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Daily Newsletter, Wednesday, 02/04/2004

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PremierInvestor.net Newsletter                Wednesday 02-04-2004
                                                    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:  Investors React to CSCO's Earnings
Watch List:   KKD, FRNT, RFMD, ANF

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)
===============================================================
     02-04-2004            High     Low     Volume Advance/Decline
DJIA    10470.74 - 34.44 10524.22 10447.18 2.02 bln    705/2132
NASDAQ   2014.14 - 52.07  2044.68  2013.92 2.24 bln    689/2405
S&P 100   558.87 -  4.49   563.36   558.11   Totals   1394/4537
S&P 500  1126.52 -  9.51  1136.03  1124.74
RUS 2000  564.03 - 15.12   579.15   564.03
DJ TRANS 2822.11 - 29.28  2853.88  2815.66
VIX        17.87 +  0.53    18.06    17.46
VXO        17.58 +  0.52    18.10    17.25
VXN        26.65 +  0.35    26.89    25.99
Total Volume 4,772M
Total UpVol    859M
Total DnVol  3,858M
52wk Highs     270
52wk Lows       19
TRIN          1.06
PUT/CALL      0.81
===============================================================

===========
Market Wrap
===========

Investors React to CSCO's Earnings
by James Brown


The NASDAQ has almost wiped out its 2004 gains after investors
used CSCO's earnings report last night as another excuse to take
profits.  What started out as a tech-specific decline quickly
widened into a market-wide sell-off.  Wall Street completely
ignored the two positive economic reports out this morning and
chose to rotate money out of tech and cyclicals and into more
defensive consumer staples and drug stocks.  The only two sector
indices that closed in the green today were the RLX retail index
and the DRG drug index.

The NASDAQ composite lost 52 points or 2.52% to close at 2014.
Today's close marks a 6.4% pull back from its high and a test of
the 2000 level is almost guaranteed.  Meanwhile the Dow
Industrials dropped 34 points to close at 10,470 after bouncing
twice intraday near the 10,450 level.  The S&P 500 index lost
almost 10 points to close at 1126.  Its short-term trend also
looks bearish and a breakdown under the 1120 level may portend a
move toward its 50-dma near 1100.

Foreign stock exchanges were generally negative, which didn't
inspire any investor confidence here.  Noteworthy was Japan's
NIKKEI index, which fell almost 200 points to 10,447.  Renewed
concerns over their banking system's bad loans may have been the
catalyst to sell and the constant drop in the dollar against the
yen doesn't help Japan's exporters.  Across the Atlantic rumors
surfaced that the Bank of England may actually raise interest
rates by 25 basis points while speculation continues for a
potential rate cut by the European Central Bank.

Here in the U.S. tech stocks took a beating after CSCO's CEO John
Chambers said many of their customers remain cautious on capex
spending and hiring.  Shares of CSCO gapped lower and closed down
8.8% on massive volume of 190 million shares.  This lead the NWX
networking index to a 5.18% loss.  Riding its coattails were the
semiconductors, software and hardware sectors.  Noteworthy was
the 3% drop in the SOX, which broke round-number price support at
the 500 level.  Shares of Intel reversed yesterday's decent gain
for a 4.27% loss.  Investors also took money out of homebuilders,
biotech, and broker-dealers.

Market internals were very bearish.  Declining stocks outnumbered
advancing stocks 3-to-1 on the NYSE and almost 4-to-1 on the
NASDAQ.  New highs were the lowest I've seen in a very long time
at 164 between both exchanges.  Down volume completely
overwhelmed up volume 3-to-1 on the NYSE and 6.5-to-1 on the
NASDAQ.  Overall volume was strong with more than 2 billion
shares trading on each exchange.

The charts below show the DJIA just above support at 10,400 but
in a very clear short-term down trend of lower highs.  Meanwhile
the NASDAQ has broken its 50-dma and is quickly approaching the
2000 mark.  I've also listed the SOX to show its long-term rising
trend and the breakdown today through the 500 level.

Chart of the DJIA:



Chart of the NASDAQ:



Chart of the SOX:



The big economic report released today was the ISM services
index.  Economists were looking for a jump to 60.0 from
December's 58.0 reading.  What we got was a spike to 65.7 in
January; a very strong report.  Compounding the good news was the
factory order numbers released by the Commerce Department.
Estimates were for a gain of 0.5% for December's factory orders.
The result was a much stronger 1.1% gain.  Making the report even
brighter was an upward revision for November's factory orders
from -1.5% to a -0.9%.

Unfortunately, no one was buying the economic news.  John
Chamber's comments were a great excuse to sell.  If that wasn't
enough CIENA issued an earnings warning last night that put
further pressure on tech and telecom stocks.  Shares of CIEN sank
nearly 18% to close under its 200-dma at $5.99 after management
lowered their first-quarter revenue guidance to $66.4 million.
Last month the company had forecasted revenues would be $70.6
million, which was still below analysts' estimates of $76
million.  CIEN blamed the timing of a single, albeit large, order
for the shortfall.

Speaking of timing, Oracle (ORCL) has upped its bid to buy
PeopleSoft (PSFT) for the second time.  This morning ORCL raised
its bid to $26.00 a share in cash (about $9.4 billion) for PSFT.
In ORCL's press release Oracle's Chairman and CFO, said, "Given
PeopleSoft's current prospects, including its recent downward
revisions to earnings guidance for the first quarter, we believe
our offer presents compelling value to PeopleSoft's
stockholders."  Their offer is an 18.8% premium over yesterday's
closing price for PSFT but some doubt whether or not the
government would approve of such an acquisition.  If ORCL doesn't
buy PSFT then they might start shopping around for another
target.  If they do get PSFT, then we could see rivals begin
looking for acquisitions to stay competitive.

Today's market declines are likely to weigh on investor sentiment
more than usual because traders are already apprehensive about
Friday's non-farm payrolls report.  If jobs fail to materialize
there could be a rush for the exits.  Many have rationalized that
last month's gain of just 1,000 jobs was an abnormality and
comments from the government have sustained this belief.
However, two months of no job growth starts to look like a trend.
We also have the G7 meeting on Friday and Wall Street has already
assumed that the dollar's decline will take center stage.  There
is hope that tomorrow could see a bounce.  Thursday will see
dozens and dozens of companies report their fourth quarter
earnings.  If we get enough positive surprises it might turn
things around.  Of course this goes against the recent trend of
sell the news no matter how good the numbers are.

We'll also have to contend with an earnings warning by Medtronic
(MDT) who warned tonight after the close.  MDT had previously
guided revenues in the $2.15-2.23 billion range and actually
suggested they might surpass it.  Naturally analysts pegged their
estimates at the top of the range.  This evening MDT is reporting
that revenues will be closer to $2.195 billion, a 15% rise from
the same period a year ago.  The stock was trading lower after
hours and rivals GDT and STJ are likely to trade lower as well.

Thursday also brings the initial jobless claims and a host of
same-store sales figures for January.  Overall the January sales
numbers should be positive.  Retailers should have easier year
over year comparisons since last January the country was holding
its breath as we prepared for the Iraq war.  Unfortunately,
apparel retailers may under perform the pack as steep markdowns
and snowy weather on the east coast reduce margins and traffic.


==================================================================
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.


==================
  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

GSK     Glaxosmithkline Plc (ADR)  45.10    +0.61
NOC     Nothrop Grumman Corp       99.25    +1.25
GD      General Dynamics Corp      93.44    +1.52
K       Kellogg Co                 37.81    +0.61
CSG     Cadbury Schwepps Plc       30.99    +0.52


---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------

TOM     Tommy Hilfiger Corp        14.35    +1.62
TRMS    Trimeris Inc               18.39    +1.77


---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------

CL      Colgate-Palmolive Co       53.84    +1.99
AVP     Avon Products Inc          68.32    +3.01
GPT     Greenpoint Financial Cp    44.72    +4.39
CHRW    C. H. Robinson Worldwide   40.09    +1.47
FSH     Fisher Scientific Int      48.70    +3.95


-------------------------------------------
Breakout to Downside (Stocks over $20)
-------------------------------------------

TM      Toyota Motor Corp (ADS)    64.73    -2.90
DELL    Dell Inc                   32.39    -1.31
CSCO    Cisco Systems Inc          24.08    -2.33
AEE     Ameren Corp                46.25    -1.32
GP      Georgia-Pacific Corp       26.79    -1.04


-----------------------------------------
Recently Overbought With Bearish Signals (Stocks over $20)
-------------------------------------------

MON     Monsanto Co                29.98    -0.39
CF      Charter One Financial      35.21    -0.74
RSE     Rouse Company The          48.45    -1.07
VTR     Ventas                     24.20    -0.65
CBL     CBL & Assoc Properties     55.75    -5.52


=================================================================
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.

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Copyright 2004  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter                Wednesday 02-04-2004
                                                    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
=================================================================

In section two:

Stop Loss Adjustments:  VC

Net Bulls (Tech Stocks)
  New Bearish Plays:    SMTC

Active Trader (Non-tech Stocks)
  Closed Bullish Plays: IPG


High Risk/Reward
  New Bearish Plays:    NETE
  Closed Bullish Plays: PVN


==================================================================
STOP LOSS ADJUSTMENTS
==================================================================

VC - Short Play
Lowering Stop from 11.40 to 11.01


==================================================================
Net Bulls (NB) Tech Stock section
==================================================================

---------
New Plays
---------


  New Bearish Plays
  -----------------

Semtech Corp. - SMTC - close: 22.50 change: -1.92 stop: 24.10

Company Description:
Semtech Corporation is a supplier of analog and mixed-signal
semiconductors. The company operates in two business segments,
Standard Semiconductor Products and Rectifier, Assembly and Other
Products.  The Standard Semiconductor Products segment makes up
the vast majority of overall sales and includes the power
management, protection, test and measurement, advanced
communications and human input device product lines.  The
Rectifier, Assembly and Other Products segment includes the
SMTC's line of assembly and rectifier devices.

Why we like it:
It has been a long time coming, but the Semiconductor sector
(SOX.X) is finally giving up the strength that helped to propel
the NASDAQ to its lofty heights of less than weeks ago.  On
Wednesday, the SOX finally cracked the $500 support level and
broke its 100-dma for the first time since last April.  Weakness
is found in many Chip stocks right now and SMTC certainly stood
out today, with its near 8% slide.  That drop came on very heavy
volume as well (nearly double the ADV) and the stock closed below
its own 100-dma ($22.56).  Investors clearly adopted a Sell
attitude in the wake of CSCO's earnings report last night that
hit the Networking and Semiconductor sectors the hardest, and it
appears they've opted to sell SMTC ahead of its earnings report
on February 24th.  Note that the stock will remain above its
longer-term trendline so long as it doesn't break $18 and it will
require a drop below $20 to generate a PnF Sell signal.  So all
we're doing is playing the pullback to strong support, not
looking for a major breakdown.

That still gives us plenty of room to play with following today's
close at $22.50.  We'll use a trigger of $22.40, just under
today's low and play for a drop to strong support at $20, which
will be reinforced by the 200-dma at $19.62.  Should SMTC rebound
from here, then there will be no play -- we only want to play on
a continued breakdown.  Aggressive entries can be taken on the
initial break, while more cautious traders may want to wait for a
subsequent rebound and rollover below today's intraday resistance
at $23.  Our stop will initially be placed at $24.10, which is
just above both the 50-dma ($23.77) and today's intraday high.
Look for continued weakness in the SOX to confirm bearish entries
in SMTC.

Annotated Chart of SMTC:



Picked on February 4th at   $22.50
Change since picked          +0.00
Earnings Date              2/24/04 (confirmed)
Average Daily Volume =    1.14 mln


==================================================================
Active Trader (AT) Non-Tech Stock section
==================================================================

============
Closed Plays
============

  Closed Bullish Plays
  --------------------

Interpublic Group - IPG - close: 16.41 chg: -0.30 stop: 15.99

There appears to be zero post-Super Bowl buzz for IPG and the
stock continues to churn sideways.  Given the markets recent
weakness we're opting to cut our losses early and close the play.


Picked on January 18 at $16.98
Gain since picked:      - 0.57
Earnings Date         03/09/04 (confirmed)
Average Daily Volume:      3.6 million




==================================================================
High Risk/Reward (HR) Stock section
==================================================================

---------
New Plays
---------

  New Bearish Plays
  -----------------

Netegrity, Inc. - NETE - close: 9.16 change: -0.42 stop: 10.50

Company Description:
Netegrity, Inc. is an access and identity management company that
delivers a single, secure and personalized point of entry to the
enterprise and a single point of administration for enterprise-
wide Web-based services for companies seeking to optimize online
business relationships.  Unlike alternative approaches,
Netegrity's application infrastructure is designed to accommodate
the most heterogeneous of computing environments.  With its vast
network of partners, Netegrity is securely managing e-business
solutions for over 660 customers worldwide, including Aetna,
American Express, Bank One, E*TRADE, General Electric, the
Internal Revenue Service and Wells Fargo.

Why we like it:
Investors clearly weren't pleased with NETE's earnings report
last week, as they pummeled the stock from $14 down to just above
$9 in the two days following that report.  But the dip buyers
took a shot at buying that apparent support and over the past two
days have been paying the price for their boldness.  NETE popped
up to just below $10.50 yesterday and the bears took advantage of
the rebound off last week's lows and sold throughout the day and
into today's session.  The key event on Wednesday was the stock's
break below last week's lows, as well as a violation of the 200-
dma ($9.30).  This support break exacerbates an already ugly-
looking PnF chart, which has a Sell signal pointing to a $4.50
bearish price target.  That is probably an overly bearish target,
so we'll set our sights a bit higher at next support at $8.00.

In order to make the stock prove continued weakness, we'll set
our entry target at $9.00, just under today's low and then target
an initial drop to $8.00.  But we'll leave the possibility out
there for a continued drop below that level to stronger support
near $7.00.  Clearly, the way things are going, the best entry
will be on the initial breakdown, as today's drop really
constitutes the technical break.  But more cautious traders may
get lucky and get a more favorable entry on a subsequent rebound
and rollover below $10.  We're setting a fairly wide initial stop
at $10.50 (just over yesterday's high), but once NETE closes
below $9.00, we'll look to aggressively tighten it.

Annotated Chart of NETE:



Picked on February 4th at    $9.16
Change since picked          +0.00
Earnings Date              1/26/04 (confirmed)
Average Daily Volume =       671 K


============
Closed Plays
============

  Closed Bullish Plays
  --------------------

Providian Financial - PVN - cls: 12.45 chng: -0.60 stop: 12.25

While it hasn't tripped our stop just yet, it is clear that the
pending breakout we saw in shares of PVN over the weekend simply
isn't going to materialize.  We were looking for a breakout over
$14 to trigger the play to active status, and the selling
pressure this week has sent the stock the other way on increasing
volume.  The final straw was today's gap down and subsequent 4.5%
less to end right at the low of the day and right on the
supportive 20-dma.  Rather than wait for our stop to be tripped
(probably tomorrow), the prudent choice is just to drop the play
tonight so that we can focus on better plays.

Picked on February 1st at   $13.69
Change since picked          -1.24
Earnings Date              4/20/04 (unconfirmed)
Average Daily Volume =    2.54 mln





=================================================================
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) 2004  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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