PremierInvestor.net Newsletter Thursday 12-11-2003 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: Santa Came Early Watch List: BBY, QLGC, CD, WAT and more! Market Sentiment: Party Like It's 1999 ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 12-11-2003 High Low Volume Advance/Decline DJIA 10008.16 + 86.30 10026.53 9920.97 1.70 bln 2231/ 899 NASDAQ 1942.32 + 37.70 1945.92 1903.93 1.74 bln 2258/ 851 S&P 100 530.16 + 4.83 531.44 525.33 Totals 4489/1750 S&P 500 1071.21 + 12.16 1073.63 1059.05 W5000 10430.54 +134.80 10448.80 10295.70 RUS 2000 542.92 + 14.43 542.93 528.49 DJ TRANS 2965.90 + 53.20 2970.09 2910.84 VIX 16.74 - 1.13 17.95 16.51 VXO (VIX-O)15.86 - 1.47 17.16 15.66 VXN 26.44 - 1.40 28.05 26.34 Total Volume 3,812M Total UpVol 3,286M Total DnVol 472M 52wk Highs 456 52wk Lows 36 TRIN 0.45 NAZTRIN 0.38 PUT/CALL 0.66 ================================================================= =========== Market Wrap =========== Santa Came Early Nobody really knows why but Santa came early to the markets and left a load of goodies for all the nice bulls. The Dow opened up and never looked back and there were as many excuses as there were points on the board but the bottom line was a complete lack of sellers. Dow Chart - Daily Nasdaq Chart - Daily This bullish bounce was surprising on the surface because the primary economic report for the day was negative. The Jobless Claims jumped to 378,000 for the week and the first time over 370,000 since mid October. On the surface this would appear negative as the second consecutive weekly gain but analysts were quick to dismiss the number as skewed by the Thanksgiving holiday. They felt many newly unemployed workers may have put off applying for benefits during the holiday week and that pushed the current reporting week higher. For the first time in recent memory the prior week's number at 365,000 was not revised upward. The four week average moved up to 364,750 and continuing claims rose to 3,346,000. The Jobless Claims were ignored despite it being the highest number in six weeks. When the bulls want to buy do not confuse them with the facts. Helping boost the sentiment was a larger than expected bounce in the Retail Sales for November by +0.9%. The consensus had been for only a +0.6% gain. While this is still well off the highs from the summer there were worries that it could have been worse. Auto related sales boosted the headline number which would have been only +0.4% without autos. Helping build investor confidence was the +7% increase in year over year sales and suggests that this holiday season will be the best since 1999. This is contrary to the recent dire predictions of retail weakness. This turnaround in retail sentiment helped inspire traders and put the spirit of Christmas into their holiday stock shopping. The Business Inventory number rose by +0.4% for October and was twice the consensus estimates. This was the second month of gains for inventories and sales rose at an even faster rate at +0.7%. This pushed the inventory to sales ratio to 1.35 and an all time low. This suggests that the 4Q GDP could already be building to stronger than expected levels. The last economic report was the Import and Export Prices which rose unexpectedly by +0.4%. While the FOMC minutes discussed below claim there is no danger of inflation there are several signs of the inflation monster creeping back into the picture. Import and Export Prices is one of them. A +1.1% increase in petroleum prices helped fuel the headline number but ex-energy the prices still rose +0.3% overall. The biggest impact to the market came from the FOMC minutes for October that were released at 2:PM. The outlook expressed in the minutes was for continued growth and shock that the growth was so strong in the 3Q. However, there were some surprises. Some of the members expressed willingness to change the bias if the economy continued to strengthen in the 4Q. We saw that morphing of the bias in the Dec-9th announcement when they tied inflation to that considerable period statement. Other surprising views included a doubt that employment will rise substantially until LATE 2005. This is a huge change in expectations. Last month we had every Fed head on the panel making speeches about growing employment and how jobs will follow the recovery. Nobody said they would follow two years later. The other statement causing excitement was a very distant view of any inflation problem. They felt the economy was growing too slow to produce any inflationary conditions for quite some time. This was interpreted by many as late 2004 or even early 2005. This was a huge positive for the market. With the bond market keying on jobs as the primary reason for the Fed to not raise rates and inflation not expected to be a problem for a long time the obvious conclusion was the Fed is not going to raise rates for an even longer period than originally thought. I had mentioned earlier that due to the election any hike had to be in March or before and after today's Fed minutes release it is extremely unlikely that hike will happen. The conventional wisdom tonight is no rate hikes until 2005. We speculated about this last week and now it almost appears to be a sure thing. If there was any bad news it was the traders pricing this into the market and setting themselves up for a monster disappointment if conditions suddenly change in March. Overall the Fed was very optimistic about the economic outlook but almost unbelievably calm about the potential for inflation. If you believe them inflation is on hold until after the election. Quite a coincidence. They feel business spending is filling the gap the consumer created in the 4Q and will continue to grow. The biggest shocker was their outlook was so far reaching going to late 2005 in some areas and they were not seeing any need to make changes for quite some time. This is a major relief to the bond market and to the equity market. Thank you Santa. Tech stocks got a boost from Cisco after CEO Chambers said they were seeing a rise in orders and a rise in budgeting for 2004. PC box makers also got a boost from an IDC survey that said PC shipments for 2003 are going to be +9% higher than 2000, which was a record year and +11.4% over last year. Notebook computers are the hot item with desktops lagging. Dell said customer traffic for the first week of December totaled nearly five million visitors compared to only four million in the same week last year. HPQ CEO Carly Fiorina also said this week that holiday sales were going well. I have mentioned this several times in the past but I think it bears repeating. I think the PC makers are all beating each other up on price point and nobody is really making any real money. We bought two 2.0GHZ computers over the last couple weeks to replace some Y2K 600mhz models. We paid $289 plus shipping for 2.0GHZ Intel, 256MB ram, 40GB disk and all the bells and whistles. (no monitor) Considering the computers I replaced cost me over $2000 each three years ago where is the profit? Using the ratios above the box makers have to sell seven boxes today to equal the gross revenue of only one box three years ago. Like the HWP CEO said last week, Dell is trapped in an ever increasing price/commodity struggle with no way out. While that is obviously a biased view it does have a lot of truth. This is why Dell and others are rapidly trying to branch out into consumer electronics, cameras, printers, plasma TVs, etc. Computers have no profit left and they have to sell 25% more each quarter just to break even. If it were not for the boom in notebooks the PC makers would be in serious trouble. Despite the problem mentioned above the tech stocks took off on the double dose of good news about rising IT budgets and higher PC shipments. The SOX bounced +2.54% on the news that Taiwan Semiconductor said 4Q sales would beat forecasts and hit a record high. This was an unusual move and came on the heals of cautious comments on Tuesday by TSM and United Microelectronics that November sales would be flat or down from October. The semiconductor sector had dropped strongly on the earlier news and TSM sought to correct the impression that business was bad. I guess it is all in how you report the numbers. November could be flat to down but maybe it was flat to down from a strong October. Maybe December orders surged strongly. It just seems strange to caution on Tuesday and then guide higher on Thursday. The markets blasted out of the gate this morning and the Dow came very close to 10,000 at 9993 but was unable to break that psychological level. The Dow traded sideways with a very slight negative trend until the ten-year note auction concluded badly and it dropped to near 9960. When the Fed minutes were released and investors got a glimpse of a distant future without rate hikes and no inflation it was too much for those undecided investors to take. The Dow surged to break 10K and traded over that level into the close. While the close over 10K was the first close over that level since May-24th 2002 it was barely convincing. The 10026 high lasted for about 20 min before the profit taking began. Even then it was very light profit taking and they managed to hold the 10K level. The Nasdaq tacked on +37 points but was unable to touch the 1950 resistance level. In reality neither the drop yesterday or the bounce today is relative to anything but the reporters. According to sources that claim to know there was a large mutual fund unloading some major positions on Tue/Wed after the first touch of 10,000. They concluded their selling yesterday afternoon and the rebound began. This makes sense to what we saw intraday today. The market did not move up prior to the FOMC minutes in normal fashion. The gains were slow and methodical with no bouts of selling. There were only a couple of noticeable buy programs and no sell programs. In fact there was almost no selling at all. The market internals were very lopsided with only one missing ingredient. The advancing volume was 6:1 over declining volume. Very bullish under any conditions. The declining volume across ALL markets was only 472 million shares with 3.3 billion in advancing volume. What was missing was volume. With only 3.7 billion shares overall that is less than the 4.1 billion on the down day on Wednesday. Those volume levels are well below the 4.5 billion share days we were seeing when the market was rising in October. Also light were the new 52-week highs. Despite a 5:2 advancer over decliner ratio the new highs across all markets were only 468. This is well below the 1100-1200 levels back on Dec 1st/2nd. The most bullish factor I saw was the +14 point jump in the Russell-2000. This was very strong and indicates a new round of buying by funds. At this stage in December this is very bullish. The RUT retraced nearly all the selling for week in only one day. Where are we going from here? This is the $64 question tonight. The Dow closed right on psychological resistance at 10000 and the Nasdaq is stuck under 1950 resistance. The Wilshire 5000 did NOT set a new high and only managed to retrace to 10450 resistance. The high was 10506 last week. The S&P also failed to reach a new high. With the Dow standing out in the crowd I glanced at the Dow stocks for a hint of what happened. CAT soared +1.94 on news that their Chairman and CEO would retire and be replaced by a 30 year veteran. Home Depot rose +1.45 on news of a new $1 billion share buyback and news that they had $5 bil in cash at the end of the 3Q despite completing a $3 bil buyback since July-2002. UTX jumped +1.00 on new guidance to +14% earnings growth. AA jumped +.92 on news that China wanted to import more raw aluminum and that a supply shortfall in China was causing a spike in the price. Finally MO rose +.78 on a favorable court ruling and BA spiked on a contract win. Those six Dow stocks accounted for +56 points of the +86 points the Dow gained. Not exactly a strong showing. This produces some conflicting indications. Breadth was strong but new highs were weak. The Dow broke to a new high that just happened to be over 10,000 but all the other indexes failed to follow suit. On the surface it would appear that a Santa rally had begun. Considering that sentiment is a surface commodity anyway the positive press tonight could help stimulate buyer interest on Friday. The Nikkei opened up +140 points and our futures are positive in the overnight session. All seems well with the market. I suggested on Tuesday that the Dow would probably test strong support at 9850 before beginning the Santa rebound. On Wednesday the low was 9882. Evidently there were enough traders watching the 9850 support level that they jumped in front of that level and the race was on. It helped to have that mutual fund run out of stock there as well. I have to admit I am surprised. I did not think the Dow would close over 10K until next week or even Christmas week. Now that we are there the markets may lack motivation for any future gains. The distinct lack of any short covering makes me wonder if anyone believes there could be a higher high in our future. Now that we have closed over 10K there is congestion all the way to 10,300. It will not be a walk in the park to higher ground. My view for the rest of the year was to remain range bound between 9700-10000. The minor move over 10K has not changed my view but I may need to raise the upper boundary depending on Friday's action. Economic reports for Friday include the PPI, International Trade and Consumer Sentiment. None should be market movers unless there is a significant change in the readings. If you are not in the markets tonight I would probably not go long at the open. You may want to err on the side of caution and wait until Monday to see if the apparent bullishness holds until next week. We saw what profit taking from one fund can do and as long as we hold at the 10K level without moving higher we have a bulls eye on our back and carrying a sign saying bears are sissies. It is dangerous to tempt fate this close to year end. 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 --------------------------------- Best Buy Company - BBY - close: 53.35 change: +1.37 WHAT TO WATCH: Let the Santa Claus rally begin! Just one day after breaking down out of its long-term rising channel, BBY was back in favor with the bulls, rebounding better than 2.5% to close back inside the channel. This looks like a great aggressive entry point for a rally back towards resistance, first at $57.50 and then just below $60. Use a tight stop just under yesterday's low. --- Qlogic Corporation - QLGC - close: 52.36 change: +1.14 WHAT TO WATCH: QLGC looked like a great rebound candidate on Tuesday and it still does after today's 2.2% advance. Any dips back near the $51 area should make for a solid entry point and based on the bounce from just above the rising trendline, stops at $50 should work just fine. Target a rally back to the $56-57 area. --- Cendant Corp. - CD - close: 21.18 change: +0.34 WHAT TO WATCH: Traders that have been waiting for a decent pullback in CD's persistent uptrend of the past several months got just what they wanted over the past week, as the stock fell to test the 50-dma yesterday. The rebound from that level continued today and with daily Stochastics just beginning to turn up, this looks like a solid entry for a run back at the recent highs above $22 and quite possibly a breakout to run up and test next resistance in the $24-25 area. --- Waters Corp. - WAT - close: 33.20 change: +1.08 WHAT TO WATCH: Ever since rebounding from just above its 200-dma in late September, WAT has been climbing steadily higher. Today's action produced an impressive breakout, which came on strengthening volume to boot. While there is plenty of resistance on the way up, WAT now looks capable of taking a run at $36 resistance area. =================== On the RADAR Screen =================== ALL $41.75 - With a big surge of volume, shares of insurer ALL managed a major breakout today and posting their best close since mid-2001. This breakout looks like it has room to run up to the $45 resistance area that presented stiff resistance in early 2001. JP $49.37 - Breakout, consolidate and repeat. That's what JP has been doing for months now and Thursday's session saw the stock break out again to reach another new 52-week high. Entries make the most sense on a slight pullback near $48.50, which can then be followed by a stop just under the 30-dma. Target a rally up to the $51-52 area. BDK $48.66 - Home improvement stocks may have been weak lately in sympathy with the selloff in the Housing sector (until today, of course), but shares of BDK have remained strong. So strong in fact, that the stock broke out to new 52-week highs today. Entries near $48 look attractive on a dip and rebound that confirms this former resistance as new support. Based on the strength shown in the PnF chart, look for BDK to rally to the $50 resistance and then continue higher in breakout fashion. =============================== Market Sentiment =============================== Party Like It's 1999 - J. Brown Wow! The Dow Jones Industrial Average traded above the psychological 10,000 mark on Tuesday of this week but could not hold it. The very first time the DJIA traded above 10,000 was March 16, 1999. Back then the index couldn't close above the big five-digit round number either. It was two weeks later on March 29th, 1999 that the DJIA finally closed above the 10K level. This time it only took two days for the index to actually close above this mark. Most veteran traders will tell you it's just a number. They're right but it's a number with significance. Untold thousands of traders big and small had been planning on shorting the market when the Dow hit 10,000. They tried on Tuesday and tried on Wednesday but they couldn't get any downside moment. Now the index has closed above it and we could see a short-squeeze as bears panic to close positions before they get away from them. Back in 1999 it only took six weeks for the DJIA to run from 10,000 to 11,000. Short-squeeze or not I don't know anyone expecting a repeat performance. However, we could very well see a continuation of the current rally. As Jim said, it looks like the Santa Claus rally may have started a little early. Market internals were VERY bullish. Advancing stocks crushed decliners 21 to 7 on the NYSE and 22 to 8 on the NASDAQ. Up volume was almost 7 times down volume on the NYSE and it was 8 times down volume on the NASDAQ. Those are some pretty hefty numbers and indicate just how wide and deep the rally was today. Contributing to investor confidence this week has been two high profile stock buy backs. Normally, companies offer stock buy backs because they're confident about future performance and it enhances shareholder value. This week both Lowe's (LOW) and rival Home Depot (HD) announced $1 billion stock buy backs (each). That sounds like a pretty big vote of confidence. Hopefully we'll see a similar vote of confidence tomorrow in the University of Michigan consumer sentiment numbers. Analysts are expecting it to rise from 93.7 to 96.0. Meanwhile, look for some follow through in the software rally tomorrow. After the bell tonight Adobe Systems (ADBE) beat earnings estimates and guided higher for the first quarter. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10026 52-week Low : 7416 Current : 10008 Moving Averages: (Simple) 10-dma: 9902 50-dma: 9759 200-dma: 9078 S&P 500 ($SPX) 52-week High: 1074 52-week Low : 788 Current : 1071 Moving Averages: (Simple) 10-dma: 1065 50-dma: 1048 200-dma: 976 Nasdaq-100 ($NDX) 52-week High: 1453 52-week Low : 795 Current : 1416 Moving Averages: (Simple) 10-dma: 1416 50-dma: 1407 200-dma: 1247 ----------------------------------------------------------------- There is absolutely NO FEAR in the markets right now as traders pushed the DJIA back above the 10,000 mark and the S&P 500 back towards its yearly high. This sent the volatility indices back toward their multi-year lows. CBOE Market Volatility Index (VIX) = 16.73 -1.14 CBOE Mkt Volatility old VIX (VXO) = 15.86 -1.47 Nasdaq Volatility Index (VXN) = 26.15 -1.69 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.67 767,216 514,764 Equity Only 0.50 589,907 297,193 OEX 0.92 40,403 43,783 QQQ 1.57 31,180 48,862 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 73.9 - 1 Bull Confirmed NASDAQ-100 67.0 - 1 Bear Correction Dow Indust. 80.0 + 0 Bull Correction S&P 500 80.2 - 1 Bull Confirmed S&P 100 79.0 - 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: 1.22 10-dma: 1.12 21-dma: 1.15 55-dma: 1.14 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 2142 2282 Decliners 688 788 New Highs 210 145 New Lows 15 26 Up Volume 1490M 1545M Down Vol. 218M 192M Total Vol. 1733M 1766M 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 Thursday 12-11-2003 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: Finally! Stop Loss Adjustments: -none- Stock Split Announcements: KSWS 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 ( Bullish ) =============== Marathon Oil Corp - MRO - close: 30.87 change: +0.41 stop: 28.75 Company Description: Marathon Oil Corporation is an energy company engaged in the worldwide exploration, production and transportation of crude oil and natural gas. Through its 62 percent ownership of Marathon Ashland Petroleum LLC, the company also refines, markets and transports petroleum products in the United States. (Source: Company Press Release) Why we like it: On October 10, MRO created a spread triple top breakout buy signal on the P&F chart, with a preliminary price target of $54.00. That was enough to draw our interest, but MRO also broke above a descending trendline that had been in place since early 1998. That really caught our interest, but breakout plays have not been particularly successful lately. Since early October, however, MRO has been consolidating, building a base above that broken trendline. Late in November, as President Bush's energy bill was blocked, MRO declined with other energy stocks, but even that setback did not take MRO below the support it had been establishing just below $29.00. About a week ago, MRO climbed back above its 30-dma and began building a slightly higher base above $29.50. Now that it's done all this careful prep work, it looks ready to break to the upside. MRO closed the week above $30.00. The XOI, the Oil Index, has already broken above its October high, suggesting that MRO, one of its component stocks, might also break above its October high. We do note the tall upper shadows on recent days, however. Although we would ordinarily suggest triggering this play on a move above October's $30.55 high, those tall upper shadows suggest that pullback entries might be better, buying on intraday dips to and bounces from the 10-dma. Although the $54.00 preliminary target on the P&F chart suggests that a $35.00 target would be a modest and logical target, we do note that the $33.75 level has been a swing top on many MRO advances on a monthly chart, so we expect considerable volatility as that level is approached. We suggest that conservative traders set an automatic profit stop at $33.75, our first target. Analysts disagree about MRO's prospects, with Goldman Sachs reiterating its underperform rating in late October while other firms have proposed buy or hold ratings for the company's stock. Late Thursday, MRO issued a press release dissociating itself with the troubled Russian company Yukos Oil Co. MRO said that although MRO had once been part of a joint venture with Yukos to explore opportunities outside Russia, that joint venture had been dissolved late last year when Yukos decided to concentrate on opportunities within Russia. MRO continues discussions with Russia's state-owned Rosneft, however, with the company maintaining an interest in pursuing opportunities inside Russia as well as outside Russia. In another release this week, the company said that the U.S. government had allowed it to take steps to extend its license agreements with Libya, with those licenses currently set to expire in 2005. The company also introduced its new CFO. Why This is our Play of the Day With the price of both crude oil and natural gas holding at or near recent highs, MRO had the backing it needed to finally break out above the $30.50 resistance level that has been keeping the stock in check since late 2001. Breaking out on strong volume and closing near the high of the day are both plusses for the bulls and it looks like the rally can now continue up towards next resistance near $32.50 on the way to our $33.75 target. A brief pullback and rebound from above $30 can be used for new entries. Maintain stops at $28.75 for now. Annotated Chart of MRO: Picked on December 5th at $30.22 Change since picked: +0.65 Earnings Date: 01/27/04 (confirmed) Average Daily Volume: 1.07 mln ================================================================= Stop Loss Adjustments ================================================================= -none- ================================================================= Stock Split Announcements ================================================================= Announcements ------------- KSWS steps into a 2:1 stock split and doubles quarterly dividend During today's trading session, K-Swiss Inc. (NASDAQ:KSWS) announced that its Board of Directors has approved a 2-for-1 stock split of its common shares outstanding, as well as doubled their cash dividend. The payable date for the stock split is set for December 31st, 2003 to shareholders on record as of December 22nd. The Quarterly cash dividend is now $0.02 per share (annual dividend is 8 cents). The payable date for the new quarterly dividend is set for January 15th, 2004 to shareholders on record by December 31st, 2003. About the company: K-Swiss Inc. designs, develops and markets an array of athletic footwear for high performance sports use, fitness activities and casual wear under the K-Swiss brand. The Company also designs and manufactures footwear under the Royal Elastics and National Geographic brands. Royal Elastics, a wholly owned subsidiary, is the leading innovator of slip-on, laceless footwear. National Geographic Footwear, under an exclusive license from the National Geographic Society, offers outdoor-oriented and casual footwear. (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 TOT Total Sa (ADS) 85.93 +0.52 RD Royal Dutch 48.17 +0.67 MO Phillip Morris 53.08 +0.77 UTX United Technology 89.25 +0.98 BLS BellSouth 27.69 +0.73 MET MetLife 33.88 +0.52 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- BVF Biovail Corp 19.74 +1.55 IKN Ikon Office Solutions 10.60 +1.80 ATI Allegheny Technologies 10.64 +1.64 HLEX HealthExtras 14.01 +1.29 MAPX Mapics Inc 13.00 +1.14 SORC Source Info Mgmt 10.52 +1.17 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- DHR Danaher Corp 85.62 +2.92 RCL Royal Caribbean 33.19 +1.49 SAY Saytam Computer 24.74 +1.85 X U.S.Steel Corp 30.00 +1.77 MBG Manadalay Bay Resort 44.60 +1.32 PII Polaris Industries 90.87 +1.69 DP Diagnostic Products 46.73 +1.29 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- BRL Barr Labs 74.40 -1.60 PPDI Pharmaceutical Products 26.64 -1.90 MMP Magellan Midstreams 50.90 -2.75 CAE Cascade Corp 21.86 -2.14 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- NCX Nova Chemicals 24.46 -0.27 AVD American Vanguard 31.65 -2.15 ================================================================= 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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