PremierInvestor.net Newsletter Wednesday 11-26-2003 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: Markets Digest Economic News 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) ================================================================= 11-26-2003 High Low Volume Advance/Decline DJIA 9779.57 + 15.63 9794.68 9706.01 1.35 bln 1846/ 942 NASDAQ 1953.31 + 10.27 1960.31 1930.63 1.48 bln 1767/1307 S&P 100 521.21 + 1.67 521.77 516.68 Totals 4437/1546 S&P 500 1058.45 + 4.56 1058.45 1048.28 RUS 2000 545.31 + 2.13 547.32 539.70 DJ TRANS 2917.27 - 4.05 2941.86 2904.12 VIX 16.23 - 0.48 17.26 16.02 VXO 15.91 - 0.38 17.08 15.81 VXN 25.63 - 0.36 26.82 25.54 Total Volume 3,167M Total UpVol 2,259M Total DnVol 840M 52wk Highs 717 52wk Lows 22 TRIN 0.75 PUT/CALL 0.72 ================================================================= =========== Market Wrap =========== Markets Digest Economic News by James Brown Heading into the Thanksgiving holiday Wednesday's session began with investors selling the positive economic news before traders bought the dip midday and drove stocks into the green by the close. The early morning weakness was probably a matter of digesting the news of which there was plenty to go around. The buffet of reports was mostly positive and reaffirmed that the world's largest economy is indeed on the rebound. Since many believe the autumn market's gains were in anticipation of the news the actual announcements left little incentive to push stocks higher. As Art Cashin likes to say, the numbers were already baked in. World markets were mixed with Asian exchanges trading higher. The Japanese NIKKEI jumped 184 points to 10,144, reclaiming the 10K mark. European stocks were generally lower but losses were mild. The U.S. dollar ended the day weaker against the yen and the euro. This in turn helped push gold up to $402 an ounce intraday but gold futures closed the session at $398, up $5.60. The DJIA stretched its winning streak to three day in a row by adding more than 15 points to close at 9779. The NASDAQ Composite added 10 points closing at 1953. The S&P 500 index marked its fourth gain in a row edging up less than five points to 1058. The market's strength today was relatively broad based. Homebuilders, retail, airlines, drugs and transports were the weakest, all closing in the red but losses were mild. The best performers were gold stocks (XAU +2.9%) followed by software, networking, broker-dealers and oil service stocks. Market internals were positive for such a low volume day. Advancing stocks climbed past decliners 18 to 9 on the NYSE and 17 to 13 on the NASDAQ. Up volume was two to three times down volume on both exchanges. Chart of the DJIA Chart of the NASDAQ One of the most influential economic reports out today was the Chicago Purchasing Managers Index (PMI). The November figures hit a 9-year high at 64.1 percent. Estimates had been for a slight improvement to 56.3 percent from October's 55.0 percent. Numbers over 50 represent improvement in business conditions. One of the most compelling ingredients in the PMI was the new orders component, which jumped to 73.3 in November from 59.2 in October. The factory sector in this country has been lagging for years and we're finally seeing some month over month improvements. Unfortunately, we're not seeing factories up their hiring practices just yet as the employment component slipped from 53.1 to 48.5 percent. Investors were also treated to some strong consumer sentiment numbers per the University of Michigan report. The consumer sentiment index hit 93.7 in November up from 89.6 in October. This was the highest level since May 2002. Those surveyed felt optimistic as the current conditions component edged up to 102.5 in November up from 99 in October. The expectations component also made gains with November hitting 88.1 compared to 83.0 in October. The Durable Goods report was very bullish as well. The consumer has been carrying our economy but we're finally beginning to see signs that business will open their wallets soon. The Commerce Department said orders for durable goods, those made to last more than three years, rose 3.3 percent in October. This is great news but it gets sweeter when you also figure that September's numbers were revised higher to a 2.1 percent gain. October was the fastest pace in more than a year with the past six months soaring almost 10 percent. Wall Street focused on the core capital goods orders, which many view as a business spending forecast. The core capital goods orders rose 1.7 percent on top of September's 5.8 percent. It's about time corporations started spending some money because consumer spending was flat in October. Personal spending numbers were down 0.6 percent in September and remained unchanged in October despite a 0.4 percent increase in personal income. If you're a glass is half full type of person then the personal spending figures might show consumers taking a breather after a strong summer and now they're rested and ready for this holiday shopping season. Speaking of holiday spending the Federal Reserve released their Beige Book report and the authors seemed rather optimistic for this year's holiday retail sales. The Beige Book said the economy has continued to expand in October and early November (no surprise there) and that manufacturing was improving. While the authors were disappointed that factory hiring had not picked up they did feel that labor conditions were generally stable or improving nationwide. We see the same improving labor conditions in this morning's initial jobless claims. The Labor Department said jobless claims dropped another 11,000 to 351,000. This was the lowest level in jobless claims sine George W. Bush took office. The improving labor conditions will also be a boon for the already hot housing market. The October new home sales report was out this morning and sales slipped 3.5 percent to an annual rate of 1.105 million homes. Analysts were not concerned as October's sales still ranked as the fifth highest on record. Plus the Mortgage Bankers Association said mortgage applications grew for the second week in a row. Hardly a day goes by that we don't hear some new development in the ongoing mutual fund scandal. Today's news was a surprise as Bank One (ONE) reported late in the trading day that it expects the SEC to take enforcement action against the bank's mutual fund advisor. ONE is the country's sixth largest bank and hopes to reach a settlement with the SEC without litigation. All U.S. markets will be closed tomorrow for the Thanksgiving holiday. Friday will be a shortened trading day with both the bond market and the stock markets closing early. The commodities market will reopen on Monday. It could be a rather quiet session with no economic reports and probably very little volume as most major market players will be absent. Fortunately, the markets have a very strong historical trend of gaining on the Friday after Thanksgiving. I would not be surprised to see the VXO (old VIX) volatility index hit yet another new low as the afternoon bounce from today continues over into Friday. Personally, I want to say thank you to all of our readers. I encourage all of you to take time on Thursday to truly appreciate our freedoms we have in this country. If you are blessed enough to have family close by then give them a hug and let them know what you're thankful for. If not, then there is always the phone. I'm sure they'd be happy to hear from you. My heart also goes out to all of our brave men and women serving overseas no matter where you are. For those of you who have come home wounded, you have my utmost respect. Happy Thanksgiving! ================= 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 --------------------------------- TOT Total Sa (ADS) 80.40 +1.07 MO Altria Group Inc 51.90 +1.08 MER Merrill Lynch & Co 56.54 +0.56 E Eni Spa (ADS) 84.35 +1.05 CVX Chevrontexaco Corp 75.25 +0.68 WYE Wyeth 40.15 +2.40 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- CACC Credit Acceptance Corp 14.93 +1.10 CCRN Cross Country Healthcare 15.14 +1.19 SEAC Seachange Intl Inc 15.20 +1.05 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- RTP Rio Tinto Plc (ADR) 98.26 +2.76 TEVA Teva Pharm Ind 59.75 +1.45 AGN Allergan Inc 75.90 +4.14 HRB H&R Block Inc 53.41 +4.01 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- LLY Eli Lilly & Co 69.30 -1.37 DLTR Dollar Tree Stores Inc 31.63 -2.78 IMDC Inamed Corporation 77.36 -3.27 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- None ================================================================= 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 (c) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form
PremierInvestor.net Newsletter Wednesday 11-26-2003 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 ================================================================= In section two: Tech Stocks New Bullish Plays: NXTL Bullish Play Updates: ZBRA Active Trader (Non-tech) Bullish Play Updates: FLIR, JCP Bearish Play Updates: MCK High Risk/Reward Bullish Play Updates: HPC, JNPR, RAD, STLD Closed Bearish Plays: SLR ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Nextel Comms - NXTL - close: 92.88 change: -26.88 stop: 23.00 Company Description: Nextel has come a long ways since its humble beginnings as a radio dispatch company. Providing mobile phone service, two-way radio dispatch, and paging services to business users; all through one Motorola handset, the company is growing into a major digital wireless services provider. NXTL's digital network (Digital Mobile Network) constitutes one of the country's largest integrated wireless communications systems utilizing a single transmission technology. NXTL has specialized mobile radio spectrum holdings in and around every major business and population center in the U.S., including all of the top 50 metropolitan areas. Why we like it: After bottoming near $2.50 nearly a year and a half ago, shares of NXTL have had a major run, up tenfold in that period of time. The rise has been measured and steady over that period, with each breakout consolidating at higher levels and then repeating the process. After pulling back earlier this month, the stock began a strong launch on Monday and capped that off with a strong breakout today for a more than 3.8% gain. What is really puzzling about the stock's strength this week is that the government-mandated number portability was supposed to be a problem for the wireless carriers. NXTL's strength appears to be driven by a couple of factors this week. First up is the bad news from AT&T Wireless, as that competitor is having problems with new activations, with delays lasting up to 3 weeks. Consumers will go where they can get service and investors appear to be perceiving this as a win for NXTL. But more importantly, yesterday Moody's affirmed NXTL's ratings and changed their outlook from stable to positive. While an argument could be made for resistance near current levels, the weekly chart shows that the next significant resistance level is found near $30. Also, we need to be cognizant of potential resistance near $26, at the bottom of the February 2002 gap down. Issuing a series of buy signals since last March, the PnF chart looks strongly bullish and the only thing that really gives us any pause is the fact that the bullish price target from the PnF chart is $25, right where it ended Wednesday's rally. Chasing this rally higher doesn't seem to be the most prudent move right now, with price closing just above the upper Bollinger band. But any pullback into the $24.00-24.25 area looks like a great entry point on the rebound. There should now be strong support near $24, backed up by the 10-dma ($23.67), 20-dma ($23.80) and the 30-dma ($23.41). With all of that strong support, we can use a stop at $23 and target a rise up to the $30 resistance level, providing a very nice balance of risk to reward on the play. Annotated Chart of NXTL: Picked on November 26th at $25.27 Change since picked +0.00 Earnings Date 1/15/04 (unconfirmed) Average Daily Volume = 17.0 mln ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Zebra Tech - ZBRA - close: 63.16 change: +2.18 stop: 58.99*new* This week, ZBRA broke out of its latest bull flag and climbed to a new closing high. We're raising our stop to $58.69, just beneath 30-dma and the support that should now be offered by that bull flag. Conservative traders might raise their stops to their entry levels. All oscillators remain in bullish mode, with MACD turning up again, perhaps preparing to erase the bearish divergence that had been building. However, RSI and stochastics have been trending a long while in territory indicating overbought conditions and it may soon be time for ZBRA to consolidate or pull back and digest recent gains. Pullbacks and bounces from above $61.00 might make good entries, but be aware that volume has not been expanding with ZBRA's climb to new highs. That lack of confirmation concerns us somewhat, so forego pullback-and-bounce entries if volume should expand on the pullback and not expand on the bounce. Annotated Chart for ZBRA: Picked on Nov 19 at 60.20 Change since picked: +2.96 Earnings Date: 10/23/04 (confirmed) Average Daily Volume: 618 thousand ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- FLIR Systems - FLIR - close: 34.48 change: -0.22 stop: 32.00 FLIR is building a pattern of a breakout, then a consolidation day and then another breakout. Last Friday was the breakout that finally lured us into the play and after a brief consolidation on Monday, the stock launched higher to a new all-time high. Today's session saw the bulls challenge the $35 resistance level before giving in to some profit taking. FLIR dropped back shortly after the open to spend the rest of the day drifting between support at $34.25 and resistance at $34.50. Not exactly exciting. Friday's shortened session isn't likely to provide any more excitement either, as volume should be very light. But a brief dip back to the $34.00 or even $33.50 support levels might be just what we need for a fresh entry point. Of course, we don't want to just buy the dip. We need to wait for the rebound before entry. A breakout over $35 next week can be used for momentum entries, but with light volume, we don't expect that scenario to unfold on Friday. Maintain stops at $32. Picked on November 23rd at $33.90 Change since picked +0.58 Earnings Date 1/21/03 (unconfirmed) Average Daily Volume = 422 K --- J.C. Penney Co. - JCP - close: 25.08 change: +0.15 stop: 22.95 Wednesday's economic data showed that consumer spending remained flat in October according to a Commerce Department report, but that report breaks spending into durable and non-durable categories. Spending on non-durables increased 0.3 percent, while the spending on durable goods dropped 1.9 percent. Real disposable incomes increased 0.4 percent. These figures all met expectations and did not sway guest economists on CNBC from reiterating expectations for a strong holiday season. With retailer WMT remaining a drag on the S&P Retail Index $RLX.X, the index fell. JCP performed better, eking out its highest daily close since early 2002. While JCP managed a gain, however, it closed slightly below its open, printing its second doji or near-doji in a row. MACD remains bullish, but RSI and stochastics both hint at a slight flattening. JCP may need to consolidate or pull back to the braided averages near $24.00 before making a new assault on recent highs. Pullbacks and bounces from above $24.00 would be appropriate for new entries, but JCP is too close to our $28.50 target to consider new momentum entries on breakouts. Annotated Chart for JCP: Picked on Nov 21 at 24.45 Change since picked: +0.73 Earnings Date: 11/11/03 (confirmed) Average Daily Volume: 2.5 million -------------------- Bearish Play Updates -------------------- McKesson Corp. - MCK - close: 28.95 change: +0.26 stop: 30.30 Last Friday's sharp drop in shares of MCK looked like the precursor to a major breakdown, but with the rebound in the broad market, that elusive event has yet to arrive. The stock has been consolidating in a very narrow range this week, finding support near $28.50 and resistance at the converging 10-dma ($29.16) and 20-dma ($29.22). If this play is to perform as expected, then we'll need to see a rollover below those moving averages, leading to our expected breakdown. Remember, we're using a trigger at $28, so no positions should be taken before that breakdown occurs. Once the play has been triggered, our stop at $30.30 (just over the 11/14 high) should be sufficient to keep us out of trouble. Picked on November 23rd at $28.26 Change since picked +0.69 Earnings Date 1/22/03 (unconfirmed) Average Daily Volume = 1.71 mln ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Hercules Inc. - HPC - close: 10.40 change: -0.04 stop: 9.99 HPC keeps attempting to vault above our trigger, but hasn't yet been able to do so. RSI tilts over, perhaps indicating that HPC will need to retreat toward the grouped averages just below before making another assault on the trigger. The trading pattern we see is a bullish right triangle, with the most probable resolution of that pattern being an upside breakout. Since HPC has been coming closer to the trigger each day, it's possible that it could rise just high enough to trigger the play before falling back into the triangle to regroup. Verify that volume expands and confirms the breakout before entering. Annotated Chart for HPC: Picked on Nov 14 at 10.36 Change since picked: +0.04 Earnings Date: 10/30/03 (confirmed) Average Daily Volume: 864 thousand --- Juniper Networks - JNPR - close: 18.67 change: +0.04 stop: 16.90 It took a few days for our expected bounce to arrive, but JNPR launched higher on Monday and has been steadily adding to its gains through this holiday-shortened week. Key resistance at $19 is looming just overhead, reinforced by the midline of the ascending channel. A break above that point should have the bulls getting bolder and will set the stage for a rally up towards the top of the channel, now at $21. Intraday dips near the 20-dma ($18.21) have been finding buyers, so another rebound from that average looks good for new entries. Momentum entries can be considered on a break above $19, although it may be more prudent to wait for a push above the early November high ($19.38) before chasing JNPR higher. Raise stops to $17.20, which is just below last week's low, as well as the 50-dma ($17.31). Picked on November 19th at $17.69 Change since picked +0.98 Earnings Date 1/08/03 (unconfirmed) Average Daily Volume = 10.2 mln --- Rite Aid - RAD - close: 6.11 change: 0.02 stop: 5.75 RAD reported this week that sales of THE CAT IN THE HAT movie- related goods had been strong at RAD stores. RAD sells exclusive designs developed in partnership with Universal Studios. That may be good news for RAD investors, as front-of-the-store items have higher margins. RAD lists a number of other holiday gift items in its promotions, hoping to cash in on the expected strong holiday sales. Despite those expected strong holiday sales, retailers declined Wednesday, with drugstore companies such as RAD, WAG, and CVS all printing various versions of potential reversal signals. RAD's version was a gravestone doji, but RAD maintained prices above its 10-dma. Both RSI and stochastics still rise. Volume was only a little more than half average daily volume, typical of a consolidation day. Because of that doji, play participants or those considering entries might be watchful for an open Friday below the doji, as such an opening could signal a likely confirmation of the potential reversal signal. New participants should now wait until a volume-backed move over Friday's high, which would be a breakout above the descending trendline that had capped recent highs. We would like to see MACD turn up and volume expand on such a breakout. Others might prefer to wait for a breakout above the November 7 high of $6.33. Annotated Chart for RAD: Picked on Nov 05 at 5.95 Change since picked: +0.16 Earnings Date: 09/25/03 (confirmed) Average Daily Volume: 3.5 million --- Steel Dynamics - STLD - close: 20.32 change: +0.51 stop: 17.99 STLD climbed Wednesday on stronger-than-average daily volume, breaking back above $20.00 and achieving a new daily closing high. Volume had been rising throughout the week as STLD rose from its recently tested support. RSI turned up again and MACD hooked up, trying to make another bullish cross from above signal. US Steel (X) also gained, with X's gains made on double average daily volume. Although our STLD play can be volatile due to the geopolitical factors that impact it, we're feeling good about its performance. New entries can be found at intraday bounces from above its 10-dma. Annotated Chart for STLD: Picked on Nov 12 at 19.78 Change since picked: +0.54 Earnings Date: 10/22/03 (confirmed) Average Daily Volume: 359 thousand ============ CLOSED PLAYS ============ -------------------- Closed Bearish Plays -------------------- Solectron Corp. - SLR - close: 5.81 change: +0.30 Stop: 5.85 It is uncanny the frequency with which this market is delivering these one-day bear traps. SLR broke down last week, giving us the confirmation on the double-top pattern, with the stock trading as low as $5.11. That was as good as it got though, as the buyers appeared, helping the stock to consolidate just below $5.60 before today's more than 5% advance. While today's rally didn't quite trigger our stop, it seems clear that it won't take much to get the job done on Friday. Today's gain broke the 6- week descending trendline and pushed SLR over the 30-dma on a closing basis for the first time in over a month. There's no sense playing the wait-and-hope game. SLR went against us and it is time to cut bait. Picked on November 16th at $5.58 Change since picked +0.23 Earnings Date 12/22/03 (unconfirmed) Average Daily Volume = 5.41 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 (c) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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