PremierInvestor.net Newsletter Monday 07-14-2003 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: Stock Fever Play of the Day: New Closing High =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 07-14-2003 High Low Volume Advance/Decline DJIA 9117.15 + 57.56 9278.41 9126.45 1.81 bln 1159/ 637 NASDAQ 1754.82 + 20.89 288+.10 1748.88 2.01 bln 1525/ 460 S&P 100 505.19 + 2.71 511.34 502.48 Totals 2684/1097 S&P 500 1003.86 + 5.72 1015.41 998.14 RUS 2000 479.03 + 5.26 481.37 473.77 DJ TRANS 2572.89 + 27.31 2583.16 2545.28 VIX 21.41 + 0.69 21.80 20.60 VXN 33.89 + 1.09 34.23 32.08 Total Volume 4,067M Total UpVol 2,893M Total DnVol 1,120M 52wk Highs 938 52wk Lows 16 TRIN 0.82 PUT/CALL 0.62 =============================================================== =========== Market Wrap =========== Stock Fever By 9:30 this morning, twenty percent of Dow stocks had reached 52-week highs. Those six Dow stocks had been joined by 515 other stocks making new 52-week highs. Zero new 52-week lows had been produced on either the NYSE or the Nasdaq. By the end of the day, 796 NYSE and Nasdaq stocks had hit 52-week highs, while only 7 had slumped to 52-week lows. Advancing/declining and up/down volume ratios showed strong numbers but had eased somewhat from their feverish levels earlier in the day, when the Nasdaq saw up volume that measured 16 times down volume. The reasons behind the strong open proved so numerous that I'll probably miss one or two. Stock fever began rising as the Asian markets opened. After the Nikkei's biggest one-day loss ever on Friday, the Nikkei rebounded 120.28 points. A study of the Nikkei's daily chart showed that Friday's decline had stopped at 9600.96, just above the key 9600 support level. Tech stocks gained in Asia and in Europe. Perhaps stock fever, or tech fever at least, had begun even before Asian markets opened, when Barron's spoke positively of Sony's prospects this weekend. Smith Barney upgraded European semiconductors to marketweight from underweight, adding its improved outlook on semiconductors to Merrill Lynch's upgrade of INTC. The CA World 2003 Semicon West conference began today, and CNBC mentioned positive buzz about increasing demand from the customers of the semiconductor equipment group. Bank of America (BAC) and Citigroup (C) reported earnings that cheered investors, and C followed by saying that the company would increase its quarterly dividend to $0.35/share. CIBC upgraded Merck (MRK) to sector perform from sector underperform, pepping up another sector. Bear Stearns added to the fever pitch by upgrading Johnson & Johnson (JNJ) to outperform from peer perform. Numerous companies also added to the excitement by announcing M&A activity. Boise Cascade (BCC) announced a surprising decision to buy OfficeMax (OMX), the third-largest retail office supply chain store in the U.S., for a 25 percent premium over Friday's closing price. BCC said the acquisition would add $0.15-.30 before costs to 2004 earnings, but with costs factored in, the impact on earnings would be neutral for 2004. Market pundits weren't surprised by the news that Yahoo (YHOO) would buy Overture (OVER), however, as rumors of YHOO's purchase of OVER had been circulating for months. YHOO's stock-and-cash deal offered a 13 percent premium over OVER's Friday close. As the day progressed, the fever pitch of news continued. On Friday, Cigna (CI) had attempted to dose the stock fever with a little sobering reality, warning that it would miss profit expectations for 2003 and for the current quarter. Today a spokesperson blamed medical inflation. Later in the afternoon, Bob Pisani of CNBC posted a chart of CI put activity over last week, pointing out the unusual put-buying activity as last week progressed and raising the specter of insider trading. If the markets paid attention to negative news, they punished only the stocks in question. YHOO lagged and so did CI. Boeing (BA) and Continental Airlines (CAL) sank after CAL announced that it would be postponing delivery of 36 Boeing 737's. While these individual stocks sank, the indices held support. Stocks had zoomed up in the morning, but the tight ranges above support put traders to sleep until 3:00 ET. At 3:00 ET, markets dived so quickly that traders awaiting bearish entries missed their opportunities unless they had orders waiting. Reportedly in yet another snafu related to electronic trading at the Chicago Mercantile, an erroneous e-mini sell order was entered, resulting in the quick drop. Just as happened with the erroneous electronic order with the YM contract on July 3, markets attempted a recovery but were unable to recover prior levels and closed near the lows of the day. SPX Five-Minute Chart: The quick drop obviously dampened bullish sentiment. That's evidenced on this five minute chart by the bear-flag formation that set up after the first five-minute drop and then the fall out of that bear flag. A quick pop pushed the SPX higher into the close, but that pop could be setting up another potential bear flag. SPX 60-minute chart: A study of this chart shows that the SPX dropped to the steepest of its ascending trendlines and bounced. A further study shows that stochastics and RSI turned down, while hourly ADX shows a near bearish cross of the -DI by the +DI. Near crosses don't count, however, and we must wait for confirmation. Still, the oscillators and ADX hint at further testing of that steepest trendline if not a fall through that level. A fall through 1000 predicts a try for 990, the site of the lower of the two ascending trendlines. The SPX daily chart shows a market that's still range-bound, as predicted by the modest 17.91 ADX level and the flat MACD. Daily Chart of the SPX: Although today's 1015.41 high matched the June 17 1015.33 high, presenting the possibility that the SPX will form a double top, double top formations require a confirming fall through the trough between the two tops. That's a long way away for the SPX. In the meantime, however, today's long upper shadow pierced the descending trendline, but the candle's body fell below the trendline. The candle's small real body rests at the bottom of the day's range. That's a bearish candle formation when it comes after an ascent, but it can be argued that the SPX is not ascending, but instead is consolidating. Because that candle's implications are not as bearish when it occurs during consolidation, it perhaps predicts only a continuation of the range-bound trading or consolidation. Consolidation could mean further testing of the upper trendline or a return to next support. RSI currently challenges the top of its ascending trendline, and watching RSI behavior around its own trendline can confirm or perhaps predict the SPX behavior. An RSI push up through that trendline could mean further testing of upside resistance, while a rollover could mean a test of support. If the descending trendline holds as resistance, the SPX could be setting up a bearish right triangle with a flat bottom near 972- 975. I mentioned this possibility this weekend and today's equal high doesn't negate the possibility since the candle's body formed back under the trendline. In addition to the 1000 and 990 support shown on the hourly chart, 984 might be considered support. Historical support can also be found at that 972-975 zone. The 959-962 level represents the 25 percent retracement of the rally, but also now represents the confirmation level for the potential double-top formation. To sum up the varied evidence, the retreat from resistance, the descending hourly oscillators, the low daily ADX, and the flat daily MACD point to consolidation, perhaps in the form of a retreat down to next support or in a rise to test today's resistance. They do not as yet predict either a steep climb or a steep descent, although that could change as a result of economic numbers and earnings releases that continue to impact the market this week. This weekend's wrap detailed multiple layers of overhead resistance, including 1010 and 1015, near the June high. Above that is the resistance implied by the midline of the rising regression channel, somewhere between 1023 and 1027 depending on how quickly the SPX should rise, and then further resistance near 1045-1050. As is often true, the OEX daily chart shows many of the same formations. Daily Chart of the OEX: MACD remains flat on the OEX daily chart as it does on the SPX chart. CCI remains green on this chart, but squiggles around the flatline, not giving a clear signal. RSI squiggles around 50, also not giving a clear signal, and there's no clear-cut descending trendline on this RSI that we can watch for further information. The prediction remains the same for the OEX, however: consolidation for now within a top described by the descending trendline and either 500, 498, 491, or 485 support. Beyond that and the economic reports due over the next several days, it's difficult to predict further action. The DJI played catch-up with the other indices today. Last week, it closed beneath its 21-dma, unlike the S&P's and the tech- related indices. Today the DJI gapped above its 21-dma and closed above it, although the daily DJI candle showed the same bearish configuration and the same retreat from the descending trendline. Unlike the S&P's, though, the DJI did not approach its previous high, and so has not yet set up the possibility of a double-top formation. The potential of a bearish right triangle remains, however. Daily Chart of the DJX, as a proxy for DJI: The DJI shows one difference from that of the two S&P's. I've included 5(3)3 stochastics on this DJX chart to show how near they are to making a bullish kiss in mid-fall. Although the OEX 5(3)3 stochastics also show a slight upturn, the DJI is nearer than the two S&P's to displaying a bullish kiss. This evidence is tentative as yet as stochastics often redraw themselves in a maddening manner, but it offers a first hint that the DJI could attempt another test of its descending trendline. The upturned RSI does the same and is more trustworthy, so watch for an upside break of the RSI descending trendline or a rollover beneath it. I included possible support and resistance levels for the DJI this weekend. A recap should mention new possible support at the 21-dma at 91.36, backing up historical support at 91.50. As I mentioned this weekend, support might be found in 50-point increments down to 8950. The 25 percent rally retracement lies at 8880, some support exists between 8710-8740, and the 38.2 percent retracement and 200-ema lie between 86.20 and 86.60. In this weekend's wrap, I mentioned that an upside break of 9200 would see next resistance at last week's 9260 level, but today's high was 9278, overshooting that 9260 level. Next levels of resistance might be found at 9300, 9350, and 9400. Unlike the DJX and the two S&P's, the ADX level on the NDX remains above 30, indicating a trending market. The buying pressure line (orange) has turned down, possibly indicating an imminent change. That change has not arrived, however, and it's dangerous to anticipate signals. In late June, +DI also declined, bringing ADX down with it, but there was never a bearish cross of the lines and ADX flattened. It has not, however, risen again as the NDX broke out of its bull flag to the upside, so this does bear watching. Daily chart of the NDX: The NDX could not maintain 1300. I haven't included the 60- minute chart, but it shows the NDX falling at the end of the day to plumb its opening gap but then pushing above that gap at the close. Hourly ADX has declined below 30, with +DI and -DI approaching a bearish cross but not yet having completed that cross. As was true this weekend, NDX direction proves difficult to predict. Daily RSI and MACD point to the possibility that the NDX still has more upside, or at least more time to spend testing the current highs. Tech fever has been strong. With INTC reporting tomorrow, that fever may be tempered or else reach malarial levels. INTC reports tomorrow after the close, and it will be joined by MOT, PHTN, RFMD, and TER along with a myriad of other stocks reporting before the open and after the close. The SEMICON West conference continues. Before the bell, the July NY Empire Manufacturing Index will be released at 8:00 and June retail sales will be released at 8:30. As I mentioned this weekend, the biggest impact on the markets may be the Greenspan testimony on monetary policy before the House. That testimony begins at 10:00 ET. Nothing I see on the charts can predict how markets might react if Greenspan says something that either cools that stock fever or sends it to malarial levels. Be careful. Linda Piazza =============== Play-of-the-Day (bullish) =============== Graftech - GTI - close: 6.50 change: +0.17 stop: 5.79 *new* - Company Description - Graftech International Ltd. is one of the world's largest manufacturers and providers of high quality natural and synthetic graphite and carbon based products and services, offering energy solutions to industry-leading customers worldwide engaged in the manufacture of steel, aluminum, silicon metal, automotive products and electronics. They have 13 manufacturing facilities in 7 countries and are the leading manufacturer in all of their major product lines. They produce graphic electrodes that are consumed primarily in the production of steel in electric arc furnaces, the steel making technology used by all "mini-mills," and for refining steel in ladle furnaces. We also produce carbon electrodes that are consumed in the manufacture of silicon metal and cathodes that are used in the production of aluminum. In addition, we develop and manufacture natural graphite for use in materials and components for proton exchange membrane fuel cells and fuel cell systems and thermal interface products for computer, communications and other applications. GRACELL (TM), GRAFOIL(R), and eGRAF(TM) are our trademarks. (Source: Company press release.) - Most Recent Update on GTI, July 13, 2003 - Is GTI setting up another bull flag? Could be. GTI leaped above one of our two triggers on Monday, but has since subsided in a pattern that looks a lot like a bull flag. Volume dropped off, too, as often happens as this consolidation pattern forms. The 10-dma rose sharply under GTI's current price. From Wednesday through Friday, GTI probed the 6.00 level, stopping just above that level and springing up again. We like this action as well as the action of the MACD, still turning up. RSI appeared to hinge up, too, after flattening for most of the week. That hinge only hints at an upturn in prices, though, so we'll have to wait until next week to see whether its promise is fulfilled. Stochastics have flattened but haven't yet turned down below 70. We couldn't find any news directly concerning GTI this week, but if Morgan Stanley's downgrade of the European steel industry hurt GTI, the chart hasn't shown the impact. Those seeking new entries could target an upside breakout of the potential bull flag, waiting until a confirming move over last week's 6.50 high, but traders seeking this entry should set an alternative stop, too, since our profit target is 7.35. After a breakout of the flag, those aggressive traders could set alternative stops at 5.99 or 6.19. Conservative traders who first entered at 6.20 could consider that alternative 5.99 stop, too. We're raising our official stop to 5.79, just below the 6.00 support from last week and the rising 10-dma. - Why This is our Play of the Day, July 14, 2003 - The strong market action this morning lifted shares of GTI to new highs not seen in months. While the stock sank back from its best levels of the day it still gave us another new closing high. Volume was pretty decent and shares could be ready for their next leg higher. Picked on July 6 at $6.06 Change since picked: +0.44 Earnings Date: 07/24/03 (confirmed) Average Daily Volume: 391 thousand ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright ) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Monday 07-14-2003 section 2 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 ================================================================= Active-Trader/Non-tech Closed Bearish Play: WFMI 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) ================================================================== Active Trader/ Non-tech plays ================================================================== ============ CLOSED PLAY ============ --------------- CLOSED BEARISH -------------- Whole Foods - WFMI - close: 48.95 change: +1.07 stop: 48.51 It appears that bears got spooked early this morning with the positive earnings reports from C & BAC shooting pre-market futures higher. The broader market indices certainly made sizeable gains early in the session before falling back towards the close. The early morning jump in WFMI at $48.40 was quickly followed by a ramp up to $49.48. PremierInvestor would have been stopped out at $48.51. While this looks like a failed rally in the making the technical damage done to the stock's recent trend is not worth a follow up for bearish trades. Traders have until the 30th of July before WFMI announces earnings. Picked on June 13 at $49.44 Change since picked: -0.49 Earnings Date 07/30/03 (unconfirmed) Average Daily Volume: 1.6 million ================================================================== 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 C Citigroup 47.12 +0.97 BAC Bank of Ameica 83.46 +0.58 ONE Bank One 39.21 +1.16 KRB MBNA Corp 23.26 +1.27 SNP China Petrol & Chemical 26.30 +0.57 NCC National City Corp 34.10 +0.83 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- CLS Celestica 17.82 +1.32 IBN ICICI Bank Ltd 8.65 +1.08 ZGEN Zymogenetics Inc 14.50 1.06 ELON Echelon Corp 18.30 +3.63 CCRT Compucredit Corp 14.06 +1.13 VVTV ValueVision Media 15.92 +1.05 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- WFC Wells Fargo & Co 53.03 +1.15 AXP American Express 45.40 +1.44 STI Suntrust Bank 62.35 +1.18 GILD Gilead Sciences 67.25 +7.97 BEN Franklin Resources 43.24 +1.21 MGA Magna Intl Inc 73.79 +1.52 FNF Fidelity National Financial33.57 +1.67 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- VZ Verizon Communications 37.50 -1.27 SSP E.W. Scripps Co 84.91 -3.99 CI Cigna 41.04 -3.45 BCC Boise Cascade 21.87 -1.56 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- GCI Gannett Co 76.80 -1.17 ELAB Eon Labs Inc 37.20 -1.70 ================================================================= 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.
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