PremierInvestor.net Newsletter Wednesday 07-09-2003 section 1 of 2 Copyright (c) 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: Correction 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) ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 07-09-2003 High Low Volume Advance/Decline DJIA 9156.21 - 66.88 9229.11 9108.24 1.99 bln 974/ 988 NASDAQ 1747.46 + 1.00 1758.18 1735.30 2.17 bln 1385/ 742 S&P 100 503.63 - 2.71 508.25 501.73 Totals 1359/1730 S&P 500 1002.21 - 5.63 1010.43 998.17 RUS 2000 476.99 + 3.02 477.88 470.50 DJ TRANS 2562.41 - 2.71 2575.07 2552.50 VIX 21.03 - 0.37 22.22 20.88 VXN 33.22 - 0.27 34.06 32.60 Total Volume 4,415M Total UpVol 2,436M Total DnVol 1,902M 52wk Highs 872 52wk Lows 19 TRIN 0.88 PUT/CALL 0.72 ================================================================= =========== Market Wrap =========== Correction Jonathan Levinson The indices pulled back to their ascending trendlines today in a much anticipated and long-awaited correction. Although there was an "impulsive" feel to the selling, the bounces came on schedule at the lower ascending trendlines. 30 minute 20 day candle chart of the INDU 30 minute 20 day candle chart of the COMPX The Commerce Department announced that US wholesale inventories dropped 0.3% in May, following a decline in the same amount in April. Wholesale sales dropped 0.5%. The inventory-to-sales ratio remained at 1.24, just above its record low of 1.21 posted in March. This negative economic news, a downside surprise against expectations of gains in both inventories and sales, sparked a selloff when it was released at 10AM, but within minutes it was bought on huge volume in the futures pits. The American Petroleum Institute reported a 3.97 million barrel increase in crude inventories for the week just ended, while the Energy Department reported a mere 100,000 barrel gain. The API reported that gasoline inventories fell by 2.5 million barrels, while the Energy Department reported a gain of 500,000 barrels. Nothing like a disagreement on the facts. Crude and heating oil futures both finished higher, with the market apparently ignoring both, judging that in any event, the data was bullish for these commodities. The Mortgage Bankers Association (MBA) announced that seasonally- adjusted demand for mortgage refinancings, the MBA refinancing index, dropped 21.3% for the week ended July 4. Demand for loans with which to buy homes, the Purchase index, dropped 5.5%. The MBA's market index, an overall measure of mortgage activity, dropped 17.7%. The average interest rate for a 30-year fixed rate mortgage rose to 5.37% from 5.23%. Reports cited rising interest rates and a shortened holiday week. For the past several weeks, I have been discussing the impact of money supply on the prices of paper assets. This past week saw a slight downtick in the overall money supply as measured by the MZM money supply, coincident with the downtick in mortgage activity. MZM chart The previous week had seen a downtick in mortgage activity as well. We also saw lower prices in equities and treasury bonds. While these data are coincident, I do not believe that they are coincidences. My premise is that the overall levels of debt are directly correlated to overall levels of liquidity. Debt is liquidity - the more debt, the more liquidity and hence, higher asset prices. The reverse appears to be true as well, as we've seen in the downtick in mortgage activity, money supply, bond and stock prices. Note that the Fed, whose ostensible mission is to promote stability in the financial markets, has been fighting this downtick in liquidity by dramatically increasing its levels of open market operations over the past weeks (see chart below). We track the Fed's daily open market operations in the Market Monitor, and my very first article on this website (in Traders Corner) attempts to explain how open market ops function. Chart of overnight and term repurchase agreements (repos) We have seen that despite the dramatic inflation of the money supply by the Fed, the money (or rather, the debt) has managed to miss commercial and industrial borrowers, flowing into the hands of individual borrowers instead. The data shows that they have used this debt for the purchase of houses (mortgages), automobiles (auto loans and leases), and other consumer products (home equity loans, lines of credit and credit card debt). Chart of Real Estate Loans Chart of Total Consumer Credit Unfortunately, as the ongoing record-breaking current account deficit has been telling us, the bulk of the economic stimulus from the Fed's operations has been in foreign countries, and this is confirmed by the rising unemployment rate at home in the US. Chart of Unemployment Rate Lastly, the selling in treasuries since the Fed's last quarter- point rate cut has caused a spike in yields. In light of the rising number of bankruptcies during the past year and the 45 year low federal funds rate, I believe that the single greatest current danger to the economy is higher interest rates. Given the Fed's strong words about its intention to keep rates down, I do not expect the selloff in treasuries to go much further. 5 year weekly chart of the ten year note yield The President named his remaining top treasury officials today, adding Susan Schwab, former dean of U. of Maryland, as deputy Treasury secretary and Kenneth Leet, former Goldman Sachs executive, to replace outgoing domestic finance undersecretary Peter Fisher. Fisher is best known for having phased out the thirty year bond. The new appointees join John Snow as Treasury secretary, Stephen Friedman as White House economic advisor and Gregory Mankiw as chairman of the council of economic advisors. In corporate news, it was announced that the SEC has launched a formal probe of THC, sending a subpoena requesting documents relating to Medicare payments and other disclosures going back to May 1997. LOGI got clocked today after warning that fiscal Q4 operating income would be between $7 million and $8 million, far below its its goal of $14 million. It cited weak demand and intense competition for decrease. Techs got a lift in the afternoon after it was reported that Gartner Group expects worldwide semiconductor capital spending to grow 7.9% in 2003 after dropping 38% percent in 2002. After the bell, DNA beat estimates, reversing a loss from Q2 2002 and announcing pro forma earnings of $163.5 million, or 31 cents per share excluding special charges. Estimates were for 26 cents per share. The much-anticipated YHOO earnings release was poorly received by the market, cratering QQQ afterhours to below 32 as of this writing and reversing a positive close by over one dollar for YHOO. The company reported that Q2 earnings were $50.8 million, or 8 cents per share, up from $16.48 million, or 3 cents per share, in Q2 2002. It missed its earnings projection of 9 cents per share by a penny. For tomorrow, we have the following economic data due before the bell: Report Briefing Market Prior Expects Expects Jul 10 8:30 AM Export Prices ex-ag. Jun - NA NA -0.1% Jul 10 8:30 AM Import Prices ex-oil Jun - NA NA -0.2% Jul 10 8:30 AM Initial Claims 07/05 - 420K 420K 430K For tomorrow, we can expect further tests of the bullish trendlines on the major indices. I am very far from caring about YHOO's financial well-being one way or the other, but the action following its earnings release is relevant for the broader market as we approach earnings season. Bulls have amassed fat profits this year, and the mighty Nasdaq is sitting near the top of a very steep ascending trendline as we head into earnings season at the start of the summer. We had a small correction today. A profit-taking event would have a distinctly deleterious effect on bull accounts, and for that reason, we should be attentive to the current support levels. Bulls should set appropriate stops and be alert. While the rally can certainly march higher, the risk- reward balance has become lopsided, and it appears to me to favor the downside. ================= 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 MAY May Dept Stores 23.14 +0.72 CEPH Cephalon Inc 46.77 +0.57 GTK GTech Holdings 38.95 +0.71 PHS Pacificare Health 54.41 +2.81 PII Polaris Industries 66.06 +1.58 NCEN New Century Financial 44.10 +1.10 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- SMTC Semtech 17.58 +1.45 CHINA Chinadotcom 13.28 +1.68 PCLE Pinnacle Systems 12.69 +1.11 TLRK Tularik Inc 12.08 +1.10 PWAV Powerwave Tech 8.75 +1.23 HELE Helen of Troy 18.65 +3.23 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- INFY Infosys Tech 56.50 +4.26 NSM National Semiconductor 23.43 +2.64 NCR NCR Corp 32.25 +3.84 WC Wellchoice Empire 30.50 +1.50 NAV Navistar Intl Corp 36.85 +1.03 CCMP Cabot Microelectronics 58.94 +1.83 KMT Kennametal 36.83 +1.36 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- MO Altria Group 44.00 -2.77 KFT Kraft Foods 31.32 -1.16 NAB National Australia Bank 106.10 -3.62 STJ Saint Jude Medical 53.25 -2.28 LOGI Logitech Intl (ADR) 31.01 -9.98 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- MBT Mobile Telesys 58.00 -4.10 FBC Flagstar Bancorp 22.75 -1.68 WEG Williams Energy Partners 47.66 -0.64 ================================================================= 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 Wednesday 07-09-2003 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: Tech Stocks Bullish Play Updates: AMZN, BRCM, SNPS, TSM Active Trader (Non-tech) New Bearish Plays: BMS Bullish Play Updates: BGP, GTI Bearish Play Updates: WFMI Closed Bullish Plays: MO High Risk/Reward New Bullish Plays: EELN Bullish Play Updates: SIGM, SIRI ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Amazon.Com - AMZN - close: 40.50 chg: -0.01 - stop: 37.74*new* That was quick. AMZN hit our initial target of $39.90 today. We're setting our next target at $42.49 and plan to exit there once it has been reached. AMZN's story tonight may be less about AMZN and its performance and more about YHOO and its performance after reporting earnings Wednesday after the bell. Although YHOO met earnings of 8 cents per share, some were optimistic that YHOO might report earnings at 9 cents per share, and the stock was trading down in after hours. AMZN was getting hit, too, in after hours, trading down near 39.30 as this article went to press. After-hours trading is not always representative of trading seen during normal market hours, and AMZN's spectacular rise since our 37.85 entry gives us plenty of cushion to see how AMZN reacts to YHOO's earnings announcement. We're raising our official stop to 37.74, just below the 10-dma at 37.75 and also just below our 37.85 entry. Conservative traders who want to ensure capturing some of this week's gains could exit ahead of that stop. The hourly chart indicates that 38.19 might be an appropriate alternate stop for conservative traders. Oscillators maintain their series of higher lows, and the MACD still points to more upside for AMZN. Competitor Barnes and Noble (BKS) staged its own breakout today, moving above 24, confirming this sector as one that's showing some promise. The retail index $RLX did pull back today, but maintains its 330 support, and the Philadelphia Internet Index $DOT.X also broke out above next resistance. That breakout may be suspect, however, if YHOO stumbles tomorrow. With a stop at 37.74 and a profit target of 42.49, it's difficult to determine new entries for this successful play. Aggressive traders might consider an entry on a breakout above this week's 40.83 high, but should then set a 39.79 stop rather than adhering to the current official stop. This would be a high-risk position. Annotated Chart for AMZN: Picked on July 2 at 37.85 Change since picked: +2.65 Earnings Date 7/22/03 (confirmed) Average Daily Volume: 8.3 million --- Broadcom Corp. - BRCM - cls: 29.10 chng: -0.42 stop: 26.50*new* Our BRCM play started the week off with a bang, blasting through the descending trendline just over $27 with a gap up move on Monday morning and following through yesterday with the stock pushing to just shy of $30 resistance with an intraday high of $29.96. After such a strong rally in so short a period of time, with yesterday's entire session taking place above the upper Bollinger band, it was a huge warning that some profit taking was close at hand. That played out early today, with the stock dipping back to just above $28, filling yesterday's gap before a rebound that took BRCM back over $29 by the close. The real story in the Chip sector on Wednesday was the fact that the SOX managed to close over $400 for the first time in over a year and follow-through on that move could usher in another strong upward wave in BRCM and other leading chip stocks. There should now be strong support for the stock in the $27.00-27.50 area and any rebound from above that zone looks attractive for new positions. While a breakout over $30 may work for new momentum entries, that approach should be viewed as more aggressive due to the proximity of the upper Bollinger band at $29.21. Raise stops to $26.50, which is below the recently broken descending trendline, the 10- dma ($26.58) and last Thursday's intraday low. Picked on July 2nd at $27.16 Change since picked +1.94 Earnings Date 07/22/03 (confirmed) Average Daily Volume = 13.4 mln --- Synopsis, Inc. - SNPS - cls: 64.39 chng: -0.70 stop: 62.25*new* The big story in the NASDAQ on Wednesday was the Semiconductor index (SOX.X) managing its first close over $400 since last June. Our SNPS play had its breakout over the $64.25 trigger on Monday and over the past couple sessions, it has been consolidating above that level. Traders looking for a reason why the stock wasn't able to immediately build on its breakout may want to look at the upper Bollinger band, which had flattened out just below $65. The price action this week has once again started an expansion of the bands, and that should open the way for SNPS to move higher after the current consolidation runs its course. There should be strong support now in the $63.00-63.50 area (former resistance) and a dip and rebound from above that zone can be used for new entries. Note that the 10-dma ($63.38) should reinforce that support zone. Note that our stop has moved up to $62.25 tonight, which is just below the converged 20-dma ($62.40) and 30-dma ($62.30). Picked on June 25th at $63.59 Change since picked +0.80 Earnings Date 08/20/03 (unconfirmed) Average Daily Volume = 1.54 mln --- Taiwan Semi - TSM - close: 10.62 change: +0.14 stop: 9.99 Early Wednesday morning, a negative close appeared more likely than the positive one TSM achieved. Although the Taiwanese government's decision to sell TSM ADR's (American depository receipts) to ease a budget deficit had been announced last week and mentioned in our TSM updates, the sale of the ADR's knocked TSM back to support on Tuesday. The result wasn't discouraging, however. The ADR's sold at a 0.7 percent discount to Tuesday's closing price, which demonstrated some demand for the ADR's. A Bloomberg article noted that similar share sales often require a deeper 4 or 5 percent discount. In addition to this development this week, TSM also revealed June sales of $523 million and Q2 factory utilization of 86 percent. Prudential commented on TSM, speculating that September's factory utilization could grow to 90 percent. Prudential repeated its buy rating and its 13.00 target. We were pleased to see that today's bounce from support came on big volume. TSM's 32 million shares measured four times its average daily volume. The bounce hinged RSI up again just as it touched its ascending trendline. That RSI hinge is tentative as yet, though, and other oscillator evidence proves less conclusive. Tuesday's fall flattened the MACD in midrise. Wednesday was an inside day, with the day's trading range encapsulated within Tuesday's range. We hope to see an upside break of that inside day with a move over Wednesday's high, and expect that's the most likely outcome since many levels of support now converge just above our 10.30 stop. If the inside day breaks to the downside, however, our stop will take us out with a minimal loss. Aggressive traders seeking a new entry might target a breakout above Tuesday's 10.77 high. Annotated Chart for TSM: Picked on June 13 at $10.66 Change since picked: -0.04 Earnings Date 07/24/03 (unconfirmed) Average Daily Volume: 7.7 million ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bearish Plays ----------------- Bemis Company - BMS - close: 45.18 change: -0.73 stop: 47.25 Company Description: Bemis Company is a principal manufacturer of flexible packaging products and pressure-sensitive materials, selling to customers throughout the United States, Canada and Europe, with a growing presence in Asia Pacific, South America and Mexico. the company's business activities are organized around its two business segments, Flexible Packaging and Pressure Sensitive Materials. Products produced within the Flexible Packaging segment are high-barrier products, polyethylene products and paper products. Products produced within the Pressure Sensitive Materials segment are printing products, decorative and sheet products and technical products. The company's primary market for its products is the food industry. Other markets include companies in the chemical, agribusiness, medical, pharmaceutical, personal care products, tissue, batteries, electronics, automotive construction and other consumer goods businesses. Why we like it: Just like everything else, shares of BMS caught a strong bounce with the rest of the market in the middle of March after finding strong support near $40. After the March volatility subsided, the stock entered a solid ascending channel, in which is steadily pushed higher right into early July. Throughout that period, the stock found consistent support on the pullbacks at the 50-dma (currently $46.51). In what turned out to be a bull-trap, BMS broke out above the $48 resistance on Monday, closing at its best level since January, but then things turned ugly. Yesterday morning before the open, the company guided below prior estimates for Q2, giving a revised estimate of $0.68-0.70 vs. consensus of $0.81. The punishment was meted out swiftly with a large gap down move and further selling that drove the stock to close below $46, wiping out 6 weeks of gains. In the process, BMS broke below the bottom of its channel, and closed below both the 30-dma ($46.88) and the 50-dma. Underscoring the significance of that drop, volume exceeded 1 million shares, or four times the ADV. That selling continued on Wednesday on still-heavy volume, driving the stock near the $45 support level. With the broken channel, heavy selling volume over the past two days and the stock now back under its 50-dma, which is under the 200-dma, this looks like a bearish trend that is just getting started. Be that as it may, chasing the stock lower may not be the best course of action, with today's close well below the lower Bollinger band. Aggressive traders could consider entries on a breakdown under $45, but must be on the watch for an oversold rebound from possible support near $44.50. The better approach appears to be to wait for that rebound and then look for a rollover below $47, which should now be very strong resistance. Being realistic, we may only see a rebound reach up to the 50- dma, so we need to be somewhat flexible in the actual target level for new entries. The point is that the best entry will come on the next failed rally, not on a breakdown below current levels. While there is mild support to be found at both $44.50 and $43, our initial target will be for a drop to the $42 area, which should be strong enough to elicit at least an oversold rebound. Should the selling get carried away ahead of the company's 7/23 earnings report though, a drop to as low as $40 could be in the cards. We're initiating coverage with our stop set at $47.25, which is above all of the moving averages, including the 200-dma ($47.12). Annotated Chart of BMS: Picked on July 9th at $45.18 Change since picked +0.00 Earnings Date 07/23/03 (unconfirmed) Average Daily Volume = 227 K ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Borders Group - BGP - close: 18.49 change: -0.11 stop: 17.25 Our BGP play gave us the breakout we were waiting for right at the open on Monday, and despite a distinct weakening in the broad market over the past couple days, the stock is holding very near its recent highs. Today's opening weakness dropped the stock back from the $18.60 area all the way down to $18.23, but the dip-buyers were lying in wait. By the time the closing bell rang, BGP was once again trading near the $18.50 level and continuing to look strong. We're still not wild about chasing the stock higher right now due to the proximity of the upper Bollinger band at $18.64, but intraday dips that find support above the $18.00 breakout level look good for new entries, especially with the 10-dma ($17.89) rising to provide additional support. As mentioned in the initial writeup, BGP is likely to be a slow mover, so traders would be well-advised to wait for the next pullback to enter the play ahead of an expected bullish continuation up to the $19.50-20.00 area, where we'll be looking to exit the play at major resistance. Raise stops to $17.40, which is right at the current level of the 20-dma and just below what should be very strong support at $17.50. Picked on June 29th at $17.54 Change since picked +0.95 Earnings Date 08/19/03 (unconfirmed) Average Daily Volume = 478 K --- Graftech - GTI - close: 6.30 change: +0.05 stop: 5.59*new* GTI leapt above one of our two triggers on Monday, traded back down to the upper trigger and then bounced higher again. It's still above that 6.20 trigger, but we wish we were looking at big white candles hanging in space and not small red ones. Still, we were cheered Wednesday when GTI reached down to test Monday's gap then sprang above that gap, doing so on volume that was more than twice the average volume. Now that the gap is closed, we hope to see the MACD continue its upward movement, and for GTI to do so, too. We wouldn't be surprised, however, to see GTI plumb that gap another day or so before it resumes its climb. The 10-dma is rising strongly, curling up under GTI and reaching 5.76 today. Recognizing this rising support, we're raising our stop to 5.59. Although GTI shot out several good-news press releases last week, news has been light this week. We did note Tuesday that Morgan Stanley downgraded the European steel industry to in-line, saying that global steel production had grown faster than consumption had. That perception doesn't match GTI's ability to raise prices on its products used in steel production, however. Aggressive traders--the only type who should be playing this stock anyway--who are seeking a new entry might target a move over June's 6.44 high or another bounce anywhere above 6.00. Annotated Chart for GTI: Picked on July 6 at $6.06 Change since picked: +0.24 Earnings Date: 07/24/03 (confirmed) Average Daily Volume: 391 thousand -------------------- Bearish Play Updates -------------------- Whole Foods - WFMI - close: 47.31 chg: -0.24 stop: 48.51 This week, BusinessWeek online featured two articles extolling the kinds of organic, wild, and artisan foods sold by Whole Foods, mentioning the grocer by name in both articles. Still, WFMI fell Wednesday along with nearest competitor Wild Oats (OATS), larger chain grocery stories, and the retail index. Standard & Poor's commented Wednesday on the effect of Wal-Mart on the big chain grocers, raising the credit rating on Kroger (KR), lowering it on Albertson's (ABS), and adding Safeway (SWY) into the mix when S&P added a note that all three carried above- average risk profiles. That comment may have soured the sector. Although WFMI closed down, it first made a close approach to our 48.51 target. After falling out of the bear flag and then trading down just below 46, WFMI spent this week testing the bottom of that bear flag. The move turned the MACD up and produced another bullish kiss on the 21(3)3 stochastics, although MACD hasn't moved above signal and the stochastics haven't lifted out of the oversold zone. RSI did turn up, finding support on its violated trendline, but Wednesday's action saw it hinging back down again. That hinging-down RSI and the rising MACD tell different stories, but we hope today's close below the 10-dma tells the real story. We wouldn't be surprised to see WFMI test the bottom of the bear flag another day or two before falling again. Since support at 46 proved stronger than we expected, we would not suggest new entries at this time. Annotated Chart for WFMI: Picked on June 13 at $49.44 Change since picked: -2.13 Earnings Date 07/30/03 (unconfirmed) Average Daily Volume: 1.6 million ============ CLOSED PLAYS ============ -------------------- Closed Bullish Plays -------------------- Altria Group - MO - close: 44.00 change: -2.77 stop: 44.25 While all good things must come to an end, we sure wish it hadn't happened so abruptly! MO had been steadily working higher over the past few weeks and as of yesterday looked like it might actually take a run at $48 resistance. But renewed litigation concerns reared their ugly head this morning as both Prudential and Morgan Stanley expressed concerns that an Illinois appellate panel will find that a lower court was out of line when he modified a $12 billion appeal bond to terms more favorable to the company. Additionally, a news report raised the possibility of increased competition from a potential merger between RJR and BTI. Those two factors were too much for MO bulls, and the stock cratered as low as $42.50 in the morning session before rebounding to $44 by the close. No matter how you slice it, the play is a drop tonight as our stop was violated in the opening 30 minutes of trade. Picked on June 18th at $44.24 Change since picked -0.24 Earnings Date 07/17/03 (unconfirmed) Average Daily Volume = 10.5 mln ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- E-LOAN - EELN - close: 6.46 change: +0.36 stop: 5.49 *new* Company Description: E-LOAN, Inc. is a consumer-direct lender and debt advisor dedicated to providing borrowers across the credit spectrum with a more enjoyable and affordable way to obtain home purchase, refinance, home equity and auto loans. By making credit scores freely available to consumers and integrating them with a suite of sophisticated tools, E-LOAN is pioneering debt advice--helping consumers proactively manage their debt to lower their overall borrowing costs. The company relentlessly advocates eliminating the dumb processes, fees, hassle, haggle and lack of transparency traditionally associated with the consumer loan experience. E- LOAN is passionate about consumers' financial privacy, and has implemented industry leading privacy practices and joined hands with consumer groups in an effort to enact strong consumer financial privacy protection laws. (Source: Company press release.) Why We Like It: We should be able to recognize this chart pattern in our sleep by now, and we can. EELN traded down in a bull flag, touched its ascending trendline, and sprang up, breaking out of the bull flag. It consolidated a day or so and then it sprang up again today, complete with volume more than 40 percent greater than average, a P&F buy signal, and a move above the P&F bearish resistance line. One financial guru warns that while companies such as E-LOAN should see the refinancing boom continue through the end of the year, the boom will eventually end. We don't intend to hold this stock until the end of the year, so as long as the refinancing boom continues another few weeks, we'll be fine. Since earnings are scheduled for July 24, we're targeting a brief play in EELN to avoid holding over the announcement. Back in the middle of June, EELN raised Q2 and full year 2003 targets, saying it expects 25-30 percent revenue growth in Q2. The good news didn't stop there, however, as E-LOAN was added to the Russell 2000 and 3000 indices. Today, Jack Guttentag, Professor of Finance emeritus at the Wharton School of the University of Pennsylvania, named E-LOAN the first lender to meet his requirements for certification of Internet mortgage lenders. Although MACD has not yet completed its roll up into full bullish position, both RSI and stochastics are bullish. Two entries are suggested: a move over Wednesday's 6.62 high or a bounce from anywhere above 5.90. With YHOO's earnings depressing Internet- related stocks in after hours, we're guessing that the bounce from support will be the likely entry. Our profit target will be 8.49. Annotated Chart for EELN: Picked on July 9 at $6.46 Change since picked: +0.00 Earnings Date: 07/24/03 (confirmed) Average Daily Volume: 2.7 million ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Sigma Designs - SIGM - cls: 12.54 chg: +0.56 stop: 10.89*new* We couldn't have charted this better if we'd penciled in the lines ourselves. When we picked this play, we liked SIGM's story, but we liked the chart even better. We noted the technical considerations, including the upside break of the bull flag and the bullish oscillators. We also noted the bullish P&F chart. They all predicted more upside, and that's exactly what we've gotten. There's nothing new to add to SIGM's story this week, but it's time to raise the stop. We're raising it to 10.89, just below the 10-dma at 11.15 and the support at 10.90. With gains in excess of 10 percent since our suggested entry, conservative traders might want to set a stop at 11.29, ensuring a profitable exit from the play. A move above 13.00 will create a new P&F buy signal for this SIGM, but with a target of $13.90, we're not suggesting new entries at this time. *Disclosure* One of our research staff currently owns shares of SIGM. Annotated Chart for SIGM: Picked on June 27 at 11.02 Change since picked: +1.52 Earnings Date 5/27/03 (confirmed) Average Daily Volume: 600 thousand --- Sirius Satellite Radio - SIRI - cls: 1.84 chg: +0.07 stop: 1.60 SIRI's spreading the news--and the option for its Sirius Satellite Radio--across the range of all Infiniti models. Previously, Nissan offered the Sirius with only one model, although rival XM Satellite Radio Holdings (XMSR) had been offered across the Infiniti range. SIRI responded by bouncing from a low of 1.77 to a high of 1.88, closing in the middle at 1.84. While we wish SIRI investors had responded with a bit more enthusiasm, with Wednesday's volume only half the average daily volume, we were glad to see SIRI spring up from above the 10-dma. Stochastics and RSI turn firmly up and MACD has flattened its downswing, so SIRI appears ready to move to the upside. Aggressive investors seeking new entries might target a move over Monday's 1.92 high, but that would not provide optimum risk/reward parameters since our profit target is in the 2.20- 2.40 range. Aggressive traders seeking this entry might consider an alternative stop, perhaps at 1.72, just below the 1.73 10-dma. REMEMBER, this is an aggressive, high-risk play! Annotated Chart for SIRI: Picked on July 02 at $ 1.77 Change since picked: +0.06 Earnings Date 00/00/00 (unconfirmed) Average Daily Volume: 71 million ================================================================= 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. 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