PremierInvestor.net Newsletter Monday 06-21-2004 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: Broken Record Watch List: Energy, Drugs And Metals =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 06-21-2004 High Low Volume Advance/Decline DJIA 10371.47 - 44.94 10440.05 10363.36 1.40 bln 1340/1487 NASDAQ 1974.38 - 12.35 1995.06 1972.43 1.38 bln 1338/1687 S&P 100 552.36 - 2.45 556.29 551.92 Totals 5678/3174 S&P 500 1130.30 - 4.72 1138.05 1129.64 RUS 2000 568.74 - 1.80 571.85 568.15 DJ TRANS 3065.24 - 3.43 3078.46 3054.43 VIX 15.26 + 0.27 15.62 14.96 VXO 14.63 - 0.12 15.24 14.42 VXN 19.73 - 0.29 21.01 19.70 Total Volume 3,083M Total UpVol 1,125M Total DnVol 1,807M 52wk Highs 209 52wk Lows 109 TRIN 1.45 PUT/CALL 0.83 =============================================================== =========== Market Wrap =========== Broken Record by James Brown All the financial media, including this column, is starting to sound like a broken record. The markets are just not moving as investors wait for the June 30th deadline for the Iraq handover of "power" and the interest rate decision by the Federal Reserve. The challenge for traders is the lack of volume and volatility. The stock market is stuck going sideways and we could easily remain here for the next seven sessions. Monday's market actually started bullish as stocks pushed higher on several merger and acquisition announcements and up beat comments from Dow-component Intel. Unfortunately, the positive glow began to fade on news that three British boats and their eight soldiers were all captured after straying into Iranian waters on a narrow river between Iran and Iraq. The majority of the session was spent trading sideways. Not counting the first and last hour of the day the Dow Industrials were stuck in a 30- point range. The NASDAQ traded in a 9-point range and the S&P 500 traded in a 3-point range. Then suddenly in the last 90 minutes of the day all three indices broke down through their intraday ranges and began to sink into the closing bell. Overseas indices didn't fair much better and most closed near the unchanged mark. The Japanese NIKKEI was the exception with a 218-point gain but this failed to erase all of Friday's 225-point loss. The Hang Seng index closed down almost 10 points to 11,845 after its recent breakdown below the 12,000 mark. The German DAX lost just over 10 points to 3989. England's FTSE dipped 3.6 points to 4502 and the French CAC lost less than a point to 3740. Like their U.S. counterparts the world indices all appear to be waiting for the June 30th deadline and the onset of the Q2 earnings season. Here at home the Dow Jones Industrials lost 45 points to close at 10,371. The venerable index could be headed to the bottom of its two-week trading range at 10,300. The NASDAQ looks weaker with its 12-point loss to close at 1974. The NASDAQ composite is only a couple of points above its simple 200-dma and appears to be headed toward its June lows near support at 1960. Technical traders will notice the fresh MACD sell signal. Market internals were mixed most of the day but turned bearish by the close. Declining stocks outnumbered advancers nearly 15 to 13 on the NYSE and about 17 to 13 on the NASDAQ. Down volume was almost 50% stronger than up volume on the NYSE while down volume was almost double up volume on the NASDAQ. Overall volume was extremely low and ranked as one of the lowest volume days of the year with less than 2.75 billion shares trading on both exchanges. The downturn in the last two hours of trading made for a market wide decline with only four sectors: airlines, retail, natural gas and utilities; closing in the green. Chart of the Dow Industrials: Chart of the NASDAQ Composite: It shouldn't come as a surprise that the markets are churning sideways ahead of the June 30th handover in Iraq. The White House has warned us for months that violence and terrorist activities would rise sharply ahead of the deadline. Last week we heard about the terrorists in Saudi Arabia kidnapping and beheading American Paul Johnson. According to reports this weekend Saudi security forces killed terrorist leader Abdul Aziz al-Muqrin and three more terrorists responsible for Paul's death. Unfortunately, there is a new kidnapping case. Insurgents in Iraq have captured a S. Korean man and have threatened to kill him if S. Korean doesn't change its mind about sending 3,000 soldiers to help with Baghdad/Iraq security. The big story in Iraq today was the capture of three British boats and their crew by Iran. This news put a wet blanket over the markets and probably raised a number of eyebrows after last week's headlines that Iran was massing troops on the Iraq-Iran border. Iran continues to butt heads with the U.N. over its on going nuclear energy/weapons development program so any negative headline involving Iran is sure to grab the markets attention. It might be surprising that the rising "geo-political tensions" did not send oil prices higher. Fortunately, news that one of Iraq's recently damaged oil pipelines was working again and pumping 42,000 barrels an hour helped alleviate some of crude's recent rise. Crude futures slipped $1.23 to $37.77 a barrel and appear to be building what looks like a bear flag pattern. Now if Norway, the globe's third largest oil exporter, could solve its oil-worker strike, currently on its fourth day, we might see oil prices truly begin to ease lower. Speaking of lower the SOX semiconductor index edged closer to breaking support at the 450 level in spite of bullish comments from Intel Corp (INTC). Intel, the world's largest producer of semiconductors, expects that its Q2 numbers will be strong and near the record setting pace of their Q1 report. The report comes from Intel CEO Craig Barrett who was interviewed by a Spanish newspaper. You might remember a few weeks ago that Intel narrowed its revenue forecast to the upper half of its previous guidance. This surprised the market, which was expecting Intel to guide lower. Barrett was quoted as saying the recession in the semiconductor industry is over. Wall Street firm J.P.Morgan (JPM) decided to raise its earnings estimates for Intel based on the news. Investors will need to keep an eye on the SOX. If it breaks support at the 450 level the NASDAQ will have a hard time making any sort of recovery with the chips sinking lower. Market analysts traditionally look at rising M&A activity as bullish. If companies are willing to make acquisitions it usually means that management has a positive outlook on the future and they're willing to spend money on improving their competitiveness. If that's the case then today's spat of acquisitions looks pretty bullish for the market. Monday's biggest deal was between banking giant Wachovia (WB) and SouthTrust (SOTR). WB announced it was buying SOTR in an all- stock deal worth $14.3 billion. This valued SOTR at a 20% premium over Friday's close. Unfortunately, Wall Street thought the deal was a little expensive and issued concerns over some of WB's expectations on what the merger might be able to do for WB's earnings. SOTR soared 13% while shares of WB slipped 4%. The second biggest deal was a consolidation in the mall business. Simon Property (SPG) announced it was buying rival Chelsea Property Group (CPG) for $3.5 billion in cash and stock. Finishing out the M&A news were announcements from MHR, BFD and OXM. Magnum Hunter Resources (MHR) declared it was buying $243 million in oil and gas properties in New Mexico from EnCana (ECA). MHR will be gaining 458 oil and gas wells and close to 44,000 acres of undeveloped land to explore. Meanwhile BostonFed Bancorp (BFD) announced it was buying Banknorth (BNK) for $195 million in cash and stock. Finally Oxford Industries (OXM) reported it was purchasing Ben Sherman, an English clothing designer, for $146 million. In other news HMO providers Aetna (AET) and Cigna (CI) announced a major win at the Supreme court. The court voted 9-0 on two cases in favor of the HMO's saying patients can't sue their HMO for refusing to pay for doctor-recommended treatments. The decision will help protect companies like AET and CI from the 72 million Americans currently covered by HMO's. Consumer groups are likely to take their cause to Congress. After the closing bell today Priceline.com (PCLN) raised its earnings guidance for the second quarter. PCLN had previously forecast 25-30 cents per share while analysts were expecting 28 cents per share. PCLN said business is strong and they now predict earnings in the 29 to 32 cent range. The next couple of days are devoid of major economic reports so stocks will be left to trade on their own news or any new developments coming out of Iraq. The current market forecast calls for stocks to remain range bound until the end of the month. Contributing to this lack of direction will be 16 IPOs this week sucking up capital that may have been spent elsewhere. Traders can keep an eye on the brokerage stocks tomorrow. Before the opening bell we'll hear earnings reports from Goldman Sachs (GS) and Morgan Stanley (MWD). Estimates for GS are $1.95 per share. Estimates for MWD are $1.05. In the past these companies tend to beat estimates only to see their stocks trade down on the news. Now that both MWD and GS are near two-week lows there is a chance they could pop higher instead. ================================================================== 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 --------------------------------- Energy, Drugs And Metals Lone Star Tech inc. - LSS - close: 26.75 change: +1.14 WHAT TO WATCH: After breaking out over $23 resistance last week, shares of LSS have really been on a tear, continuing that rally today with the breakout over $26. While volume has been strong, we're hesitant to suggest chasing the stock higher. But a pullback to fill the gap left behind as LSS shot through the $24 level could provide a solid bullish entry point. Look for strong resistance to come in near $30. --- Brown & Brown Inc. - BR - close: 42.77 change: +1.23 WHAT TO WATCH: With BRO stalling near the $41.50 level on its April rally, it's no great surprise to have seen the stock stall there for the past couple weeks. But with the expiration nonsense behind us, the stock blasted through that resistance to set new all-time highs today. Look for a pullback to confirm broken resistance as new support as the ideal entry point and then target a run to the $45-46 area. --- Pharmaceutical Resources - PRX - close: 37.30 change: +0.20 WHAT TO WATCH: Following a convincing breakdown under the $40 level, shares of PRX are trying to gather enough strength for a credible bounce. But with strong overhead resistance and the 50- dma bearing down as well, a failed bounce in the $39-40 area would be a great setup for new bearish entries. Target a drop to the 200-week moving average, which is currently near $34. --- Southern Peru Copper - PCU - close: 38.65 change: +0.15 WHAT TO WATCH: Finally breaking the nearly 6-month descending trendline on Friday, shares of PCU also blasted through the 200- dma on strong volume. While the stock is holding its ground today, we're looking for a measured pullback to the site of the broken trendline and 200-dma in the $35 area to offer a solid bullish entry. Once clear of the $42 resistance, we're expecting PCU to make a run back at strong resistance in the $49-50 area. =================== On the RADAR Screen =================== PNR $31.73 - Steady as she goes, PNR has been riding its 50-dma higher throughout the first 6 months of the year. While momentum traders can certainly consider new entries on a break above the $32.30 level (setting new all-time highs), the more conservative approach would be to look for entries on a dip and rebound in the vicinity of the 50-dma. PCLN $28.00 - Having already broken out to its best levels this year, PCLN looks like it is giving us a gift of a pullback entry. Target entries on a successful rebound from the $27.00-27.50 area and then ride the rally up to the $32-33 resistance zone. AXCA $20.92 - As strong as the early breakout move looked today, AXCA lost a lot of its bullish tone with the pullback from the highs. Closing above resistance salvaged some of that honor, but we're expecting a solid fill of today's gap before the stock is able to continue higher. Target entries in the $20.25-20.50 area and look for a rally to the $24-25 area. ================================================================= 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 Monday 06-21-2004 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 ================================================================= Stop Loss Updates: SNDK, SOHU Split Announcement: SLXP 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) ================================================================== Stop Loss Updates ================================================================== SNDK - tech stock short - Lower stop from $22.00 to $21.51 --- SOHU - high risk short- Lower stop from $23.25 to $22.15 ================================================================== Stock Splits ================================================================== Announcements ------------- SLXP announces a 3-for-2 stock split This morning before the opening bell Salix Pharmaceuticals (NASDAQ:SLXP) announced that its Board of Directors had approved a 3-for-2 stock split of its common stock. The split will be payable on July 12th, 2004 to shareholders on record as of June 30th. Post-split SLXP will have approximately 36 million shares outstanding. About the company: Salix Pharmaceuticals, Ltd., headquartered in Raleigh, North Carolina, develops and markets prescription pharmaceutical products for the treatment of gastrointestinal diseases. Salix's strategy is to in-license late-stage or marketed proprietary therapeutic drugs, complete any required development and regulatory submission of these products, and market them through the Company's 100-member gastroenterology specialty sales and marketing team. Currently the Company markets COLAZAL., XIFAXAN(TM), and AZASAN.. (source: company press release) ================================================================== 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 CAT Caterpillar Inc 74.98 +0.56 CNQ Canadian Natural Res Ltd 29.38 +0.55 DVN Devon Energy Corp 64.51 +0.98 SOTR Southtrust Corp 39.37 +4.57 FO Fortune Brands Inc 74.82 +1.72 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- None --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- RJR RJ Reynolds Tobbaco Hldg 64.33 +1.24 FMX Fomento Economic Mex 44.90 +1.31 TK Teekay Shipping Corp 37.65 +1.54 BRO Brown and Brown 42.77 +1.23 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- WB Wachovia Corp 45.02 -1.98 APOL Apollo Group Inc CI A 91.85 -2.59 FMD First Marblehead Corp 36.74 -1.46 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- AET Aetna Inc New 83.93 -1.69 AGN Allergan Inc 90.44 -0.98 BGG Briggs & Stratton Corp 83.67 -1.13 ================================================================= 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.
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