PremierInvestor.net Newsletter Monday 01-26-2004 section 1 of 2 Copyright (c) 2004, 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: Momentum is positive Watch List: FRNT, CTXS, LRCX, LNCR =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 01-26-2004 High Low Volume Advance/Decline DJIA 10702.51 +134.22 10705.18 10702.51 1.82 bln 1668/1199 NASDAQ 2153.83 + 29.96 2153.83 2115.34 1.93 bln 2000/1094 S&P 100 573.44 + 8.03 573.44 565.29 Totals 3668/2293 S&P 500 1155.37 + 13.82 1155.38 1141.00 RUS 2000 601.50 + 5.36 601.50 592.46 DJ TRANS 3066.71 - 6.23 3074.45 3037.70 VIX 14.55 - 0.29 15.78 14.52 VXO 14.32 - 0.55 15.28 14.21 VXN 20399 - 0.28 22.77 20.99 Total Volume 4,160M Total UpVol 3,012M Total DnVol 1,088M 52wk Highs 934 52wk Lows 6 TRIN 0.51 PUT/CALL 0.58 =============================================================== =========== Market Wrap =========== Momentum is positive by James Brown Overheard in a conversation between to bearish traders about the current rally, "It can't be bargained with! It can't be reasoned with! It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever!" Okay, I'm joking. I didn't actually hear that but anyone short this market might feel that way (and my apologies to any Terminator fans). Investors definitely appear fearless as they quickly stepped in to buy Friday's and last week's dip. The Dow Jones Industrials added 134 points to breakthrough resistance and close at 10,702. Only one Dow component closed in the red and that was Alcoa, which lost 5 cents on the session. The strongest performers in the Dow were HPQ +3.24%, MRK +3.1% and GE +2.8%. The NASDAQ posted a strong rally as well, up nearly 30 points or 1.4%. This puts both the DJIA and the NASDAQ at 2 1/2 year highs while the S&P 500's rally leaves it at 22-month highs. Positive earnings news and a better than expected existing home sales numbers helped fuel a widespread rally today. Only a handful of sectors closed negative. Under performing were gold and silver stocks, airlines, utilities and transports. Investors focused their buying power on networkers, hardware (think LXK, HPQ & IBM), semiconductors and tech stocks in general. Even the dollar managed a bounce against the euro after Friday's rumors that the G7 summit next week might finally address the soaring euro. This put more pressure on gold, which fell $1.30 to $406.70 an ounce. The U.S. stock markets had to power today's rally on their own. Overseas markets weren't much help. Asian stocks traded mostly lower with the Japanese NIKKEI down 96 points to 10,972 and the Chinese Hang Seng down 23 points to 13,727. European stocks lagged as well. The British FTSE fell 15 points to 4445 and the German DAX dropped 23 points to 4128. The ramp higher today in the DJIA and the NASDAQ really began to pick up speed in the afternoon and by the close market internals had turned strongly positive. The NYSE reported nearly 17 winners for every 12 losing stocks. Meanwhile advancers out numbered winners almost 20 to 11 on the NASDAQ. Up volume was about 2.7 times stronger than down volume on both exchanges. Chart of the Dow Jones Industrials: Chart of the NASDAQ: The only economic data out this morning was the December Existing Home Sales report. Economists were looking for a small jump of 0.3 percent to 6.08 million but were surprised with a 6.9% jump to 6.47 million (at an annualized rate). The historically low interest rates continue to fuel a strong increase in home ownership and that's great news for the economy. Home sales tend to generate additional consumption with new furniture, new appliances, etc. This was the largest one-month jump in existing home sales since January 2001. Later this week we'll get to hear the December new home sales figures due out on Wednesday. Estimates are looking for a small rise to 1.1 million, up from 1.082 million in November. This mid-week report should have an affect on the homebuilders. Not quite an economic "event" but any time Alan Greenspan talks Wall Street is going to want to listen. Today he spoke to a conference in London via satellite. He didn't say much about the Fed's monetary policy but strongly suggested that the various free-market governments should avoid the recent signs of protectionism (hint, hint to the U.S. government). He also discussed the "creative destruction" of capitalism as we rotate from old technology to new technology. Jobs will also have to follow this process. He was confident that the U.S. can generate new job growth but not "without a high degree of pain" for those in the job-losing segment in this technology creation job- shifting turnover process. We'll hear from Alan again this week as the Federal Reserve begins its two-day FOMC meeting tomorrow. The decision on interest rates will be announced on Wednesday afternoon and no one really expects any change. Of course there is a lot of conjecture over the Fed making any changes in their bias and if they will continue to use the "considerable period" wordage. The Fed meeting this week is expected to take center stage but it is going to have to share it with a parade of earnings announcements. This week alone some 30% of the S&P 500 companies are expected to report. American Express (AXP), a Dow component, reported today and beat estimates by a penny with 60 cents a share. Revenues were up 14% to $7.07 billion and above consensus estimates. AXP cited strong fee growth for its financial advisory unit and its credit card business for its performance. Also announcing earnings today was drug giant Schering-Plough (SGP). SGP reported net loss of 12 cents per share, which was worse than expected. Revenues dropped almost 18% to $1.95 billion, below analysts' forecasts. The company also guided lower for 2004 but this was old news and shares actually turned higher painting a bullish engulfing candlestick pattern with a bounce off its simple 50 & 200-dma's. Another drug giant making headlines today was Merck & Co (MRK), a Dow component. MRK was up more than 3% after Barron's published a positive story over the weekend suggesting the stock was undervalued to its peers. Some investors also see MRK as a potential takeover or merger target and news of Sanofi- Synthelaob's hostile bid for Aventis (AVE) might be contributing to MRK's strength. Sanofi (SNY) is a French drug company who announced a $60 billion hostile takeover offer for fellow French- based Aventis. AVE's board of directors rejected the bid claiming it doesn't accurately reflect their company's value. The AVE website stated SNY's bid only represents a 3.6% premium from their recent closing price. The merger news and MRK's performance today pushed the DRG drug index to a new relative high and levels not seen since last June. One of the biggest earnings reports out today was released very early this morning. I'm referring to Lexmark Intl (LXK). The printer manufacturer reported earnings of $1.05 a share, which were 13 cents better than expected. Revenues were also above estimates at a record setting $1.37 billion for the quarter. LXK said its December quarter showed the fastest growth since first quarter 2000. "Our fourth-quarter revenue growth was significantly over our guidance, driven by strong printer sales," said Paul J. Curlander, Lexmark chairman and chief executive officer. "Lexmark's earnings for the quarter exceeded our expectations as we achieved higher revenue and were able to hold gross profit margins fairly stable both sequentially and year-to- year." (source: LXK's press release). "While we do see some indications of market improvement, we continue to remain cautious due to the uncertain economic environment and the potential for aggressive price competition." LXK's caution did not rub off on investors and shares soared more than 7% to $84.50, breaking out over major resistance at $80. Their strong earnings news also lifted shares of rival Hewlett-Packard (HPQ) boosting shares 3.24%. The closing bell brought even more earnings news and making headlines were NVLS, TXN and MCD. Novellus Systems (NVLS), a manufacturer of semiconductor production equipment, announced earnings of 7 cents a share, which was significantly better than last year's 2 cents a share and above current estimates by a penny. Revenues came in at $226.5 million and beat analysts' estimates but the company warned that the current quarter could turn soft. The stock fell 7.6% after hours as it issued earnings guidance at 8 cents a share versus analysts' current range of 7 to 11 cents for the first quarter. Eclipsing NVLS' report was Texas Instruments (TXN). Analysts were looking for 19 cents a share on revenues of $2.72 billion. When TXN's earnings report first hit the wires it sounded like net income hit 22 cents, or 3 cents better than expected. Unfortunately, the real number was closer to 20 cents. TXN did beat but only by a penny. However, revenues were above estimates at $2.77 billion and above their own guidance from December in the 2.64-2.76 billion range. Unfortunately, shares were lower in after hours trading despite guiding higher for the current quarter's net income and revenues. It is notable that TXN plans to raise its capex spending from $800 million to $1.1 billion in 2004. McDonalds (MCD) served up its December quarter's earnings results after the bell and met estimates at 35 cents a share. The real net income number was 10 cents a share due to a 25-cent charge for its sale of Donatos Pizzeria back to its founder. Q4 same- store sales numbers were up 7.4% and revenues for the quarter were up 16.8% to $4.56 billion, above estimates of 4.33 billion. This is a definite improvement over last year's Q4 loss, its first quarterly loss ever. Sounds like the Mad Cow scare never really hit MCD and their current "I'm loving it" ad campaign might be working. Its rival Burger King has seen two months of slipping same-store sales, down 5.4% in November and down 6.9% in December. One of the biggest stories out this evening is Agilent Technologies (A). The company came out with an upside surprise and raised its earnings guidance from 5-to-15 cents a share to 20-to-24 cents a share. It now expects revenues to hit $1.63- 1.68 billion, above estimates of $1.61 billion. Agilent is a manufacturer of electronics and testing equipment and this positive surprise may counterbalance the disappointing news we got from NVLS tonight. Agilent's press release unveiled these comments, "We have not seen the normal seasonal decline in first quarter activity," said Ned Barnholt, Agilent chairman, president and chief executive officer. "Both semiconductors and semiconductor capital equipment have been particularly strong. We have also been successful bringing the benefits of lower structural costs to Agilent's bottom line." The stock closed at $33.91 during the normal session but shot to $39.90 after the news before settling near $37.98 in after hours trading. It will be interesting to see how investors react to these various earnings announcements out tonight but the markets will also have to digest a handful of major reports out tomorrow morning as well. Announcing before the opening bell is Caterpillar (CAT), Countrywide Financial (CFC), DuPoint (DD), Lockheed Martin (LMT), Merck & Co (MRK), SBC Communications (SBC) and Xerox (XRX) just to name a few. Wall Street will also have to interpret the Conference Board's consumer confidence index. Estimates are for a jump from 91.3 in December to 95.1 in January. On top of it all the New Hampshire Democratic primary will be held tomorrow night and will almost guarantee some volatility on Wednesday. Whoever wins will be the frontrunner for the Democratic nomination and thus the major competitor to the current President. We already know it's going to be a close race this November and merely having one democratic candidate to focus on will create the one thing the stock markets hate - uncertainty! Let me finish with a quote from billionaire George Soros from an interview on Bloomberg TV. Whether you love him or hate him he has accurately summed up what we and other market pundits have been saying for a while. "Whether stocks are overvalued or not doesn't actually determine whether they go up or they go down... so they may be overvalued, but they can get a lot more overvalued, and I would say that right now the momentum is positive." ================================================================== 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 --------------------------------- Frontier Airlines - FRNT - close: 10.47 change: -0.85 WHAT TO WATCH: Just when it looked like FRNT might have found a bottom, Merrill Lynch came out with a downgrade this morning, driving the stock down to the $10 support level. Support doesn't really get strong until $9 and if that level fails to support the price, then FRNT looks vulnerable to next support near $8.00. With earnings due out on Thursday, we can use a failed rebound below the 10-dma and target $9 initially. --- Citrix Systems - CTXS - close: 21.02 change: -0.83 WHAT TO WATCH: Solid earnings from CTXS last week were enough for a brief pop above resistance, but clearly the sellers were lying in wait and the stock has been headed straight down ever since. After breaking back under the 50-dma on Friday, price fell under the 200-dma today and looks headed for a breach of major support near $20. Use a trigger under $20 and then target next significant support near $17 --- Lam Research - LRCX - close: 28.45 change: -0.61 WHAT TO WATCH: Semiconductor stocks have been consistently losing strength over the past couple weeks, and LRCX is no exception. After beating estimates in its earnings release last week, the stock has been trading poorly, smashing through the 50-dma last Friday and continuing down today. Today's rebound from the $27.50 level looks feeble and a rollover and break below that level should have the stock seeking out next support at $25 enroute to a test of the 200-dma. Use a trigger at $27.50. --- Lincare Holdings - LNCR - close: 31.69 change: +1.12 WHAT TO WATCH: Our recent bearish play on LNCR didn't work out like we expected, but the stock looks like it is going to give us another chance, this time to the long side. Monday's action saw the stock pushing through the 50-dma for the first time since the big gap in late November and price is now nearing significant resistance at $32.70. Use a trigger above that level and target a run at the bottom of the gap near $35.50. Earnings are set to be released on February 10th. --- =================== On the RADAR Screen =================== PMCS $23.63 - Buy the dip? The post-earnings dip stopped promptly at the 10-dma and PMCS is seeing a solid rebound from the $22.50 level as old resistance becomes new support. Look for new entries on another test of that level, which should lead to a breakout to new recent highs above $25. GE $34.14 - After languishing for much of the past year, shares of GE are finally starting to shine again. Breaking out over the $33 level was just the beginning and with the broad market breaking out big time today, it looks like a run at the next strong resistance near $37.50 is in the cards. CSCO $28.20 - Leading Networker CSCO is giving us a chance at a continuation entry here in advance of a run to new recent highs ahead of the company's earnings report on February 3rd. It's a short-term play and therefore aggressive, but with the strength that has been seen in the group and with CSCO leading the way, a breakout over $30 does not seem unreasonable ahead of the announcement. Use dips near the 10-dma as the preferred entry strategy, with a tight stop at $27, just under the last two days' intraday lows. ================================================================= 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 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Monday 01-26-2004 section 2 of 2 Copyright (c) 2004, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= Stop Loss Updates: None Split Announcement: CCBI, MSCC, SBGA 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) ================================================================== Stop Loss Updates ================================================================== None ================================================================== Stock Splits ================================================================== Announcements ------------- CCBI banks on a 4-for-3 stock split Around lunchtime this morning Commercial Capital Bancorp, Inc. (NASDAQ:CCBI) announced that its board of directors had approved a 4-for-3 stock split in the form of a stock dividend. The payable date or distribution date for the split is February 20th, 2004 for shareholders on record as of February 6th. Fractional shares resulting from the split will be paid in cash. The split will increase the number of shares outstanding to 29.9 million. About the company: CCBI, headquartered in Irvine, CA, is a multifaceted financial services company which provides financial services to meet the needs of its client base, which includes income-property real estate investors, middle market commercial businesses, and high net-worth individuals, families and professionals. At December 31, 2003, CCBI had total assets of $1.7 billion, was the 4th largest multi-family lender in California during the 12 months ended September 30, 2003 (source: Dataquick Information Systems) and had originated approximately $3.1 billion in multi-family and commercial real estate loans through December 31, 2003. Commercial Capital Bank, the Company's bank subsidiary, was the fastest growing banking organization in California, based on percentage growth in total assets over the 36 months ended September 30, 2003. (Source: Company Press Release) --- Microsemi (MSCC) chips up a 2-for-1 split Right at today's closing bell Microsemi Corp (NASDAQ:MSCC) announced that its Board of Direcors had approved a 2-for-1 stock split. The split will be enacted as a stock dividend. The payable date or ex-dividend date should be February 9th, 2004 for shareholders on record as of February 6th. The stock split will raise the number of shares outstanding to 58.9 million. About the company: Microsemi is a leading designer, manufacturer and marketer of high performance analog and mixed-signal integrated circuits and high reliability discrete semiconductors. The company's semiconductors manage and control or regulate power, protect against transient voltage spikes and transmit, receive and amplify signals. Microsemi's products include individual components as well as integrated circuit solutions that enhance customer designs by improving performance and reliability, battery optimization, reducing size or protecting circuits. The principal markets the company serves include implanted medical, military/aerospace and satellite, notebook computers and monitors, automotive and mobile connectivity applications. (Source: Company Press Release) --- Summit Bank (SBGA) declares 3-for-2 split Just before the stock market's open this morning Summit Bank Corp (NASDAQ:SBGA) announced that its board of directors had approved a 3-for-2 stock split in the form of a 50% stock dividend. The split will increase shares to 5.6 million shares outstanding. The payable date or distribution date will be February 17th, 2004 for shareholders on record as of February 9th. The Board also increased its quarterly cash dividend to 10 cents per share from .0867 cents, to be paid on a post-split basis. The cash dividend will be distributed on February 27th for shareholders on record as of February 19th. About the company: Summit's banking subsidiary, The Summit National Bank, provides banking services to various growing ethnic communities in the Atlanta, Georgia, and the South San Francisco Bay area of California markets, including the Asian-American market. The Summit National Bank has four branches in the metropolitan area of Atlanta, Georgia and two branches in the South San Francisco Bay area. In addition to the Asian-American market, Summit's niche specialties include small business lending and serving other ethnic markets including European- and Latin-American individuals and businesses. Summit also provides international trade services for local customers that import and export products throughout the world. (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 XOM Exxon Mobil Corporation 41.55 +0.51 C Citigroup 50.93 +0.61 ONE Bank One Corp 52.50 +0.98 WFC Wells Fargo $ Co New 58.04 +1.20 BAC Bank of America Corp 82.24 +0.97 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- TSN Tyson Foods Inc 14.99 +1.49 TCP Telesp Celular Participa 9.64 +1.39 CIG Companhia Energetica Mines 19.51 +1.15 STHLY Stet Hellas Tele Sa ADS 18.52 +1.02 ADIC Advanced Digital Info 19.22 +1.23 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- AVE Aventis 75.10 +2.10 SLB Schlumberger Ltd 61.06 +1.29 G Gillette Company 37.91 +1.61 SYY Sysco Corp 37.55 +1.21 KMB Kimberly Clark Corp 58.50 +1.95 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- SNY Sanofi-synthelabo (ADS) 34.30 -2.71 SOV Soverign Bancorp Inc 22.93 -1.25 XMSR SM Satellite Radio Hldgs 24.87 -1.15 AIN Albany International A 32.50 -2.50 VECO VECO Instruments Inc 31.24 -1.52 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- NWL Newell Rubbermaid Inc 23.08 -0.57 IPR Internat Power Plc (ADS) 23.42 -0.48 XLU SPDR Utilities Select 23.65 -0.14 IRGI Inveresk Research Group Inc24.49 -0.81 CYBX Cyberonics Inc 32.42 -4.78 ================================================================= 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 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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