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Daily Newsletter, Monday, 02/23/2004

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PremierInvestor.net Newsletter                   Monday 02-23-2004
                                                    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:  Stocks Fall for Fourth Day
Watch List:   EDS, FLML, LRCX, NSM

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     02-23-2004            High     Low     Volume Advance/Decline
DJIA    10609.62 -  9.41 10644.96 10560.44 1.73 bln   1037/1808
NASDAQ   2007.52 - 30.41  2045.10  1999.59 1.92 bln    869/2229
S&P 100   564.58 -  0.29   566.16   562.06   Totals   1906/4037
S&P 500  1140.99 -  3.12  1146.69  1136.98
RUS 2000  570.20 -  9.69   581.86   570.20
DJ TRANS 2854.86 - 37.32  2893.76  2848.49
VIX        16.29 +  0.25    16.78    16.25
VXO        15.93 -  0.32    16.79    15.75
VXN        24.38 +  0.26    25.37    24.36
Total Volume 4,094M
Total UpVol    965M
Total DnVol  3,057M
52wk Highs     257
52wk Lows       23
TRIN          1.21
PUT/CALL      0.62
===============================================================

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

Stocks Fall for Fourth Day
by James Brown

The last week of February began with a decline as the NASDAQ
erased its 2004 gains and stocks fell for their fourth straight
session.  The tech-heavy NASDAQ traded to 1999.59 in the last
hour of trading before bouncing back above the 2000 level.
Today's close marks a 6.7% correction from the NASDAQ's 2004
highs at 2153 and from the lack of bounce at the 2000 level we
may see more declines in the near future.  The selling in the
tech sector was lead by a 2.74% decline in the semiconductor
sector, which produced a new intraday low for 2004.

The Dow Jones Industrials also struggled through most of the
session as two components, United Technologies (UTX) and Boeing
(BA), traded lower over news that the Pentagon might be canceling
the Comanche helicopter program.  The Dow Transports index also
slipped lower, continuing last week's decline.  Normally one
might expect defensive stocks like the drug sector to rally
higher as investors shift money into "safe haven" plays but the
DRG drug index fell again for the sixth loss in seven days.

Overseas stock exchanges were mixed as the dollar slipped from
three-week highs against the euro and three-month highs against
the Japanese yen.  The Japanese NIKKEI index added 148 points to
close at 10,868 while the Chinese Hang Seng lost 103 to close at
13,765.  English stocks ended with modest gains as the FTSE 100
closed up 9 points to 4524.  German stocks edged lower with a
4.6-point decline on the DAX to 4068.  In commodities crude oil
ticked higher 9 cents to $34.35 while gold bounced $1.30 to close
at $399.30 an ounce, its second session in a row under the $400
mark.

Here at home market internals were very negative. Declining
stocks surged past advancers 9 to 5 on the NYSE and 22 to 8 on
the NASDAQ.  Down volume overwhelmed up volume by more than 2 to
1 on the NYSE and nearly 5 to 1 on the NASDAQ.  Overall volume
settled at 1.73 billion on the NYSE and 1.92 billion on the
NASDAQ.

Technical oscillators are all negative on the Dow Industrials but
the venerable index managed to close above the 10,600 level again
with only minor losses.  If the selling continues tomorrow the
Industrials should find support at 10,500 with its rising 50-dma
to support it.

Daily chart of the Dow Jones Industrials:



Intraday Chart of the Dow Jones Industrials:



The NASDAQ Composite is in worse shape.  Market analysts have
been calling for a 5% to 10% correction in the major averages for
months now and many expect the NASDAQ to suffer the worst of the
selling because it out performed so well last year.  As I
mentioned earlier the NASDAQ is down 6.7% from its 2004 highs and
today's decline firmly broke technical support at the simple 50-
dma.  Art Cashin, a floor trader at the NYSE and a popular guest
commentator for CNBC, mentioned that the breakdown under the 50-
dma may be seen by many investors as a sign that the rally is
over and it's time to take some money off the table before any
more of their profits evaporate.  The temptation to sell now and
book all of 2003's profits will be a strong one.  However, there
are plenty of investors who have been waiting for a pull back to
re-enter the markets and the psychological 2000 level might look
like an entry point.

The greater concern to me is the lack of bounce from the test of
2000.  If there are a lot of traders waiting to buy the dip here
where are they?  A 7-point rebound in the last hour is not what I
would call enthusiastic.  Looking at the daily chart below you'll
see two supporting trendlines.  One is broken with today's
decline and the other is not.  Also noteworthy is the broken
simple 50-dma (pink line) on the NASDAQ's chart.  The same
technical breakdown through the 50-dma showed up in the GHA
hardware index, the GSO software index, the NWX networking index
and the INX Internet index.

Daily chart of the NASDAQ:



Weighing heavily on the NASDAQ was strong selling in the
semiconductor sector (SOX).  Earlier in February the SOX broke
through the bottom of its long-term rising channel but found
support at its 100-dma and bounced.  Today the SOX has broken
support at the 500 level and its 100-dma, which could be very bad
news for tech traders since many believe that the semiconductors
tend to lead the NASDAQ higher or lower.

Driving today's declines in the SOX was Intel, also a Dow
component.  Intel fell 3.33% and broke major support at $29.50
after reporting that an IRS audit of their 1999 and 2000 returns
might find it liable to the government for another $600 million,
plus interest, in back taxes.  The tax adjustments are focused on
Intel's export sales and the IRS has not issued any formal
rulings yet but if Intel is found liable they plan to appeal.
Investors might be worried that the IRS may find more back taxes
are owed as they currently conduct an audit of Intel's 2001 and
2002 returns.  Compounding concerns in the semiconductor group
was a downgrade for Intel rival AMD.  UBS lowered their price
target on AMD to $17 and cut its earnings estimates over concerns
from stiffer competition.  Plus, a Goldman Sachs analyst issued
some negative comments for Applied Micro Circuits Corp (AMCC)
stating their belief that AMCC won't be profitable again until
June 2005.

Daily chart of the Semiconductor Index (SOX):




Some of today's larger headlines were made by QUALCOMM (QCOM) and
Lowe's (LOW).  QCOM raised its Q2 earnings guidance this morning
and shares gapped higher above resistance at $60.00.  QCOM is the
second largest producer of chips for mobile phones and it raised
its Q2 EPS guidance from 38-41 cents to 48-50 cents.  Including
the estimated 1-cent loss for its investment division QCOM
expects to report 47-49 cents a share on revenues of $1.19-1.21
billion.  Compared to the 13 cents it earned for last year's Q2
that's a pretty big improvement.  QCOM's CEO Dr. Jacobs was
quoted as saying, "in fiscal year 2002 we shipped 65 million MSM
phone chips.  Comparatively, in the first two fiscal quarters of
2004 we expect to ship approximately 63-64 million MSM chips."
Jacobs said QCOM was seeing, "Record demand for our chipsets and
strong growth in virtually all CDMA markets..."  QCOM ended the
session with a 5.1% gain at $62.43.

Investor reaction wasn't so cheery for LOW's.  The second largest
home improvement chain in the country issued Q4 earnings that
were a penny better than analysts estimates on sales that rose
20% for the quarter to $7.25 billion.  Lowes even raised their Q2
estimates but their stock fell 2.9% by the close to $56.67.
Troubling investors was a sales shortfall compared to analyst
estimates of $7.28 billion for the quarter and a drop in same-
store sales.  Last quarter Lowes had same-store sales of +12%.
This quarter they dropped to a +7.3% gain, which is not bad but
under estimates of +7.5% and below "whisper" numbers in the high
single digits to low double digits.  Tomorrow before the opening
bell we'll hear from larger rival Home Depot (HD), a Dow
component.  Current estimates are for HD to turn in 39 cents a
share.  If HD can hit analyst estimates and issue higher guidance
it may be a positive influence on the Dow tomorrow.

More Dow components to watch tomorrow are UTX and BA.  As
mentioned earlier they traded lower today on the expectation that
the Pentagon would cancel the $38 billion Comanche helicopter
program.  After Monday's closing bell the Pentagon confirmed that
news and said the remaining $14.6 billion for the Comanche
project would be shifted to other aircraft projects.  Some of
that money is said to be headed toward UTX's Black Hawk
helicopter program.  Now there is still a chance that lawmakers,
especially those with constituents likely to be affected by this
move, will fight this cancellation.  However, the real question
for us is how will investors react tomorrow now that the news has
been verified.

Tomorrow will also bring another consumer confidence report, this
one for February.  Economists are expecting a rise to 102.0 after
last month's reading at 92.0.  Last but not least is another
scheduled appearance for Alan Greenspan before the Senate banking
committee in Washington.  While not expected to issue any
comments on monetary policy his appearance alone could cause the
markets to drift sideways on the off chance that he may say
something negative.


==================================================================
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
---------------------------------

Electronic Data Systems - EDS - close: 19.35 change: -0.67

WHAT TO WATCH: Looking weak for the past couple weeks, EDS
confirmed that bearish view this morning when it broke below the
$20 support level on a gap-down open.  With the stock ending near
its low of the day, it looks like next support at $18 and then
$17 is in play.  Ideal entries will now come on a failed bounce
and rollover near $20.




---

Flamel Technologies - FLML - close: 24.29 change: -1.94

WHAT TO WATCH: After consolidating in a narrowing sideways
pattern for the past few months, FLML appears poised to break
that pattern to the downside.  Today's plunge dropped the stock
right to its 200-dma, breaking the ascending trendline connecting
the lows of the past few months in the process.  Use a trigger
under the 200-dma and target strong support near $20.




---

Lam Research Corp. - LRCX - close: 24.99 change: -1.26

WHAT TO WATCH: Pressured by the weakness in the Semiconductor
sector, shares of LRCX staged their own breakdown on Monday,
breaking support near $25.50 and closing fractionally below the
200-dma.  Downside continuation should see the stock working its
way towards strong support at $22.50, giving us just enough room
for a solid bearish play.  Momentum entries under today's low
look best, but there's nothing wrong with an entry on a failed
bounce below the $25.50-26.00 area, which should now be solid
resistance.




---

National Semiconductor - NSM - close: 37.25 change: -1.14

WHAT TO WATCH: Bearish traders have been fooled more than once in
recent months, waiting for shares of NSM to break down.  But with
the SOX looking weak, perhaps this time is the real deal.  Look
for a break under the $36 level to trigger entries and target a
drop to strong support near $32, also the site of the 200-dma.




---

===================
On the RADAR Screen
===================

A $33.72 - Technology bulls have been repeatedly rewarded over
the past several months for buying every dip.  A is giving us an
opportunity at an aggressive rebound play.  Falling sharply over
the past few sessions, the stock is nearing strong support at
$32.50, also the site of the 50-dma and the 50% retracement of
its December/January rally.  Use a tight stop at $31.50.

SNDK $23.99 - So much for support!  Following its recent split,
the stock broke down again on Monday, coming to rest just above
the key $23.50 support level.  Use a trigger under $23.50 to
enter new bearish positions and target a drop to strong support
in the $19-20 area.

BRKS $20.58 - Selling volume has been heavy in shares of BRKS
over the past few days and the stock is in the process of
challenging key support.  So far support is holding at $20 with
the help of the 200-dma.  Use an entry trigger under $20 and
target a drop to next solid support at $17.50.


=================================================================
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 02-23-2004
                                                    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:   NETE, CSCO
Closed Plays:        VTSS
Split Announcement:  None


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

NETE - short
Adjust from $10.00 down to $9.60

CSCO - short
Adjust from $25.10 down to $24.50


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


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

Vitesse Semicon. - VTSS - close: 8.10 change: -0.37 stop: 8.10

There's just no way to put a pretty face on our VTSS play.
Popping up just enough to seduce us into playing it over $9.00
last week, the stock made an about face and has been heading
south ever since, steadily pressured by the decline in the
Semiconductor index (SOX.X).  Monday was no different, with the
stock suffering another 4.4% decline and ending right on our
stop.  Clearly, we must drop the play tonight as a dismal
failure, a play that never worked in our favor.

Picked on February 18th at   $9.05
Change since picked          -0.95
Earnings Date              1/22/04 (confirmed)
Average Daily Volume =    6.11 mln





==================================================================
Stock Splits
==================================================================

Announcements
-------------

None


==================================================================
  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    42.58    +0.55
TOT     Total Sa (ADS)             93.16    +1.44
SC      Shell Transport & Trading  41.36    +0.52
RD      Royal Dutch Petroleum      48.92    +0.52
BAC     Bank of America Corp       82.00    +0.66


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

DYS     Distribution Y Serv D&S    19.65    +1.33


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

QCOM    Qualcomm Inc               62.43    +3.03
BUD     Anheuser-Busch Cos Inc     54.01    +1.07
TXU     TXU Corp                   27.87    +3.04
RJR     RJ Reynolds Tobbaco Hldg   61.87    +1.89


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

UTX     United Technologies Corp   93.80    -2.82
LOW     Lowe's Companies           56.67    -1.71
RTN     Raytheon Co                31.01    -1.01
UVN     Univision Communications   34.04    -1.06
COH     Coach Inc                  38.02    -1.34


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

FRE     Freddie Mac                63.93    -0.17
BA      Boeing Co                  43.62    -0.72
NTRS    Nothern Trust Corp         48.29    -0.39
COH     Coach Inc                  38.02    -1.34
DST     DST Systems Inc            42.26    -0.82


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

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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