PremierInvestor.net Newsletter Monday 08-18-2003 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: SOX Soars & Retail Roars Play of the Day: Surging SOX =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 08-18-2003 High Low Volume Advance/Decline DJIA 9412.45 + 90.76 9419.38 9320.59 1.40 bln 1052/ 331 NASDAQ 1739.49 + 37.48 1739.59 1706.93 1.48 bln 1273/ 183 S&P 100 502.79 + 4.49 503.39 498.30 Totals 2335/ 514 S&P 500 999.74 + 9.07 1000.35 990.67 RUS 2000 480.92 + 9.00 480.92 471.92 DJ TRANS 2643.83 + 20.17 2643.91 2623.32 VIX 19.28 - 0.92 20.30 19.06 VXN 26.62 - 2.59 28.55 25.94 Total Volume 3,115M Total UpVol 2,515M Total DnVol 548M 52wk Highs 585 52wk Lows 67 TRIN 0.65 PUT/CALL 0.72 =============================================================== =========== Market Wrap =========== SOX Soars & Retail Roars by James Brown It was another big day on Wall Street as equity bulls muscled out another win and put another resistance level below them, at least for the Dow Jones Industrials. The $INDU added 90 points to close above the 9400 level, a feat not seen for more than a year. This is a clear breakout of the recent trading range and should have the bears concerned as the bulls appear to be sharpening their horns for an attempted break out above 9500. The NASDAQ Composite out performed the Industrials with a gain of 2.2 percent. This also appears to be a breakout of its bull flag consolidation pattern. Meanwhile the S&P 500 index added nine points to close just a quarter point away from the 1000 mark. Contributing to the moves in the U.S. markets were strong performances by their overseas counterparts. The Asian stock markets were mostly higher with the NIKKEI putting in a strong session adding 169 points or 1.72 percent to close at 10,032. The Hang Seng added more than 100 points to close at 10,525. European stocks also cast a positive glow as the FTSE 100 added nearly 25 points to close at 4272 and the DAX 30 jumped 1.84 percent to close at 3507. It's hard not to miss all the psychological resistance levels falling under the hooves of this late summer bovine buying spree. There was plenty of speculation on what sparked the rally today. Was it a positive sigh of relief that last week's blackout was not a terrorist event? Or maybe it was a delayed reaction to last week's positive economic reports. There were some comments that it was money that moved out of bonds last week being put to work in equities this week. Except we did see bond yields dip today indicating some buying pressure there. Whatever case you make for starting the rally it quickly spread to become a broad-based run across most sectors. Advancing stocks beat declining stocks 19 to 9 on the NYSE and 21 to 9 on the NASDAQ. New highs swamped new lows 406 to 23. Up volume was better than 3 to 1 over down volume on the NYSE and more than 7 to 1 on the NASDAQ. Total volume was actually slightly better than in recent sessions but we are still seeing very low volume numbers, which is to be expected this time of the year. Chart of the Dow Jones Industrials: Chart of the NASDAQ Composite: Hitting a new 52-week high was the S&P Retail Index (RLX), up 1.95 percent to 357. Lifting the sector higher was a host of earnings news. However, probably the most significant news bit came from Wal-Mart (WMT) who did not report earnings but did report that its weekly August same-store sales numbers were looking very good. According to WMT management sales are "tracking" in near the high-end of previous guidance of 3 to 5 percent, which has been fueled by the annual back-to-school season. This pushed shares of WMT to a new 52-week high just under $59. Shares of Lowes Companies (LOW) also hit a new 52-week high as the stock gapped higher above major resistance at $50 to close up 6.25 percent. The home improvement retailer announced earnings this morning and the results blew away consensus estimates. LOW turned in net income of 75 cents a share, up 28 percent. Analysts had been expecting 69 cents. Revenues came in at $8.77 billion, beating estimates of just $8.5 billion. The company guided higher for the third quarter and raised their full year guidance to $2.24 to $2.27 a share. These positive announcements from major retailers like WMT and LOW have many raising expectations for another round of strong consumer spending throughout the rest of the third quarter and into the fourth. It will be interesting to hear from LOW's bigger rival Home Depot (HD), also a Dow component, who announces earnings tomorrow morning before the bell. Current estimates for HD are 54 cents a share. Plus we have the delayed Michigan Sentiment report that comes out tomorrow morning about 9:45 AM ET. As one of our commentators in the MarketMonitor mentioned today, this could be a market mover. Traditionally, stronger consumer sentiment is translated into stronger consumer spending. The SOX pitched a no-hitter against the bears today as all 18 components in the semiconductor index closed in the green. Igniting today's tech rally were strong comments from the market research firm Gartner, Wall Street broker/analyst Smith Barney and an optimistic article in Barron's over the weekend. Gartner believes that environment for the chip sector has vastly improved. This was echoed by Smith Barney who claims that stronger PC demand and improving order trends overall could be forecasting a stronger recovery for the industry. Meanwhile an article in Barron's gave Advanced Micro Devices (AMD) a big push. The column claims that AMD's new chips set to launch next month could significantly increase its market share. AMD's stock gapped up and traded higher throughout the day to close at $8.91, up 14 percent, the largest gainer in the S&P 500 for the session. AMD's rival and Dow component Intel (INTC) also added 4.5 percent, which contributed to the SOX's 5.15 percent rally. The SOX closed at a new 52-week high above resistance at 400 and 410. Many analysts believe that it is the chip sector that tends to lead the NASDAQ higher (or lower) so this is a positive development for tech. Bulls might be looking for some follow through tomorrow with tonight's positive news from Broadcom (BRCM). BRCM raised their guidance for the current quarter claiming a new digital tuner would help push revenues higher by 10 percent. The stock is up more than a dollar in after hours trading. The bulls may be looking gleefully for some positive follow through on today's technical developments but we must caution traders that it's still a dangerous world out there. You've heard us cautioning traders that the VIX and VXN, both of which hit new lows today, have been flashing a warning sign for the bulls. Thus far the markets have ignored them both. However, today's drop in the VIX put it below the 20 level, which is a strong historical indicator of market tops. Now this is not an exact science as the VIX can remain low (as we've already witnessed) for some time and the market tops can be days away from actually forming. The chart below is a monthly chart of the Dow Jones Industrials and the VIX. I've drawn a pink line for every time the VIX fell significantly below 20 and each time there is a near perfect correlation of a top in the Industrials. Chart of the VIX I'm not suggesting the market can't go higher from here. From all indications is looks like it can and will. The question is how long can the market sustain these gains without a steep correction phase. Trade carefully. Watch those stop losses. James =============== Play-of-the-Day ( BULLISH ) =============== Int'l Rectifier - IRF - cls: 35.29 chng: +1.45 stop: 32.00*new* 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: It certainly wasn't a day to write home about with the major exchanges seeing by far their lightest volume of the year, but our bullish Chip play inched its way higher by a bit over 1% and is sneaking up on the $34 level. At the same time, the Semiconductor index (SOX.X), while near unchanged for the day, appears once again to be setting up for a serious assault on major resistance in the $400-410 area. The top of the ascending channel for IRF is now at $34.50, so either there will be a strong push higher next week to break out of the top of the channel, or we'll see a mild pullback to consolidate, while allowing the top of the channel to move higher and allow for more room to the upside. While we'd prefer the former outcome, the latter is more likely, with the SOX likely to be rejected at least one more time from that strong resistance zone. This close to the top of the channel, we want to shy away from momentum entries and will instead recommend looking for pullbacks near the $32 area (the center of the channel) for new entries. Note that our stop moves up to $31 this weekend, near the top of the most recent consolidation and well below the 10-dma ($31.71). Why This is our Play of the Day One look at the Semiconductor index (SOX.X) today is all it takes to explain why IRF is our Play of the Day, as the SOX vaulted higher by more than 5%, breaking out to new highs for the year. IRF followed suit, breaking above the top of its ascending channel on above average volume, tacking on 4.28% enroute to setting its own 52-week high. That moves the stock into the gap left behind on June 21st of 2002 and it looks like the next resistance of consequence will be the top of that gap near $37.50. In fact, if this breakout in the SOX is the real deal, then IRF could be headed for strong resistance in the $40-42 area. That said, we need to be on the lookout for the a near- term pullback to provide for the next likely entry point. A dip back to the $33.25 area is probably too much to hope for and we should look for a rebound from $33.75 (Friday's intraday support) as a possible entry for new positions. IRF may continue powering higher from here, but momentum entries would seem to not be the way to go now with the stock pressing (actually above) its upper Bollinger band. We're raising our stop to $32, as that is just below the level of last week's breakout, as well as the 10-dma ($32.15). Annotated Chart of IRF: Picked on August 13th at $32.99 Change since picked +2.30 Earnings Date 10/30/03 (unconfirmed) Average Daily Volume = 886 K ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright ) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Monday 08-18-2003 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 ================================================================= Split Announcement: HNBC Closed Plays: NVLS Stop Loss Updates: IRF, LSI 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) ================================================================== Split Trader/ Stock Splits ================================================================== ------------------- Split Announcements ------------------- HNBC cashes in on a 5-for-4 split Shortly after the opening bell, Harleysville National Corp's (NASDAQ:HNBC) Board of Directors declared a 5-for-4 stock split of its common shares. The stock split will be payable on September 15th, 2003 to shareholders on record as of September 2nd. This is the HNBC’s fifth split in as many years. This is the company’s first 5-for-4 split since being listed on the NASDAQ in 1987. About the company: Providing Real Life Financial Solutions, Harleysville National Corporation (HNC) has assets in excess of $2.4 billion and operates 40 banking offices in 9 counties throughout Eastern Pennsylvania through its three subsidiary banks - Harleysville National Bank and Trust Company, Citizens National Bank and Security National Bank. Investment Management and Trust Services are provided throughout the company by Harleysville National Bank and Trust Company. Harleysville National Corporation's stock is traded in the over-the- counter market under the symbol "HNBC" and commonly quoted under Nasdaq National Market Issues. For more information, visit the HNC Web site at www.hncbank.com. (Source: Company Press Release) ================================================================== NetBulls - Tech Stock Plays ================================================================== ============ Closed Plays ============ -------------------- Closed Bearish Plays -------------------- Novellus Systems - NVLS - close: 38.23 change: +2.51 stop: 36.25 Oh, the agony! NVLS rose just enough last week to leave us sitting on the fence as to whether to hold or drop our bearish play. Well, positive action in the Semiconductor index (SOX.X) on Monday clearly showed that we made the wrong decision. The SOX powered through $400 resistance at the open and then charged higher for a 5.15% gain on the day and a new 52-week high. NVLS couldn't help but go along for the ride, tacking on more than 7% to end well above resistance. Our $36.25 stop was brutally violated at the open and then it was a strong volume ramp right to the closing bell, with the 50-dma at $36.38 failing to offer even token resistance. The failed breakdown from last week has now come full circle and there should be no question about pulling the plug here as the bulls are once again in full control. Picked on August 10th at $33.32 Change since picked +4.91 Earnings Date 10/20/03 (unconfirmed) Average Daily Volume = 8.75 mln ================================================================= Stop Loss Adjustments ================================================================= Bullish ------------ IRF - Raise from $31.00 up to $32.00 LSI - Raise from $8.99 up to $9.25 ================================================================== 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 DYII Dynacq International Inc 23.25 +2.73 POWL Powell Industries Inc 18.61 +2.43 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- AMD Advanced Micro Devices 8.91 +1.11 CY Cypress Semiconductor Cp 15.92 +1.62 FCS Fairchild Semiconductor 14.34 +1.04 ASKJ Ask Jeeves Inc 17.77 +1.68 MSCC Microsemi Corp 17.88 +1.90 IDE Integrated Defense Tech 17.60 +2.06 RDEN Elizabeth Arden Inc 17.91 +1.31 RSYS Radisys Corporation 17.92 +3.17 ADEX ADE Corporation 16.77 +1.55 MTRX Matrix Service Co 19.25 +1.80 EVOL Evolving Systems Inc 8.80 +1.13 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- LOW Lowe's Companies Inc 51.96 +3.06 TIF Tiffany & Co 38.83 +1.03 PDCO Patterson Dent 54.06 +2.55 FLR Fluor Corp (New) 36.95 +1.07 VIP Vimpel Communications (ADS)51.60 +1.85 AF Astonia Financial Corp 31.20 +1.90 DV Devry Inc 29.80 +2.64 TEK Tektronix Inc 22.02 +1.23 PCLN Priceline.com Inc 38.26 +3.61 TUES Tuesday Morning Corp 31.04 +1.66 TSCO Tractor Supply Corp 61.95 +3.70 UAG United Auto Group Inc 25.00 +1.60 DKS Dick's Sporting Goods 41.43 +2.94 MATW Matthews International Inc 26.65 +1.22 AEIS Advanced Energy Ind Inc 22.45 +1.44 DGIN Digital Insight Corp 23.17 +1.83 OTEX Open Text Corp 34.07 +2.57 UTEK Ultratech Inc 28.19 +2.44 ATRX Atrix Laboratories Inc 27.17 +1.82 PLMD Polymedica Corp 46.05 +5.01 CELL Brightpoint Inc 31.60 +3.15 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- FE Firstenergy Corp 27.75 -2.86 EL Estee Lauder Cosmetics Inc 34.33 -1.12 DRS DRS Technologies 25.30 -3.85 NFI Novastar Financial Inc 50.60 -2.42 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- ACL Alcon Inc 49.85 -0.95 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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