PremierInvestor.net Newsletter Wednesday 12-31-2003 section 1 of 2 Copyright (c) 2003, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= In section one: -------------- Market Wrap: The Books Close on 2003 Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= 12-31-2003 High Low Volume Advance/Decline DJIA 10453.92 + 28.88 10462.44 10407.04 1.19 bln 1245/1575 NASDAQ 2003.37 - 6.51 2015.23 1996.62 1.54 bln 1285/1831 S&P 100 550.78 + 1.71 550.90 547.53 Totals 2530/3406 S&P 500 1111.92 + 2.28 1112.56 1106.21 RUS 2000 556.91 - 8.56 566.74 556.91 DJ TRANS 3007.05 - 31.10 3034.37 3004.65 VIX 18.31 + 0.63 18.86 17.41 VXO 17.51 + 0.54 17.81 16.93 VXN 24.49 + 1.13 24.76 23.43 Total Volume 3,280M Total UpVol 1,662M Total DnVol 1,525M 52wk Highs 819 52wk Lows 16 TRIN 0.76 PUT/CALL 1.25 ================================================================= =========== Market Wrap =========== The Books Close on 2003 by James Brown It's not every day that the floor traders at the NYSE serenade the TV audience with "Wait till the Sun Shines Nellie" so that must mean one thing. Happy New Year! Wow! It's hard to believe 2003 has come and gone so quickly. The last session of the year was a mild one with low volume and a negative advance-decline line but the Dow managed yet another gain and the NASDAQ managed to close above the 2000 mark. For those market conspiracy traders out there it was no coincidence that the NASDAQ ended the year 2003 by closing at 2003 with a truly last minute spike higher. Today ends the best year for the markets since 1999. The Dow Jones Industrial Average climbed 25% in 2003. The S&P 500 added 26% and the NASDAQ composite soared a massive 50%. Gains like these have certainly re-ignited interest in stocks but 2004 will have a hard time keeping up with a pace that strong and most analysts are looking for a slow down in the gains. Fortunately, the outlook for 2004 is generally positive. Market internals were actually mixed. The advance-decline numbers were negative with almost 16 losers for every 12 winners on the NYSE and 18 losers for every 12 winners on the NASDAQ. Up volume did manage to outpace down volume on both exchanges. Total volume was light with just 1.19 billion on the NYSE and 1.5 billion on the NASDAQ. Chart of the DJIA: Chart of the NASDAQ: The big news today was the initial jobless claims report, released early due to the market holiday tomorrow. Economists had been expecting a number close to 350,000 but the markets were surprised with a much-improved figure at 339,000. This is a drop of 15,000 claims from last week's figure (354K). This is the lowest level in jobless claims since January 20th, 2001. More importantly the four-week moving average, which tends to even out any seasonal fluctuations, fell to 355,750, which is the lowest level for the four-week moving average since February 2001. Obviously, this is great news for Wall Street and Main Street as the biggest concern next year is job growth and these declining numbers show a steady improvement in the labor market. Unfortunately, most investors had already packed up for the year and there was no one to respond to the good news. The decline in the U.S. dollar has been a constant headline for the markets here and abroad and today was no different. The euro rose to an intraday high (and all-time high) of $1.2647 before settling closer to 1.2605. The dollar dropped 20% against the euro in 2003 making it the worst year for the dollar since the euro began trading in 1999. It also happens to be the worst decline in five years for the dollar against the Japanese yen. The dropping dollar continues to prop up gold prices although gold futures slipped more than $1 to $416 an ounce in Wednesday's session. A declining dollar and geopolitical unrest have pushed gold to a 20% gain in 2003. Some of the more enthusiastic gold bugs are speculating that gold will reach the $500 level by the end of 2004. While that may sound like a wild claim not many would have predicted gold at $415 a year ago. Whatever your stance on the shiny metal it will be a sector to watch next year. One of today's big news stories was the drop in AmerisourceBergen (ABC). Shares were actually halted midday but not before the stock plummeted below the $60 level and its 200-dma. ABC, America's biggest drug wholesaler, just got a little bit smaller after announcing the loss of a major contract. The $3 billion a year contract with the Department of Veteran Affairs will end this coming March and ABC lowered its earnings guidance for the year. ABC lost the contract to rival distributor McKesson (MCK), who just announced a two-year deal the government agency. It will be interesting to see where the markets take us on Friday and next week. As Jim has pointed out the historical trends are bullish. Funds usually begin putting their fresh 401K/IRA money to work. The wild card is always a terrorist event. It's become rather surreal to think of the millions of New Year's Eve and New Year's Day partiers celebrating while government helicopters and F16's circle the major events to protect the no-fly zones. From everyone at our family at OptionInvestor.com to yours we wish you a happy New Year! We're looking forward to a great 2004. ================= Trading Ideas ================= This section contains stocks that meet criteria which may make them of interest to long and short side traders. These are not recommendations, nor have they been reviewed by PremierInvestor editors for investment potential. However, each of them has technical and fundamental characteristics that make them worthy of further review by traders and investors looking for fresh ideas. New stocks will appear daily following the market close. ------------------------------------------------------------------- Value Plays With Bullish Signals --------------------------------- TOT Total Sa (ADS) 92.51 +1.51 MRK Merck & Co 46.19 +0.69 PTR Petrochina Co Ltd (ADS) 57.16 +1.84 GSK Glaxosmithkline Plc (ADR) 46.62 +0.59 SNP China Petro & Chem (ADS) 44.41 +2.59 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- None --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- INFY Infosys Technologies (ADS) 95.40 +1.89 MCK McKesson Corp 32.15 +1.05 VIP Vimpel Communications (ADS)73.50 +4.30 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- CAH Cardinal Health Inc 61.15 -1.63 FDX Fedex Corp 67.45 -1.55 ABC Amerisourcebergen Corp 56.15 -7.35 MUR Murphy Oil Corp 65.25 -2.77 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- BRCM Broadcom Corp CI A 34.02 -0.73 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright (c) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form
PremierInvestor.net Newsletter Wednesday 12-31-2003 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 ================================================================= Tech Stocks New Bullish Plays: PLCM Bullish Play Updates: NVDA, NXTL Active Trader (Non-tech) New Bearish Plays: GES Bullish Play Updates: ACE, CIT, DHI, MRO Bearish Play Updates: ANF High Risk/Reward Bearish Play Updates: NTES ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Polycom, Inc. - PLCM - close: 19.52 change: +0.62 stop: 18.40 Company Description: Polycom manufactures and markets a full range of high quality, media-rich communications tools and network solutions, which enable business users to immediately realize the benefits of video, voice and data over rapidly growing converged networks. Although the company is primarily a video conferencing and voice conferencing product provider, it has recently entered the DSL access market, particularly in the area of integrated voice appliances and broadband access devices. Why we like it: After tripling from its March lows near $7.50, shares of PLCM finally ran into a serious round of selling earlier this month. The selling volume really picked up on 12/18-12/19, driving the stock down for its first test of the 100-dma ($18.54) since early May. Volume on that drop ran more than triple the ADV, so it was impressive that the stock was able to turn on a dime and bounce from the $18.50 area. The initial bounce didn't go very far though and after drifting sideways for more than a week, dipped again on Tuesday and then rebounded again from right at the 100- dma. This looks like a solid double-bottom formation, coming just above key support at $18.50. There's no question that it is an aggressive play, but with market sentiment so unabashedly bullish, we're looking for the rising tide to lift this boat back to test its recent highs near $22. In order to avoid getting caught in a sideways drift like we saw following the last rebound from the 100-dma, we're going to set a trigger at $20, just over the 50-dma ($19.90). The ideal approach will be to enter on the initial breakout, although more cautious traders can wait for a pullback and rebound from the 50- dma as their signal to enter the play. Initial resistance will then come in around $20.80, prior to the expected push up to test the $22 resistance level. While a push through that level is certainly possible, we won't be getting greedy on this play. Looking at the weekly chart shows just how strong resistance is in the $22-23 area, so we'll suggest exiting on strength when PLCM reclaims that level. Initial stops should be set at $18.40, just below today's intraday low, as well as the 100-dma. Annotated Chart of PLCM: Picked on December 31st at $19.52 Change since picked +0.00 Earnings Date 1/28/04 (unconfirmed) Average Daily Volume = 1.51 mln ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- NVIDIA Corp. - NVDA - close: 23.20 change: -0.55 stop: 21.00 Wasting no time at all, shares of NVDA launched higher last Friday, satisfying our $22.25 trigger right out of the starting gate. Adding to the bullish tone, the stock gapped up on Monday and by early on Tuesday was trading above $24. But with insufficient volume to keep the stock aloft, NVDA posted a doji yesterday and a good-sized red candle today, leaving behind a bearish-looking 3-candle formation. That leads us to expect a continued retracement in the days ahead, which should set up a favorable entry on the successful test of $22 as new-found support. One key factor to the stock's success at finding support at that former resistance will be the action in the overall Semiconductor index (SOX.X), which we'll want to see break decisively through the $510 area that has been solid overhead resistance all week. Maintain stops at $21. Picked on December 24th at $21.80 Change since picked +1.40 Earnings Date 2/05/04 (unconfirmed) Average Daily Volume = 5.59 mln --- Nextel Comms - NXTL - close: 28.06 change: +0.30 stop: 26.00 After breaking to new recent highs on Monday with a close at $28.00, we fully expected to see some profit taking in shares of NXTL. While there was some, it was quite limited in nature, with the bears unable even to create a pullback below $27.50. There was a complete lack of directional action over the past two days, but that didn't stop the bulls from launching a buy program right at the close, which allowed the stock to end at $28.06, setting a new recent high. This 2-day consolidation could be a repeat of what we last week with another breakout to new highs being the end result. We're still targeting a move to the top of the February 2001 gap in the $29.50-30.00 area, so aggressive traders might be able to nab a quick gain following a breakout over today's high. More conservative traders will want to wait for a pullback near $27, to confirm support near the top of the channel ($26.90) and the 10-dma ($26.98). Maintain stops at $26 and remember that we want to sell into strength if our $30 target is reached. Picked on November 26th at $25.27 Change since picked +2.79 Earnings Date 2/18/04 (unconfirmed) Average Daily Volume = 14.3 mln ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bearish Plays ----------------- Guess?, Inc. - GES - close: 12.07 change: +0.07 stop: 13.40 Company Description: Guess?, Inc. designs, markets, distributes and licenses lifestyle collections of casual apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The company's apparel is marketed under numerous trademarks including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, GUESS? and Triangle Design, Question Mark and Triangle Design, BRAND G, a stylized G, GUESS Kids, Baby GUESS and GUESS Collection. The lines include full collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets and knitwear. GES also selectively grants licenses to manufacture and distribute a broad range of products that complement its apparel lines, including eyewear, watches, handbags, footwear, children's and infants' apparel and other fashion accessories. Why we like it: With Wal-Mart acting particularly weak in recent weeks, it is really no great secret that Retailers are starting to lose strength. As much can be seen on the chart of the Retail index (RLX.X), which has been unable to get with the bullish program of the overall market, ending the year well below its November highs. Compared to shares of GES though, the RLX looks positively robust. GES began to weaken in early November, and its trading pattern suggests a big breakdown is coming soon. The early December high represented a lower high and the dip below the $12 level over the past two days has produced a lower low relative to late November. More importantly, last week say the stock break below the 50-dma ($13.25) for the first time since mid-August, but the contrast this time around is that the 50-dma has now assumed a negative slope (for the first time since April) and the 20-dma ($13.32) is about to cross below the 50-dma. Once below $12, an argument can be made for support coming in near $11, also the site of the 100-dma. But the more realistic target appears to be $10 and that will be our price objective for the play. Note that the PnF chart just gave a fresh Sell signal with the trade at $12 and that gives the bears a tentative target of $8.50. We'll use a trigger at $11.80, just under the past two day's intraday lows. That ought to keep us from entering just before a rebound. Momentum traders can enter on the initial break, but with the bullish bias in the market, conservative traders should be able to snag a better entry on a failed bounce below strong resistance at $12.75. Set initial stops at $13.40), just above the pending convergence of the 20-dma and 50-dma. Annotated Chart of GES: Picked on December 31st at $19.52 Change since picked +0.00 Earnings Date 1/28/04 (unconfirmed) Average Daily Volume = 1.51 mln ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- ACE Ltd - ACE - close: 41.42 change: +0.13 stop: 39.00 The IUX insurance index has continued its steady climb higher over the last several sessions. Meanwhile, ACE has taken a more stair-step approach to making gains. The stock quickly broke out above the $40 level and hit our trigger at $40.05 on the 22nd. Soon thereafter it traded sideways, digesting its gains, with new support at 40.80. Today we saw a strong surge higher to the $42 mark before profit taking brought ACE back towards the $41 level. You might see an intraday high at 42.80 but that appears to be a bad tick early in Wednesday's session. Bad tick or not ACE might be ready for another dip. A pull back to 40.80 or even the $40 level might be the best place to gauge new entries. Recent headlines for ACE have reflected their plans to spin-off its AGC Holdings unit in an IPO next year that could be worth $100 million. We're going to leave our stop loss at $39.00. Picked on Dec 22nd at $40.05 Gain since picked: +1.37 Earnings Date 01/27/04 (unconfirmed) Average Daily Volume: 1.3 million --- CIT Group - CIT - close: 35.95 change: 0.68 stop: 33.98*new* With the recent consolidation period ended, CIT spent the early part of this week climbing. Last weekend, a Barron's article quoted a company spokesperson as saying the shares could rise 50 percent in the next year to 18 months. The spokesperson cited a likely increased demand for consumer and business loans due to the improving U.S. economy and also cited the expectation that the company's borrowing costs should decrease over the next couple of years. Speculation arose that the company could be a takeover target, especially as it trades at a discount to other financial stocks in the S&P 500. Monday, CIT gapped up, and then has built on those gains all week. The gains were blunted Wednesday afternoon when it was learned that CIT purchased bank HSBC Holdings' U.S. factoring unit. One article described a factoring business as one that bought companies' unpaid invoices, helping the companies manage cash flow. CIT felt that the business was a good fit with its core businesses. About the time this news surfaced, CIT pulled back from the day's high and from the resistance at the midline of its rising regression channel. MACD lines begin to break through the descending trendline, and both RSI and stochastics appear bullish. The one fly in the ointment in this advance is that it's taken place in a light- volume holiday-week environment. While we're not surprised that there was no volume confirmation of the breakout since the breakout occurred during a holiday week, we're not sure the gain will hold when volume returns. CIT could pull back at least to fill or partially fill its gap. Pullbacks and bounces from the bottom of the rising channel could be used for new entries, but we would not suggest momentum entries with CIT so near our $37.50 target. We're raising our stop to $33.98, just below the rising 30-dma. Annotated Chart for CIT: Picked on Dec 12 at 34.05 Change since picked: +1.90 Earnings Date: 01/22/03 (unconfirmed) Average Daily Volume: 879 thousand --- D.R. Horton Inc. - DHI - close: 43.26 change: -0.43 stop: 41.50 The Housing sector got dealt a setback on Tuesday in the form of disappointing Housing numbers. That was enough to make the $DJUSHB the biggest losing sector for the past 2 days running. Of course, today's drop only amounted to a 1% slide, so there wasn't any real carnage to worry about. DHI lost roughly 1%, keeping in line with the sector. While the losses of the past 2 days are not large, it is disappointing to see the stock fall back below the midline of the rising channel. The key will be whether DHI can hold above its 50-dma on this pullback. If so, then we ought to have a nice entry point set up in the next few days, as traders jockey for position ahead of the company's split on January 13th. Look for a rebound from above $42 to provide for new entries, maintaining stops at $41.50, just under the 50- dma. Momentum entries over the early December high ($45.37) might work as well, but that is not our preferred strategy. Picked on December 17th at $42.69 Change since picked +0.57 Earnings Date 1/15/04 (unconfirmed) Average Daily Volume = 1.41 mln --- Marathon Oil - MRO - close: 33.09 change: -0.28 stop: 31.90 With oil-related issues gaining in Europe this week, the XOI oil index gained through the week. MRO joined in those gains, too, until approaching our target and the May 2001 swing high. We think that gains may slow now as MRO consolidates ahead of a test of that May 2001 high. Some play participants might elect to take partial profits here. Wednesday's trading produced a bearish candle and a hooking-down RSI. It's been a couple of weeks since MRO touched its 10-dma to reestablish support at that moving average, so we think it's likely that MRO could do that Friday or early next week. New entries are problematic just head of a test of the $33.73 intraweek high from May 2001. Pullbacks and bounces from the rising 10-dma might be possible entries, but new play participants should be aware of that looming resistance just ahead. Those seeking momentum entries should wait for a move above that $33.73 swing high with confirming volume expansion. Annotated Chart for MRO: Picked on Dec 05 at 30.22 Change since picked: +2.87 Earnings Date: 01/27/04 (confirmed) Average Daily Volume: 1.2 million -------------------- Bearish Play Updates -------------------- Abercrombie & Fitch - ANF - cls: 24.71 chng: -0.17 stp: 25.25 Here we are two full weeks past ANF's big breakdown under the $24 support level and the stock has battled its way right back into the $24-25 area and held its ground right into the end of the year. Clearly the play has been a disappointment -- showing enough weakness on a daily basis to keep us interested, yet steadily gaining ground since the lows posted on 12/15. Monday's session looked pretty bullish, with the stock managing to finally close over the 10-dma (now at $24.53). The bulls followed that up yesterday with a move through the 20-dma (now at $24.57) at the close. In fact, the early strength this morning gave the appearance that our $25.25 stop was in jeopardy. Fortunately, the bears prevailed and it looks like the long-expected rollover may be getting underway. While aggressive traders can certainly enter on this nascent rollover, the more prudent course of action will be to wait for a break under $24.40, which would constitute a break of the 2-week rising trendline. We're still looking for ANF to head significantly lower, and renewed weakness in the Retail index (RLX.X) should help to get things moving in the right direction. For traders looking to open new positions, wait for the RLX to at least break back under its 50-dma ($377) before playing. Picked on December 14th at $24.59 Change since picked +0.12 Earnings Date 2/17/04 (unconfirmed) Average Daily Volume = 2.24 mln ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bearish Play Updates -------------------- Netease.com - NTES - close: 36.92 change: -0.08 stop: 39.51 NTES found support at the 50 percent retracement of this year's rally, but that support didn't prove a strong enough base to send NTES much higher, either. After rising to test $40.00, NTES sank back to the 50 percent retracement line again. Other Chinese Internet-related stocks turned in a mixed performance on Wednesday, but none produced either big gains or big losses. As was true last week, oscillator evidence proves inconclusive. MACD remains flat, as do RSI and stochastics. This is a consolidating stock, but whether that consolidation is in preparation for a decline or a bounce remains to be seen. Moving averages angle down toward the current position, hinting that they'll offer resistance if NTES should attempt to climb. Because the 50 percent retracement level has proven its importance, we still recommend waiting on new entries until a drop beneath the 12/22 low of 35.26. We're keeping our stop at $39.51. Annotated Chart for NTES: Picked on Dec 10 at 38.96 Change since picked: -2.04 Earnings Date: 10/28/03 (confirmed) Average Daily Volume: 4.6 million ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright (c) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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