PremierInvestor.net Newsletter Monday 09-08-2003 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: Vote of Confidence Play of the Day: Da Bulls =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 09-08-2003 High Low Volume Advance/Decline DJIA 9586.29 + 82.95 9599.34 9503.41 1.62 bln 2012/ 814 NASDAQ 1888.62 + 30.38 1888.65 1863.88 2.02 bln 2115/1014 S&P 100 518.50 + 5.53 518.50 512.49 Totals 2960/3263 S&P 500 1031.64 + 10.25 1032.41 1021.39 RUS 2000 517.13 + 8.26 517.21 509.76 DJ TRANS 2761.68 + 14.39 2777.04 2743.36 VIX 18.79 - 0.58 19.54 18.79 VXN 29.55 - 1.15 31.38 29.50 Total Volume 4,058M Total UpVol 3,350M Total DnVol 655M 52wk Highs 913 52wk Lows 17 TRIN 1.14 PUT/CALL 0.67 =============================================================== =========== Market Wrap =========== Vote of Confidence by James Brown Investors continue to cast their vote confidently to the bulls as the S&P 500 notches a new 15-month high and the NASDAQ composite claims a new 18-month peak. Most of the gains were concentrated in technology and biotech issues but the rally was once again very broad-based with nearly every sector closing in the green save for Retail and Gold. Historically a weak season for the equity markets this September is proving to be anything but. The Dow Jones Industrial average added almost 83 points to close at 9586. The COMPX rose more than 30 points to 1888 and the SPX inched up one percent to 1031. Contributing to the general mood in the U.S. were positive sessions for the Japanese, English and German exchanges. The market internals for the U.S. were strongly positive with 20 stocks rising for every 8 losers on the NYSE and 21 winners for every 10 decliners on the NASDAQ. New 52-week highs were a little less than what we've come to expect at 463 between the two exchanges but they continue to stomp new lows, which rang in at 10. Overall volume could have been stronger but up volume beat down volume by 3.9-to-1 on the NYSE and more than 6-to-1 on the NASDAQ exchange. Chart of the NASDAQ Composite: Chart of the S&P 500 Index: Chart of the Dow Jones Industrials: The weekend headlines were all about the President's request for another $87 billion to rebuild and defend Iraq and Afghanistan. Yet when Wall Street opened for business this morning it wasn't the ballooning deficit on investors' minds. Instead traders were more concerned with grabbing their share of the ever-rising tech tidal wave that has swept away the bulls and bears in recent sessions. Shares of IBM lead that charge today after Credit Suisse First Boston upgraded the stock from "neutral" to "out perform" while lifting their earnings estimates for 2004 and raising their price target from $87 to $102. CSFB believes IBM will be a great candidate to catch any "late- cycle" I.T. spending and shares of Big Blue added 2.47% to close just under overhead resistance at $90. But IBM wasn't the only news contributing to the 1.7% gain in the GHA hardware index. Research firm IDC raised its own forecast for the global PC market this morning. The firm said Q2 PC shipments were nearly 10% stronger than expected and they raised their estimates for all of 2003 by 8.3%. Semiconductor bears are probably still suffering from a wave of vertigo or is it dij` vu? It was just last Thursday that UBS raised their outlook for the chip equipment sector. Today it was Smith Barney's turn to lift their outlook on the industry from "market weight" to "over weight". The analyst believes that the improving fundamentals and economic conditions can push industry revenue growth to 20 percent in 2004 and 30 percent in 2005, which is a four percent increase from current estimates. Semiconductors also got a boost this morning when Taiwan Semiconductor (TSM) said they expect Q3 shipments to rise 10 percent over previous quarters and they see Q4 tracking inline at Q3 levels. First Albany came out with several opinions today as well and one of them was to raise chip stocks Altera (ALTR) and Xilinx (XLNX) from "neutral" to "buy". This fresh round of positive chip news was not lost on shares of Intel (INTC) which added 1.6% after launching two new Itanium 2 chips, which will target low-end servers and put more pressure on Sun Microsystems' (SUNW) business. Lastly, shares of communication chipmaker, RF Micro Devices (RFMD), sprang up over 16 percent after raising its Q2 outlook based on strong customer activity. Tech issues were also buoyed by EMC Corp (EMC) who received an "out perform" rating and a $16 price target from SoundView. Plus, Nextel Communicatoins (NXTL) reaffirmed its full-year guidance of $1 a share backed by growing revenues and subscriber growth. Out performing the 2.84% gain in the SOX semiconductor index was the booming biotech index. The BTK added 3.89% inspired by a 32 percent gain in shares of Regeneron Pharmaceuticals (REGN). REGN announced that French company Aventis would pay $125 million down and up to 50 percent of the profits for REGN's experimental VEGF Trap treatment to fight cancer. The deal is estimated to be worth upwards of $500 million for REGN. The VEGF trap treatment uses anti-angiogensis, which blocks blood vessel growth to the cancerous area. Shares of Amgen (AMGN) and Genentech (DNA), the No. 1 and No. 2 biotech firms, respectively, were up strongly on the day. DNA previous reported success earlier this year with their Avastin drug, which also uses anti-angiogensis to treat colon cancer. Overshadowed by the big gains in biotech was a strong day for the DRG drug index. Last Friday in the Market Monitor I outlined a bullish breakout of the descending channel in the oversold DRG.X and suggested that bullish traders who would prefer not chasing the tech train look here. Barron's apparently agrees. Over the weekend a Barron's article highlighted the low P/E's in the group combined with the 2% and 3% yields for big caps like Pfizer (PFE), Merck (MRK) and Johnson and Johnson (JNJ) making them tempting values, especially compared with to the tech sector. The news pushed Merck to the top gainer in the Dow Jones Industrials with a 3.1 percent gain. The FDA was in a giving mood today as well. Barr Labs (BRL) rocketed 8.4% by the close after the FDA approved BRL's Seasonale Extended-Cycle oral contraceptive. The new drug can reduce a woman's menstrual cycle to just four times a year. Watson Pharmaceutical (WPI) also received an FDA approval for its generic version of the Percocet pain reliever produced by Endo Pharmaceuticals (ENDP). By the end of the day WPI was up 7.2%, the DRG.X was up 1.94% and even ENDP added 3.8%. Last week we continued to suggest that traders needed to stay sharp because the rally has come so far now that analysts could start to downgrade stocks based on valuation concerns. We started to see a couple of these opinions late last week and they've begun anew today. This time the Retail sector was the main target. Sanford Bernstein's retail analyst cut their ratings on Wal-Mart (WMT) and Target (TGT) from "out perform" to "market perform". The research note was actually titled "Time to take some profits" as the analyst felt that these shares had already priced in a strong second half for 2003 and double-digit growth for 2004. This came on the same day that WMT said their weekly same-store sales are on track to meet their September goals of 3-5 percent growth. RBC Capital Markets chimed in with two downgrades of their own for Gap Inc (GPS) and Ann Taylor Stores (ANN) from "out perform" to "sector perform". Lehman Brothers actually disagreed and felt that the retail sector was poised to perform well heading into Christmas after the stronger than expected back-to-school season. Speaking of end-of-year projections, The S&P Investment Policy Committee raised their year-end forecast for the S&P 500 from 1030 to 1085 or about +5 percent. They're really stepping out on a limb since the SPX closed at 1031 today. The outlook is based on improving economic conditions and rising corporate earnings. However, Smith Barney's institutional equity strategist, Tobias Levkovich, was less enthusiastic. Tobias is targeting a year-end target of 1075 for the S&P 500 but forecasts 2004 will be bearish with a year-end target of 1025. Levkovich believes that the markets will remain range bound and that contrary to popular belief we are not in a new bull market. Whatever the long-term outlook is, short-term traders have to contend with the trend this week. Honestly, I'm surprised to see the markets higher ahead of the September 11th anniversary and we could still see some profit taking in the next couple of sessions. Yet until that occurs the best bet may be to just keep raising your stops on any current profitable positions. Look for news on Nokia (NOK) tomorrow with their mid-quarter update and headlines from the Bear Stearns Healthcare conference, Lehman Brothers Financial Services conference, and the Merrill Lynch Media & Entertainment conferences which are all in session tomorrow. =============== Play-of-the-Day ( BULLISH ) =============== Qualcomm - QCOM - close: 42.48 change: +1.28 stop: 39.99*new* Company Description: Based on its proprietary CDMA technology, QCOM is engaged in developing and delivering digital wireless communications services. The company's business areas include integrated CDMA chipsets and system software and technology licensing. QCOM owns patents that are essential to all of the CDMA wireless telecommunications standards that have been adopted or proposed for adoption by the worldwide standards-setting bodies. Currently, QCOM has licensed its CDMA patent portfolio to more than 80 telecommunications equipment manufacturers around the world. Why we like it: Almost. QCOM almost broke free of its recent congestion zone. After presenting at the SG Cowen Conference Thursday, QCOM began gaining. Friday, prices temporarily broke above the recent congestion zone, but the midday tech weakness carried QCOM down, too. At the conference, QCOM commented that the company expects the turning point for W-CDMA to occur in 2005. The company expects less than 10 million mobile devices to employ that technology in 2004, however. COO Tony Thornley did not know when China would be likely the issue the awaited licenses for phone companies to offer high speed services. Investors initially reacted by buying QCOM, sending it higher in after-hours trading, but, during the overnight Asian session, cell-phone maker NTT DoCoMo said mobile- phone subscriptions may decline throughout the industry in the second half of the year. We waited to see how QCOM would open Friday morning, and we cheered by an open at the top of the recent congestion zone. Like QCOM, the XTC, the North American Telecommunications Index, printed a candle with a long upper shadow. Unlike QCOM's, the XTC's candle came at the top of a rally, and so might have more bearish implications than QCOM's, which came during consolidation. The possibility exists, however, that QCOM forms a broadening pattern at the top of its recent climb, and broadening patterns can be typical of market tops. So far, QCOM continues to find support just above $40.00, not broadening the bottom support. Still, a retreat in the XTC might carry QCOM down, too, so traders might confirm that XTC finds support near 520 on any retreat. The NWX, the Networking Index, printed a doji at the top of a rally, also signaling that this related index might retreat to confirm support after its recent rally. New entries can still be found on a pullback and bounce from above $40.00, but confirm that support is holding in the XTC and NWX, too. Momentum entries can be sought on a breakout above $42.00, but confirm strength in the same two indices before entering on momentum. Why This is our Play of the Day When QCOM broke out above the $40 level on August 27th, the bullish prospects looked too good to pass up, and we felt compelled to add the stock to our bullish playlist, as that was the first trip over that level since last December. However, we knew that a continuation straight up the chart was going to be a low odds bet due to the fact that price was pressed right up against the upper Bollinger band. Simply put, the stock needed some time to consolidate that breakout, with the Bollinger bands continuing to expand so that the stock could continue northwards. Well, we got that consolidation over the past week and today QCOM blasted higher by 3.1% on pretty solid volume too. By no means is the stock out of the bears' woods, as it is right up against the December 2002 high ($42.89) and then will have to face the March 2002 highs near $44. But the technicals are pointing higher with a quad-top breakout on the PnF chart and a tentative bullish price target of $55. QCOM should now find solid support near the $41 level, with additional support offered by the 10-dma ($40.82). Intraday dips back near that level should provide for favorable entry into the play. Note that our stop rises to $39.99 tonight, as the bears should not be able to effect a move back under the $40 level if there is any life in this bullish move. Annotated Chart of QCOM: 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 09-08-2003 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: KVA Closed Plays: C, STJ Stop Loss Updates: WPI, TWR, QCOM 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 ------------------- KVA prescribes a 3-for-2 stock split During today's trading session, KV Pharmaceutical's (NYSE:KVA) 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 18th. This is KVA's first stock split since the third quarter of 2000. About the company: KV Pharmaceutical Company is a fully integrated specialty pharmaceutical company that develops, acquires, manufactures and markets controlled release and tastemasked pharmaceutical products using proprietary drug delivery and tastemasking technologies. The company markets its technology-distinguished products through ETHEX Corporation, a national leader in pharmaceuticals that compete with branded products, and Ther-Rx Corporation, its emerging branded drug subsidiary. KV has consistently ranked as one of America's fastest growing small companies, most recently by Forbes in its October 2002 issue. (Source: Company Press Release) ================================================================== Active Trader - Non Tech Stock Plays ================================================================== ============ Closed Plays ============ -------------------- Closed Bearish Plays -------------------- Citigroup, Inc. - C - close: 44.52 change: +0.18 stop: 45.00 Our bearish Financial play on C has been on life support for over a week now, as the stock continues to benefit from the strength in the overall Banking index (BKX.X) After gradually working through its descending trendline, the stock finally tapped the $45.00 level (exactly) on Monday, ending our misery by stopping us out of the play. C was definitely a weakling in the sector, but the rising tide lifted even this leaky boat. Use any early weakness tomorrow morning to exit open positions at a more favorable level, but don't let it get away from you to the upside. Honor those stops. Picked on August 24th at $43.10 Change since picked +1.42 Earnings Date 10/13/03 (unconfirmed) Average Daily Volume = 12.6 mln St. Jude Medical - STJ - close: 53.75 change: +1.18 stop: 53.75 Apparently STJ has just been building up a head of steam over the past two weeks, as the narrow tight-range action over that period of time broke to the upside with some strength on Monday. Today's 2.24% gain was the best one-day performance for the stock since early August and with the move coming on expanding volume, it's clear that any hope for a downside move has been squashed. With the stock closing right on our $53.75 stop, there's nothing to be said except the farewells. STJ traded above that level intraday so any open positions should have been stopped out. But for those of you holding onto bearish positions, don't let it get away from you. Place a stop just over today's intraday high and use a pullback near the $53.50 level to manage a more favorable exit from the play. Picked on August 27th at $51.80 Change since picked +1.95 Earnings Date 10/15/03 (unconfirmed) Average Daily Volume = 2.22 mln ================================================================= Stop Loss Adjustments ================================================================= Bullish ------------ WPI - Raise from $39.99 up to $41.10 TWR - Raise from $4.50 up to $4.75 QCOM – Raise from $38.49 up to $39.99 ================================================================== 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 MRK Merck & Co 52.59 +1.59 WYE Wyeth 46.36 +1.10 PGN Progress Energy 42.73 +1.00 CPB Campbell Soup Co 26.61 +0.75 UCL Unocal Corp 31.90 +0.82 CEPH Cephalon Inc 48.40 +1.33 HTCH Hutchinson Technology Inc 34.51 +1.29 CYD China Yuchai Int Ltd 18.31 +2.22 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- ASML ASML Hldgs Nv Ny Reg Shs 16.89 +1.16 XMSR XM Satallite Radio Hldgs 14.58 +1.11 RFMD RF Micro Devices Inc 10.46 +1.45 SWKS Skyworks Solutions Inc 12.12 +1.01 PKN Petrokazakhstan Inc 17.45 +1.12 ABGX Abgenix Inc 15.67 +2.16 ASTSF ASE Test Limited Ord Shr 9.75 +1.70 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- SNE Sony Corp 36.40 +2.65 NAB National Australia Bank 101.81 +2.39 STM Stmicroelectronics Nv 27.15 +1.16 CHIR Chiron Corp 56.35 +1.68 SPC Saint Paul Companies Inc 36.56 +1.15 CIT CIT Group CI A 28.90 +1.35 KMP Kinder Morgan En Prtn Lp 41.74 +1.20 BGEN Biogen Inc 40.82 +1.54 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- CEO Cnooc Ltd (ADR) 36.23 -1.22 UTSI Utstarcom Inc 38.49 -4.14 MIK Michaels Stores Inc 43.30 -1.46 HU Hudson United Bancorp 36.27 -1.53 RGLD Royal Gold Inc 23.43 -1.14 AMWD American Woodmark Corp 48.20 -2.34 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- DOX Amdocs Ltd 21.21 -0.64 APH Amphenol Corp 54.80 -0.35 FDP Fresh Del Monte Produce 26.30 -0.70 MANH Manhattan Associates Inc 31.30 -1.00 JASA Jo-Ann Stores Inc 29.10 -1.30 MOV Movado Group Inc 23.00 -0.55 AIP American Israeli Paper 42.00 -4.25 JAS-B Jo-Ann Stores Inc CI B 25.08 -1.12 ================================================================= 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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