PremierInvestor.net Newsletter Wednesday 08-13-2003 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: Perspective 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) ================================================================= 08-13-2003 High Low Volume Advance/Decline DJIA 9271.76 – 38.30 9322.11 9233.94 1.48 bln 608/ 849 NASDAQ 1686.61 – 0.40 1695.83 1681.31 1.44 bln 738/ 677 S&P 100 495.29 - 4.45 500.95 493.55 Totals 1346/1526 S&P 500 984.03 - 6.32 992.50 980.85 RUS 2000 467.47 + 0.52 468.37 466.01 DJ TRANS 2598.88 - 8.59 2610.04 2592.52 VIX 20.62 + 0.41 21.69 20.17 VXN 30.27 + 0.06 31.24 29.79 Total Volume 3,144M Total UpVol 1,490M Total DnVol 1,598M 52wk Highs 367 52wk Lows 59 TRIN 0.12 PUT/CALL 0.78 ================================================================= =========== Market Wrap =========== Perspective Jonathan Levinson The indices flirted with significant upside and downside levels today, finishing the day nearly unchanged, with the Nasdaq losing less than one point and the Dow 38 points. 5 year weekly COMPX Cyclically, the Dow and Nasdaq both appear to have just completed up-phases from the March lows. Note that on both indices, the March bottom was a higher low on the 10 week stochastic, and the top of the ensuing up-phase occurred at a higher high. While lower prices appear to be in the cards, the onus will be on the bears for the down-phase just commencing. 5 year weekly INDU 6 month daily COMPX The daily candles paint a picture of bifurcated markets with the Dow vastly outperforming the Nasdaq on the correction off the March rally's high. The Dow is on buy signals, with the Nasdaq on sells. 6 month daily INDU 20 day 30 minute COMPX On the 30 minute candles, we see both indices in the early stages of downphases within bear flag formations, projecting to lower lows. 20 day 30 minute INDU What does the foregoing tell us? The bulk of the long-term (weekly timeframe) energy of the Spring rally has been expended, and the cycles are beginning a down-phase. Countertrend to that are the daily candles, which have paused in their ongoing downphases. The short term up-phase which caused that pause has terminated on the 30 minute candles, with the oscillators in that timeframe topped out and pointing south. While the outlook appears weighted to the downside, note that significant bounces can occur within downphases without disturbing their course, such as we see on the daily candles. For me, the best trades occur when the short cycles max-out countertrend to their longer cycles before resuming their runs in gear with the longer trend. On the economic front, the Mortgage Bankers Association (MBA) announced this morning that seasonally-adjusted demand for mortgage refinancings, the MBA refi index, declined 16.1% for the past week following the previous week's 2.4% drop. Demand for loans with which to buy homes, the Purchase index, fell 10%. The Application index fell 10.3% for the week. The average interest rate for a 30-year fixed rate mortgage fell to 6% from 6.37%. The drop in mortgage and refi activity for the week is indicating either the beginning of the end of the mortgage and credit bubble, a very significant development, or merely a lag between rates and mortgage/refi demand. While it's entirely possible that demand has been satisfied at and near current rates, I find the latter case the more likely scenario, and we'll see next Wednesday whether demand perks up for this current week. The Philadelphia Housing Index (HGX) was lower today, while treasuries got sold aggressively throughout the session sending yields sharply higher, the thirty year yield (TYX) finishing higher by 15.3 basis points at 5.441%. One year daily chart of the HGX The HGX sold off, dropping 5.44 to 286.14. It seems obvious that higher rates should slam the brakes on the homebuilders, but strong yield rally (see TYX below) has yet to have any serious impact on the index. Nevertheless, today saw the TYX add 15.5 basis points to the HGX' 5.44 point loss. If yields post new year highs, one might expect to see a downward trend in the HGX assert itself. One year daily chart of the TYX Equity futures took a jump at 8:30 when The Commerce Department reported that U.S. retail sales increased by 1.4% in July, exceeding estimates of 0.8%, led by purchases of gasoline, autos, electronics and household goods. The June figure was revised up to 0.9% from the 0.5% previously reported. Auto sales were up 3.2% in July. Excluding autos, retail sales were up 0.8% compared with estimates for a 0.5% increase. Retail sales were higher by 5.6% from July 2002, and this month's figures represent the largest increase since March of this year. It was reported that sporting goods stores and non-store retailers were the only retail categories to see a decline in sales for July. The financial press reported that this data is evidence of the sharp economic recovery that some are seeing. This may well be the case, but I find the water excessively muddied by the recent sharp moves in interest rates, the ongoing new highs in consumer credit, and the aggressive inflation of money supply by the Fed. The combination of increased sales with the recent declines in initial claims paints a potentially bullish picture for the economy, but ongoing price inflation, continuing unemployment claims and duration of that unemployment remain worrisome. On that point, President G.W. Bush, following a meeting with his top economic advisors, told reporters that in his opinion, the current round of tax cuts and incentives should be sufficiently robust to create jobs, and that his administration is upbeat on the employment outlook. In a separate statement, U.S. Treasury Secretary John Snow said that, "When an economy is recovering, it is normal to see interest rates rise some. So I would point to the rising interest rates as an indication that the economy is coming back." While Mr. Snow is not the only observer to share that opinion, I do not. Unless a significant uptick in employment and domestic corporate spending occurs (ie spending at home, and not foreign direct investment), the rise in yields looks purely negative to me, particularly in light of the alltime record levels of personal indebtedness and bankruptcies already occurring in this year's "as good as it gets" credit environment. The increase in yields will only exacerbate these problems, putting additional pressure on the straining consumer, as well as corporate and government borrowers. As a purely technical aside, a better than 130 basis point jump in yields within a 2 month period looks like more than interest rates merely "rising some", as Secretary Snow puts it, but the matter is open to interpretation. The Labor Department reported that the price of imported goods rose 0.5% in July following a rise of 0.7% in June, exceeding estimates of a 0.3% increase. Prices for exported goods fell 0.1%. Prices rose in nearly all major sectors, with petroleum import prices rising 3.7% in the month while non-fuel import prices rose 0.1%. The Energy Department reported a 200,000 barrel increase in crude oil supplies for the week ended August 8, while the American Petroleum Institute reported a 3.2 million barrel increase to 281.3 million barrels. Gasoline supplies fell 1.85 million barrels to 200 million barrels and distillate inventories lost 836,000 barrels to 117 million barrels according to the API. Unsurprisingly, analysts were caught flatfooted again, expecting a drop in crude oil supplies for the week. Crude oil futures led the Commodities Index to the downside, dropping 1.14 or 3.57% to $30.78 per barrel. Notwithstanding today's drop, crude remains above the widely-regarded 30 per barrel level and continues to pressure the economy. We have the following economic data due tomorrow: Report Briefing Market Prior Expects Expects Aug 14 8:30 AM Core PPI Jul - 0.1% 0.1% -0.1% Aug 14 8:30 AM Initial Claims 08/09 - 385K 393K 390K Aug 14 8:30 AM PPI Jul - 0.1% 0.1% 0.5% Aug 14 8:30 AM Trade Balance Jun - -$42.0B -$42.0B -$41.8B Aug 14 2:00 PM FOMC Minutes With bonds selling off aggressively today and gold rallying, the markets should be particularly sensitive to the 8:30 news. The initial claims data is expected to be low, and any upside surprise could be the straw that breaks the camel's back on the bear flags we've been watching. Nevertheless, it is options expiration week, and price has a habit of misbehaving during this period. We'll trade what the markets give us and exercise caution in either direction. ================= 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 KR Kroger Company 17.70 +0.65 S Sears Roebuck & Co 43.25 +0.53 IR Ingersoll-rand Ltd CI A 56.30 +0.81 MGA Mafna International Inc 77.96 +1.46 ABS Albertson's Inc 19.90 +0.88 DRI Darden Restaurants 20.96 +0.74 RGS Regis Corp 31.87 +0.87 CLE Claires Stores Inc 30.70 +0.80 GGB Gerdau Sa Ads 12.40 +0.73 OSIS OSI Systems Inc 16.55 +0.81 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- PKN Petrokazakhstan Inc 17.18 +1.26 WTEL Wiltel Comm Group Inc 15.89 +1.82 DRTE Dendrite International Inc 14.60 +1.30 ISPH Inspire Pharmaceuticals 14.10 +2.25 KDE 4Kids Entertainment Inc 19.15 +3.00 TCBI Texas Capital Bancshares 11.99 +10.99 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- DE Deere & Co 55.00 +1.49 SWY Safeway Inc 22.53 +1.28 CHIR Chiron Corp 46.33 +1.54 TIF Tiffany & Co 37.41 +1.13 GNTX Gentex Corp 36.27 +2.85 AAP Advance Auto Parts Inc 71.00 +2.29 AG Agco Corp 20.23 +1.10 SILI Siliconix Inc 47.46 +2.82 TECH Techne Corp 33.69 +1.61 TRN Trinity Industries Inc 25.18 +1.19 ESPD Espeed Incorporated CI A 22.15 +2.20 WMS WMS Industries Inc 22.60 +2.61 FINL Finish Line Inc CI A 26.19 +1.07 KIND Kindred Healthcare Inc 27.65 +5.58 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- PFE Pfizer Inc 31.56 -1.31 MDT Medtronic Inc 50.88 -1.77 BSX Boston Scientific Corp 62.10 -1.40 DISH Echostar Communications 34.27 -1.85 CSC Computer Sciences Corp 40.40 -3.22 AVB Avalonbay Communities 46.05 -1.20 PGTV Pegasus Commun Corp CI A 20.90 -1.15 BSML Britesmile Inc 33.23 -2.78 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- MUEL Paul Mueller 40.98 -1.57 ================================================================= 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 08-13-2003 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 Tech Stocks New Bullish Play: IRF Bearish Play Updates: NVLS Active Trader (Non-tech) Bullish Play Updates: HOTT, HELE, NEM Bearish Play Updates: DAL, SHRP, JPM Closed Bearish Plays: FDP High Risk/Reward New Bullish Plays: LSI Bearish Play Updates: SOHU ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= Int'l Rectifier - IRF - close: 32.99 change: +1.35 stop: 30.00 Company Description: International Rectifier Corporation is a designer, manufacturer and marketer of power management products and a worldwide supplier of a type of power semiconductor, MOSFET (a metal oxide semiconductor field effect transistor). Power semiconductors process electricity into a form more usable by electrical products. The company's products are divided among three broad product categories: analog integrated circuits (ICs) and advanced circuit devices, power systems and power components. IRF's products are used in a range of end markets, including consumer electronics, information technology, automotive, aerospace and defense, communications and industrial. Why we like it: If we had a nickel for every unexpected reversal over the past 2 months, we'd have a lot of nickels! Well, the Semiconductor index (SOX.X) is the latest major reversal to make its appearance. Last Friday, the SOX broke below its months-long ascending channel and looked like it was down for the count. Three days later, the index has broken back into that channel and is once again challenging strong resistance at $400. That brings us to our new bullish candidate, IRF, which has continued to work steadily higher in its own ascending channel. A couple weeks back, it looked like the stock's rise would be capped near $30, the site of strong resistance going back to last July. But the market liked the company's earnings report on July 31st and the stock rocketed through that level the next day. That rise topped out just over $32, pulled back to confirm new support at $30 and then broke out again today. The PnF chart has good things to say as well, with the breakout over $31 generating another Buy signal, hinting that the current bullish price target of $42 just might be achievable. Isn't it interesting how that correlates with very strong support (now resistance) before the big breakdown last July. We don't want to get too greedy shooting for the moon, so we'll set our sights a bit lower, initially targeting a move into the gap between $34.75-37.25 and then we'll see if there's any more gas in the tank. We're looking for the stock to continue working higher in its channel, so that means targeting entries on pullbacks near $31. Aggressive traders can certainly consider entering on further strength above $33.50 (today's intraday high), but should only do so if the SOX is continuing to surge, preferably above the $400 level. The risk of chasing the stock higher is that the top of the channel currently $34.25 will likely present near-term resistance. We're initiating coverage with our stop set at $30, which is just below the intraday low from last Friday. Annotated Chart of IRF: Picked on August 13th at $32.99 Change since picked +0.00 Earnings Date 10/30/03 (unconfirmed) Average Daily Volume = 883 K ============ PLAY UPDATES ============ -------------------- Bearish Play Updates -------------------- Novellus Systems - NVLS - close: 35.43 change: +1.25 stop: 36.25 That is not the way this was supposed to work! NVLS gave us a picture-perfect break below support last Friday, confirmed by the Semiconductor index (SOX.X) breaking down out of its months-long ascending channel. We don't know where those bears went over the weekend, but they certainly lost their conviction. NVLS found support on Monday and Tuesday near Friday's low and then vaulted higher today, gaining 3.65% on above average volume. The only saving grace was the afternoon reversal from just above $36, keeping the stock below our $36.25 stop. But even after the afternoon fade, NVLS is now back above the strong support at $35 that was broken on Friday. We're keeping the play alive for now in anticipation of the SOX once again being rejected from the $400 resistance level. But we are not recommending new positions at this time. We need to see the stock back under $34.50 (the bottom of that support zone) before considering new entries. Conservative traders will want to see a break below $33 before playing. Picked on August 10th at $33.32 Change since picked +2.11 Earnings Date 10/20/03 (unconfirmed) Average Daily Volume = 8.83 mln ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Hot Topic, Inc. - HOTT - cls: 31.50 chng: +0.78 stop: 29.45*new* Tuesday, HOTT announced a three-for-two split of the company's common stock. The split will take the form of a share dividend and will be effective September 2 for shareholders of record as of August 21. If this stock's chart sizzled last week when we chose the play, it really crackles since that announcement. HOTT jumped above the sedate regression channel that had been containing its prices since early March, showing signs of going parabolic. We're enjoying going along for the ride. Today, competitor Too, Inc. (TOO) was cut to a sell by AG Edwards after reporting a weak Q2 and cutting estimates for the Q3. TOO sells apparel and lifestyle products to teenaged girls, the same age group HOTT targets. Participants should remember that earnings are August 20 and we'll be closing this play ahead of those earnings. Although it looks as if we were lucky enough to capture the beginning of an old-fashioned earnings and split run, conservative traders should begin taking profit now or as those earnings approach. There may not be time for a pullback to support and a new launch before we close the play. Nothing on the chart says pullback yet, however. Volume continues to support the upward move, although the volume hasn't again equaled that strong push last week. MACD remains strong. Stochastics hint at a bearish kiss, but oscillators often give false signals in a strongly trending market. We would not suggest new entries this close to earnings. Annotated Chart for HOTT: Picked on Aug 10 at 30.16 Change since picked: +1.34 Earnings Date: 08/20/03 (confirmed) Average Daily Volume: 448 thousand ---- Helen of Troy - HELE - cls: 21.21 change: +0.02 stop: 19.60*new* Retailers got off to a strong start Wednesday, with retailers Wal-Mart (WMT) and Federated Department Stores (FD) reporting Q2 results that some tagged as promising. July retail sales were reported up 1.4 percent, with the market expecting a 1.0 percent climb according to one source. The retail index, the $RLX, started off on an upswing, but a downgrade to WMT due to valuation weighed on that stock and the sector. Like the retail index, HELE swung up in early trading but then dipped. It recovered, but never reached the morning's high before closing flat. Volume proved light on a light-volume day for the indices. By the close of the day, HELE had outperformed the RLX, matching its 0.09 percent climb to the RLX's 0.09 percent decline. HELE's chart reveals a MACD that still looks strong, although both RSI and stochastics hint at equal highs while prices made higher highs. These oscillators can't keep climbing indefinitely, however, and so sometimes do seem to depict bearish divergence when a stock trends this strongly. We don't discount the possibility that HELE might need to pull back and regroup. A light-volume pullback and bounce above $20.00 might make an ideal new entry. Our first target remains the $22.80-23.00 zone, predicted by HELE's recent upside breakout of its month-long trading range. Annotated Chart for HELE: Picked on Aug 10 at 21.03 Change since picked: +0.18 Earnings Date: 07/09/03 (confirmed) Average Daily Volume: 432 thousand ---- Newmont Mining - NEM - cls: 38.48 chng: +0.78 stop: 37.25*new* Another selling spree in the bond pits on Wednesday, combined with another gain for gold, has our bullish play on the largest gold mining company looking ripe for another breakout attempt. NEM has actually been treating us rather well after breaking out above $37 last week and after just missing our initial profit target of $39 by a few pennies on Monday, pulled back to find higher support near $37.40. Of course, it doesn't hurt that gold is back over $360/ounce and the Gold and Silver index (XAU.X) is threatening to break out over its own $88 resistance. There is still resistance near $89 from last spring, but once clear of that obstacle, the XAU looks ready to run to new multi-year highs. NEM is ahead of the game though, having already set 5- year highs on Monday and a trade at $39 would repeat the process. Recall that there is stiff resistance in the $39-40 area and the stock will likely have a hard time breaking through that area on the first try. So we're still advising traders to harvest gains on the play if price moves into that zone and begins to weaken. We're getting a bit more stingy with our stop tonight, raising it to $37.25, just below this week's intraday lows. Picked on July 23rd at $35.28 Change since picked +3.20 Earnings Date 7/31/03 (confirmed) Average Daily Volume = 4.58 mln -------------------- Bearish Play Updates -------------------- Delta - DAL - close: 10.89 change: +0.09 stop: 11.86*new* Tuesday, U.S. agents arrested a British arms merchant and two others allegedly trying to sell a shoulder-launched surface-to- air missile to undercover agents in New Jersey. Also this week, British Airways suspended some flights, listing security concerns they did not identify. Some felt these developments should have pressured the airlines, but perhaps investors were reassured by the arrests, feeling that security issues were being addressed. The XAL rose 0.45 percent, with DAL trumping that percentage gain with a 0.83 percent gain of its own. DAL's climb came on about 2/3 average daily volume. The day didn't begin so happily for DAL, with Wednesday's trading beginning with DAL below cruising level. The news stations covered the New Jersey arrests and some questioned homeland safety issues. As this update is being prepared after the close, CBNC still addresses airline safety issues in special segments. It wasn't until midday that DAL climbed. News specific to DAL included the announcement this week that it would stop contributing to a pension plan meant to keep top executives onboard as DAL struggles to pull up out of the airline industry downturn. As of Tuesday, the pilots' union had not yet completed its review of the company's plan. Talks between company representatives and the pilots' union had fallen apart in July, but a union representative stated that the pilot's union remained willing to discuss their goals with company management. That pension rankled other employees, whose pension is thought to be underfunded. DAL made other efforts to impress investors, attempting to make its $800 million offer to exchange old notes for new notes and cash more appealing. DAL's chart displays a potential bear flag pattern rising into resistance. After a steep decline, a tight pattern of higher highs and lower highs characterizes this pattern. The usual outcome arrives with a downside breakout as prices hit that resistance. For DAL, that resistance consists of historical resistance and a number of moving averages now converging overhead. The closest is the 10-dma, just overhead at $10.92. DAL has been testing this descending moving average all week but has not yet been able to maintain levels above that average. That may change later in the week, but then DAL confronts its 200-dma at $11.76. We're placing our new stop just above that 200-dma, with the stop at $11.86. Annotated Chart for DAL: Picked on July 30 at 11.15 Change since picked: -0.26 Earnings Date: 07/17/03 (confirmed) Average Daily Volume: 3.3 million ---- Sharper Image - SHRP - close: 24.64 change: +0.11 stop: 18.79 Sharper Image tried to pierce overhead resistance this week, but much lower volume accompanied those attempts. SHRP has so far been unsuccessful in moving back above the neckline of its head- and-shoulders formation. The rise has not yet been enough to turn oscillators back up with the exception of the RSI, which already appears to be flattening again. Wednesday's candle was a small doji at resistance, hinting that it could be followed by a decline later in the week. Several moving averages slant down toward SHRP. If a rollover is occurring, it's happening from a higher level than we anticipated, however, so we would not suggest new entries on a rollover. Aggressive players who like to enter on momentum could target a new entry on a break below Monday's low, but should be cognizant of possible first support near $22.00. We're targeting $21.00. We couldn't find news to explain SHRP's rise on Tuesday. Wednesday, SHRP seemed to be trading independent of the RLX. SHRP's trading didn't produce the early ramp up seen in the RLX and many retail stocks, and instead the stock found its highest levels in the early afternoon before it dove into the close. Annotated Chart for SHRP: Picked on Aug 10 at 24.65 Change since picked: +0.99 Earnings Date: 08/21/03 (confirmed) Average Daily Volume: 260 thousand ---- J.P. Morgan Chase - JPM - cls: 33.43 chng: -0.21 stop: 34.75 There certainly hasn't been much to get excited about in our JPM play this week, as the stock continues to hover near the $33 level. The Broker/Dealer index (XBD.X) has managed to reclaim the $550 as support and that is helping JPM to hold above the $33 level. But we still like the bearish prospects here, given the stock's lack of participation in the sector rally. Since bottoming near $32.50, the stock has spent the past 6 sessions creeping higher in a shallow ascending channel that looks an awful lot like a bear flag. One encouraging sign is that resistance near $33.80 (intraday resistance following the big breakdown on 8/01) is still holding and aggressive traders can still look to initiate new positions on failed bounces below $34. An alternate strategy will be to wait for a break below the bottom of the bear flag (currently $33.20) before playing. More conservative traders may want to wait for a break below $32.40 (the 8/01 intraday low) before getting their feet wet. Maintain stops at $34.75, which is just above the 50-dma. Picked on July 30th at $33.36 Change since picked +0.07 Earnings Date 10/15/03 (unconfirmed) Average Daily Volume = 9.55 mln ============ CLOSED PLAYS ============ -------------------- Closed Bearish Plays -------------------- Fresh Del Monte Prod. - FDP - cls: 27.40 chng: +0.82 stop: 27.50 Bears must be tearing their hair out all over the place tonight and we have to count ourselves among them. FDP looked primed for a breakdown when we initiated coverage last week, and fortunately we set our entry trigger in the correct place. The stock dipped to $25.80, testing the 7/21 low and the 50-dma and has been moving higher ever since. Wednesday's 3% gain was the final straw, as the stock moved through our $27.50 stop early in the day, removing it from consideration for new positions. Since the play was never triggered, we'll chalk it up as another rejected breakdown and move on to better candidates. Picked on August 6th at $26.20 Change since picked +1.20 Earnings Date 10/28/03 (unconfirmed) Average Daily Volume = 515 K ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- LSI Logic - LSI - close: 9.46 change: +0.30 stop: 8.99 Company Description: LSI Logic Corporation (NYSE: LSI) is a leading designer and manufacturer of communications, consumer and storage semiconductors for applications that access, interconnect and store data, voice and video. In addition, the company supplies storage network solutions for the enterprise. (Source: Company Press Release) Why We Like It: LSI caught our attention when we noticed that it had sprung up from an ascending trendline, leaped above its 21- and 10-dma's, and bounded out of a bull flag pattern. Many semiconductor stocks and the $SOX itself show these characteristic patterns, but they appear particularly well developed on LSI's chart. Because some bull flags have fallen apart lately, we're setting a trigger for our entry at $9.70. That entry should coordinate fairly well with a $SOX move back above $400.00, too, which should give further corroboration of the play's viability. We're targeting a move to $12.00. Wednesday, LSI Logic Storage Systems announced that LightSand's SAN extension gateway had passed compatible testing and that the gateways would now be available to customers. This results in a disaster recovery solution that would be more robust, according to a company spokesperson. On Monday, LSI announced that Chinese telecommunications equipment giant Datang Microelectronics had licensed one of LSI's products for use in a handset design. Annotated Chart for LSI: Picked on August 13 at 9.46 Change since picked: +0.00 Earnings Date: 07/23/03 (confirmed) Average Daily Volume: 4.5 million ============ PLAY UPDATES ============ -------------------- Bearish Play Updates -------------------- SOHU.com - SOHU - close: 32.42 change: +1.21 stop: 34.30 SOHU climbed Wednesday, but it did so without its companions SINA and NTES, other Chinese Internet stocks. Those stocks dropped in Wednesday's trading. Although SOHU's volume measured just a little more than 3/4 of average daily volume, we don't like the way it outperformed other stocks in this space. We still think SOHU appears to be forming the right shoulder of a possible head-and-shoulder formation. Although MACD still turns down, RSI and stochastics have picked up as SOHU tests resistance. A phalanx of moving averages slopes down to meet SOHU's advances, with some of those averages just above SOHU's current prices. Further gains should be hard won, but the increased volume last week and outperformance of peers this week worries us. Last week, many participants in this play may have taken gains when SOHU dipped within $0.43 of our target. We hope other investors will soon have the opportunity to do so. With SOHU's strong performance the last few days, we would not suggest new entries at this time. Annotated Chart for SOHU: Picked on August 6 at 32.27 Change since picked: +0.15 Earnings Date: 07/23/03 (confirmed) Average Daily Volume: 4.6 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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