PremierInvestor.net Newsletter Tuesday 12-09-2003 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: Considerable Period Watch List: INTC, QLGC, UNP, HD and more! Market Sentiment: Fed Stays, Investors Don't ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 12-09-2003 High Low Volume Advance/Decline DJIA 9923.42 - 41.90 10003.12 9916.90 1.79 bln 1257/1954 NASDAQ 1908.32 - 40.50 1956.97 1906.84 1.80 bln 990/2249 S&P 100 524.15 - 3.52 529.14 523.63 Totals 2247/4203 S&P 500 1060.18 - 9.12 1071.94 1059.16 W5000 10326.70 - 98.50 10449.94 10318.40 RUS 2000 534.54 - 8.50 544.85 534.26 DJ TRANS 2920.92 - 8.60 2948.66 2919.74 VIX 17.63 + 1.09 17.80 16.56 VXO (VIX-O)17.08 + 0.77 18.00 16.40 VXN 28.32 + 0.77 28.47 27.35 Total Volume 3,946M Total UpVol 955M Total DnVol 2,949M 52wk Highs 617 52wk Lows 33 TRIN 1.38 NAZTRIN 1.61 PUT/CALL 0.73 ================================================================= =========== Market Wrap =========== Considerable Period That was not how long the Dow lingered over 10,000 on Tuesday. The hang time was far less than two minutes and the result was exactly what I had expected. The Dow slipped back to 9960 and held there until after the Fed announcement. There was a valiant effort to hit D10K once more after the announcement but that effort fell short by .46 of a point. Close enough for me and it was close enough for the sell programs as well. Wilshire-5000 Chart - Daily Dow Chart - Daily Nasdaq Chart - Daily The morning opened with a mission and that mission was to hit D10K and put that target behind them. Many of the traders on the floor at the NYSE brought their Dow 10000 hats with them to work today. Does that give you a clue that the fix was in? Once that mission was accomplished in the first ten minutes of trading investors were left to focus on economic reports and wait for the Fed. The economics were not pretty. The Weekly Chain Store Sales dropped -2.5% compared to -0.1% the prior week. This was the biggest drop in sales in three years. The excuse was the snow in the Northeast despite the early reports that stores were packed over the weekend even with the snow. Somebody is wrong. If stores were packed in the Northeast then they must have been vacant elsewhere. There are definitely some conflicting signals in the retail sector and there are some signs of rising prices making discounting difficult. The second report was the Richmond Fed Manufacturing Survey and it also disappointed with a +11 compared to last months +20. If you will remember it was just yesterday that the Kansas City Fed Survey fell from +28 to +6 with some nasty drops in the internals. The Richmond Fed Survey showed that Shipments fell from 20 to 11 but New Orders rose from 6 to 14. This was more neutral than the Kansas City Fed number but still a drop. Production on the Kansas survey fell to 6 from 28, Shipments to -1 from +21, New orders to 14 from 29. The Kansas survey was not positive in any respect from my view. With the Richmond Fed Survey confirming the Kansas numbers it should not take a rocket scientist to conclude the recovery is slowing. This weighed on the markets but with the Fed meeting underway the focus was on the 2:15 announcement and not the economics. The Fed announcement had the potential to be the economic trump card and nobody was making any bets until that card was shown. The Wholesale Trade report which showed a sharp increase in sales also failed to lift the markets. Sales were up +2.0% and inventories were up +0.5%. This was an October number so the revelation was old news and not earth shaking. There was a sharp drop in the inventory to sales ratio to 1.18 and an all time record low. I have conflicting thoughts about that. First, it suggests that there is a huge inventory build somewhere in our future. Second, it makes me wonder where the inventory is going to come from for 4Q sales. You can't sell it if you do not have it and the two Fed surveys show that nobody was making any in November. If demand were suddenly to surge there would be a strong inventory short squeeze and you know who would get squeezed. The consumer would end up paying more if retailers are fighting for the product. Remember Chicken Dance Elmo last year? They were selling for 2-3 times retail on EBAY because the stores had no inventory. The Dow had plenty of support this morning or the pull back would have been much worse. GM soared +1.50, bringing to almost $5 the last week's gain after they said their pension returns were +14% for the last year. They only need +8% to keep them fully funded and +14% is almost twice that amount. Two years ago their $44 billion pension liability was the topic of conversation constantly and how would they ever recover. Evidently a little Fed liquidity injection and a nine-month bull market was all it took. It also did not hurt having an upgrade from Goldman Sachs to provide some short covering urgency. UTX, GE and MMM also helped boost the market as each made new highs for the month and new 52-week highs in the case of MMM and UTX. Unfortunately they all closed well off their highs. Dow component HPQ tried hard to help out with an upbeat forecast but HPQ ended up in the red. Fiorina said HPQ expects to grow its earnings +20% per year in 2004 and beyond. I listened to an in-depth interview with her on Kudlow-Cramer tonight and I was impressed. She took the hardball questions and the comparisons with IBM and DELL and really surprised me with the answers. I have to admit I never thought I would buy HPQ due to years of lackluster performance by CPQ tainting my memory but I was impressed. She has taken the enormous heat from the merger and even before that and has not wilted. I am thinking about adding HPQ to our TOP 50 Stocks for 2004 Special Investor Guide as a wildcard play. I have to do some more research but if what she said was true there is plenty of upside potential there. One thing Fiorina did say negative was there is no bounce in IT spending in the 4Q. She said there was no end of year flush the excess budget buying as in years past. She also said IT spending in 2004 was likely to be flat at maybe twice the GDP. Assuming the GDP is 4.5% that keeps the IT spending under 10% growth and does not suggest a strong IT recovery. This could have helped accelerate the Nasdaq slide and at -40 points it was definitely downhill. The biggest news of the day was of course the Fed meeting. The answer to the $64 trillion question was, yes. They kept the "considerable period" statement in the forecast and gave the markets a holiday gift. At least that is what they thought they were doing. In order to leave it in they played with the context and the preface to that statement to give them some wiggle room. The initial reaction was positive and the Dow soared back to 9999.56 again but once the impact filtered through it was lights out for the bulls. It is not that there was anything bad in the statement and in reality it was just one factor in the D10K sell off. One analyst suggested maybe they are telling us the economy is not as strong as we thought. I seriously doubt it but that view was making the rounds. Of course they do have inside data we do not have so it could take a couple more months to know for sure. Here is the text of the statement: The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period confirms that output is expanding briskly, and the labor market appears to be improving modestly. Increases in core consumer prices are muted and expected to remain low. The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. However, with inflation quite low and resource use slack, the Committee believes that policy accommodation can be maintained for a considerable period. The key points are "output expanding briskly, labor market improving modestly, prices low". All three of those items are past tense if we are to believe the recent economics but that is not the problem. The problem was "unwelcome fall in inflation has diminished" and "with inflation quite low and resource use slack". With these words they sank the bond market and suggested that contrary to the explicit English there could be a rate hike in our March future. If deflation fears have diminished then inflation, which is already beginning to appear, could rise quickly. As long as the larger risk was deflation the bond market felt safe with their long term investments. The inflation statement put a qualifier on the "considerable period" sentence. Reading between the lines it says if we see inflation rising and/or an uptick in capacity utilization then all bets are off. This was always implied in past Fed stances but by adding the inflation tag line to the considerable period context they set the stage for a faster exit from accommodation if needed. Bonds crashed on fears that the inflation trigger could be pulled at will and they no longer had the "considerable period" of safety despite those words in the announcement. Ten-year yields jumped from 42.09 at the announcement to 43.52 at the close. This almost completely retraced the drop from Friday which was the biggest one day drop since Jan-2002. Easy come, easy go. The capacity portion of the announcement does not really produce any worry. The Fed seldom raises rates in these situations until the capacity utilization is over 80%. It is currently only 75% and should take many months to rise to the 80% level. Durable goods utilization is only 70.5%. With this much excess capacity it is tough to make the "risk of deflation has been minimized" argument. But then the Fed said it so it must be true or at least that is the way the bond market reacted. The stock market reaction after the announcement probably had more to do with the touch of Dow 10,000 than it did with the Fed but there always has to be an excuse. Nobody expected the Fed to raise rates and very few people expected the Fed to leave the phrase alone. The Fed performed as expected and investors simply sold the news. There were seven sell programs and only two buy programs in the 30 minutes after the announcement. Obviously institutions were ready and waiting and hoping for a post announcement spike to provide the volume to exit safely. The Dow effectively made a double top today at 10,000 intraday and failed both times. While it looks spectacular on the charts it is not material until we see what follow through appears. The real key is the next support level. Dow Intraday Chart Dow 30 min Chart The Dow held 9850 since Dec-1st and that is strong support. The -41 drop today was nothing and only brought it back to the top of last weeks range. It only appears more important because of the touch at 10,000 and the dramatic post meeting drop. The Dow has three critical levels of support at 9850, 9725 and 9600. The odds of 9850 being tested are good. 9725 is possible and 9600 would be only a remote possibility before the Santa rebound. While I expect a serious bout of profit taking in January I also expect us to remain range bound between 9700-10000 until year end. There is too much support below and too much overhead supply between 10000 and 10200 to break out of either side of the range. At least that is the model I am going with today. The way this market has been acting anything is possible. The more important breakdown today was the Nasdaq. The Nasdaq broke a level of serious support at 1925 (50 DMA) and appears headed to 1880. It was barely able to remain above 1900 at the close. While the 50 DMA was never the strong support for the Nasdaq as it has been for the Dow it was still a market milestone. The 100 DMA at 1850 would be the next crucial test but baring a disaster before the holidays I would be surprised to see it tested. Nasdaq Chart 60 min For the balance of the week the markets need to find a sector to lead the way back to neutral. Chips led the Nasdaq down with Intel dropping -10% since last Thursday. The SOX broke its 50 DMA which HAS been support since March. This is a critical test for the techs. The bank index dropped to a new low for the month on warnings from Washington Mutual and National City that mortgage loan demand was down and corporate borrowings were declining. Home builders dropped like a rock on the mortgage news despite record earnings by HOV and raised guidance. There were comments making the rounds that the outlook for the first quarter was softer than originally thought. Even the Biotech index was sliding on problems with the drug pipeline. The only economic report for Wednesday is the weekly Mortgage Application Survey which could help or hurt the homebuilder sector depending on the results. That leaves the markets free to focus on any new earnings warnings. The Nikkei opened down -200 points on our performance and our futures are down slightly at 8:PM. Thursday and Friday the pace of the economics releases picks up and you can bet there will be some more rehashing of the Fed statement until every word has been dissected hundreds of times. I am still expecting a slight pullback this week and then a rebound into the holidays. Use the support levels I outlined above to plan for that rebound. The wildcard is the profit taking by institutions. Eventually somebody is going to pull the trigger that fires the starters gun and the race will be on. I am just betting that it does not get serious until January. I am hoping that the majority of funds will hold out hoping for one last bounce into the end of year retirement contributions and a chance to push tax consequences into 2004. This is obviously just speculation based on historical trends but so far the script has played out as we expected. For the rest of the week I would be patient about entries and let prices come to you. 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 --------------------------------- Intel Corporation - INTC - close: 30.25 change: -1.39 WHAT TO WATCH: After channeling steadily higher for months, INTC broke down out of that channel on strong volume on Tuesday and the break indicates more downside is in store. While momentum entries below the $30 level should work just fine, a failed bounce and rollover below the bottom of the broken channel near $31.50 would be even better. Target a drop towards the 200-dma near $24.50. --- Qlogic Corporation - QLGC - close: 51.45 change: -1.00 WHAT TO WATCH: Traders looking for a dip to buy in the Semiconductor arena would be hard-pressed to find a better candidate than QLGC. While the stock fell in sympathy with the SOX, and it has given a PnF Sell signal, the stock is sitting right on its bullish support line, which is just above the rising trendline from October 2002, as well as the 100-dma. But the dip near $50-51 and look for a rebound back to the $56 area, using a stop just below the 200-dma. --- Union Pacific - UNP - close: 66.09 change: +0.75 WHAT TO WATCH: Not everything was mired in the red on Tuesday, as UNP surged to a new multi-year closing high, defying even the DOW Transports' negative close. While it is possible that we'll see a near-term pullback to confirm support in the $64-65 area (which would make a solid entry point on the rebound), it looks like UNP is in the early stage of a breakout move that should take the stock up to strong resistance in the $72-73 area. Momentum entries can be considered on bullish continuation above $66.50 --- Home Depot - HD - close: 34.04 change: -0.66 WHAT TO WATCH: Housing stocks got slammed on Tuesday in response to the selloff in bonds, so it is no surprise that shares of HD were weak as well. The stock recently rolled over from the top of a multi-year descending channel and appear headed back towards the $31-32 support area. While entries near current levels don't really make sense, a failed rebound back near the 50-dma (just under $36) would likely set up a favorable entry for the ride down. =================== On the RADAR Screen =================== EMN $38.75 - Despite the carnage in the rest of the market, shares of EMN soared on Tuesday and on volume that nearly doubled the ADV. While a near-term pullback can be expected to test support now at $37, this looks like the early stage of a breakout move, especially with the new PnF Buy signal. Once over $40 resistance, look for EMN to make progress towards strong resistance in the $44-46 area. BBY $52.82 - What happened to the holiday cheer? It wasn't that long ago that BBY was threatening to break out of the top of its rising year-long channel. After the heavy selling of the past week, capped off by today's 2.6% slide, shares of the electronics retailer are threatening to break down out of that channel. Use a trigger at $52.50 and look for that breakdown to fall quickly to the $49-50 area, with potential downside to $45-46. MER $55.25 - Financial stocks are giving up their recent strength and are starting to make strides towards lower levels. MER is right on the verge of a breakdown and if it breaks below $54, then it appears to have easy downside to $51.50 and possibly $50. Wait for the breakdown and use a stop just over the 50-dma at $57.09. =============================== Market Sentiment =============================== Fed Stays, Investors Don't - J. Brown The FOMC announcement tonight was upstaged by the DJIA touching 10,000 again for the first time since May 2002. There was a brief dip as traders did some profit taking but the INDU managed to hold its gains until the Fed announcement. The NASDAQ wasn't so lucky. Overall the feeling among professional traders is to hold on to their gains through the end of the year. That doesn't mean they won't by the dip again but the DJIA has plenty of room before it finds new support. The NASDAQ looks a lot worse for wear. The tech heavy index dropped more than two percent and broke its simple 50-dma. Furthermore, with the SOX also breaking down and the chips like to lead the tech sector. I would expect the NASDAQ to test support at 1880 again. Looking at the daily chart we see a strong bearish divergence in its MACD stretching back to September. This could be the dip we need to prep the markets for a Santa Claus rally but that could just be wishful thinking. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10003 52-week Low : 7197 Current : 9923 Moving Averages: (Simple) 10-dma: 9863 50-dma: 9735 200-dma: 9057 S&P 500 ($SPX) 52-week High: 1074 52-week Low : 768 Current : 1060 Moving Averages: (Simple) 10-dma: 1063 50-dma: 1045 200-dma: 973 Nasdaq-100 ($NDX) 52-week High: 1453 52-week Low : 795 Current : 1383 Moving Averages: (Simple) 10-dma: 1419 50-dma: 1403 200-dma: 1243 ----------------------------------------------------------------- Given the drop in the major indices we're surprised that the volatility indices didn't jump higher. CBOE Market Volatility Index (VIX) = 17.63 +1.09 CBOE Mkt Volatility old VIX (VXO) = 17.08 +0.77 Nasdaq Volatility Index (VXN) = 28.32 +0.77 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.73 770,383 559,394 Equity Only 0.56 611,586 340,208 OEX 1.10 27,228 30,007 QQQ 1.45 34,499 50,011 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 74.5 + 1 Bull Confirmed NASDAQ-100 68.0 - 6 Bear Correction Dow Indust. 80.0 + 0 Bull Correction S&P 500 81.2 - 1 Bull Confirmed S&P 100 80.0 + 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-dma: 1.33 10-dma: 1.13 21-dma: 1.17 55-dma: 1.15 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 1083 927 Decliners 1753 2174 New Highs 352 101 New Lows 13 12 Up Volume 509M 376M Down Vol. 1217M 1385M Total Vol. 1740M 1778M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 12/02/03 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 Long and short interest continues to flat line from the commercial traders. Everyone seems to be waiting for the year to end before changing their bets. Small traders have grown slightly more optimistic. Commercials Long Short Net % Of OI 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%) 12/02/03 394,531 414,223 (19,692) (2.4%) 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 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% 12/02/03 154,788 85,776 69,012 28.7% 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 Wow! We're actually seeing some action here in the e-minis. Commercial traders have reversed from being net short to net long. This is bullish news. Small traders have added strongly to both their long and short positions and remain bullish as well. Commercials Long Short Net % Of OI 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%) 12/02/03 283,199 268,833 14,366 2.6% 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 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% 12/02/03 119,555 77,609 41,946 21.3% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Much like the large S&P contracts above, commercial traders have fallen asleep. There is very little change in positions. Meanwhile, small traders have reduced positions on both sides of the equation. Commercials Long Short Net % of OI 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%) 12/02/03 35,569 48,552 (12,983) (15.4%) 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 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% 12/02/03 21,594 9,429 12,165 39.2% Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL The same story appears to hold true for DJ futures. The overall trend is flat with commercials slightly bullish and small traders generally bearish. Commercials Long Short Net % of OI 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% 12/02/03 21,128 12,379 8,749 26.1% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 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%) 12/02/03 6,667 9,302 (2,635) (16.5%) 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 12-09-2003 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 ================================================================= Play of the Day: Solid Breakdown Stop Adjustments: SIRI, FCEL, SLAB, UTEK Closed Plays: JNPR, ZBRA Stock Split: PCAR 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 ) =============== Ultratech Stepper - UTEK - cls: 26.79 chng: -1.38 stop: 30.00*new* Company Description: UTEK develops, manufactures and markets photolithography equipment designed to reduce the cost of ownership for manufacturers of integrated circuits, including advanced packaging processes, photomasks, thin film magnetic recording devices and micro- machined components, The company supplies step-and-repeat systems based on one-to-one (1X) and reduction optical technology to customers involved in the semiconductor fabrication process throughout North America, Europe and Asia. Why we like it: After several months of steadily moving higher, the price action in shares of UTEK is growing more volatile, which is often a sign of a topping formation. Conveniently, the stock has also traced out a Head and Shoulders top, with price coming to rest on Friday right at the $28.25 neckline. This slightly upward-sloping neckline is the result of connecting the slightly higher lows of the past 2 months, a trend that was broken on Friday. But we don't want to get caught selling a breakdown before it happens, as many a bear has been caught in that trap in recent months. So we're going to wait for a solid break of support, using a trigger at $27.50 before considering UTEK a live play. We can afford to give up a little bit of room on the downside, because the measuring objective from the H&S pattern is $21.75 (28.25-6.50). Isn't it nice how the 200-dma is waiting near that level at $21.87? A quick glance at the PnF chart reveals a fresh Sell signal on Friday, with a bearish price target of $22. With so many factors pointing to $22 as a downside target, we won't argue and will set $22 as our exit target on the play. When the initial trigger is satisfied, aggressive traders can enter on the initial break, but need to be mindful of the possibility of a near-term bounce from the $26.50-27.00, where UTEK bounced in late August on the way up. The more conservative approach to entering the play will be to wait for that rebound and then enter on a rollover from the $28.00-28.50 area, as broken support at the neckline provides new resistance. Once below that $26.50-27.00 support, look for a potential bounce point near $24 before reaching our $22 target. Initial stops are set at $31, which is above Thursday's intraday high, as well as the cluster of the 20- dma ($30.45), 30-dma ($30.89) and 50-dma ($30.71). Why This is our Play of the Day A failed bounce right at the open this morning provided an aggressive entry point for traders looking to enter new bearish plays in UTEK before the confirmed breakdown. The initial drop took the stock down to the $27.25 area, where it consolidated in anticipation of the FOMC meeting being over. Once the news was out, traders hit the sell button again, driving UTEK down to close at its low of the day, solidly breaking the $27 support and closing at its lowest level since mid-August. With a confirmed breakdown from the H&S pattern we mentioned over the weekend and a break below horizontal support, UTEK looks vulnerable to more downside in the near term. Traders still looking for an entry can use either a break below the 8/26 intraday low ($26.32) for momentum entries or a failed bounce below $28.50. Once below $26, there isn't much in the way of support until the $24 level, which is the next likely spot for a short-term bounce before continuing down to our $22 target. Lower stops to $30 tonight, which is right at the site of the falling 20-dma. Annotated Chart of UTEK: Picked on December 7th at $28.20 Change since picked -1.41 Earnings Date 1/15/04 (unconfirmed) Average Daily Volume = 385 K ================================================================= Stop Loss Adjustments ================================================================= SIRI - long Adjust from $1.95 up to $2.05 FCEL - short Adjust from $14.05 down to $13.25 SLAB - short Adjust from $48.00 down to $46.75 UTEK - short Adjust from $31.00 down to $30.00 ================================================================= Tech Stock section ================================================================= ============ Closed Plays ============ -------------------- Closed Bullish Plays -------------------- Zebra Tech - ZBRA - close: 62.22 change: -1.88 stop: 61.00 Zebra Technologies hit our target Wednesday, and we're sure glad it hit that target early in the day as markets charged higher in early trading. ZBRA ended the day three points lower than its day's high. Volume was lower than average daily volume, but sell programs must have been triggered as the high was hit. RSI turned down toward its ascending trendline again. The 21(3)3 stochastics rolled down out of territory indicating overbought conditions, but they've done that before as ZBRA has ascended toward today's high, only to turn up again after a brief retracement. Although ZBRA's drop proved steady and relentless Wednesday, and although it retraced nearly all yesterday's gains, ZBRA maintained support above its 21- and 30-dma's and also maintained support above the $60.50 level that was the top of a previous consolidation zone. It's difficult to decipher today's action and determine whether it was just an expected retracement as a new high was achieved or whether it's something more serious. The relentlessness of the decline felt troublesome, however. Fortunately we don't have to make that determination since ZBRA hit our $65.00 target this morning before the decline. We're closing the play and taking our profits. Picked on Nov 19 at 60.20 Change since picked: +2.02 Earnings Date: 10/23/04 (confirmed) Average Daily Volume: 618 thousand ================================================================= High Risk/High Reward (HR) section ================================================================= ============ Closed Plays ============ -------------------- Closed Bullish Plays -------------------- Juniper Networks - JNPR - close: 17.50 change: -0.68 stop: 17.50 The bulls really tried to defend support on Tuesday, but the selling frenzy in Chip-related stocks was just too much. JNPR sliced through the 50-dma and then the bottom of its rising channel enroute to a close of $17.50, exactly at our stop. Hindsight shows the problems brewing under the surface, as JNPR's last rally failed right at the channel midline, leaving behind a potential H&S top to contend with, a pattern that is looking more likely now that the neckline (right at the bottom of the broken channel) has been violated. Any positions should have been closed near the lows of the day, as all the potential support used to justify our bullish bias was broken. Picked on November 19th at $17.69 Change since picked -0.19 Earnings Date 1/08/03 (unconfirmed) Average Daily Volume = 9.07 mln ================================================================= Stock Splits ================================================================= Announcements ------------- PCAR announces an extra cash dividend and a 3:2 stock split During today's session, Paccar Inc. (NASDAQ:PCAR) announced that its Board of Directors has approved a 3-for-2 stock split of its common shares and a cash dividend. The payable date for the stock split is set for February 5th, 2004 to shareholders on record as of January 19th. The company also increased their quarterly dividend to $0.15, which is payable on March 5th, 2004 to shareholders on record February 18th. PCAR has paid a dividend every year since 1941, and has increased their dividend by 125% in the last six months. About the company: PACCAR is a global technology leader in the design, manufacture and customer support of high-quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt, DAF and Foden nameplates. It also provides financial services and distributes truck parts related to its principal business. In addition, the Bellevue, Washington-based company manufactures winches under the Braden, Gearmatic and Carco nameplates. (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 PTR Petrochina Co 45.02 +1.77 TOT Total Sa (ADS) 85.57 +1.35 BP BP Plc 45.07 +0.67 SC Shell Transport 40.92 +0.87 GM General Motors 48.41 +1.27 UNP Union Pacific Corp 66.09 +0.75 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- NL NI Industries Inc 10.67 +1.56 MLT Metals USA Inc 10.00 +1.10 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- PBR Petroleo Brasileiro 26.42 +1.07 PPG PPG industries 62.48 +1.21 CCL Carnival Corp 37.06 +1.76 PD Phelps Dodge 68.98 +2.05 WON Westwood One 32.46 +1.08 SWK The Stanley Works 35.58 +1.32 PII Polaris Industries 88.85 +2.20 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- INTC Intel Corp 30.25 -1.39 GDW Golden West Financial 99.13 -2.42 ADBE Adobe Systems 37.73 -1.70 NWL Newell Rubbermaid 21.00 -1.97 SNDK Sandisk Corp 60.80 -5.54 ACV Alberto-Culver 60.50 -1.20 AVID Avid Technology 46.60 -3.23 ATMI ATMI Inc 20.42 -1.44 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- CFC Countrywide Financial 103.20 -5.10 CTX Centex Corp 107.51 -5.29 DRL Doral Financial 49.17 -2.84 TOL Toll Brothers 39.45 -2.15 HOV Hovnanian Enterprises 89.00 -7.61 ================================================================= 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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