45 area to be strong, as that is the site of both former resistance, as well as the rising 20-dma at $17.32. Note that our stop remains at $17.25, as a drop below that level would raise concerns as to the sustainability of the current bullish trend. Annotated Chart of BGP: Picked on June 29th at $17.54 Change since picked +1.06 Earnings Date 08/19/03 (unconfirmed) Average Daily Volume = 478 K ================================================================= Active Trader / Non-Tech Stocks ================================================================= =========== CLOSED PLAY =========== -------------- Closed Bearish -------------- D.R. Horton - DHI - close: 30.40 change: +0.71 stop: 30.25 Things were looking a bit dicey in our bearish play on the Housing sector via DHI at the close on Monday, as the broad market strength had propelled the $DJUSHB index back above its 20-dma. DHI had followed along with a solid bounce back over the $29.50 level, but still held below our stop. That all came to a screeching halt this morning though, as DHI gapped up, plowed through our stop in the first 90 minutes of the day and never looked back, ending right at its intraday high. The play worked marginally for a few days, but the relentless bullish action in both the broad market and the $DJUSHB was just too much to keep even this sector weakling underwater for long. We had the right idea, but after being stopped out today, we apparently overstayed our welcome on this one. Picked on June 25th at $28.90 Change since picked +1.50 Earnings Date 07/17/03 (confirmed) Average Daily Volume = 1.42 mln ================================================================= High Risk/High Reward ================================================================= =========== CLOSED PLAY =========== -------------- Closed Bearish -------------- Human Genome Sciences - HGSI - cls: 13.88 chng: +0.74 stop: 13.55 It was a hard-fought battle, but the bulls finally won out on our HGSI play. The stock gave every indication of wanting to break down below support, including an intraday dip below $12 last week. But in the end, the strength in the Biotechnology index was too much and the stock crept back over the 10-dma and $13 level on Monday. This bearish play's fate was sealed this morning when USB Piper Jaffray initiated coverage with an Outperform rating and the bears ran for cover, helping the stock to post a 5.6% gain on the day. That was enough to push through our stop and force us to drop the play tonight. HGSI's relative weakness served us well right up to the bitter end, proving the hazards of playing the downside (even on a weak stock) in a bullish market. Picked on June 18th at $13.43 Change since picked +0.37 Earnings Date 07/24/03 (unconfirmed) Average Daily Volume = 3.07 mln ================== 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 UTX United Technologies 73.94 +1.40 GM General Motors 36.58 +0.68 STT State Street 42.31 +1.07 STI Suntrust Banks Inc 61.55 +0.76 GD General Dynamics 75.40 +1.63 S Sears Roebuck & Co 34.90 +1.15 LTR Loews Corp 49.06 +0.55 HRB H&R Block 45.20 +0.91 MGA Magna Intl Inc 72.55 +3.61 CMX Caremark Rx 26.89 +0.99 PBG Pepsi Bottling Group 22.25 +1.52 LEN Lennar 76.49 +1.39 NYB New York Community 31.88 +0.99 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- ACN Accenture Ltd 19.39 +1.38 BEAS Bea System Inc 12.26 +1.01 AW Allied Waste Industries 11.48 +1.13 IM Ingram Micro 12.86 +1.21 DCN Dana Corp 16.20 +4.18 DCLK Doubleclick 11.98 +1.02 ACF AmeriCredit 10.06 +1.26 WWCA Western Wireless 13.68 +1.28 ASKJ Ask Jeeves Inc 17.85 +1.45 NTE Nam Tai Electronics 18.50 +3.58 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- CHA China Telecom 25.10 +1.49 SDS Sungard Data System 27.65 +1.49 MCO Moody's Corp 56.49 +1.50 PIXR Pixar 66.32 +2.92 LEA Lear Corp 48.85 +1.42 GYI Getty Images Inc 43.35 +1.74 APH Amphenol Corp 51.90 +3.61 ORLY O'reilly Automotive 36.51 +2.14 CHS Chico's FAS Inc 24.95 +2.85 PSUN Pacific Sunwear 28.28 +1.88 CCMP Cabot Microelectronics 57.11 +1.47 AXL American Axle & Mfg 26.87 +1.69 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- DEO Diageo Plc (ADS) 42.32 -1.27 NAB National Australia Bank 109.72 -4.86 ECA Encana Corp 36.35 -1.17 PPP Pogo Producing 40.30 -1.38 BMS Bemis Co 45.91 -2.66 FR First Industrial Realty 30.30 -1.58 SCHL Scholastic 26.99 -1.35 EVG Evergreen Resources 50.10 -1.53 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- FBC Flagstar Bancorp 24.43 -1.12 ================================================================= 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. 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