PremierInvestor.net Newsletter Monday 02-02-2004 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: Did The Market See Its Shadow? Watch List: KKD, FRNT, RFMD, ANF =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 02-02-2004 High Low Volume Advance/Decline DJIA 10499.18 + 11.11 10568.96 10434.67 1.96 bln 1526/1461 NASDAQ 2063.15 - 3.00 2085.49 2053.79 1.90 bln 1319/1639 S&P 100 562.76 + 2.45 566.42 558.69 Totals 2845/3100 S&P 500 1135.26 + 4.13 1142.58 1127.87 RUS 2000 580.54 - 0.22 585.07 576.03 DJ TRANS 2968.02 - 17.93 2892.40 2856.28 VIX 17.11 + 0.48 17.56 16.67 VXO 16.87 - 0.18 17.19 16.04 VXN 25.81 + 0.75 26.38 25.22 Total Volume 4,296M Total UpVol 2,052M Total DnVol 2,079M 52wk Highs 498 52wk Lows 11 TRIN 0.87 PUT/CALL 0.72 =============================================================== =========== Market Wrap =========== Did The Market See Its Shadow? by James Brown Saying that stocks were mixed today would be an understatement. A day after the Super Bowl investors seemed undecided on which direction to take the market. As a result the major averages oscillated both directions. As is typically the case the Industrials, the NASDAQ Composite and the S&P 500 index all posted similar moves. The early morning strength looked more like a continuation of Friday's afternoon bounce. Unfortunately, that strength didn't last and stocks quickly faded before finding a bottom just before 11:00 a.m. A quick rebound launched a strong rally that stalled mid-afternoon. Traders began to take money off the table again and the last hour drift suddenly became a sharp drop in the market's last thirty minutes. Contributing to the market volatility was mixed economic data. The reports were generally positive but the numbers missed expectations. Not helping were mixed to down markets overseas. Britain's FTSE dropped 9 points to 4381 while the German DAX gained 13 to 4071. The Japanese NIKKEI lost less than 7 points to close at 10,776 but the Chinese Hang Seng fell 289 points to 12,999. It could be concerns over the Avian flu or it could be just profit taking but the Hang Seng has dropped more than 750 points in the last seven sessions. Speaking of the avian flu, which has now spread to more than 10 Asian countries, the XAL airlines index dropped more than 1.88% and marked its third loss in four sessions. Investors could be concerned that this new outbreak will dramatically cut back on air travel to the region. China has already killed 23 million chickens in an attempt to stop the flu's advance. Unfortunately, the virus may be mutating. The U.N.'s health agency reported yesterday that two sisters in Vietnam died from the deadly virus after potentially contracting it from their brother. This would be the first human-to-human transmission if confirmed. Currently the W.H.O. is claiming there is no pandemic in Asia and their level of concern has not risen with just 12 deaths being attributed to the avian flu. Also weighing on the airlines was news of at least three flights being cancelled over the weekend due to terrorist threats. British Airways and Air France had flights from Europe to the U.S. cancelled on Saturday while Continental Airlines had one flight from Washington D.C. to Houston cancelled on Sunday. Evidence of equities' mixed movements today can be seen in the market's internals. The NYSE reported 15 winners for every 13 losers while the NASDAQ witnessed advancing stocks falling behind decliners almost 15 to 16. Up volume on the NYSE outnumbered down volume but it was just the opposite on the NASDAQ. Market pundits claimed that Monday's low volume exacerbated the moves in the indices. In the futures market we saw crude oil rocket higher with a $1.93 jump to $34.98 a barrel while gold futures slipped $3.60 to $399.30 an ounce. Stock sectors that saw the heaviest buying pressure were insurance, defense, biotechs and drug stocks. Insurance stocks were up on anticipation of stronger earnings. Several companies in the sector are due to announce this week. A few of them announced tonight. Everest RE Group (RE) missed earnings by 7 cents despite Q4 profits more than doubling. AFLAC (AFL) reported earnings that were inline and announced a 30 million share buyback. Nationwide Financial Services (NFS) reported earnings that beat estimates by 8 cents (estimates were 71 cents). The Principal Financial Group (PFG) sprinted past earnings estimates of 31 cents with net income hitting 46 cents a share in spite of a write down that lowered income from last year's numbers. Defense stocks were higher due to an increase for defense spending in the just released White House budget plan. Biotechs were higher lead by a strong day for Amgen (AMGN) and news that Chiron (CHIR) had launched a new clinical trial for its latest HIV/AIDS treatment. The DRG drug index hit a new relative high after Pfizer (PFE), the largest drug company on the planet by market cap, announced that the FDA had approved two new drugs. The new hypertension/cholesterol treatment, named Caduet, combines their cholesterol fighting treatment Lipitor with Norvasc for high blood pressure. The second new drug is Spiriva, developed by Germany's Boehringer Ingelheim and co-marketed by Pfizer. Spiriva is designed to treat Chronic Obstructive Pulmonary Disorder (COPD), which affects millions of smokers. Analysts believe both drugs can eventually top $1 billion and potentially reach $2 billion in annual sales each. Shares of PFE broke out above resistance at $37.00 to a new 52-week high. Also in the news was SBC Communications (SBC) who announced a rise in DSL prices. Both Bank of America and Goldman Sachs offered positive comments on this news. Meanwhile speculation that SBC might bid on AT&T Wireless (AWE) appears to be cooling. Shares of SBC rose 3.8%. The lead front runner for an AWE acquisition seems to be Cingular. Ford also made the news with a "sell" rating from Deutsche Bank, who downgraded the stock from a "hold". Last week we noted the rollover in shares of General Motors (GM) and today's downgrade for rival Ford sent Dow component GM even lower. Of course the biggest news story of the day, aside from the halftime show "incident", was the ISM index. After two quarters of strong GDP growth the Institute for Supply Management's factory index reached 20-year highs as manufacturers geared up to replace low inventories and meet rising demand. January's ISM number hit 63.6. This passed December's 63.4 but missed economists' expectations for 64. Readings above 50 indicate economic growth and this was the eighth month in a row the index came in above 50 and the third consecutive reading above 60. The last time the ISM was this strong was back in December 1983, which read 69.9. Looking deeper into the ISM factory index's components we see that the new orders index, a major factor of growth, slipped from 73.1 to 71.1. The production index rose from 69.2 to 71.1, another 20-year high dating back to December 1983. The order backlog index slipped from 61 to 60.5 and the new export orders index fell from 60 to 57.5. The employment index also slipped to 52.9 from 53.5, but marked its third month in a row over 50 (a sign of expansion). Today's ISM number corresponds with last Friday's GDP number. Both fell below expectations but together they confirm steady growth. The ISM wasn't the only economic report out this morning. Investors also had to digest the December construction spending numbers, which rose 0.4%. This was below the 0.7% growth expected. Making this potentially troublesome was November's downward revision from 1.2% to 0.5% growth. The Commerce Department also announced that real disposable personal incomes were flat while wages slipped for the first time in over a year. On a more positive note the Semiconductor Industry Association (SIA) once again reiterated their belief that chip sales would grow nearly 20 percent in 2004. Meanwhile the World Semiconductor Trade Statistics group reported that global chip sales did rise 18.3% in 2003. Unfortunately, this wasn't enough to keep the chip stocks in the green and the SOX semiconductor index slipped lower in the afternoon sell-off. Tomorrow will be interesting. Nearly two thirds of the S&P 500 have reported their December quarterly earnings and this week we'll hear from another 75 companies. The big tech stock to report this week is Cisco Systems (CSCO). CSCO is due to report after the bell on Tuesday with estimates set at 17 cents per share. The stock had traded strongly higher midday on Monday but gains slipped to just 1.9% amid the afternoon pull back. Expectations are pretty strong for CSCO, especially given the blow out numbers and guidance from rivals Juniper and Nortel Networks. It will also be interesting to see it the semiconductor index (SOX) can hold support at the 500 level. Many people believe the SOX tends to lead the NASDAQ. If that's true then tomorrow may be a down day. After the bell tonight I heard a note that Goldman Sachs was downgrading the chip sector to "neutral". Unfortunately, I was unable to confirm this announcement. We still have a week full of economic news with the next major report on Wednesday with the ISM services index. Friday is the big event with the non-farm payrolls report. Currently Bloomberg is reporting an average estimate of about 165,000 jobs being created in January. Let's hope it doesn't disappoint this time or we may be in store for a stock market freeze. In the mean time button up those coats. Punxsutawney Phil, the most famous groundhog prognosticator, saw his shadow today indicating six more weeks of winter. ================================================================== 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 --------------------------------- Krispy Kreme Doughnuts - KKD - close: 35.12 change: -0.52 WHAT TO WATCH: The fad seems to be wearing off in the wake of the Atkins diet popularity and KKD has been in a persistent downtrend since early November. The last bounce attempt failed miserably below the 50-dma and KKD is now threatening to break below $35 for the first time since last June. Use a trigger under support and target a drop to $32 or perhaps even to stronger support at $30. --- Frontier Airlines - FRNT - close: 9.28 change: -0.48 WHAT TO WATCH: We pointed out the weakness in FRNT a couple weeks ago, looking for a rollover and break to new recent lows. That played out nicely and with the stock being further pressured by breakdowns in both the XAL index and the Dow Transports, FRNT looks headed for stronger support down in the $7.50 area. Even last Friday's earnings report couldn't provide support with the stock coming to rest on Monday near new multi-month lows. Use a trigger under today's close and target $7.50. --- RF Micro Devices Inc. - RFMD - close: 9.24 change: -0.25 WHAT TO WATCH: Investors clearly didn't like what they heard from RFMD's earnings report on 1/21 and they've been hitting the sell button ever since. Critical support at $9 appears in danger of breaking and if it does, the stock could be headed down to strong support near $7.00. Along the way, there's the potential for support at the 200-dma and then again near $8.00, but if the $9.00 level is traded, then a PnF Sell signal will be issued, inviting a drop all the way to $5.50. Use a trigger at $9.00 and target a drop to $7.00 --- Abercrombie & Fitch - ANF - close: 26.56 change: +0.66 WHAT TO WATCH: It has been a pretty dismal couple months for ANF investors, as the stock has continued to languish after December's rash of downgrades. But optimism is clearly building for a better report on February 17th, as the stock broke above the bottom of that December gap on Monday on rising volume. Use an entry trigger above today's high and target a rally up to the 200-dma. --- =================== On the RADAR Screen =================== JDAS $15.25 - The initial excitement over JDAS' earnings report failed right at the 50-dma and since then the stock has been trending steadily downwards. In early January, the 200-dma provided support, but if it fails this time, it could be a quick trip down to next support in the vicinity of $13.50. Use a trigger under the 200-dma and then watch for potential support at $14.50 on the way to that $13.50 target. GSS $5.37 - Strength in the US Dollar has continued to pressure the price of gold and gold stocks in the wake of last week's FOMC meeting. GSS is at a critical level here, resting just above strong support at $5.00. A break below that level looks like a good point to enter a quick bearish play, looking for a drop to the 200-dma at $4.18. AFFX $31.95 - Voting with their wallets, investors have shown their approval for AFFX's earnings report late last week, delivering a strong breakout over the $30 resistance level and price is continuing to rise on solid volume. Aggressive traders can chase the stock higher from here, looking for a continued rally to resistance in the $35-36 area. ================================================================= 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 02-02-2004 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 Closed Plays: SPIL Split Announcement: MGAM 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 ================================================================== Closed Plays ================================================================== TECH STOCKS ----------- Closed Bullish Plays -------------------- Siliconware Precision - SPIL - cls: 5.86 chg: -0.21 stop: 5.90 As we suspected the big move on Friday may have been a top. Shares of SPIL quickly traded under the $6.00 level this morning. While finding support at 5.90 and trading between 5.90-6.00 most of the day, the late day sell-off, especially in the SOX, was too much for SPIL. We are stopped out at $5.90. Congratulations to readers who exited at our initial profit target of $6.50-6.60 on Friday. Picked on January 18 at $ 6.02 Gain since picked: - 0.16 Earnings Date 02/12/04 (unconfirmed) Average Daily Volume: 1.7 million ================================================================== Stock Splits ================================================================== Announcements ------------- Multimedia Games designs a 2-for-1 stock split During today's trading session, Multimedia Games Inc (NASDAQ:MGAM) announced that its Board of Directors has approved a 2-for-1 stock split of its common shares outstanding. The announcement comes after the company's shareholders just approved a proposal to increase the number of authorized common shares from 25 million to 75 million. The split will take place as a stock dividend. The payable date for the stock split is set for February 27th, 2004 to shareholders on record as of February 16th. MGAM will have approximately 27.0 million shares, on a post split basis. About the company: Multimedia Games, Inc. is the leading supplier of interactive electronic games and player stations to the rapidly growing Native American gaming market. The Company's games are delivered through a telecommunications network that links its player stations with one another both within and among gaming facilities. Multimedia Games designs and develops networks, software and content that provide its customers with comprehensive gaming systems. The Company also offers systems and products for the growing racino, charity and commercial bingo markets. The Company's ongoing development and marketing efforts focus on new Class II gaming systems and products, Class III video lottery systems for use by Native American tribes throughout the United States, and products for charity bingo opportunities. Additional information may be found at www.multimediagames.com. (Source: Company Press Release) ================================================================== Trading Ideas ================================================================== This section contains stocks that meet criteria which may make them of interest to long and short side traders. These are not recommendations, nor have they been reviewed by PremierInvestor editors for investment potential. However, each of them has technical and fundamental characteristics that make them worthy of further review by traders and investors looking for fresh ideas. New stocks will appear daily following the market close. Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change SBC SBC Communications Inc 26.46 +0.96 FNM Fannie Mae 77.71 +0.61 VZ Verizon Communications 37.50 +0.64 FRE Freddie Mac 63.00 +0.58 BMY Bristol-Myers Squibb Co 28.57 +0.52 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- ANDW Andrew Corp 18.15 +1.01 GNTA Genta Incorporated 13.82 +1.06 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- AVE Aventis 78.10 +1.75 MDT Medtronic Inc 50.65 +1.43 TRB Tribune Co 52.63 +1.44 BDX Becton Dickinson 46.20 +1.14 ATH Anthem Inc 83.33 +1.55 HSY Hershey Foods Corp 76.53 +1.02 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- HBC HSBC Holdings Plc 75.95 -1.65 ACS Affiliated Computer Svc 51.18 -4.27 ROK Rockwell Automation Inc 31.26 -1.31 RYAAY Ryanair Hldgs Plc (ADR) 33.00 -2.00 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- SIAL Sigma-Aldrich Corp 57.92 -0.66 UCBH UCBH Holdings Inc 39.47 -0.39 ================================================================= 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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