PremierInvestor.net Newsletter Thursday 10-02-2003 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: A Round of Applause Please Watch List: SVU, LAVA, MTZ, TE and more! Market Sentiment: Count Down to Jobs ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 10-02-2003 High Low Volume Advance/Decline DJIA 9487.80 + 18.60 9511.06 9427.65 1.53 bln 1900/1244 NASDAQ 1836.22 + 4.00 1842.55 1823.64 1.60 bln 1734/1401 S&P 100 511.20 + 0.87 512.14 507.77 Totals 3634/2645 S&P 500 1020.24 + 2.02 1021.87 1013.38 W5000 9887.36 + 27.80 9900.72 9820.28 RUS 2000 503.20 + 2.88 504.25 499.76 DJ TRANS 2743.67 + 7.30 2751.39 2727.75 VIX 20.80 - 0.27 21.45 20.71 VXN 31.25 - 0.08 31.70 31.08 Total Volume 3,384M Total UpVol 2,043M Total DnVol 1,254M 52wk Highs 514 52wk Lows 23 TRIN 0.79 NAZTRIN 1.05 PUT/CALL 0.78 ================================================================= =========== Market Wrap =========== A Round of Applause Please The October rally continued to the consternation of bears everywhere. After the nearly +200 point gains on Wednesday the Dow shook off some early weakness and rallied to tack on another +18 points and close very near the 9500 resistance level. The indexes traded on both sides of zero several times during the day but the only score that matters is the one at the final gun. Chalk a big one up for the bulls because they held the high ground. Dow Chart Nasdaq Chart The Jobless Claims came in higher than expected but the pencil pushers managed to slip it in just below 400K at 399,000. The claims from last week were revised up +5,000 to 386k and that is where they are likely to stay. The storm week will be chalked up as an economic blip and this week will probably end up revised over 400K next week. I can't remember off hand a drop in a revision recently. They are all revised up. Continuing claims rose again to 3.67 million and the highest level since July. The multiple economic reports lately with declining employment components and the rising continuing claims would indicate future weakness in claims. The nonfarm payrolls on Friday is expected to be weak as well. Factory Orders fell -0.8% and more than double the consensus estimates of -0.3%. Nondurable Orders fell -0.51% and Durable Orders fell -1.11%. Communications equipment fell to -4.89% from +11.78 in July and aircraft and parts to -2.50%, up from -13.89 in July. Computers dropped to +3.21 from +9.22 in July. Industrial machinery rose +5.78 from -8.31 and was the strongest component change. Still, a -0.8% headline number is a material change from the +2.0% gain in July. This report showed that the economy is still expanding from the late 2001 lows but the pace of expansion is very anemic. This report only represents orders to U.S. factories and with the change to overseas manufacturing it is hard to determine what the balance of orders really reflects. For Friday the big report is the nonfarm payrolls. The official consensus estimate is for a drop of -25,000 jobs. The whisper numbers I have heard are as high as -100,000. This has set the stock market up for a positive surprise or at least a non event. If everybody expects worse than -25K then a -40, -50 even -75K number could be met with a yawn. Ok, we knew that, so what else is new? Basically we spend a week posturing in front of the release and then the outcome is ignored. The only other material release on Friday is the ISM non manufacturing Services Index. The consensus is 62.8 and a decline from 65.1 in August and July. Services appear to have peaked in July/August and could be trending down if the consensus numbers are correct. Since July/August were the highest numbers posted since the creation of the index six years ago any decline is likely to be ignored unless it falls under 60. Any number over 60 represents a strong expansion and a strong contribution to the GDP for the balance of the year. If anything, the ISM Services represents the true state of the economy. With more and more manufacturing done outside the U.S. we are turning into a service economy. Unless there is a disaster I expect this release to be spun to the bulls advantage by analysts. IBM announced today that it was cutting 720 jobs and initially lost ground in the market but recovered to down only -50 cents. PSFT announced it was cutting 7% of its staff after completing the merger with J.D. Edwards. That could be up to 1000 jobs in an effort to save $207 million in 2004. PSFT also got signs of a reprieve from the Oracle death sentence. The Justice Dept is reportedly preparing a challenge to Oracle's hostile bid for the company. This would end the attack and allow PSFT to breathe again. Many customers were reluctant to buy their software because they were afraid Oracle would end up with the company and force the customers into an Oracle solution. Techs got another sunburn today after a Merrill Lynch analyst penned a scathing open letter to Sun Micro. The analyst said SUNW had reached a point of crisis and was bloated, unfocused and likely to suffer further loss of market share. He said the company would dwindle into irrelevance and eventually be bought for its installed user base. He said the SUNW CEO, Scott McNealy's brash and contrarian personality was getting old and he needed to clean up his act. He suggested SUNW cut 5-7000 jobs and quickly, spin off Java and narrow its focus. SUNW fired back that the analyst did not understand the SUNW business and if he had attended any of the Sun conferences he would know what they were focusing on. They called the attack a broken record and suggested the analyst try another tune. SUNW finished the day down a nickel. There were rumors on the street today that the gains we saw on Wednesday were partly due to a very large buy program by Goldman Sachs. They were said to be accumulating big cap stocks all day for a large customer. There is no way to verify this rumor although it was mentioned on CNBC several times. Also helping the markets was growth estimates by MMM of +12% to +14% for 2004. 3M affirmed the prior estimates and said the economy was showing signs of improvement. A DB analyst said 3M was closer to the beginning of a high-growth transformation than the end. These types of comments helped to maintain a bullish posture in the markets on Thursday. News of the big buy program helped to give bulls confidence that big bets were still being made at the beginning of the October tribulation period. This buying in front of the most volatile two weeks of the year smells of the plunge protection team at work but tracking them down is harder than getting evidence of aliens on the X-Files. The PPT exists but the secrecy surrounding their actions is better than that surrounding Area-51 in Nevada. The positive mood is contagious and the bulls pulled off a real trick by posting additional gains for the second consecutive day in October. Last year the first day of October saw a +340 point Dow gain and the 2nd day a -180 point loss leading to -743 points over the next seven days. We have successfully evaded the reversal drop so far but a two day string of gains is hardly a string. Regardless of the reason or the season the Dow did manage to test strong resistance at 9500 a total of four times on Thursday. While it failed each time it did not fail far. The Dow closed at 9488, only -12 points from the critical level and stretching its move over the 50 DMA to +22 points. The Dow closed less than 200 points from the September high of 9686. A pretty convincing performance all things considered. The Nasdaq was far less exciting but still clung to positive territory. After bouncing off the 50 DMA earlier in the week it rallied to close at 1836 with a +4 point gain but still well off the 1913 52-week highs. The Nasdaq traded in only a 19 point range and much of that range was early in the day. The SUNW attack and an earnings warning from NTIQ helped to restrain the eagerness to buy. Ironically there were numerous upgrades to tech stocks and many with new coverage started. Helping to restrain the gains were technical considerations where stocks bouncing over the last two days were nearing resistance again. With the high profile SUNW warning this week there may be some rethinking of the lofty expectations. The major hindrances to the current market are jobs, bonds and valuations with many stocks at new highs on hopes of strong earnings. On Thursday 516 stocks hit new 52-week highs. That was the highest level in over a week. While the jobs number tomorrow is likely to be ignored it was a cloud over the market today. Bonds sold off sharply at the open and gave back all the gains from the last two days. They did improve slightly on the day but the continuing confusion on foreign currency challenges, conflicting economic data and tomorrows Jobs report had them on the run. Fed President Moskow gave them the afternoon boost after saying the "job market was weak despite an upturn in household data." Another Fed President Santomero added to the worry saying "structural unemployment was an ongoing worry." In the war of words Dallas Fed President McTeer while acknowledging weak jobs said "We can't keep having growth that fast (3Q) without producing job growth pretty soon." This positive outlook was the primary cause for the spike in yields at the open. Not to be left out Ben Bernanke also said that "employment was a major concern" for the Fed. The September Jobs report will be the first look at a massive revision to previous payroll numbers as the Bureau of Labor Statistics attempts to include data that falls outside the normal payroll sample. The revision is made each June but we could get the first clue with the Sept report and the initial revision data. Economists are hoping for an upward adjustment of +200,000 jobs over the 12 month period ending in June. The adjustment comes from matching federal data with state unemployment filings. Personally, I think the barrage of Fed heads all speaking out on employment on a single day was an attempt to cushion the blow for Friday's report. The Fed gets a 24-48 hour advance look at most reports and this literal barrage of employment comments on the same day sure appears to concentrated to be coincidental. Either way the report has been filed and the numbers will hit the wires at 8:30 tomorrow morning. The overnight futures are flat and it appears there is a lack of concern. Traders have either gone flat or placed their bets and we are waiting for the cards to be shown. The problem that concerned me on Thursday was volume. The combined volume was only 3.4 billion shares across all markets. This was the lowest volume on record since Sept-15th and the day before the FOMC meeting. Just like that Monday we are not seeing any rush to place bets. Traders are either confident in their positions or flat. The lack of volume is a problem for the bulls as it takes lots of volume to overcome upward resistance. Tuesday and Wednesday were examples of a complete direction change. On Tuesday there was 4.1 billion shares, 3.1B down volume, 1.0B up volume and the Dow lost -105, Nasdaq -37. Yesterday there was 4.0 billion shares, 3.1B up volume, 0.9 down volume and the Dow gained +194, Nasdaq +45. Exactly opposite days by volume. Market Breadth Last 30 Trading Days People have been asking why the market is so hard to predict lately. First, because it has not been following normal calendar trends. The second reason is the stall at the top. Since September 1st we have been trading in a narrow range between 9400-9600 with the drop over the last week being the only major move out of that range. Take a look at the sheet above. It is the total market breadth for the last 30 days. Over the last 30 trading days over 110 billion shares have changed hands and the total points gained in that period was +61 on the Dow and +56 on the Nasdaq. Notice also the huge shifts in up and down volume. One day there are 900M in one direction and the next day it is over 3B. (The volume columns are in millions) What you should derive from this exercise is that when markets are at or near the top traders are nervous. Both bulls and bears are afraid of that next big move and they are quick to buy the dip or sell the top and do it in a hurry. Note also the increase in the range of point swings as we near the top of the chart. If you do not like one days massive move just wait and it will reverse. There is a lot of information in this sheet if you take the time to review it. It tells the psychology of the market without even looking at a real chart. I put this together for one reason. You can easily see the increasing volatility and bipolar swings in the U/D volume. Next week begins the two most volatile weeks of the year and the odds are good the numbers at the top two weeks from now will be even more bipolar. Nobody knows which way we are going or how far but the odds are we are going to be moving fast and we are likely to cover the same ground more than once. Keep those seatbelts fastened! Enter Very Passively, Exit Very Aggressively! Jim Brown Editor ================================================================== WATCH LIST ================================================================== The PremierInvestor.net watch list is not designed to be read as full fledged stock picks. Rather we would prefer to offer it as an extra tool in today's investor toolbox. Think of it as a radar screen with your own radar operator pointing out interesting developments, technical patterns or potential plays that you may or may not have seen on your own. Due to time constraints we do glance at the news but rarely do we have time to fully read pertinent news stories, due background research and other necessary screens that investors should do before making a decision. A common exercise is to read the entry, glance at the sector and other stocks in that industry and then compare what's happening in the stock to what's happening in the broader market indices. We hope you enjoy the Watch List and that it proves to be a useful tool for your own trading success. STOCKS WORTH WATCHING --------------------------------- Supervalu - SVU - close: 24.47 change: +0.47 WHAT TO WATCH: After producing a double-top-breakout P&F buy signal, SVU consolidated, building a base from which to climb. We think it's ready. After establishing $23.30 as support, SVU began moving up early this week, and it now looks ready to challenge next resistance. RSI and 21(3)3 stochastics both roll into full bullish mode. Look for a climb above the 21-dma at $24.52 as an entry, setting a $23.30 stop. Look for an expansion of volume and confirm strength in the RLX, the retail index. --- Magma Design Automation - LAVA - close: 18.58 change: -0.22 WHAT TO WATCH: Late last week, LAVA fell below a months-long ascending trendline. It consolidated a few days, and then dropped to $18.00 this week. With the oscillators on the GSO.X, the software index, trying to turn up, it looks as if it might be time for a bounce and rollover entry in LAVA, perhaps on a rollover under $19.50. The P&F chart shows a bullish signal reversal. On a rollover entry, target $16.50 and set a stop just over the 50-dma. Confirm weakness in the GSO.X. LAVA reports near October 29 or 30, so watch for a confirmation of its earnings date, exiting the play before earnings. --- Mastec, Inc. - MTZ - close: 11.71 change: +0.80 WHAT TO WATCH: Mastec broke out of its bull flag Wednesday and has tacked on a couple of points since Tuesday's close. As might be expected, it's on a P&F buy signal, and a trade above $12.00 will create a new buy signal. We'd prefer a pullback entry since MTZ has made such big percentage gains. MACD, stochastics, and RSI evidence argue that the breakout entry might come first, on a breakout over $12.00. After breaking out, MTZ tends to consolidate in a bull flag. On a breakout entry, consider a stop just beneath 50% of the rise from the 9/29 low to the peak. If a pullback entry occurs first, look for a pullback and bounce from above $10.50. --- Teco Energy Inc. - TE - close: change: WHAT TO WATCH: Thursday, TE announced that it had completed the sale of a power station. The stock broke out over its $14.00 resistance on strong volume, and it looks ready to break out over the $14.20 high from late September. It's got a double-top- breakout P&F buy signal. Momentum entries might be sought on a climb above that recent $14.20 high with an initial stop at $13.30 and a target of $16.50. The P&F chart shows resistance at that level, resistance that also shows up on the bar chart. The less-than-optimal risk/reward situation puts this entry in the high-risk category. TE reports October 23, so plan to close the play before then. --- =================== On the RADAR Screen =================== ATU $61.89 - Too expensive for our regular play list, ATU broke to a new high this week, adding another X to its ascending triple top breakout P&F buy signal. What sent the stock higher? It reported earnings that beat expectations on Wednesday, and also announced a 2-for-1 stock split for shareholders of record on October 10. We'd like to see the stock pull back to $59 and bounce from there, but it looks to be setting up for an old- fashioned split run. It has popped above an ascending regression channel and appears ready to go vertical. New entries could be found on any pullback and bounces from above $59.00, but those pullback entries might not be offered. New entries can also be found on a move above Thursday's high. Whatever the entry, this is an aggressive play, and it might be appropriate to take profits quickly when offered. Plan to exit ahead of that October 10 date. DISH $39.13 - Sporting an ascending triple top breakout buy signal on the P&F chart and an ascending regression channel on the bar chart, DISH looks ready to break out of its latest bull flag. New entries can be found on a pullback and bounce from the 30-dma or on a move above $40.00, which would confirm the bull flag breakout. $39.00 appears to have been the strongest resistance on the weekly chart. Target $45.00, although a brief pullback, perhaps in the form of another bull flag, should be expected as DISH approaches the top of its regression channel, currently near $42.00. FNSR $2.61 - Here's one for the aggressive bulls. In the middle of September, FNSR gapped above its rising regression channel. It spent the next several weeks filling that gap, but now looks ready to move up again. This week, FNSR found support at its 30- dma, then its 21-dma, and Thursday, it managed a climb above its 10-dma. Stochastics made a bullish kiss and RSI tilted up again. MACD lines appear on the verge of a bullish cross. New entries can be found on retreats and bounces from its 21-dma at $2.35 or on a break out over $2.75. It has a triple top breakout signal, and a trade above $3.00 will create a new buy signal. Some traders might prefer to wait for that trade above $3.00 and that new P&F buy signal. Earnings were early in September. =============================== Market Sentiment =============================== Count Down to Jobs -J. Brown The markets hit the pause button as investors decided to wait and see what tomorrow's September jobs report will reveal. Economists are expecting the Labor Department's employment report to show the U.S. economy losing jobs for the eighth month in a row. Current estimates, per a Bloomberg survey, are for a loss of 25,000 jobs last month and a jump in unemployment to 6.2 percent, up from 6.1 in August. Should this number come in significantly weaker than expected then look for turmoil in stocks as investors hit the sell button in a knee-jerk reaction to lock in profits. If the report is positive, then it's off to the races as Wall Street heads into the Q3 earnings reporting season. Looking at today's action the overall mood was still somewhat optimistic as the major indices tended to drift higher into the afternoon. The lack of profit taking on yesterday's big moves is encouraging. Recent comments from the Chicago Federal Reserve President and the Dallas Federal Reserve President regarding strong growth for the U.S. economy for the remainder of this year and throughout 2004 helped soothe investors concerns. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9686 52-week Low : 7197 Current : 9487 Moving Averages: (Simple) 10-dma: 9447 50-dma: 9365 200-dma: 8705 S&P 500 ($SPX) 52-week High: 1040 52-week Low : 768 Current : 1020 Moving Averages: (Simple) 10-dma: 1013 50-dma: 1003 200-dma: 932 Nasdaq-100 ($NDX) 52-week High: 1406 52-week Low : 795 Current : 1337 Moving Averages: (Simple) 10-dma: 1345 50-dma: 1311 200-dma: 1150 ----------------------------------------------------------------- It appears the recent rise in the volatility indices was a false alarm. Both have rolled back over as the markets rebound from Tuesday's lows. CBOE Market Volatility Index (VIX) = 20.80 –0.27 Nasdaq Volatility Index (VXN) = 31.25 –0.08 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.77 495,796 384,012 Equity Only 0.55 386,713 213,906 OEX 1.53 16,855 25,892 QQQ 0.67 25,310 17,140 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 72.0 + 0 Bull Confirmed NASDAQ-100 72.0 - 3 Bear Confirmed Dow Indust. 83.0 + 3 Bull Correction S&P 500 77.2 + 1 Bull Confirmed S&P 100 79.0 + 1 Bull Correction Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.20 10-Day Arms Index 1.34 21-Day Arms Index 1.25 55-Day Arms Index 1.07 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals -NYSE- -NASDAQ- Advancers 1698 1676 Decliners 1109 1372 New Highs 228 149 New Lows 12 12 Up Volume 988M 829M Down Vol. 496M 730M Total Vol. 1521M 1593M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 09/23/03 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 The latest option/futures expiration appears to have reduced some outstanding positions and commercial shorts saw the biggest drop. Suddenly, professional longs are dead even with shorts. Meanwhile, small traders closed a large chunk of long positions. Commercials Long Short Net % Of OI 08/26/03 410,378 472,987 (62,609) (7.1%) 09/02/03 417,973 482,392 (64,419) (7.2%) 09/09/03 418,958 486,209 (67,251) (7.4%) 09/23/03 395,123 397,858 ( 2,735) (0.0%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 18,486 - 6/17/03 Small Traders Long Short Net % of OI 08/26/03 170,424 76,967 93,457 37.8% 09/02/03 169,030 75,748 93,282 38.1% 09/09/03 176,401 81,444 94,957 36.8% 09/23/03 139,482 87,981 51,501 22.6% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 We have a major reversal in the works here. Commercial long positions dropped about 260K, instantly changing sentiment to bearish. Small traders had a change of heart and suddenly went excessively long, which is ironic now that the SPX just broke support. Commercials Long Short Net % Of OI 08/26/03 338,766 234,841 103,925 18.1% 09/02/03 347,724 224,011 123,713 21.6% 09/09/03 370,909 237,610 133,299 21.9% 09/23/03 109,417 204,026 ( 94,609) (30.2%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 08/26/03 52,131 120,853 (68,722) (39.3%) 09/02/03 56,709 134,094 (77,385) (40.6%) 09/09/03 59,692 130,270 (70,578) (37.1%) 09/23/03 175,750 62,558 113,192 47.5% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 The recent expiration appears to have reduced the number of outstanding positions but sentiment remains bearish for commercials and bullish for small traders. Commercials Long Short Net % of OI 08/26/03 33,991 55,849 (21,858) (24.3%) 09/02/03 37,002 55,379 (18,377) (19.9%) 09/09/03 44,677 62,369 (17,692) (16.5%) 09/23/03 32,648 42,565 ( 9,917) (13.2% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 08/26/03 26,108 8,864 17,244 49.3% 09/02/03 23,168 10,561 12,607 37.4% 09/09/03 28,788 13,370 15,418 36.6% 09/23/03 17,862 9,880 7,982 28.8% Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL The same can be said for the $INDU futures with outstanding positions dropping, the sentiment remains the same with commercials feeling bullish. However, small traders are feeling a lot more neutral with a drop in short positions. Commercials Long Short Net % of OI 08/26/03 24,586 10,386 14,200 40.6% 09/02/03 25,462 10,447 15,015 41.8% 09/09/03 25,807 10,756 15,051 41.2% 09/23/03 15,911 9,123 6,788 27.1% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 08/26/03 14,115 5,592 8,523 43.2% 09/02/03 6,629 13,402 (6,773) (33.8%) 09/09/03 7,429 13,796 (6,367) (30.0%) 09/23/03 7,505 7,779 ( 274) ( 1.8%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ================================================================= 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. 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PremierInvestor.net Newsletter Thursday 10-02-2003 section 2 of 2 Copyright (c) 2003, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= Play of the Day: New Highs Tech Stocks Closed Play: UTSI Active Trader Closed Play: FMX Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================= Play-of-the-Day ( Bullish ) =============== Zimmer Holdings - ZMH - close: 56.18 change: +0.48 - stop: 53.90 Company Description: Zimmer, based in Warsaw, Indiana, is a worldwide leader in the design, development, manufacture and marketing of reconstructive orthopaedic implants and trauma products. Orthopaedic reconstruction implants restore joint function lost due to disease or trauma in joints such as knees, hips, shoulders and elbows. Trauma products are devices used primarily to reattach or stabilize damaged bone and tissue to support the body's natural healing process. Zimmer manufactures and markets other products related to orthopaedic surgery. For the year 2002, the Company recorded worldwide revenues of $1.37 billion. Zimmer was founded in 1927 and has more than 3,600 employees worldwide. (Source: Company Press Release.) Why we like it: Tuesday, medical device company MDT affirmed FY04 estimates and said it would provide quarterly sales information later this week. The CEO claimed that the company doesn't need acquisitions to meet its goals. ZMH is pursuing a policy of acquisition, and expects to close the deal to acquire Centerpulse on Thursday. MDT declined Tuesday, and so did ZMH, but it's unclear whether MDT's guidance had anything to do with ZMH's decline. Performance proved mixed in the sector, with STJ and GDT gaining while ZMH and SYK declined. Wednesday, the RXP, the Morgan Stanley Health Care Products Index, gained ground, and so did many of the medical-device makers. That included ZMH. ZMH's chart depicts a symmetrical triangle forming at the top of ZMH's rise. Symmetrical triangles often prove to be continuation patterns, with the presumption being that the break will be in the direction of the move that preceded the triangle's formation. That's not always true, of course, so play participants should watch the lower trendline of that triangle, too. The triangle forms above the midline support of the regression channel, another bullish sign, but it's still possible that ZMH might retreat to that midline again. We've raised our stop to $53.90, just below the rising 21-dma (in blue on the chart). New entries could be sought on a break above the symmetrical triangle's upper trendline. Why This is our Play of the Day The move has come in rather staccato fashion, but ZMH looks like it finally broke out on Thursday, registering a new closing high, its first ever above $56. The stock isn't tearing up the charts, just gradually advancing a bit at a time. That is nice because it provides occasional pullbacks for fresh entries. Most recently, ZMH dipped back to the 10-dma near $55 and rebounded smartly on Wednesday. If the past points to the future, then we want to look for successive rebounds from the vicinity of the 10- dma (currently $55.22) as viable entry points. Now that we have our stop at break even, it's just a matter of ratcheting that stop up, keeping it below the 20-dma For now, we'll leave that stop at $53.90, but look to tighten it if we see more strength going into the weekend. Annotated Chart of ZMH: Picked on Sep 17 at 53.87 Change since picked: +2.31 Earnings Date: 07/23/03 (confirmed) Average Daily Volume: 1.81 million ============================= TECH STOCKS (NB) CLOSED PLAYS ============================= -------------------- Closed Bearish Plays -------------------- UTStarcom, Inc. - UTSI - cls: 34.26 chng: +2.35 stop: 34.10*new* Leave it to an upgrade to ruin a perfectly enjoyable bearish play. As of yesterday, our UTSI play looked to be resting up for another leg down the chart. That was before this morning's Buy rating from BofA, which sent the stock soaring. Fortunately, we tightened our stop last night and that took us out of the play with a small gain. Nothing like what existed last night, but a gain is a gain. While the stock did retrace sharply throughout the session, we're still advocating an exit here with our violated stop. Look for additional weakness of Friday to provide a better exit point. Picked on September 24th at $35.08 Change since picked -0.82 Earnings Date 10/23/03 (confirmed) Average Daily Volume = 3.82 mln =============================== ACTIVE TRADER (AT) CLOSED PLAYS =============================== -------------------- Closed Bullish Plays -------------------- Femsa Fomento - FMX - close: 37.60 change: -0.08 - stop: 36.59 Grupo Modelo, Mexico's top brewer, announced Wednesday that it expected a 5 percent increase in U.S. beer sales, and also announced a price increase on two brands. These are the Corona brands discussed in Wednesday's writeup. BUD, which owns a portion of Modelo, dropped on the news, and so did FMX. Both dropped on heavier-than-average volume, too, although FMX's volume far exceeded that of its U.S. counterpart. Although it's possible that FMX will again find support at its 200-dma or even at the 30-dma, today's bearish candle offers nothing that supports a bullish entry in the play. Picked on Sep 24 at 38.46 Change since picked: +0.86 Earnings Date: 07/28/03 (confirmed) Average Daily Volume: 299 thousand ================== 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 PBR Petroleo Brasileiro Sa 24.26 +1.05 HNZ H. J. Heinz Co 35.24 +0.64 LEN Lennar Corp 82.75 +0.60 WEN Wendy's Intl Inc 34.20 +1.10 LEA Lear Corp 57.14 +2.67 PNP Pan Pacific Retail 43.79 +0.74 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- CMVT Comverse Technology Inc 16.27 +1.26 RMBS Rambus Inc 18.07 +1.03 ALKS Alkermes Inc 14.77 +1.04 CGFW Cyberguard Corp 11.46 +1.13 DGII Digi Intl Inc 7.91 +1.11 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- MBT Mobile Telesys 81.40 +3.00 MYL Mylan Labs 41.46 +2.46 GGP General Growth Properties 73.25 +1.10 ASH Ashland Inc 35.54 +1.66 THO Thor Industries 58.86 +2.86 CNX Consol Energy 20.09 +1.13 NFLX Netflix Inc 40.97 +6.46 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- .none.. ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- TROW T.Rowe Price 40.95 -1.11 STRA Strayer Education 95.49 -3.30 ================================================================= 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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