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Daily Newsletter, Wednesday, 05/19/2004

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PremierInvestor.net Newsletter                Wednesday 05-19-2004
                                                    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:  Despite Being Primed, the Pump Runs Dry
Watch List:   Spectacular Failure

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)
===============================================================
     05-19-2004            High     Low     Volume Advance/Decline
DJIA     9937.71 - 30.80 10093.21  9933.11 1.88 bln   1472/1365
NASDAQ   1898.17 +  0.35  1936.04  1898.16 1.79 bln   1613/1449
S&P 100   532.28 -  1.54   540.70   532.28   Totals   3085/2814
S&P 500  1088.68 -  2.81  1105.93  1088.49
RUS 2000  540.86 -  1.70   552.75   540.01
DJ TRANS 2836.71 -  5.65  2885.16  2830.92
VIX        18.93 -  0.40    18.93    17.58
VXO        19.37 -  0.45    19.48    17.60
VXN        26.09 -  1.66    27.19    24.75
Total Volume 4,169M
Total UpVol  2,161M
Total DnVol  1,930M
52wk Highs      74
52wk Lows      184
TRIN          1.00
PUT/CALL      0.80
===============================================================

===========
Market Wrap
===========

Despite Being Primed, the Pump Runs Dry
Linda Piazza

With the NYMEX crude contract easing back toward $40.00 as U.S.
markets opened, the pump was primed for market gains.  Asian
markets had realized those gains, also helped by tech strength
and reassurances out of China.

Despite a cautionary statement from a Merrill Lynch analyst that
Hewlett Packard's (HPQ) revenue gains came to the detriment of
pricing, HPQ's earnings resulted in tech gains in overseas
markets, helped along by news out of the semi-related stocks.
Samsung Electronics posted a 5.6 percent gain after forecasting a
computer memory-chip shortage this year.  STMicrolectronics (STM)
predicted that 2004's industry sales would expand by 30 percent.
European chip-equipment companies benefited from the higher-than-
expected sales from Applied Materials (AMAT) although Wednesday
morning saw UBS Warburg downgrading AMAT and the semi-production
industry to a neutral rating.

In addition, China reassured markets made jittery at the thought
of a rate hike and a possible hard landing.  Vice Premier Huang
Ju said that preliminary results of some measures were already
being felt.  Another report showed that foreign investments in
China had slowed, also easing fears that China would be forced to
raise rates to cool its economy.  Around the globe, metals
rebounded.  The Nikkei and DAX climbed back above their 200-
dma's.

Our futures climbed, too, and the upside promised by the pre-
market futures levels was soon delivered.  The Russell 2000
gapped up to 545 on the open, headed up to a 10:15 high of
552.75.  The SPX soared in the first five minutes of trade,
reaching 1,100 by the 9:45 five-minute candle.  The Nasdaq opened
at 1,917.58, gapping above 1,900 on its way to an early morning
high of 1,936.04. Within the first five minutes of trade, the DOW
had climbed above 10,000 on its way to an early morning high of
10,093.

The pump might have been primed, but it was about to run dry.
Midmorning, the American Petroleum Institute (API) released
figures for crude, gas, and distillate stocks, noting that
inventories increased for that period, with petroleum deliveries
rising 4.8 percent over the same month last year.  The Energy
Department disputed the figures, saying that crude stocks fell by
1.1 million barrels.

John Felmy, chief economist for the API, discussed the rise in
crude oil prices with a reporter from Marketwatch.com, mentioning
the record prices in crude oil and gasoline and near-record
levels for diesel fuel.  His comments urge caution against
pinning too many hopes on the informal OPEC meeting to begin this
weekend, as he suggested that there isn't a lot of excess
production capacity.   Only Saudi Arabia has the ability to
increase production, he noted, and that increase would not be a
large one.  OPEC raised its demand forecast, and Felmy noted the
strong growth in China and U.S. was keeping demand high.  Felmy
also remarked that history shows that U.S. consumers don't change
behavior until they perceive an increase to be permanent, at
which time they change driving habits, choose different cars, and
make lifestyle changes.  That hasn't happened yet, according to
Felmy, but with many speaking of $40.00 as being a floor for
crude oil prices rather than the ceiling that it once was,
consumers may begin that critical shift in thinking that Felmy
mentions.

The process may have begun, with Continental Airlines announcing
a hike in fares and possible wage and job cuts to offset the
increasing cost of fuels.  A late-day headline announced that
American and United matched Continental's planned fare hikes.

Many indices had already seen their highs of the day.  As they
were hitting those highs, crude oil was hitting its low of the
day, punching below $40.00 to $39.90 before rebounding.

Annotated 5-minute Chart of Light, Sweet Crude Oil:



The effect of that test of $40.00 and the subsequent bounce was
obvious on the five-minute chart of the Dow Jones Transportation
Index.

Annotated 5-Minute Chart of the TRAN:



By the end of the day, the SPX had lost 0.26 percent; the Russell
2000, 0.31 percent; the Dow, 0.31 percent; the TRAN, 0.20
percent, and the NDX, 0.08 percent.  The Nasdaq eked out a 0.02
percent gain, but closed beneath 1900.  Breadth patterns showed
advancers leading the decliners by an 18:15 ratio on the NYSE and
a 17:15 ratio on the Nasdaq, with total volume at 1.5 billion on
the NYSE and 1.8 billion on the Nasdaq.  Volume had reportedly
been low during the morning's climb, sounding a warning that the
climb might not be supported.

Weak sectors included the HMO, the Morgan Stanley Healthcare
Index; the XAL, the Airline Index; the DJUSHB, the Dow Jones US
Home Construction Index, and the BTK, the Biotechnology Index.
Not all sectors lost ground, however.  The SOX gained 0.97
percent; the INX, the CBOE Internet Index, 1.19 percent; and the
NWX, the AMEX Networking Index, 1.78 percent.  Other gainers
included telecoms, gold, iron and steel, and the XBD, the
Securities Broker Dealer Index.  HPQ, credited along with AMAT
with sending techs higher across the globe in overnight trading,
closed higher by 3.63 percent, but AMAT tumbled 1.11 percent.

The day's trading pattern left troubling long upper shadows on
many candles.  If those candles had been formed at the top of a
rise, they would have been dubbed shooting stars and would have
been possible reversal signals, but their formation in the midst
of a consolidation zone eliminates some of the bearish
implications.  It was just last Wednesday that I discussed
hammers formed in the midst of the same consolidation patterns,
and the way that their bullishness was erased by their positions
within those patterns.

Let's look at how much damage the day's trading produced,
beginning with the S&P 500.

Annotated Daily Chart of the SPX:



The SPX remains above its 200-dma, still mired in the congestion
zone that has captured it throughout much of April.  While
Wednesday's candle does not have the same bearish implications
that it would if produced at the top of the climb, it may
nevertheless be suggesting another test of the 200-dma.  Although
the MACD histogram grows less negative, also watch the value of
the MACD lines, as they're on the verge of moving lower and
erasing the bullish price/MACD divergence that has been present.

Annotated Daily Chart of the Nasdaq:



Despite gains made in the SOX and several other tech sectors, the
Nasdaq's daily candle was not a bullish one, and may be
predicting another test of support.

Annotated Daily Chart of the Dow:



The Dow's chart shows some of the same characteristics seen on
others.  The day's candle was anything but bullish, but was
produced from within a consolidation zone and so might only be a
part of the normal back-and-forth of such a zone.  As was true on
other charts, the bullish price/MACD divergence, so cheering to
bullish traders, could be erased with a strong downdraft or even
several more days of lower prices.

Annotated Chart of the Russell 2000:



The Russell 2000's pattern looks somewhat better formed than that
seen on other charts, and its formation is that of a possible "b"
distribution formation.  Unlike what is seen on several other
charts, no bullish price/MACD divergence exists on this chart.
Even a likely "b" distribution pattern must be watched for a
downside or upside break, however.

All these charts show indices mired in congestion zones that may
or may not break this week.  With OPEC holding an informal
meeting beginning this weekend and with option expiration week
rapidly drawing to a close, the effort to hold indices steady may
continue through the end of the week.  Determining when
breakdowns or upside breaks will have occurred has been made more
difficult by the broadening or spiky nature of some of the
consolidation patterns.  Watch for MACD levels to dip on some
indices, erasing that bullish price/MACD divergence, as one guide
to market behavior.  For guidance, market watchers might also pay
special attention to the price of crude, watching for new highs
or a downturn below $40.00 again, a move that might spike a
relief rally.  In addition, keep an eye on the yields for the
benchmark Ten-Year Treasury Note.  After piercing the neckline of
a reverse H&S formation, yields fell below that line again, but
are now headed higher again.  Another pullback might ease
pressure on equities, while a push above that neckline and then
above recent highs might apply more pressure.

Annotated Daily Chart of the TNX:



From this vantage point ahead of tomorrow's open, it appears that
monumental efforts have been made to hold indices above key
support and may continue to be made.  If fund flows are negative
this week, as Jim postulated they might be based on his
observations of selling patterns today, then those efforts might
be swamped, but that remains to be seen.

In after-hours news, Intuit and Brocade both traded lower after
releasing earnings reports, with Intuit beating expectations but
saying that it would lose 6-10 cents per share in Q4, a greater-
than-expected predicted loss.  Brocade met expectations according
to early reports but announced that it would reduce its work
force.

Economic reports due Thursday include the usual weekly initial
claims, with forecasts ranging from 326-330,000, with the
previous number at 331,000.  That number will be released at 8:30
EST.  The Conference Board releases the April's Leading
Indicators at 10:00 EST according to one report and earlier
according to another, with estimates for the expected gain
ranging from 0.1 percent to 0.2 percent.  The prior number stood
at 0.3 percent.  Since most of the data comprising this report's
data base has been previously announced, this number doesn't
usually prove to be market moving.  Perhaps of more interest will
be May's Philadelphia Fed report to be released at noon, with the
forecasts I've seen ranging from 30.5-33 against April's 32.5.

It's difficult to know what catalyst might break the indices out
of their current consolidation zones, but due to the spiky,
broadening nature of those zones and to this being opex week,
enter trades with care, making sure that the risks taken or
contracts entered are account-appropriate ones.


==================================================================
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
---------------------------------

Spectacular Failure

Impax Laboratories Inc. - IPXL - close: 20.38 change: +0.15

WHAT TO WATCH: It wasn't a pretty day in the Biotech sector on
Wednesday, and shares of IPXL put in a very bearish looking daily
candle, with the intraday rally completely reversed by the close,
dropping price right back to critical support.  A break below
yesterday's low can be used for aggressive entries, with stops
placed just above the top of yesterday's gap.  Once IPXL
decisively takes out support at $20, look for a downside move to
the 200-dma, currently just over $17.




---

Taro Pharmaceutical Ind. - TARO - close: 43.10 change: -1.10

WHAT TO WATCH: After a precipitous drop last month, TARO has been
trying to solidify support near $43.  But that attempt appears to
be failing and the stock is in danger of breaking down again.  We
want to use a trigger at $41 (just under last month's low) and
then target a move down to the $37 level, which is also the site
of the 200 week moving average.




---
Western Wireless Corp. - WWCA- - close: 26.03 change: +1.22

WHAT TO WATCH: Price action in the Technology arena has certainly
been bearish of late, but that isn't stopping the bulls from
bidding up the price of WWCA.  Investors cheered the company's
recent earnings report and the stock gapped higher in response.
After a bit of healthy consolidation, WWCA made another bullish
move today, closing at its best level in more than 2 months.  A
test of the recent highs at $27.40 appears to be on the menu as
early as next week.  Use a trigger of $27.50 and target a rally
up to resistance near $30.




---

Amgen Inc. - AMGN - close: 37.97 change: +1.69

WHAT TO WATCH: Following several failed attempts to challenge the
50-dma resistance, AMGN finally succumbed to the weakness in the
Biotechnology sector today, breaking below the $56 support level
for the first time in over a year.  Volume is on the rise and it
looks like a serious breakdown is in progress.  Aggressive
traders can enter on continued weakness, while the more
conservative approach would be to short a failed rebound at the
$56 level, which should now be solid resistance.  While there's
likely to be some support found near $53, a more likely stopping
point to this decline appears to be the $49-50 support zone.





===================
On the RADAR Screen
===================

AA $29.56 - After a month-long downtrend without a sign of
respite, AA investors jumped at the opportunity when the stock
surged higher this morning.  Based on the afternoon selloff
though, it looks like that could have been an effective bull
trap.  Should the stock break below the $28.50 level, it will be
a clear sign that there's more weakness ahead.  Trigger on a
trade under that support and target a drop to next support near
$26.

SINA $30.00 - With the rebound in Asian markets, SINA is trying
to get a bullish move going.  Over the past couple weeks, the
stock has put in a pretty convincing rounded bottom formation and
today's early rally looked pretty impressive before the afternoon
fade.  Use a trigger over today's high and then look for an
initial move to the 50-dma.

MCHP $30.15 - At first glance, there's not much in MCHP's chart
to get excited about.  But then we took notice of the fact that
each of the dips appear to be getting bought at the short-term
rising trendline, currently near $28 and also on the 50-dma.
That gives us a nice target to shoot for, looking to buy another
dip near that trendline in anticipation of a rally back towards
$32 resistance.


==================
  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

FTE     France Telecom (ADS)       23.16    +0.56
IBM     Internat Business Mach     87.05    +0.99
PTR     Petrochina Co Ltd (ADS)    44.12    +1.49
MWD     Morgan Stanley             52.00    +0.68
UBS     UBS Ag Ord. Shares         70.91    +1.01
BCS     Barclays Plc (ADR)         36.08    +0.58


---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------

TLK     P T Telekom Indonesia      17.20    +1.57

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------

CEO     Cnooc Ltd (ADR)            38.28    +1.52
INFY    Infosys Technologies (ADS) 79.95    +1.55
ITU     Banco Itau S A (ADR)       39.20    +1.04
RIMM    Research In Motion Ltd    104.09    +4.11
PD      Phelps Dodge Corp          64.82    +1.02


-------------------------------------------
Breakout to Downside (Stocks over $20)
-------------------------------------------

ERTS    Electronic Arts Inc        47.98    -1.62
AHC     Aerada Hess Corp           70.22    -1.81
RJR     RJ Reynolds Tobbaco Hldg   57.10    -1.01
TCB     TCF Financial Corp         51.30    -1.44
ROST    Ross Stores Inc            24.50    -1.15


-----------------------------------------
Recently Overbought With Bearish Signals (Stocks over $20)
-------------------------------------------

FMS     Fresenius Med Care Ag      23.35    -0.38


=================================================================
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 05-19-2004
                                                   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:  ENZN

Net Bulls (Tech Stocks)
  Closed Bearish Plays: ISIL


Active Trader (Non-tech Stocks)
  New Bearish Plays:    IP
  Closed Bearish Plays: IGT


=================================================================
Stop Loss Adjustments
=================================================================

ENZN - Non-tech Short -
We have been triggered at $13.95 today.


=================================================================
Net Bulls (NB) Tech Stock section
=================================================================

============
Closed Plays
============

  Closed Bearish Plays
  --------------------

Intersil Corp. - ISIL - close: 20.30 change: +0.68 stop: 20.20

With the strong Asian market performance, it was not a great
surprise to see the strong open to the U.S. markets and by the
time the closing bell faded away, the SOX was testing $470
resistance and our ISIL play had been stopped out.  In truth,
ISIL's move really got started with yesterday's strong rally back
to test the 20-dma and $20 resistance.  At that point, it could
have been either a bearish entry point or a warning to get out.
Unfortunately we guessed wrong, but that's what stops are for.
With buying volume running strong, ISIL looks headed higher from
here, so we're more than happy to stand aside.

Picked on May 12th at       $18.67
Change since picked          +1.63
Earnings Date              4/21/04 (confirmed)
Average Daily Volume =    2.24 mln






=================================================================
Active Trader (AT) Non-Tech Stock section
=================================================================

---------
New Plays
---------


  New Bearish Plays
  -----------------

International Paper - IP - close: 40.25 change: +0.09 stop: 42.50

Company Description:
International Paper Company (IP) is a global forest products,
paper and packaging company that is complemented by an extensive
distribution system, with primary markets and manufacturing
operations in the United States, Canada, Europe, the Pacific Rim
and South America.  At year-end 2003, the Company also owned or
managed approximately 8.3 million acres of forestlands in the
United States, mostly in the South, approximately 1.5 million
acres in Brazil and had, through licenses and forest management
agreements, harvesting rights on government-owned forestlands in
Canada and Russia.  Through Carter Holt Harvey, a company that is
approximately 50.5% owned by IP, the Company operates five mills
producing pulp, paper, packaging and tissue products, 23
converting and packaging plants and 72 wood products
manufacturing and distribution facilities, primarily in New
Zealand and Australia.  In New Zealand, Carter Holt Harvey owns
or leases approximately 795,000 acres of forestlands.

Why we like it:
Enjoying the strength in the overall market through the end of
last year, IP had a nice run.  But that run came to an end with
the top posted in early January.  That top was confirmed with the
lower high in late February and then the point was really driven
home with the sharp selloff from yet another lower high in late
April.  The clincher was the early May breakdown under key
support near $40 and after that breakdown, we just wanted to see
an oversold bounce that would let us in as that rally began to
fail.  The break below the $39 level served up a fresh PnF Sell
signal to go along with the pre-existing Sell signal and bearish
price target of $35.  While we can look at the recent rebound off
the $38 level and see that there's certainly some support there,
the combination of the PnF chart and strong resistance now in the
vicinity of $41 is enough to tempt us into a bearish play,
targeting strong support in the $35-36 area.

Note how the 50-dma ($41.23) is closing in on the 200-dma
($40.88) and when those averages cross it will increase the
downward pressure on the stock.  Entries look favorable here in
the $40-41 area, and aggressive traders might try to get a
slightly better entry on a failed push up near the 50-dma.  But
note that the daily Stochastics have already rolled bearish, so
we don't want to dally too long trying to get the perfect entry.
We should expect to see some support in the $38-39 area on the
way back down, but we really won't be confronted with strong
support until the stock reaches $37, the site of the November
lows.  A drop to that level can be used for conservative exits,
while those willing to go for the gusto can hold on for a trip
down to our $35 target.  Initial stops will be placed at $42.50,
just over the 100-dma.

Annotated Chart of IP:



Picked on May 19th at       $40.25
Change since picked          +0.00
Earnings Date              4/23/04 (confirmed)
Average Daily Volume =    2.87 mln


============
Closed Plays
============

  Closed Bearish Plays
  --------------------

Intl. Game Tech. - IGT - cls: 38.00 chng: -0.40 stop: 38.80

After spending the past two weeks building a bottom formation on
declining volume, IGT finally busted a bullish move this morning,
helped along by the strong opening to the market day.  The stock
soared to above $39, but the bloom faded quickly, with the stock
then heading steadily southward for the remainder of the day,
closing well below the open of the day and well inside the recent
consolidation range.  Unfortunately, the initial surge was enough
to trigger our stop, which had been placed just over near
resistance.  We'll take our lumps and drop the play tonight, even
though the afternoon selloff gives the stock a freshly bearish
hue.

Picked on April 28th at     $38.89
Change since picked          -0.89
Earnings Date              4/22/04 (confirmed)
Average Daily Volume =    3.22 mln





=================================================================
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.


DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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