Option Investor
Newsletter

Daily Newsletter, Monday, 10/13/2003

HAVING TROUBLE PRINTING?
Printer friendly version
PremierInvestor.net Newsletter                 Monday 10-13-2003
                                                  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 Wave of New Highs
Play of the Day:  Breakout Coming

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     10-13-2003            High     Low     Volume Advance/Decline
DJIA     9764.38 + 89.70  9783.49  9675.57 1.28 bln   2058/ 747
NASDAQ   1933.53 + 18.22  1940.97  1921.96 1.48 bln   2154/ 928
S&P 100   523.01 +  2.92   523.01   518.05   Totals   4212/1675
S&P 500  1045.35 +  7.29  1048.90  1038.06
RUS 2000  527.57 +  8.51   528.91   519.06
DJ TRANS 2874.72 + 51.17  2881.65  2822.41
VIX        17.55 -  0.90    17.91    17.42
VXN        26.77 -  0.35    27.20    25.97
Total Volume 3,039M
Total UpVol  2,173M
Total DnVol    816M
52wk Highs    1031
52wk Lows       14
TRIN          0.80
PUT/CALL      0.62
===============================================================

===========
Market Wrap
===========


A Wave of New Highs
by James Brown

The first full week of Q3 earnings season is underway and the
markets celebrated with another round of new highs.  The DJIA
closed above the 9700 level for the first time since June 2002.
Broader indices like the NASDAQ Composite set a 19-month high,
the S&P 500 closed at a 16-month high and the Wilshire 5000 index
also closed at its best levels since June 2002.  Volume was very
light today but it was expected with the Columbus Day holiday.
Contributing to a lack of action were the quiet bond markets,
closed for the U.S. holiday and the Japanese markets were closed
for their own local holiday.

Overall the general feeling remains optimistic as investors
position themselves ahead of what is expected to be a very good
earnings season.  One of Prudential's analysts mentioned that the
three dozen plus S&P component companies who have already
reported have on average been beating consensus estimates by 11
percent or better.  That's exactly what investors want to hear.
Current estimates are for Q3 earnings to be up 16 percent from
last year.  If businesses are beating the Q3 estimates by 10
percent or better then Wall Street can put more hope in the Q4
estimates for 20 percent profit improvement and that might
actually keep the rally going.

The buying pressure was pretty broad today.  Only one major
sector index, the OSX oil services index, closed in the red.  The
strongest buying was concentrated in Transports, Disk Drives,
Software, Banks, Brokers and Gold stocks despite a small drop in
December gold futures.  The U.S. markets enjoyed a positive tail
wind from their European counterparts with the English FTSE up
1.2% and the German DAX up 1.9% today.  American markets posted
strong advance/decline numbers with 20 winners for every 7 losers
on the NYSE and 21 winners per 9 losers on the NASDAQ.  Up volume
was more than three times down volume on the big board (NYSE) and
better than twice down volume on the NASDAQ.  New 52-week highs
hit 633 to just 10 new lows between the two exchanges.

Chart of the DJIA:


Chart of the NASDAQ:


As would be expected during the onset of earnings season stocks
were battered about by announcements and new analyst ratings.
The three biggest stories today appeared to be Motorola (MOT),
Honeywell (HON) and eBay (EBAY).  MOT made headlines by
announcing their Q3 results one day early.  The company announced
prior to the opening bell in response to a credit downgrade from
Moody's, who cut MOT's rating from Baa2 to Baa3 over concerns
from strong competition and revenue weakness.  Surprisingly, MOT
beat consensus estimates of 3 cents with 6 cents a share,
excluding charges.  Even more unexpected was MOT's positive
guidance for the fourth quarter.  Analysts had been expecting Q4
numbers to fall near 12 cents a share on revenues of 7.41
billion.  Motorola now expects Q4 earnings in the 11 to 15 cent
range on revenues closer to 7.8 billion.  However, even the good
news did little to assuage investors' fears with MOT's credit
rating now just one level above junk.  The stock added 8 cents to
close at $13.87.

The best performer among the Dow Jones components was Honeywell
(HON), which jumped 4.6% on a positive article in Barron's over
the weekend.  Barron's highlighted the company and said the stock
offers a very attractive valuation given what they see is a
bottom in the manufacturer's business and a recovery in the
global economy.  With a forward-looking P/E of less than 16 the
company is significantly under valued compared to the S&P's
average P/E near 29.  HON should announce earnings on Thursday
morning with consensus estimates looking for 40 cents a share.

Another headliner expected to announce on Thursday is EBAY.  The
online auctioneer was rattled for a 2.4 percent loss after a
Smith Barney analyst downgraded the stock from a "hold" to a
"sell".  Problematic was the term analyst Lanny Baker used to
describe EBAY's eBay Motors pricing model after surveying 150 car
dealerships.  The survey found that 30% are using the service but
40% used to but are no longer using EBAY's used-vehicle auctions.
Whether a survey of 150 car dealers out of the 80,000 dealers in
this country is enough research is an argument enthusiastic bulls
will have to carry.  We've mentioned in the past that EBAY is
richly valued with a current P/E near 125 and any upset in its
execution could wreak havoc on the stock price.  Yet today's
downgrade was not met with sharp selling but dip buying.  The
stock quickly rebounded from its early morning lows to bounce
from old resistance, now new support in the $57.00-57.50 range.
The intraday rebound probably isn't a surprise considering that
EBAY's execution is not only on track but apparently one-year
ahead of schedule.  Look for EBAY to report after the bell on
Thursday.  Estimates are for 18 cents a share.

But enough about companies announcing on Thursday.  The markets
have plenty to watch tomorrow.  Announcing earnings before the
opening bell are several big cap stocks that could set the tone
for the rest of the day.  Many of them are bank stocks and
economists will be listening to hear if loan demand has been
picking up with the improving economy.  The third-biggest U.S.
bank by assets is Bank of America (BAC).  Estimates for BAC are
$1.70.  Another big financial announcing tomorrow morning is
Merrill Lynch (MER).  We've already heard from the rest of Wall
Street's big brokers and they've all beaten estimates, some by a
wide margin.  If MER doesn't turn in the same kind of results the
XBD, currently at a fresh 52-week high, could easily see some
strong profit taking.  Estimates for MER are 85 cents a share.
Dow component Johnson and Johnson (JNJ) also announces before the
bell.  Estimates for JNJ are 68 cents.  Another big announcement
could be Delta Airlines (DAL).  Estimates for DAL are for a loss
of $1.47/share.  With all the positive press the airlines have
been getting in recent weeks I wouldn't be surprised in the least
to hear DAL beat that number.

After the bell we'll hear from Dow component Intel Corp (INTC).
The semiconductor titan has already raised guidance twice this
quarter so investor expectations are probably pretty high.  If
INTC doesn't beat the estimates of 23 cents the SOX is likely to
take a dive on Wednesday and the index is already fighting with
resistance at 475 creating a potential double-top.

Stay nimble and watch your stop losses.  Earnings season can be
dangerous with the potential for big gap opens in the morning
that make stops hard to juggle.




===============
Play-of-the-Day  ( BULLISH )
===============


EchoStar - DISH - close: 40.53  change: +0.03 - stop: 38.50*new*

Company Description:
EchoStar Communications Corporation (Nasdaq:DISH) serves over 9
million satellite TV customers through its DISH Network(TM), the
fastest-growing subscription television service in the nation.
DISH Network delivers advanced digital satellite television
services, including hundreds of video and audio channels,
Interactive TV, HDTV, sports and international programming,
professional installation and 24-hour customer service. DISH
Network is the leader in the sale of digital video recorders
(DVRs).

Why we like it:
DISH dealt with a possible disappointment this week.  Loral Space
and Communications rejected DISH's bid to acquire the bankrupt
company.  DISH's $1.85 billion cash offer exceeded that of
competitive bidder Intelsat, but Intelsat bid for only six of
Loral's satellite assets.  DISH bid for the entire company.
Loral's CEO felt that DISH's bid undervalued Loral's businesses,
and the CEO now favors continuing negotiations with Intelsat.
Loral's official committee of unsecured creditors is said to
favor DISH, however. DISH has asked a court to prohibit Loral
from selling assets to Intelsat until the matter is decided.
Final bids are due next Wednesday.

While DISH dealt with this situation, the stock fell back in what
may be its latest bull flag.  Candles grew smaller and lower
shadows longer as DISH declined in value but kept bouncing from
support.  It bounced from a short-term ascending trendline as
well as from above the climbing 21-dma (in blue).  RSI maintained
its pattern of higher lows, and appeared to be turning up along
its trendline.  Volume declined Friday, although volume had been
bigger Thursday as investors reacted to the news that Loral might
not accept DISH's offer.

Trading in DISH may be news driven next week.  While a pullback
and bounce from above $39.50 may still offer a new entry, traders
should take such entries with knowledge that DISH's plan to
acquire Loral's assets might not be finalized.  Some might prefer
to wait for a momentum entry on a breakout over $41.00,
confirming that the breakout occurs on strong volume.

Why This is our Play of the Day
With Monday's bank holiday and the bond markets closed, equities
suffered from a distinct lack of interest and volume.  But that
didn't stop our DISH play from tacking on 1.7% to end at its high
of the day and just below strong resistance that has been holding
since early September.  The pattern of higher lows is increasing
the upside pressure on the $41 resistance and a breakout over
that level could generate some follow-through.  Both the 10-dma
($39.75) and the 20-dma ($39.31) provided support on the latest
dip and another brief downward blip near the $39.50 looks
attractive for new entries ahead of the anticipated breakout.
The broad ascending channel is still the dominant price pattern
at play, so that means the near-term upside target is $43 (top of
the channel) and our stop now rises to $38.50 (bottom of the
channel). With plenty of time until the company's scheduled
earnings release on November 10th, DISH should continue its way
higher, ideally reaching our final target of $45 near the end of
October.

Annotated Chart of DISH:


Picked on October 3rd at  $39.95
Change since picked:       +0.50
Earnings Date:          11/10/03 (confirmed)
Average Daily Volume:   2.44 mln





=================================================================
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 10-13-2003
                                                   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
=================================================================

Stop Loss Updates:   DISH

Active Trader (Non-Tech)
  Closed Bullish Plays:  ZMH

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)


=================================================================
Stop Loss Adjustments
=================================================================


DISH - Raise from $38.10 up to $38.50


==================================================================
Stock Bottom / Active Trader (AT) section
==================================================================

  --------------------
  Closed Bullish Plays
  --------------------

Zimmer Holdings - ZMH - close: 55.85 change: -0.67 - stop: 56.24

Declining on stronger than average volume, ZMH dipped beneath our
$56.24 stop in Monday's first hour of trading.  It traded in
opposition to the Morgan Stanley Healthcare Products Index, the
$RXP.X, with that index climbing in early trading.

We're not sure what caused the decline. After researching
downgrades and conferences today, we saw nothing that might have
impacted ZMH.  Perhaps it was just time for profit-taking ahead
of earnings next week.  We're glad to have taken part in some of
that profit taking.

Monday's trade turned the RSI down, and stochastics appear ready
to roll down out of territory indicating overbought conditions,
too.  MACD approaches its ascending trendline, threatening to
break through to the downside.  With all those negative develops,
ZMH still trades within its ascending regression channel.  It
remains above its ascending 30-dma, currently at 54.69, and it
bounced from the 21-dma.  We weren't willing to risk our profit
on this play to watch ZMH's behavior near its 30-dma, but it's
still possible that ZMH could bounce once again from that rising
trendline.

Picked on Sep 17 at   53.87
Change since picked:  +1.93
Earnings Date:    10/22/03 (confirmed)
Average Daily Volume:  2.2 million





==================================================================
  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

BP      BP Plc                     44.73    +0.67
NCC     National City Corp         31.35    +0.52
TOY     Toys R Us Inc              14.57    +0.56
TRI     Triad Hospitals Inc        33.34    +0.99

---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------

SAY     Satyam Computer Services   17.10    +1.02
RHAT    Red Hat Inc                12.97    +2.19
UPL     Ultra Petroleum Corp       18.60    +1.35
CPRT    Copart Inc                 13.27    +1.45
UNA     Unova Inc                  17.16    +1.26

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------

RTP     Rio Tinto Plc (ADR)        98.56    +3.24
FDX     Fedex Corp                 71.35    +2.79
HON     Honeywell International    28.77    +1.27
CFC     Countrywide Financial      95.41    +1.41
IGT     Internat Game Technology   31.16    +3.07
INFY    Infosys Technologies (ADS) 79.75    +2.19
WIT     Wipro Ltd (ADS)            36.60    +1.75

-------------------------------------------
Breakout to Downside (Stocks over $20)
-------------------------------------------

KSS     Kohl's Corp                51.61    -1.04
GRMN    Garmin Ltd                 42.21    -1.51
PIXR    Pixar                      69.90    -1.66
IMCL    Imclone Systems Inc        38.50    -3.50
OSIP    OSI Pharmaceuticals        29.91    -1.20

-----------------------------------------
Recently Overbought With Bearish Signals (Stocks over $20)
-------------------------------------------

APH     Amphenop Corp              53.86    -0.60
ATK     Alliant Techsystems Inc    49.40    -0.07
BL      Blair Corp                 21.15    -0.45



=================================================================
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.

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives