PremierInvestor.net Newsletter Wednesday 07-30-2003 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: "A notch" 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) ================================================================= 07-30-2003 High Low Volume Advance/Decline DJIA 9200.05 - 4.41 9236.54 9164.97 1.64 bln 628/ 960 NASDAQ 1720.91 - 10.46 1733.40 1717.07 1.52 bln 502/ 994 S&P 100 497.29 - 0.56 499.80 496.19 Totals 1130/1954 S&P 500 987.49 - 1.79 992.62 985.96 RUS 2000 472.80 - 0.80 474.23 470.93 DJ TRANS 2606.22 - 12.15 2620.52 2598.15 VIX 20.72 + 0.49 21.06 20.54 VXN 30.86 + 0.70 31.42 30.86 Total Volume 3,342M Total UpVol 1,163M Total DnVol 2,096M 52wk Highs 435 52wk Lows 58 TRIN 1.38 PUT/CALL 0.80 ================================================================= =========== Market Wrap =========== "A notch" Jonathan Levinson The markets closed lower by a notch, while the summary of the Fed's Beige Book found that the economy edged higher by a notch. 20 day 30 minute INDU The Dow closed lower by all of 4 points, while the COMPX dropped 10. The narrowing pennant formations are setting the markets up for a big move in either direction, and with a plethora of economic data commencing tomorrow, the break could come at any time. 20 day 30 minute COMPX The Energy Department reported that U.S. crude inventories rose by 1 million barrels to 277.3 million for the week ended July 25, while the American Petroleum Institute reported a 400,000 barrel decline to 276.6 million barrels. In either case, analysts got it wrong, expecting a larger increase. Gasoline inventories fell by 3.3 barrels to 204.5 million barrels according to the Energy Department, while the API reported a 2.1 million barrel drop to 206.3 million barrels. The big news, however, was the most recent set of data concerning mortgage and refi activity. The Mortgage Bankers Association (MBA) announced that seasonally- adjusted demand for mortgage refinancings, the MBA refinancing index, dropped 32.9% for the week ended July 24. Demand for loans with which to buy homes, the Purchase index, dropped 3.5% following last week's 1.1% loss. The Application index dropped 24.9%. The average interest rate for a 30-year fixed rate mortgage rose to 5.87% from 5.72%. As I have been discussing for the past several weeks in our Wednesday market wraps, this trend poses significant risks to the economy and to the market, as the liquidity generated by debt origination has been providing fuel with which to support the financial system. Further more, the rapid rise in interest rates comes against the backdrop posted below. I won't rehash this material, and strongly encourage you to review recent Wednesday market wraps for a more detailed discussion. Here are some highlights: Chart of Total Consumer Credit Chart of Unemployment Rate Chart of US Bankruptcy Filings Chart of State and Local Surplus or Deficit Against this backdrop, GE CEO Jeff Immelt made statements in an interview worth repeating (and attributing to him). Note that GE owns CNBC, on which channel the interview took place: "I'm pretty optimistic. It is not that every thing is perfect. I still see the U.S. on a slow economic growth trend. I don't see anything negative as I look at the economy today..." Photo of Jeff Immelt I beg to differ, and while charts are always open to interpretation, those posted above appear pretty unequivocal. The quote was released last night in a Reuters story at 7:05PM. One would be hard pressed to find a clearer example of manifest editorial bias. The President spoke today and was optimistic about the economy, saying that he expected his tax cut package to stimulate productivity and job growth. "There's still work to do, but I'm optimistic about the future and I believe you'll see more jobs created and that will be good for the country," he said. Regarding the deficit: "We would have had deficits with or without tax cuts for this reason: the slowdown in the economy, the decline in the stock market starting March of 2000, plus the recession, reduced the amount of revenues coming into the federal Treasury." Donald Grimes, economist at the University of Michigan's Institute of Labor and Industrial Relations, released a study today noting that U.S. economic recovery since the end of the recession in November 2001 has been substantially more drawn-out than the recovery period of the early 1990s. "The current jobless recovery has lasted nearly twice as long and has resulted in three times as many job losses compared to the economic recovery in 1991-92. While most people would attribute the continued weakness to job losses in information technology industries, states that have suffered the greatest during the post-recession period are not technology-based states, but are industrial states in the Midwest," he said. Grimes noted that California, home of the tech revolution, saw significantly greater job losses in the early '90s than it has since 2000. Rather than rehash the debt and money supply situation, with which material we should by now be thoroughly familiar, the following is a longer term view of the markets we follow. I'm hoping to gain some perspective on the recent market action, particularly as the treasury and commodity markets continue to diverge from equities during weeks past. SPX 33 year monthly The long term Nasdaq and S&P 500 charts speak for themselves. Note that the unwinding of the tech bubble brought the COMPX to a 76.4% retracement off its alltime high, while the SPX stopped at the 50% line. COMPX 33 year monthly The weekly charts reflect the toppiness that we've been following for weeks in the tri-weekly Sentiment Wraps. SPX 3 year weekly COMPX 3 year weekly Noteworthy is that bond yields have recently rallied very strongly, bonds selling off sharply with no corresponding action in either direction from equities which have drifted mostly sideways during that time. Recall that bonds and stocks rallied together through most of this year, and so the recent action from the larger treasury market is so far baffling. My interpretation is that the selloff in treasuries has yet to reach equities, but I can think of arguments on the other side as well. Ten year note yield 3 year weekly The strong uptrend in gold does not bode well for equities, in my opinion. Note that the weekly chart of the Dec '03 contract reveals a continuation pennant forming so far. Gold 3 year weekly The Federal Reserve Board's Beige Book was released at 2PM EST, and caused a brief stir of buying for a few minutes. The report found that the U.S. economy is showing some signs of improvement, with 8 out of 12 districts reporting "somewhat stronger growth." The manufacturing sector looked stronger with Philadelphia and Richmond and calling an end to the downturn in production, though goods prices throughout the country still appeared soft. The report noted the jump in automobile inventories in June and July. Overall, the report noted that economic activity had picked up "a notch." There are no doubt windowless offices filled with harried quants attempting to discern what percentage of GDP corresponds to "a notch". The inability of the report to spark more that a fleeting bid no doubt owes itself to the more negative "hard" data we've been following, including initial and continuing jobless claims, the current account deficit, the CPI and the PPI. Statements like "inflation remains tame" and "consumer spending is lackluster" did nothing to rally bonds, contrary to what one might otherwise have expected. The markets all but ignored the Beige Book, but what I find to be most interesting is its reflection of the Fed's view on current and ongoing economic conditions. The full report can be accessed at http://www.federalreserve.gov/fomc/beigebook/2003/20030730/default.htm. As Jeff Bailey noted in the 3:15 Market Update, "The word that showed up most often was "mixed" and as one subscriber has pointed out in the past, where I use quotation marks too frequently and perhaps improperly, we can envision the late Chris Farley in a Saturday Night Live skit using his fingers to signify quotation marks around today's release of the Fed Beige Book Data, which contains little hard data points..." The bottom line is that the Fed pulled out the stops quite some time ago. The more than tripling of the money supply inside of 15 years, the lowering of rates to 45 year lows, the aggressive ongoing daily intervention via Fed repo agreements, all indicate a Fed increasingly open to exercising strong measures, while the charts on unemployment, state budgets, personal borrowing and bankruptcies tell a sad tale of the failure of those measures so far. It is my sincere hope that the optimistic "mixed" story in the Beige Book and in the mainstream financial media's spin thereon is both well-founded and an indication of brighter times to come. However, in light of the proliferation of "hard" data to the contrary and the new threats posed by rising rates, a weak dollar, and the other factors discussed above, the Fed's Beige Book sounds more like the placative tone of an airline steward than an objective report of the current and future conditions facing us. In other news, the Investment Company Institute reported that net inflows into stock funds totaled $18.7 billion in June, topping $11.9 billion of inflows during May. This data follows over 1 year of mostly negative inflows since March 2002. Trimtabs is estimating that the trend will continue, projecting inflows of $8.5 billion for this month. We have the following economic data due tomorrow: Report Briefing Market Prior Expects Expects Jul 31 8:30 AM Chain Deflator-Adv. Q2 - 1.0% 1.4% 2.4% Jul 31 8:30 AM Employment Cost Index Q2 - 0.9% 1.0% 1.3% Jul 31 8:30 AM GDP-Adv. Q2 - 1.5% 1.5% 1.4% Jul 31 8:30 AM Initial Claims 07/26 - 410K 400K 386K Jul 31 10:00 AM Chicago PMI Jul - 53.0 53.8 52.5 Jul 31 10:00 AM Help-Wanted Index Jun - 37 37 36 Today's session gave us an inside day following a very light week for economic data. Tomorrow and Friday are much heavier, and with tension building with today's price compression within what is proving to be a persistent trading range, the stage is set for a big move either way. If this year has taught us anything, it's patience and open-mindedness. The markets could blast to the upside as easily to the downside, although I personally find the latter to be the more likely outcome. With the indices just below their year highs, volatility very low and beginning to climb, bullish percents toppy and bears hesitant to go short, the downside appears for the moment to be the path of lesser resistance. We'll keep close on our stops in case The Great Humiliator disagrees. 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 MGA Magna Intl Inc 75.62 +0.55 BXP Boston Properties 43.35 +0.54 BPO Brookfield Properties 22.60 +0.65 LUK Leucadia National 38.47 +1.17 GXP Great Plains Energy 28.86 +0.54 ALEX Alexander & Baldwin 28.68 +0.57 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- TKLC Tekelec 14.85 +2.46 CSGS CSG Systems Intl 14.86 +1.65 ITMN Intermune Inc 18.80 +2.21 PSTI Per-Se Technologies 13.53 +1.34 HGR Hanger Othropedic 13.72 +1.10 INVX Innovex Inc 14.29 +1.29 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- MAY May Dept Stores 24.46 +1.01 BEC Beckman Coulter 43.70 +1.33 ORLY O'reilly Automotive 37.73 +1.52 MLM Martin Marietta 38.40 +4.16 CRL Charles River Labs 37.13 +4.42 FRK Florida Rock Industries 49.00 +2.50 MATK Martek Biosciences 49.76 +3.30 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- AVE Aventis 51.64 -1.75 BVF Biovail Corp 36.85 -1.65 GRMN Garmin Ltd 38.51 -8.10 EXPD Expeditors Int 32.99 -2.66 RCI Renal Care Group 34.95 -2.40 LDR Landauer Inc 38.98 -1.48 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- SILI Siliconix Inc 41.97 -1.48 LFG LandAmerica Fncl Grp 46.22 -2.12 SCHN Schnitzer Steel 44.10 -3.14 MNST Monster Worldwide 23.42 -1.36 SAFM Sanderson Farms 29.65 -0.48 ================================================================= 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 07-30-2003 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: MU, PLNR Closed Bearish Plays: STX Active Trader (Non-tech) New Bullish Plays: CTAS New Bearish Plays: DAL Bullish Play Updates: HSIC, NEM, PETM Bearish Play Updates: HOV High Risk/Reward Bullish Play Updates: BEAS ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Micron Technology - MU - close: 14.35 change: -0.17 stop: 13.90 As good as last week's breakout move in shares of MU looked, the ensuing action has made it clear that another test of support is necessary to provide the conviction necessary to continue the move. After pulling back from just below $16, the stock is finding consistent intraday support just above $14 and fortunately the 20-dma ($14.11) has risen enough to help reinforce that support. Making things more difficult for the bulls though, is the Semiconductor index (SOX.X) pulling back for another apparent test of its months-long ascending channel. The bottom of that channel at $378 looks like it could be in for another test as support tomorrow morning, and if it fails, our MU play will likely have a hard time holding over $14. But if the support holds, then we could be presented with another solid entry with MU rebounding from known support and the SOX rebounding for another run at the key $400 resistance level. New entries near that known support look attractive on a risk-reward basis, especially with our stop set at $13.90. Recall that our first target will be for a run at last week's highs and a test of resistance near $16.50. That would make a good point for conservative traders to harvest some gains. Picked on July 23rd at $15.38 Change since picked -1.03 Earnings Date 9/17/03 (unconfirmed) Average Daily Volume = 11.4 mln --- Planar Systems - PLNR - cls: 24.01 chg: +0.05 stop: 22.49*new* On Wednesday, PLNR's 0.21 percent gain occurred on lighter-than- average volume. That's okay because Tuesday's volume was up 50% over average daily volume. Investors had already shown their interest in accumulating the stock. They have been driving the price right up to $24.20 resistance since July 18. Pullbacks get shallower with each assault. PLNR's "p" accumulation pattern has resolved into a bullish right triangle with a rising support line and a flat resistance line. The typical outcome of such a triangle is an upside breakout and that's what we hope to see. Light volume or not, PLNR's percentage gains still outperformed those of the XCI, the Amex Computer Technology Index, with that index losing 0.58 percent. On PLNR's daily chart, indicators have moved into territory showing overbought conditions, but haven't yet turned down. Oscillators rarely give good signals in a trending market anyway. Aggressive traders seeking a new entry might enter on a momentum push above 24.20 resistance. We're raising our stop loss to $22.49. Annotated Chart for PLNR: Picked on July 20 at $23.89 Change since picked: +0.12 Earnings Date: 07/16/03 (confirmed) Average Daily Volume: 174 thousand ============ CLOSED PLAYS ============ -------------------- Closed Bearish Plays -------------------- Seagate Tech. - STX - cls: 20.86 chg: +0.36 stop: 21.01 Late last week, STX competitor Western Digital trumped a joint bid by STX, Hitachi, and Alps Electric to buy the assets of bankrupt Read-Rite Corp. A GS analyst didn't think the lost opportunity would adverse affect Alps' earnings. He didn't mention STX, but the company's investors certainly haven't appeared discouraged, either by that development or by the flood of new stock that began hitting the market late last week. Investors haven't exactly been encouraged, either, with STX's Wednesday gains made on about three-fourths average daily volume. No matter what the volume levels, however, STX keeps chugging up the underside of its violated trendline and that means trouble for our short play. Most disturbing is the way it's been using the 21-dma as support the last two days. STX's advance this week turned the stochastics back up, but RSI and MACD remain more inconclusive. The candles have grown smaller, too, as STX climbed. That evidence, coupled with the lower volume, may indicate some hesitation to drive STX back to previous highs, but that's a dim hope. STX now trades less than $.30 below our stop and we see no reason to wait out that extra $.30. We're closing the play tonight. Picked on July 23 at 19.50 Change since picked: +1.36 Earnings Date: 07/15/03 (confirmed) Average Daily Volume: 3.1 million ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Cintas Corp. - CTAS - close: 39.90 change: +0.61 stop: 37.50 Company Description: Cintas Corporation is primarily a corporate identity uniform company that also provides ancillary services. The company provides a highly specialized service to businesses of all types, from small service and manufacturing companies to major corporations that employ thousands of people. CTAS classifies its businesses into two operating segments: Rentals and Other Services. The Rentals operating segment designs and manufactures corporate identity uniforms that it rents, along with other items, to its customers. The Other Services segment involves the design, manufacture and direct sale of uniforms to its customers, as well as the sale of ancillary services, including sanitation supplies, first aid and safety products and services. Why we like it: While there really hasn't been much of a hint of an improvement in the job market in recent months, CTAS is defying the government statistics and has been steadily working higher over the past month. The $40 level is major resistance, and handily turned back the stock the last time it seriously challenged this level in the middle of June. But with a positive earnings report and inline guidance under its belt a couple weeks ago, the stock has once again been building a series of higher lows and higher highs and is right back at that $40 resistance level. Making this level all the more pivotal is the 200-dma, which currently rests at $40.27. Yesterday's Consumer Confidence report put a dent in the recent bullishness, but after pulling back to just above $37.50, found eager buying interest that propelled CTAS back over $39 by the closing bell. CTAS attempted to break that resistance on Wednesday, but fell back after tracing an intraday high of $40.18. This leaves us with the perfect setup for a momentum breakout, and we're setting our trigger at $40.30, just over the 200-dma. There's likely to be some interim resistance near $42, which can most clearly be seen on the PnF chart, where that level proved to be strong support last year. CTAS also will have to contend with the bearish resistance line at $41 before solidifying any strong breakout, but it looks like the recent bullish pattern should win out. As a point of reference, the bullish price target from the PnF chart is $47, but we're setting our sights just a bit lower, looking for a rally to major resistance at $45. Momentum traders will want to jump on the initial breakout over the 200-dma, while those with a more conservative approach will want to wait for a subsequent pullback to confirm the $39-40 level as newfound support before entering. Once triggered, we'll set our stop initially at $37.50, which is just below yesterday's reaction low, as well as the 20-dma (currently $37.58). Keep an eye on the Initial Claims report tomorrow morning and the Nonfarm Payrolls and Unemployment Rate report on Friday for a clue to investor sentiment. An unexpected improvement in any of these reports may be just the catalyst to deliver the breakout over resistance. Annotated Chart of CTAS: Picked on July 30th at $39.90 Change since picked +0.00 Earnings Date 10/14/03 (unconfirmed) Average Daily Volume = 1.11 mln Chart: ----------------- New Bearish Plays ----------------- Delta Air Lines - DAL - cls: 11.15 chg: -0.22 stop: 12.21 Company Description: Delta Air Lines, the world's second largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offers 5,734 flights each day to 444 destinations in 79 countries on Delta, Song, Delta Express, Delta Shuttle, Delta Connection and Delta's worldwide partners. (Source: Company Press Release.) Why We Like It: Back in June, DAL broke out of a bull flag and zoomed toward recent highs, but soon slammed into resistance and headed down again. Its high-flying days turned out to be short-lived. DAL paused a few days at the midline support of a huge regression channel from its weekly chart, but it couldn't take flight again. It broke through the support. Then it idled again near its 200- dma, forming a "b" distribution pattern. It's been clinging to levels near its 200-dma, but has now had two consecutive closes below that important moving average. We think the "b" distribution pattern will soon break to the downside. It might be accompanied by other airliners' stocks as it dives, since the XAL, the airline index, matched DAL's 1.93 percent drop on Wednesday with a 2.57 percent drop of its own. DAL investors have reason to abandon the stock. Last week, the company announced a decision to stop dividend payments. It had been making regular dividend payments since 1949. It also announced plans to convince holders of two notes due in 2004 and 2005 to keep those notes a bit longer and not require payment. S&P announced that it had assigned a "B" rating to the proposed $683.5 million 10% senior notes meant to convince those holders, with that rating being two notches below Delta's corporate debt. The press release includes phrases such as "reflect financial damage from substantial losses over the past two years, a heavy debt and lease burden" and other gloomy language. In addition, DAL and United said they would end their frequent-flyer deal. On the daily chart, MACD looks bearish. After such a prolonged downdraft, stochastics and RSI remain buried in levels indicating oversold conditions, of course. It's possible that DAL will attempt one more try at its 200-dma or the $12.00 level, but we think that attempt will be a failed one. Traders can enter at current levels or on a rollover anywhere underneath $12.00. We're targeting $9.00, just above the support offered by the rising regression channel. Conservative traders might want to take profits or watch carefully as DAL approaches $10.00. DAL just printed a new P&F double-bottom breakdown sell signal, and it's below its bearish resistance line. The P&F target lies below our $9.00 target, although we don't have a final count because the stock has not yet reversed into an "X" column. Annotated Chart for DAL: Picked on July 30 at 11.15 Change since picked: 0.00 Earnings Date: 07/17/03 (confirmed) Average Daily Volume: 3.3 million ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Henry Schein - HSIC - cls: 58.83 chg: +0.14 stop: 55.45 *new* Friday we mentioned that HSIC might breeze past the resistance just above $57, and that's what it did. HSIC marched right to the top of its ascending regression channel this week, with that channel rising toward our 59.90 target. With earnings scheduled for next Tuesday, we needed HSIC to climb quickly, and it's conceded to our wishes. Although Wednesday's volume proved lighter than normal, Tuesday's 1.87 percent climb was on almost double the average daily volume. MACD kicked up again, although RSI flattened and stochastics show the slightest tendency to flatten, too. We can't trust those oscillators too much, however, as they've been behaving similarly ever since May, when RSI and stochastics first climbed up into the zone indicating overbought conditions. The fluctuations haven't retarded HSIC's climb so far. Still, with this play scheduled to close out at the end of this week, we're raising our stop to 55.45. Since the play has performed handsomely already, conservative players might begin taking profits at current levels or might consider setting an alternative stop at 56.49 or even at 56.99. We would not suggest new entries at this time. Annotated Chart for HSIC: Picked on July 27 at $56.75 Change since picked: +2.08 Earnings Date: 08/05/03 (confirmed) Average Daily Volume: 346 thousand --- Newmont Mining - NEM - cls: 35.44 chng: -0.54 stop: 33.75 Following last week's breakout to new 5-year highs, we've been looking for a decent pullback to provide the next palatable entry into our NEM play, and it looks like it is setting up right now. A failure to push higher on Monday resulted in a drop back to just above $35 and the stock has been finding consistent support in the $35.20-35.30 area over the past few days. Pressuring the stock over the past few couple days has been the pullback in the price of gold from its $365 resistance level. The yellow metal has been trading in a neutral wedge since tracing its February high of $390, but given the bullish action in the gold stocks, we're leaning to a bullish resolution of this pattern. While a successful rebound from this area might make for a decent entry, we've still got the potential for a deeper pullback to the 10-dma ($34.44) or the top of last week's breakaway gap at $34.00 before the bullish move continues. So long as gold doesn't break the bottom of its wedge at $344 (also the site of the 200-dma) a deeper pullback in NEM should just be the setup for a better entry. Wait for the rebound in both NEM and gold before entry and maintain stops at $33.75, just below the top of that gap. The primary wrinkle in our plans is the company's earnings report. The company has moved up its earnings release from August 5th to tomorrow before the open. Normally we'd drop the play ahead of earnings, but it's too late for that. Let the stop do its job if the report is poorly received and wait for the initial post-report volatility to ease before entering new positions. Picked on July 23rd at $35.28 Change since picked +0.16 Earnings Date 8/05/03 (unconfirmed) Average Daily Volume = 4.36 mln --- PETsMART, Inc. - PETM - cls: 19.56 chg: -0.36 stop: 18.29 We said last week that we weren't choosing PETM because its symbol gave us a warm-and-fuzzy feeling, and it's a good thing that wasn't our reason. Friday, PETM bounced from the midline support of its rising regression channel, and that upward move continued Monday. Tuesday and Wednesday, however, PETM dropped back below $20 and the midline support. Its 1.81 percent loss exceeded the 0.36 percent loss seen on the RLX, the retail index. That cooled some of our warmth for the play. But it didn't cool all our warm feelings. PETM's drop on Wednesday stopped at an ascending trendline that could be drawn from the July 1 low to the current position. Wednesday's drop also occurred on less than half the average daily volume. It felt like a pullback. How deep will that pullback take PETM? Historical support, the rising 21-dma, and the rising bottom channel support should hold PETM above our $18.29 stop. MACD flattened, but stochastics and RSI both react to the pullback. Stochastics made a bearish kiss but haven't yet rolled down. They might not do so, as they sometimes remain pinned at overbought levels for long periods in trending stocks. Those watching for a new entry could target a bounce anywhere north of $19.00 or could enter on another move through $20.00. Annotated Chart for PETM: Picked on July 27 at 19.99 Change since picked: -0.44 Earnings Date: 08/28/03 (confirmed) Average Daily Volume: 1.4 million -------------------- Bearish Play Updates -------------------- Hovnanian Ent. - HOV - cls: 51.13 chng: +0.13 stop: 52.30*new* Over the past week, the Dow Jones Home Construction index ($DJUSHB) has been gravitating to the $425 level as bond yields continue to hold near their 52-week highs. At the same time, our HOV play has continued to drift lazily lower. The 10-dma (now at $51.72) has been providing intraday resistance, while the stock continues to find intraday support just above $50. At this point, it looks like things could go either way, so we're erring on the side of caution and tightening our stop, while at the same time allowing for the expected breakdown to materialize and take us deeper into the profit zone. Our stop moves lower to $52.30 tonight, which is above both the 10-dma and yesterday's intraday high. Should HOV rally above that level, we'll want to take a quick exit, preserving a modest gain. The only way we want to consider new entries here is on a breakdown under $50, which should be good for a quick run down to our eventual $45-46 target area. Picked on July 16th at $54.25 Change since picked -3.12 Earnings Date 08/27/03 (unconfirmed) Average Daily Volume = 1.02 mln ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- BEA Systems - BEAS - close: 13.30 change: -0.22 stop: 12.35*new* After a convincing breakout through the $13.25 level last week, our BEAS play has been struggling to sustain further gains. It has made a couple forays up into the $13.65-13.75 area, but without the support of broad market strength, each of these bullish attempts have been turned back. On the bullish side of the coin though, it has been encouraging to see intraday support beginning to build near the site of last week's breakout, hinting that the stock wants to put in another bullish performance ahead of earnings on August 14th. There's a short-term ascending channel that can be drawn on the intraday chart, with the bottom of the pattern at $13.20, and aggressive bulls may want to consider new positions on a rebound from that area in anticipation of a run at the $14 resistance level. Conservative traders may want to harvest gains near that level on a failure to break out, while aggressive traders can still consider breakout entries on a move through $14.00. As we've been doing over the past week, we're continuing to ratchet our stop up to $12.35, keeping it just below the 20-dma ($12.46). Setting it at that level gives us a bit of additional cushion and keeps us under last Monday's $12.37 intraday low. Picked on July 20th at $12.79 Change since picked +0.51 Earnings Date 8/14/03 (confirmed) Average Daily Volume = 11.1 mln ================================================================= 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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