PremierInvestor.net Newsletter Wednesday 05-26-2004 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: Tech Stays Positive Watch List: Day of Rest 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) =============================================================== 05-26-2004 High Low Volume Advance/Decline DJIA 10109.89 - 7.73 10128.77 10077.81 1.70 bln 1687/1144 NASDAQ 1976.15 + 11.50 1976.16 1957.58 1.57 bln 1794/1245 S&P 100 542.60 + 0.21 543.43 540.10 Totals 3481/2389 S&P 500 1114.94 + 1.89 1116.71 1109.91 RUS 2000 567.77 + 2.38 567.77 562.47 DJ TRANS 2939.92 + 74.56 2940.32 2911.62 VIX 15.97 + 0.01 16.30 15.78 VXO 16.15 + 0.24 17.06 15.95 VXN 21.63 - 0.41 22.53 21.56 Total Volume 3,635M Total UpVol 2,457M Total DnVol 1,115M 52wk Highs 140 52wk Lows 90 TRIN 0.70 PUT/CALL 1.01 =============================================================== =========== Market Wrap =========== Tech Stays Positive by James Brown The Dow Industrials may have ended in the red today but bulls can still claim a victory. After yesterday's big 159-point gain the INDU only lost about 8 points due to weakness in SBC and VZ. The NASDAQ Composite posted its fourth straight gain and the S&P 500 index marked its fifth straight gain despite disappointing economic data and renewed terror concerns. The morning started out on a sour note when the government raised concerns about the growing threat of terrorist actions on American soil. Fortunately, the 10:30 AM low proved to be the low of the day and stocks slowly drifted higher throughout the session. Later in the afternoon Attorney General John Ashcroft held a press conference and pointed out seven specific individuals the government was looking for and asked citizens to help. What could be challenge for stocks this summer are the number of high-profile events that could be targets for terrorist actions. On the list are the soon to be dedicated WWII memorial, the G8 summit in Georgia, the Democratic convention in July and the Republican convention in August, the Olympics in Athens, and the November elections here at home. Speaking of home the U.S. durable goods orders for April fell a worse than expected 2.9% to $191.3 billion. Economists had been looking for a mild decline of 0.9% after February's 3.9% gain and March's upwardly revised 5.7% jump. The drop in durable goods in April was the biggest slip in almost two years. While the number was disappointing Wall Street didn't seem too worried and won't be unless there is a repeat in May. The second biggest economic report out today was the April new home sales. Economists were expecting a dip from the record highs near 1.239 million in March to 1.19 million in April (annualized pace). The Commerce Department surprised the markets with an 11.8% drop to 1.09 million homes. This was the largest one-month drop in a decade and immediately sent the home building stocks lower. The decline was fueled by significant slow downs in the South with a 22% drop in sales and the West with a 9.4% drop in sales. Contributing to the decline was a strong rise in 30-year fixed rate mortgages to 6% and the price of homes hitting new all-time highs. Oil remained in the spotlight as well but confusing supply data produced a volatile session for crude. The Energy Department released their supply numbers that showed no change in crude oil stocks and a drop in gasoline stocks. Yet shortly thereafter the American Petroleum Institute released their supply numbers showing a rise in crude and gasoline inventories. Crude oil futures ended lower on the session down 44 cents to $40.70 per barrel. Investors took it as a cue to do a little profit taking in energy stocks and the OSX oil services index lost 1.72% while the OIX oil index fell 0.74%. Fortunately the volatile session for oil and our own disappointing economic data didn't appear to have much impact on global stock exchanges. The Japanese NIKKEI jumped 189 points to 11,152 in response to our own rally yesterday. European stocks were mostly higher as well with gains for the English FTSE, German DAX and French CAC. Looking at a chart of the Dow Industrials you can see how yesterday's big rally broke out of the recent consolidation phase and above its simple 200-dma. The good news is today's minor decline held above the 200-dma and the 10,100 level. A chart of the NASDAQ looks encouraging too. Yesterday's gain broke out above its 200-dma and today's gain closed above its 50-dma. The tech-rich index is also above resistance at 1950 and 1970, which leaves the next hurdle at the 2000 mark. Chart of the Dow Industrials: Chart of the NASDAQ Composite: Overall market internals were bullish with advancing issues running past decliners almost 17 to 11 on the NYSE and 3 to 2 on the NASDAQ. Up volume was 50% stronger than down volume on the NYSE and nearly three times stronger than down volume on the NASDAQ. Money was flowing into tech, biotechs, some financials and gold while investors were selling oil service stocks and home builders. The Dow probably would have closed in the green today if it hadn't been for a one-two punch from VZ and SBC communication. Verizon Communications (VZ) was the biggest drag on the Dow Industrials with its 2.96% decline and SBC was close on its heels with a 2.28% decline. Both stocks are dropping due to rising competition from the likes of Comcast. Comcast Corp (CMCSA), the nation's largest cable company, announced today that it would offer 40 million households the opportunity to use VoIP or voice- over-Internet protocol to make their phone calls through their high-speed cable modems by 2006. This is a huge threat to traditional phone companies. Another Dow component making headlines was Boeing (BA). Last year BA suffered from a scandal over its controversial leasing deal for 100 Boeing refueling tankers. Today the Pentagon announced that it would postpone any decision on the $23.5 billion deal. Defense Secretary Donald Rumsfeld has ordered two new studies done on the project as the Pentagon considers other options that might be less expensive. A decision might be reached in November but already some analysts feel that BA may lose the deal and be forced to take a $300 million charge. Shares of BA closed up 6 cents to $44.76. Some of Wednesday's biggest movers were in the lucrative heart stent industry. We've seen a lot of news come out this week with Medtronic's disappointing clinical trials data on Tuesday sending shares of Boston Scientific (BSX) and rival Guidant (GDT) higher. There was a reversal of fortunes for GDT today who announced they were encountering some manufacturing challenges with its Champion drug-coated stent and it may require a design change. Such a move would delay its filing for FDA approval and that's good news for rival BSX with its Taxus drug-coated stent. GDT fell 11% to $53.71 while BSX rose 11% to $44.82. Looking ahead to Thursday we have a handful of economic reports to wade through. On the list is the help wanted index, the preliminary chain-deflator data, and the weekly initial jobless claims but the biggest report tomorrow is the preliminary GDP numbers. Economists are expecting the first quarter of 2004 to show the economy growing at 4.5% compared to 4.2% for the fourth quarter of 2003. This report will set the tone for the day and probably the rest of the week. What could be exciting is that any moves tomorrow and Friday could be sharper than normal due to extremely low volume. We've had low volume the last couple of weeks and it's only going to get worse as we head toward the long weekend. Trading will dry up quickly Thursday afternoon and Friday is likely to be a ghost town with traders already gone for the Memorial Day weekend. ================================================================== 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 --------------------------------- Day of Rest Brunswick Corp. - BC - close: 41.40 change: +0.79 WHAT TO WATCH: After a successful test of the 100-dma near $38 last week, shares of BC appear ready to take a run at their highs from last month. Support should now be found near the 50-dma, so a dip near that average can be used for aggressive entries. With resistance looming near $42, more conservative traders will want to see a breakout over that level before initiating new positions. Look for a rally back to test the April highs near $44. --- UTStarcom, Inc. - UTSI - close: 29.00 change: +0.16 WHAT TO WATCH: After spending nearly 4 months mired in a persistently downward trend, shares of UTSI finally broke above the top of the falling channel yesterday on a strong burst of buying volume. That breakout even carried the stock through its 50-dma and we're looking for upside continuation towards first major resistance at $32. The best entries will be found on a pullback to test the top of the broken channel near $28 as new support. But more aggressive traders can play a breakout over today's high, looking for a momentum run towards $32. Watch out for possible resistance near $30.50. --- Maxim Integrated Prod. - MXIM - close: 50.00 change: -0.04 WHAT TO WATCH: Breaking out over the $470 resistance level on yesterday's strong market action, the SOX looks headed back for a retest of the $500 level. MXIM is offering us a great setup to play that rally, as the stock has risen right to key resistance at $50 and is awaiting the push to get the next leg of the rebound going. Use a trigger over yesterday's high (using continued SOX strength for confirmation) and target a rally back to $54 or possibly even the January highs at $56. --- Yahoo! Inc.. - YHOO - close: 30.11 change: -0.17 WHAT TO WATCH: We looked at YHOO earlier in the week as the breakout over the $29 resistance level looked impressive. The strength of that move was underscored by yesterday's rally and today's consolidation looks healthy, holding in the upper half of yesterday's range. Use a trigger over yesterday's $30.50 high and target a rally towards strong resistance in the $34-35 area. --- =================== On the RADAR Screen =================== SYMC $45.01 - With the overall market turning higher this week, SYMC stands out due to its lack of participation, actually breaking below the late April lows in yesterday's session. SYMC has been particularly resilient in recent months during the broad market weakness, so we need to target conservative entries if we're going to play the downside. Look for a rollover near the 50-dma to provide entry and target a downward move towards strong support near $40. Note that there's likely to be some support found near the $44 level, from which the stock rebounded over the past 2 sessions. SMTC $24.69 - Helped along by the rebound in the SOX, yesterday SMTC finally managed a bullish breakout of the neutral wedge formation that has been building since the first of the year. The stock tested the top of that broken wedge near $24 today and then rallied very close to key resistance at $25. Aggressive traders can look to enter on another bounce from the $24 area, while the conservative approach will be to wait for a breakout over the $25 resistance. Target a rally to the $27 area for a retest of the January highs. ================== 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 BAC Bank of America Corp 82.82 +0.38 MO Altria Group Inc 47.36 +0.71 HD Home Depot Inc 35.40 +0.10 PTR Petrochina Co Ltd (ADS) 47.31 +0.63 GSK Glaxosmithkline Plc (ADR) 42.91 +0.16 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- TEN Tenneco Automotive Inc 12.63 +0.56 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- AVE Aventis 78.13 +0.17 BSX Boston Scientific Corp 42.91 +2.55 ZMH Zimmer Holdings 84.64 +0.89 CNA CNA Financial Corp 30.11 +0.74 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- WYE Wyeth 35.63 +0.98 WMGI Wright Medical 31.80 +0.77 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- None ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Wednesday 05-26-2004 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) New Bullish plays: AAI, SBUX Closed Bearish Plays: TARO High Risk/Reward Closed Bullish Plays: MAGS Stock Splits Announcements: WCN ================================================================== Stop Loss Adjustments ================================================================== None ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- AirTran Holdings - AAI - close: 13.87 change: 0.21 stop: 12.75 Company Description: AirTran Holdings, Inc. is a low-fare scheduled airline in the United States. The company operates scheduled airline service in short-haul markets principally in the eastern United States, primarily from its hub in Atlanta, Georgia. As of March 1, 2004, it operated 75 Boeing 717 (B717) aircraft making approximately 436 scheduled flights per day to 45 airports across the United States, serving more than 60 communities in 21 states and the District of Columbia. AirTran also flies to the Bahamas. The company's products include competitive fares, advanced seat assignment, business class, consumer driven automation such as online check-in, Bye-Pass airport self-service kiosks and A-Plus Rewards, the Company's customer loyalty programs. In January 2004, it announced that it will be the launch airline for XM Satellite Radio, which the Company expects to deploy fleet-wide beginning in August 2004. Why we like it: Fresh from the watch list, AAI is looking ready to make a break higher, and we want to get ready for the move before it happens. After building a messy H&S bottom for the past several months, the stock broke above its down-sloping neckline late last week with the move over the $13 level and the bullish market action this week has pushed price right to horizontal resistance just over $14. Taking the measurement off of the H&S pattern, the breakout over $13 should have a minimum of $2.50 upside following the neckline break, which gives us an upside target of $15.50. But looking at the chart, we can see that the more likely target is going to be horizontal resistance at $16. The PnF chart is even more encouraging, with the move over $13.50 generating another Buy signal and suggesting that the $18.50 bullish price objective may be in play over the longer term. Given the significance of the January high at $14.25, we want to wait for a breakout over that level before playing. So we'll set an entry trigger at $14.30 and target look for a move towards the $16 resistance level. Aggressive traders can enter on the initial breakout, while the more conservative approach will be to wait for a subsequent pullback to test broken resistance at $13 as newfound support. Realistically, we shouldn't see a dip that low, as the bottom of Monday's gap and the 10-dma ($13.26) should offer support in the $13.25 area. We'll play this one with a fairly tight stop at $12.75, just under the 20-dma ($12.80). A break back under that level would be a strong indication that the breakout has failed. Annotated Chart of AAI: Picked on May 26th at $14.15 Change since picked +0.00 Earnings Date 4/27/04 (confirmed) Average Daily Volume = 1.43 mln --- Starbucks Corp. - SBUX - close: 39.67 change: +0.09 stop: 37.00 Company Description: Starbucks Corporation purchases and roasts whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of complementary food items, coffee-related accessories and equipment, a selection of premium teas and a line of compact discs, primarily through company-operated retail stores. As of September 28, 2003, Starbucks operated a total of 4,546 retail stores. Starbucks sells coffee and tea products through other channels, and, through certain of its equity investees, it also produces and sells bottled Frappuccino and Starbucks DoubleShot coffee drinks and a line of premium ice creams. These non-retail channels are collectively known as Specialty Operations. Why we like it: Following its strong rally from below the $25 level to almost $40, beginning last June, shares of SBUX have been trying to catch their breath over the past few months. The stock has been consolidating tin the $37-40 area since February, and it looks like a breakout move could be close at hand. While the PnF chart still has a very bullish tone to it, there's no guidance to be found there in terms of an upside target due to the fact that that upside objective of $35.50 has long since been achieved. Despite that view giving the impression of a stock that is rather extended, SBUX hasn't showed much in the way of price weakness and with the stock once again pressing against the top of the consolidation zone, this is where we want to focus our attention in anticipation of a breakout move. Should SBUX break out like we expect, it should result in a solid directional move. Note that the last time the stock consolidated for an extended period, the resulting upside break was good for a rally from $33 up to about $39, or a $6 move. We may not get that much of a rally this time around because of a lack of broad market strength to accompany the bullishness in SBUX, That said, we're going to target a $5 move in the stock, looking for a rise to the $45 level. Use a trigger at $40, with momentum entries coming on the initial breakout and pullback entries being viable on a subsequent pullback to test the $39 level as new-found support. We'll start with a liberal stop at $37, just under the 100-dma ($37.38) and just under the May 12th intraday low of $37.03. Annotated Chart of SBUX: Picked on May 26th at $39.67 Change since picked +0.00 Earnings Date 7/21/04 (unconfirmed) Average Daily Volume = 2.98 mln ============ Closed Plays ============ Closed Bearish Plays -------------------- Taro Pharmaceuticals - TARO - cls: 42.56 chg: +1.30 stop: 43.00 Ouch! We've been stopped out of TARO on a two-day reversal. The play was looking pretty good on Monday when TARO traded below its April lows and triggered us at $40.94. Then Tuesday's widespread rally occurred and TARO bounced strongly back to $41.26. We had lowered our stop to $43.00 on Monday evening so we were not yet concerned. Unfortunately, the rally continued on Wednesday without any explanation. The DRG drug index turned in a tepid gain and there were no new headlines for TARO. We suspect it may have been short covering on the rebound back above $40. Picked on May 24 at $40.94 Gain since picked: + 1.62 Earnings Date 04/29/04 (confirmed) Average Daily Volume: 485 thousand ================================================================== High Risk/Reward (HR) Stock section ================================================================== ============ Closed Plays ============ Closed Bullish Plays -------------------- Magal Security - MAGS - cls: 20.85 chng: +3.88 stop: 16.50 The explosive price action in shares of MAGS over the past few sessions is precisely what we envisioned when we initially added it to the play list. It took a couple weeks of meandering near support, but when the bulls decided to run, they got serious! MAGS broke out over the top of its neutral wedge on Friday, gapped strongly higher on Monday and then tested the top of that gap yesterday before today's explosive 22% gain. We were looking for a move first to the 50-dma and then possibly to the $20 level and we got both today. Aggressive traders can hold on for more gains, but we'd suggest a tight stop just under the 50-dma at this point. We're officially dropping the play tonight, as our aggressive price target has been met. Picked on May 5th at $15.04 Change since picked +5.81 Earnings Date 4/28/04 (confirmed) Average Daily Volume = 2.52 mln ================================================================== Stock Splits ================================================================== Announcements ------------- WCN announces a 3-for-2 stock split This afternoon before the market's closing bell Waste Connections, Inc. (NYSE:WCN) announced that its Board of Directors had approved a 3-for-2 stock split of its common stock. The split will take place as a 50% stock dividend payable on June 24th, 2004 to shareholders on record as of June 10th. About the company: Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly secondary markets in the Western and Southern U.S. The Company serves more than one million commercial, residential and industrial customers from a network of operations in 23 states. Waste Connections, Inc. was founded in September 1997 and is headquartered in Folsom, California. (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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