PremierInvestor.net Newsletter Wednesday 03-24-2004 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 Meander Midweek Watch List: GNSS, TEN, SOHU, GTK 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) =============================================================== 03-24-2004 High Low Volume Advance/Decline DJIA 10048.23 - 15.41 10108.15 10007.49 1.81 bln 944/1850 NASDAQ 1909.48 + 7.68 1922.51 1896.91 1.81 bln 1385/1646 S&P 100 534.49 - 0.66 537.95 532.00 Totals 2329/3496 S&P 500 1091.33 - 2.62 1098.39 1087.06 RUS 2000 557.63 - 3.29 562.26 556.13 DJ TRANS 2761.83 - 1.29 2772.29 2743.46 VIX 19.81 - 0.86 20.83 19.45 VXO 20.49 + 0.04 21.34 19.85 VXN 26.06 - 0.78 26.97 25.77 Total Volume 4,085M Total UpVol 1,842M Total DnVol 2,153M 52wk Highs 178 52wk Lows 48 TRIN 1.25 PUT/CALL 0.88 =============================================================== =========== Market Wrap =========== Markets Meander Midweek by James Brown Stocks seesawed sideways on Wednesday as the major averages tested support only to see the rebound fail in the afternoon hours. The Dow Industrials and the S&P 500 index both posted their fifth loss in a row while the NASDAQ managed to end its losing streak with a bounce in the semiconductor sector. Rotation seemed to be the agenda for the session as investors took money out of oil services, gold, natural gas and broker- dealers while buying semiconductors, software and hardware issues. The more optimistic of the market pundits were calling for a bottom in the NASDAQ while the less sanguine commentators reduced today's bounce to nothing more than mild short covering. Wednesday's economic data was positive but it failed to produce any lasting results against the new backdrop of terrorism fears. This morning French police reported finding a bomb under the Paris to Basel, Switzerland railroad. Meanwhile in the Mid East the U.S. closed their embassy in the United Arab Emirates (UAE) under new threats of violence. Global markets were mixed. The Japanese NIKKEI jumped nearly 84 points to 11,364 while the Chinese Hang Seng rallied almost 90 points to 12,678. European stocks were mostly down with the French CAC index suffering the worst declines compared to Germany and Britain. Commodities were making news as gold pulled back for the first time in eight sessions as the U.S. dollar turned in a strong day. Gold futures closed down $2.60 to $417.40 an ounce. Crude oil was also a major story after both the American Petroleum Institute and the Department of Energy both reported a significant build up in oil supplies last week. Crude oil futures dropped 44 cents to $37.01 a barrel but well off its lows of the session at $36.65. The pull back had no affect on gasoline prices, which hit a new all-time (average) high of $1.74 a gallon. Some industry experts are predicting fuel prices near $3.00 a gallon as we approach the summer driving season. The pull back in oil fed the profit taking in the oil and oil service stocks but the trend is still up for crude oil futures. OPEC is still considering its previously announced April production cuts and talk is growing that we'll see $40-42 per barrel prices. Looking more closely at the major averages you'll see the Dow, The S&P 500 and the NASDAQ Composite all churning sideways the last three sessions but with a trend of lower highs. Fortunately, the Dow is holding support at the 10,000 mark while the NASDAQ is holding support at the 1900 level. The bad news is that short-term technicals for both look weak again. Meanwhile the S&P 500 is churning sideways under old support at 1100 and the longer it stays here the more 1100 becomes resistance. Chart of the Dow Industrials: Chart of the NASDAQ Composite: Chart of the S&P 500: Some of the trader talk this morning was focused on concerns that the economic recovery was in jeopardy even though the Durable Goods order and the New Home Sales numbers were positive. Durable goods are products made to last at least three years. The Commerce Department reported that February's durable goods rose a better than expected 2.5% above estimates for 1.7%. This seemed especially bullish considering that January's numbers were revised lower to a 2.7% decline. Driving the gains were strong improvements in aircraft, computers and motor vehicles. Homebuilders are living up to their word that business is good. The New Homes Sales numbers raced to a 5.8% gain in February to an annualized rate of 1.16 million units. This surpasses the old high of 1.09 million units. I suspect we'll see this number run even higher as the weather continues to improve. The good news here is that new homes are big boost to the economy as consumers buy new furnishings and appliances. The historically low interest and mortgage rates should keep this trend in place and underpin the economic rebound. Speaking of a rebound we might see one in shares of Microsoft soon. As previously announced the EU antitrust commission officially declared its fine of $612 million against MSFT for its monopolistic-style of business. The $612 million or 497 million euro fine is less than the maximum the EU could have levied, which was just over $3 billion but still qualifies as the largest fine like this ever levied. MSFT plans to appeal the fine and the decision that would impose restrictions on how MSFT can do business in the EU including sharing their code so that rivals can make competing applications. Industry experts say the appeal will tie up the decision in the court system for four to five years. More importantly for investors analysts believe that MSFT, who has been sitting on close to $53 billion in cash and adding to its hoard at close to $1 billion per quarter, can finally make a decision about what to do with all that money. That's not to say that MSFT is out of the legal woods just yet but many are expecting MSFT to announce a major stock buyback and/or a huge one-time cash dividend. One of Goldman Sach's analysts speculated that MSFT could declare a one-time cash dividend in the $10 to $20 billion range. That's anywhere from 92 cents to $1.84 a share compared to the current dividend of 16 cents annually. Shares of MSFT, which have been weak for 9 weeks straight, bounced higher by more than 1 percent but remain in its current downtrend. One of the most important developments on Wednesday occurred after the closing bell. Applied Materials (AMAT), the world's biggest producer of semiconductor equipment, held its annual meeting. AMAT's CFO told analysts that the chip sector recovery was still in the "early stages not the later stages" of development. AMAT said they see a huge opportunity in the flat- panel market for TV and monitor screens. This positive sentiment for the LCD market was echoed by Corning (GLW) earlier today. AMAT also announced a three-year $3 billion stock buy back program. This is great news that could really boost the nascent rebound in the chip stocks tomorrow. Today's bounce in the SOX back above the simple 200-dma is a good start but to see some follow through tomorrow would be pretty encouraging and lend some much needed strength to any NASDAQ rally attempt. Micron Technology (MU), another chipmaker, announced its earnings after the close today. Analysts were looking for a loss of 6 cents a share compared to a loss of 64 cents a share last year. MU turned in a loss of 4 cents but fell short of consensus revenues estimates at $1 billion for the quarter. While the stock traded lower after hours we've come to expect a "sell the news" reaction. More importantly is MU's earnings performance, which might help set the mood for the April earnings season. We've already heard from dozens of companies that have pre- announced positive earnings but it may actually take the onset of earnings season to jog investors out of the current market malaise. Tomorrow brings the weekly initial jobless claims data. Estimates are suggesting a small uptick in claims from last week's 336,000. We'll also hear the latest and final GDP revision for the fourth quarter but no one expects any change from the previous reading at 4.1%. Thursday morning also brings the February existing home sales numbers, which economists have predicted to rise to 6.12 million units. News junkies can also look for the Help Wanted index to be announced. I don't expect any of these to be market movers and Wall Street may continue to ignore all the economic data until the April 2nd non-farm payrolls job report a week from this Friday. However, I would keep my ears open for any positive comments from Nokia's annual shareholder meeting being held tomorrow after the close. ================================================================== 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 --------------------------------- Genesis Microchip Inc. - GNSS - close: 14.33 change: +0.11 WHAT TO WATCH: The trend in shares of GNSS is looking grim, as it has been one steady decline since the stock topped out above $22 in mid-January. Having now fallen below the 200-dma and strong support near $16, we can expect that level to offer stiff resistance on any rebound attempts. The SOX rebound today is giving a bit of a lift to the stock, but conviction is lacking. Ideal entries will come on a rollover below the 200-dma, while more aggressive traders can look to enter on a break below $13.90, taking out this week's support level. Target a drop to support in the $11-12 area. --- Tenneco Auto Inc. - TEN - close: 11.18 change: -0.34 WHAT TO WATCH: Pressured by the falling market, TEN has had a rough ride over the past few weeks, falling back from its highs above $14. This week has seen a concerted effort to defend support at $11, but with the break of the 50-dma, that attempt appears destined to failure. Aggressive traders can enter on a failed bounce below the 50-dma, while the more conservative approach will be to wait for the break under $11. Target a drop to $10 support and use a tight stop. --- Sohu.com Inc. - SOHU - close: 22.86 change: -0.67 WHAT TO WATCH: After an impressive rally in early 2003, Chinese Internet stocks are starting to deflate in spectacular fashion. SOHU traced out a pattern of declining tops before breaking down under the 200-dma last month and it has continued to deteriorate over the past several weeks. The recent break under the $25 level broke the last vestige of support and that level should now be firm resistance. Failed rallies below that level look good for aggressive bearish entries, with a breakdown under $22.40 ushering in the next downward leg. Target an initial drop to $20, with a likely extension down to the $18 level, at the top of the May 2003 gap. --- Gtech Holdings Corp. - GTK - close: 57.92 change: +1.34 WHAT TO WATCH: While the recent bout of selling in the broad market has hit all sectors hard, some stocks are actually starting to rebound smartly. GTK is one such stock, as it is seeing a strong bounce from the $55 support level, with price rallying right back through the 50-dma on strong volume. Near- term pullbacks to the 50-dma near $57 look good for bullish entries ahead of a push back to test the highs from earlier this month near $62. Use a stop just under $55. --- =================== On the RADAR Screen =================== MGG $44.81 - Flexing its muscles, casino stock MGG is surging strongly higher today after finding support near $43 earlier in the week and the strength of the rebound suggests a breakout to new highs could be in the works. Wait for a breakout above the early March highs at $45.85 before playing and target a move to $50. ZRAN $16.31 - This isn't the first critical support test for shares of ZRAN, as the stock has been consistently bouncing from the long-term rising trendline, currently at $16. but the bounces have been growing weaker and this is the first time in over a year where the trendline has been broken. Aggressive bulls can buy this bounce looking for a run back to resistance near $19. But with the poor price action in the broad market, a breakdown seems the more likely resolution. Use a trigger under Monday's low ($15.60) and target support near $14. OTEX $27.37 - After breaking the 50-dma on Monday, shares of OTEX are trying to rebound, but on anemic volume. This looks like a great setup for a bearish play, with strong resistance just overhead near $28. Use a rollover for bearish entries, targeting a drop to strong support near $24. Note that the PnF chart is bearish with a price target of $21. SSTI $10.97 - SSTI had been holding at support near $11.50 for more than 2 months before the breakdown that occurred on Monday. Buyers are trying to put in a bounce from the $10.50 level, but this looks like the recipe for a bearish play when this rebound fails, with $11.50 now likely to be very strong resistance. Target a drop to next support near $9.50 ================== 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 NTT Noppon Tel & Tel (ADS) 26.85 +1.61 MTF Mitsubishi Tokyo Finl Grp 9.71 +0.58 LMT Lockheed Martin Corp 45.60 +0.70 GD General Dynamics Corp 87.32 +1.22 CI Cigna Corp 57.08 +0.96 MYL Mylan Laboratories Inc 23.34 +0.97 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- NOVL Novell Inc 10.63 +1.17 CTB Cooper Tire & Rubber Co 19.79 +1.23 EAGL EGL Incorporated 17.42 +1.02 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- IGT Intl Game Technology 44.17 +2.71 ROK Rockwell Automation Inc 32.08 +1.05 VFC VF Corp 45.59 +2.77 CHRW C.H. Robinson Worldwide 40.58 +1.44 GTK Gtech Holdings Corp 57.92 +1.34 ENDP Endo Pharmaceuticals Hld 22.68 +2.55 STN Station Casinos Inc 42.70 +3.60 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- AVE Aventis 75.36 -2.85 MWD Morgan Stanley 55.90 -1.56 UN Unilever N.V. 65.75 -1.78 SLB Schlumberger Ltd 61.08 -1.06 GS Goldman Sachs Group Inc 99.24 -2.15 WPPGY WPP Group Plc (ADR) 48.64 -1.39 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- HMA Health Management Assoc 21.78 -0.48 ================================================================= 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 03-24-2004 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: IGT Stock Splits Announcements: CRED ================================================================== Stop Loss Adjustments ================================================================== IGT - long Adjust from $38.00 up to $41.25 ================================================================== Stock Splits ================================================================== Announcements ------------- CRED announces 3-for-2 stock split About 90 minutes before Wednesday's opening bell CREDO Petroleum Corp (NASDAQ:CRED) announced that its Board of Directors had approved a 3-for-2 stock split of its common shares. The payable date will be April 20th, 2004 for shareholders on record as of April 5th. CRED will trade ex-dividend (at its split adjusted price) on April 21st. CRED will have more than 6.0 million shares after the stock split. About the company: CREDO Petroleum Corporation is a publicly traded independent energy company headquartered in Denver, Colorado. The company is engaged in the exploration for and the acquisition, development and marketing of natural gas and crude oil in the Mid-Continent and Rocky Mountain regions. (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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