PremierInvestor.net Newsletter Tuesday 10-14-2003 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: 187 and Counting Watch List: SANM, TGT, XL, SPW and more! Market Sentiment: What's New? ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 10-14-2003 High Low Volume Advance/Decline DJIA 9812.98 + 48.60 9812.98 9732.31 1.57 bln 1831/1358 NASDAQ 1943.19 + 9.70 1043.33 1922.82 1.75 bln 1958/1162 S&P 100 523.30 + 2.33 523.31 518.70 Totals 3789/2520 S&P 500 1049.48 + 4.13 1049.49 1040.84 W5000 10211.14 + 43.40 10211.14 10126.80 RUS 2000 531.84 + 4.27 531.88 525.78 DJ TRANS 2881.66 + 6.90 2890.38 2857.44 VIX 17.37 - 0.18 17.79 17.20 VXO (VIX-O)19.39 + 0.06 19.95 19.05 VXN 26.49 - 0.28 27.33 26.31 Total Volume 3,569M Total UpVol 2,301M Total DnVol 1,187M 52wk Highs 967 52wk Lows 18 TRIN 1.12 NAZTRIN 0.51 PUT/CALL 0.70 ================================================================= =========== Market Wrap =========== 187 and Counting The Dow managed to climb another +48 points in front of the Intel earnings announcement and is now only 187 points away from Dow 10,000 once again. The Nasdaq, not to be outdone, added +9 to 1943 and only 57 points away from NAZ-2000. But, putting them all to shame was the Russell-2000 which tacked on +4.27 and closed near 532.00 and a three year high. This is a very bullish move and suggests that fund managers are not afraid of the next two weeks and are putting money into the market. Dow Chart Nasdaq Chart S&P 500 The good news just kept rolling in and started with the California Manufacturing Survey. The headline number rocketed to 63.3 for the 3Q from 47.5 in the 2Q. If California is growing in the manufacturing area can the rest of the country be far behind? After two quarters of declines, a number under 50, this was a very strong rebound. The high tech component rose to 71.3 from 43.4 and employment showed strong gain to 51.5 from 39.6. New orders had a huge jump to 72.3 from 47.1. Great news for Arnold that he is taking control just as the momentum turned. Elsewhere the Kansas City Fed Manufacturing Survey jumped to 31 for September from only 20 in August. Unlike the CA survey any positive number is an increase in conditions and a negative number a contraction. Only prices received still lingered at -1 and negative. The headline number was a multi year high and well above any recent readings. Production, shipments and new orders all jumped significantly and even job growth grew slightly. Unfortunately the Kansas District Surveys tend to be on the bullish side so this report was well received but not overly so. In the Richmond District the news was not as good. The same manufacturing survey for that district turned negative with a headline number of only -7 and down from the flat line last month. The only improving components were the backlog of orders which improved to a still negative -14 and the six month outlook which improved to 33 from 31. The employee component dropped -11 points to -22 and the lowest level since Dec-2001. The overall report clearly showed a declining manufacturing sector in the Richmond district. The Weekly Chain Store Sales fell -0.5% for last week and the Bank of Tokyo was quick to revise the outlook for Oct down to +3.5% from the +4.5% to +5.0% just last week. The outlook for a consumer led recovery in the 4Q is slowly fading and all hopes are for businesses to pickup and take control. Unemployment is still high and shrinking claims checks are hurting the consumer base. Over all it was a very positive day. JNJ announced strong earnings and beat the street with pharmaceuticals up +13% and medical devices up +20%. Merrill Lynch beat the street by +18 cents but mostly on cost cutting from about -20,000 jobs over the last two years, -400 last quarter. Bank of America posted earnings of $1.92 as mortgage fees tripled. BAC took a charge of $100 million to cover mutual fund probe expenses. BAC said the consumer sector was stronger than they had expected and a major drop in loans due to the higher mortgage rates had not occurred. While these numbers were outstanding Merrill warned that the good times might not last. They said investor sentiment was very strong and that was one reason they were expecting a substantial correction in the 4Q. First Data reported earnings that were inline with estimates but took a hit on broker comments that the internals were weaker than expected. FDC specializes in payment systems with its Western Union unit growing +14%. The big news of the day was Intel after the close. They beat estimates by +2 cents and revenue by +.08 billion. They guided to $8.1-$8.7 billion for the current quarter compared to prior estimates of $8.32 billion. The median of their current estimates would be $8.4 billion so this is a slight increase. The key number was the estimate that gross margins would be around 60%. It was 58.2% in the 3Q. Intel's earnings grew +15% over last quarter and Andy Bryant said that was the highest 3Q growth rate in over 25 years. The company reported record shipments of processors, chipsets and motherboards. They said the most demand was from Russia, India and China. They said the mature economies like the U.S. were growing much slower. Intel said it was growing market share in most sectors due to the absence of strong competition. Profits for the 3Q was more than double the same quarter in 2002 and highlights the weak comparisons across the tech sector. Flash memory revenue fell nearly -25% due to a weak market and strong competition in that product line. With profits of $1.7 billion for the quarter and estimates of something over $2 billion in the 4Q it would appear Intel is firing on all cylinders. On the conference call Andy Bryant was pounding the soapbox on their performance. The initial news had some analysts pegging $45 as a fair value for their stock based on the current earnings ramp. For the economic outlook Intel said PC unit growth was only modest and their earnings came from a higher value processor mix rather than a flood of new PCs. Intel said it was an "orderly market" and there was no rush to buy and no real inventory buildup. Other chip companies reporting after the bell were NVLS, LLTC and PWAV. NVLS reported earnings of +0.04 cents when estimates were flat. NVLS said they expected bookings to increase +5% to +10%. LLTC reported earnings that beat the street by a penny and said demand was improving in all markets. PWAV missed estimates by a penny but affirmed guidance for the 4Q. PHG announced before the open and beat earnings estimates but cautioned that the consumer outlook for the 4Q could be weak. The net of all the chip/tech earnings was that business was improving but at an orderly, (read slow), rate into the 4Q. Most quarterly guidance was for a seasonal +5% to +8% growth rate. Definitely not a blowout. Intel is winning the profit battle because they have no real competition and they are keeping the prices high for their high performance chips and those are the chips most vendors are buying. The cheap chips do not appear to be moving well. I read that as businesses are adding sparingly and the consumer market is still weak. Also, the majority of the gains were not in the U.S. but in Europe and Asia. That means our economy is still in the slow growth mode. Two Fed heads spoke today and Bernanke was quoted as saying that growth in 2004 should be in the 4% range. That is well below the generally accepted +5% to +6% rates making the rounds. He qualified the statement saying it could be higher IF inventory rebuilding or a strong pickup in the economies of our trading partners occurred. He repeated the lack of job growth problem and said the timing of a recovery in jobs was still unclear. The main tone of his speech and that of Ferguson was that deflation was less of a problem than before. They said inflation was still tame but the shifting of focus away from the deflation worry immediately magnified the inflation concerns. They both went out of their way to stress that the Fed would remain neutral for some time. Many Fed watchers feel the 1Q may be the trip wire for a rate hike despite their continued denial. If the Q4 shows any major gains in the economy most feel they will be hard pressed to prevent hiking rates by March. This put pressure on bonds and helped keep the markets in check until late afternoon. Contrasting the +4% official Fed growth targets, Goldman Sachs raised their growth rates to +6.5% for 2004 and up from +5%. This is an incredible jump and indicates the bullish sentiment already in the market. This contrasts with a comment by John Chambers in Geneva where he said "the IT recovery is muted and customers remain in a show me state." The recovery is going to be impacted by rising oil which traded over $32 today and the rising interest rates. How much they will impact the recovery is unknown. Tomorrow we get earnings from GM and IBM, both Dow components and IBM could be a challenge for the tech sector. Several analysts went on record today as expecting IBM to downplay the recovery and possibly warn that IT spending was still very light. IBM is the leading indicator for how larger companies are investing in capex. If that large expenditure component has not triggered then analysts will start pushing recovery estimates into 2004 and writing off the 4Q. That may be hard to do in the face of the Intel earnings but there was no real table pounding on business demand by Intel. Russell 2000 S&P Small Cap Index The markets responded well today and the Dow close over 9800 was a key event. There is no material resistance between us and Dow 10,000 other than the IBM earnings. The market is very bullish and sentiment is strong across all sectors. Earnings are coming in strong and investors are racing to place bets. The strongest indication of sentiment by the funds is in the Russell-2000. This index of small cap stocks would be the most volatile and most in danger of any October drop. Instead of trading cautiously it set a new three year high at 530 and showing no signs of any weakness. The S&P Small Cap Index closed at 255 and is very close to an all time high. This is very bullish considering the calendar. If funds are buying heavily in the small caps before the fund year end in two weeks then there is the possibility that we are not going to see any massive fund selling after option expiration. With IBM tomorrow plus more than 100 other companies and another 225 reporting on Thursday we will be buried with reports. The flood of earnings across all sectors this week will give investors a clear picture of the 4Q without having to wait for the next three weeks of earnings to unfold. With options expiration on Friday and nearly half of the S&P earnings over this week it sets up a dangerous period for next week. Once the expectations component expires with the passage of earnings there is nothing left to pull buyers off the sidelines. On Sunday I suggested we could see an attempt on Dow 10,000 by Thursday and it looks like that could easily come to pass. The Dow has gained nearly 500 points in the last ten sessions and the Nasdaq is following suit. The S&P has the closest near term resistance at 1050 but with futures rising in after hours it appears that resistance will be broken at the open. The bullish percent on all the major indexes is approaching recent extreme highs once again. The difference is that the oscillators for those indexes are actually rising and could do so for several more days. My outlook from last week is still the same. Should we actually touch Dow 10000 and Nasdaq 2000 I am betting we will see some immediate profit taking. I would plan on it and either bail from long positions as we near that level or at lease snug up your stops and consider some index puts. Should we break that level the Dow has further resistance at 10100, 10300, and 10500. Without some really blowout guidance over the next couple days it may be really difficult for the Dow to move much above the 10,000 level. We are very extended, especially over the last ten days and once earnings are over we could see some consolidation before pressing higher. The October roller coaster is coming to the top of that long first hill. We can't see the other side yet so we don't know if it is another hill or a cliff. Enjoy the ride and 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 --------------------------------- Sanmina-SCI Corporation - SANM - close: 10.83 change: +0.13 WHAT TO WATCH: Entry setups don't get much better than this! SANM has been banging on the $11.00 resistance level with increasing regularity while maintaining its consistent trend of higher lows. With just over a week until earnings (10/23), a breakout over $11 looks like an ideal momentum entry for a run at next solid resistance in the $13.00-13.50 area. --- Target Corp. - TGT - close: 40.67 change: +0.56 WHAT TO WATCH: In late August TGT made a serious run over $40, but couldn't hold it, coming back to confirm strong support in the $37-38 area. Now, with the Retail index surging to new highs, TGT is back over $40 and looking like it is headed for new highs. A dip and rebound from the $40 level looks like a good entry strategy in anticipation of a breakout over $42 and a possible run at $44 ahead of earnings in November. --- XL Capital Ltd. - XL - close: 79.76 change: +0.55 WHAT TO WATCH: Insurance stocks have been surging higher lately, with the Insurance index (IUX.X) breaking above the $280 resistance level. Shares of XL have been chipping away at the $80 resistance level over the past couple weeks and a breakout looks imminent. Use an entry trigger just above $80 and use an upside target of $84 ahead of earnings on October 29th. --- S P X Corp. - SPW - close: 50.32 change: +0.72 WHAT TO WATCH: Turned back from just above $50 in early September, shares of SPW are making another convincing run at that resistance level, helped along by the broad market strength. Use an entry trigger above $50.75 and look for a run into earnings to carry the stock up near next resistance in the $53.50-54.00 area. Earnings are scheduled for October 28th. =================== On the RADAR Screen =================== TARO $62.05 - There appears to be no end in sight to TARO's bullish action. After breaking out over $60 last week, the stock has gone vertical, and is now looking quite extended. This is an aggressive play, but TARO may just keep soaring right into earnings next Thursday. A pullback into the $64.00-64.50 area looks like the best we can expect in the way of a dip-buying entry. DOX $21.30 - The past couple months have not been very kind to shares of DOX, as the stock has continued to meander lower, with support being found in the $18.50-19.00 area. That way until today, when the stock soared more than 7%, finally breaking the descending trendline. Volume was strong as well, so this looks like the beginning of a solid breakout ahead of earnings on November 5th. Consider entries near current levels or on a pullback near $20.00-20.50 and target a rally up to the $24 level. FRE $59.00 - Finally shaking off all the allegations of wrongdoing by its former management, shares of FRE finally broke out late last week and then cleared long-term trendline resistance just above $58 on Tuesday. Entries near current levels look good to run to next resistance near $61.50, with an outside chance of a rally up to strong resistance at $64. =============================== Market Sentiment =============================== What's New? - J. Brown Investor sentiment is getting pretty easy to read these days. The deluge of earnings news has been good with most companies beating estimates and offering positive comments going forward. At least that's how investors are interpreting all the data and post announcement conference calls. Bullish investors tend to look at life through rose-colored glasses. Reality tends to be a bit less enthusiastic. Whatever your bias, this morning the tone was set with strong results from Dow component Johnson-and- Johnson (JNJ), Wall Street titan Merrill Lynch (MER) and the third biggest U.S. bank, Bank of America (BAC). All three beat their estimates. I will note that it was interesting to see the market's reaction. The tone may have been positive but the markets traded sideways most of the session before the usual afternoon fade higher. Commentators and industry experts would like to see more volume on these gains (as would we all). Still, we're not complaining. It's been a long time since the INDU closed above 9800. Both the DJIA and the NASDAQ composite are within striking distance of significant milestones with 10,000 and 2000 looming just ahead. Contributing to the overall enthusiasm has been two recent revisions to the Q3 GDP estimates. In the last two days we've heard from Goldman Sachs and Lehman Brothers. GS raised their outlook from 5% to 6.5% Q3 GDP growth while LEH raised theirs to 6% GDP growth. This is a very robust pace. If the job situation can continue to improve then there may be nothing to stop this market. However, I will add that there are new rumblings from the street that the extreme bullishness now is likely to lead to a sizeable pull back in the fourth quarter. More grumblings from the wounded bears? It's possible. I'm not sure I subscribe to a massive Q4 pull back but I will certainly agree that we're very overbought short-term and could use a good multi-day consolidation. Any such stall in the markets advance may have to wait with the parade of earnings churning at full speed. Big Blue (IBM) is the big cap name to watch tomorrow and MSFT headlines the announcements for Thursday. I know I'm beginning to sound like a broken record here... it's okay to play the trend but at these levels you'd better watch your stops. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9812 52-week Low : 7197 Current : 9812 Moving Averages: (Simple) 10-dma: 9634 50-dma: 9439 200-dma: 8752 S&P 500 ($SPX) 52-week High: 1049 52-week Low : 768 Current : 1049 Moving Averages: (Simple) 10-dma: 1034 50-dma: 1011 200-dma: 938 Nasdaq-100 ($NDX) 52-week High: 1422 52-week Low : 795 Current : 1420 Moving Averages: (Simple) 10-dma: 1384 50-dma: 1331 200-dma: 1165 ----------------------------------------------------------------- Wow! That new VIX is falling fast and near the 17 level is definitely a warning sign for the bulls. Even the old VIX, based on the OEX, is still hovering around 19. Meanwhile the VXN is near all time lows as the NASDAQ surges toward the 2000 mark. CBOE Market Volatility Index (VIX) = 17.37 -0.18 Nasdaq Volatility Index (VXN) = 26.49 -0.28 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.70 866,472 605,892 Equity Only 0.56 700,315 391,386 OEX 0.83 37,908 31,590 QQQ 0.93 63,494 59,151 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 73.7 + 0 Bull Confirmed NASDAQ-100 79.0 + 2 Bear Correction Dow Indust. 83.3 + 0 Bull Correction S&P 500 80.8 + 1 Bull Confirmed S&P 100 79.0 + 0 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 1.02 10-Day Arms Index 0.90 21-Day Arms Index 1.13 55-Day Arms Index 1.06 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 1648 1941 Decliners 1160 1139 New Highs 425 411 New Lows 7 7 Up Volume 835M 1276M Down Vol. 676M 447M Total Vol. 1535M 1752M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 10/07/03 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 After two weeks of little movement we're beginning to see commercial traders edge toward a more bearish position. Looking at the small traders we see a reduction in short positions and they remain overall net bullish. Commercials Long Short Net % Of OI 09/09/03 418,958 486,209 (67,251) (7.4%) 09/23/03 395,123 397,858 ( 2,735) (0.0%) 09/30/03 395,713 397,577 ( 1,864) (0.0%) 10/07/03 390,232 402,964 (12,732) (1.6%) 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 09/09/03 176,401 81,444 94,957 36.8% 09/23/03 139,482 87,981 51,501 22.6% 09/30/03 144,681 96,801 47,880 19.8% 10/07/03 138,644 88,018 50,626 22.3% 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're definitely seeing a small trend in the commercials' positions in the e-minis. Long positions have jumped strongly, outpacing new short positions, and the overall net short attitude is dwindling. Retail traders remain heavily net long. Commercials Long Short Net % Of OI 09/09/03 370,909 237,610 133,299 21.9% 09/23/03 109,417 204,026 ( 94,609) (30.2%) 09/30/03 163,828 218,991 ( 55,163) (14.4%) 10/07/03 212,273 225,377 ( 13,104) ( 3.0%) 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 09/09/03 59,692 130,270 (70,578) (37.1%) 09/23/03 175,750 62,558 113,192 47.5% 09/30/03 131,698 65,259 66,439 33.8% 10/07/03 134,990 63,560 71,430 36.0% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 We're still not seeing much movement in commercials willing to commit one way or the other in the NDX. They're currently net short but the margin is fading. Small traders haven't changed much either and remain net long. Commercials Long Short Net % of OI 09/09/03 44,677 62,369 (17,692) (16.5%) 09/23/03 32,648 42,565 ( 9,917) (13.2%) 09/30/03 33,571 42,993 ( 9,422) (12.3%) 10/07/03 33,253 40,861 ( 7,608) (10.3%) 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 09/09/03 28,788 13,370 15,418 36.6% 09/23/03 17,862 9,880 7,982 28.8% 09/30/03 19,803 9,917 9,886 33.3% 10/07/03 18,182 9,688 8,494 30.5% 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 It's the same story here in the DJ futures. There is little change between the commercials or the small traders over all positions. Commercials Long Short Net % of OI 09/09/03 25,807 10,756 15,051 41.2% 09/23/03 15,911 9,123 6,788 27.1% 09/30/03 16,561 8,932 7,629 31.5% 10/07/03 16,277 9,528 6,749 26.2% 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 09/09/03 7,429 13,796 (6,367) (30.0%) 09/23/03 7,505 7,779 ( 274) ( 1.8%) 09/30/03 7,578 8,125 ( 547) ( 3.5%) 10/07/03 7,392 7,910 ( 518) ( 3.4%) 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 Tuesday 10-14-2003 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: Getting Closer Active Trader (Non-Tech) Closed Bullish Plays: GENZ High Risk/Reward Closed Bullish Plays: ORB Stock Splits/Announcements: USNA 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 ( Bearish ) =============== Marsh & McLennan - MMC - close: 47.95 change: -0.50 stop: 49.50 Company Description: As the world's largest insurance brokerage company, MMC could be called the ultimate middleman. After purchasing UK broker Sedgwick Group, the firm formed Marsh, Inc. to hold its risk and insurance units including J & H Marsh & McLennan (risk and insurance brokering); Guy Carpenter & Co. (reinsurance); Seabury & Smith (insurance program management services); and Marsh & McLennan Risk Capital (insurance industry investment and advisory services). The company also owns Putnam Investments, which provides investment management services such as research and accounting for publicly held investment companies. Why we like it: Our patience was tested on Friday, as MMC gapped lower at the open, reaching right to the 200-dma ($47.45). That was as far down as it went though, as buyers propped the stock up at that point, allowing it to rise modestly by the close. The downtrend that has been in place since the middle of June is still intact, but MMC has not yet satisfied our entry trigger, despite trading a new 5-month intraday low. We're still looking for a break of the 200-dma to trigger our entry into the play, and with the rise of the 200-dma over the past week, we can now raise that trigger to $47.40. An entry on the initial break of that level is one way to play, but given the way in which the stock continues to bounce after each new lower low, a better entry is likely to present itself on the next failed rebound. Traders willing to wait for that rebound can look to enter on a rollover in the $48.00-48.50 area. We're lowering our stop to $49.50, which is still above the descending trendline, the 30-dma ($49.04) and last Monday's intraday high of $49.48. Why This is our Play of the Day We don't normally like to list untriggered plays as our Play of the Day, but in the case of MMC, we're going to make an exception. Last week, the stock rebounded from the 200-dma, but once again the rebound was soundly rejected at the descending trendline. Despite another bullish session in the Insurance index (IUX.X), MMC shed just over 1% and is poised to deliver the breakdown we've been anticipating. We still need to see a drop below our $47.40 trigger before initiating new positions, but once that level gives way, we're looking for an acceleration of the current downtrend as we head into the company's earnings announcement next Tuesday. Target an initial drop to the $44-45 area, although $42 is still a viable possibility if the bears weak from their slumber. Note that we've got a tight stop on the play at $49.50, which is just above last week's intraday high and well above the descending trendline and the 50-dma ($49.35). Annotated Chart of MMC: Picked on October 5th at $48.18 Change since picked -0.23 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 1.79 mln ================================================================== ACTIVE TRADER (AT) Section ================================================================== ============ CLOSED PLAYS ============ -------------------- Closed Bullish Plays -------------------- Genzyme Corp. - GENZ - close: 49.99 change: +1.09 stop: 47.40 We gave GENZ all the time we could to break out over resistance ahead of earnings, but the bulls just couldn't get the job done. As mentioned over the weekend, we were looking to exit the play ahead of earnings, and with the announcement coming out tomorrow morning, obviously this play is done. We'll chalk it up as a moderate success, as the stock gained a little over 5% from our picked price. While the stock could break out on positive reception of the earnings results, we're sticking with our discipline of closing out open positions ahead of earnings. Picked on October 1st at $47.50 Change since picked +2.49 Earnings Date 10/15/03 (confirmed) Average Daily Volume = 2.90 mln ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ============ CLOSED PLAYS ============ -------------------- Closed Bullish Plays -------------------- Orbital Sciences - ORB - cls: chng: + - stop: 9.34 We thought Friday that ORB might be ready to blast off again, and it did so this week, finding support at its 30-dma and the ascending channel. Tuesday, it moved up to $10.00 and the midline of that rising channel. Lockheed Martin Corporation (LMT) issued a press release announcing that ORB would join LMT and Northrop Grumman (NOC) in competing for a NASA contract. The contract will be for full-scale development of the OSP, Orbital Space Plane. That announcement, an earnings run, and perhaps a bit of short-covering helped propel ORB up 2.80 percent on more than double average daily volume. ORB will announce earnings Thursday, however, and it's our policy to close plays before earnings releases. Picked on Sep 3 at $9.18 Change since picked: +0.72 Earnings Date: 10/16/03 (confirmed) Average Daily Volume: 347 thousand ========================== Stock Splits/Announcements ========================== USNA announces a 2-for-1 stock split with Earnings After today's closing bell, USANA Health Sciences Inc.'s (NASDAQ:USNA) Board of Directors declared a 2-for-1 stock split of its common shares. The payable date on the stock split is October 30th, 2003 to shareholders on record October 24th. After the stock split USNA will have approximately 19 million shares outstanding. This is USNA's first stock split since the middle of 1998. About the company: USANA develops and manufactures high-quality nutritionals, personal care, and weight management products that are sold directly to Preferred Customers and Associates throughout the United States, Canada, Australia, New Zealand, Hong Kong, Japan, Taiwan, South Korea and the United Kingdom. More information on USANA can be found at http://www.usanahealthsciences.com. (Source: Company Web Site) ================== 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 BAC Bank of America 82.50 +0.76 FRE Freddie Mac 59.00 +0.88 ONE Bank One 41.70 +0.55 GD General Dynamics 85.07 +2.45 AZO AutoZone Inc 94.42 +1.40 DHI D.R.Horton Inc 38.48 +0.68 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- SPOT PanAmSat Corp 17.99 +1.93 VCLK ValueClick Inc 10.50 +1.04 GERN Geron Corp 16.15 +1.74 GES Guess? Inc 12.71 +1.47 RATE BankRate Inc 19.82 +1.67 BLTI Biolase Tech 13.74 +1.39 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- FDX Fedex Corp 73.65 +2.30 STT State Street Corp 52.66 +2.87 CFC Countrywide Financial 97.18 +1.77 SSP E.W.Scripps Co 92.88 +4.89 KMI Kinder Morgan Inc 57.00 +1.10 ETN Eaton Corp 98.90 +3.16 POT Potash Corp 80.11 +1.81 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- WYE Wyeth 44.55 -1.21 FDC First Data Corp 37.20 -2.66 UNTD United Online Inc 25.44 -5.48 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- MCO Moody's Corp 56.67 -3.01 ADTN Adtran Inc 69.55 -3.95 JBHT JB Hunt Transport 26.60 -1.62 AVID Avid Tech 54.03 -4.76 ================================================================= 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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