PremierInvestor.net Newsletter Wednesday 03-17-2004 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: Markets Blossom Green on St. Patrick's Day Watch List: RSG, GNTX, LUK, AMB 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) =============================================================== 03-17-2004 High Low Volume Advance/Decline DJIA 10300.30 +115.63 10326.52 10184.30 1.85 bln 2247/ 623 NASDAQ 1976.76 + 33.67 1980.31 1956.52 1.67 bln 2294/ 765 S&P 100 551.48 + 5.92 552.64 545.56 Totals 4541/1388 S&P 500 1123.75 + 13.05 1125.76 1110.70 RUS 2000 578.57 + 11.93 578.92 566.64 DJ TRANS 2847.65 + 59.30 2855.61 2790.04 VIX 18.11 - 2.23 19.55 17.95 VXO 18.14 - 2.57 19.73 18.07 VXN 24.75 - 2.59 27.31 24.50 Total Volume 3,878M Total UpVol 3,192M Total DnVol 631M 52wk Highs 257 52wk Lows 25 TRIN 0.74 PUT/CALL 0.81 =============================================================== =========== Market Wrap =========== Markets Blossom Green on St. Patrick's Day by James Brown Stocks sprinted higher for the second day in a row buoyed by tame inflation data and positive earnings reports. The rally was very widespread with 27 of the 30 Dow components closing higher. Buying was very strong in technology stocks, airlines and oil services. The only sectors trading lower were the DRG drug index and the DJUSHB home construction index. Bullish sentiment was strong enough to shake off news of the Mount Lebanon hotel bombing in downtown Baghdad, which hit the wires mid-afternoon. Global markets traded higher as well. The Japanese NIKKEI added 194 points to close at 11,436. The Hang Seng stepped up 43 points to 12,975. The British FTSE jumped almost 28 points to 4456. Meanwhile the German DAX and the French CAC both soared with 1.9% gains. The bombing news sent gold futures to $4.50 gain to end at $407.10 an ounce. Market internals for the U.S. exchanges were very bullish but less than stellar volume casts doubt on the true strength of the rebound. Advancing stocks rushed past decliners 22 to 6 on the NYSE and 23 to 8 on the NASDAQ. Up volume was an impressive 4.4- to-1 winner over down volume on the NYSE and 5.2-to-1 gainer on the NASDAQ but these readers don't compare to the extremely bearish readers we witnessed on Monday when down volume was 9-to- 1 and 10-to-1 respectively. Overall volume hit 1.85 billion on the NYSE and 1.675 billion on the NASDAQ. There has been a lot of talk this week about market volatility and investors shuffling positions ahead of this Friday's quadruple-witching expiration where index options, equity options, index futures and single-stock futures all expire. This could explain some of the rebound. However, we shouldn't forget that the Dow and S&P 500 both traded near their 5% correction levels while the NASDAQ hit a 10% pull back from its highs. There are a lot of investors, both big and small, that have been waiting for just such an event and are using the recent weakness to buy the dip. The Dow Industrials closed right at the 10,300 level and has broken the very minor trend of lower highs. The next challenge for the bulls is to push the Dow through its simple 10-dma at 10,342 as well as overhead resistance at 10,400 and 10,500. I believe that the 10,500 level could be the real battle. A failed rally at that level will look like a huge entry point to short the market. Fortunately, we do have the April earnings season just around the corner and the recent trend of positive pre- announcements could still inspire an earnings run. Chart of the Dow Industrials: The rebound in the NASDAQ looks less convincing. The simple 10- dma will be short-term resistance here too but the Composite also has minor resistance at the 1982 level. The real challenge here may be the 2000 level and the host of moving averages still above it. It's a common belief that the semiconductor sector (SOX) tends to lead the NASDAQ higher or lower. If the SOX can keep the rally going then the NASDAQ should be able to challenge the top of its new descending channel. Unfortunately, the SOX has its own challenges to deal with. Chart of the NASDAQ Composite: Chart of the Semiconductor Index (SOX): The major economic report out today was the CPI. Economists were looking for a 0.3% rise in February and the headline number matched expectations. The core CPI, which excludes the more volatile food and energy components, jumped 0.2%, which was above estimates for a 0.1% gain. Energy prices have been on the rise and the energy component for February rose 1.7%. Investors were happy with these numbers because it soothed fears that the expanding global economy had not yet sparked a dangerous rise in inflation. This follows yesterday's statement from the Federal Reserve who said the risks of inflation and deflation were almost equal. The same cannot be said for the risk of higher oil prices. Crude oil closed above $38 a barrel for the first time in 13 years. Oil saw intraday spikes to $39.99 last year during the Iraq war and it spiked to $41.15 during the 1991 Iraq war but the last time crude oil closed this high was September 27th, 1990 at $39.54 a barrel. Recent reports have begun to show a trend of falling supplies for crude oil and gasoline here in the states. Demand continues to grow and we are approaching the summer driving season, which will not allow for any slack to rebuild our stockpiles. The markets are concerned that OPEC may follow through on their previously forecasted production cuts in April. Combine concerns that Venezuela is threatening to cut its supply to the U.S. and many are forecasting oil to hit $40 a barrel or higher. Now most industry experts don't really believe that Venezuela will follow through on such threats since they need the money but it doesn't help the situation. Speaking of needing the money the drop in mortgage rates has re- ignited the refinancing boom. The Mortgage Bankers Association of America reported that mortgage applications rose 25.6% last week to their highest levels since July 2003. The increase in applications for home purchases was only 5.6% but the increase for refi's jumped 39.7%. Major mortgage lenders like BAC, CFC, WFC and WM didn't move much on the news but then these stocks didn't suffer very badly during the recent sell-off. One of Wednesday's headliners was Bear Stearns (BSC). The Wall Street broker-dealer reported earnings this morning that beat estimates by 57 cents. Analysts had been looking for $2.00 per share and BSC reported profits of $361.1 million or $2.57/share. Revenues jumped from $1.5 billion to $1.7 billion for the quarter. This news follows Lehman Brothers (LEH) earnings report yesterday who reported earnings of $2.21 versus estimates of $1.66 per share. Tomorrow we'll hear from Morgan Stanley (MWD) who is expected to earn 96 cents per share. Boosting the Dow Transport index to a 2% gain was a very promising earnings report from Fedex Corp (FDX). FDX reported its Q3 earnings this morning of 71 cents per share, which was 5 cents above estimates. Revenues jumped 9.3% to $6.06 billion and were boosted by its recent $2.4 billion acquisition of Kinko's. The delivery company raised its estimates for the current quarter to $1.15-1.25 per share placing it above average analyst estimates at $1.16. The stock soared 4.61% and broke out above resistance at the $70.00 level. Internet stocks were the best performing group today. The INX's 4.1% gain out did the 3.39% bounce in the XAL airlines index. Driving those gains in the Internets was Yahoo! (YHOO). The stock vaulted to a 5.35% gain on big volume after First Albany and Smith Barney upgraded the stock. First Albany raised YHOO from a "neutral" to a "buy" and inched up its price target from $47 to $48. Smith Barney was more bullish and raised its price target from $50 to $60 while lifting its rating from "hold" to a "buy". Lately option expiration Friday's have been rather mellow. That means that if we're going to see any more volatility related to investors restructuring positions ahead of expiration then tomorrow is the day. Adding to the excitement will be the long- awaited January PPI report. This was scheduled to be released back in February but has been delayed as the government dealt with various data conversion "difficulties". They still haven't told us when to expect the February PPI index but look for January's tomorrow morning before the bell. We'll also get the weekly initial jobless claims, the February leading indicator numbers and the Philly Fed manufacturing survey. ================================================================== 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 --------------------------------- Republic Services, Inc. - RSG - close: 27.01 change: +0.49 WHAT TO WATCH: Continually driving to new highs over the past year, RSG did it again in early February, cresting the $26.25 level. Since then, the stock has been putting in a series of higher lows, with rallies capped at $27, with the 50-dma providing backup support. Today's close over $27 looks like the beginning of a breakout and momentum entries over today's high look favorable. Target a rally to the $30 level. --- Gentex Corp. - GNTX - close: 41.35 change: +0.58 WHAT TO WATCH: It looks like the profit taking in shares of GNTX may finally be over, as the stock continued the rebound that began last Friday and pushed over near term resistance near $41. This is still an aggressive play, as the rebound has lacked volume, but the stock does appear to be on the mend. Entries near current levels look favorable for a rally back towards the $44-45 area. Keep a tight reign on this one though, as the 50- dma and 100-dma could represent resistance in the $42.00-42.50 area. --- Leucadia National Corp. - LUK - close: 52.01 change: +1.23 WHAT TO WATCH: Shares of LUK have been on a tear since early October, ramping sharply higher, consolidating and then repeating the process. The more significant pullbacks have found support just above the 50-dma and we saw that average come into play as support earlier this week before today's solid rally. With oscillators turning north, this looks like a good point to step into new bullish positions ahead of a breakout to new highs above the $54 level. Use a stop just under the 50-dma. --- AMB Properties Corp. - AMB - close: 36.07 change: +0.93 WHAT TO WATCH: It is amazing how often the 50-dma comes into play in extended bullish moves and AMB is another stock using this average as key support on the pullbacks. Just yesterday, the stock fell within pennies of its 50-dma and then surged strongly higher today. Another dip near the 50-dma would make for a more favorable entry point, but there's nothing wrong with entries near current levels. More conservative traders may want to wait for a breakout over $37 (which would be a new high) before playing. Set stops just under the 50-dma. --- =================== On the RADAR Screen =================== LNT $26.43 - Ready for a breakout play? Energy and Utility stocks have been looking strong during the latest downturn in the overall market and LNT is no exception. The stock rose to a new recent closing high today and looks like it could continue that breakout into the end of the week. Use a trigger over $26.50 and look for a rally towards strong resistance near $30. NOI $29.39 - Oil stocks continue to be in favor with traders and NOI flexed its muscles this week, holding firmly above support at the 30-dma and bouncing strongly today. Look for a continued rally to challenge the recent highs near $31 and then break out, with the $34 resistance level being a viable target. GXP $34.88 - Are you noticing the theme? Bulls are hungry for energy stocks and GXP looks poised for the next leg up to new highs. The stock has been consolidating in a tight pattern for the past several weeks, with resistance waiting at the February high of $35.69. Use a trigger over that level and target a rally to the $40 area. ================== Trading Ideas ================== This section contains stocks that meet criteria which may make them of interest to long and short side traders. These are not recommendations, nor have they been reviewed by PremierInvestor editors for investment potential. However, each of them has technical and fundamental characteristics that make them worthy of further review by traders and investors looking for fresh ideas. New stocks will appear daily following the market close. Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change C Citigroup 50.82 +0.83 ONE Bank One Corp 55.06 +1.22 NTT Nippon Tel & Tel (ADS) 24.82 +0.67 MO Altria Group Inc 54.78 +0.81 MER Merrill Lynch & Co 61.18 +1.01 HD Home Depot Inc 36.50 +0.64 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- ELN Elan Corp Plc 18.65 +1.77 PLXS Plexus Corp 18.10 +1.26 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- UPS United Parcel Service B 69.47 +1.40 YHOO Yahoo! Inc 44.85 +2.28 GCI Gannett Co Inc 89.24 +3.18 STT State Street Corp 53.46 +1.45 FDX Fedex Corp 71.59 +3.16 OMC Omnicom Group Inc 78.00 +2.77 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- LEN Lennar Corp CI A 53.75 -2.26 CHS Chico's Fas Inc 43.91 -2.16 PKZ Petrokazakhstan Inc 27.73 -1.78 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- 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 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Wednesday 03-17-2004 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: R (triggered) Net Bulls (Tech Stocks) Closed Bearish Plays: NVLS Active Trader (Non-tech Stocks) New Bullish plays: IGT New Bearish Plays: PRX Stock Splits Announcements: SHFL ================================================================== Stop Loss Adjustments ================================================================== R, no change in stop loss at $36.49 but today's breakout over $38.00 has triggered the play. ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ============ Closed Plays ============ Closed Bearish Plays -------------------- Novellus Systems - NVLS - close: 31.03 change: +0.40 stop: 34.00 After two weeks, we've lost patience with our bearish play on NVLS, as it came to rest today just pennies from where we initiated coverage. If the stock was going to deliver a decent downside move, then the SOX weakness over the past couple weeks certainly should have been sufficient to push NVLS into the expected decline. Instead, price fell to the $30 level, found solid support there and appears to be in the early stages of a rebound, even though it appears weak. NVLS may still deliver that downside move, but it clearly isn't showing any inclination to do that. Rather than keeping waiting and hoping, let's free up the capital to put to work on more promising plays. Picked on March 3rd at $31.15 Change since picked -0.12 Earnings Date 1/26/04 (confirmed) Average Daily Volume = 6.57 mln ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- Intl Game Tech - IGT - close: 41.82 change: +0.94 stop: 38.00 Company Description: IGT is a manufacturer of computerized casino gaming products and an operator of proprietary gaming systems. The company serves the casino gaming industry in the United States as well as manufacturing gaming products in the United Kingdom and through a third party manufacturer in Japan. IGT provides gaming products in every significant legalized gaming jurisdiction in the world. Why we like it: There may not be a strong PC replacement cycle in progress, but there must be a replacement cycle underway in the gaming industry. Continued brisk demand for its various game units has kept shares of IGT steadily marching to new all-time highs throughout much of the past year. The 4-1 split last summer produced a minor blip and then the stock renewed its upward march, gaining more than $15 per share since the split. After consolidating just under the $38.50 resistance level for several weeks earlier this year, IGT broke out on heavy volume in early March, with buyers motivated by a combination of a favorable court ruling for Indian Casinos and upgrades from both JP Morgan and Smith Barney Citigroup. That surge took IGT all the way to the $43 area before some profit taking set in, allowing for a healthy pull back to the $40 level. Finding support at the 20- dma, IGT is on the move again and with today's test of the $42 level, it looks like new highs may be just around the corner. Each pullback in IGT over the past few months has found reliable support just above the 50-dma (currently $38.10) and based on this week's rebound off the 20-dma ($40.12), we could be witnessing a strengthening of the bullish trend. A dip back near the 20-dma would represent a great entry into the play, although more conservative traders may want to wait for a fresh breakout to new highs (over $43.11) before jumping aboard. IGT's PnF chart is strongly bullish, but since the stock has already exceeded its bullish price target (by a great deal), we won't get any help in determining upside objectives from that source. We'll set an initial target of $47 and then re-evaluate as that target draws near. Set stops initially at $38, just under the 50-dma. Annotated Chart of IGT: Picked on March 17th at $41.82 Change since picked +0.00 Earnings Date 4/22/04 (unconfirmed) Average Daily Volume = 2.03 mln New Bearish Plays ----------------- Pharm. Resources - PRX - close: 57.83 change: -1.17 stop: 62.00 Company Description: Pharmaceutical Resources, Inc. is a holding company that, through its principal subsidiary, is in the business of developing, manufacturing and distributing a broad line of generic drugs in the United States. In addition, the company develops and manufactures, in small quantities, complex synthetic active pharmaceutical ingredients through its subsidiary, FineTech Laboratories, Ltd., based in Haifa, Israel, and sells a limited number of mature brand name drugs through an agreement with Bristol Myers Squibb. PRX operates primarily through its wholly owned subsidiary, Par Pharmaceutical, Inc. (Par), a manufacturer and distributor of generic drugs. Par markets 69 products, representing various dosage strengths for 25 drugs that are manufactured by the company, and 87 additional products, representing various dosage strengths for 34 drugs that are manufactured for it by other companies. Par holds ANDAs (abbreviated new drug applications) for the drugs it manufactures. Why we like it: There's no denying that the bulls had quite a party with PRX last year, as the stock rose from $30 in early January to as high as $75 by early December. But it looks like the stock is having to pay the piper now, as it has been mired in a nasty downward trend since breaking key support near $64. Since then, the stock has really been consolidating in a sideways channel, with a top being found near $64 and a bottom just above $57 as the stock has tried to reclaim the 200-dma ($61.75) as support. The stock slipped below that average last week and making matters worse for the bulls, the 50-dma ($61.03) fell below the 200-dma earlier this week. Diverging from the strength seen in the rest of the market today, PRX fell sharply on rising volume and is close to breaking below the bottom of the past 2 months trading range. Although it looks bearish, the PnF chart is actually on a Buy signal due to the failed rally just above $64 in early March. Since we don't want to buck the supply/demand dynamic depicted on the PnF chart, we're going to use an entry trigger at $57. That will force the stock to both break the bottom of its recent range and generate a new PnF Sell signal before we take a position. The initial break of $57 looks like a great entry point, but more conservative traders may want to try catching a subsequent failed bounce below what should then be strong resistance in the $59-60 area. To give the stock some room to maneuver in case the breakdown doesn't arrive right away, we're setting a fairly wide stop at $62, just over the 200-dma. Once triggered though, we'll lower that stop to just above the 50-dma, which should be out of the way of any rebound short of a trend reversal. Annotated Chart of PRX: Picked on March 17th at $57.83 Change since picked +0.00 Earnings Date 2/26/04 (confirmed) Average Daily Volume = 693 K ================================================================== Stock Splits ================================================================== Announcements ------------- SHFL deals up a 3-for-2 stock split Just after lunchtime on Wednesday Shuffle Master, Inc. (NASDAQ:SHFL) announced that its Board of Directors declared a 3- for-2 stock split at the company's annual shareholder meeting. The split will be payable on April 16th, 2004 to shareholders on record as of April 5th. Fractional shares will be paid in cash. About the company: Shuffle Master, Inc. is a gaming supply company specializing in providing its casino customers Utility Products, including automatic card shufflers, to improve their productivity and security, and Entertainment Products, including proprietary table games and Table Master(TM) games to expand their gaming entertainment content. The Company is included in the S&P Smallcap 600 Index. (source: company press release) ================================================================= 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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