PremierInvestor.net Newsletter Monday 03-15-2004 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: Anymore Questions? Watch List: ISIL, MYGN, IDTI, ABGX =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 03-15-2004 High Low Volume Advance/Decline DJIA 10102.89 -137.19 10241.11 10092.47 1.90 bln 675/2160 NASDAQ 1939.20 - 45.53 1977.78 1939.20 1.71 bln 594/2453 S&P 100 542.26 - 7.66 549.92 541.67 Totals 1269/4613 S&P 500 1104.49 - 16.08 1120.57 1103.36 RUS 2000 566.95 - 15.89 582.96 566.87 DJ TRANS 2790.53 - 72.56 2860.42 2789.81 VIX 21.13 + 2.83 21.39 18.86 VXO 21.38 + 2.66 21.64 19.22 VXN 27.13 + 1.83 27.30 26.07 Total Volume 4,025M Total UpVol 398M Total DnVol 3,598M 52wk Highs 170 52wk Lows 36 TRIN 2.82 PUT/CALL 1.05 =============================================================== =========== Market Wrap =========== Anymore Questions? by James Brown Last Friday's rally eased the pain from a brutal week in the markets but the question investors were left with over the weekend was, "Is it an honest reversal or just an oversold bounce?" Monday's 137-point loss answered that question. New evidence over the weekend linking the Madrid bombings to Al Qaida renewed terrorism fears around the globe and investors erased all of Friday's gains. Positive comments from GE and Wal-Mart were not enough to inspire investor confidence and mixed economic data only added to the turmoil. Over the weekend Spanish officials reported that a videotape left in a trash can outside a mosque in Madrid held a message from an alleged Al Qaida spokesperson claiming responsibility for the train station bombings last Thursday. Officials were originally blaming the Basque separatist group Eta but when rumors surfaced late Thursday that Al Qaida may be involved the U.S. markets immediately tanked. Concerns that Al Qaida is still alive and well and planning attacks here at home have immediately put investors on the defensive. It didn't help that authorities in Pakistan found a bomb-laden car parked outside the U.S. consulate this morning or news that Greek officials discovered a bomb near a Citibank branch in Athens. As if the terror threat issues weren't enough the surprise win by the Socialist party in Spain's general election on Sunday is a damaging blow to President Bush's global support network for the war in Iraq. The new Prime minister-elect has vowed to bring home Spain's 1300 troops in Iraq by June 30th. The combination of these variables sent the European markets staggering lower. The French CAC 40 index lost 2.4% or almost 88 points to close at 3573. The German DAX index lost 2.67%, a triple-digit loss, to close at 3810. The British FTSE slipped 1.22% to 4412. The picture was a little different across the Pacific with the Japanese NIKKEI adding 155 points to close at 11,317 and the Chinese Hang Seng only losing 12 points to 12,919. Most analysts believe the NIKKEI's gain was a reflection of our own rebound from Friday but with today's loss in the U.S. markets we could see Asian stocks retreat tomorrow. One of my biggest concerns today is the market internals. One would expect them to be bearish with the major indices in the red but they're starting to get a little extreme. Declining stocks outnumbered advancing stocks 3-to-1 on the NYSE and 4-to-1 on the NASDAQ. New highs have all but evaporated during the recent sell-off. We were used to seeing new highs in the 400 to 800 range. Today there were only 131 new highs. What's really disturbing are the up and down volume numbers. Down volume was almost 9 times up volume on the NYSE and down volume did hit 10- to-1 levels versus up volume on the NASDAQ. Last week I commented on the upside breakout in the volatility indices and how the surge higher broke their longer-term down trends suggesting this sell-off was "for real". We're seeing another surge today on the VIX, VXO and the VXN. The Dow Industrials did manage to close at the 10,100 level but today's drop was another new relative low and suggests the index is headed for the 10,000 mark. Currently the Dow is down 6% from its February highs, so we've satisfied those technicians crying out for a 5% pull back but the 10K mark has now become a magnet where bulls will wait to buy the dip to support and short-term bears cover positions for a profit. The S&P 500 index is mirroring the Dow's decline with another new relative low itself but it should find some support at its rising 100-dma near the 1100 mark just four points away. Currently the SPX is down 4.6% from its recent highs, which may be enough to satisfy those investors looking to buy after a correction. The NASDAQ Composite out performed both the Dow and the S&P 500 during the 2003 rally so it's no surprise that it's under performing during the pull back. Today's 2.29% loss is a new relative low and also happens to be extremely close to a 10% correction from the NASDAQ's January highs. Unfortunately, I wouldn't expect it to stop here. The 1900 level is the next real support level and its 200-dma near 1877 could also become a magnet pulling the index lower. Chart of the Dow Jones Industrials: Chart of the S&P 500: Chart of the NASDAQ Composite: Monday's economic reports were mixed. Lately we've been seeing a very steady trend. Economists have been expecting dips in a large number of economic survey's following some recent highs. Almost every time the dip has been deeper than expected, which is throwing doubt over the economic recovery. Case in point this morning's New York Empire State Manufacturing index showed up with a reading of 25.3 when economists were only expecting a dip to 38.7 from February's record setting 42.1 reading. Readings above zero indicate economic expansion and the Empire State Mfg index has been above 30 for the last five months in a row. New orders slipped from 34.9 to 23.5. What are really disturbing numbers were the employment component dropped from 16.5 to 9.7 and the workweek component dropped from 26.5 to 11.9. Later in the session the Federal Reserve reported that February's industrial production rose 0.7%, which was better than the expected 0.4% rise. Plus the country's capacity utilization numbers hit 76.6% in February, up from 76.1 in January and near pre-9/11 levels. This helped soften the blow from the New York readings but couldn't help stem the tide of selling. Investors also chose to ignore positive comments from Dow component General Electric (GE). The massive conglomerate told investors it was confident that its Q1 and Q2 earnings numbers will come in at the high end of its range. That puts GE's earnings estimates at 32 cents for the first quarter and 39 cents for the second quarter, which is about a penny above analysts' estimates. Considering the market's renewed concerns over terrorism it was apropos that GE announce its plans to acquire InVision Technologies (INVN) for $900 million or $50 a share. INVN is well known as one of the leading manufacturers of bomb detectors for U.S. airports. Separately INVN announced that it has received an order from the Transportation Security Administration worth $105 million. Investors have been bullish on the stock after President Bush's proposed budget called for a 20% increase in airport security. Shares of INVN gapped higher and ended the session up 19.7% to $49.30. Another Dow component to issue good news today was Wal-Mart (WMT). The retail titan said March same-store sales were coming in at the high end of its 4%-6% range. Sales were being driven by an increase in the number of tax refund checks their stores were cashing. WMT believes that retailers should do well in the first two quarters of 2004 due to larger tax refunds for consumers. Yet another Dow component in the headlines was United Technologies (UTX). Deutsche Bank upgraded the stock to a "buy" from a "hold" and told clients that the recent weakness was a buying opportunity. Analysts are bullish on the company's defense-related businesses and an estimated increase in commercial aircraft maintenance. Shares of UTX added 55 cents to close at $87.90 and was the only Dow component to close in the green in today's widespread sell-off. I'm actually surprised that the DFI defense index didn't see a gain today with investors focused on terrorism concerns. What is not a surprise was the 7% drop in the XAL airline index. What probably started out as weakness related to terrorism concerns was exacerbated by an earnings warning from Delta Airlines (DAL). The company had already warned that it would lose between $300 and $350 million this quarter but now DAL is estimating its losses will be closer to $400 million. The airline cited sharply higher fuel costs but mentioned that weaker customer demand also played a role. Shares of DAL fell 12.2% to $7.76 and rival Continental Airlines (CAL) followed it with an 11.92% drop to $12.27. DAL's announcement shouldn't come as a surprise. We've mentioned before that the rising cost of oil would wreak havoc on the airlines. A quick glance at the charts for DAL and CAL and you can see that investors have been rotating out of the group for weeks. This problem is likely to spread with oil still rising. Crude oil futures jumped more than 3% today and closed above $37 a barrel. Investor confidence is also suffering from a revival in corporate accounting concerns. Nortel Networks (NT) took the lead in today's parade of accounting calamities after announcing that they had put their CFO and Controller on paid leave of absence pending an independent review of the company's financials. You might remember last week that NT said it would delay filing its annual 10-K report because the company would probably have to restate its past results. J.P.Morgan downgraded the stock to "neutral" and shares of NT fell 18.5% to $5.24. NT's drop lead the NWX networking index to a 3.41% decline. Software stocks were also trading lower led by a 6% decline in shares of Veritas Software (VRTS). The company said it would restate its results for 2001 and 2002 while delay filing its 2003 10-K as it dealt with various accounting errors. Management said that its delay would prompt a NASDAQ delisting notice but they would take the appropriate steps to come under compliance before any delisting deadline. Investors were probably thankful to hear the closing bell this afternoon and put a halt to the market's decline but that didn't stop the bad news. P.F. Chang's China Bistro (PFCB) announced that it would be restating its financial results for the previous three years as it accounted for its partnership program. The company said it would take an $11.5 million charge in its Q1 earnings report and the stock dropped some 8% in after hours trading. Fortunately not all the after hours news was bad. 3M (MMM) joined fellow Dow component GE and issued an upside pre- announcement for its Q1 earnings. MMM is raising its Q1 earnings guidance from 80-82 cents a share to 86-88 cents and raising its full year estimates from $3.46-3.52 to $3.52-3.62. Analysts' estimates had been 82 cents and $3.52 respectively. MMM said its industrial-related businesses were seeing strong growth trends and that currency effects were adding about 5% to its Q1 sales numbers. Hopefully MMM's upside earnings guidance, combined with the underlying affects of GE's upside guidance and WMT's positive same-store sales guidance will start to sink into the collective investor mindset and stall the sell-off. If not we still have the FOMC meeting tomorrow afternoon to occupy traders' focus. No one really expects the Federal Reserve to alter interest rates but what and how they comment on the country's current economic status will have an impact on how we finish the week. Keep an eye on the broker-dealers tomorrow. Lehman Brothers (LEH) reports earnings tomorrow morning before the opening bell. Estimates are for $1.66 per share compared with $1.15 from a year ago. Bear Stearns (BSC) will report on Wednesday and Morgan Stanley (MWD) will report on Thursday. The group has been flying past the estimates lately but that hasn't stopped traders from "selling the news". You'll also want to watch the homebuilders. The group has been weathering the recent downturn extremely well but we'll get the latest housing starts and building permit numbers tomorrow morning before the open. ================================================================== 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 --------------------------------- Intersil Corporation - ISIL - close: 21.27 change: -1.36 WHAT TO WATCH: A feeble rebound at the end of last week wasn't enough to halt the persistent downtrend in shares of ISIL that has been in process since early January. The resumption of the selling came on heavy volume today and the stock smashed through support near $22. Despite a rebound off the lows, the stock once again rolled over and looks destined for new recent lows ahead. Use a trigger under today's low and look for a continued decline towards strong support at $18. --- Myriad Genetics, Inc. - MYGN - close: 15.95 change: -0.92 WHAT TO WATCH: Volatile price action has been the name of the game for MYGN over the past few months, but it looks like the nominal bullish trend is cracking. The bulls managed to battle back from Thursday's break of the 200-dma, but the stock came crashing back through that average today on strong volume. Use a drop under $15.50 to trigger bearish entries and look for downside to the $13 level, with a potential near-term bounce from the 200-dma on the way down. --- Integrated Device Tech. Inc. - IDTI - close: 14.72 change: -0.89 WHAT TO WATCH: Breakdowns under the 200-dma have been very common over the past week and while IDTI managed to move back over that key average on Friday, the sellers pushed price back underwater on Monday and another breakdown appears imminent. Use a trigger under $14.25 (Friday's low) and target a drop to the October lows near $12.50. --- Abgenix, Inc. - ABGX - close: 13.92 change: -0.68 WHAT TO WATCH: ABGX has been building a broad topping formation for the past several weeks and Monday's drop brings price that much closer to the expected breakdown. A drop under $13.65 will break support that has been in place since early January and have the stock falling into that early January gap. While it's possible that support could be found at the 200-dma, a more likely target is for a drop into the $12.25-12.50 area, where the stock has stronger historical support. =================== On the RADAR Screen =================== VRSN $15.40 - Last week's feeble bounce failed to halt the slide in shares of VRSN and the stock broke the 200-dma and is now threatening to break below key support at $15. Use a trigger below that level and target a drop down to the September lows near $13. GNSS $15.30 - Pressured by the weakness in the Semiconductor sector, GNSS fell below its 200-dma last week, but managed to reclaim that level as potential support on Friday. That potential disappeared on Monday, with the stock closing at new recent lows. Use a trigger below $15 for initiating new bearish positions and target a move down to next solid support near $13. IGT $39.95 - The unstoppable rally in shares of IGT is being put to the test over the past week, with the stock retracing its recent breakout over the $38.50 level. This appears to be setting up a second chance for bulls to step into the strong upward trend at a more favorable price point. Look for a rebound from the $38 level, reinforced by the 50-dma to trigger entries and then look for a resumption of the rally and drive to new highs. ================================================================= 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 03-15-2004 section 2 of 2 Copyright (c) 2004, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= Stop Loss Updates: None Split Announcement: UCBI Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================== Stop Loss Updates ================================================================== None ================================================================== Stock Splits ================================================================== Announcements ------------- UCBI banks on a 3-for-2 stock split Mid-session today, United Community Banks, Inc (NASDAQ:UCBI) announced that its Board of Directors had approved a 3-for-2 stock split of its common stock in the form of a 50% stock dividend. The payable date is April 28th, 2004 to shareholders on record as of April 14th, 2004. This is their second split in as many years. About the company: Headquartered in Blairsville, United Community Banks is the third-largest bank holding company in Georgia. United Community Banks has assets of $4.1 billion and operates 20 community banks with 73 banking offices located throughout north Georgia, metro Atlanta, coastal Georgia, western North Carolina and east Tennessee. The company specializes in providing personalized community banking services to individuals and small to mid-size businesses in its markets. United Community Banks also offers the convenience of 24-hour access to its services through a network of ATMs, telephone and on-line banking. United Community Banks common stock is listed on the Nasdaq National Market under the symbol UCBI. Additional information may be found at the company's web site, www.ucbi.com. ================================================================== 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 UTX United Technologies Corp 87.90 +0.55 WLP Wellpoint Health Network 112.25 +0.75 APA Apache Corp 42.25 +0.97 AET Aetna Inc New 86.59 +2.17 BR Burlington Resources Inc 60.93 +1.02 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- None --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- IDXX Idexx Laboratories 56.02 +1.51 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- TEF Telefonica Sa 43.79 -2.69 SI Siemens Aktien 72.15 -2.43 PHG Koninklijke Philips Elec 27.40 -1.01 AXA AXA (ADS) 20.39 -1.13 IACI Interactivecorp 29.07 -1.93 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- ANZ Australigen Idec Inc 69.44 -1.31 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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