PremierInvestor.net Newsletter Thursday 12-04-2003 section 1 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 one: Market Wrap: Warning Season Begins Watch List: LXK, XLNX, BLL, NFLX and more! Market Sentiment: Late Day Turn ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 12-04-2003 High Low Volume Advance/Decline DJIA 9930.82 + 57.40 9933.86 9865.78 1.84 bln 1563/1620 NASDAQ 1968.80 + 8.60 1971.25 1942.67 2.11 bln 1436/1748 S&P 100 527.56 + 3.14 528.01 524.42 Totals 2999/3368 S&P 500 1069.72 + 4.99 1070.37 1063.15 W5000 10431.96 + 29.60 10437.68 10362.72 RUS 2000 544.15 - 1.04 545.89 537.23 DJ TRANS 2938.02 - 1.50 2944.22 2914.20 VIX 16.30 - 0.33 16.83 16.29 VXO (VIX-O)16.56 + 0.26 17.37 16.50 VXN 26.81 - 0.53 27.45 26.70 Total Volume 4,264M Total UpVol 2,195M Total DnVol 2,018M 52wk Highs 444 52wk Lows 25 TRIN 1.05 NAZTRIN 1.11 PUT/CALL 0.72 ================================================================= =========== Market Wrap =========== Warning Season Begins It was a strange day in the markets with the opening bounce fading midday and taking the indexes down to initial support before a series of buy programs in the last hour rescued the bulls from a dismal fate. That rescue ran into trouble after the close with warnings from two companies that tanked the futures in the overnight session. Dow Chart Nasdaq Chart Russell-2000 Chart The bad news started early with a jump in Jobless Claims by +11,000 to 365,000 and an upward revision to last weeks numbers to +354,000. It was not a material bounce but we all know how traders count on new trends continuing. The two consecutive weeks of declines gave traders hope and the return to early November levels weakened those hopes. If the Nonfarm Payroll report was not tomorrow I do not think traders would have been so nervous. Continuing claims also rose to 3.38 million. Actually the internal numbers were great. 47 states and territories reported a drop in claims while only six reported increases. The overall decline in claims may have unintended consequences. It appears now that lawmakers will NOT vote for a fourth extension of benefits and that means over a million more workers will no longer have any unemployment income. This could further depress the retail sector as those on the bubble tighten their wallets even further. Also depressing sentiment was the lighter than expected Retail Sales for November. The monthly sales came in at +3.6% and slightly below already lowered estimates. The Discount stores, Wholesale Clubs and Drug Stores were the only real gainers. Apparel and Footwear lost ground from October. Estimates for December are for a +4% to +4.5% gain and while this is up from November it is still below the late summer months in the 5.5% range. Only a few stores said the post Thanksgiving sales were strong. Wal-Mart specifically did NOT mention post holiday sales and DID say sales in early November were stronger. Read between the lines and you can probably decide that last weekend was a disappointment for them. Complicating the situation was the fact that last November was the weakest month of the year for chain stores with December the second worst. This makes the comparisons much easier for the current period and they were only able to grow +3.6%. Does not look good for the retail sector. The Retail Index was down nearly -6% from the Dec-2nd high to today's lows. They did benefit from the end of day buy programs and bounced nearly +10 points off the 365.46 low. Also, more than half of retailers MISSED their November projections. The retailers said sales were slower due to lower inventory levels, fewer sale items and smaller promotions. Sounds like the retailers saw the decline coming. Leading the decline in the retail sector were WMT, HD, LOW, JCP, FD and ANN. Going against the trend was Target which gained nearly $1 on its results. National Semi announced earnings this morning and said profit was up tenfold on lower costs and strong sales from North America and the Asia Pacific region. Wall Street was expecting 32 cents and NSM posted 36 cents. NSM said they expected 4Q revenue to rise +3% to +5%. Suddenly traders were shocked back to reality and the stock dropped over -$3 on the news. Great sales, great profit but only +4% growth? Traders dropped it like a hot skillet and despite an end of day rebound it closed under $42 and well under yesterday's nearly $45 high. This put even more focus on Intel and their mid quarter update after the close. Intel shocked investors after the close and the shock could carry over to Friday's open. They raised their revenue range to $8.5B-$8.7B from $8.1B-$8.7B. ($8.4B avg to $8.6B) This is not what shocked investors because everyone had already expected them to raise the range. Many had hoped they would raise the upper end but Intel is smarter than that. They give the wide range in their first estimate and then adjust it to the center as the quarter progresses. What shocked analysts was the announcement of a $600 million charge for unsold inventory and good will in their wireless communications and flash memory business. They said growth in that business was less than previously expected. The charge will lower their earnings by six cents for the 4Q. Andy Bryant said they were seeing "normal" seasonal growth with good demand for processors. Analysts never want to hear that growth is normal. Intel dropped -$1 in after hours and all the other chip stocks followed suit. The problem is the perception of the charge. Intel would want you to believe it was "not normal business" and therefore their -6 cent earnings drop would not be a warning but an adjustment. Some analysts differ on that view. Since Intel is a chip company and that is a large portion of their business they feel at least a portion of the charge is "normal course" and represents a warning. Either way Intel still said the microprocessor business was still strong and strong enough to raise estimates slightly. With the NSM slow growth comments and the INTC earnings charge there is a good chance the semi sector will not be a leader to the upside on Friday. Another tech stock held an analyst update on Thursday but failed to update anything. IBM spent a considerable amount of time bragging on IBM and trying to suggest there was a tech revolution underway but in the end they never gave any revenue or earnings guidance. It was a pep rally for analysts and nothing of substance. This suggests this thought process. If they had any good news they would have wanted to give it. Companies only disguise the bad news. IBM rarely updates guidance in these analyst meetings so we really can't draw too any negative conclusions despite thinking about them. IBM did rise +1.12 after the dog and pony show. Jet Blue warned after the close saying that the airline industry was faced with a challenging revenue environment. They said capacity additions by the major carriers were producing lower fares and more vacant seats. Western routes were said to be under the greatest strain. Airlines have been under pressure from rising fuel costs and there are starting to be rumors of lower than expected bookings for the coming holiday travel season. This warning came after Raymond James cut Southwest Airlines (LUV) neutral from buy saying that drops in November airfares could continue into December. The Nortel CEO said that they expected to see some growth in the telecom sector in 2004 but they did not expect it to be strong. He said there was "no spending boom" in the near future. He also said prospects for Nortel's optical division were weak. NT dropped about 20 cents on the news to $4.40. Considering the downplay I thought this was a positive sign that investors had already priced in the bad news. Despite all the bad news the markets crawled out of the gates and picked up speed around 10:AM. The Dow moved over the critical 9900 level and reached initial resistance from yesterday at 9925 before stalling. For two hours the Dow struggled to cling to 9925 while the Nasdaq was heading lower. The Dow finally collapsed around 1:PM and fell to support at 9875. This was not a big drop but the fall from 9925 represented a lower high and the beginning of a potential roll over. The 9875 level was support Wednesday morning again Wednesday afternoon at the close. It began as support again this morning so the afternoon retest was a critical fourth test of support. The Nasdaq touched 2000 right on schedule on Wednesday and almost immediately started down as expected. It fell to a low of 1942 on Thursday, -59 points from the Wednesday high. That 1945 level was initial support and provided a resting place for over an hour before the rebound began. At exactly 3:PM we saw the first of three broad based buy programs hit the market and A/D line gained +1600 issues over the next hour. The rebound caught everyone by surprise and the speed of the program spikes left most speechless and stopped out of their shorts. The Nasdaq rebounded to early morning resistance at 1970, still well off the 2000 highs from Wednesday but +28 points off the lows and back in positive territory. There was speculation it was short covering before the Intel update and the Jobs Report on Friday. I don't buy this based on the three distinct buy programs and the breadth of each. I suspect it was funds putting November month end money to work ahead of any potential Santa Claus rally. There was also a rumor at 2:55 that MSFT was going to announce a huge share buyback and raise their dividend. MSFT stock jumped +2% in the last hour of trading and a new high for the month. The Dow was the real winner in terms of gains. The rebound off the 9875 support propelled it to a 9934 close and only 8 points below its intraday 19-month high of 9942 from Wednesday. While the Dow failed to touch 10,000 when the Nasdaq hit 2K it was now poised to make another try on Friday. I saw "was" because there are three big hurdles in its path. The first hurdle was the Intel earnings warning. Even if it was not a warning it was less than exciting for traders who were expecting just a boost in estimates. The S&P futures fell almost immediately to 1065.50, about -4 points off the close. The Nasdaq futures fell -10 points. Those levels have eased some as the dip buyers speculate on the morning Jobs report. The second hurdle is the Jobs report itself. The whisper number is about +200,000 jobs and the official estimates are for a gain of +140,000. This sets up the market for a potential disappointment much like the Jobless Claims today. Even if we get another gain in jobs of say +50K or so it will still be less than expected and not a vertical ramp into a wonderland of full employment. With the expectations so high we run the risk of any number being sold as already priced into the market. A really good number would be seen as negative because of the Fed meeting on Tuesday. It would be seen as accelerating the Fed's decision to raise rates or at least change their bias to raising rates. This is where a good number can be bad and a bad number can be good. Lately the good news has been sold as readily as the bad news so the bottom line is that flipping a coin for direction would have a better chance of success than guessing this outcome. The third hurdle is the continuing flood of terror alerts. It seems like every Thr/Fri we get another round of warnings about potential impending attacks. Tonight was no exception. I know that we have had a hundred warnings to every real event but they keep filling the airwaves with them because they are breaking news. Whether they come to pass or not there is always the fear by fund managers that months of gains could be wiped out on any real event only days before 2003 closes. This has got to be weighing on many managers and with the recent market weakness and the weekend approaching there may not be any incentive to be bullish Friday morning. I told you on Tuesday I expected a continued bounce this week to 9900/2000 and both occurred. I predicted a sell off in the Nasdaq once that 2000 level was touched and it played out as expected. I suggested that we would then see a dip into next week in preparation for any potential Santa Claus rally. The bounce back to 9934 at the close leaves us right on the verge of either a test of 10,000 before the decline begins or looking at an opening drop on the Intel news, or both. We have seen some serious selling in the Russell-2000 yesterday and today. The buy programs at the close erased an eight point drop on the Russell and brought it back to the 545 level but still down for the day. The Russell tends to be a leading indicator for fund movement. When they decide to exit many funds dump the smaller and less liquid small caps first. The -12 point drop from yesterday's highs, (-20 at the lows for today), is a significant drop. However, one funds exit could be another's entrance. We will not know until real support is violated at 520 and that is several days away even in a directional market. This is just something else to keep your eye on. One measure of market internal strength is the new 52-week highs. I mention this often because it shows the breadth of the market leaders. A decline in the new highs means the leaders are losing support. On a day where the Dow closed at a new two-year high you would expect the new individual highs to be strong. Beginning with Monday the new highs across all markets were 1254, 1113, 902 and today only 444. To put that in perspective the Dow failed to break 9900 on Monday or Tuesday but new highs were over 1100 each day. Yesterday and today when the Nasdaq and Dow hit new highs the individual stock highs were dropping drastically. The new highs today were only 1/3 of the new highs on Monday. Does that indicate continued bullish internals to you? The market direction for Friday will be determined by the Jobs Report, fear of the Fed and whatever damage is remaining from the Intel news tonight. The Nikkei opened down nearly -70 points but recovered to even in the first hour. No obvious indication of Intel concern there. If I were flat tonight I would find it very hard to go long on Friday. With very strong resistance at 10,000 just ahead and known resistance at Nasdaq 2000 I just do not see a compelling reason to buy stocks. Odds are much better we can buy them cheaper next week as warning season accelerates. Enter Very Passively, Exit Very Aggressively! Jim Brown ================================================================== 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 --------------------------------- Lexmark Intl. - LXK - close: 77.20 change: +0.96 WHAT TO WATCH: Pulling back to confirm support at the 20-dma on Thursday, LXK looks poised to take another run at the $80 resistance level. A breakout above there could have the stock challenging $90 going into the end of the year. Conservative traders will want to wait for that breakout before playing, while those with a more aggressive stance can enter on bounces from above $75. Use a tight stop just under the 30-dma. --- Xilinx, Inc. - XLNX - close: 37.62 change: +0.88 WHAT TO WATCH: If you think there's more upside in the Semiconductor rally, then XLNX looks like a good strong horse to ride. There was plenty of volatility on Thursday, but if investors can shake off their disappointment over the INTC news tonight, a breakout could be in the offing ahead of the weekend. Use a trigger over $38 and target a rally into the $41-42 area. --- Ball Corp. - BLL - close: 58.80 change: +1.49 WHAT TO WATCH: Blast off! Shares of BLL really went vertical over the past couple sessions, with the assistance of rising volume. This move looks a bit extended to chase higher, especially with the stock nearing its all-time high of $59.22. But a pullback and rebound from new support near $57 should set up a nice continuation entry ahead of the real breakout to new all-time highs. --- Netflix - NFLX - close: 48.04 change: -1.73 WHAT TO WATCH: What goes up, must come down. NFLX had an amazing rally over the past year, but clearly it was too far, too fast. Investors are confronting that reality and NFLX is pulling back. Thursday's drop halted right at the 50-dma, but that looks like a temporary pause on the way to testing support at $44. That level should also fall to the bears' assault, and will open the door to a drop towards the $40 level. Aggressive entries can be taken on a rebound failure below $50, while the more conservative approach will be to wait for a break below $44. =================== On the RADAR Screen =================== LF $27.36 - Competition is cramping LF's style and the pain can be seen in the price chart as shares of the children's education company have fallen precipitously since mid-October. Another breakdown arrived on Thursday, with LF ending at its lowest level since May. Continued weakness should have the stock making its way towards the $24-25 area and possibly falling all the way to the $22.50 level. DLTR $29.99 - The discount Retailers have not been doing well lately, and DLTR has been right in the thick of the selling frenzy. Today the stock broke below its 200-dma and that opens the door for a continued slide down to next strong support at $25. Look for a possible rebound off the $28 level, which could set up new entries on a rollover below the 200-dma. SUNW $4.54 - Fans of the underdog will love this one. SUNW has been beaten down by just about every form of competition imaginable in the past few years, but the stock is actually making an attempt at a recovery, breaking out to new multi-month highs on Thursday. This one is only for the aggressive players out there, but those with the stomach can target a rally towards the $5.50 level, where the stock topped out in June. =============================== Market Sentiment =============================== Late Day Turn - J. Brown Bears seemed almost gleeful at the intraday weakness today but victory was snatched from their jaws with a late day turnaround that pushed the DJIA back to 9930 and the NASDAQ back to 1968. Market internals were mixed but generally bearish. Advancing stocks slipped below declining stocks 1393 to 1410 on the NYSE and 14 to 16 on the NASDAQ. Up volume tripped below down volume on the NYSE by a close margin but out paced down volume on the NASDAQ. Airlines and Gold stocks suffered the heaviest selling while investors found strength in Oil Service stocks and Natural Gas issues. Odds are good that Airlines stocks (XAL) will see new weakness tomorrow. After the bell JetBlue Airways (JBLU) warned and lowered its margins for the current quarter. Meanwhile chip stocks might lead the way lower for tech tomorrow as investors were not happy with Intel's mid-quarter update tonight. The SOX index had pulled back to the 500 level and bounced but we wouldn't be surprised to see it test its 50-dma soon near 485. Investor sentiment is certainly mixed. The early holiday cheer on December 1st has faded replaced by concerns that retailers may not be doing as well as expected. Wal-Mart continues to see declines on extremely high share volume. Tech-retailer Best Buy helped lead the decliners behind Abercrombie & Fitch, who had reported a 13% decline in November same-store sales. The big focus tomorrow will be the employment report. Will the small up tick in the ISM employment component translate into new jobs overall? And how will these numbers affect the Fed's decision next Tuesday on interest rates? These are the questions currently on investors' minds. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9933 52-week Low : 7197 Current : 9930 Moving Averages: (Simple) 10-dma: 9787 50-dma: 9700 200-dma: 9027 S&P 500 ($SPX) 52-week High: 1071 52-week Low : 768 Current : 1069 Moving Averages: (Simple) 10-dma: 1056 50-dma: 1042 200-dma: 970 Nasdaq-100 ($NDX) 52-week High: 1453 52-week Low : 795 Current : 1432 Moving Averages: (Simple) 10-dma: 1414 50-dma: 1398 200-dma: 1237 ----------------------------------------------------------------- Without any follow through on the recent selling these "fear" indices remain near extreme lows. We're still susceptible to stronger declines. CBOE Market Volatility Index (VIX) = 16.30 -0.33 CBOE Mkt Volatility old VIX (VXO) = 16.56 +0.26 Nasdaq Volatility Index (VXN) = 26.81 -0.53 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.72 682,634 489,126 Equity Only 0.57 584,895 330,837 OEX 0.79 21,062 16,645 QQQ 1.13 25,084 28,372 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 73.8 + 0 Bull Confirmed NASDAQ-100 74.0 - 1 Bear Correction Dow Indust. 80.0 + 0 Bull Correction S&P 500 81.8 + 0 Bull Confirmed S&P 100 80.0 + 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-dma: 0.95 10-dma: 0.96 21-dma: 1.12 55-dma: 1.12 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 1393 1418 Decliners 1410 1651 New Highs 199 182 New Lows 10 12 Up Volume 872M 1075M Down Vol. 920M 972M Total Vol. 1806M 2082M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 11/18/03 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 Will it never end? The commercial traders refuse to move any positions or make any more big bets in the full S&P futures contracts. They've been oscillating in the current range for weeks. Small traders have bumped up both their short and long positions but they remain relatively equidistance from each other. Commercials Long Short Net % Of OI 10/28/03 391,596 412,498 (20,902) (2.6%) 11/04/03 391,079 415,136 (24,057) (3.0%) 11/11/03 389,965 415,259 (25,294) (3.1%) 11/18/03 393,893 414,442 (20,549) (2.5%) 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 10/28/03 137,791 76,791 61,000 28.4% 11/04/03 137,829 78,206 59,623 27.6% 11/11/03 136,072 74,249 61,823 29.4% 11/18/03 147,842 80,047 67,795 29.7% 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 The e-minis are seeing some action. Commercials upped their short positions but not by too much. Small traders also raised their short positions by 10K contracts (almost 20% of outstanding shorts). Commercials Long Short Net % Of OI 10/28/03 220,171 260,644 (40,473) ( 8.4%) 11/04/03 242,409 270,785 (28,376) ( 5.5%) 11/11/03 249,864 258,503 ( 8,639) ( 1.7%) 11/18/03 249,286 264,083 (14,797) ( 2.9%) 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 10/28/03 123,569 59,742 63,827 34.8% 11/04/03 135,525 63,006 72,519 36.5% 11/11/03 94,649 51,815 42,834 29.2% 11/18/03 95,119 61,975 33,144 21.1% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders are still stuck in limbo with outstanding longs and shorts in NDX futures barely budging the last few weeks. Meanwhile small traders have turned more bullish with a nice jump in outstanding long positions. Commercials Long Short Net % of OI 10/28/03 36,168 46,272 (10,104) (12.3%) 11/04/03 34,159 48,293 (14,134) (17.1%) 11/11/03 35,889 49,201 (13,312) (15.6%) 11/18/03 35,608 49,689 (14,081) (16.5%) 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 10/28/03 21,640 8,830 12,810 42.0% 11/04/03 24,132 9,703 14,429 42.6% 11/11/03 26,212 10,730 15,482 41.9% 11/18/03 32,034 10,356 21,678 51.3% 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 Ditto here as well...commercials are not making any new big bets and keeping the number of long and short contracts relatively unchanged. Small traders appeared to have scaled back on longs and inched up their shorts. Commercials Long Short Net % of OI 10/28/03 20,504 11,366 9,138 28.7% 11/04/03 21,756 11,903 9,853 29.3% 11/11/03 20,209 11,660 8,549 26.8% 11/18/03 20,746 11,080 9,666 30.4% 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 10/28/03 5,295 8,864 (3,569) (25.2%) 11/04/03 5,099 9,160 (4,061) (28.5%) 11/11/03 6,105 8,201 (2,096) (14.7%) 11/18/03 5,655 8,607 (2,952) (20.7%) 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 12-04-2003 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: Breakdown! Stop Loss Adjustments: SLAB, FLIR Stock Split Announcements: ACET 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 ) =============== Silicon Labs. - SLAB - close: 46.55 change: -1.63 stop: 48.50*new* Company Description: Silicon Laboratories designs, manufactures and markets proprietary high-performance mixed-signal integrated circuits (ICs) for the wireless, wireline and optical communications industries. The company initially focused its efforts on developing ICs for the personal computer modem market and is now applying its mixed- signal and communications expertise to the development of ICs for other high growth communications devices, such as wireless telephones and optical network applications. Why we like it: There's no escaping the fact that the bullish tone in the markets really hasn't begun to crack. So if we're going to play the downside, we need to zero in on pockets of relative weakness. The Semiconductor index (SOX.X) has definitely been a source of relative strength, leading the NASDAQ to graze the 2000 level on Wednesday before the late-day reversal. The SOX stretched up to the $535 resistance level again before being sent sharply lower in the final two hours, losing 1.44% on the day. This could be the beginning of a significant rollover in the SOX, but we need to pick on a relatively weak stock in the sector until there are more concrete signs of weakness. SLAB fits that bill, having been in a persistent downtrend since late October. The stock seemed to find support near the $45 level in late November and staged a decent rebound. But the buyers ran out of gas just below $50 and SLAB rolled over just under the 20-dma (now at $49.51. The PnF chart went bearish in early November and the current bearish price target is $39, giving the stock room to fall. But in order to really get moving to the downside, the bears are first going to have to overcome support near $45.75, which is both the site of the ascending trendline from the 9/30 and 11/20 lows, as well as the 100-dma ($45.80). Additional support will be found at $45, which is the location of the PnF bullish support line. Once SLAB breaks these measures of support, it could be a swift trip down the charts, with next significant support coming in at $40 and then $38. There should now be strong resistance in the $47.50-48.50 area, so aggressive entries can be taken on a failed bounce below that zone. More conservative traders will need to wait for a break of the trendline or even a drop under $45 support before playing. We'll target a drop into the $39-40 area as our optimum exit point, while using an initial stop at $50, just over the top of last week's failed rally. Why This is our Play of the Day Talk about arriving just in the nick of time, our SLAB play sure performed nicely out of the gates on Thursday. The stock had been trading poorly relative to the overall Semiconductor index (SOX.X) and looked ready for a breakdown under the $45.75 trendline and then $45 support. That breakdown arrived early on Thursday, as the stock plunged in response to some pretty heavy selling on the SOX. There was a late-day rebound in both the SOX and SLAB, but not nearly enough to undo the technical damage inflicted, with SLAB closing well below the broken $45 support level as well as the 100-dma ($45.92). Look for this rebound to fail below the dual measures of resistance at the broken trendline and the 100- dma, and that will be the cue for initiating new positions. The way the stock snapped back from its intraday low just below $43 hints that breakdown entries below that level are probably not the most prudent strategy. Remember, our first target on the play is in the $39-40 area, at which point, it would be wise to take those gains off the table. If this breakdown is the real deal that we think it is, the stock shouldn't have the ability to reach the 20- dma (now at $48.95). We're lowering our stop to $48.50 tonight, which will be above the 20-dma by tomorrow. Annotated Chart of SLAB: Picked on December 3rd at $46.55 Change since picked -2.29 Earnings Date 1/19/04 (unconfirmed) Average Daily Volume = 1.24 mln ================================================================= Stop Loss Adjustments ================================================================= SLAB - short Adjust from $50.00 up to $48.50 FLIR - long Adjust from $32.65 up to $33.20 ================================================================= Stock Split Announcements ================================================================= Announcements ------------- ACET markets a 3-for-2 split and increases dividend by 11% During today's session, Aceto Corporation (NASDAQ:ACET) announced that its Board of Directors has approved a 3-for-2 stock split of its common shares and a new cash dividend of $0.17, which is an 11% increase over last year's dividend (to be paid semi-annually). The payable date for the stock split is set for January 2nd, 2004 to shareholders on record as of December 17th. Fractional shares of the stock split will be paid in cash. After the stock split ACET will have approximately 15.7 million shares. The cash dividend will be paid on January 2nd, 2004. About the company: Aceto Corporation, which was incorporated in 1947, is a global leader in the distribution and marketing of pharmaceutical and specialty chemicals used principally in the agricultural, color, pharmaceutical, surface coating/ink and general chemical industries. With offices in nine countries, Aceto Corporation distributes over 1,000 chemicals in these and other fields. For more information, please visit www.aceto.com. (Source: Company Press Release) ================== 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 VZ Verizon Communications 33.19 +0.95 CVX ChevronTexaco 77.78 +1.68 SBC SBC Communications 24.01 +0.86 COP ConocoPhillips 59.63 +1.23 BLS Bellsouth Corp 27.43 +0.74 GM General Motors 46.48 +0.94 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- SBL Symbol Technologies 15.81 +1.19 ISSX Internet Security System 18.60 +1.80 ORB Orbital Sciences 11.01 +1.17 OMCL Omnicell 15.01 +1.85 LCAV LCA-Vision 19.60 +1.99 TRCI Technology Research 19.92 +2.55 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- QCOM Qualcomm 49.10 +4.63 DCX DiamlerChrysler 41.07 +1.63 NOC Northrop Gruman 94.42 +2.54 BR Burlington Resources 53.56 +2.47 APD Air Products & Chemicals 50.55 +1.45 UCL Unocal Corp 33.75 +1.32 ASD American Standard Cos 101.58 +1.82 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- BBY Best Buy Co 54.20 -3.22 SNDK SanDisk Corp 68.41 -3.49 FDO Family Dollar Store 34.88 -2.22 CECO Career Education 36.54 -2.94 JBLU JetBlue Airways 31.38 -1.37 CHS Chico's FAS Inc 34.69 -2.18 COCO Corinthian Colleges 57.52 -4.56 ANF Abercrombie & Fitch 24.75 -2.53 ICST Integrated Circuit Systems 27.04 -1.59 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- S Sears Roebuck 52.64 -2.22 NSM National Semiconductor 41.88 -1.62 FD Federated Dept Stores 48.54 -1.07 XMSR XM Satellite Radio 23.36 -1.33 APPX American Pharma 33.78 -2.52 WPI Watson Pharmaceuticals 47.26 -0.65 CYN City National Corp 62.44 -0.86 URBN Urban Outfitters 35.69 -2.52 ================================================================= 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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