PremierInvestor.net Newsletter Wednesday 04-07-2004 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: Earnings Worries Weigh On Wall Street Watch List: XTO, SOV, TXT, SRCL 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) =============================================================== 04-07-2004 High Low Volume Advance/Decline DJIA 10480.15 - 90.66 10569.26 10465.33 1.79 bln 1325/1492 NASDAQ 2050.24 - 9.66 2060.44 2038.74 1.76 bln 1528/1511 S&P 100 557.28 - 4.30 561.58 556.33 Totals 2853/3003 S&P 500 1140.53 - 7.63 1148.16 1138.41 RUS 2000 601.64 + 2.31 603.76 595.22 DJ TRANS 2954.47 - 20.31 2974.53 2933.60 VIX 15.76 + 0.44 16.36 15.34 VXO 15.46 + 0.97 16.01 15.19 VXN 21.99 - 0.24 22.65 21.81 Total Volume 3,964M Total UpVol 2,217M Total DnVol 1,684M 52wk Highs 325 52wk Lows 30 TRIN 1.84 PUT/CALL 0.70 =============================================================== =========== Market Wrap =========== Earnings Worries Weigh On Wall Street by James Brown Major stock indices traded lower on Wednesday due to concerns that Q1 earnings may not meet expectations. An earnings miss from Dow component Alcoa (AA) last night and two high-profile earnings warnings from tech stocks (Nokia and Seagate) in the last two days are testing investors' resolve while giving weak- willed traders an excuse to take profits. Rising tensions in Iraq with the heaviest fighting since the end of the war were also weighing on Wall Street. Global stocks markets were mixed and many trended lower but losses were relatively mild. The Japanese NIKKEI lost 60 points but still managed to close over the 12,000 mark, a level it achieved yesterday. The Chinese Hang Seng added 33 points to close at 12,920. European stocks were generally lower with the German DAX down 21 to 4001, the French CAC down 11 to 3734 and the British FTSE down 4 to 4468. The dollar was also weaker and that helped a $3.80 rally in gold to $423.70 an ounce. Crude oil futures also turned in a big day adding $1.18 (3.4%) to $36.15 a barrel. U.S. markets opened the day in the red and sank for the first 90 minutes of trading as investors reacted to the Alcoa earnings news and the Seagate earnings warning. Alcoa was a major drag on the Dow with a 5% loss to $34.65 after missing analyst estimates by 2 cents despite beating the revenue estimates. The good news was that rising aluminum prices should boost their second quarter numbers but traders sold the news anyway. Seagate (STX) gapped lower to open down 16% but rebounded almost the entire session to end at $14.98 (only down 3.91%). Their earnings warning last night sparked a round of profit taking across the tech sector but like STX most stocks pared their losses by the close. If you take a moment to look at the intraday charts on the Industrials, S*P 500 and the NASDAQ you'll see that all three traded a good chunk of their day in a very narrow range before spiking higher in the last hour only to fade again. There was speculation that stocks were rebounding higher on news that Secretary of Defense Donald Rumsfeld would hold a 3:30 PM afternoon press conference. When that press conference failed to deliver any good news on the situation in Iraq the markets faded again. Chart of the Dow Industrials: Chart of the NASDAQ Composite: Chart of the S&P 500 Index: There were a few economic reports out this morning but nothing market moving. Influencing the already weak mortgage lenders was the Mortgage Bankers Association of America survey of weekly loan applications. This weekly survey dropped 7.2% due to a 15% plunge in refinancing applications, which really isn't that surprising since the rates on a 30-year fixed mortgage jumped from 5.49% to 5.75% last week. The two larger reports were the consumer credit numbers and the import/export prices. The Federal Reserve said that consumer credit jumped $4.2 billion in February to $2.02 trillion but this was below economists' expectations for a $7.4 billion gain. March's import prices climbed 0.9% but if you exclude oil imports the jump was only 0.2%. This marked the fifth consecutive gain for import prices. The Labor Department reported that export prices also rose 0.9% in March. Aside from the early morning weakness it turned out to be a slow day. Volume was light and will get even lighter tomorrow as more traders leave early to take advantage of the three-day weekend. Market internals were mixed. Advancing stocks fell behind decliners 13 to 15 on the NYSE and it was a dead heat at 15 to 15 on the NASDAQ. Down volume was almost twice up volume on the NYSE but bulls managed to push ahead on the NASDAQ with up volume of 880 million versus 791 million in down volume. Selling was heaviest in the airlines, cyclicals and retail stocks. . Making headlines during the trading session were HPQ, KMG, TASR and WMT. Hewlett-Packard (HPQ) won some negative comments from Prudential who reduced their earnings estimates and lowered their price target a dollar to $25 based on weakness in the computer market. Kerr-McGee (KMG) made headlines when it announced the acquisition of Westport Resources (WRC) for $2.5 billion in stock. TASER Intl (TASR) can't seem to help but make headlines as the stock soared another 6.27% and breached the $100 level after announcing another 2:1 split yesterday. TASR closed at $98.04. Meanwhile Wal-Mart (WMT) slipped just over a dollar to $57.98 after citizens in Inglewood, CA voted down WMT's proposal to build one of their mega-sized supercenters in their town. After hours was when the real excitement began. A handful of high-profile earnings reports all beat estimates and in the euphoria we had three new 2-for-1 split announcements. Starting the earnings parade this evening was biotech firm Genentech (DNA). Second only to Amgen in the biotech world, DNA reported earnings of 38 cents per share (ex-items) versus estimates of 32 cents. Revenues soared 30% to $975.1 million and profits were boosted by strong sales of its Avastin drug. Its board also declared a 2-for-1 stock split that is subject to shareholder approval at their April 16th annual shareholder meeting. This news was followed by earnings from Research In Motion (RIMM). The company reported that demand for its BlackBerry wireless handhelds sent sales soaring. Revenues jumped almost 37% to $210.6 million, which was above consensus estimates. Net income, accounting for its litigation provision and tax recovery, hit 56 cents a share surpassing analyst expectations by 6 cents. RIMM's management also raised their estimates on the next quarter. On top of it all they announced another 2-for-1 split payable in June. In spite of all this good news traders chose to hit the sell button and RIMM was trading lower after hours. The real after-hours headliner was Internet giant Yahoo! Inc. (YHOO). Analysts were expecting YHOO's earnings to hit 11 cents a share, up from 8 cents a year ago. YHOO reported a headline number of 14 cents but looking deeper net income was closer to 13 cents or $101.2 million for the quarter. This is a 116% improvement over last year's profit number. Furthermore YHOO raised its 2004 profit estimates from $420-480 million to $575- 625 million while bumping its yearly sales estimates from $2.12- 2.25 billion to more than $2.41 billion. The icing on the cake was a 2-for-1 stock split announcement payable on May 11th. This trio of positive earnings announcements should be more than enough to juice the markets into a pre-holiday rally. Yet if that wasn't enough DELL jumped on the bandwagon and raised its revenue numbers after the bell tonight too. The No 2 computer maker upped its quarterly revenue estimates from $11.2 billion to $11.4 billion while leaving estimates at 28 cents per share. The Stock Traders Almanac says that the Thursday before Good Friday has been up five years in a row. With this sort of positive earnings news I think odds are good that we'll see the trend hit six years in a row. I believe that tonight's positive earnings news should wash away any bitter aftertaste left by the Alcoa miss and the Nokia and Seagate earnings warning. Our only worries now should be a disastrous earnings miss Thursday morning from General Electric but I don't believe that's going to happen with the U.S. economy doing so well. We'll also see earnings from Abbott Labs (ABT), Rite Aid (RAD) and SunTrust Banks (STI) tomorrow morning. Before I close remember that volume should be very light tomorrow ahead of the market holiday on Friday. Extremely light volume tends to exaggerate moves both directions. While I expect the market to be up tomorrow the rising tensions in Iraq have caught the market's attention. The larger issue is how America perceives the conflict and how it affects President Bush's reelection. However, the specter of a long weekend (and the Easter holiday weekend at that) could curb investors' enthusiasm to hold stocks while we battle Muslim extremists half a world away. This could set us up for a strong opening tomorrow morning only to see it fade later in the session. More importantly let's keep our men and women in uniform in our prayers! ================================================================== 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 --------------------------------- XTO Energy, Inc. - XTO - close: 25.76 change: +0.52 WHAT TO WATCH: As earnings season gets underway, traders need to be more nimble in their trading, avoiding holding over an earnings announcement. XTO is poised for a breakout over $26, but the fuse is short, with the company set to release its quarterly results on April 20th. Use a trigger over the March high at $26.02 and target a quick move to the $28 area. Use a tight stop at $24.75, just under the 10-dma, 20-dma and 30-dma. --- Sovereign Bancorp - SOV - close: 20.97 change: +0.30 WHAT TO WATCH: Shares of SOV have been in a pronounced bearish trend for the past couple months, and that action has brought the stock right down to strong support at the 200-dma. After bouncing from that average twice in the past couple weeks, SOV looks poised for a rally into earnings on April 20th. The proximity of that report means any bullish move will have to happen quickly though. Entries near current levels look favorable, targeting a quick move up to the $22-23 resistance area. Use a tight stop just under the 200-dma. --- Textron Inc. - TXT - close: 52.93 change: -1.20 WHAT TO WATCH: Ready for a quickie? Shares of TXT rolled over right at resistance on Wednesday, where the 50-dma, 100-dma and the descending trendline of the past few months converge near $54. This looks like a nice setup for a bearish play, where we're looking for a breakdown under the $50 level to extend towards $48 support. Unfortunately, earnings are close (4/22), so any continued bearish move will have to unfold quickly. --- Stericycle Inc. - SRCL - close: 49.74 change: +0.41 WHAT TO WATCH: Shares of SRCL have been stymied at the $50 level for the past several months and the stock made an attempt to scale that level on Wednesday. A renewed push over that level can be used for bullish entries, but we need to be on the lookout for resistance near the $52 level that served as resistance last October. Once clear of that obstacle, SRCL will be at new all- time highs and be free to move towards its PnF price target of $62. Note that earnings are scheduled for release on April 28th. --- =================== On the RADAR Screen =================== MKTW $12.45 - It certainly looks like the recent surge over $14 was a blowoff top for MKTW and that view was confirmed by the sharp selloff today, as the stock crashed through the 50-dma on heavy volume. There's some potential support near $11.75-12.00 and then it is a long was down to next support at the 200-dma below $10. Use a trigger under $11.75. Note that earnings are scheduled for April 28th. PETM $28.59 - As a late reporter for earnings, PETM appears to be giving us a solid opportunity for a bullish play on a breakout. The rally of the past two days has the stock testing its all-time highs and a breakout over today's $29 high looks like a good entry trigger. Target a rally into the $32-33 area. Note that earnings are not set for release until May 20th. AMSC $14.35 - With energy prices holding near their highs, alternate energy stocks are finding renewed interest from investors. AMSC has been rebounding from its March lows lately and today solidified its breakout over the 50-dma. A continued rally should see the stock moving up to test strong resistance near $16, with potential for a move to $17. ================== 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 GSK Glaxosmithkline Plc (ADR) 41.56 +0.91 CVX Chevrontexaco Corp 89.75 +0.70 DEO Diageo Plc (ADS) 54.74 +1.00 UN Unilever N.V. 69.01 +0.64 NAB National Australia Bank 119.79 +0.64 FITB Fifth Third Bancorp 55.49 +0.91 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- SSTI Silicon Storage Tech Inc 15.28 +1.27 NABI NABI Biopharmaceuticals 17.15 +1.11 WLT Walter Industries Inc 13.25 +1.04 OATS Wild Oats Markets Inc 14.70 +1.28 DHB DHB Industries Inc 8.70 +1.05 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- CF Charter One Financial 36.66 +1.26 NYT New York Times Co The 46.50 +1.05 LFC China Life Insurance 26.88 +2.05 WRC Westport Resources Corp 34.20 +1.15 IIT Indonesian Satellite Cp 24.12 +1.39 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- MBT Mobile Telesys OJSC (ADS) 130.01 -5.59 JCI Johnson Controls Inc 56.78 -3.30 WIT Wipro Ltd (ADS) 41.44 -2.64 ABK Ambac Financial Group 72.65 -1.48 KMG Kerr-Mcgee Corp 49.41 -2.10 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- BLS Bellsouth Corp 26.76 -0.60 MBI MBIA Inc 62.97 -0.94 WL Wilmighton Trust Corp 37.36 -0.64 SFG Stancorp Financial 65.11 -1.63 TTC Toro Co 61.00 -1.38 ================================================================= 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 04-07-2004 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: None Active Trader (Non-tech Stocks) Closed Bearish Plays: PRX High Risk/Reward Closed Bullish Plays: SIRI Stock Splits Announcements: DNA, RIMM, SMTB, YHOO ================================================================== Stop Loss Adjustments ================================================================== None ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== ============ Closed Plays ============ Closed Bearish Plays -------------------- Pharm. Resources - PRX - cls: 61.20 chng: +3.90 stop: 59.70 Just as expected, PRX tipped over just below key resistance yesterday and it looked like the next drop towards support was underway. We always need to be prepared for the impact of an exogenous event though and that's precisely what occurred to bring a swift and painful end to the play. PRX received FDA approval for its Hepatitis C drug, a generic version of Rebetol, and the stock exploded higher at the open. After hitting an intraday high near $62, PRX weakened a bit before consolidating above $61 for the remainder of the session. With our stop smashed on the opening tick, clearly the play is a drop tonight. Picked on March 17th at $57.83 Change since picked +3.37 Earnings Date 2/26/04 (confirmed) Average Daily Volume = 730 K ================================================================== High Risk/Reward (HR) Stock section ================================================================== ============ Closed Plays ============ Closed Bullish Plays -------------------- Sirius Sat. Radio - SIRI - cls: 4.02 chng: +0.13 stop: 3.40 SIRI has been a great performer for us this time around, as the breakout over resistance seemed to get the ball rolling and it has been a straight up affair ever since. We were looking for a run to the $4.00 level as our desired exit point and today we got that and more as the stock ran as high as $4.17, before running into selling pressure near the early January highs and falling back to close just over $4.00. Aggressive traders could hold onto their positions, looking for a breakout to new recent highs, but with a 24% gain from our picked price, we're not going to be greedy. If you do opt to hold for more upside, stops should be kept tight. If a breakout does occur, look to exit the play on the first sign of weakness near the $5.00 level. Picked on March 28th at $3.24 Change since picked +0.78 Earnings Date N/A Average Daily Volume = 63.9 mln ================================================================== Stock Splits ================================================================== Announcements ------------- DNA announces a 2-for-1 split with earnings Right at the closing bell Genentech announced its Q1 2004 earnings results with a 28% increase in sales. In addition to its earnings management declared a 2-for-1 stock split of its common shares. However the split is subject to shareholder approval for an increase of the company's authorized shares at the next shareholder meeting on April 16th, 2004. Management will then decide on a payable date. About the company: Genentech is a leading biotechnology company that discovers, develops, manufactures, and commercializes biotherapeutics for significant unmet medical needs. Eighteen of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes 13 biotechnology products in the United States. The company has headquarters in South San Francisco, California (source: company press release) --- RIMM announces 2-for-1 split with earnings After today's closing bell Research In Motion Ltd (NASDAQ:RIMM) announced its Q4 and FY04 earnings along with a 2-for-1 stock split of its common shares. The 2-for-1 stock split will take effect as a 100% stock dividend. The dividend is payable on June 4th, 2004 to shareholders on record as of May 27th. Post-split RIMM should have close to 184.8 million shares outstanding. About the company: Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. RIM's portfolio of award- winning products, services and embedded technologies are used by thousands of organizations around the world and include the BlackBerry. wireless platform, the RIM Wireless Handheld(TM) product line, software development tools, radio-modems and software/hardware licensing agreements. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. (source: company press release) --- SMTB cashes in with a 2-for-1 split Late this morning Smithtown Bancorp announced that its Board of Directors had approved a 2-for-1 stock split. The split is subject to shareholder approval at the annual shareholder meeting on April 20th, 2004 where they will vote to increase the number of authorized shares. The payable date will be May 7th to shareholders on record as of April 23rd. About the company: Smithtown Bancorp is the publicly-held holding company for Bank of Smithtown. Bank of Smithtown is a 95 year-old community bank which operates ten offices, primarily along the north shore of Suffolk County in the communities of Smithtown, Commack, Hauppauge, Kings Park, Northport, Centereach, Lake Grove, East Setauket, Rocky Point and Wading River. (source: company press release) --- YHOO announces 2-for-1 split with earnings About 30 minutes after tonight's closing bell Yahoo! Inc (NASDAQ:YHOO) announced its Q1 2004 earnings and a 2-for-1 stock split. Earnings were strong. Revenues jumped to $758 million versus $283 million a year ago. YHOO's Board of Directors declared a 2-for-1 stock split of all outstanding shares payable on May 11th, 2004 to shareholders on record as of April 26th. About the company: Yahoo! Inc. headquartered in Sunnyvale, Calif., is a leading provider of comprehensive online products and services to consumers and businesses worldwide. Yahoo! is the No. 1 Internet brand globally and the most trafficked Internet destination worldwide. (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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