PremierInvestor.net Newsletter Wednesday 02-11-2004 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: The Picture Has Brightened Watch List: NVLS, BSX, IGT, JPM 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) =============================================================== 02-11-2004 High Low Volume Advance/Decline DJIA 10737.70 +123.85 10746.88 10572.59 2.12 bln 1923/ 911 NASDAQ 2089.66 + 14.33 2089.66 2064.77 2.00 bln 1853/1238 S&P 100 572.39 + 6.04 573.20 565.01 Totals 3776/2149 S&P 500 1157.76 + 12.22 1158.89 1142.33 RUS 2000 597.07 + 4.24 597.08 590.14 DJ TRANS 2951.93 + 30.07 2951.97 2910.47 VIX 15.39 - 0.55 16.16 15.26 VXO 14.88 - 0.67 16.26 14.80 VXN 23.53 - 0.97 24.77 23.40 Total Volume 4,721M Total UpVol 3,298M Total DnVol 1,358M 52wk Highs 858 52wk Lows 5 TRIN 0.57 PUT/CALL 0.68 =============================================================== =========== Market Wrap =========== The Picture Has Brightened by James Brown "...the picture has brightened." sums up the day and Greenspan's perspective on the U.S. economy. The excerpt was part of Federal Reserve Chairman Alan Greenspan's official comments before congress in day one of a two-day semiannual meeting. Alan's positive speech sent the markets soaring while broker-dealers and media stocks traded higher on the $66 billion Disney takeover bid by cable-giant Comcast. The one-two punch of Greenspan's speech and the Disney bid sent the markets to new highs. The Dow Jones Industrials added 123 points to close above resistance at 10,700 and hit levels not seen since June 2001. The S&P 500 also broke out to a new one- year high above January's resistance near 1155. The NASDAQ lagged behind with a 14-point gain but it closed over minor resistance at 2075 and the index looks poised to take another swing at the 2150 level. Overall the rally was very widespread. Every major sector closed higher except for the HMO index, which fell 2%. Investors were pouring money into broker-dealers, homebuilders, gold and mining, semiconductors and retail stocks. Market internals were naturally bullish with advancers outrunning decliners by more than 2-to-1 on the NYSE and 3-to-2 on the NASDAQ. New highs exploded to 665 between the two exchanges. Up volume was four times down volume on the NYSE and more than twice down volume on the NASDAQ. Traders want to see rallies support by strong volume and we got that today with more than 4 billion shares trading between the two exchanges. Chart of the DJIA: Chart of the NASDAQ: Chart of the S&P 500: The new closing high for the DJIA is very bullish. This breaks the major resistance near 10,700 from March 2002 and paves the way for the Dow to run towards its next overhead barrier in the 10,900-11,000 range. The NASDAQ also looks good. The move through resistance in the 2050-2075 range has set us up for a run toward overhead resistance at 2150. Today's close puts the NASDAQ above all its major moving averages on both its daily and weekly chart save for the 21-dma. The S&P 500 has followed the Dow's lead and broken through to a new one-year high above January's resistance. Overhead resistance on the SPX is virtually nonexistent between here and the 1175 level dating back to December 2001-March 2002. This week the markets have been exceptionally Greenspan-centric. Monday and Tuesday the markets traded cautiously ahead of his appearance for fear of what he might say. Today they soared higher on his bullish comments for the economy and a reiteration of the Fed's plan to be patient. When commenting on how the situation has changed from his last visit to congress Alan said, "Since then, the picture has brightened. The gross domestic product expanded vigorously over the second half of 2003 while productivity surged, prices remained stable, and financial conditions improved further. Overall, the economy has made impressive gains in output and real incomes; however, progress in creating jobs has been limited." More importantly Alan followed up with, "Looking forward, the prospects are good for sustained expansion of the U.S. economy." That's exactly what the markets want to hear from him. Alan also commented on the "growing confidence of business executives in the durability of the expansion" and the "favorable financial conditions" that lead to a turnaround in business spending. Of course Greenspan couldn't dodge the jobs question, mainly where are they? His response was that "stunning increases in productivity" had been a surprise and allowed businesses to meet increasing demand "without stepping up hiring". However, he quickly pointed out that "employment will begin to grow more quickly before long as output continues to expand." Essentially he believes that productivity increases are going to become harder and harder to squeeze out and as the expansion continues managers will become more confident in its "durability" and "firms will surely once again add to their payrolls." Following his appearance there is always a lot of discussion as the markets dissect his comments and I heard some analysts suggesting that the U.S. could produce between 2 million and 3 million jobs by the end of the year. Speaking of jobs some believe that Disney's CEO Mike Eisner's job may be on the line. The big story today was an unsolicited $66 billion all-stock bid by Comcast cable (CMCSA) to buy Disney (DIS). Evidently Comcast's CEO Brian Roberts had pitched the idea of a merger to Eisner earlier this week but Mike turned him down. In response Comcast decided to take it to the Disney shareholders and Board of directors by making it public. The $54 billion deal, plus $12 billion in assume debt, offers 0.78 shares of Comcast's Class A stock for each share of Disney stock. Should the deal go through it would form the largest media company on the planet, eclipsing media titan Time-Warner's $40 billion in revenues and $79 billion market cap. What really makes this interesting is not only the timing of the bid but Wall Street's reaction to it. Based on yesterday's prices the Comcast offer values Disney at $26.47 a share, almost a 10% premium from Tuesday's close. Yet shares of DISNEY shot up 14.6% to 27.60, which means Wall Street believes there may be a bidding war between Comcast and other media giants looking to buy up Disney's brand and assets. A few of the companies considered as potential buyers are Viacom, News corp., Time-Warner and even Microsoft since the software company is still sitting on a $50 billion pile of cash and has expressed an interest in the media business. Right now Viacom seems to be the most viable alternative to Comcast who will probably end up raising its bid. A combined Comcast-Disney business has immediately raised some antitrust concerns. Such a media conglomerate would own ABC, Disney Channel, E! entertainment, the Golf channel, ESPN sports network, Disney's film studio, Disney's Touchstone movie studio, Disney's theme parks, cruise ship business, the most enviable portfolio of cartoons and movies on top of a cable business with 21 million homes, and 5 million high-speed Internet customers. The merger news completely overshadowed earnings reports from both Disney and Comcast. DIS reported earnings of 33 cents a share, which was a dramatic improvement from last year's 2 cents and above current estimates at 23 cents a share. Revenues soared past analysts' estimates to $8.5 billion for the quarter. Meanwhile Comcast reported earnings of 17 cents a share, where were also dramatically better than last year's loss of 7 cents and well above current estimates for a net profit of 3 cents per share. Comcast's revenues jumped more than 58% to $4.74 billion. Another major earnings report out today was Dow component Coca- Cola Co (KO). KO reported before the opening bell with 38 cents a share, but minus one-time charges their EPS was 46 cents, or 2 cents above the estimates. Revenues surpassed the estimate but investors sold the news as analysts comments turned negative over a drop in operating income and an 8% jump in expenses. Also noteworthy was an earnings pre-announcement from Hewlett-Packard (HPQ). Speculation had been growing over HPQ's earnings but the company wasn't due to report until next week on Feb. 19th. We don't know whether HPQ management got tired of the rumors or whether they wanted to steal some of Dell's thunder but they pre- announced an hour before today's close. For the quarter ending January 31st HPQ will report earnings of 35 cents a share, which is in line with estimates on revenues of $19.5 billion. The news quickly took the wind out of the stock and shares fell steadily into the close. Tomorrow should be interesting. The new highs on the Dow and the SPX above January's resistance could spark another round of short covering and inspire bulls who had been waiting for another dip to finally jump on board for fear they'll miss the train. We'll also hear the latest weekly jobless claims, the January retail sales figures, business inventories and the Treasury budget numbers. However, eclipsing them all will be Alan Greenspan's second appearance, this time before the senate. As Jim mentioned in the monitor today the Q&A section is likely to be tougher and this is still a wild card event should he stumble and issue the wrong comment. Personally, after today's speech I feel that any Greenspan-risk has sunk considerably. That leaves us with just Dell's earnings report after the close. Let's hope Michael Dell has some positive comments for us! ================================================================== 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 --------------------------------- Novellus Systems Inc. - NVLS - close: 34.11 change: +1.29 WHAT TO WATCH: With the Semiconductor index rebounding nicely from its 50-dma, NVLS is beginning to solidify and looks ready to reclaim some of its recent losses. Note the strong support that has been found near $32 over the past 2 weeks. Use a trigger over today's high and target a move to the 200-dma near $37.50. --- Boston Scientific Corp. - BSX - close: 42.94 change: +0.98 WHAT TO WATCH: After rallying near the $42.50 level just over a week ago, shares of BSX have been in consolidation mode, holding very near their highs. With the strong surge in the broad market on Wednesday, the stock broke out and looks like it has room to run, especially in light of today's close at new all-time highs. Use either a pullback to $42 support or a breakout over $43.25 to gain entry. --- International Game Technology - IGT - close: 38.05 change: +0.89 WHAT TO WATCH: IGT has been a consistent performer over the past year, continually rallying to new highs, consolidating and then repeating the process. The stock has been consolidating for the past couple weeks and with today's rebound off the 20-dma, it looks ready to break out again. Use a trigger over $38.60 for entry. --- J.P. Morgan & Company - JPM - close: 40.27 change: +0.79 WHAT TO WATCH: Brokerage stocks led the charge today as investors cheered Greenspan's Humphrey Hawkins testimony. JPM pushed right to resistance on strong volume and a breakout over $40.50 could really get things moving. Use a trigger at $40.55 and target a rally to next resistance at $45. --- =================== On the RADAR Screen =================== CBSS $40.75 - The longer a consolidation lasts prior to a breakout, the stronger that breakout tends to be. CBSS has been banging into the $40 resistance level since early December, so today's breakout on very strong volume looks like it has room to run. The stock is already at new all-time highs, so entries look good either on a breakout over today's high or on a pullback and successful rebound from the $40 level. ORLY $39.43 - Since selling off during the month of December, ORLY has been building a solid base just above the 200-dma. Buyers sent the stock higher on Wednesday and it looks like a pending breakout. Use a trigger over $40 and target a rally to the $44 area, near the December highs. DY $25.04 - It's tough to find a viable bearish candidate in such a strong market, but DY certainly seems to fit the bill, losing 3% to close at its low today in contrast to the rest of the market. Use a trigger at $24.50 and target a drop to the 200- dma. Watch for potential near-term support at $22 on the way down. ================== Trading Ideas ================== This section contains stocks that meet criteria which may make them of interest to long and short side traders. These are not recommendations, nor have they been reviewed by PremierInvestor editors for investment potential. However, each of them has technical and fundamental characteristics that make them worthy of further review by traders and investors looking for fresh ideas. New stocks will appear daily following the market close. Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change TOT Total Sa (ADS) 92.53 +0.54 LEH Lehman Bros Hldg 86.89 +0.94 GDW Golden West Financial 107.12 +0.63 AET Aetna Inc New 71.60 +0.56 LH Laboratory Cp Am Hldgs 44.20 +0.72 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- None --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- DE Deere & Co 64.50 +1.50 AMG Affiliated Managers Grp 86.96 +1.36 TASR Taser Omt; 49.70 +1.29 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- None ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- WEC Wisconsin Energy 33.46 -0.53 ================================================================= 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 Wednesday 02-11-2004 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: ANN, LIN Net Bulls (Tech Stocks) New Bullish plays: AMZN Active Trader (Non-tech Stocks) New Bullish plays: BA Stock Splits Announcements: None ================================================================== Stop Loss Adjustments ================================================================== ANN, non-tech long raise stop from 39.50 to 41.40 --- LIN, non-tech long raise stop from 29.00 to 29.99 ================================================================== Net Bulls (NB) Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- Amazon.com - AMZN - close: 47.14 change: +1.55 stop: 44.00 Company Description: Amazon.com is a website where customers can find virtually anything they want to buy online. The company lists millions of unique items in categories such as books, music, DVDs, consumer electronics, toys, software, computer and video games, lawn a patio items, kitchen products and wireless products. Through its Amazon Marketplace, Auctions and zShops services, any business or individual can sell virtually anything to AMZN's approximately 30 million cumulative customers. Why we like it: "Sell the news" was investors' reaction following AMZN's earnings report last month and the stock plunged from above $55 all the way down to the 200-dma (currently $45.39) before finding any tangible support. That support has held up well and the stock saw a nice round of buying on Wednesday, good for a 3.4% advance. With the broad market in full rally mode, AMZN looks like it could gather speed to the upside and a run back to the $55 level looks quite possible. There will be a battle with resistance in the $51.50-52.50 area, as that is the site of the clustered 20- dma ($51.44), 30-dma ($51.80), 50-dma ($51.54) and 100-dma ($52.60). AMZN has shown an amazing ability to charge through major resistance levels over the past year, so we'll give the stock the benefit of the doubt and expect it to do the same this time around. Note that daily Stochastics are just starting to emerge from oversold territory and with today's expanding volume, we could see a strong move towards that resistance, perhaps even later this week. The stock posted its best close in over a week today, but we'll play on the cautious side and use a trigger just over today's high ($47.36) before considering an entry. Use a trigger of $47.50 and then set an initial stop at $44.00, just under the 200-dma and the 2/04 intraday low. As noted above, there's likely to be resistance near the $52 level, so conservative traders may want to harvest gains on the first hint of weakness near that level. But we're going to go for the gusto and target a rally back up to the $55 level, where AMZN ought to find strong resistance. Annotated Chart of AMZN: Picked on February 11th at $47.14 Change since picked +0.00 Earnings Date 1/27/04 (confirmed) Average Daily Volume = 9.84 mln ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- The Boeing Company - BA - close: 44.49 change: +0.89 stop: 41.49 Company Description: One of the world's major aerospace firms, BA operates in three principal segments: commercial airplanes, military aircraft and missiles, and space and communications. Commercial airplanes operations involves the development, production and marketing of commercial jet aircraft, principally to the commercial airline industry. The Military Aircraft and Missiles division is involved in the research, development, production, modification and support of military aircraft, including transport and attack aircraft. The Space and Communications segment is involved in the research, development, production, modification and support of space systems, rocket engines and battle management systems. Why we like it: Despite the recent abrupt selloff in the DOW Transports ($TRAN), shares of BA have been amazingly resilient. The selloff in the TRAN only dropped BA back to its first level of support near $41.50 and the stock stabilized there, even before the TRAN stopped falling. Over the past week, the stock rallied back to resistance just south of $45 and it looks like a breakout to new 52-week highs could come any day now. Once through that level of resistance, BA may find some mild resistance near $46 and then it should be clear sailing up to $48 and then $50, which is the site of the 2002 highs. The PnF chart certainly says there is plenty of room to run, with the Buy signal generated last summer giving a vertical price target of $62. The stock has been so consistent in recent months, that it hasn't printed so much as a 3-box reversal since September. Clearly, we want to make the stock prove its intentions before playing, so we're setting our entry trigger at $45.05, just over last Friday's intraday high. Aggressive traders can enter on the initial breakout, while those looking for a better entry will want to wait for a subsequent pullback to confirm new support in the $43.50-44.00 area. The reason the pullback entry may make more sense is due to the potential for a mild pullback following the first test of that mild resistance at $46. While there is some resistance at $48, based on the way the stock has been trading, we're expecting a move to the upper end of that $48-50 resistance zone to put in a bona fide test of the 2002 highs. We're setting our stop initially at $41.49, which is just below its recent consolidation lows, as well as the 50-dma ($41.66). Annotated Chart of BA: Picked on February 11th at $44.49 Change since picked +0.00 Earnings Date 1/29/04 (confirmed) Average Daily Volume = 3.19 mln ================================================================== Stock Splits ================================================================== Announcements ------------- None ================================================================= 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.
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