PremierInvestor.net Newsletter Wednesday 07-23-2003 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: Bernanke Does it Again 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) ================================================================= 07-23-2003 High Low Volume Advance/Decline DJIA 9194.24 + 35.79 9203.48 9102.28 1.59 bln 738/ 815 NASDAQ 1719.18 + 13.08 1720.04 1695.20 1.91 bln 1117/ 483 S&P 100 497.79 + 0.15 498.61 493.36 Totals 1855/1298 S&P 500 988.61 + 0.50 989.86 979.79 RUS 2000 466.14 + 2.14 466.15 460.52 DJ TRANS 2572.16 - 4.21 2578.82 2561.51 VIX 20.44 - 0.54 21.82 20.37 VXN 30.78 - 1.67 33.51 30.52 Total Volume 3,767M Total UpVol 2,071M Total DnVol 1,625M 52wk Highs 340 52wk Lows 37 TRIN 1.17 PUT/CALL 0.85 ================================================================= =========== Market Wrap =========== Bernanke Does it Again by Jonathan Levinson Today's session spent a great deal of energy determining what traders believed the Fed will seek to do next, and closed on a question mark. That indecision caused a ferocious rally in precious metal, with stocks and bonds adding tentative gains. One year daily candle chart of the INDU I've zoomed out to the yearly view of the indices to seek perspective. The Dow has clearly stalled out within its up-phase, the oscillators on sell signals from lower highs, while the Nasdaq appears to be completing a healthy pullback within its bullish uptrend. The Stochastic and Macd oscillators are in mid-downphases, however, and seem to imply that the 22 day EMA (green line), which has supported each pullback, may not hold on the current test. For a more detailed view of the daily and thirty minute charts of the index futures, see tonight's Futures Wrap. One year daily candle chart of the COMPX The Energy Department announced today that crude inventories dropped by 2.3 million barrels for the week ended July 18. Total inventories are down year-over-year to 276.3 million barrels, an 11 percent decline. Gasoline inventories fell by 1.6 million barrels to 207.8 million barrels in the latest week. Surprisingly, analysts got it right for a change, with many calling for the decline based on Hurricane Claudette's disruption to oil production in the Gulf of Mexico. The American Petroleum Institute reported a drop of 700,000 barrels in crude stocks for the week, considerably lower than the Energy Department's 2.3 million barrel decline. The API reported a 1.1 million barrel drop in gasoline supplies to 208.4 million barrels. Crude futures finished above their lows but under $30 per barrel. The Mortgage Bankers Association (MBA) announced that seasonally- adjusted demand for mortgage refinancings, the MBA refinancing index, dropped 7.2% for the week ended July 17 following a 1.6% drop the previous week. Demand for loans with which to buy homes, the Purchase index, dropped 1.1%. The average interest rate for a 30-year fixed rate mortgage rose to 5.72% from 5.33%. Given the sharp jump in treasury yields over the past week, it was expected that refinancings would drop, but I find it surprising that there wasn't more activity from late-comers who might have been procrasting and jumped to get in when rates began to climb. This implies that the market for home loans may be maxxed out. I've updated the macro charts we've been following during the past weeks. The changes are minute for this past week, with the MBA mortgage and refi indices giving the first and, I believe, leading indication of a possible pullback in the money supply as the origination of loans begins to recede. As treasury bonds continue to get sold, this trend should strengthen. Mr. Bernanke's speech, discussed below, asserts that the Fed will fight this contractionary trend, much as it has been doing for the past several years. MZM chart The zero-maturity money supply and the Fed's open market activity maintained their steeply rising trends as the Fed continued to add bank reserves, freeing up capital with which to purchase securities in the open market. Note that an increase in the supply of anything lowers its per unit value, and so the expansion of the money supply is at the expense of the value of each dollar. In this light, inflation may be seen as a "hidden" tax. Chart of overnight and term repurchase agreements (repos) Bank prime loan rate The effect of the inflation of the money supply and the purchase by the Fed's member banks of treasury bonds has helped lower the time-value of money, with the prime rate at a multidecade low, although this 13 year time series doesn't fully capture it. Chart of Total Consumer Credit Consumer credit outstanding appears to have ticked up this week, and it too remains at multi-decade highs, fueled by the record low rates. I find it disconcerting that consumers have been encouraged to take advantage of these low rates by taking on more debt instead of refinancing and paying down their existing debt. This legacy of the President and Mr. Greenspan may well come back to haunt them. The overall effectiveness of Mr. Greenspan's war against the Kondratieff Winter and inflationary stimulation policies is measured by the following charts, those which constitute the bottom line for the broad citizenry subject to the Federal Reserve's policies: Chart of Unemployment Rate Chart of US Bankruptcy Filings, unchanged from last week Chart of State and Local Surplus or Deficit Against this backdrop, Federal Reserve governor Ben Bernanke addressed a speech at UCSD this morning. True to form, Bernanke broadcast what appear to me to be panic-type comments on the Fed's part, and a wanton disregard for the US currency and all those who save and invest prudently with it. As mentioned in last week's Wednesday market wrap, the effective rate of return on short term treasuries is more than 1 percent below the CPI, forcing our elderly and savers to put their capital at risk just break even with cost of living increases. Bernanke took it a step further, saying that "We should be willing to cut the funds rate to zero, should that prove necessary to provide the required support to the economy." Once again, the "pushing on a string" analogy comes to mind. A highlight: "In any case, I hope we can agree that a substantial fall in inflation at this stage has the potential to interfere with the ongoing U.S. recovery, and that in conceivable--though remote circumstances, a serious deflation could do significant economic harm. Thus, avoiding a further substantial fall in inflation should be a priority of monetary policy. To my mind, the central import of the May 6 statement is that the Fed stands ready and able to resist further declines in inflation; and--if inflation does fall further--to ensure that the decline does not impede the recovery in output and employment." The full text of the speech is available at http://www.federalreserve.gov/boarddocs/speeches/2003/20030723/default.htm The Fed added a larger-than-usual 7B overnight repo, and for the second time this week failed to announce it through its website until several hours later than usual. The number announced in this morning's Market Monitor was obtained by calling the New York Fed and asking for it. This large open market operation, with no expiries today, indicates a certain trepidation on the part of the Fed. However, the inflationary words of Bernanke's speech are ultimately bullish for paper assets, as he's implying an increase in the supply of money with which to chase those assets, and both bonds and stocks remained firm following his speech. Gold rallied explosively on the comments, as investors fled to commodities which are not subject to arbitrary inflation or proliferation, unlike dollars, treasuries, stocks and other paper. There was a plethora of corporate data released today. AOL Time Warner (AOL) reported $0.12 per share, beating expectations by 2 cents. Boeing (BA) lost $0.24 per share vs. expectations of a 0.43 per share loss. Bell South (BLS) earned $0.52 per share, beating by 2 cents. Lucent (LU) met expectations, losing 7 cents per share. Eastman Kodak (EK) earned 60 cents, clobbering expectations of 27 cents per share. Kimberly Clark (KMB) beat by a penny, earning $.82 per share. After the bell, Qualcomm (QCOM) beat by 3 cents at 33 cents per share. AFLAC (AFL) earned 48 cents per share, beating by 3 cents. Overture (OVER) beat by 6 cents, coming in at 12 cents per share, and Veritas (VTAS) beat by 5 cents per share, reporting revenues of 19 cents per share. Electronic Arts (ERTS) blew out estimates of 2 cents per share, earning 13 cents and increasing y-o-y profits by 148%. Symantec (SYMC) earned $0.45 per share, beating estimates by 6 cents. We have the following economic data due tomorrow: Report Briefing Market Prior Expects Expects Jul 24 8:30 AM Initial Claims 07/19 - 415K 415K 412K For tomorrow, with a very light slate of economic data due, the question mark on which today's equity session closed will continue. The comments made by Bernanke are obviously not bullish for companies or the broader economy. However, the spring rallies in bonds and stocks were the result of a surge in liquidity. The big moves up in gold and silver were obvious, as was the move down in the dollar. The big unanswered question is whether stocks have it in them to rally again from current levels, and whether the Fed will do as much as Mr. Bernanke implied today. The mixed trading throughout the day will likely carry over to tomorrow as the markets struggle to choose a direction. See you at the bell! ================= 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 SGP Schering-Plough 17.75 +0.78 ITU Banco Itau (ADR) 35.68 +1.03 SHW Sherwin-Williams Co 29.15 +1.02 CBE Cooper Industries 42.89 +0.77 FL Foot Locker Inc 14.98 +0.93 ICBC Independence Cmmty Bk 32.32 +1.05 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- MU Micron Technology 15.38 +1.08 RX IMS Health Inc 19.00 +1.31 ENTG Entegris Inc 15.11 +1.04 QLTI QLT Inc 15.39 +1.59 LII Lennox Intl Inc 15.43 +2.34 VCLK ValueClick Inc 7.52 +1.17 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- UNH UnitedHealth Group 54.51 +1.68 NEM Newmont Mining 35.28 +1.88 CNI Canadian Natl Railway 50.07 +1.01 AL Alcan Inc 32.94 +1.64 FISV Fiserv Inc 38.90 +1.29 ETN Eaton Corp 85.90 +3.10 CECO Career Education Corp 82.11 +9.13 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- CCU Clear Channel Communication 39.49 -1.42 TEVA Teva Pharmaceuticals 53.05 -1.54 XL XL Capital 77.09 -3.61 ACE Ace Ltd 31.70 -1.04 BRCM Broadcom Corp 23.53 -3.00 DGX Quest Diagnostic 58.33 -1.23 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- MKL Markel Corp 263.25 -1.74 ================================================================= 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 (c) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form
PremierInvestor.net Newsletter Wednesday 07-23-2003 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 New Bullish Plays: MU New Bearish Plays: STX Bullish Play Updates: PLNR Closed Bearish Plays: YHOO Active Trader (Non-tech) New Bullish Plays: NEM Bullish Play Updates: COH Bearish Play Updates: BMS, HOV High Risk/Reward Bullish Play Updates: BEAS, SIRI ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Micron Technology - MU - close: 15.38 change: +1.08 stop: 13.90 Company Description: Micron is one of the world's leading makers of semiconductor memory components. Two-thirds of the companies revenues come from dynamic random-access memory (DRAM), flash memory, and other chips. MU has added the newer Rambus DRAM and Synchronous DRAM products to its line, and it is developing embedded memory for the digital video and other markets. The other third of the company's sales come from Micron Electronics (61% owned by MU), which makes PCs and laptop computers and offers Internet related business services. Why we like it: The Semiconductor sector (SOX.X) has been key to the impressive and extended rally in the Technology sector over the past few months. That trend looked to be in jeopardy on Monday, with the SOX challenging the bottom of its 5-month ascending channel and closing right on that lower channel line, just above the 50-dma. Tuesday was a different story, with the bulls coming back with enthusiasm and the SOX now looks to be setting up for another challenge of the $400-410 resistance level that has turned back the past two bullish advances. While it hasn't necessarily been the sector leader, MU started its own rebound a bit earlier on the back of last Thursday's upgrade from UBS. That helped to put a floor under the stock near $13.25, just above the bottom of the early July gap. Finding resistance near $14.50 earlier in the week, the stock finally got that push over resistance this morning when the stock was upgraded by Soundview to Outperform and put in a very strong showing. After gapping up to $15, the stock dipped back to nearly fill the gap and then surge higher to close near its high with a 7.5% gain on volume that doubled the ADV. With volume like that supporting the breakout, this move looks like it has room to run. The PnF chart looks totally bullish with another Buy signal and price now clearly through the bearish resistance line. The vertical count points to the $24 level as the eventual target and with earnings not set to be released until the middle of September, who knows. Narrowing our focus a bit though has us looking at the first upside objective as the next resistance near $16.50, with an eventual target of $18, which should represent strong resistance. With price already pressing the upper Bollinger band, we'd certainly prefer to enter on the next pullback into the $14.50-14.75 area. Aggressive traders can enter on a breakout over $15.70, but need to be aware of the risk of a near-term pullback due to the proximity of the upper Bollinger band. MU should now find strong support near $14, reinforced by the 10-dma ($14.14), so we're setting our stop at $13.90, just below Monday's intraday low of $13.95. Annotated Chart of MU: Picked on July 23rd at $15.38 Change since picked +0.00 Earnings Date 9/17/03 (unconfirmed) Average Daily Volume = 10.9 mln ----------------- New Bearish Plays ----------------- Seagate Tech. - STX - cls: 19.50 chg: -0.42 stop: 21.21 Company Description: Seagate is the worldwide leader in the design, manufacturing and marketing of hard disc drives for Enterprise, PC and Consumer Electronics applications. (Source: Company Press Release) Why We Like It: Have we lost our minds? What are we doing recommending a short on a stock that recently reached an all-time high, beat earnings, and saw CSFB raise its 2004 earnings forecast? On July 15, STX reported Q4 $0.33/share earnings that came in at the high end of revised-higher estimates of $0.30-.33/share, up from the year-ago loss of $0.49/share. The next day, CSFB raised its 2004 earnings forecast. STX climbed until July 16, when it printed a high-wave candle that indicated indecision. That candle proved predictive, since STX has fallen ever since. Raised estimates or not, STX investors ought to be undecided about buying STX at the recent high. This is a stock that traded just below $8.00 in early February. At last week's high, it traded at levels almost 150 percent of its still-trending-lower 200-dma. So, we haven't lost our minds and we don't expect STX to spin all the way back to $8.00, but we do think it's time for STX to pull back and regroup. We intend to take advantage of that regrouping if it occurs. Technical considerations make us believe that's just what might happen. This week, STX fell below its newest and steepest nearly parabolic ascending trendline. Prices retested the trendline Tuesday and fell away Wednesday, closing just below the 21-dma. STX hasn't closed below its 21-dma since the middle of March, so this marks a divergence. RSI, stochastics and MACD all look bearish. Today's volume was bigger than average, too, supporting the notion that profit-taking has set in. To ensure that today's minimal close below the 21-dma wasn't a trap, we're setting an entry TRIGGER below today's low of 19.35. Our stop will be 21.21, just above that ascending trendline. We'll watch carefully as SGT approaches $17.00, the site of the rising 50-dma, as we will likely see our first serious bounce attempt at that level. We're targeting stronger support at $16.00 and the descending 200-dma near $15.00 for our profit targets. Annotated Chart for STX: Picked on July 23 at $19.50 Change since picked: +0.00 Earnings Date: 07/15/03 (confirmed) Average Daily Volume: 3.1 million ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Planar Systems - PLNR - cls: 23.84 chg: +0.50 stop: 20.99 While PLNR didn't dip low enough to give us the hoped-for $22.00- 22.50 entry, it did cooperate by dipping near $23.00 on both Tuesday and Wednesday. That gives us a better risk/reward setup with either the official 20.99 stop or the closer stop that we suggested conservative traders might set. We're cheered to see that all week PLNR has closed above the 50 percent retracement of Friday's big range. That's a sign of strength. The next sign we want to see is a close above $24.00. MACD strength shows that it's possible that we'll get that breakout above $24.00. Both RSI and 21(3)3 stochastics indicate the possibility of more upside, too, although their evidence isn't conclusive. Since each approaches or already measures levels that indicate overbought conditions, it's possible that PLNR may need to regroup before breaking out above that next resistance. Today's 2.14 percent gain came on slightly greater-than-normal volume, confirming strength. Perhaps PLNR drew investor interest yesterday when the company announced that it would launch a new line of PE 15-, 17-, and 19-inch flat-panel monitors, hoping to speed the acceptance of flat-panel monitors. The PE line is an entry-level line. Although PLNR is not a component of the XCI, the Amex Computer Hardware Index, we do think a comparison of its performance to the XCI's has merit, and PLNR outperformed the XCI's 0.52 percent gain. Annotated Chart for PLNR: Picked on July 20 at $23.89 Change since picked: -0.05 Earnings Date: 07/16/03 (confirmed) Average Daily Volume: 174 thousand ============ CLOSED PLAYS ============ -------------------- Closed Bearish Plays -------------------- Yahoo! Inc. - YHOO - close: 32.12 change: +0.87 stop: 32.75 In retrospect, it certainly looks like YHOO's break below both $30 support and the 50-dma last Fridaywas a bear trap, as the stock has been recovering steadily this week. Positive reception of AMZN's earnings today propelled the stock back over $32 and with price breaking back into the broken channel, it appears our stop will be in danger as early as tomorrow. Rather than take the risk, we'll admit the mistake, take our lumps and exit the play tonight. Traders willing to stick with the original game plan will need to be disciplined about keeping their stops in place. On a pullback, we would look to use a dip back towards $31 as an opportunity to exit at a more favorable level and look for a better use for the capital. Picked on July 20th at $29.95 Change since picked +2.17 Earnings Date 10/08/03 (unconfirmed) Average Daily Volume = 13.1 mln ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Newmont Mining - NEM - close: 35.28 change: +1.88 stop: 32.90 Company Description: Newmont Mining Corporation is a holding company and is principally engaged in gold mining. As of the end of 2002, the company had gold reserves of 86.9 million equity ounces and an aggregate land position of approximately 63,000 square miles. NEM has operations in North America, South America, Australia, New Zealand, Indonesia, Uzbekistan and Turkey. In 2002, the company obtained more than 69% of its equity gold production from politically and economically stable countries, namely the United States, Canada and Australia. Why we like it: It doesn't seem to matter whether the concern is inflation or deflation, it is nearly impossible to argue with the fact that gold is well established in its bullish long-term trend and gold stocks have been soaring again over the past week. The largest and strongest of gold stocks, NEM confirmed that bullishness on Wednesday, by breaking out above the $35 level for the first time since late 1997. The actual level of the breakout appears to be $34, as that resistance level has been holding the stock back since the middle of June. After breaking out to new 52-week highs in early June, the stock has been consolidating that breakout between $31-34 and confirmed its bullish state with today's 5.6% gain. Judging by the volume that accompanied today's move (80% above the ADV), this is a strong breakout and we're looking for the run to continue, possibly right into the company's earnings report on August 5th. The most recent dip to the 50-dma near $31 was met with solid buying, providing yet another measure of the stock's strength. With gold prices significantly higher than a year ago and production costs remaining fixed, investors appear to be looking for a positive report from the company when it releases earnings. And with gold prices on the rise again, odds are good for positive future guidance. Judging by the strength of today's bullish move, investors are getting aboard for a good old fashioned momentum run into the event. While there is some mild resistance near $36, if the increasing volume is any indication, NEM may just blast right on through, bringing our $39 target into view as a tangible pre-earnings goal. While momentum traders can certainly consider entries on a push through Wednesday's $35.30 intraday high, we'd prefer to see a pullback and rebound from the $33.50-34.00 area, confirming old resistance as new support, as well as filling in today's gap. Place stops initially at $32.90, which is just below Monday's intraday low of $32.93. Annotated Chart of NEM: Picked on July 20th at $35.28 Change since picked +0.00 Earnings Date 8/05/03 (unconfirmed) Average Daily Volume = 4.17 mln ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Coach Inc. - COH - cls: 53.63 chg: -0.20 stop: 51.99 While COH trades almost a dollar higher than it did at last Friday's close, we can't exactly call COH's action a ramping up into its earnings release. Tuesday and Wednesday, COH printed small-bodied red candles indicative of indecision. The low volume verified that indecision. Once again, the stock underperformed the retail index, with the RLX gaining 0.68 percent Wednesday while COH retreated 0.37 percent. Still, COH maintains its most aggressive rising trendline and the support offered by its rising 30-dma, currently at 52.16. It's still printing higher highs and higher lows. The 21(3)3 stochastics rise and the rolling-over RSI doesn't have far to travel before it hits its own supporting trendline. We suggest watching that supporting RSI trendline as an RSI violation of its trendline could predict or confirm a COH violation of its own trendline. While we had suggested last week that aggressive traders might set an alternative stop just below the 50-dma, currently at 50.39, the quick approach of the earnings on July 29 and the continued underperformance of COH in relationship to the retail index lead us to conclude that honoring the 51.99 stop is probably the best idea for all traders. We would not suggest new entries at this time. Annotated Chart for COH: Picked on July 13 at $55.33 Change since picked: -1.70 Earnings Date: 07/29/03 (confirmed) Average Daily Volume: 966 thousand -------------------- Bearish Play Updates -------------------- Bemis Company - BMS - close: 43.45 change: -0.05 stop: 43.90*new* Oops! We missed the fact that BMS was slated to release earnings this morning and neglected to drop the play last night. Fortunately, even beating earnings by 2 cents wasn't enough to do anything but allow the stock to continue consolidating in the $43-44 area. Over the past several days, BMS has been trading sideways, while daily Stochastics have been rising and that's a bearish sign. Note also the way the 10-dma ($43.59) presented solid resistance to today's rebound attempt. If this is all the bounce the bulls can muster after the sharp fall from the $48.50 area, then another rollover and breakdown seems in order. But with positive earnings under its belt, we see no reason to take an undue amount of risk and we're going to get aggressive with our stop, lowering it to $43.90, just above the intraday highs for the past 7 sessions. With the possibility of a post-earnings bounce, we need to be careful of new entries here, instead waiting for a break below $42.75 (just under yesterday's intraday low) before adding new positions. Remember there's the possibility of some support near $42 enroute to our final destination at $40. Picked on July 9th at $45.18 Change since picked -1.73 Earnings Date 07/23/03 (confirmed) Average Daily Volume = 267 K --- Hovnanian Ent. - HOV - close: 51.59 change: -0.51 stop: 55.10 A moderate rise in Treasury yields wasn't enough to produce another positive day in the Housing sector, and the $DJUSHB index slipped fractionally lower on Wednesday after a failed attempt at the open to reclaim the $430 level. Old support is starting to act as new resistance and that's a boon to our bearish HOV play, which slid fractionally lower on the day as well. The stock has been finding resistance this week near $53. Should the rollover continue, then we'll be looking for a breakdown under $50 to take the play down towards our eventual target in the $45-46 area. We've been advising to look for entries on failed rallies in the $53.50-54.00 area and so far that strategy seems to be working all right, as the lower Bollinger band falls away, making room for more downside directly ahead. If looking for a new entry on renewed weakness, wait for the $50 level to be broken first. Should HOV do an about face on us, the $54 level will be the first test. A breakout over that level will suggest that the downtrend is over, so conservative traders may want to tighten stops to just above that level. We're leaving our stop in place at $55.10 as we still want to leave room for HOV to move before continuing its downward trek. Picked on July 16th at $54.25 Change since picked -2.66 Earnings Date 08/27/03 (unconfirmed) Average Daily Volume = 1.01 mln ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- BEA Systems - BEAS - close: 12.86 change: -0.07 stop: 11.75*new* Another day and another test of the $13 resistance level has us still feeling pretty good about our BEAS play. While it would be nice to see a rally above that resistance level actually stick, it is encouraging to see that weakness has been limited as well. Investors seem to be having a hard time making up their minds which way to jump with all the breaking news events so far this week, but the fact that they haven't panicked, has us thinking the bullish sentiment is still very much intact. BEAS doesn't report earnings until August 14th, so there's still plenty of time for the bulls to work their magic. Intraday dips that find buyers above $12.25, preferably above the 10-dma (now at $12.41) look attractive for new entries. Momentum traders will need to wait for the break over $13.30 before jumping aboard. Note that we're continuing to inch our stop up just below the 20-dma and it is now set at $11.75. Picked on July 20th at $12.79 Change since picked +0.07 Earnings Date 8/14/03 (confirmed) Average Daily Volume = 10.9 mln --- Sirius Satellite - SIRI - cls: 1.63 chg: -0.04 stop: 1.60 Sirius Satellite Radio's reception dimmed today, at least if we measure that reception by the number of investors buying SIRI stock. Wednesday's volume proved to be less than half the average. SIRI's price dimmed, too, sinking within one cent of our stop. Even fewer investors tuned in to competitor XM Satellite Radio Holdings (XMSR) although XMSR announced good news this week. Its radio capability will soon be available on Toyota's 2004 Camry Solara Coupe. The conditions that dimmed SIRI's reception affected XMSR's, too, with its volume less than 40 percent the average daily volume and with price flat. After breaking out of its bull flag early this month, SIRI failed to achieve a new high. That failure set up a potential bearish right triangle with the horizontal support line at our $1.60 stop. In an even more disturbing development, SIRI closed below its 50-dma on Tuesday and again on Wednesday, with the last close below this average occurring in April. We wouldn't be surprised to be stopped out of this play as early as tomorrow, but MACD and the 21(3)3 stochastics offer the barest whisper of hope. Both appear to be trying to flatten and resist further declines. If SIRI should bounce from the $1.60 support, a failure to move above the recent $1.86 high should be a signal to exit the play on strength. We would not suggest new long entries at this time. REMEMBER, this is an aggressive, high-risk play! Annotated chart of SIRI: Picked on July 2 at 1.78 Change since picked: -0.15 Earnings Date: 08/06/03 (confirmed) 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. 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 (c) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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