PremierInvestor.net Newsletter Thursday 08-14-2003 section 1 of 2 Copyright (c) 2003, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= In section one: Market Wrap: Got Power? Watch List: TOL, HCA, CFC, AGIX and more! Market Sentiment: Low Volatility ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 08-14-2003 High Low Volume Advance/Decline DJIA 9310.56 + 28.80 9334.57 9218.82 1.43 bln 1945/1238 NASDAQ 1700.34 + 13.73 1700.34 1681.52 1.30 bln 1877/1276 S&P 100 498.22 + 2.93 499.11 493.28 Totals 3822/2514 S&P 500 990.51 + 6.48 991.91 980.36 W5000 9540.78 + 59.51 9548.40 9449.91 RUS 2000 471.22 + 3.75 471.22 466.55 DJ TRANS 2621.90 + 23.02 2627.35 2596.08 VIX 20.51 - 0.11 21.53 20.22 VXN 29.27 - 1.00 31.59 29.10 Total Volume 2,933M Total UpVol 1,893M Total DnVol 973M 52wk Highs 388 52wk Lows 86 TRIN 1.09 NAZTRIN 1.05 PUT/CALL 0.80 ================================================================= =========== Market Wrap =========== Got Power? If you live in the Northeast chances are you are reading this newsletter a little later than usual due to the lack of power. Fortunately the markets had closed when the disaster began and the disruption was minimal. The disaster is going to occur on Friday morning if the power does not come back online soon. The challenge is not going to be the NYSE computer systems but the massive dislocation of thousands of traders and support staff. Dow Chart - Daily Nasdaq Chart - Daily When the lights went out in New York at the close on Wednesday it immediately created an urge to exit the city even if walking was the only mode of transportation. Trains, subways, airports and communication were immediately knocked out and streets and bridges were jammed with pedestrians moving quickly away from town. Even cell phones ceased to function without base station support. With hundreds of trains and subway cars stuck in tunnels the urge to find ANY alternative exit in case it was a terrorist attack was strong. People were literally running away from the city. At one point authorities estimated there were over 20,000 people jamming streets around a single ferry terminal to New jersey. New York is a commuter city and with no way out people were literally lining up by the thousands at bus lines and ferries. The problem will come tomorrow when these same people try to get back into the city to pick up their lives where they left off. Since the problem appears to be a grid failure from the heat generated overload there is always the possibility of another failure on Friday. That possibility may only be in the minds of citizens but it could wreak havoc to the normal business cycle. Many New Yorkers may simply decide to stay home and that could be the best decision. This means that trading on expiration Friday could be very hectic at the open followed by very light trading the rest of the day. With many funds and institutional traders in the New York area those operations could be running with a skeleton staff. The city of New York has assured everyone the power will be restored sometime tonight but should it not return the sentiment impact could be strong. Because the outage covered multiple states there were about a dozen airports closed. Some estimates were between 7-10% of all U.S. airline traffic for the day was either delayed, rerouted or cancelled. Planes headed for the Northeast were rerouted to airports several states away in some cases. This means those passengers will not make connections and not be home until tomorrow night. Planes scheduled to be in some other part of the country for the start of business tomorrow will still be somewhere in the Northeast. Flights from Miami, Dallas, LA etc will not be there because the planes were grounded overnight in the Northeast. It could be Monday before all the equipment can be rerouted to catch up with their schedules. The morning started off calmly with Jobless Claims rising to 398,000 and last weeks claims revised up by +6,000 to 396,000. This was the fourth week under 400K but we are rising steadily toward that number. In the last four weeks beginning with July 19th we had 391K, 392K, 396K and ending with 398K this week. Analysts have made a big deal about the four weeks under 400K but you can see by the numbers we are moving up again. Also, the prior three weeks were adjusted to account for historical automaker layoffs for retooling in July. Now that this period is over we could see these numbers begin to rise again. The four-week moving average rose to 3.63 million. 29 states reported an increase in claims for the week. The PPI came in as expected at +0.1% with the core rate at +0.2%. Core intermediate prices fell slightly and have posted no gains since the first quarter. This is normally a leading indicator for consumer inflation and it is showing a move toward deflationary conditions instead. Prices for finished consumer goods also fell. There is nothing in this report to excite either the bulls or the bears as the changes are minimal. The minutes to the June FOMC meeting were released and the Fed heads were pleased that their "unwelcome fall in inflation" statement had pushed interest rates so low. The minutes showed no indications that they had a clue rates would rebound so quickly. They were confused as to why the economy had not rebounded and felt sure it would soon. Still stuck in denial it seems. The 25 point cut in June was not unanimous and Parry voted for a 50 point cut and one member voted for no cut. The main concern was the wording of the statement to make sure they clearly expressed the reason for the cut. In other words they spent a large amount of time trying to say deflation without using the D word. We now know they miscalculated by only cutting 25 points when the bond market clearly wanted a 50 point cut. When their actions failed to match their words the bond market revolted. The FOMC minutes did not excite the bond market and bonds fell significantly. Yields on the 10-year rose to a new 52-week intraday high at 4.668% and closed at 4.586%. This is much higher than the August 1st panic highs. This two-day sell off after the FOMC meeting this week shows the bond market is still not impressed with the Fed's action or lack of action. The problem is still rampant selling or dumping of bonds by mortgage lenders, funds, institutions and even countries. There are rumors that the rising deficit, which could approach a trillion dollars next year, has caused several countries to dump debt. Rumors are that Japan and China have told the U.S. they were not going to buy U.S. debt until the deficit is under control. Suddenly there are only sellers and no buyers. The 23 primary dealers that took down the majority of the $60 billion in the bond auction last week at a 10-year yield of 4.36% are seriously underwater. Ten Year Yields The markets performed very well despite several high profile problems. TGT missed earnings by a penny before the open and while that contributed to the morning dip it was quickly shrugged off. MMM was cut by Smith Barney on valuation concerns. CSFB cut techs in general on worries about demand but the Nasdaq shook it off early. The Dow moved over 9300 and stayed there most of the day despite the soaring bond yields. The Nasdaq closed back at 1700 with Dell earnings looming over the market at the close. It was a very positive day with a strong bid under the market but not enough volume to push it higher. Dell reported earnings inline with estimates but the entire event was ignored due to the power outage which occurred about 4 min later. Dell reported 24 cents and said demand had stabilized but had not significantly improved. Michael Dell said CEO optimism was increasing but not enough for him to characterize it too strongly. He said it would take a couple more quarters before he expected budgets to begin to increase. Michael, would that be before the second half of 2005? Dell saw margins shrink due to a slowing in the rate of decline in computer parts. Many components are already selling for much less than the cost to manufacture them but factories cannot afford to stop production due to the expense of restarting and rehiring when demand returns. This means costs are not going to get any cheaper and we could get a further margin squeeze on any future demand. When you can buy a 125GB Maxtor hard drive for $89 and 256MB of DDR memory for $39 there is no margin left. When Dell sells a 2.2GHZ Pentium IV with a free flat panel monitor for $599 how much money do you think they make? Analysts think $20 bucks or less. They make their money on the laptops, servers and accessories. It would not take much of a component cost increase to put the squeeze on Dell. With computers now a highly competitive commodity and consumers constantly being bombarded with low price specials it will be difficult to command higher retail prices when the trend changes. Most consumers will balk before paying over $599 for a long time after the costs change. Volume continued to be extremely low with total volume under 3.0 billion for the 4th time in five days. The volume has been under the 50DMA for 17 of the last 25 days. This is summer when volume normally slows but it has been much slower than normal. The good news is the steady climb in the markets on this low volume. Tomorrow we have some critical reports. The most critical for me is the Capacity Utilization. It has been 74.3 for the last two months and a low not seen since 1983. Analysts are hoping for a bounce over 75% but will probably be happy with anything higher than 74.3. Any drop in this number and bad things will happen because it would indicate more potential layoffs and a further unwelcome decline in inflation as competition increases. It would mean no need to upgrade or buy new equipment and no increase in capital spending. Also closely watched will be the first Michigan Sentiment for August. The final July reading was 90.9 and with other surveys showing a drop in sentiment analysts are worried the headline number could drop into the middle 80s. The New York Empire State Mfg Survey also showed a drop last month to 22.6 and if it follows the last NY NAPM report it could fall back below 20. All of these reports are at a critical stage and this could be a turning point for the markets if they were to show weakness. Friday is also option expiration day and from the late reports on the news it appears the markets will open for business at the regular time. The maximum pain numbers where the most options expire worthless are either at or below the current market levels, OEX 495.00, QQQ 31.00 as examples. This should keep the indexes pretty close to level unless the economic news is very good. Expiration Fridays lately have been tame but the economics at the open will rule. Might be a good day for New Yorkers to stay home after all. Enter Very Passively, Exit Very Aggressively! Jim Brown Editor ================================================================== WATCH LIST ================================================================== The PremierInvestor.net watch list is not designed to be read as full fledged stock picks. Rather we would prefer to offer it as an extra tool in today's investor toolbox. Think of it as a radar screen with your own radar operator pointing out interesting developments, technical patterns or potential plays that you may or may not have seen on your own. Due to time constraints we do glance at the news but rarely do we have time to fully read pertinent news stories, due background research and other necessary screens that investors should do before making a decision. A common exercise is to read the entry, glance at the sector and other stocks in that industry and then compare what's happening in the stock to what's happening in the broader market indices. We hope you enjoy the Watch List and that it proves to be a useful tool for your own trading success. STOCKS WORTH WATCHING --------------------------------- Toll Brothers - TOL - close: 27.30 change: -0.42 WHAT TO WATCH: The Dow Jones US Home Construction Index, the DJUSHB, rose 0.67 percent Wednesday, with builders such as Beazer (BZH) and Ryland (RYL) participating in the gains. TOL was a conspicuous loser among the group, however, dropping on more than double average daily volume. TOL managed to pull out a close just above the 21-dma at $27.27, but dropped below the 50-dma at $28.55. The declines over the last two days have produced big volume, turning down the stochastics, MACD, and RSI. If the homebuilders finally succumb to lowered demand due to rising interest rates, TOL might be outperform to the downside. We see support below at $26.00, but a drop below $26.00 should send TOL down to test its 200-dma just above $23.00. Careful, though, as it's still on a P&F buy signal. --- HCA Inc. - HCA - close: 36.80 change: -0.72 WHAT TO WATCH: HCA is tagged the No. 1 U.S. hospital chain, and as befits the first place winner in any category, it's been gathering some attention over the last week. Late last week, Merrill Lynch raised its rating on HCA to "buy" from "neutral." Early this week, Bank of America raised its price target to $40.00 from $35.00. We're not recommending this for a bullish play, however, as HCA may be rolling over just below its 200-dma. While the 10-, 21-, and 50-dma's all slant up in bullish fashion, the 200-dma dives down to meet HCA at its current level and has not yet flattened. RSI turns down, and on-balance volume does not yet show a pickup in interest for this stock as it rises. HCA also currently trades in the $37-38 resistance zone from its weekly chart. While we don't think HCA will crater, we do think it may be due to a pullback to the ascending trendline that's been forming since April. That trendline currently crosses at $32.40. Traders interested in playing the downside on HCA might watch for a push through the 10-dma, currently at $36.04, with a stop just above the 200-dma, currently at $37.58. --- Countrywide Fin. Corp. - CFC - close: 66.50 change: +0.45 WHAT TO WATCH: On August 11, CFC said its daily mortgage applications in July fell 22 percent month-over-month. The company experienced an increase in funded loans as interest rates leaped up and buyers rushed to close mortgages, but the company expects home refinancing volume to drop in the fourth quarter, leading to a drop in mortgage production. The company expects new purchase volume to remain high. CNC has been trading in a descending regression channel since early June. On Thursday, CFC fell through its 10-dma, and it's threatening to fall beneath the midline of that regression channel. A fall through $65 will send CFC through that midline and also get it past the support in early August. Target $60.00, the bottom of the regression channel, but be careful of gap support near $63.00. A stop can be set just above either the 10- or 21-dma. --- AtheroGenics - AGIX - close: 12.15 change: -0.37 WHAT TO WATCH: AGIX printed a double-bottom breakdown on its P&F chart, and its candlestick chart looks ugly, too. The company announced plans to sell $75-80M in notes in a convertible debt offering, and the stock has been dropping since on big volume. We'd like to see AGIX bounce back up to broken support at $13.00 and roll over there so that we could place stops just above that support and the descending 10-dma. Aggressive traders could short the stock on a move below $11.60, looking for a drop to $10.30. --- =================== On the RADAR Screen =================== MMC $51.02 - Former mutual fund darlings haven't been in favor with investors opening quarterly statements over the last couple of years, but we wonder if some investors aren't reconsidering MMC. It's been trading in a regression channel that retraced a little more than 38.2 percent of its March to June rally, and it may be ready to break out. Last week's trading brought the weekly candle down to plumb strong weekly support, and then the stock rebounded. For the last couple of days, it's been finding support at its 21-dma. It hasn't cleared its 50-dma, however, and we're looking for a move above that average, currently at $51.43, before we consider the breakout confirmed. We also want to see stronger volume than we've been seeing. Stops could be placed just below the 21-dma. GLW $7.96 - Could GLW be trying to break to the upside again? The oscillators predict that it is. So does the P&F chart, but there's also the possibility that the stock is forming a H&S on the daily chart with the current rise being the right shoulder. To preclude that possibility, a bullish trader should wait for a break above the $8.20 resistance before considering the breakout confirmed. Stops should be set close by, but several moving averages group just under GLW's current price, providing close stops. There's P&F resistance near $10.50 so profit would need to be taken by that point. A bullish trader would have to deal with resistance offered at the July high of $8.85. NAV $41.63 - Due to report earnings Friday, NAV is on a P&F buy signal and has been climbing an ascending trendline since March. We think the stock is overextended now, but after earnings, we're looking for a pullback to that supporting trendline, currently near the support at $37.00. The 50-dma rises strongly underneath that trendline. The 21-dma measures $38.65 currently, so it's possible that NAV won't pull back all the way to $36. Although NAV has violated that trendline on a single day's candle on a couple of occasions, we would not suggest a bullish entry after such a violation. =============================== Market Sentiment =============================== Low Volatility Jonathan Levinson Today gave us another light volume day, and a very low volatility day. The put to call ratio finished lower by .06 at .72, indicating a predominance of calls over puts relative to yesterday. The VIX (S&P Volatility Index) was lower by .11 to 21.11, while the VXN (Nasdaq Volatility Index) dropped 1 to 29.27, and the QQV (NDX Volatility Index) dropped a reported 2.14 or 8.81%, but closed at 22.14, having opened at 29.79. The closing value is an alltime low for that volatility index. I suspect that there is bad data in play, except that we observed these readings for the last hour of trading, and it appeared to be behaving as normal, other than the low levels. The intraday low was below 21. Regardless of the actual levels, this being options expiration week, it's possible to imagine almost any distortion within the options market as commercial option traders position their accounts for the expiry of August contracts. As we discuss in the Market Monitor every month, prices tend to gravitate toward and eventually become pinned at or near the strike prices that will cause the greatest value of puts and calls to expire worthless. For a few days of each month, it is clear that the derivative "tail" wags the underlying "dog". If the QQV values are correct, then traders were aggressively dumping QQQ puts and calls, lowering their price and hence their implied volatility. This creates a buyer's market, as volatility does not tend to remain at extreme low levels for long, and as it increases, so necessarily does the price of QQQ options. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9361 52-week Low : 7197 Current : 9310 Moving Averages: (Simple) 10-dma: 9186 50-dma: 9149 200-dma: 8565 S&P 500 ($SPX) 52-week High: 1015 52-week Low : 768 Current : 990 Moving Averages: (Simple) 10-dma: 979 50-dma: 989 200-dma: 914 Nasdaq-100 ($NDX) 52-week High: 1316 52-week Low : 795 Current : 1251 Moving Averages: (Simple) 10-dma: 1235 50-dma: 1243 200-dma: 1100 ----------------------------------------------------------------- The VXN dropped 1 point to 29.27, within half a point of its year low. The VIX as well is within 1 point of its year low. As the maxim goes, "When the VIX is low, it's time to go, when it's high, time to buy." This refers not to options, but to the underlying. The current low levels on the VIX, VXN and QQV are extreme, and indicate that the INDU, S&P and COMPX are toppy. CBOE Market Volatility Index (VIX) = 20.51 –0.11 Nasdaq-100 Volatility Index (VXN) = 29.27 –1.00 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.70 713,453 502,875 Equity Only 0.53 470,196 248,421 OEX 1.03 39,019 40,269 QQQ 1.20 35,518 42,473 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 68.6 + 0 Bull Confirmed NASDAQ-100 65.0 + 1 Bear Confirmed Dow Indust. 80.0 + 0 Bull Correction S&P 500 74.6 + 1 Bull Correction S&P 100 82.0 + 2 Bull Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 0.84 10-Day Arms Index 1.01 21-Day Arms Index 0.98 55-Day Arms Index 1.10 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals -NYSE- -NASDAQ- Advancers 1803 1845 Decliners 999 1164 New Highs 173 181 New Lows 30 13 Up Volume 906M 828M Down Vol. 466M 435M Total Vol. 1400M 1286M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 08/05/03 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercial traders appear to be pruning some long positions and moving that money to the short side. As expected we see just the opposite from the small trader. Commercials Long Short Net % Of OI 07/15/03 414,020 453,033 (39,013) (4.5%) 07/22/03 411,206 442,131 (30,925) (3.6%) 07/29/03 405,429 445,114 (39,685) (4.7%) 08/05/03 395,633 450,988 (55,353) (6.5%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 18,486 - 6/17/03 Small Traders Long Short Net % of OI 07/15/03 148,716 70,279 78,437 35.8% 07/22/03 155,891 76,466 79,425 34.2% 07/29/03 155,216 73,030 82,186 36.0% 08/05/03 159,971 72,951 87,020 37.4% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 The bulls in the commercial group continue to add to their positions here but we did see an increase in short positions as well. This is the most bullish the commercials have been in quite some time. Meanwhile the large spread between longs and shorts for the small traders narrowed a bit. Commercials Long Short Net % Of OI 07/15/03 214,274 218,765 ( 4,491) ( 1.0%) 07/22/03 249,392 249,386 6 0.0% 07/29/03 272,659 216,166 56,493 11.6% 08/05/03 310,662 249,004 61,658 11.0% Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 61,658 - 08/05/03 Small Traders Long Short Net % of OI 07/15/03 45,372 54,654 (9,282) (9.3%) 07/22/03 45,945 76,071 (30,126) (24.7%) 07/29/03 44,437 93,144 (48,707) (35.4%) 08/05/03 56,663 95,919 (39,256) (25.7%) Most bearish reading of the year: (48,707) - 07/29/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 "Smart" money didn't do much last week as positions remain relatively the same but we saw some small traders eliminate a few long positions in the NDX. Commercials Long Short Net % of OI 07/15/03 28,467 49,154 (20,687) (26.7%) 07/22/03 32,502 48,139 (15,637) (19.4%) 07/29/03 31,456 50,294 (18,838) (23.0%) 08/05/03 32,813 52,383 (19,570) (23.0%) Most bearish reading of the year: (20,687) - 07/15/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 07/15/03 26,489 8,004 18,485 53.6% 07/22/03 27,321 8,844 18,477 51.1% 07/29/03 25,691 7,810 17,881 53.4% 08/05/03 22,188 7,783 14,405 48.1% Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL More shades of limbo here as well with the commercials not making any new commitments and the small traders holding steady going on a month now. Commercials Long Short Net % of OI 07/15/03 21,607 7,855 13,752 46.7% 07/22/03 22,198 8,176 14,022 46.2% 07/29/03 23,696 9,572 14,124 42.5% 08/05/03 23,981 9,264 14,717 44.3% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 07/15/03 5,475 9,717 (4,242) (27.9%) 07/22/03 6,110 10,898 (4,788) (28.2%) 07/29/03 5,744 11,601 (5,857) (33.8%) 08/05/03 5,716 10,422 (4,706) (29.2%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- ================================================================= 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. 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PremierInvestor.net Newsletter Thursday 08-14-2003 section 2 of 2 Copyright (c) 2003, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= Play of the Day: This One's a Classic Split Announcements: MDU, URBN, 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) ================================================================= Play-of-the-Day ( Bearish ) =============== SOHU.com - SOHU - close: 30.44 change: -1.98 stop: 34.30 Company Description: SOHU.com is one of China's most recognized and established Internet brands and indispensable to the daily life of millions of Chinese who use the portal for e-mail, alumni club, short messaging services, news, search, games, browsing and shopping. Apart from continuous product and services development, SOHU.com also concentrates its efforts on making the Internet ubiquitously available, whether in the office, at home or on the road. SOHU.com, established by Dr. Charles Zhang, one of China's Internet pioneers, is in its seventh year of operation. (Source: Company Press Release.) Why we like it: 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. Why This is our Play of the Day In classic bear-flag behavior, SOHU has been climbing in a series of higher highs and higher lows toward resistance. As it climbs, it appears to be forming the right shoulder of a possible head- and-shoulder formation. It's hard to endure those bear-flag climbs when you're short a stock, and we were feeling the pain ourselves yesterday, but today should have eased the fears of SOHU shorts. SOHU fell back, achieving both a lower high and a lower low. Although volume was not strong, it equaled SOHU's volume on Wednesday as it was climbing. Most technicians feel that volume confirmation is not as important in declines as it is in rallies. SOHU's 6.11 percent drop says all that needs to be said. Other Chinese Internet-related stocks dropped by more modest percentages on Thursday, but they had a head-start on SOHU, dropping on Wednesday when SOHU climbed. SOHU had to play catch- up. The 10-dma proved too much for SOHU to surmount today. Although there was no news about SOHU on Thursday, one investment advisor in the last week had been speaking out in favor of high P/E tech stocks, saying investors shouldn't be afraid of those high P/E's. SOHU's P/E ratio stands at 82.27 according to one source. Another Chinese Internet-related stock, NTES, has a P/E ratio of 113.87, and SINA has a P/E of 125.61. While we appreciate the advice, we remember hearing something similar back in late 1999, back when we were seeing other stocks shoot from $4.00 to more than $40.00 in less than a year, as SOHU did. We remember what happened when the profit-taking ensued that time, and we'd rather be short than long this stock. While it's possible that SOHU will continue trading in that bear flag up into the right-shoulder level of the potential H&S, we do believe it will round over into that right shoulder. We've set our stop at the 50 percent retracement of SOHU's steep fall, and believe SOHU should drop out of the bear flag before reaching our stop. Entries can be made at current levels or on a rollover anywhere under $34.00. Annotated Chart of SOHU: Picked on August 6 at 32.27 Change since picked: -1.83 Earnings Date: 07/23/03 (confirmed) Average Daily Volume: 4.6 million ================================================================= Stock Split Announcements ================================================================= MDU leaks out a 3-for-2 stock split and increases dividend During today's trading session, MDU Resources Group Inc's (NYSE:MDU) Board of Directors declared a 3-for-2 stock split of its common shares. The stock split will be payable on October 29th, 2003 to shareholders on record as of October 10th. Fractional Shares will be paid in cash as of market close on October 10th. MDU also announced a 6.3% increase in its quarterly dividend, increasing from $0.24 per share to $0.255 cents per share. This measures out to be an annualized $0.06 increase per share. The Payable date for this dividend is October 1st, 2003 to shareholders on record as of September 11th. This is the MDU’s first stock split since mid-1998. About the company: MDU Resources Group, Inc. provides energy, value-added natural resource products and related services that are essential to our country's energy, transportation and communication infrastructure. MDU Resources includes natural gas and oil production, construction materials and mining, a natural gas pipeline, electric and natural gas utilities, utility services, energy services and domestic and international independent power production. For more information about MDU Resources, see the company's Web site at www.mdu.com or contact the investor relations department at firstname.lastname@example.org. (Source: Company Press Release) --- URBN outfits a 2-for-1 stock split Before today’s opening bell, Urban Outfitters Inc's (NASDAQ:URBN) Board of Directors declared a 2-for-1 stock split of its common shares. The stock split will be payable on September 19th, 2003 to shareholders on record as of September 5th. This is the URBN’s Second 2:1 split since the second quarter of 1996. About the company: Urban Outfitters, Inc. (NASDAQ:URBN), is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 54 Urban Retail stores in the United States, Canada, and Europe; an Urban catalog and web site (www.urbn.com); 40 Anthropologie stores in the United States; an Anthropologie catalog and web site (www.anthropologie.com); and Free People, the Company’s wholesale division, which sells its product to approximately 1,100 specialty stores, department stores and catalogs, as well as through one Free People store. The wholesale division sells its products under two labels: Free People and bdg. (Source: Company Press Release) ================== 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 DCX Daimlerchrysler Ag 36.90 +0.62 KMB Kimberly Clark Corp 50.26 +1.35 KR Kroger Company 18.28 +0.58 MGA Mafna International Inc 78.70 +0.74 AZO Auto Zone Inc 86.45 +0.75 TCB TCF Financial Corp 46.07 +1.03 LEA Lear Corp 53.93 +1.92 SNA Snap-On Inc 28.91 +0.56 BBOX Black Box Corp 43.36 +1.49 MBRS Memberworks Inc 36.84 +3.89 RSTI Rofin-Sinar Tech Inc 19.22 +2.12 IPSU Imperial Sugar Company 8.86 +1.67 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- TKLC Tekelec 15.80 +1.35 PBY Pep Boys Manny Moe & Jack 16.04 +1.24 KSU Kansas City Southern 12.95 +1.03 ORBK Orbotech Ltd 17.22 +1.01 MOSY Monolithic Sys 10.53 +1.06 ECLG Ecollege.com 13.30 +1.29 NTST Netsmart Technologies 8.37 +1.53 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- TM Toyota Motor Corp (ADS) 55.63 +2.33 HBC HSBC Holdings Plc 65.30 +1.02 IACI USA Interactive 35.93 +1.20 DHR Danaher Corp 75.94 +1.51 RIO Companhia Vale Do Rio Doce 36.78 +1.52 KKD Krispy Krene Doughnuts 47.68 +2.65 GNTX Genetex Corp 37.45 +1.18 GTK Gtech Holdings Corp 41.00 +1.29 BOW Bowater Inc 42.78 +1.52 CAI CACI International Inc 43.09 +3.41 KYPH Kyphon Inc 24.09 +1.15 KIND Kindred Healthcare Inc 29.74 +2.09 QSII Quality Systems Inc 39.77 +2.63 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- EL Estee Lauder Cos Inc 35.45 -1.71 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- STX Seagate Tech Holdings 20.70 -1.00 ================================================================= 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. 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