PremierInvestor.net Newsletter Wednesday 02-25-2004 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: Oversold Bounce? Watch List: IGT, JNPR, LPNT, FD 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) =============================================================== 02-25-2004 High Low Volume Advance/Decline DJIA 10601.62 + 35.25 10615.56 10560.07 1.67 bln 1841/ 996 NASDAQ 2022.98 + 17.54 2024.20 2007.73 1.68 bln 1968/1091 S&P 100 565.86 + 2.17 566.74 563.64 Totals 3809/2087 S&P 500 1143.67 + 4.58 1145.24 1138.71 RUS 2000 579.04 + 7.17 579.09 571.56 DJ TRANS 2868.96 + 9.65 2873.27 2849.52 VIX 14.93 - 0.97 16.05 14.93 VXO 14.99 - 0.83 15.98 14.89 VXN 23.55 - 1.13 24.80 23.52 Total Volume 3,718M Total UpVol 2,648M Total DnVol 1,024M 52wk Highs 267 52wk Lows 21 TRIN 0.78 PUT/CALL 0.77 =============================================================== =========== Market Wrap =========== Oversold Bounce? by James Brown What felt like a rather slow day on Wall Street actually turned into a rather bullish session. Stocks ignored disappointing home sales data and rising oil and gas prices to focus on positive comments from Fed chairman Alan Greenspan. Tech stocks actually lead the bounce with chip and networking stocks posting strong gains. Overall the major indices turned things around to end the recent losing streak. Market internals were very bullish with advancing stocks sweeping past declining issues 18 to 10 on the NYSE and 20 to 11 on the NASDAQ. Up volume was better than 2-to-1 over down volume on both exchanges but total volume was light for the session. If you're feeling pessimistic this may look like an oversold bounce after five days of consecutive losses but the rebound today was very widespread. The only sector to turn lower was the XAU gold & silver index, which lost 1% and only due to the strength in the U.S. dollar. Gold futures dropped $8.70 to $396.10 an ounce after the greenback rose against the euro and the yen. The Dow Jones Industrial average traded in a relatively tight 50- point range but remained above support and managed to close over the 10,600 level. This bodes well for tomorrow and its short- term oscillators are suggesting a continuation of the bounce. The rebound in the NASDAQ is probably more important. It was crucial that the tech-heavy NASDAQ hold support at the 2000 level and today's move should send it back toward overhead resistance at its 50-dma. Chart of the DJIA: Chart of the NASDAQ Composite: Also noteworthy was the rebound in the Russell 2000 (RUT) and the Semiconductor index (SOX). The RUT broke support at its 50-dma on Monday but never saw any follow through during Tuesday's session. Today's bounce puts it back over the 50-dma and the index has put in a new higher low compared to the earlier February drop. The SOX also made an impressive turnaround with today's 1.82% gain putting it back above its 100-dma and the 500 mark. Boosting the SOX was news from the Gartner research group who said that global semiconductor sales should rise 22.6% in 2004, the largest improvement since 2000. What I find interesting is that in Gartner's press release they call their 2004 forecast "deliberately conservative". Chart of the Russell 2000: Chart of the Semiconductor Index: The economic data this morning turned out to be disappointing. Economists were looking for a dip in existing homes sales to 6.27 million units, down from the previous month's 6.47 million annual adjusted rate. What we got was a 5.2% drop to 6.04 million units. It may have been this news that influenced early morning weakness in the homebuilders even though these were existing home sales and not new ones. Tomorrow could be important for the homebuilding sector as the new homes sales numbers are released. The media was also buzzing about the strong gains in oil and gas prices today. Crude oil rose $1.10 to $35.68 and gas prices rose 3.45 cents to $1.0589 per gallon to hit their highest levels in almost a year. Driving the news was a report from the Energy Department that unleaded gasoline inventories had dropped 1.6 million barrels last week to 203.4 million barrels, which is below year-ago levels. As mentioned in yesterday's wrap the high price of oil is a major influence on multiple sectors in our economy and the markets ability to ignore this rise has been extraordinary. Concerns over OPEC suggesting another production cut at their April meeting has some analysts speculating that we'll see drastically increased prices at the pump this summer. The rise in oil is the major factor in the oil service sector's three-month rally. Hogging the spotlight again was Alan Greenspan's third appearance this week. This time Alan was speaking before the House Budget Committee and shared his views on the U.S. economic outlook. Greenspan stated that the Bush tax cuts had sparked the current economic expansion and the Fed's accommodative stance (a.k.a. the lowest interest rates in 40 years) had allowed the U.S. to move from a "period of sub-par growth to one of more vigorous expansion". He did issue strong caution on the rising deficit and said Congress needs to address it while both congress and the President need to curb spending. Of course the real hot topic today was Greenspan's comments on Social Security and his proposals to "fix" Social Security by adjusting policy for inflation and longer life expectancies. More importantly for us short-term were his comments that, "The most recent indicators suggest that the economy is off to a strong start in 2004 and prospects for sustaining the expansion in the period ahead are good." A few market pundits went on to speculate that Greenspan's comments may re-ignite the rally in tech stocks. Currently the U.S. economy is expected to grow by 4.6% through 2004, well above the 3.1% seen in 2003. Many believe that tech stocks have already priced in this rate of growth. However, if the market interprets Greenspan's comments today to mean that the economy can grow even faster then there may be more room for stocks to run again. Given the rebound today I believe tomorrow should be bullish assuming there aren't any huge negative surprises in the handful of economic reports. Before the opening bell we'll get the weekly initial jobless claims, the durable goods orders for January. After the open we'll see the Help-wanted index and the new home sales figures. Plus, the markets will get to hear from Ben Bernanke, one of the Federal Reserve governors, as he speaks in Washington tomorrow. Traders can also keep an eye on retail stocks. Announcing before the opening bell is American Eagle Outfitters (AEOS), The Limited (LTD) and Liz Claiborne (LIZ). Announcing later on Thursday will be Kohl's (KSS) and the Gap (GPS). ================================================================== 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 --------------------------------- International Game Technology - IGT - close: 37.21 change: +0.13 WHAT TO WATCH: Just as we suspected, IGT found support just above its 50-dma today, rebounding from its $36.75 intraday low. This looks like a good entry for a rebound play, targeting a run back to $38.50 resistance ahead of a breakout to new highs. Use a tight stop just under the 50-dma. Chart= --- Juniper Networks - JNPR - close: 25.25 change: +0.50 WHAT TO WATCH: We're a bit early here, but JNPR is setting up for a solid long entry as it nears dual support at the 50-dma and the post-gap high near $24. Target entries on a rebound from that support level and then look for a near-term rise to $28 followed by potential for a continued rally back up to test the $30 resistance level. A more conservative approach would be to wait for a breakout over the top of the month-long bull flag at $26.75 before playing. Chart= --- LifePoint Hospitals, Inc. - LPNT - close: 33.59 change: +0.61 WHAT TO WATCH: After topping out near the $37 level a month ago, shares of LPNT have been drifting lower in what looks like a bear flag continuation pattern. Bouncing off the 50-dma the past few sessions, the stock looks ready to begin its rebound. Entries near current levels look attractive ahead of a rally back to test resistance in the $37-38 area. Use a tight stop just under last Friday's $32.25 low. Chart= --- Federated Department Stores - FD - close: 52.54 change: +1.59 WHAT TO WATCH: Repeatedly banging its head on $50 resistance over the past couple weeks, FD finally crept through that barrier and then exploded upwards today, solidifying the breakout. With the Retail index (RLX.X) finding support above $390, FD looks like it has room to run. Optimum entries would come on a pullback to test new support in the $50-51 area ahead of a rally up towards the stock's all-time highs in the $55-56 area. Chart= --- =================== On the RADAR Screen =================== AMTD $15.72 - It looks like the profit taking that followed AMTD's rejection at the $17.50 resistance level last week has run its course and the stock staged a nice bounce off of 50-dma support on Wednesday. Current levels look good for aggressive entries, targeting a rally back to the recent highs. Use a tight stop just under yesterday's low. RI $31.51 - Investor's cheered RI's raised earnings estimates today and the stock broke out above strong resistance at $30 on huge volume. The stock seems a bit extended after today's 7.5% surge, but a pullback near the $30 level should provide a very nice entry before the rally resumes. BG $37.85 - There's no question BG looks extended here, but today's rebound above near-term support suggests that another breakout move is on tap. Use a trigger over $38.25 and a tight stop at $36.50, just under the early February lows, as well as the 20-dma. ================== 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 WFC Wells Fargo & Co New 57.23 +0.51 MER Merrill Lynch & Co 61.42 +0.67 MWD Morgan Stanley 60.43 +0.83 GS Goldman Sachs Group Inc 105.82 +1.50 FRE Freddie Mac 62.69 +0.57 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- AUO AU Optronics Corp 16.70 +1.25 IM Ingram Inc 19.55 +3.49 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- KMB Kimberely Clark Corp 64.59 +1.07 GDT Guidant Corp 69.79 +1.84 PCZ Petro-Canada 44.35 +1.09 FD Federated Dept Stores 52.54 +1.59 BSC Bear Stearns Companies 87.18 +1.98 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- HRB H&R Block Inc 54.41 -4.09 CECO Career Education Corp 48.80 -2.66 FMS Fresenius Med Care Ag 22.70 -1.06 DLTR Dollar Tree Stores Inc 30.95 -1.29 STZ Constellation Brands Inc 30.72 -3.04 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- PGR Progressive Corp 83.24 -1.09 SSP E.W. Scripps Company 97.99 -0.98 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to remove@PremierInvestor.net ================================================================= 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 advertising@PremierInvestor.net. ***************************************************************** Copyright 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Wednesday 02-25-2004 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: TSS, ANN, LIN, ARA Active Trader (Non-tech Stocks) New Bullish plays: XMSR High Risk/Reward New Bullish plays: MXO Stock Splits Announcements: BFCF ================================================================== Stop Loss Adjustments ================================================================== TSS, short lower stop from 22.50 to 22.00 --- ANN, long raise stop from 42.25 to 42.50 --- LIN, long raise stop from 31.00 to 31.50 --- ARA, long raise stop from 32.00 to 32.50 ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- XM Satellite Radio. - XMSR - cls: 23.95 chng: +1.35 stop: 21.25 Company Description: XM Satellite Radio Holdings Inc. is a nationwide provider of audio entertainment and information programming for reception by vehicle, home and portable radios. The company's digital audio XM Radio service offers 100 channels of music, news, talk, sports and children's programming for a monthly subscription price of $9.99. XMSR also offers one premium channel. The company has original music and talk channels created by its in-house programming unit, as well as channels created by well-known providers of brand-name programming, including MTV, VH1, ESPN Radio, Radio Disney, CNN, CNBC, Discovery, Fox News, E!, NASCAR, Radio One, Clear Channel, The Weather Channel and Hispanic Broadcasting Corporation. Why we like it: After a stellar 2003, it was only natural to expect a significant round of profit taking in the Satellite Radio stocks. Sure enough that's precisely what happened, and XMSR has spent the past several weeks pulling back from it's January peak just under $30. Over the past 3 weeks, the stock has been building a healthy base near $22, with the stock putting in a series of higher lows as the 100-dma ($22.62) appears to be offering loose support. In fact, the basing action of the past few weeks has the look of an inverse Head and Shoulders pattern, with the head at $20.50 and the neckline at $24. A breakout over the neckline gives a vertical measuring objective of $27.50, which lines up nicely with solid resistance. There may be some resistance to deal with near the 50-dma ($24.44) and then again at $26, but we're expecting those to be areas of potential consolidation, not rejection. While we're going to use an official trigger at $24, more conservative traders may want to wait for a break above $24.50 before playing, as that would have the stock already breaking over the 50-dma. The best entry into the play will come on the initial breakout over our trigger, while more conservative players may find that a subsequent pullback to test the $24 level as new-found support suits their risk profile better. Initial stops will be placed at $21.25, just under the site of the shoulders of the H&S pattern. That's a wider stop than we normally like to use and we'd recommend tightening that stop to $22 (just under yesterday's low) once the stock is able to push through the 50-dma. Annotated Chart of XMSR: Picked on February 25th at $23.95 Change since picked +0.00 Earnings Date 2/12/04 (confirmed) Average Daily Volume = 6.68 mln ================================================================== High Risk/Reward (HR) Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- Maxtor Corp. - MXO - cls: 9.98 chng: +0.65 stop: 9.00 Company Description: Maxtor Corporation is a provider of hard disk drives for a variety of applications, including desktop computers, Intel-based servers, near-line storage systems and consumer electronics. The company's desktop products are marketed under the Fireball, DiamondMax and MaXLine brand names, and consist of 3.5-inch hard disk drives with storage capacities ranging from 20 to 300 gigabytes per platter and speeds of 5,400 RPM (revolutions per minute) and 7,200 RPM. MXO also provides a line of high-end 3.5- inch hard disk drives for use in high-performance, storage- intensive applications such as workstations, enterprise servers and storage subsystems. These Intel-based server products are marketed under the Atlas brand name and provide storage capacities of 18.4 to 146.9 gigabytes at speeds of 10,000 RPM and 15,000 RPM. Why we like it: After topping out near $15 in mid-October, MXO has been under consistent selling pressure, posting one lower high after another. That weakness persisted through the end of January, with the stock breaking below the 200-dma and briefly dropping under strong support at $9.00. But over the past few weeks, the price action has started to look more constructive. The stock has continued to find support just above that $9 level, while bumping into resistance near $10, and this consolidation pattern looks like the prelude to a bullish breakout. Yesterday's dip was met by solid buying interest, which continued today, propelling the stock higher to close just under that $10 resistance level on expanding volume. Buying a breakout over $10 seems a bit too aggressive due to a bit more resistance at $10.25 and the 50-dma ($10.38) and 200-dma ($10.33) clustered just above there. But if the stock is able to break over those averages, it has a better than even chance of rallying up towards its January high near $12.50. Because of that near resistance, we're going to use an entry trigger at $10.40. The best entries will come on the initial breakout, especially if it is accompanied by continued strong volume. Traders that would prefer a more cautious approach will want to enter on a subsequent pullback to confirm new support near $10 after that initial breakout. We'll target a rally back to the $12.50 level, but will need to keep an eye on potential resistance first at $11.00 and then again at the 100-dma ($11.43). Note that the Disk Drive index (DDX.X) rebounded today right from the site of its 200-dma and that has bullish implications as well. Look for a continued rebound in the DDX to confirm bullish entries in MXO. We're initially setting a fairly wide stop at $9.00, just under yesterday's high. Once the play is triggered though, we're recommending a tighter stop at $9.40, just below both the 20-dma ($9.45) and today's intraday low at $9.48. Annotated Chart of MXO: Picked on February 25th at $9.98 Change since picked +0.00 Earnings Date 1/21/04 (confirmed) Average Daily Volume = 4.10 mln ================================================================== Stock Splits ================================================================== Announcements ------------- BFCF declares 5-for-4 split. Just after today's closing bell BFC Financial Corp (NASDAQ:BFCF) announced that its Board of Directors had approved a 5-for-4 stock split in the form of a 25% stock dividend. The dividend is payable to both Class A and Class B common shareholders on March 1st, 2004. The record date is February 20th. About the company: BFC Financial Corporation is a holding company as a consequence of its ownership of 13 million shares of the common stock of BankAtlantic Bancorp (NYSE:BBX) and a controlling interest in the shares of Levitt Corporation (NYSE:LEV) BankAtlantic Bancorp (NYSE:BBX) is a diversified financial services holding company and the parent company of BankAtlantic and Ryan Beck & Co. Through these subsidiaries, BankAtlantic Bancorp provides a full line of products and services encompassing consumer and commercial banking and brokerage and investment banking. Levitt Corporation (NYSE:LEV), the parent company of Levitt and Sons(TM) and Core Communities, develops single-family homes and master-planned communities in Florida. (Source: Company Press Release) ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to remove@PremierInvestor.net ================================================================= 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 advertising@PremierInvestor.net. ***************************************************************** Copyright (c) 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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