PremierInvestor.net Newsletter Wednesday 09-03-2003 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: New York Changes Name to Pamplona 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) ================================================================= 09-03-2003 High Low Volume Advance/Decline DJIA 9568.46 + 45.19 9597.38 9514.49 2.06 bln 1778/1061 NASDAQ 1852.90 + 11.42 1863.55 1846.51 2.32 bln 1777/1320 S&P 100 514.50 + 3.64 516.27 510.86 Totals 1736/1759 S&P 500 1026.27 + 4.28 1029.34 1021.99 RUS 2000 510.71 + 3.21 512.01 507.50 DJ TRANS 2761.47 + 15.63 2769.67 2745.28 VIX 20.43 + 0.48 20.89 19.94 VXN 31.19 + 1.13 31.32 29.98 Total Volume 4,689M Total UpVol 3,016M Total DnVol 1,594M 52wk Highs 1,189 52wk Lows 23 TRIN 0.97 PUT/CALL 0.64 ================================================================= =========== Market Wrap =========== New York Changes Name to Pamplona by James Brown It was another busy day on Wall Street. If you weren't running with the bulls then you were probably trampled under their feet. A second round of positive analyst comments and economic data swept the markets to another set of new yearly highs. Pundits were eager to share their excitement over the return of volume to the markets but skeptics thought it felt like smart money unloading stocks to the uninitiated. It's not very often that the NASDAQ Composite, the Russell 2000 and the Wilshire 5000 index can all notch a six-day winning streak. If the markets can stretch the rally a couple of more days we may have to move the Fiesta of San Fermin to New York. Market internals continue to be positive but they have slipped somewhat from Tuesday's torrid pace. Advancing issues beat decliners 17 to 10 on the NYSE and 17 to 13 on the NASDAQ. Wednesday's new yearly highs hit 822 compared to just 13 new lows. One of the big factors that Wall Street analysts were talking about today was the return of volume and the market's ability to hold its gains. The NYSE experienced its best volume in six weeks with more than 2 billion shares traded. The NASDAQ saw the best volume since June with more than 2.3 billion shares. Volume is normally accepted as a tool for the bulls but from the looks of the doji candlestick on the NASDAQ today we could be seeing some distribution, not new buying. Overseas markets reacted strongly to the U.S. gains from Tuesday and that helped set the mood again this morning at home. The English FTSE 100 added 57 points (+1.37%) to close at 4262. The German DAX added 80 points (+2.25%) to close at 3647. The Japanese NIKKEI rose 25 points to 10715 and the Hang Seng broke above the 11,100 mark with a 162-point gain. Meanwhile the U.S. treasury markets seem to hover in anticipation of the Beige book report out this afternoon. The 10-year note and the 30-year note remained close to yearly lows. Chart of the Dow Jones Industrials Chart of the S&P 500 index Chart of the NASDAQ Early this morning, prior to the opening bell, Credit Suisse First Boston gave the broker-technology party new energy with positive comments about the software sector. CSFB raised their outlook from "market weight" to "overweight" claiming their belief that corporate discretionary spending will increase over the next 12 months and this money would filter into the software group. As we commented on yesterday and CNBC did today, these brokers are coming in awfully late with these upgrades but that hasn't stopped the GSO software index from making new gains. As a matter of fact Microsoft (MSFT) was the biggest gainer in the Industrials today with a 3.8% move on big volume of 109 million shares. Dumping more fuel on the tech fire was SG Cowen who revealed that their most recent technology survey showed a decent recovery in I.T. spending. Unfortunately, the outlook wasn't quite as rosy as their March survey and SG Cowen lowered its earnings estimates for IBM and HPQ. Speaking of IBM, Soundview also raised their Q3 estimates for Big Blue. This comes a day after Dan Niles, with Lehman Brothers, offered positive comments for Big Blue's service division. Shares of IBM added 57 cents after giving up most of the day's gains. One of these biggest influences on the markets today were comments from John Chambers, CEO of Cisco Systems (CSCO). CSCO is the world's largest maker of routers and networking equipment so any up tick in I.T. spending is probably going to find its way to CSCO. Sure enough, John stated this morning that August sales were better than expected but he quickly cautioned that the trend may not carry over into September. August is traditionally a slow time for CSCO so investors cheered anyway and CSCO added 3.3 percent by the close with a breakout above the $20 mark. Also contributing to the networking/communication equipment fever were shares of Nortel Networks (NT), which added 8.1 percent after signing a $1 billion multi-year deal with Verizon Wireless. The day was not without its economic reports. This morning saw the July construction numbers come out. Economists had been expecting a rise of 0.5 percent. The Commerce Department estimated that July's construction spending came in at +0.2 percent. While less than the estimates it still put the seasonally adjusted rate to its highest level since January. This comes on the back of an upwardly revised +0.7 percent in June (from +0.3 percent). Higher mortgage rates in June and July had little affect on residential construction, which rose 6.1 percent in July on a year-over-year basis. Economists and bond traders were also waiting to hear the Beige book report announced at 2:00 PM ET. The report takes a survey of economic conditions for the 12 Fed districts. All but one showed a pick up in business activity over the last two months. The general trend was a rise in consumer spending and a firming in the manufacturing sector, which we already knew from Tuesday's ISM report. The combination of positive comments from the likes of CSCO, the outbreak of analyst upgrades and daily confirmation that the economy really does seem to be improving has put the markets into a momentum mode. Many believe that valuations have become too rich. However, as is its modus operandi the stock market is discounting future earnings growth. Fears of being left behind as the markets charge ahead could be fueling the recent run up. Personally, I find it encouraging that Wall Street could mount a follow through on Tuesday's big breakout. The bad news is that I suspect the rally could run out of steam pretty quickly. The SOX has failed to participate in the rally this week and actually lost 2.68% by the close. That's not supposed to happen with the NASDAQ making new 17-month highs. The drop in the semiconductor index is suggesting that chips are due for more profit taking. Jeff Bailey likes to point out that the chips usually lead the markets higher and lower. I also note that the financial sectors were not really participating in the rally today either. Both the BKX and BIX closed with a gain but they were minor. Only the broker/dealer index has maintained any strength. Another disturbing observation remains the bullish percent data. Bullish percent data measures how many stocks are on a buy signal. Readings under 30 are typically oversold and a good time to consider initiating longs while readings over 70 are typically overbought and time to start liquidating longs and evaluating bearish plays. Both the S&P 100 (OEX) and the S&P 500 (SPX) are at 5-year extremes. The OEX bullish percent is at 87 (out of 100) and the SPX is at 80. I am not suggesting that we close out our longs and load up on puts but it should make traders very cautious about initiating new bullish plays. The "don't leave me behind" mentality could keep investors buying the dips long after you or I run out of money trying to short the top. So what are traders to do? The trend is obviously up but the key to short-term trading is timing and that requires patience to wait for the right entry point. Keep in mind that with so many gains, any bad news could spark a sharp drop as investors rush to lock in profits. Tomorrow is going to be another hectic day with the August ISM Services index, July Factory Orders, the Q2 GDP revision and Intel's mid- quarter update. Watch those stop losses. ================= 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 AT Alltel Corp 47.37 +0.99 MCK Mckesson Corp 34.94 +1.01 JCP J.C. Penney Company Inc 22.55 +0.57 MTG Mgic Investments Corp 58.50 +0.84 BXP Boston Properties Inc 44.25 +0.75 UIS Unisys Corp 13.76 +0.63 CHKP Check Point Software Tech 19.09 +1.00 BBI Blockbuster Inc 21.78 +0.97 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- BMC BMC Software Inc 16.13 +1.20 AMR AMR Corporation 12.73 +1.07 AAI Airtran Holding 15.04 +1.07 ALGN Align Tech Inc 12.53 +1.23 ZGEN Zymogenetics Inc 15.49 +1.19 SGR Shaw Group Inc (THE) 10.47 +1.72 RSYS Radisys Corporation 19.38 +1.35 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- TM Toyota Motor Corp (ADS) 58.52 +1.42 MSFT Microsoft Corp 28.30 +1.04 SAP SAP Ag (ADS) 34.06 +2.96 ACN Accenture Ltd 23.41 +1.06 VRTS Veritas Software Corp 36.08 +1.19 AVP Avon Products Inc 66.74 +1.64 INTU Intuit Inc 47.84 +1.13 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- LLY Eli Lilly & Company 62.10 -4.70 EON E.On Ag (ADS) 50.33 -1.47 MEDI Medimmune Inc 34.00 -1.58 CMX Xaremark Rx Inc 23.30 -2.10 PBG Pepsi Bottling Group Inc 21.90 -2.36 ESRX Express Scripts Inc 60.72 -4.02 CRL Charles River Labs Intl 31.50 -4.97 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- MOH Molina Healthcare Inc 22.22 -1.08 ================================================================= 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 Wednesday 09-03-2003 section 2 of 2 Copyright ) 2003, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= In section two: Tech Stocks New Bullish Plays: FDC Bullish Play Updates: COHU Active Trader (Non-tech) Bullish Play Updates: CC, FMC, GOLD, WPI Bearish Play Updates: ABC, C, STJ High Risk/Reward New Bullish Plays: ORB Bullish Play Updates: QCOM, TWR SplitTrader/Stock Splits Announcements: ABVA ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- First Data Corp. - FDC - close: 41.01 change: +1.16 stop: 38.50 Company Description: First Data Corporation operates in four business segments: payment services, merchant services, card issuing services and emerging payments. The company provides money transfer, official check, money order, electronic payment and stored-value card services in its payment services segment. In the merchant services segment, FDC provides credit and debit card transaction processing services on behalf of merchants, check verification and guarantee services and also operates an ATM network. In the card issuing services segment, the company provides card issuing and processing services for financial institutions issuing credit and debit cards and to issuers of oil/fuel, retail/private-label, stored-value and smart cards. Finally, in the emerging payments segment, the company provides mobile payments, government payments and enterprise payment solutions. Why we like it: Reaching the site of its all-time highs near $45 in mid-June, shares of FDC have had a rough time since then, sliding all the way down to the 200-dma (just above $37) by early August. Over the past month, the stock has thrice tested that average and in each instance found sufficient buying interest to provide a bounce. Over the past two days, the stock has seen a strong resurgence of buying volume, running well above the ADV and price has rebounded from just above $38 to $41. Today's nearly 3% jump is particularly encouraging, as it put FDC above both its descending trendline ($40.30) from the June highs as well as the 50-dma ($39.94). Looking at the trading pattern over the past month, it is now clear that we have a confirmed double-bottom near the $37.50 level, which was confirmed with today's positive movement that moved price above the relative high ($40) between the two dips in August. The question now is how high FDC could rally from here. It is hard to ascertain anything meaningful (at least in the near-term) from the PnF chart, as it is still on the Buy signal created by the rally in May and June, and that bullish price target is $67. We don't want to set any such lofty goals, but it does look like the stock has a reasonable shot at retesting its June highs at $45. So we'll set that as our initial target, while keeping open the possibility of a breakout over that level, market permitting. The best case for new entries would be on a pullback and rebound from the $40 level, confirming that prior resistance as new-found support. We're actually hesitant to recommend momentum entries on further strength due to the fact that FDC is nearing some resistance in the $41.50-42.00 area and with current price actually above the upper Bollinger band. Set initial stops at $38.50, which is below both yesterday's intraday low ($38.58) and the 20-dma ($38.81). Annotated Chart of FDC: Picked on September 3rd at $41.01 Change since picked +0.00 Earnings Date 10/16/03 (unconfirmed) Average Daily Volume = 4.59 mln ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Cohu, Inc. - COHU - close: 23.03 change: +0.70 - stop: 21.40*new* Despite a rash of semi or computer-related good news this week, the SOX.X retreated. Goldman Sachs' Laura Conigliaro upgraded Dell (DELL) to overweight, noting growth prospects and valuation, and Seagate Technology (STX) to outperform. In addition, she raised her rating on the enterprise hardware sector from its previous neutral to outperform. The Banc of America started Intel (INTC), Advanced Micro Devices (AMD), and Micron Technology (MU) at a buy rating. The SIA announced Tuesday that July's global chip sales amounted to $12.9 billion, up from June's $12.5 billion. July global chip revenue was up 10.5% over the year-ago revenue. Wednesday saw more upgrades, but also saw the SOX.X drop down to its 10-dma. None of those reports specifically addressed COHU's business, but it certainly sounded as if this manufacturer of semi test- handling equipment ought to be benefiting from the upgrades and good news. Like the SOX, COHU printed a doji Tuesday, warning of indecision, but we're glad to say that the indecision ended Wednesday. COHU charged up the chart. We're raising our stop to $21.40, just below the steeply rising 10-dma and the ascending red trendline drawn on the chart. Those seeking new entries could enter on a pullback and bounce from above $22.00. We currently maintain our target of $26.00, but conservative traders might set an alternative target just under $25.00. Volume increased Wednesday as COHU moved up and closed near the day's high, a bullish sign. Although most indicators have moved into territory indicating overbought conditions, they haven't yet flattened, much less turned down. When they do, they might indicate nothing more than consolidation or a slight pullback. Annotated Chart for COHU: Picked on Aug 24 at 21.80 Change since picked: +1.23 Earnings Date: 07/26/03 (confirmed) Average Daily Volume: 154 thousand ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Circuit City - CC - close: 10.78 change: +0.12 - stop: 9.85 We don't like the look of the two doji printed on CC's daily chart Tuesday and Wednesday, but we were glad to see CC gain on a day when the RLX dropped 0.21 percent and competitor Best Buy (BBY) dropped 0.11 percent. Although we didn't find a same-store sales release for CC Wednesday, other retailers released same- store figures with mixed results. We do note, however, one news item that will affect our play: Circuit City set a tentative earnings release of September 12, so we'll need to be out of the play by early next week. While CC printed those two doji in a row, both stochastics and RSI turned up again. The doji signal indecision: those indicators signal anything but indecision. They're bullish. MACD lines also separated and curled up again. On balance, then, CC's chart does a fair job of selling a bullish case. We set a new stop earlier this week at $9.85, just below the sharply rising 10-dma and Friday's gap. New entries could be taken at current levels or on a pullback and bounce above $10.00. However, with earnings scheduled for next week and two consecutive doji signaling a possible need for consolidation, new entries may not offer favorable risk/reward parameters. Annotated Chart for CC: Picked on Aug 31 at $10.43 Change since picked: +0.33 Earnings Date: 09/12/03 (tentative) Average Daily Volume: 2.8 million --- FMC Corporation - FMC - close: 25.48 change: +0.26 stop: 24.00 Good things happen when preparedness meets opportunity, and our FMC play appears to be a good example of that. We initiated coverage last weekend as the stock had risen to just below the $25 resistance level and looked ready for a breakout. We played it cautiously with an entry trigger of $25.10, just over the recent intraday highs and we didn't have to wait long for that trigger to be tripped. After an initial rejection just below that level yesterday morning, the bullishness in the broad market yesterday afternoon pushed the stock through that level on robust volume, resulting in a close at $25.22. Confirming that breakout was both increasing volume and today's continuation to just below the $25.50 level. Intraday pullbacks near the 10-dma (currently $24.70) look like good continuation entry points, while more aggressive traders can enter on a continued rally through the $25.60 level (just above today's intraday high). Keep in mind that we're initially targeting the $27.50 level, so for the momentum traders out there, make sure to weigh risk vs. reward before playing. Note that our stop is currently set at $24.00, as a break below there would require a break of both the 20-dma and last week's intraday low ($24.06). Picked on August 27th at $24.89 Change since picked +0.59 Earnings Date 10/28/03 (unconfirmed) Average Daily Volume = 253 K --- Randgold - GOLD - close: 23.25 change: -0.27 - stop: 21.49 Copper and iron mining companies performed well in Europe at the beginning of the week as optimism about the economic recovery fanned hopes for increasing demand for products used in manufacturing. The gold miners didn't respond the same, with gold, the HUI, and GOLD all dropping. Wednesday, GOLD continued its decline, but it printed a doji that sprang up from an ascending trendline. Doji that come after a decline can be reversal signals, and we hope that's what this one is, too. We would feel more hopeful if GOLD had closed above the 10-dma, but it closed just beneath that average. Meanwhile, the HUI, the gold bugs index, also sprang up from support, with that support being its 10-dma. Both RSI and stochastics roll down out of territory indicating overbought conditions, hinting that GOLD may have more consolidating to do before it turns back up again. We're not sure about the need for consolidation, however. A scan of GOLD's chart shows a nearly identical configuration on August 26, when GOLD came down to touch the lower trendline of the regression channel, printing a doji, with RSI and stochastics rolling out of overbought territory. The next day, GOLD gapped up and started the climb that popped it above the rising red trendline visible on the chart. With similar configurations present, GOLD could repeat that performance. Just in case it doesn't, we set our stop at $21.99, just below the rising 21-dma. New entries could be found on a push above the rising red trendline, currently at about $24.40, but $HUI strength should be confirmed before considering such an entry. Annotated Chart for GOLD: Picked on Aug 24 at 23.40 Change since picked: -0.15 Earnings Date: 08/12/03 (confirmed) Average Daily Volume: 360 thousand --- Watson Pharma. - WPI - cls: 41.91 chng: +0.32 - stop: 39.99*new* We couldn't be more pleased with the way WPI performs, with candles chugging toward recent highs. WPI announced Tuesday that it would present at the Bear Stearns 16th Annual Healthcare Conference on Monday, September 8, at 11:30 ET, and it appears that investors expect WPI to make a good showing. We'll have to guard against a sell-the-news event, however, perhaps tightening our stop again on Friday. The DRG was down today, with a spot check of pharmaceutical companies showing mixed performances. Other companies producing generic drugs also showed spotty performances, with FRX down and IVX up on Wednesday. IVX's climb might be attributable to its submission of an NDA (new drug application) to the FDA for its Easi-Breathe(R) inhaler rather than any specific sector strength. In addition to those candles chugging toward recent highs, WPI's daily chart also reveals that MACD has now crossed above zero, with the lines separated and rising. To balance MACD's strong performance, however, the 21(3)3 stochastics gave a bearish kiss from within territory indicating overbought conditions, although they have not yet rolled. RSI remains strong, not signaling a pullback yet, but the stochastics may be providing an early signal that WPI might see a day or two of consolidation. We've raised our official stop to $39.99, but an alternative and more conservative stop might be $40.25, just below the rising 10-dma. New entries could be found on a pullback and bounce anywhere above $40.00. Now that WPI moved through the July 28 intraday high of $41.35, new entries could be considered at the current level, but entrants from the current level should be aware of the possible need to consolidate ahead of the July 9 intraday high of $42.84 or the June 17 intraday high of $43.32. Entries at the current level would not provide as much cushion if that consolidation were to occur. Annotated Chart for WPI: Picked on Aug 27 at 40.74 Change since picked: +1.17 Earnings Date: 08/05/03 (confirmed) Average Daily Volume: 1.1 million -------------------- Bearish Play Updates -------------------- AmerisourceBergen - ABC - cls: 56.82 chng: -1.87 stop: 59.65*new* There's no question that ABC's rebound off the $56 level had us feeling a bit nervous, especially with the buying volume on Thursday giving the two-day candle pattern the appearance of a tweezer-bottom. But with the stock's recent relative weakness, it seemed a prudent move to let the play work, with our stop resting just above the $60 level. That is looking like a prudent move after today's sharp reversal lower. Tuesday's session consisted of a gap higher that ran into stiff resistance at the converged 10-dma (currently $58.37) and 200-dma (currently $58.85), resulting in a nearly perfect doji candle. Taken together with today's gap down, yesterday's candle now looks like a perfect island reversal (even though these normally come at relative highs) and with daily Stochastics (5,3,3) hinging down in a short-cycle reversal, we're feeling much more comfortable with our bearish stance on the stock. Our initial downside target remains at $54, but to get there, ABC is going to need to trade below $56 and decisively break below the PnF chart's bullish support line. It is hard to make a case for new conservative entries at this level, but aggressive traders can look to enter on a break under $56. If taking that aggressive stance, it should be done in anticipation of a decline down to the $50 level, which is a more aggressive target than we had initially been looking for. Tonight we're tightening our stop to $59.65, which is just above yesterday's intraday high, as well as the 20-dma (currently $59.62). Picked on August 10th at $60.00 Change since picked -3.18 Earnings Date 10/23/03 (unconfirmed) Average Daily Volume = 1.39 mln --- Citigroup, Inc. - C - close: 44.50 change: +0.32 stop: 45.00 Financial stocks have performed quite well this week, with the Banking index (BKX.X) reaching up to the $885 level, right at the level that provided resistance on the mid-August rally attempt. The concern we have for our bearish play on C though is the way the BKX has managed to move through its descending trendline from the July highs, and this could be the beginning of a bullish break from the triangle consolidation pattern of past 2 months. C has certainly maintained its role of underperformance, but the rally so far this week has brought that stock right to its descending trendline at $44.50. Today's intraday high of $44.85 had it looking like our $45 stop would be broken, but fortunately there was a bit of a pullback into the close. Right now, we don't want to consider new entries unless C can roll over below that trendline and break under that critical $42 level. From the looks of the daily chart, it looks like the bulls will win this battle, so more conservative traders with open positions may just want to cut their losses here and move on. Picked on August 24th at $43.10 Change since picked +1.40 Earnings Date 10/13/03 (unconfirmed) Average Daily Volume = 12.8 mln --- St. Jude Medical - STJ - cls: 52.16 chng: +0.02 stop: 54.00*new* If boredom had a symbol, then STJ would be it. After that sharp drop last week that first attracted us to the play, the stock has been meandering in a very tight range. In the past four days, the total range has been from $51.40-52.61, with the $52 level acting like a powerful price magnet. This week, we're seeing volume start to increase, but so far the increased interest has been unable to push price in either direction from that magnet. At this point, our preference is to abstain from new entries unless the stock can break below $51.25. On a breakdown, our initial target will still be $49.25 (the target from the H&S pattern), with a possible decline to the 200-dma at $48. With the moving averages all rolling lower, we can reduce our risk in the play by lowering our stop to $54.00, which is just above the 50-dma (currently $53.98). Picked on August 27th at $51.80 Change since picked +0.36 Earnings Date 10/15/03 (unconfirmed) Average Daily Volume = 2.20 mln ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Orbital Sciences - ORB - close: 9.18 change: +0.53 - stop: 38.49 Company Description: Orbital develops and manufactures small space systems for commercial, civil government and military customers. The company's primary products are satellites and launch vehicles, including low-orbit, geostationary and planetary spacecraft for communications, remote sensing and scientific missions; ground- and air-launched rockets that deliver satellites into orbit; and missile defense boosters that are used as interceptor and target vehicles. Orbital also offers space-related technical services to government agencies and develops and builds satellite-based transportation management systems for public transit agencies and private vehicle fleet operators. (Source: Company Press Release) Why We Like It: If we didn't know better, this defense-related stock's performance might convince us we were still at war. ORB's bar chart impresses us, but its real strength shows up on the P&F chart. ORB sports a bullish P&F chart, with a buy signal, a three-box pullback, and then a new buy signal. Wednesday, it created a new double-top breakout signal with its move above $9.00. It's above its bullish support line and P&F resistance at $8.50. The next P&F congestion begins at $11.00, but doesn't get strong until $11.50, and that's going to be our target. The DFI.X, the American Defense Index, displays its own P&F buy signal, an ascending triple top breakout. ORB's bar chart displays a bullish posture, too. Wednesday, ORB broke out of a bull flag and roared upward, bypassing recent resistance on volume that was almost three days the daily average. RSI turned up again from the middle of a downward move, and stochastics and MACD both made new bullish kisses and attempted to roll back up again. Wednesday's push brought ORB back above its 10-dma, currently at $8.90. Traders considering this play must also consider the reason it's in the high-risk section. Although both the P&F and the weekly chart show that $11.50-11.60 provides stronger historical resistance than does $10.00, there's likely will be psychological resistance to moving this stock back above that nice round $10.00. We expect ORB to either burst through this level and build on recent gains, or attempt to rush through and be repelled, needing to consolidate a bit longer. Wednesday's rise encompassed such a hefty percentage gain that the only viable stop is also at a hefty percentage loss below the current price. With the DFI showing strength, we suspect that part of ORB's recent gains comes from strength in anything related to defense spending, but ORB also has been busy reorganizing its executive team. Late in August, the company announced that it would begin exchanging its 9 percent senior note exchange offers due in 2011 and sold in July 2003. Earlier in August, the company had successfully launched a missile defense boost vehicle. This vehicle is being developed and manufactured for the U.S. Missile Defense Agency, and the launch represented the 25th consecutive successful space mission over the previous 21 months. Annotated Chart for ORB: Picked on Sep 3 at $9.18 Change since picked: +0.00 Earnings Date: 07/22/03 (confirmed) Average Daily Volume: 347 thousand ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Qualcomm - QCOM - close: 40.37 change: -0.84 - stop: 38.49 Tuesday, China's Ministry of Information Industry, the country's telecoms regulator, announced that 3G licenses should be available by the end of the year. Presumably, the Ministry will first decide whether it will use the European standard advanced by QCOM or a Chinese-developed standard. The Ministry has not always been clear about its plans. In addition, Lehman lowered the telecom sector to marketweight in their Strategy Growth Portfolio. QCOM dipped on larger-than-average daily volume Tuesday although the NWX, the networking index, and the XTC, the North American Telecommunications Index, both gained. Wednesday repeated the pattern with QCOM printing an ominous bearish engulfing candle not matched by the bullish patterns on those two indices. We think QCOM pulls back to establish recent resistance as new support, a normal occurrence. QCOM is likely to find that support at the confluence of the rising 10-dma and the neckline of its inverse H&S, with those levels of support converging near the psychologically important $40.00. If that level does not hold as support, next support is offered by historical support/resistance and the rising 21-dma near $38.50. We've placed our stop just below this second tier of support. New entries could be found on a bounce from anywhere above $40.00. If momentum entries are sought, look for a break above this week's high. Annotated Chart for QCOM: Picked on Aug 27 at 41.00 Change since picked: -0.63 Earnings Date: 07/23/03 (confirmed) Average Daily Volume: 10 million --- Tower Automotive - TWR - cls: 4.64 chng: +0.09 stop: 4.24*new* Last Friday's bullish action was definitely a sign of things to come, as TWR followed through with a powerful breakout on Tuesday. Starting with an initial dip to test support at the 10- dma (now $4.27), the stock rebounded from the $4.25 level and pushed as high as $4.59, before settling just a few pennies below that level. The bullish action continued on Wednesday, with the stock moving through the $4.60 level and closing just a penny below its intraday high. Both days this week have seen strong volume, and it looks like the bulls are intent on at least testing our initial profit target of $4.80. Conservative traders should look to harvest gains when that level is reached, while those willing to hold on a bit longer should exit at our final target of $5.00. TWR is already up more than 13% from our picked price, so our focus now turns to protecting and maximizing gains. Raise stops to $4.24, which is a penny below yesterday's intraday low and is also below the 10-dma, which should provide solid support on any intraday pullback. Picked on August 10th at $4.10 Change since picked +0.54 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 539 K ================================================================== Split Trader/Stock Splits ================================================================== Annoucements ------------ ABVA cashes in on a 3-for-2 stock split Before today's opening bell, Alliance Bankshares Corporation's (NASDAQ:ABVA) Board of Directors declared a 3-for-2 stock split of its common shares. The stock split will be payable on September 29th, 2003 to shareholders on record as of September 17th. This is ABVA's first split since being listed on the NASDAQ in 2001. About the company: Alliance Bankshares Corporation is a locally managed community banking organization based in Northern Virginia. The independent status of the organization allows the Bank's management to create implement and maintain banking services with a level of flexibility, creativity and discretion that is not possible with larger institutions. (Source: Company Press Release) ================================================================= 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. 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