PremierInvestor.net Newsletter Wednesday 06-23-2004 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: A Day for Breakouts Watch List: Stampeding Bulls 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) =============================================================== 06-23-2004 High Low Volume Advance/Decline DJIA 10479.57 + 84.50 10486.87 10359.46 1.77 bln 2007/ 810 NASDAQ 2020.98 + 26.83 2023.23 1990.78 1.78 bln 2016/1029 S&P 100 557.80 + 4.33 558.30 551.72 Totals 4023/1839 S&P 500 1144.06 + 9.65 1145.16 1131.73 RUS 2000 580.15 + 8.26 580.79 571.23 DJ TRANS 3139.27 + 61.44 3139.27 3073.52 VIX 13.98 - 0.33 14.82 13.75 VXO 13.63 - 0.47 14.56 13.37 VXN 18.98 - 0.31 19.71 18.78 Total Volume 3,894M Total UpVol 3,168M Total DnVol 667M 52wk Highs 314 52wk Lows 108 TRIN 0.41 PUT/CALL 0.83 =============================================================== =========== Market Wrap =========== A Day for Breakouts by James Brown Express courier Fedex got us started on the right foot when the company announced earnings this morning and raised its earnings guidance for the next quarter. Unfortunately, the markets continued to trade inside its three-week trading range - that is until the last hour. Suddenly, volume surged and stocks, lead by technology issues, charged into the last hour and broke through the top of the trading range. The Dow and the NASDAQ Composite actually closed positive for the year with the Industrials at new two-month highs and the NASDAQ at new two-week highs above the pivotal 2000 mark. Jim was on the right track yesterday when he said the market felt like it wanted to go higher and that traders were getting nervous that stocks could rally without them. We have been staring at the June 30th deadline non-stop for the last three weeks so everyone who wanted to sell to avoid any event risk certainly had their chance. Now that the June 30th-fever has broken there is a lot of money on the sidelines that could really lend some momentum to today's gains. I noticed a number of significant breakouts across the board with stocks and sector indices hitting new highs or breaking through technical resistance like their 50-dma's. Dow theory fans will point out that the Dow Transports are partly to blame for today's gains. The transports soared another 2% to breakout over resistance at the 3100 level to hit new three-year highs. The move in transports was boosted by a down tick in crude oil prices to $37.57 a barrel. Yet this failed to stall the rally in energy stocks. The OIX oil index and the XNG natural gas index soared to new all-time highs while the OSX oil services index hit new two-month highs. Chart of crude oil (August contract): While we still have the Russell shuffle ahead of us the Russell 2000 still managed to hit new two-month highs. More importantly the Dow Industrial's 84-point gain broke through resistance in the 10,440 area. The NASDAQ's 26.8-point or 1.34% rally pushed the index back through the 2000 mark and confidently back above its descending trendline of resistance and its simple 100-dma. The S&P 500 index also managed a new relative high. Chart of the Dow Industrials: Chart of the NASDAQ Composite: Chart of the S&P 500 index: Overall it was a very widespread rally with every sector-specific index closing higher. The largest gains were seen in networking stocks, semiconductors, Internets, biotechs, airlines, and homebuilders. Meanwhile defense stocks managed to hit new all- time highs again. The rally in the networkers was fueled by yesterday's news that telecom giant SBC Communications (SBC) was discussing plans to spend $4B to $6 billion over the next five years on a new fiber-optic network. Gains for the several networking stocks have been substantial as traders speculate on who might win such a lucrative contract. Over the last two days Lucent (LU) has rallied 8.5%, Juniper Networks (JNPR) has soared 15% and JDS Uniphase (JDSU) is up 18%. Market internals were strongly bullish as you might expect. Advancing stocks outnumbered decliners 5-to-2 on the NYSE and 2- to-1 on the NASDAQ. Up volume was approximately three times stronger than down volume on both exchanges. More importantly overall volume was relatively strong at 3.5 billion across both exchanges. This is a significant improvement to what we've experienced over the past couple of weeks and adds a little bit more confidence to today's rally. Fedex (FDX) deserves some credit for both improving investor's moods with their positive earnings forecast as well as contributing to the rally in transports. The company reported earnings this morning of $1.36 per share, which was above estimates at $1.33 and well above last year's 92 cents for its fourth quarter. FDX's revenues jumped more than 20% to $7.04 billion compared to just $5.8 billion a year ago. FDX now sees next quarter (Q1) falling in the $0.90-to-$1.00 range compared to analysts' estimates at 80 cents per share. Shares of FDX jumped more than 2% to close at $80.05 - a new all-time high. Don't look now but the closer FDX edges toward $100 the closer we are to hearing another stock split announcement. Its last 2-for-1 split was back in May of 1999. RJ Reynolds Tobacco (RJR) made headlines today after the FTC gave its approval last night to the company's long-awaited merger with Brown & Williamson, a division of British Tobacco (BTI). The newly formed company will be the No 2 cigarette maker behind Phillip Morris. Shares of Phillip Morris, now Altria Group (MO), added 1.3% and helped lift the Dow Industrials. Meanwhile RJR received a credit upgrade from "negative" to "stable" from Fitch. There were plenty of tech stocks hitting new highs but none of them performed quite as well as Salesforce.com (CRM). The company's IPO came to market today with 10 million shares at $11 per share. This was above the expected offering price in the $9 to $10 range. CRM's claim to fame allows customers to truly use their application software "on demand" for as much or as little as they need. The stock soared 56% to close at $17.20 per share on volume of 10.89 million. Alas the day was not without its losers. Mylan Labs (MYL) lost about 7% to close at $20.86 after the FDA chose to extended JNJ's patent protection on its Duragesic pain relief patch by another six months. MYL had planned to offer a generic version. The company plans to fight the decision and sue the FDA. Meanwhile Career Education Corp (CECO) plummeted another 24.7% to $44.11 after the company confirmed that the SEC had formalized its probe into the ongoing scandal involving falsified student records. Merrill Lynch and Bear Stearns downgraded the stock to "neutral" and "peer perform", respectively. I wonder how BAC and ThinkEquity feel after the two firms reiterated their "buy" and "strong buy" ratings on CECO in the previous two sessions. AT&T was making headlines after the closing bell when the company lowered its financial outlook for fiscal year 2004. T is lowering its revenue outlook from $31-32 billion for the year to $29.5-30.5 billion. AT&T separately announced it would stop selling local and long distance services in seven states as it continued to fight with competition from the regional Bells. Existing customers would be allowed to keep their current service. AT&T (T) was trading down more than 4% in after hours markets. Tomorrow should prove interesting. Now that the major indices have broken through the tops of their trading ranges will we see any follow through? The Dow could struggle with the 10,500 level but I suspect it will be the 10,550-10,600 region that will be the next hurdle. The NASDAQ has plenty of overhead resistance but the strength in the two-day rally should encourage investors who have been sitting on the sidelines to jump on the bullish bandwagon before they "miss" the rally. Thursday does bring a few economic reports. Before the opening bell will be the May durable goods orders. Economists are looking for a small gain of 1.5% after April's 3.2% loss. We'll also get the weekly initial jobless claims before the open. After the bell will be the May new home sales. The economic data continues on Friday with the final Q1 GDP numbers, the chain deflator numbers, existing home sales and the Michigan sentiment index. Finally, let me leave you with a word of caution. The breakout today looks great. I believe we should trade what we see. However, the volatility indices are waving huge red flags as they drop back to the low end of their trading range or to new all- time lows like the VXN. Traditionally, these would be huge sell signals but one thing we've learned over the past 18 months is that the volatility indices can continue to slip lower than we would normally imagine. ================================================================== 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 --------------------------------- Stampeding Bulls Manulife Financial Corp. - MFC - close: 39.99 change: +0.24 WHAT TO WATCH: After last month's dip to the 100-dma, shares of MFC have been running strong and are right back to resistance near all-time highs. Use a trigger over the April high ($40.41) and target a rally to the $45 area. Use a stop at $38. --- D R Horton Inc. - DHI - close: 29.06 change: +1.06 WHAT TO WATCH: The strongest of the Housing stocks on a relative strength basis, DHI looks like it is preparing to make a serious bullish move. But with strong resistance looming near the $30.50 level, we need to see the stock prove itself before attempting a bullish play. Use a trigger at $30.50, just over the early June highs and target a rally back to solid resistance in the $33.50- 34.00 area. --- Yahoo! Inc. - YHOO - close: 33.97 change: +1.43 WHAT TO WATCH: After 3 weeks of coiling near multi-year highs, YHOO made its intentions known on Wednesday with a powerful breakout through $33 resistance, and closed at its best level since late 2000. Aggressive traders can chase the stock higher above today's high, while the more conservative approach will be to target entries on a pullback near the $32.50-33.00 area. Target strong resistance near $40, and use an initial stop at $31, just under the bottom of the recent consolidation. --- J B Hunt Transport Services - JBHT - close: 36.56 change: +0.90 WHAT TO WATCH: Transports are on fire, breaking to new highs for the year today and on the cusp of a breakout to their best levels since late 1999. JBHT is no laggard, busting out to new highs and looking like it could keep on running. While it looks extended on the weekly chart, aggressive traders may be able to jump on for a quick ride higher. Look for a rally towards the $40 level, so entries on either a continued breakout or a slight pullback near $35.50 look good. =================== On the RADAR Screen =================== YELL $39.92 - While more extended than JBHT, YELL is another transport that is looking quite bullish, breakout out to new highs today. Use an entry trigger over $40 and target a continued rally towards the $45 level. Use a tight stop at $38, just under the recent consolidation lows. APPB $23.97 - While not quite a H&S top, APPB has been building a major topping formation over the past several months and the $23.50 support level appears to be the key. Use a break under that level for new entries and then target a drop towards the $20-21 area. ================== 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 SI Siemens Aktien 69.25 +1.53 PTR Petrochina Co Ltd (ADS) 44.25 +0.86 BP BP Plc 54.38 +0.74 WB Wachovia Corp 45.44 +0.53 NTT Nippon Tel & Tel (ADS) 26.42 +0.62 CVX Chevrontexaco Corp 94.88 +1.05 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- TLK P T Telekom Indonesia 15.36 +1.04 UNA Unova Inc 19.64 +2.29 CKR CKE Restaurants Inc 13.45 +2.24 OSUR Orasure Technologies Inc 9.44 +1.73 QADI QAD Inc 10.94 +1.64 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- GS Goldman Sachs Group Inc 91.72 +1.12 ERICY LM Ericsson Telephone Co 29.13 +1.78 HIT Hitachi Ltd 68.61 +1.76 FDX Fedex Corp 80.05 +1.62 BAX Baxter International Inc 34.50 +1.54 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- APOL Apollo Group Inc CI A 90.62 -3.55 MYL Mylan Laboratories Inc 20.86 -1.56 LH Laboratory Cp Am Hldgs 40.83 -1.05 CECO Career Education Corp 44.11 -14.47 COCO Corinthian Colleges Inc 25.06 -1.84 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- MCBC Macatawa Bank Corp 25.90 -0.20 ================================================================= 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 06-23-2004 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: BRCM, JCP, SBUX, MACE Net Bulls (Tech Stocks) New Bullish plays: CSCO Closed Bullish Plays: TTEC Closed Bearish Plays: ISIL, SNDK Stock Splits Announcements: BAC ================================================================== Stop Loss Adjustments ================================================================== BRCM - long Adjust from $41.60 up to $42.75 JCP - long Adjust from $35.75 up to $36.50 SBUX - long Adjust from $42.50 up to $42.90 MACE - long Adjust from $4.90 up to $5.35 ================================================================== Net Bulls (NB) Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- Cisco Systems - CSCO - close: 23.97 change: +0.75 stop: 22.50 Company Description: Cisco Systems, Inc. manufactures and sells networking and communications products and provides services associated with that equipment and its use. The Company's products are installed at corporations, public institutions and telecommunication companies, as well as commercial businesses, and are also found in personal residences. Cisco provides a broad line of products for transporting data, voice and video within buildings, across campuses and around the world. It conducts its business globally and is managed geographically in four segments: the Americas; Europe, the Middle East and Africa (EMEA); Asia Pacific, and Japan. Why we like it: While the persistent weakness in the Technology sector in recent months has had a negative impact on the price of CSCO, the stock has held up better than many other stocks in the sector. It really started gaining some relative strength earlier this month with the breakout over the 50-dma (now $22.46), but the real key is the new PnF Buy signal on the non-standard 0.5-point box scale. Note that the standard scale chart remains bullish with an upside target of $52.50. The fresh Buy signal on the non- standard scale chart gives us a more reasonable near-term target of $30.50 to work with, which is still a solid 20% above current levels. On the candle chart, we can see that the stock has been held in check by the $24 resistance level over the past couple weeks and it began to peek over that level this afternoon. With the Networking index (NWX.X) posting a better than 4% advance today and blasting through the 50-dma as well as the $250 resistance level, it looks like the sector is on the move and CSCO appear poised for a strong breakout. We'll use an entry trigger of $24.25 (just over today's high) to confirm we do get a breakout. Momentum traders can enter on a breakout over that level, while those with a more cautious approach can look for a subsequent pullback and rebound from above the 10-dma ($23.39) Note that there should be solid support now in the $23.50 area. On the upside, look for resistance first at $24.75-25.00 area, with the next obstacle being the top of the February gap near $26. While conservative traders may want to harvest a small gain near that resistance area, based on the strength of the CSCO charts as well as that of the NWX, we're going to go for the gusto and look for a rally into the $27.50-28.00 area. Set stops initially at $22.25, just under the bottom of the early June gap, as well as the 50-dma. Annotated Chart of CSCO: Picked on June 16th at $23.97 Change since picked +0.00 Earnings Date 8/10/04 (unconfirmed) Average Daily Volume = 51.8 mln ============ Closed Plays ============ Closed Bullish Plays -------------------- TeleTech Holdings - TTEC - close: 8.36 change: -0.01 stop: 7.85 Hmm... it looks like somebody wanted out of TTEC and dumped their position on Tuesday. Shares fell quickly through support at $8.00 and its 10-dma and 200-dma to hit $7.77 (near its 21-dma) before bouncing back within the first hour of trading on Tuesday. We we're stopped out at $7.85. The upward trend is still viable and traders still willing to follow the stock can look for bounces from $8.00 or moves above today's high at $8.51. Picked on June 13 at $ 8.03 Gain since picked: + 0.33 Earnings Date 05/05/04 (confirmed) Average Daily Volume: 441 thousand Closed Bearish Plays -------------------- Intersil Corp. - ISIL - cls: 20.79 chng: +0.33 stop: 21.00 After spending the past few weeks workings its way down towards support, shares of ISIL surged higher yesterday, breaking strongly over the descending trendline and both the 10-dma and 20-dma. But with price still under the 50-dma, we had reason to hope for a rollover under resistance. Those hopes were dashed today with another strong performance from the Semiconductor sector and ISIL looks intent on making a run back near the early June highs. Rather than wait for our $21 stop to be hit, let's cut our losses here and look for better places to put our capital to work. Picked on June 2nd at $20.65 Change since picked +0.14 Earnings Date 4/21/04 (unconfirmed) Average Daily Volume = 2.05 mln --- SanDisk Corp - SNDK - close: 22.15 change: +0.69 stop: 21.51 The semiconductor sector has exploded higher in the last two sessions and it has lifted the entire technology sector with it. SNDK and other flash memory makers like FLSH have rallied strongly from their bearish trends. Yesterday's move over $21.00 and SNDK's simple 10-dma was the first clue. Today's 3.2% jump hit our stop loss at $21.51 and closed us out. Picked on June 13 at $21.33 Gain since picked: + 0.82 Earnings Date 04/14/04 (confirmed) Average Daily Volume: 7.4 million ================================================================== Stock Splits ================================================================== Announcements ------------- BAC deposits a 2-for-1 split This afternoon Bank of America (NYSE:BAC) announced that its Board of Directors had approved a 2-for-1 stock split of its common shares. The split will take the form of a stock dividend. Meanwhile the BoD also approved a 12.5% rise in BAC's cash dividend from 80 cents to 90 cents on a pre-split basis. The stock split will be payable on August 27th, 2004 to shareholders on record as of August 6th. The cash dividend will be paid on September 24th for shareholders on record as of September 3rd, which will make the actual pay out 45 cents per share on a post-split basis. About the company: Bank of America is one of the world's largest financial institutions, serving individual consumers, small businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving 33 million consumer relationships with 5,700 retail banking offices, more than 16,000 ATMs and award-winning online banking with more than ten million active users. Bank of America is the No. 1 Small Business Administration Lender in the United States by the SBA. The company serves clients in 150 countries and has relationships with 96 percent of the U.S. Fortune 500 companies and 82 percent of the Global Fortune 500. (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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