PremierInvestor.net Newsletter Wednesday 06-02-2004 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: Bluechips Rally on Oil's Weakness Watch List: Bifurcation 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) =============================================================== 06-02-2004 High Low Volume Advance/Decline DJIA 10262.97 + 60.32 10288.81 10197.06 1.52 bln 1695/1120 NASDAQ 1988.98 - 1.79 1998.32 1978.71 1.50 bln 1560/1450 S&P 100 547.58 + 2.47 549.22 544.40 Totals 3255/2570 S&P 500 1124.99 + 3.79 1128.10 1118.64 RUS 2000 573.56 + 1.07 574.81 570.76 DJ TRANS 3001.85 + 38.35 3005.00 2962.92 VIX 16.08 - 0.22 16.70 15.95 VXO 16.24 - 0.43 16.87 15.00 VXN 22.61 + 0.04 23.17 22.19 Total Volume 3,395M Total UpVol 1,730M Total DnVol 1,551M 52wk Highs 218 52wk Lows 63 TRIN 1.15 PUT/CALL 0.91 =============================================================== =========== Market Wrap =========== Bluechips Rally on Oil's Weakness by James Brown Positive comments from Saudi Arabia's Oil Minister a day before OPEC's official meeting in Beirut sent crude to a 5.6% decline, its biggest drop in six months. This gave the Dow Industrials a lift but the tech-heavy NASDAQ slipped into the red for the first time in eight sessions. Memorial day is the unofficial start of summer and the markets wasted no time slipping into their summer doldrums. Volume continues to be low with many traders either still on vacation or sitting on the sidelines ahead of Friday's non-farm payrolls report. Market internals were generally flat but bulls won the day. The NYSE reported 17 advancers for every 11 decliners. On the NASDAQ it was almost a dead heat at 15 to 14, advancers over decliners. Up volume was only marginally above down volume on both exchanges. The first half of the trading day was mostly sideways chop but an afternoon rally pushed the Industrials through resistance at 10,220 outlined in yesterday's wrap. The same can be said for the S&P 500 index, which drifted lower into lunchtime but then rallied past resistance at 1122. The action in the NASDAQ composite followed a similar pattern and the COMPX tested resistance at 2000 with an intraday high of 1998 before fading in the last hour. At the end of the day the Dow added 60 points to 10,262. The NASDAQ lost less than two points to close at 1988 and the S&P 500 inched up less than four points to 1124.99. Overseas the Japanese NIKKEI slipped 54 points to 11,242. The Chinese Hang Seng climbed 96 points to 12,201. Across the Atlantic the German DAX rose 24 points to 3,888. The French CAC followed with a 21-point gain to 3646 and the London FTSE close nearly unchanged at 4,442. Concerns over crude oil prices and supplies continued to hog the spotlight. The recent attack in Saudi over the weekend sent crude prices to their all-time high on Tuesday to more than $42 a barrel. Industry experts say the markets are pricing in a fear premium of $8 to $12 a barrel due to concerns that terrorist might disrupt supply lines. Fortunately, Ali al-Naimi, Saudi's Oil Minister, told the press that Saudi Arabia (and OPEC) will continue to target a $22-$28 price per barrel for oil. There had been some speculation that OPEC might be raising their target price, which has been fuel to the fire under oil's rally. World markets are already concerned that the current record highs for oil is beginning to choke off the best economic recovery the globe has seen in twenty years. Today's drop back under the psychological $40 a barrel level helped ease nervous traders. Crude's decline may have been sharper than normal due to a small but growing expectation that several OPEC ministers will push to temporarily suspend the current quota system altogether as a signal to the markets that they are taking serious action. Of course the move may be largely ceremonial as most of the cartel's members are already cheating above their current quotas and pumping oil at or near their full capacity. The drop in oil prices gave the airlines and transportation stocks a boost today. The XAL airline index rallied 4.27% with a strong rebound from its 52 level sending it back toward its May highs. The Dow Transports also turned in a big move adding 38 points to breakout and close over the 3000 level for the first time in more than a month. Traditional Dow theory suggests we can't have a sustained market rally without participation by the transports and this has been underlying support for the Industrials. Impacting the NASDAQ has been the SOX semiconductor index. Investors are cautious over the upcoming Intel mid-quarter update on Thursday night and shares of Intel fell 1.12% to $28.01 today. Currently the unofficial word on the street is expecting Intel to guide to the lower end of their previously forecasted range. This is undermining strength in the SOX, which fell 2.25%. The SOX tried to rebound from its lows this afternoon but it failed under the 480 level and odds are it will test previous resistance at 470 soon. It is a commonly held belief that the semiconductor sector leads the NASDAQ. Should Intel disappoint it will be a major drag on tech stocks just as the NASDAQ tries to breakout over resistance at the 2000 level. Speaking of resistance the trendline of lower highs for the NASDAQ is just over the 2000 mark as is its simple 100-dma and both will make it that much tougher for the NASDAQ to breakout. Meanwhile the Dow Industrials has broken out above the 10,220 level and its 40 & 50-dma's. This is very impressive but its trendline of lower highs (and top of its descending channel) is near the 10,400 level and near its simple 100-dma. Chart of the Dow Industrials: Chart of the NASDAQ Composite: Chart of the S&P 500 Index: Wednesday's only "economic" reports were the auto and truck sales numbers. According to reports U.S. vehicle sales rose 3.4% in May despite rising prices at the pump. General Motors (GM) reported its best month ever with sales up 2.8% over last May. DaimlerChrysler turned in a 1.3% jump in sales while Ford said sales slipped 2.8%. Ford (F) continued to see strong sales of its F-series trucks but overall sales slipped due to very steep comparisons to last year's big numbers. Many of the stock-specific headlines today were made by ALTH, BA, HD, and NT. Allos Therapeutics (ALTH) was a huge winner with a 44% jump in its share price to $2.82 after the FDA issued a surprise approval for its RSR13 treatment. The "approvable" letter was a surprise because the FDA advisory panel had suggested the drug not be approved due to concerns over the patient make up of ALTH's trials. RSR13 is being given conditional approval for patients with cancer that originates in the chest and spreads to the brain but the company will need to complete another round of Phase III trials. Dow-component Boeing Inc (BA) was a winner today, hitting new two-year highs, after announcing that Air New Zealand had ordered 10 new plans worth $851 million. BA also got a boost from a Merrill Lynch analyst who suggested that BA could benefit from higher oil prices. Surging fuel costs could force the airline industry to upgrade their aging fleet to BA's new more fuel- efficient models sooner rather than later. Boeing added 1.87% to close at $46.47. Dow-component Home Depot (HD) was an early drag on the Industrials after a Bank of America analyst downgraded the stock from a "buy" to a "neutral". The concern centered on slowing traffic patterns and a potential slow down in the housing market and refinancings due to higher rates. The historically low interest rates and refi boom have lead to a huge increase in home improvements but now with higher rates looming ahead of us the do-it-yourself crowd may not be quite so ready to tap into their equity. This morning the Mortgage Bankers Association reported that applications for loans slipped 1.2% last week with refi's falling 6.6%. Meanwhile Canadian telecom giant Nortel Networks (NT) fell more than 6% to $3.83. The company said it was still not ready to issue new financials for the last three years. The stock has fallen sharply from its February highs near $8.50 due to its ongoing accounting scandal. Looking ahead to tomorrow we'll hear a small number of economic reports. Before the opening bell will be the initial weekly jobless claims. After the open we'll get the factory orders for April and the ISM services index for May. Yet the real focus will be on Intel's mid-quarter update after the closing bell and Friday's non-farm payrolls report. If the jobs number comes in too strong many believe the Fed will feel forced to raise rates at its June 29-30th meeting. ================================================================== 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 --------------------------------- Bifurcation Southwest Airlines - LUV - close: 15.73 change: +0.37 WHAT TO WATCH: Despite the persistent rise in fuel costs, Airline stocks have been acting quite well as we head into the heavy travel season. LUV now appears to be finding solid support near broken resistance at $15.25 and today's strong rise suggests a breakout is coming. Aggressive entries can be taken on another dip near the 10-dma, while the more conservative approach will be to wait for a break above dual resistance at $16 and the 200-dma. There will be resistance found near $16.50 and then $17.50, but the longer term target is $18 at the PnF bearish resistance line. --- Arbitron Inc. - ARB - close: 39.45 change: -0.05 WHAT TO WATCH: After finally stabilizing just above $36, shares of ARB have risen through the 50-dma and are currently challenging the multi-month descending trendline near $39.50. Just above that level is the 200-dma and a break over that average looks like a good trigger point for bullish entries. Use an initial target at $42 resistance, with the possibility of a rise into the $44-45 area to challenge the January highs. --- Amer. Eagle Outfitters, Inc. - AEOS - close: 29.01 change: -0.10 WHAT TO WATCH: After dropping back from its April highs, AEOS is finding new strength, along with the rest of the Retail sector. Near-term the stock appears to be struggling with the $29-30 resistance level, but a breakout over $30 should pave the way for a push up to $35 resistance. Aggressive traders can enter on a dip back near $28, with the more conservative approach being a breakout entry over $30. --- Western Wireless Corp. - WWCA - close: 28.31 change: -0.21 WHAT TO WATCH: On the daily chart, shares of WWCA may seem a bit extended here, as the stock has already broken out over the $27 resistance level. But looking at the longer-term view, we can see the significance of the $30 resistance level and a breakout over that point should lead to a run first to $33.50 and then the $35-36 area. Aggressive traders can buy a successful dip and rebound from $27, while the more conservative approach will be to wait for a move above $30. --- =================== On the RADAR Screen =================== GPS $24.47 - There's no question that CR has been looking very strong over the past week, with the stock rising through $23.50 resistance. While it may look a bit extended in the near-term, the weekly chart shows the stock still riding right in the middle of its rising channel. A brief pullback to test support near $23.50 would be the ideal entry point. Target the top of the rising channel near $26. ASKJ $42.86 - The rally in Internet stocks yesterday was not lost on ASKJ, with the stock pressing through the $42 level and strengthening its fresh PnF Buy signal. With the stock between support ($40) and resistance ($44) we aren't wild about new entries at this juncture. But either a pullback to test support or a breakout through resistance can be used for new bullish entry points. Note that the upside target from the PnF chart is $58, but we'd suggest targeting a move to the $50 level. LFUS $40.83 - Continuing with its solid bullish trend of the past year, LFUS broke above the $40 level on strong volume yesterday and we're betting on upside continuation towards the $45 level. But the best entry point will come on a dip back to test broken resistance near $39.50-40.00 as new support. ================== 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 TOT Total Sa (ADS) 95.12 +1.04 MRK Merck & Co 48.36 +1.06 HBC HSBC Holdings Plc 74.95 +0.92 PTR Petrochina Co Ltd (ADS) 48.24 +0.74 CVX Chevrontexaco Corp 91.30 +0.90 COP Conocophillips 75.21 +1.88 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- ZRAN Zoran Corp 18.58 +1.01 LRW Labor Ready Inc 13.85 +1.68 SERO Serologicals Corp 19.39 +2.26 SNX Synnex Corp 18.50 +1.46 CHIC Charlotte Russe Hldg Inc 19.61 +1.12 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- AMZN Amazon.Com Inc 50.23 +1.73 SU Suncor Energy 24.66 +1.01 CMX Caremark Rx Inc 32.90 +1.70 DGX Quest Diagnostics Inc 87.70 +1.55 CVH Coventry Health Care Inc 48.47 +2.39 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- CME Chicago Mrcntile Exchnge 122.01 -7.19 STC Stewart Info Services Cp 32.70 -1.45 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- LEH Lehman Bros Hldg Inc 74.43 -1.22 AUO AU Optronics Corp 20.42 -0.94 AVCT Avocent Corporation 33.32 -0.95 UFPI Universal Forest Prodcts 28.90 -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 06-02-2004 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: IGT, NOVL Net Bulls (Tech Stocks) New Bearish Plays: ISIL Active Trader (Non-tech Stocks) New Bullish plays: JBLU Stock Splits Announcements: None ================================================================== Stop Loss Adjustments ================================================================== IGT - non-tech long play Today's 3% gain and breakout over $40.00 is good news but IGT still needs to breakout above its 40-dma. We are going to RAISE our stop loss from $37.85 to $38.45. --- NOVL - high risk short play NOVL continues to sink so we're going to lower our stop loss from $9.91 to $9.51. ================================================================== Net Bulls (NB) Tech Stock section ================================================================== --------- New Plays --------- New Bearish Plays ----------------- Intersil Corp. - ISIL - close: 20.65 change: -0.54 stop: 22.00 Company Description: Intersil Corporation is a global designer and manufacturer of high-performance analog semiconductors and a supplier of power management solutions for all computing platforms. The company's portfolio primarily addresses four markets: power management, optical storage (CD and DVD recordable), flat-panel displays and wireless networking. Products are organized into three product groups: power management, Elantec and standard analog, wireless networking and automotive. Why we like it: Over the past several months, shares of ISIL have been tracing out a pattern of lower highs and lower lows, working down the chart in a broad descending channel. The stock finally found some support just over 2 weeks ago near the $18 level as price finally tapped the lower channel line. ISIL rebounded smartly along with the rest of the Chip sector, but with investors growing wary ahead of INTC's mid-quarter update, the Semiconductor index (SOX.X) has not been behaving well this week, losing 2.25% today to close right on the key $475 support level. Should this support fail, we can expect the index to fall back towards the $440 level that provided support a couple weeks ago. ISIL looks like an ideal way to play that expected decline, as the stock appears to be weakening in its descending channel. The most recent rally attempt failed right at the top of the channel and once again we can see the stock rolling over from its descending upper channel line. At the same time, daily oscillators are rolling bearish, adding to the picture that suggests a return to support in the near future. Turning to the PnF chart, we can see that ISIL is still in a bearish configuration, with the recent rebound to $21 having just relieved the oversold condition. The PnF downside objective of $17 is still intact. While an argument can certainly be made for a drop to that strong level of support, we're going to be a bit more conservative and target a move to $18 for a retest of the lows from last month. Look for another failure near the descending channel line ($21.30) and the 50-dma ($21.16) to set up the optimum entry point. Traders looking to enter on renewed weakness will wait for a break back under the $20 level before playing. Note that the mid-quarter update from INTC could have a material impact on the play and conservative traders may want to wait until after that event (after the close on Thursday) before taking a position. We'll use a tight stop on this play at $22, which is comfortably above the intraday highs towards the end of last week. Annotated Chart of ISIL: Picked on June 2nd at $20.65 Change since picked +0.00 Earnings Date 4/21/04 (unconfirmed) Average Daily Volume = 2.36 mln ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- JetBlue Airways - JBLU - close: 29.42 change: +1.14 stop: 26.50 Company Description: JetBlue Airways Corporation is a low-fare, low-cost passenger airline that serves point-to-point routes between 22 destinations in 11 states and Puerto Rico. The company focuses on serving underserved markets and/or large metropolitan areas that have high average fares. It has a geographically diversified flight schedule that includes both short-haul and long-haul routes. JetBlue commenced service in February 2000 and established its primary base of operations at New York's John F. Kennedy International Airport. On August 28, 2001, it began service at its West Coast base of operations, Los Angeles' Long Beach Municipal Airport. In early 2004, JetBlue launched service from Logan International Airport in Boston to five cities with a total of 11 daily departures. As of February 11, 2004, it operated 222 weekday flights, including 108 weekday flights between the Northeast and Florida, 66 weekday flights between the East Coast and western United States and 48 weekday short-haul flights. Why we like it: After being pummeled lower from its October highs near $46, JBLU has been busy building a new base over the past several months and it looks like a breakout could be just around the corner. The stock has been building a pattern of higher lows over the past couple months, with horizontal resistance at $30 being tested on a more frequent basis. Turning to look at the PnF chart, we can clearly see that the supply/demand dynamic has shifted squarely in favor of the bulls. The break over $26 in early April put the PnF chart on a new Buy signal and the current vertical count is $43, giving the stock lots of room to run to the upside. Just moving through $30 isn't going to be enough to tempt us into breakout entries though, as the 200-dma ($30.59) will be an additional obstacle. With the PnF chart in our favor and the healthy appearance of the daily chart, we're going to pass on using a trigger for this play, leaving the door open to buying any near-term intraday dips. Pullback entries look favorable on a rebound from above the $27.50 level, as the 20-dma ($27.65) should provide solid support. Traders that would prefer to enter on continued strength should be careful, waiting for a breakout over the 200- dma before playing. We're looking for an initial move to the $34 resistance level, with an outside chance of a continued push into the $36-37 area. Note the rising trendline on the chart below, which is just under the 50-dma ($26.69). That gives us a high degree of confidence in placing our initial stop at $26.50. Annotated Chart of JBLU: Picked on June 2nd at $29.42 Change since picked +0.00 Earnings Date 4/22/04 (confirmed) Average Daily Volume = 1.87 mln ================================================================== Stock Splits ================================================================== Announcements ------------- 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 (c) 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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