PremierInvestor.net Newsletter Weekend Edition 05-16-2004 section 1 of 3 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: Escaped With A Minor Loss Market Sentiment: Big Moves Watch List: Weakness Prevails ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= WE 5-14 WE 5-07 WE 4-30 WE 4-23 DOW 10012.87 -104.47 10117.3 -108.23 10225.6 -247.27 + 20.87 Nasdaq 1904.25 - 13.71 1917.96 - 2.19 1920.15 -129.62 + 54.03 S&P-100 535.47 - 1.88 537.35 - 3.53 540.88 - 15.92 + 1.86 S&P-500 1095.66 - 3.03 1098.69 - 8.61 1107.30 - 33.30 + 6.03 W5000 10634.71 - 51.33 10686.0 -107.62 10793.7 -356.76 + 72.34 SOX 450.99 - 6.02 457.01 + 13.52 443.48 - 44.50 + 7.84 RUT 543.76 - 4.80 548.56 - 11.24 559.80 - 30.91 + 7.34 TRAN 2848.89 + 2.71 2846.18 - 40.26 2886.44 -115.27 + 62.24 WE = week ending ================================================================= =========================== Market Wrap =========================== Escaped With A Minor Loss by Jim Brown After a very rocky week traders escaped with only a minor loss across all the indexes. The Dow was the most negative at -104 for the week and mostly on the back of losses in CAT, IBM, MRK, C and JPM. The Nasdaq only finished with a -14 point drop despite some high profile losses in individual stocks. As the time ran out on the clock at Friday's close the bulls mounted a solid goal line stand to prevent the Dow and Nasdaq both from dropping under the critical 10000/1900 levels. Dow Chart - Daily Nasdaq Chart - Daily After dropping to new lows for the year on Wednesday the Dow has managed to trade sideways for two days at the 10000 level. Considering the negativity from multiple events this was a minor miracle. Unlike Thursday the economics on Friday were great. The Consumer Price Index led the list with a minimal +0.2% jump in the headline number and slightly below the +0.3% consensus. The core rate only rose +0.3% and is now only +1.8% for the year. No soaring inflation in sight for consumers according to this report. Both numbers were actually less than they were in March. If you dig into the internals it does show that core inflation although moderate is growing an annualized rate of +3.3% over the last three months. We are far from home free. Most analysts do not expect this rate to continue but to lessen over the summer. This slight bump in the core rate is what lessened the Fed's fears of "unwelcome fall in inflation" or what the rest of us would call deflation. To be free of the "D" monster the Fed would be perfectly happy with a hint of moderately higher inflation ahead. The Fed has been trying to fan the inflationary fire under conditions similar to midnight in the cold north woods. With only one match left they are very relieved to see a warming flame begin to develop from the smoldering economic embers. The alternative was a cold winter night and frost on their sleeping bags and bears closing in on all sides. There was one small point of contention. The CPI actually showed that energy prices slowed to only a +0.1% gain in April. Anybody at least room temperature and breathing should doubt this statistic based on the price of oil and soaring gasoline prices. Expect an unwelcome upward revision in May. Also bullish was a +0.7% jump in Business Inventories and well over consensus of only +0.5%. This was a March number and February was revised up to +0.8%. The governments last estimates for inventory buildup were very low and this hot number should spike the GDP on the next revision. Business Sales also shot up +2.9% prompting the inventory to sales ratio to fall to a record low at 1.30. The +2.9% jump was the largest single month gain in the 12 year history of the report. Manufacturing shipments rose +3.8%. Considering this is a March number and the 1.3 inventory to sales ratio means there was only 1.3 months of inventory on hand I think we are going to see a real blowout in April. We all know April was a stronger month than March and those inventories have got to be much lower today. This ties into the next paragraph on Industrial Production and the rise in capacity utilization. The race is on. Industrial Production jumped a huge +0.8% and well over the consensus at +0.3%. Capacity Utilization also rose +0.3% and is at the highest level in over a year at 76.9%. Several analysts believe this is artificially low and is a result of the Fed's failure to remove "dead" capacity from their figures. The ISM capacity utilization numbers are nearer 85% and this is more in line with current production growth. However you look at it the number was strong and climbing. The negative news for the day was the Consumer Sentiment at 94.2 and unchanged from last month. Consensus was slightly higher but the higher cost of gasoline appears to be an offset to the new jobs. Also, the falling stock market over the last two weeks and prisoner scandal in Iraq have combined to depress expectations. The expectations component posted its second consecutive monthly drop and is now at 85.8 suggesting consumers are becoming more depressed as the summer doldrums near. Consumers have held in the 94.5 range for the last six months except for an unexplained spike in January to nearly 104. There is no explanation for that event and we have seen nothing similar since. It remains to be seen if the pace of job creation can overcome $50 oil and $3 gasoline. $50 oil? Yes, that is the growing forecast. Demand continues to grow faster than supply. Oil traded at a 20-year high on Friday at $41.60 and closed at $41.40. This is the highest level we have seen since the Iran hostage crisis in 1979 that sent oil to an inflation adjusted price of $78. OPEC is meeting on May-22/24th to discuss boosting quotas and Saudi Arabia called on OPEC to raise output by 1.5M barrels per day. Don't hold your breath. I still believe the OPEC countries around Iraq are mad at us for the war and are extracting their pound of flesh in retaliation. Remember I also mentioned last week that oil tankers are booked solid for months to come and there is no additional shipping capacity available. The manager of the Russian pipeline system said output from Russia was at max capacity. This eliminated hope that Russia could fill the shortfall. A survey also announced on Friday said that oil consumption in some sections of China would increase 600% over the next year. Currently $44 is almost a given and $50 is the current whisper number target. With unleaded now over $2.40 in many places $50 oil could spike that price to $3.00 or more very quickly. How would that impact consumer sentiment? After the close on Friday Oracle reduced its bid for PSFT to $21 from $26 to reflect "current market conditions". Since the tech decline began ORCL has dropped from $15 to $11.50 and PSFT dropped to $17 from $24. If ORCL could not buy it for $26 I doubt they will be successful at $21. I am sure they were beginning to have a lot of stockholders reconsider their offer of $26 with the stock nearing 52-week lows but that is ancient history now. Dell traded down to $34.50 and barely saw any rebound after posting earnings that disappointed quite a few traders. This was just a drop in the bucket compared to the crash in ADIC which fell to $7.50 from its $10 close on weaker than expected earnings. BEAS got hit for a -22% loss from $10.80 to $8.34 after saying sales declined. This was the backdrop on Friday that saw the Nasdaq hold over 1900 despite a -22 point drop. There is no joy in tech land and the current three-week decline is showing no signs of letting up. The Dow has failed to rally from the massive sell off over the last three weeks and could not get out of its trading range all week. The negativity is very strong but there is a chance that by holding the line we could be getting ready to attempt a rebound. I know this would be a stretch for most to comprehend given the heavy selling but don't count it out. Wednesday was very negative and volume was high. Almost 2B shares of the volume came in the last hour when the S&P bounced off the 200dma in what is being called the Barton Biggs Bounce. That bounce found no follow through but sellers have not been able to put in a repeat performance. Volume for Thr/Fri was very low with barely 3.5B shares traded and the A/D ratios were almost even. Overall internals were much closer than the indexes would lead you to believe. Only the Nasdaq internals were significantly worse with declining volume 3:1 over advancing. The high profile earnings problems contributed to this imbalance. More on the rebound potential later. Other internal problems included very large cash outflows from mutual funds. I mentioned Thursday night the numbers were somehow missing from the news reports. They appeared on Friday and now we know why. Equity funds saw $2.4 billion in outflows for the week ended on Wednesday. Junk bond funds saw outflows of $2.15 billion indicating traders were becoming much more concerned about the future and were jumping to safety now that yields are nearing 5.0%. Emerging market equity funds saw the largest fund outflows on record for any single week. Tech funds saw cash outflows for the 15th consecutive week. Considering the Wednesday drop probably triggered many investors to head for the barn on Thursday those outflows will not be tallied until next week. There were several comments in the analyst community on Friday about hedge fund losses over the last month. Names were withheld to protect the guilty but evidently there are some hedgies in serious trouble. Seems the monster moves and whipsaw nature of the last couple months have caused some best laid plans to go astray. The momentum players have had their heads handed to them and nobody knows which way to jump. Welcome to reality. Speaking of reality it is coming home to roost for Greenspan. His appointment as Chairman of the Fed is up on June 20th. Bush has said he would reappoint him BUT has not done it yet. With the next Fed meeting on June-30th the scuttlebutt making the rounds has the Bush administration applying pressure to Greenspan to delay the rate hikes until after the election. The economy continues to ramp up, jobs are created, income generated and everybody votes Republican. If this is the case then somebody is smoking grass clippings. I could see Bush leaning on Greenie about rates but not with a heavy hand. If Bush is really withholding the appointment to apply pressure it is more likely to get him to shut up about the deficit and the looming Baby Boomer Social Security crash. Greenspan has been taking shots at the administration for the last couple of months as if he and Bush have their own cold war brewing. Either way the countdown is on and after 14 years at the helm their may only be 35 days left in Greenspan's tenure. Ten-year Yields Banking Index - Daily When trying to generate a potential scenario for a market rebound it must include financials and they are not leading the pack. Bonds sold off at the open on Friday with ten-year yields hitting 4.90% but then rallied on the tame CPI news. Financials failed to gain any ground and until the Fed begins its rate hike process there will be a cloud over the sector. SOX Chart - Daily Another cloud continues to be the Semiconductor sector and the midweek rebound to 470 has been completely erased. The SOX is threatening to break the May support at 440 and test support from last September at 420. The Nasdaq cannot rebound without the SOX. Russell-2000 Chart - Daily Behind the SOX the Russell was the next weakest supporter of the Nasdaq on Friday. The index dropped back to close right on its 200ema and very close to a significant drop. Small caps continue to be weak and the record withdrawals from emerging markets last week were a signal to me that the Russell is likely seeing the same fund weakness. If you follow the pattern on the chart above from the last touch of 600 you will see large drops followed by several days of consolidation and then a repeat of the process. This is a "b" pattern selling cycle. The Russell could be about ready to take the next dump to 520 to begin the next "b". I started this conversation thread with the potential for a coming rebound. Unfortunately the evidence is very thin and not something on which I would bet the farm. Here is my case. This is option expiration week. Open interest is very high, much higher than normal and most of the indexes are underwater. The MaxPain numbers for the DJX/DIA are 103, NDX 1425, SPX 1125 and QQQ 36. This suggests there could be some upward pressure on Monday as traders attempt to square positions and market makers try to maneuver the indexes higher to expire more options worthless. There are no material economic reports early in the week and nothing significant in the earnings arena until Tuesday. The Nikkei stopped its slide on Friday with a minimal gain but a gain never the less. The Dow closed at 10000 support. The Nasdaq at 1900 support and the NDX at 1400 support. It was a fight but they all held their ground at the close in front of weekend event risk. The SPX has not sold off since testing its 200dma on Wednesday and has been holding 1095, right where it closed. All of this is circumstantial evidence as the say but it is the only evidence we have. They tried to sell them both Thursday and Friday and were unsuccessful. As a betting man I am betting we "could" see an options related rebound on Monday morning assuming there are no "events" over the weekend. If we do see a rebound I expect it to only be a trading rally and we continue to see weakness once positions are squared. The Dow has resistance at 10200 and strong resistance at 10300. I would be very surprised to see those touched. The Nasdaq is the weak link and has strong resistance at 1930, 1950 and 1960. Corresponding resistance for the SPX is 1110 and 1120. Any expiration rally should slow considerably at those levels. I continue to advise selling any rally until the pattern changes. I still believe we have some serious risk in front of us with rates, Iraq, elections, Olympics, oil prices, China and declining earnings growth. Now we have the Greenspan time bomb ticking down in our future. Whatever you think about Greenspan the markets will definitely be volatile around any change in the Fed chairmanship. Views of any new appointee will be immediately scrutinized and reacted to accordingly. At least the countdown will reduce the impact of a sudden change from a health issue. The Fed replacements will be cussed and discussed in the media until Greenspan's fate is finally known. Our fate next week should be known very quickly. We will either rebound out of the gate on Monday or sink beneath current levels to our next support plateau. Choose your direction carefully. Enter Very Passively, Exit Very Aggressively! Jim Brown ================================================ Market Sentiment ================================================ Big Moves Jonathan Levinson There was much ado about breadth this week, with the now- (in)famous Biggs exclamation presumably referencing the large swings in the New Highs minus New Lows category. For all the drama and handwringing, price moves were relatively subdued- for examply, the NYSE's NYHL chart (new highs-new lows) reached a low this week at levels seen only thrice in at least 10 years (the outer limit of my dataset). While the swings in price were significant for leveraged speculators, the overall moves were nothing like the swings in breadth. By the end of Friday's session, most of the damage was repaired, with the NYSE's NYHL line closing just south of unchanged in neutral territory. The VXO closed below 19 after a number of bursts above 20, with the recent prints in the low 14's a distant memory. The Nasdaq volatility index, the VXN, closed above 29, also well above the recent lows around 20. The seesaws in the internals were not matched by equivalent moves in the prices of the indices, and that disconnect is attributable to the action of a few major bellwethers, most notably MSFT and GE, both of which held up remarkably well during the worst plunges of the week. Whether this was mutual funds or other interests defending the headline index numbers, the market was far weaker below the surface than was apparent from the index prices. By the end of the week, the worst of the internal imbalanced were corrected. For next week, we will see whether the bounces off the lows were the first steps of a daily change in direction and a new upleg, or merely the result of the more deeply bearish internals, a deadcat bounce. The COT data indicates that commercials in the E-mini S&P are betting on the former, while for the other contracts, the market is not clearly favoring either outcome yet. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 8416 Current : 10012 Moving Averages: (Simple) 10-dma: 10137 50-dma: 10303 200-dma: 10021 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 912 Current : 1095 Moving Averages: (Simple) 10-dma: 1104 50-dma: 1121 200-dma: 1079 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1103 Current : 1399 Moving Averages: (Simple) 10-dma: 1413 50-dma: 1438 200-dma: 1436 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 18.47 -0.39 CBOE Mkt Volatility old VIX (VXO) = 18.93 -0.46 Nasdaq Volatility Index (VXN) = 29.04 +0.93 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.97 530,308 1,046,464 Equity Only 0.82 398,858 326,891 OEX 0.91 37,692 34,406 QQQ 4.24 20,726 87,791 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 62.1 + 0 Bear Confirmed NASDAQ-100 34.0 + 0 Bear Confirmed Dow Indust. 66.7 + 0 Bear Confirmed S&P 500 59.0 + 0 Bear Confirmed S&P 100 61.0 + 0 Bear Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-dma: 1.00 10-dma: 0.92 21-dma: 1.14 55-dma: 1.14 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals -NYSE- -NASDAQ- Advancers 1513 1045 Decliners 1313 1987 New Highs 25 46 New Lows 104 81 Up Volume 721M 260M Down Vol. 897M 1210M Total Vol. 1644M 1485M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 05/04/04 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercials increased their open interest be equivalent amounts both long and short, while small traders went net shorter. Commercials Long Short Net % Of OI 04/20/04 409,729 421,456 (11,727) (1.4%) 04/27/04 406,927 416,244 ( 9,317) (1.1%) 05/04/04 397,964 417,175 (19,211) (2.4%) 05/11/04 401,365 421,672 (20,307) (2.5%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 23,977 - 12/09/03 Small Traders Long Short Net % of OI 04/20/04 136,699 92,982 43,717 19.0% 04/27/04 133,775 90,535 43,240 19.3% 05/04/04 137,112 80,201 56,911 21.6% 05/11/04 135,534 76,987 58,547 27.5% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 Commercials were much more active in the e-mini S&P contracts, reducing their shorts slightly and dramatically increasing longs, flipping to net long for the first time in at least 4 weeks. Small traders took the other side of the trade, reducing longs and increasing their net short position. Commercials Long Short Net % Of OI 04/20/04 275,985 355,555 (79,570) (10.1%) 04/27/04 291,365 370,549 (79,184) (12.0%) 05/04/04 316,840 370,781 (53,941) ( 7.8%) 05/11/04 378,696 362,887 15,809 2.1% Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 04/20/04 186,799 69,137 117,662 46.0% 04/27/04 175,788 69,613 106,175 43.3% 05/04/04 119,308 74,407 44,901 23.2% 05/11/04 101,199 94,408 6,791 3.5% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercials added slightly to their net short position, while small traders reduced both shorts and longs but favoring the long side, reducing their overall net short position. Commercials Long Short Net % of OI 04/20/04 54,852 35,964 18,888 20.8% 04/27/04 54,196 33,948 20,248 23.0% 05/04/04 56,931 35,209 21,722 23.6% 05/11/04 57,680 37,410 20,270 21.3% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 21,722 - 05/04/04 Small Traders Long Short Net % of OI 04/20/04 8,538 19,431 (10,893) (39.0%) 04/27/04 9,008 20,347 (11,339) (38.6%) 05/04/04 10,247 24,764 (14,517) (41.5%) 05/11/04 9,716 21,072 (11,356) (36.9%) Most bearish reading of the year: (14,517) - 05/04/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercials increased their net long position, while small traders took the other side of the trade, increasing longs and reducing shorts. Commercials Long Short Net % of OI 04/20/04 24,156 22,009 2,147 4.7% 04/27/04 23,676 22,009 1,667 3.6% 05/04/04 24,296 22,181 2,115 4.6% 05/11/04 22,614 21,507 1,107 2.5% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 04/20/04 5,997 9,631 (3,634) (23.3%) 04/27/04 5,998 8,868 (2,870) (19.3%) 05/04/04 6,262 8,155 (1,893) ( 9.2%) 05/11/04 7,009 7,640 ( 631) ( 4.3%) Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ================================================================= 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 --------------------------------- Weakness Prevails Netease.com Inc. - NTES - close: 37.34 change: -2.28 WHAT TO WATCH: The past month has not been kind to NTES investors, as the stock has plunged on the weakness associated with China's purported slowdown. The past week's price action looks like a precursor to more weakness too, as resistance was found at former support near $41 and Friday's plunge has the bears eyeing a breakdown below its multi-month support at $35. Use a trigger below that level and target an initial plunge to $30. Chart= --- Cognizant Tech. Solutions - CTSH - close: 42.01 change: -1.89 WHAT TO WATCH: Joining the "Broken 200-dma" party, CTSH broke that important average just over a week ago and then found resistance at that average late last week before Friday's precipitous plunge. The stock did manage to bounce back to end right at critical support/resistance at $42, but it looks like the breakdown is coming. Use a trigger under Friday's low and then target an initial drop to the $35 support level. Chart= --- NII Holdings - NIHD - close: 33.24 change: -1.60 WHAT TO WATCH: In classic topping fashion, snares of NIHD have been trading in an expanding wedge pattern for the past 3 months and these patterns are normally bearish. Friday's break of the 100-dma looks bearish as well, and the lower wedge line is just below at $32. Use a trigger below that level and target a drop to the 200-dma, currently just below $28. Chart= --- Black Box Corp. - BBOX - close: 47.93 change: -1.21 WHAT TO WATCH: After the recent breakdown under the $50 level, shares of BBOX have been trying to find support, but the prospects of that occurring don't look good. The stock finally cracked the $48 level on Friday to test the 200-dma and while we'll probably see a near-term bounce from that average, the stock does look ready to head substantially lower. Note that the PnF chart is on a Sell signal with a downside target of $37. Target entries either on a failed rally near $50 or on a volume- backed move below the 200-dma. Target $42-43 initially due to the PnF bullish support line at $43. Chart= --- Xilinx Inc. - XLNX - close: 34.10 change: -0.93 WHAT TO WATCH: The price chart of XLNX is looking worse by the day, as the stock continues to be pressured by the persistent weakness in the SOX index. The last major rollover pressed the stock under the 50-dma and the 100-dma and now the shorter average has crossed below the longer one. The next battle occurred at the 200-dma and it looks like the stock is in the process of breaking below that average as well. XLNX is barely above key support near $33 and we can use that level as a bearish entry trigger. Target a move down to the next significant support near $30. 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PremierInvestor.net Newsletter Weekend Edition 05-16-2004 section 2 of 3 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: Tech Stocks New Bearish Plays: JNPR Bullish Play Updates: NXTP Bearish Play Updates: ISIL Active Trader (Non-tech) Bearish Play Updates: ENZN, FCX, IGT High Risk/Reward Bullish Play Updates: MAGS, VRSN Stock Splits Announcements: None ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= ----------------- New Bearish Plays ----------------- Juniper Networks - JNPR - close: 20.92 change: -1.58 stop: 20.90 Company Description: Juniper Networks, Inc. is a provider of network infrastructure solutions that transform the business of networking by converting bandwidth into a dependable and secure corporate asset. The company's products, services and solutions enable service providers and other network-intensive businesses to support and deliver services and applications on an efficient and low-cost integrated network. Products are designed and purpose-built for service provider networks and offer its customers high performance with less complexity and cost than legacy alternatives. Why we like it: On more than one occasion recently, we've mentioned JNPR as a possible bearish play in our daily Watch List. After the sharp decline in late April, the stock found support for a sharp rebound from the $21 level. But that rebound stalled right at the 10-dma ($22.47), which has been acting as stiff resistance over the past week. But there was still the potential for the stock to hold above the early May low ($20.91) and rebound. Friday's action made that possibility rather unlikely though, as the stock traded down as low as $20.80 before bouncing slightly at the close to end just barely above the 200-dma ($20.83). JNPR hasn't yet completely broken down, but it is in an ideal position from which to play a breakdown should it occur. The PnF chart argues for a major move lower, with its current Sell signal predicting a fall all the way to the bullish support line at $14. While the PnF chart has a price objective of $14, that doesn't look reasonable over the near term, as there is mild support near $19, becoming quite strong in the $17.50-18.00 area. We'll target the top of that lower support zone for our play, looking to exit open positions on the first test of $18. Because of where the stock came to rest on Friday, we have the ability to set a very close trigger at $20.70. Entries on the initial breakdown look good for aggressive traders, but the way the stock has bounced back from the past two tests of the $21 level, we have to be prepared for another volatile snap-back bounce as high as $22. Now a bounce and rollover from the $22 level after our trigger has been satisfied looks like an even better entry point. We'll set our stop initially at $20.90, just over Thursday's intraday high. If our bearish thesis has merit, then the stock should not be able to move through that level, as it should still find resistance at the 10-dma. Annotated Chart of JNPR: Picked on May 12th at $20.92 Change since picked +0.00 Earnings Date 4/21/04 (confirmed) Average Daily Volume = 12.5 mln Chart = ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Nextel Partners - NXTP - close: 14.59 change: -0.36 stop: 13.75 With volume dwindling to an absolute trickle at the end of the week, it really is hard to read much into NXTP's price action towards the end of the week. After the prior week's strong breakout, we were expecting (and hoping for) a pullback towards what we suspected would be solid support near the $14.50 level. The stock didn't disappoint, falling back towards that level early in the week and then bouncing in volatile fashion in roughly the $14.50-15.00 area for the remainder of the week. Next week is option expiration, so it could be that we'll see that stock continue to gravitate towards the $15 level over the next week. Brief dips into the $14.00-14.50 area still look viable for new entries in anticipation of a renewed bullish move. Note that the daily Stochastics are almost to oversold territory and when they turn up from that zone, we'll have greater confidence in trying to buy this dip. The 20-dma ($13.93) and 30-dma ($13.73) will provide additional protection for our $13.75 stop next week if the $14 level sees a serious test. Traders looking for momentum entries have some time to wait, as we'll need to see NXTP push through the $15.75 before we'll have a breakout situation on our hands. Picked on May 9th at $15.38 Change since picked -0.79 Earnings Date 4/28/04 (confirmed) Average Daily Volume = 2.23 mln Chart = -------------------- Bearish Play Updates -------------------- Intersil Corp. - ISIL - close: 18.26 change: -0.63 stop: 20.50 While Semiconductor stocks appear to be failing in their attempt to break the dominant downtrend of the past month, our new bearish play on ISIL is leaving no room for equivocation. Wednesday's breakdown under the $19 level was a clear warning of more weakness to come. After a feeble rebound attempt on Thursday, the stock tipped over at the 10-dma ($19.23). Heading sharply lower at the open on Friday, the stock made one attempt at an intraday rally before rolling over and heading sharply lower into the close, ending at its low of the day and a new 52- week low. We have to be careful not to read too much into the plunge on Friday though, as it came on very light volume, the product of a buyers strike, rather than a flood of sellers. The bottom of the descending channel at $17.50 is likely to provide the next possible support, as it is also the site of the top of the gap from April of last year. Aggressive traders can enter on a break below Friday's low, but our preferred entry strategy is still to target failed bounces near the 10-dma. Maintain stops at $20.50 for now. Picked on May 12th at $18.67 Change since picked -0.41 Earnings Date 4/21/04 (confirmed) Average Daily Volume = 2.24 mln Chart = ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ PLAY UPDATES ============ -------------------- Bearish Play Updates -------------------- Enzon Pharma. - ENZN - close: 14.70 change: -0.12 stop: 15.41 After another week of trying, ENZN still hasn't broken down from its bearish triangle formation, but it hasn't been for a lack of trying. The bears managed to drive the stock down for a couple of solid tests of the $14 level on Monday, but the buyers prevailed and once again the stock lofted back towards the $15 level, which is now beginning to provide solid resistance. The stock hasn't been able to manage a close over its 30-dma ($15.10) since late April, reinforcing the idea that resistance is moving lower. That said, we need to see a real break of the $14 level to activate our entry trigger at $13.95. Until that happens, we remain in a holding pattern. Entries off the initial break look viable, but based on the way the stock has been bouncing back from tests of support at $14, we're expecting that the initial break below that level might see a quick rebound to test broken support as new resistance. That could set up a nice conservative entry on a rollover from the $14.50-14.75 area. Maintain stops at $15.41, which is now above the 50-dma ($15.40). Picked on May 9th at $14.68 Gain since picked: +0.02 Earnings Date 05/06/04 (confirmed) Average Daily Volume: 689 K Chart = --- Freeport McMoran - FCX - cls: 28.83 chng: +0.43 stop: 29.75*new* The downtrend in the metals stocks appears to be losing momentum, but as of yet there hasn't been any sign of a meaningful rebound. After touching a new multi-month low of $27.76 early on Monday, shares of FCX bounced strongly, but stalled upon running into the 10-dma (now $29.52). The bulls made another mid-week attempt at moving through that average, but resistance held firm and the stock fell back under $29 to close out the week. Looking at the intraday chart, we can see a semblance of a neutral wedge being formed and that suggests a break from this ever-narrowing range is likely in the week ahead. The top of the wedge is at $29.45 and coupled with the 10-dma, ought to provide solid resistance at the $29.50 level. A move above there could kick off a more sustained rally, so we want to keep our stops tight. Note that we've aggressively lowered our official stop to $29.75 this weekend. Should the current consolidation break to the downside with a move under $27.75, we are not recommending breakdown entries. Instead, let's use that breakdown to achieve the best possible exit from the play, targeting the $26 level, which appears as though it could provide support. Picked on April 25th at $32.59 Change since picked -3.76 Earnings Date 4/20/04 (confirmed) Average Daily Volume = 3.41 mln Chart = --- Intl. Game Tech. - IGT - cls: 38.18 chng: +0.89 stop: 38.80 We may be coming to the end of the line on our IGT play. On four separate occasions in the past two weeks, the bears have pressed the stock right down to the $36 level and eager buyers have stepped forward to halt the slide. In searching for the reason for that level to provide support, we noted that the 50% retracement of the rally that began last August sites at $35.71, close enough to be construed as support. Of course, that lines up nicely with horizontal support near $36 as well. Interestingly, the rebounds off of this support have seen resistance come in near $38.50, which is no small coincidence with the 38% retracement resting at $38.40. Based on the pattern of the upturned daily oscillators, it looks like IGT is ready to break this pattern to the upside. But lately things haven't been as they have seemed, so we're going to give the play one more chance to head south, in deference to the PnF chart, which is quite bearish. Maintain a tight stop at $38.80, just over the intraday peaks of the past 2 weeks. Picked on April 28th at $38.89 Change since picked -0.79 Earnings Date 4/22/04 (confirmed) Average Daily Volume = 3.22 mln Chart = ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Magal Security - MAGS - cls: 13.69 chng: -0.78 stop: 12.50*new* We haven't seen anything that would indicate MAGS is ready to make its next bullish move yet, but the price action over the past 2 days is setting up what could be considered a very attractive entry point. Recall that we were initially looking for a rebound off the $14 level as a good pullback entry point. Dialing down to the intraday charts, we can fine-tune that a bit by noticing that the past 2 weeks have created a pattern of a neutral consolidation wedge. The lower boundary currently rests near $13.25, while the top (resistance) line lies in wait at $15.50. Taking another look at the PnF chart, we can see that the past two days painted a new column of O's, and that simplifies the play significantly. Whichever way this neutral triangle breaks (both on the candle chart and the PnF chart), there ought to be significant follow-through. So target-shooting entries in the $13.50-14.00 area (with the PnF bullish support line at $13.50) looks like a viable, albeit aggressive strategy. Traders looking to enter on demonstrable strength can use an entry trigger at $16, which will not only be a PnF Buy signal, but also have the stock solidly above the top of the neutral wedge on the candle chart. The recent developments on the PnF chart also allow us to reduce our risk by raising our stop to $12.50, as a trade at that level will constitute a bearish resolution of the current wedge, as well as a new Sell signal. Picked on May 5th at $15.04 Change since picked -1.35 Earnings Date 4/28/04 (confirmed) Average Daily Volume = 2.52 mln Chart = --- Verisign Inc. - VRSN - close: 17.86 change: -0.61 stop: 16.50 After the bullish week VRSN just had, we're willing to cut the stock a bit of slack and let it fall back to test support. After satisfying our entry trigger with its break above the short-term descending trendline, the stock rose almost to the $19 level on Thursday before falling back a bit. Friday's negative Technology market was to much to bear (pardon the pun) and the stock fell back towards what should now be strong support in the $17.25- 17.50 area. That support is reinforced first by the 10-dma ($17.58) and then the 100-dma ($17.29) and finally the 20-dma ($17.10). Connecting the lows over the past several weeks produces a trendline that crosses at approximately $17.25. The bottom line is that unless the selling volume picks up significantly, we should be able to use this drop towards support as a high-odds bullish entry point. There will be resistance found near $19, but we're still targeting a rise to $20 as our signal to exit the play. Maintain stops at $16.50, just under the most recent swing low, as well as the 50-dma ($16.63). Picked on May 5th at $17.40 Change since picked +0.46 Earnings Date 4/22/04 (confirmed) Average Daily Volume = 2.47 mln Chart = ================================================================== Stock Splits ================================================================== Announcements ------------- None ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to remove@PremierInvestor.net ================================================================= 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 advertising@PremierInvestor.net. ***************************************************************** Copyright (c) 2001-2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Weekend Edition 05-16-2004 section 3 of 3 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 three: Market Watch for Week of May 17th, 2004 - Major Earnings - Stock Splits - Economic Reports 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 Watch for the week of May 17th ========================================== ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- A Agilent Technologies Mon, May 17 After the Bell 0.24 BAB British Airways Mon, May 17 Before the Bell N/A CCH Coca-Cola Hllnc BttlngMon, May 17 Before the Bell 0.05 CSC Computer Sciences CorpMon, May 17 After the Bell 1.00 LTD Limited Brands Mon, May 17 -----N/A----- 0.13 LOW Lowe's Co Mon, May 17 Before the Bell 0.54 ROS Rostelecom Mon, May 17 Before the Bell N/A TOY Toys R Us Mon, May 17 Before the Bell -0.01 VAL Valspar Mon, May 17 Before the Bell 0.74 ------------------------- TUESDAY ------------------------------ AMAT Applied Materials Tue, May 18 -----N/A----- 0.19 ADSK Autodesk, Inc. Tue, May 18 After the Bell 0.30 BKS Barnes&Noble Tue, May 18 Before the Bell 0.12 BJ BJ's Wholesale Club Tue, May 18 Before the Bell 0.22 BGP Borders Group Inc. Tue, May 18 After the Bell 0.02 DE Deere & Co Tue, May 18 -----N/A----- 1.74 DKS Dick's Sporting Goods Tue, May 18 Before the Bell 0.18 HPQ Hewlett-Packard Tue, May 18 After the Bell 0.34 HD Home Depot Inc Tue, May 18 Before the Bell 0.43 JCP JCPenney Tue, May 18 Before the Bell 0.34 MNT Mentor Tue, May 18 After the Bell 0.32 OOM MMO2 Tue, May 18 Before the Bell N/A NTAP Network Appliance Tue, May 18 After the Bell 0.12 SKS Saks Incorporated Tue, May 18 Before the Bell 0.17 SCO Scor Tue, May 18 -----N/A----- N/A SPLS Staples, Inc. Tue, May 18 Before the Bell 0.22 TJX The TJX Co Inc. Tue, May 18 Before the Bell 0.32 ZLC Zale Corp Tue, May 18 Before the Bell 0.43 ------------------------ WEDNESDAY ----------------------------- ADCT ADC Wed, May 19 After the Bell 0.00 AAP Advance Auto Parts Wed, May 19 After the Bell 0.66 BLI Big Lots, Inc. Wed, May 19 Before the Bell 0.04 BRCD Brocade Comm Systems Wed, May 19 After the Bell 0.03 EV Eaton Vance Corp. Wed, May 19 Before the Bell 0.50 FL Foot Locker, Inc. Wed, May 19 -----N/A----- 0.31 GT Goodyear Tire Rubber Wed, May 19 Before the Bell -0.20 INTU Intuit Wed, May 19 After the Bell 1.16 PETC PETCO ANIMAL SUPPLIES Wed, May 19 After the Bell 0.25 ROST Ross Stores, Inc. Wed, May 19 Before the Bell 0.32 SNPS Synopsys Wed, May 19 After the Bell 0.33 TLB Talbots Wed, May 19 -----N/A----- 0.57 ------------------------- THUSDAY ----------------------------- ARO Aeropostale, Inc. Thu, May 20 After the Bell 0.09 BTY BT Group PLC Thu, May 20 Before the Bell N/A CBRL CBRL Group Thu, May 20 Before the Bell 0.53 CIEN CIENA Corp Thu, May 20 Before the Bell -0.08 CLE Claire's Stores, Inc. Thu, May 20 Before the Bell 0.24 GPS Gap Inc. Thu, May 20 After the Bell 0.32 HRL Hormel Foods Corp Thu, May 20 Before the Bell 0.33 MRVL Marvell Technology GrpThu, May 20 After the Bell 0.32 NGG National Grid Transco Thu, May 20 Before the Bell N/A NAV Navistar InternationalThu, May 20 Before the Bell 0.59 JWN Nordstrom Thu, May 20 After the Bell 0.43 PDCO Patterson Dental Thu, May 20 Before the Bell 0.65 PETM PetsMart Thu, May 20 -----N/A----- 0.21 UU United Utilities Thu, May 20 Before the Bell N/A UVV Universal Corp Thu, May 20 After the Bell N/A ------------------------- FRIDAY ------------------------------- TKS Tomkins PLC Fri, May 21 Before the Bell N/A ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Co Name Ratio Payable Executable SYK Stryker Corp 2:1 May 14th May 17th TOUS Tech Olympic USA, Inc 3:2 May 14th May 17th BCR C.R.Bard 2:1 May 14th May 17th PBCT Peoples Bank 3:2 May 15th May 17th BWA BorgWarner Inc 2:1 May 17th May 18th TK Teekay Shipping Corp 2:1 May 17th May 18th DHR Danaher Corp 2:1 May 20th May 21st ODFL Old Dom Freight Line, Inc 3:2 May 20th May 21st CCNE CNB Financial Corp 5:2 May 21st May 24th FBTC First BancTrust Corp 2:1 May 21st May 24th ASBC Associated Banc-Corp 3:2 May 21st May 24th SONC Sonic Corp 3:2 May 21st May 24th RCI Renal Care Group, Inc 3:2 May 24th May 25th BMRC Bank of Marin 3:2 May 24th May 25th BFCF BFC Financial Corp 5:4 May 25th May 26th ESCA Escalade, Inc 2:1 May 25th May 26th ANN AnnTaylor Stores Corp 3:2 May 26th May 27th ERES eResearchTechnology, Inc 3:2 May 27th May 28th KIND Kindred Healthcare, Inc 2:1 May 27th May 28th IEX IDEX Corp 3:2 May 28th May 31st CEDC Central European Dist 3:2 May 28th May 31st QCRH QCR Holdings, Inc 3:2 May 28th May 31st CNQ Canadian Natural Res Lmtd 2:1 May 28th May 31st -------------------------- Economic Reports This Week -------------------------- If it wasn't for a full week of stock splits, there wouldn't be much to report this week. We have the NY Empire State Index report due on Monday and the Leading Indicators set for Thursday. ============================================================== -For- ---------------- Monday, 05/17/04 ---------------- NY Empire State Index (BB) May Forecast: 34.8 Previous: 36.1 ----------------- Tuesday, 05/18/04 ----------------- None ------------------- Wednesday, 05/19/04 ------------------- Housing Starts (BB) Apr Forecast: 1988K Previous: 2007K Building Permits (BB) Apr Forecast: 1940K Previous: 1976K ------------------ Thursday, 05/20/04 ------------------ Initial Claims (BB) 05/15 Forecast: N/A Previous: 321K Leading Indicators (DM) Apr Forecast: 0.2% Previous: 0.3% Philadelphia Fed (DM) May Forecast: 31.2 Previous: 32.5 ---------------- Friday, 05/21/04 ---------------- None Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ====================================================== 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 XOM Exxon Mobil Corp 43.27 +0.54 TOT Total SA (ADS) 94.18 +1.13 WFC Wells Fargo & Co 56.99 +0.89 MO Altria Group Inc 49.88 +0.98 CVX Chevrontexaco Corp 92.69 +0.82 BP BP Plc 52.93 +0.53 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- VXGN Vaxgen Inc 16.36 +1.26 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- GD General Dynamics Corp 95.19 +1.57 LTR Loews Corp 59.29 +1.05 ESRX Express Scripts Inc 76.72 +2.69 FMX Fomento Economico Mex 45.30 +3.70 SMG Scotts Co CI A 64.36 +1.28 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- TM Toyota Motor Corp (ADS) 69.70 -1.85 DELL Dell Inc 34.72 -1.08 UN Unilever N.V. 62.30 -1.38 CAJ Canon Inc (ADR) 48.13 -1.08 CAH Cardinal Health Inc 73.44 -1.29 RTP Rio Tinto Plc (ADR) 86.42 -3.43 NAB National Australia Bank 98.62 -1.19 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- None ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to remove@PremierInvestor.net ================================================================= 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 advertising@PremierInvestor.net. ***************************************************************** Copyright (c) 2001-2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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