PremierInvestor.net Newsletter Wednesday 09-24-2003 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: Selloff 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) ================================================================= 09-24-2003 High Low Volume Advance/Decline DJIA 9425.23 -150.81 9592.67 9423.54 1.86 bln 890/1951 NASDAQ 1843.70 - 58.02 1904.13 1843.43 2.17 bln 933/2176 S&P 100 505.46 - 10.66 516.67 505.23 Totals 1823/4127 S&P 500 1009.38 - 19.65 1029.83 1008.93 RUS 2000 507.86 - 11.50 519.85 507.86 DJ TRANS 2745.93 - 54.45 2802.74 2745.63 VIX 21.22 + 1.75 21.26 19.44 VXN 29.36 + 2.38 29.36 27.21 Total Volume 4,367M Total UpVol 752M Total DnVol 3,567M 52wk Highs 586 52wk Lows 15 TRIN 0.84 PUT/CALL 0.88 ================================================================= =========== Market Wrap =========== Selloff Jonathan Levinson Traders decided to do some selling today, and sell they did, with the major stock averages printing bearish engulfing days as bonds and precious metals advanced. The volatility indices all rose, with the “new” VIX (based on the S&P 500) breaking 20 for the first time since its inception days ago. Volume exceeded that of the past several days, with the Nasdaq trading 2.17B shares and the NYSE 1.73B. The TRIN.NQ closed at 2.04, the highest level I’ve seen in what seems like a very long time, months on closing basis, and the TRIN 2.32. The 58 point drop on the COMPX to 1843.69 was verging on a sellathon, the INDU –150 to 9425. For all that, the technical damage on the daily chart was not major, but the bearish engulfing to close at the day lows bodes ill for tomorrow’s open. As can be seen on the 1 year daily chart of the COMPX below, any further selling from here could touch off a bear wedge breakdown, projecting potentially to the March lows. 1 year daily COMPX On both the Nasdaq and the Dow, the daily chart oscillators are lined up to the downside, and appear to be completing what could prove to be a major top for the markets. 6 month daily INDU On the Dow, the bear wedge projects again to the March lows on a maximum fulfilment, in this case at 7400. 20 day 30 minute COMPX Notwithstanding the immensely bearish finish, bulls were sent home with a measure of hope in the form of a bullish descending wedge. The Nasdaq blew right through it on either a formation failure or a throwunder, while the Dow managed to hold within it. If the bottomy 30 minute chart oscillators combine with this pattern tomorrow morning, we could see a bounce potentially to the day highs. I don’t think we will, but this is the message on the 30 minute charts. 20 day 30 minute INDU Today is an opportune day to briefly review sentiment and some of the fundamentals beneath the economy and the markets: Chart of Yale Crash Confidence Index The Yale School of Management has been compiling the above data for the past 14 years, which measures the percentage of both individual and institutional investors who believe that there is no immediate risk of a stock market crash. The higher the reading, the higher the confidence in the health of the stock market. Note how confidence has risen since September 11, 2001. On further reflection, one might conclude that the above chart depicts the growth of confidence in the Fed since September 11, 2001, as a precipitous market plunge was dramatically reversed by short term liquidity operations during the weeks and months that followed the tragic day. Note also that confidence has been rising with the markets during 2003. Despite the fact that markets which are overpriced tend to crash more readily than those which are underpriced, this sentiment gauge reveals confidence rising alongside price. Viewed another way, here’s a four year chart of the VIX, commonly referred to by option traders as the “fear” index. Once again, we see evidence of a bear market in fear: 4 year weekly chart of the VIX Is this confidence in the Fed and the health of the markets justified? Let’s look “under the hood” at some of the broader trends during this period. First, we have the money supply (MZM), depicting the inflationary effects of the Fed’s work since 1990. Chart of MZM During the same period, the Fed Funds rate, which, though not captured in this more recent time series, is at a 45 year low. Federal funds rate The Fed has been aggressively lowering interest rates and increasing the supply of dollars. The proliferation of this new “hot” money has resulted in an impressive rise in consumer credit. I believe that current levels represent alltime highs. Consumer credit It appears, further, that US consumers have used this money to import goods and services from abroad, encouraging foreign economies but not their own. Balance of Payments The Fed’s efforts appeared to be having a stimulative effect on employment until 2001, at which point unemployment began to rise steeply. The pullback in unemployment that pundits have been cheering during the past months is better contextualized by the time series below. Lastly, evidence that the current levels of services enjoyed by the citizenry are becoming increasingly unsustainable, with the level of overall government deficit in a breakout. Government defit The net picture is one in which the Federal Reserve has been aggressively increasing the supply of dollars and lowering the carrying cost of those dollars, ostensibly to stimulate the US economy. What has resulted is a bubble in consumer credit, accompanied by bubbles in stocks (Nasdaq 5000), real estate prices (ongoing), consumer credit (ongoing) and imports (ongoing). The rise in unemployment and the record government deficit levels, as well as the record personal bankruptcy levels (not shown) are a compelling rebuttal of the Fed’s thinking to date. Unfortunately, the Fed’s response appears to have been an acceleration of the process- witness Governor Bernanke’s no- holds-barred “printing press” comments. In view of the foregoing, while stock market crashes are indeed low-probability events, I see little reason for an increase of confidence in the unlikelihood of one’s occurring. On the other hand, while the Fed appears to be unable to cure the problems it claims to address, the aggressive increase in liquidity could well reinforce the price of the markets even as their underlying value drops. In economic news today, the Mortgage Bankers Association (MBA) announced this morning that seasonally-adjusted demand for mortgage refinancings, the MBA refi index, dropped 0.4%% for the past week, despite the decline in mortgage rates from 5.91% to 5.85 for a thirty fixed. Demand for loans with which to buy homes, the Purchase index, fell 7% to 402.1 from the previous week’s 432.4. The Application index fell 3.7% for the week to 699.6. Early in the session, it was reported that OPEC had agreed to restrict output by 900,000 barrels per day to 24.5M barrels per day. Marketwatch reported that the move “comes as a complete surprise to the oil markets,” as the cartel was expected to keep levels unchanged. John Person, head financial analyst at Infinity Brokerage Services, was reported to have called it a "shocking and yet disturbing decision." Being unfamiliar with John Person and “Infinity Brokerage Services”, I can only guess why he or his firm would find it shocking or disturbing, given that oil prices have fallen during recent months. Note further that Bernanke, Snow and others have been preaching a further devaluation of the dollar, and the charts I’ve attached above bear this out. With a greater supply of dollars and recent lower prices for oil, it is absolutely beyond me how any person or bucket shop in intellectual good faith could possibly find it “shocking” or “disturbing” or “a complete surprise” that oil producers are unwilling or unable to sell as much oil at those lower prices in less valuable dollars. Go figure. In other news, the Energy Department reported that crude inventories rose by 1.5M barrels in the week ended Sept. 19. Gasoline inventories rose by 1.5 million barrels as well, and distillate supplies fell by 100,000 barrels. The American Petroleum Institute confirmed an 800,000 barrel rise in crude inventories to total 282.9 million barrels. It was an otherwise quiet day news-wise, with DELL announcing a $500M army contract and FLEX getting smoked for 5.18% on news of a $934M jury award against it. We have the following economic data due tomorrow: Report Briefing Market Prior Expects Expects Sep 25 8:30 AM Durable Orders Aug - 1.5% 0.5% 1.0% Sep 25 8:30 AM Initial Claims 09/20 - 410K 400K 399K Sep 25 10:00 AM Existing Home Sales Aug - 5.95M 6.05M 6.12M Sep 25 10:00 AM Help-Wanted Index Aug - 39 39 38 Sep 25 10:00 AM New Home Sales Aug - 1120K 1120K 1165K Given today’s strong selloff, traders are left in a precarious position. Bears need to keep stops close above, while bulls are either getting stopped out or are close. The 30 minute formations and oscillators portend a possible bounce within the confines of the early stages of a long-awaited daily cycle downphase. The bounce should not carry very high, if it comes at all. While the oscillators do not tend to trend or get pinned in oversold territory, the close at the day lows on higher volume sets up conditions more conducive for such to occur. The tide could well be turning against the bulls, and if so, there should be plenty of downside left. Plan your trades and wait for your entries. ================= 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 APA Apache Corp 69.09 +0.99 BR Burlington Resources Inc 48.46 +1.19 TLK P T Telekom Indonesia 13.73 +0.72 POG Patina Oil & Gas 36.52 +0.52 ATN Action Performance Cos 26.69 +1.84 MTLM Metal Management 19.08 +0.58 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- BLDP Ballard Power Systems Inc 14.59 +1.01 AMI Alaris Medical Systems Inc 17.96 +1.01 FCEL Fuelcell Energy Inc 13.28 +2.13 ENER Energy Coversion Devices 18.45 +1.45 VXGN Vaxgen Inc 14.00 +1.45 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- FRX Forest laboratories Inc 51.68 +2.95 RIG Transocean Inc 20.07 +1.07 LEN Lennar Corp CI A 75.94 +1.81 MUR Murphy Oil Corp 59.72 +2.23 WFT Weatherford Intl Ltd 38.50 +1.25 NE Noble Corp 33.98 +1.16 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- TEF Telefonica SA 35.21 -1.27 NVS Novartis AG (ADS) 38.40 -1.37 AMGN Amgen Inc 65.85 -2.73 SI Siemens Aktien 59.44 -1.87 AIG American Intl Group 58.00 -1.78 FTE France Telecom (ADS) 23.51 -1.23 EON E.On Ag (ADS) 48.60 -1.65 DNA Genentech Inc 82.93 -4.47 GS Goldman Sachs Group Inc 85.82 -3.24 DB Deutsche Back AG 61.72 -2.45 DD Dupont E I Nemours & Co 40.18 -1.36 DCX Daimlerchrysler AG 35.75 -1.48 KSS Kohl's Corp 53.21 -2.17 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- STI Suntrust Banks Inc 60.80 -1.19 ETN Eaton Corp 91.31 -2.02 PRX Pharmaceutical Resources 65.75 -3.24 TR Tootsie Roll Industries 31.47 -0.48 BBDA Bank if Bermuda Ltd (THE) 39.80 -1.03 MOGN MGI Pharma Inc 39.00 -3.03 ================================================================= 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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PremierInvestor.net Newsletter Wednesday 09-24-2003 section 2 of 2 Copyright ) 2003, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= Tech Stocks New Bearish Plays: UTSI Bullish Play Updates: ADBE Closed Bullish Plays: FDC Active Trader (Non-tech) New Bullish Plays: FMX Bullish Play Updates: TYC, ZMH Closed Bullish Plays: TARO High Risk/Reward New Bullish Plays: DRTE Bullish Play Updates: GLW, ORB, QCOM Closed Bullish Plays: ABGX, TER Stock Splits/Announcements Stock Splits: UNTD ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= ----------------- New Bearish Plays ----------------- UTStarcom, Inc. - UTSI - close: 35.08 change: +0.02 stop: 38.50 Company Description: UTStarcom, Inc. is a global provider of wireless and wireline access and Internet protocol (IP) switching solutions. The company designs, manufactures, sells and installs an integrated suite of future-ready access network and next-generation switching solutions. It enables wireless and wireline operators in fast-growth markets worldwide to offer voice, data and Internet access services rapidly and cost effectively by utilizing their existing infrastructure. UTSI's products provide a seamless migration from wireline to wireless, from narrowband to broadband and from circuit- to packet-based networks by employing next-generation network technology. Why we like it: Technology stocks have been on fire lately, as though we're right back in 1999. But the party had to come to an end sometime, and this week seems as good a time as any. Actually, UTSI began to weaken in early September, with the first downdraft culminating with a weak rebound from the $34 level. That rebound ran its course and the stock rolled over just below $38.50 and based on the past two days closing at the low of the day and selling volume on the rise, it looks like another downward move is in the offing. The PnF chart has already cast its vote with a big Sell signal in early September that now gives us a bearish price target of $24. That may be a bit aggressive with the bullish support line at $25, but a drop to next support at $30 and possibly to the 200-dma near $28 certainly seems likely. Note that a trade at $34 would reinforce the bearish picture with another PnF Sell signal. We'll use a trigger at $34.99 and advocate a couple of possible entry strategies. A breakdown below the trigger can be used for aggressive entries, while those with a more patient approach can wait for a successive rebound and rollover below the $36-37 resistance area. The recent consolidation/rebound found a local high at $38.45, so our stop will initially be placed at $38.50. A rally through that level would be a clear sign that we are premature in looking for a substantial breakdown. More conservative momentum traders may want to wait for a drop through the $34 level and that new PnF Sell signal before playing. Our initial target will be for a move down to the $30 support level, with an outside chance of continuation down to the 200-dma, currently $27.88. Annotated Chart of UTSI: Picked on September 24th at $35.08 Change since picked +0.00 Earnings Date 10/23/03 (unconfirmed) Average Daily Volume = 3.47 mln ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Adobe Systems - ADBE - close: 40.51 change: -0.95 stop: 39.25 Profit taking ramped back up on Wednesday, and as one of the recent leaders to the upside, the Software index (GSO.X) was susceptible to some hefty profit-taking. That certainly described the day's activity, as the GSO shed nearly 3.5%, keeping pace with the 3.5% loss in the overall NASDAQ-100. In light of the sector action, it is no surprise to have once again seen ADBE reverse from the $41.50 resistance level, but it is encouraging to see the stock hold above $40 and keep its losses to only 2.3%. Note how the 10-dma (currently $40.35) once again provided intraday support. The $39.50-40.00 area is key support, and intraday dips and rebounds from that region can be used for new entries. Note that we're keeping our stop (currently $39.25) just below the 20-dma ($39.40) as a break below that average will likely spell the end of this bullish move. Traders looking to enter on strength will want to wait for ADBE to push above $41.75, with renewed strength from the GSO index before playing. If entering on the breakout, remember that next resistance shows up in the $43.00-43.50 area. Picked on September 17th at $40.47 Change since picked +0.04 Earnings Date 12/10/03 (unconfirmed) Average Daily Volume = 3.08 mln ============ CLOSED PLAYS ============ -------------------- Closed Bullish Plays -------------------- First Data Corp. - FDC - cls: 41.54 chng: -1.48 stop: 41.05 Everything was looking splendid in our bullish FMC play, as the stock was steadily moving higher and nearing our initial target at $44. But Wednesday's round of profit taking seems to have caught more than a few bulls by surprise. FDC got hit for a 3.4% decline, wiping out all the gains from earlier in the week and bringing the stock right back to the point where it ended last Thursday. Such a large reversal does not look healthy, especially with a close right on the low of the day. Rather than risk more downside, we're going to exit the play tonight near break even and look for something better to replace it. Picked on September 3rd at $41.01 Change since picked +0.53 Earnings Date 10/14/03 (unconfirmed) Average Daily Volume = 4.59 mln ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Femsa Fomento - FMX - close: 38.46 change: +0.60 - stop: 36.59 Company Description: FEMSA is Latin America's largest beverage company in terms of sales. Founded in 1890 and headquartered in Monterrey, Mexico, FEMSA is strategically comprised of and operates by means of the following subsidiaries: FEMSA Cerveza, which produces, distributes and exports various brands of beer such as Tecate, Carta Blanca, Superior, Sol, XX Lager, Dos Equis, and Bohemia; Coca-Cola FEMSA, the largest bottler for The Coca-Cola Co. in Latin America, which produces and distributes carbonated beverages such as Coca-Cola, Coca-Cola Light, Fanta, Sprite, and Quatro; and the Strategic Businesses Division, which groups the packaging (FEMSA Empaques) and retail (FEMSA Comercio) operations, and whose main objective is to offer strategic competitive advantages to the beverage subsidiaries. (Source: Company Press Release.) Why We Like It: Sporting a P&F buy signal with an upside target of $65.00, FMX currently trades in an "O" column, but we think it's ready to move up to the "X" list. Back in July, Deutsche Bank must have thought so, too, because Deutsche Bank started it as a buy. Of course, those who bought FMX back in July had to wait a while, as it's been consolidating since then in a range from $36-38.00, but Wednesday, FMX broke above that consolidation band. It did so on 2.5 time average daily volume. Although light congestion shows up at the current level and we can expect some hesitation as FMX approaches round-number resistance at $40.00, we think it's ready to take on recent highs above $42.00 again, and this time, it's supported by a host of grouped moving averages just beneath its current level. It based for much of the last couple of months just above its 200-dma, too, establishing that level as firm support. It was probably not a coincidence that FMX turned back at $38.76 Wednesday, as it has also had a previous $38.80 high in early August, and this level was briefly important during December 2002, also. Set a trigger on a move above today's high and set a stop just below the 200-dma, with the stop at $36.59. Annotated Chart for FMX: Picked on Sep 24 at 38.46 Change since picked: +0.00 Earnings Date: 07/28/03 (confirmed) Average Daily Volume: 299 thousand ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- TYCO Intl. - TYC - close: 21.15 change: -0.70 - stop: 19.99 Thanks to market weakness, TYC may give traders the pullback entry we suggested last week, but we're reserving judgment now. While we don't like the look of Wednesday's bearish engulfing candle, we did expect a pullback to fill the gap from last week. We do note that Wednesday's candle filled the gap but did not fall below it, a first encouraging sign. It also closed above the rising 10 and 21-dma's, another encouraging sign. It has not violated the rising trendline, a third encouraging sign. Although RSI and stochastics turn down, they and MACD all maintain their rising trendlines. To help verify a pullback-and- bounce entry as valid, watch how RSI behaves as it approaches its rising trendline. An RSI break of its trendline might signal a need to step aside until TYC steadies. If RSI instead bounces from its own trendline as TYC bounces from anywhere above $20.50, the bounce entry has extra confirmation. News Wednesday centered on TYC's choice of James Harman as VP of advertising and branding, a move meant to help TYC rebuild its image. Harman moves to TYC from GE, where he served as manager of corporate advertising. Annotated Chart for TYC: Picked on Sep 21 at 21.90 Change since picked: -0.75 Earnings Date: 07/29/03 (confirmed) Average Daily Volume: 8 million ---- Zimmer Holdings - ZMH - close: 55.79 change: +0.18 - stop: 53.00 We worried last week when ZMH hit our trigger, but without an expansion of volume. We needn't have worried. As we had expected it would do when we first listed the play, ZMH found support at the midline of its regression channel and charged up toward the top of that regression channel. Wednesday, it even pierced the channel. By the end of the day, however, it had fallen back, closing near the low of the day and printing a gravestone doji. That candlestick formation can be a reversal signal, but we would have expected a reversal after ZMH hit the top of the channel. Lately, reversals have ended at the midline of the rising channel, but we wouldn't be surprised to find the former resistance level at $54.00 now providing support. Volume has been picking up as ZMH climbs, now confirming the upside momentum. Today, Merrill Lynch reported that the weak dollar might help medical technology stocks such as ZMH. Although ZMH gained, many of the other stocks mentioned in the report--BSX, SYK, EW--got caught in the downdraft in the markets. We think they'll be the first to rebound and were pleased that ZMH managed a gain. We're leaving our stop at $53.00, but conservative traders worried that ZMH might retrace all the way to the bottom of the regression channel might set a stop just beneath the midline of the channel instead. We would normally suggest that traders watch for an RSI violation of its rising trendline, except that the trendline has risen so high that it's due to be violated on even the slightest oscillation. We're not sure how meaningful such a trendline violation will be, but we've marked the trendline anyway. Traders looking for a new entry on this medical-device company might target a pullback and bounce from anywhere above $54.00, but all traders should be aware that ZMH now approaches the $58- 60 target many analysts hold on the stock. Annotated Chart for ZMH: Picked on Sep 17 at 53.87 Change since picked: +1.92 Earnings Date: 07/23/03 (confirmed) Average Daily Volume: 2.2 million ============ CLOSED PLAYS ============ -------------------- Closed Bullish Plays -------------------- Taro Pharm. - TARO - close: 57.17 change: -1.54 stop: 57.00 After nearly a week of banging against the $59 resistance level, shares of TARO finally lost their battle with the bears and succumbed to a round of profit taking. The 2.6% loss engulfed the price action of the prior 5 days, and it looks like this play is over. Volume picked up significantly, daily Stochastics have now dropped sharply out of overbought and the reversal came just below known resistance at $59. In case there was any question, the stock tapped our aggressive $57 stop during the day as well, confirming our decision to harvest the modest gains accrued. TARO gave us a nice ride up the chart, but just fell a little bit shy of our ultimate goal. Picked on September 10th at $54.65 Change since picked +2.52 Earnings Date 10/23/03 (unconfirmed) Average Daily Volume = 331 K ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Dendrite Int'l - DRTE - close: 15.55 change: +0.26 stop: 13.60 Company Description: Dendrite International provides multiple sales and marketing solutions and related services to life sciences clients. The company was originally established to provide sales force automation solutions for the pharmaceutical industry. In 2002, the company further expanded its offerings to include knowledge- based, technology-driven solutions that increase the effectiveness of sales, marketing and clinical processes for pharmaceutical and other life sciences clients. These include customer relationship management solutions, information management, business intelligence and analytics, and commercial operations management. Why we like it: Days of strong profit taking in the broad market are particularly useful, as they help to separate the strong bullish plays from those that are just riding on the coattails of the rest of the market. Wednesday was just such a day with most stocks and sectors ending in the red. Not so with our new bullish play on DRTE. The Business Software company has been doing a good job of keeping Wall Street happy, with earnings continuing to come in at or ahead of analyst estimates. That has enabled the stock to build a solid rising channel over the past 10 months, while price has nearly tripled. After consolidating sideways for much of the past 6 weeks, DRTE put in a solid rebound from its 50-dma ($13.79) a week ago and has really broken out with style (and volume) this week. Both of the past two days have seen the stock closing at levels not seen since March 2001, and it looks like there is more in store. A pullback to confirm support in the $14.50-15.00 area would make for an ideal entry setup ahead of the expected breakout through $16. More conservative traders may want to wait for the breakout before playing. Once clear of that resistance, bulls will be setting their sights on resistance near $18.50 and then $20. We're not looking for a quick move higher, as DRTE should continue to work higher in its ascending channel, the bottom of which is currently $13.75, with the top at $16.35. Look for entries in the lower half of the channel and harvest near-term gains near the top of the channel. We're initially setting our stop at $13.60, just below the bottom of the channel and the 50- dma ($13.79). Annotated Chart of DRTE: Picked on September 24th at $15.55 Change since picked +0.00 Earnings Date 10/23/03 (unconfirmed) Average Daily Volume = 177 K ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Corning, Inc. - GLW - cls: 9.43 change: -0.08 - stop: 8.98 Although GLW spent this week retreating from recent highs, it trades safely within its rising regression channel. It has retraced less than 50 percent of the most recent rise that began September 11. Volume, although above the daily average, measures far less than it did during GLW's rise the end of last week. Wednesday's decline in the small caps, as depicted by $SML.X, matched that of the S&P 500. Each dropped about 1.9 percent, but GLW maintained a smaller 0.84 percent loss. No news surfaced to explain the decline. It appears attributable to the expected pullback at the top of the rising channel and round-number resistance at $10.00, combined with the general market weakness. Conservative traders might set stops at their entry levels, or at the rising midline or 10-dma, currently at $9.28. Aggressive traders might find new entries on a bounce from the current level or from anywhere above that rising 10-dma. Annotated Chart for GLW: Picked on Sep 17 at $9.35 Change since picked: +0.08 Earnings Date: 07/21/03 (confirmed) Average Daily Volume: 6.8 million ---- Orbital Sciences - ORB - cls: 9.51 chng: -0.14 - stop: 8.99 Tuesday, ORB announced another contract, this one a $14 million contract with the U.S. Army's Space and Missile Defense Command in Huntsville, AL. ORB will supply launch vehicle design, payload interface development in conjunction with two national laboratories, and vehicle integration and launch services for the CCCM-1 and CMP programs. However, the $DFI, the defense index, fell steeply, indicating the weakness in the defense-related stocks. Although ORB struggled against that weakness at the first of the week, printing doji instead of the bearish candles being printed by the DFI, ORB finally succumbed and printed a small red candle Wednesday. The stock closed just below its 10- dma, but remained above its more-important 30-dma. That moving average now trends just above the bottom support of the rising regression channel. While we're still concerned that ORB did not print a higher high before beginning the latest consolidation pattern, all-in-all, we're pleased to see how well ORB held up in relationship to other defense-related stocks. Volume drops as ORB consolidates, also reassuring. Oscillator evidence remains mixed, with RSI and stochastics turning down but remaining within the patterns they've established as ORB trends. Our stop remains just below the rising 30-dma, currently at $9.12. A bounce from this moving average still appears to be a solid entry. Conservative traders might raise stops to $9.09, just below that rising trendline. Annotated Chart for ORB: Picked on Sep 3 at $9.18 Change since picked: +0.33 Earnings Date: 07/22/03 (confirmed) Average Daily Volume: 347 thousand ---- Qualcomm - QCOM - close: 43.52 change: -1.26 - stop: 42.75 QCOM and TXN are squabbling over a cross-license agreement that allowed TXN to use QCOM's patented CMA technology in wireless communications chips. QCOM sued TXN first, and this week TXN countersued. Both stocks declined in price, although it's difficult to tell whether the declines had anything to do with the suit or were the result of general tech weakness. The XTC, the North American Telecommunications Index, fell 1.89 percent, and the COMPX fell more than 3 percent. QCOM dropped to the bottom of its ascending regression channel, falling just beneath the 10-dma for the first time since September 10, when it was also testing the bottom of its regression channel. At the time of that last dip to the channel support, indicators look much as they do now, with MACD lines touching, RSI turning down out of levels indicating overbought conditions, and stochastics doing so, too. Volume had been dropping during that consolidation, too. Precedent exists, then, for QCOM to begin the next ascent toward the top of that channel, even with these indicators looking somewhat bearish, and that's what we hope happens now. We also realize, however, that the channel rises rather steeply, and QCOM will probably break out of that channel at some point. Otherwise, it will reach its fabled bubble target! If it breaks out of that channel now and begins a decline, our $42.75 stop will take us out of the play soon after that breakdown occurs. New entries could still be sought on a bounce from above $43.00, but since Wednesday's candle was a bearish candle that may indicate more downside, verify strength in the $XTC first. Consider waiting until QCOM retraces at least 50 percent of Wednesday's drop to enter as further verification of renewed strength. Annotated Chart for QCOM: Picked on Aug 27 at 41.00 Change since picked: +4.05 Earnings Date: 07/23/03 (confirmed) Average Daily Volume: 10 million ============ CLOSED PLAYS ============ -------------------- Closed Bullish Plays -------------------- Abgenix Inc. - ABGX - close: 14.75 change: -0.81 stop: 14.60 Predicated on a breakout to new 52-week highs and a breakout in the Biotechnology index (BTK.X), our ABGX play never worked one bit. Starting with Monday's drop back under $16, the stock hasn't been able to catch a break and once again ended at its low of the day on Wednesday after shedding more than 5%. Our $14.60 stop hasn't been hit yet, but based on the poor price action, it will be surprising if it isn't hit on Thursday. ABGX never went in our favor and we're going to pull the plug tonight, chalking it up as a clearly failed play. Picked on September 17th at $16.58 Change since picked -1.83 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 1.51 mln --- Teradyne Inc. - TER - close: 20.52 change: -1.35 stop: 20.50 Hindsight being what it is, we obviously should have closed our TER play last Friday when it ended at the $22 level after retracing a large portion of its intraday gain. The early part of the week saw TER trying to hold near that level despite the weakening of the Semiconductor index (SOX.X). But today's 4.7% slid in the SOX was just too much and TER played catch up in a big way, losing more than 6% and ending just above our $20.50 stop, after briefly trading below it. Adhering to our discipline, we have to drop the play tonight, and even if our stop hadn't been hit, we'd still want to exit after such a sharp one-day fall. Picked on September 3rd at $20.11 Change since picked +0.41 Earnings Date 10/14/03 (unconfirmed) Average Daily Volume = 2.95 mln ================================================================== STOCK SPLITS/ANNOUNCEMENTS ================================================================== UNTD gets back online with a 3-for-2 stock split Before today's opening bell, United Online's (NASDAQ:UNTD) Board of Directors declared a 3-for-2 stock split of its common shares. The payable date on the stock split is October 31st, 2003 to shareholders on record October 14th. UNTD currently has 43.4 million shares. This is UNTD's first split since their 1-for-5 reverse split in September of 2001. About the company: United Online, Inc. (NasdaqNM:UNTD - News) is a leading provider of value-priced Internet services through its NetZero, Juno and BlueLight Internet consumer brands. The company's standard services are offered at less than half the standard monthly prices of its major competitors and are available in more than 6,500 cities across the United States and in Canada. The company is headquartered in Westlake Village, CA, with offices in New York City, San Francisco and Hyderabad, India. For more information about United Online and its Internet access services, please visit http://www.untd.com. (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. 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