PremierInvestor.net Newsletter Wednesday 03-31-2004 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: Q1 Ends In The Red Watch List: AF, CLI, AMB, ISSX 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) =============================================================== 03-31-2004 High Low Volume Advance/Decline DJIA 10357.70 - 24.00 10401.70 10314.89 1.82 bln 1713/1107 NASDAQ 1994.22 - 6.41 2004.00 1985.04 1.85 bln 1683/1398 S&P 100 551.13 - 1.40 553.69 549.40 Totals 3396/2505 S&P 500 1126.21 - 14.41 1130.83 1121.46 RUS 2000 591.67 + 0.91 591.67 585.16 DJ TRANS 2895.43 + 11.79 2899.97 2863.53 VIX 16.74 + 0.46 16.96 16.23 VXO 16.59 + 0.60 16.90 16.19 VXN 23.76 + 0.58 24.03 23.49 Total Volume 4,154M Total UpVol 1,844M Total DnVol 2,152M 52wk Highs 468 52wk Lows 30 TRIN 1.19 PUT/CALL 1.31 =============================================================== =========== Market Wrap =========== Q1 Ends In The Red by James Brown The first quarter of 2004 has ended and the Dow Industrials and the NASDAQ Composite both posted losses. Disappointing economic news, production cuts from OPEC, concerns over this Friday's jobs report and new violence in Iraq were all factors in today's declines. The good news is that the declines were mild but volume continues to be light indicating a lack of conviction ahead of Thursday and Friday's economic reports. Global exchanges were mixed as Asian stocks tracked higher against European stocks, which slipped lower. The dollar fell strongly against the euro and hit new four-year lows against the yen. The Japanese policy change about not intervening between the dollar/yen is starting to have an effect. The U.S. markets were volatile earlier in the session after rumors surfaced that Federal Reserve Chairman Alan Greenspan was sick or had a heart attack. This is not a new ploy by those who would try and manipulate the market lower as we've heard the Alan is sick card before. However, this time the Fed chose to come out and respond saying Greenspan is fine, which is unusual since their normal policy is not to comment on any rumors. The U.S. markets ended the session mixed with only about half of the major sector indices in the red. Yet the tone of the session felt weak as the Dow, NASDAQ and S&P 500 all closed lower. The Dow ended the first quarter of 2004 with a 1% loss while the NASDAQ lost 0.6%. This was the first quarterly loss in a year for both indices. Flexing its relative strength was the S&P 500, which ended March up 1.3% YTD. The last few sessions have been pretty bullish for the markets as mutual funds finished their end-of-quarter window dressing. Today we began to see some un- dressing and tech stocks were hit the hardest. Investors were rotating out of hardware stocks and disk drives/storage related issues mainly due to QLogic's earnings warning. Buying was heaviest in the airlines, homebuilders and oil. Market internals reflected the mixed market message as well. Advancing stocks outnumbered decliners 17 to 11 on the NYSE and almost 17 to 14 on the NASDAQ. Yet down volume on the NASDAQ rushed past up volume 11-to-7. Bulls pulled ahead on the NYSE but up volume narrowly beat down volume 9-to-8. Volatility indices ticked higher and the yield on the 10-year note dropped to 3.837% as money sought safety ahead of Friday's economic reports. The good news is that the markets have managed to maintain their gains from last week's lows. The bad news is that we're short- term overbought and with apprehension growing over Friday's economic reports we're liable to see some profit taking between now and then. The battle for support resistance remains. The Dow is holding above minor support at the 10,325 level but the NASDAQ is back under the 2000 mark. Meanwhile the S&P 500 is trading right at its minor support/resistance level of 1125. Chart of the Dow Industrials: Chart of the NASDAQ Composite: Chart of the S&P 500 Index: The Chicago PMI and the Factory Orders numbers were the two big economic reports out today and both turned in disappointing results. Economists had been looking for the Chicago Purchasing Managers Index to drop from 63.6 in February to 61.6 in March. Unfortunately, the results were worse than expected at 57.6 and marked the biggest drop since March 2001. The glass-is-half-full crowd will tell you that March is the 11th consecutive month of economic expansion since any reading over 50 marks improvement or expansion. The real story here was the employment component, which dropped from 54.8 to 49.2. Factories may be expanding output but they're certainly not hiring to meet demand and this doesn't bode well for Friday's jobs report. Manufacturing payrolls have dropped for 43 months in a row and today's PMI report suggests we're going to see 44 months. The factory orders for February were just as disappointing. Economists were looking for an increase of 1.7% but received an anemic 0.3% increase instead. The biggest economic event today wasn't a report at all but the decision by OPEC to proceed with their previously announced plans to curtail oil production by 1 million barrels a day starting April 1st. The markets have been speculating/fretting over this decision for weeks and now that it's here the price of crude actually drops 49 cents to $35.76 a barrel. Maybe it's because everyone knows that several of OPEC's member tend to cheat and produce more than they are supposed to. Or that if OPEC doesn't cheat those countries not in the cartel will pump all they can with crude oil at 13-year highs. While this does look like a sell-the-news reaction in crude I'm a bit surprised that we didn't see more volatility intraday. It was only a week ago that the FBI warned of possible terrorist attacks on oil refineries in Texas and this morning British Petroleum (BP) announced that there was a fire in one of its refineries in Texas. Fortunately, they were quick to suggest the cause was not likely an act of sabotage. Speaking of fuel Qlogic Corp's (QLGC) earnings warning this morning sent the stock to a 22.7% loss and sparked heavy selling across the tech sectors. QLGC now expects Q4 earnings at 36 cents a share on revenues of just $128 million versus analysts' consensus estimates of 38 cents and $140 million for the quarter. QLGC is a chipmaker that specializes in circuits for storage devices and host bus adapters. The company blamed a drop in orders and the news dragged its rival Emulex (ELX) to a 6.5% loss. On a more positive note Americans still managed to feed their desire for the latest techno gadgets and wide-screen T.V.'s in spite of the rising prices at the pump. Best Buy Co (BBY) and rival Circuit City (CC) both announced earnings this morning and the results were strong. BBY, the larger of the two companies, reported earnings that were 3 cents better than estimates at $1.42 a share. Revenues jumped from $6.99 billion to $8.45 billion and same-store sales soared 9.7%. BBY stood by its forecasts for 15 to 20% earnings growth for the year and said it should be able to maintain same-store sales growth of 4-to-6%. Meanwhile Circuit City remains firmly in BBY's shadow but appears to have turned a corner as earnings came in at 46 cents a share, well above estimates for 36 cents. Revenues came in at $3.25 billion while same-store sales managed a positive increase of 1%. CC has been in a very lengthy restructuring to make it more profitable and more competitive and today they announced plans to buy Canadian firm InterTan (ITN) for $284 million in cash and a separate deal to buy the assets of MusicNow, a provider of digital media. The performance of both BBY and CC is great news for the retailers and foreshadows what many are expecting to be a positive earnings season. Before the markets can focus on earnings we have to wade through a crowd of economic reports. They begin in earnest tomorrow. According to Ford and GM the auto and truck sales numbers tomorrow should be pretty strong. We'll also get the weekly initial jobless claims and the construction spending numbers. Yet the big reports on Thursday will be the long overdue February PPI report and the ISM Index. However, even these two are overshadowed by the non-farm payrolls report on Friday morning. Economists are looking for 120,000-125,000 new jobs but the employment component in this morning's Chicago PMI survey isn't a good sign. Considering our short-term overbought status and the opportunity for investors to use any news as an excuse to take profits ahead of the jobs number I'm not looking for a bullish day tomorrow. Furthermore traders might want to prepare for what could be a volatile day on Friday. Even if the jobs numbers does come in strong there is the argument that strong jobs growth is the last and final component we've been waiting on for the economic recovery and that means the Federal Reserve is one step closer to raising rates. Of course we expect the Fed to wait for several months of strong jobs growth before raising rates but you know how excitable the markets can be. ================================================================== 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 --------------------------------- Astoria Financial Corp. - AF - close: 38.03 change: +0.60 WHAT TO WATCH: Yesterday's rebound was encouraging, but AF really made a convincing move today, with its break above both the 8- week descending trendline, as well as the 100-dma. this should enable the stock to return to the $40 level and quite possibly retest the February highs near $42. Entries look favorable either on a pullback near the $37.50 level or on a breakout over today's high. --- Mack-Cali Realty Corp. - CLI - close: 44.91 change: +0.58 WHAT TO WATCH: The bull market in the housing sector is not confined to the homebuilders, as the REITS have been on fire too. CLI has been in a non-stop uptrend for the past year and broke out to new highs again today. A pullback near $44 can be used for an entry point, as can a continued breakout over $45. Look for this rally to extend up towards the $50 level. --- AMB Property Corp. - AMB - close: 37.17 change: +0.31 WHAT TO WATCH: Is there no end to this rally? Shares of AMB hardly flinched during the recent broad market downturn and the bulls showed their dominance again today, breaking out to new highs. Current levels look favorable for new entries, although more patient traders may be able to nab a better entry on a pullback into the $36.50-37.00 area. Target the $40 level above. --- Internet Security Systems Inc - ISSX - close: 17.64 change: +0.26 WHAT TO WATCH: Believe it or not, we did manage to find a bearish candidate, but it's an aggressive one. ISSX was once again rejected at its 3-month descending trendline and it looks like another rollover could be in the works. Consider new entries near current levels or on a break back under the 50-dma. Target a drop back towards the 200-dma, just under $16. =================== On the RADAR Screen =================== ARW $25.46 - After building a convincing bottom formation near $23, shares of ARW are back on the move to the upside. Today's session saw the stock break the past month's worth of resistance and also clear the 50-dma. This looks like a good point to step aboard for the ride back up to test the recent highs near $28. RCII $32.96 - There are a lot of disappointed bears out there that have been attempting to short the breakdowns under the 200- dma in RCII. Each violation has been shallower and the bulls have continued to buy the dips. The last drop has the look of a convincing rebound before a strong bullish move and the stock is right back at strong resistance near $33. Look for entries on a solid breakout and then look for a run up to test and break the highs near $35. JBLU $25.25 - This definitely isn't for the timid, but JBLU finally looks like it wants to break from its recent downtrend and signs of bullish divergence are showing up in the oscillators. Not only that, but today's price action solidified the breakout from the 4-month descending channel and it looks like a return to the $28-29 area is in the works. ================== 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 51.86 -0.08 TOT Total Sa (ADS) 92.14 +0.69 PTR Petrochina Co Ltd (ADS) 51.08 +1.28 CVX Chevrontexaco Corp 87.91 +0.83 BP BP Plc 51.15 +0.00 UN Unilever N.V. 69.40 +0.90 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- WRNC Warnaco Group Inc (the) 20.10 +0.10 PXLW Pixelworks Incorporated 17.12 +0.16 BLTI Biolase Technology 17.45 +0.20 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- PEP Pepsico Inc 53.86 +0.58 MON Monsanto Co 36.68 +0.54 FD Federated Dept Stores 54.05 +0.13 SSP E.W. Scripps Company 100.64 +0.37 NXY Nexen Inc 38.88 +0.12 POT Potash Cp Saskatchewan 83.17 +0.28 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- DF Dean Foods Company 33.42 -0.02 WFMI Whole Foods Market Inc 74.69 +1.71 WPI Watson Pharmaceuticals 42.85 +0.43 UTSI Utstarcom Inc 28.80 -0.58 ----------------------------------------- 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 03-31-2004 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: PBG (see note), SIRI Active Trader (Non-tech Stocks) New Bullish plays: APA, FNF Closed Bullish Plays: SPF Stock Splits Announcements: OMTL (Announced Late Last Night) ================================================================== Stop Loss Adjustments ================================================================== PBG - active trader long play No actual change in our stop loss $28.44 but PBG was TRIGGERED on the move above our TRIGGER at $30.05 today. --- SIRI - long Adjust from $2.75 up to $2.95 ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- Apache Corp. - APA - close: 43.17 change: +0.21 stop: 40.00 Company Description: Apache Corporation is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. In North America, the company's exploration and production interests are focused in the Gulf of Mexico, the Gulf Coast, the Permian Basin, the Anadarko Basin and the Western Sedimentary Basin of Canada. Outside of North America, Apache has exploration and production interests offshore western Australia, offshore and onshore Egypt, offshore The People's Republic of China and onshore Argentina, as well as exploration interests in Poland. As of December 31, 2002, APA had total estimated proven reserves of 637 million barrels of crude oil, condensate and natural gas liquids and 4.1 trillion cubic feet (Tcf) of natural gas. Combined, these total estimated proved reserves are equivalent to 1.3 billion barrels of oil or 7.9 Tcf of gas. Why we like it: We've had our eye on shares of APA for awhile now, as the stock has continued to wedge itself up against resistance and appears poised for a breakout. The stock has been benefiting from the persistent rise in energy costs and that trend doesn't appear likely to reverse any time soon. Since completing its pullback in February, the stock has been building a pattern of higher lows and the test of key resistance at $43.50 are becoming more frequent and persistent. Together with the trend of higher lows over the past couple months, APA has built a convincing bullish wedge and when the breakout over horizontal resistance at $43.50 arrives, it should unleash some decent follow through to the upside. Despite having already met its bullish price objective, the PNF chart is giving a bullish view as well, and a breakout over $44 will be a fresh Triple Top buy signal. We'll use an entry trigger at $43.50, and momentum entries above that level look quite favorable. More conservative traders may want to wait for the print at $44 before playing though, forcing the PnF chart to give its blessing with the new Buy signal. An alternate approach would be to wait for a subsequent pullback and rebound from the $42 area, confirming that level as new, higher support. Our upside target will be for a run at the $48 level and possibly higher to the $50 area. The rising trendline should now offer strong support on any pullback, especially with the additional support of the 50-dma at $40.74. We'll set our stop initially at $40.50. Annotated Chart of APA: Picked on March 17th at $43.17 Change since picked +0.00 Earnings Date 4/22/04 (unconfirmed) Average Daily Volume = 2.34 mln --- Fidelity Nat. Fin. - FNF - close: 39.60 change: +0.79 stop: 36.90 Company Description: Fidelity National Financial, Inc. provides title insurance and real estate-related services in the United States. The company's title insurance underwriters, Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title, together issue all of its title insurance policies in 49 states, the District of Columbia, Guam, Puerto Rico and the United States Virgin Islands, as well as in Canada and Mexico. FNF's escrow and other title-related services and its real estate-related products and services include collection and trust activities, trustee's sales guarantees, recordings, reconveyances, property appraisal, credit reporting, exchange intermediary services, real estate tax services, home warranty insurance, foreclosure posting and publishing, loan portfolio services, flood certification, field services, property data and disclosure services, multiple listing services, mortgage loan fulfillment services, flood insurance and home owners insurance. Why we like it: Since reaching new all-time highs near $40 in early February, shares of FNF have been consolidating near their highs in preparation for another move higher. After dipping just below the 50-dma ($38.35) in early March, the stock has been solidifying support at that average, while at the same time continuing to keep testing resistance at $40. This looks like the setup for a bullish breakout and given the length of the consolidation, the resulting breakout should carry some power. Looking at the chart below, we can see how the stock is building a bullish wedge and while we could see a bit more consolidation before the breakout, we shouldn't see the rising trendline violated if the breakout we're expecting is going to materialize. We'll initiate the play with an entry trigger at $40.10, just over the intraday high from earlier in the month. Aggressive traders can certainly enter on the initial breakout, while those with a more conservative approach will want to wait for a subsequent pullback to confirm support in the $39 area before entering. Once free of near-term resistance, FNF looks like it could easily vault higher to the $45 level, so that will be our upside target for the play. Until we get the breakout, let's use a liberal stop of $36.90, just under the mid-March intraday low. Annotated Chart of FNF: Picked on March 31st at $39.60 Change since picked +0.00 Earnings Date N/A Average Daily Volume = 922 K ============ Closed Plays ============ Closed Bullish Plays -------------------- Standard Pacific - SPF - cls: 60.00 chg: +0.74 stop: 58.95 The homebuilders surged yesterday and SPF lead the way with a $3.00 gain of its own coming within 10 cents of our exit price at $59.50. The rally continued today and SPF gapped open at $59.75 and ran to $61.60 before sliding into the close on profit taking. We can close the play at $59.75 for a move of $7.44 (+14%). Traders still in the play should be careful. Today's move looks like a blow-off top even though volume has been double the norm during the last two sessions. We're going to keep our eyes on the group for another trading opportunity. Picked on February 29 at $52.31 Gain since picked: + 7.69 Earnings Date 02/04/04 (confirmed) Average Daily Volume: 468 thousand ================================================================== Stock Splits ================================================================== Announcements ------------- OMTL announces 2-for-1 split Very late Tuesday Omtool, Ltd (NASDAQ:OMTL) announced that it had raised another $3.6 million through the private placement of 300,000 shares of stock at $12.00 per share. The company also announced that its Board of Directors had approved a 2-for-1 stock split of its common stock. The split, effective in the form of a stock dividend, will be payable on April 27th, 2004 to shareholders on record as of April 7th. About the company: Omtool provides enterprise document messaging applications that streamline workflows, reduce costs and ensure secure, confidential e-document exchange. Omtool accomplishes this by integrating with industry-leading e-mail messaging, enterprise resource and document management systems to add secure delivery and high volume fax functionality to a company's existing communication infrastructure. Because paper remains an integral part of many business processes, Omtool also provides technology that incorporates electronic delivery, security and billing functionality into commonly used multifunction and scanning devices. (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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