PremierInvestor.net Newsletter Monday 07-26-2004 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: Doji Day Watch List: From Chicken to Software =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 07-26-2004 High Low Volume Advance/Decline DJIA 9961.92 - 0.30 10003.80 9913.92 1.67 bln 893/1913 NASDAQ 1839.02 - 10.07 1860.12 1829306 1.61 bln 968/2059 S&P 100 530.09 - 0.29 532.33 527.17 Totals 1861/3972 S&P 500 1084.07 - 2.13 1089.82 1078.78 RUS 2000 533.49 - 5.74 542.29 531.40 DJ TRANS 3048.60 + 5.16 3072.63 3036.46 VIX 17.30 + 0.80 17.93 16.98 VXO 17.00 + 0.37 17.85 16.88 VXN 25.29 + 1.38 25.98 24.57 Total Volume 3,637M Total UpVol 933M Total DnVol 2,658M 52wk Highs 43 52wk Lows 421 TRIN 1.31 PUT/CALL 0.81 =============================================================== =========== Market Wrap =========== Doji Day Jonathan Levinson QQQ and Nasdaq broke below their previous year-to-date lows this morning, the first of the major indices to do so. The OEX, Dow, and SPX all came close to doing so but managed to hold above the previous lows. Much of the losses were corrected in the final hour of trading. Volatility rose, with the QQV up 7.61% to 23.62 and the VXO adding 2.22% to 17. While these levels represent significant increases from the recent lows, they continue to reflect relative complacency on a longer-term basis. Several investment houses were out with opinions on where the stock indices are likely to go next. Prudential's Ed Yardeni lowered his year-end 2004 target for the SPX from 1300 to 1190 and his 2005 target from 1450 to 1300 citing investor disappointment regarding high oil prices and uncertainty surrounding the presidential election. Prudential also cut its technology weighting to underweight, with strategist Edward Keon advising clients that he sees at best single-digit growth for 2005, compared with the previously expected rates of 11% overall and 18% for the tech sector. Merrill's Richard McCabe was out early in the morning, stating that his short term momentum indicators were "extremely oversold" and that a "new rally phase" could develop in the short-term. He went on to note, however, that sentiment was not sufficiently negative to lead him to expect a resumption of the post-2002 rally. CSFB's Garthwaite disagreed, advising clients that valuations remain above their long-term averages, and that a correction to those averages would require another 3% decline. However, he added that a throwunder of just one standard deviation could result in an additional 18% decline for equities. He went to say that "Implied volatility remains low, the CSFB chartists' view continues to be negative, and the ratio of gainers to losers remains well above levels that have been associated with previous turning points in the markets." Weekly Dow Chart Last week's candle broke the rising weekly support line on a closing basis for the first time since the 2003 bottom, with Friday finishing at the week's low. The move resolved both the price and oscillator ambiguity to the downside, printing a fresh sell signal on the 10-week stochastic and reversing the bullish kiss on the Macd. While the potential bull wedge remains intact, with the parallel pattern of lower highs and lower lows above 9800, the action was decidedly bearish, particularly with respect to the shorter timeframes, which failed to bounce on schedule and which trended lower as the price decline continued. Daily Dow Chart The Dow daily chart left off with a doji star for the day, with moves to both the high and low rejected and price settling unchanged, lower by 0.3 at 9961.92. The 10-day stochastic buy signal that had me expecting a bounce last week above 10K aborted its fledgling upphase and is now trending, still showing a very slight bullish divergence but bumping along the bottom of its range as it did in March and in May. The Macd has not confirmed with any buy signals, showing only a slight histogram divergence as highlighted in the chart. The spike low in May to 9840 is support below the levels tested today at the previous May lows of 9900. While the oscillator setup continues to suggest bullish pressure building, the bottom of the current descending channel is well below 9720. We recall 9800-10200 from years past, however, and despite the downside whipsaw, the daily cycle oscillators remain at levels that have more risk for bulls than for bears. A break back above 10020 would have the daily cycle back on buy signals. However, as we've seen since last week, picking bottoms in this market is very risky business. Weekly Nasdaq Chart The Nasdaq had been weaker through the bulk of the decline, and last week did not disappoint. An initial retest of the rising weekly trendline (which had broken the previous week) was repelled with authority, leaving a long doji shadow atop what proved to be a bearish reverse hammer or gravestone doji. As with the Dow, the bull flag is still intact. However, the oscillators have also resolved their uncertainty to the downside, with sell signals printed from lower price and oscillator highs. Resistance is in the 1930 area, while flag support and price confluence now line up at the 1760 Fibonacci level. Daily Nasdaq Chart The Nasdaq's 10 point decline was sufficient to maintain the steep downtrend on the daily chart, with the close at 1839 leaving the upturning 10-day stochastic rolling over for a trending move within oversold territory. Bollinger and regression channel support are down to 1820 here, and while the risk to bears is obviously increasingly with each decline, previous support between 1880 and 1900 is now resistance. As even Merrill's McCabe noted, the increases in volatility, while respectable, are not at absolute levels from which a bounce appears readily obvious. While the weekly cycle pointed south and the daily unable to turn from previous support at the y-t-d lows, the onus is on bulls to regain former support before imputing too much significance to an oversold daily chart. Weekly TNX Chart Bonds declined today from the open, falling further with the release of the record existing home sales data (see below), with the ten year note yield (TNX) closing higher by 4.3 bps at 4.475%. Resistance above is at 4.48%, followed by 4.5%, 4.64, 4.75% and 4.8%. This daily cycle upphase is opposed to the weekly cycle downphase on the chart above, projecting to a retest of support at the 4.02% level and possibly to what appears as daily bullish descending wedge support as low as 4.32%. A break above 4.5% would have a bullish implied target of 4.8%, with stronger resistance at 4.5%. At 10AM, Existing Home Sales for June were released by the National Association of Realtors, with the number of existing homes sold rising 2.1% from a revised 6.81M level to a record 6.95M units. This represents a 17.4% increase over last year. The NAR also announced that the median sales price reached a record $191,800 in June, a 9.6% increase. K announced earnings of 57 cents per share, up from 50 cents in the same fiscal quarter of 2003 but missing estimates of 54 cents. The company reaffirmed its 2004 outlook of $2.07-$2.11 per share, below the consensus estimates of $2.14 per share. K finished higher by 1.29% at 40.75. WMT announced that July sales were headed for a 2-4% increasing, matching prior forecasts buoyed by warm weather summer buying and back-to-school products, but closed for the day lower by .96% at 52.65. TSN beat expectations of 36 cents, coming in at 45 cents per share but announced that 2004 results will miss previous estimates of $1.41 per share, guiding to between $1.20 and $1.30 per share. The stock got smoked for a 7.37% loss, closing at 18.48. Google, which has requested to trade under the symbol "GOOG", seeks to price its IPO at $108-$135 per share for 24.64M shares. The company expects to raise $3.3B to $3.8B, above the 2.7B that marked the highest estimates in its previous filings. ASKJ was higher on the morning announcement of the extension of its advertising pact with Google through 2007. AXP reported Q2 earnings 68 cents a share, beating expectations by a penny and up 9 cents from Q2 2003's results. Revenues roses 14% to $7.26B, exceeding expectations for $6.91 billion, and the stock closed higher by 1.64% at 48.90. After the bell, GNSS reported earnings excluding charges of 5 cents per share, beating estimates by a penny. The stock was lower by 1.13% for the day at 9.60, sliding lower to 9.45 after the announcement. Homebuilder CTX announced a 21% y-o-y- increase in net earnings to $1.35 per share, with sales increasing 33% since last year. The company upped its fiscal '05 earnings target to $6.75-$7.25 share, compared with expectations for $6.78 per share. The future is anything but clear from here. On the one hand, the daily charts tell us to expect a bounce, but the weekly charts are reasserting their ongoing downtrend and suggest a possible move to the lower bull flag supports or below. The rally off the 2003 lows generated a slew of extreme readings, including breadth and the TRINQ, the volatility indices, and, among others, on the oscillators. It is easily imaginable that the intraday and daily oscillators will continue to trend as the longer cycles continue to dominate to the downside. While the daily candles printed lower doji shadows, the intraday action was not the stuff of classic doji bottoms- the crowd was not gleefully selling through support and the reversal was not sudden, swift or on much higher volume. I'm not trying to talk down the bullish case, but am rather trying to provide a counterpoint to it. I personally expect to see the daily cycle generate buy signals at or close to current levels. However, that gut feeling is tempered by the foregoing arguments. The indices do not have to continue today's 3PM bounce, and patient bulls should continue to so be, at least until at least one or two levels of prior support have been regained. Until it reverses, the daily trend remains down. ================================================================== 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 --------------------------------- From Chicken to Software Inter-tel Inc - INTL - close: 19.66 change: -0.84 WHAT TO WATCH: Gosh darn it! We considered adding INTL to the PremierInvestor play list over the weekend. The recent failed rally at $22.50 (and its 21-dma) combined with its recent earnings miss and the bearish P&F chart all looked pretty strong. Today INTL fell more than 4% to close back under the $20.00 mark. This could be your entry point for a move toward the $16-17 region. The P&F chart actually points to an $8.00 target. --- Pilgrim's Pride Corp - PPC - close: 27.55 change: -0.95 WHAT TO WATCH: Chicken farmer PPC could be on the verge of a serious breakdown. The company reported lower quarterly earnings today and shares dropped 3.33% to close under support at $28.00 and its rising 50-dma. The move also broke through the bottom of its rising channel. We'd consider bearish positions on a drop through today's low as confirmation of the trend change. Traders could target a drop to $24.85, a 38.2% retracement of the December-to-July rally, or target $22.70, a 50% retracement. --- Par Pharmaceutical - PRX - close: 32.59 change: -0.60 WHAT TO WATCH: PRX got approval from the FDA to market a new generic Mycostatin topical agent but shares of the stock continued to trade lower. PRX is now testing support at the $32 level again. A breakdown here and PRX will look vulnerable to the $29-30 level. Watch out for earnings expected on July 30th. --- Manhattan Associates - MANH - close: 24.12 change: -0.88 WHAT TO WATCH: MANH's 3.5% drop today on strong volume through support in the $25.00-24.50 range sent the stock to new one-year lows. The stock looks vulnerable to more weakness and its next support level is the $20.00 region. Its P&F chart has turned bearish with a descending triple-bottom breakdown sell signal pointing to a $19 target. While the move looks like a bearish entry point we'd wait until after its July 28th earnings report. ================================================================= 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 07-26-2004 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 ================================================================= Stop Loss Updates: BOBJ, CMTL, DLTR, FRED, FLML, ENDP Closed Plays: WMB Split Announcement: SYMBOL 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 ================================================================== BOBJ - tech stock short - BOBJ is down another 1.22 percent but remember we plan to exit before Tuesday's close to avoid BOBJ's earnings on Wednesday. --- CMTL - tech stock short - CMTL fell another 2.7 percent to $18.12 today. We're going to lower our stop from $20.51 to $20.01 --- DLTR - non-tech short play - We have been TRIGGERED in DLTR as the stock traded at $25.95 (our entry point to go short). --- FRED - non-tech short play - Exit Alert! FRED closed at $17.28, down 3.89 percent on Monday. Shares actually traded to $16.91 early in the session. This is below our initial profit target at $17.50. Readers should consider exiting for a profit at current levels. We're going to keep the play open but lower our stop from $19.01 to $18.51. We would expect a potential bounce back to the $18.00 level before FRED continues lower. Our secondary target is the $15.00 region. --- FLML - high risk/reward short - Heads up! FLML fell another 4.9 percent today to $17.19. Short-term traders may want to consider exiting for a profit. The company finally announced its earnings date as Thursday, July 29th. We will plan to exit on Wednesday afternoon before the close. --- ENDP - high risk/reward short - Entry Alert! ENDP's 2.85 percent drop to $19.41 is enough to TRIGGER our entry to go short at $19.49. ================================================================== Closed Plays ================================================================== Closed Bullish Plays -------------------- Williams Cos - WMB - $11.65 change: -0.40 stop: 11.79 Yuck! WMB out did the 1.27 percent drop in the XNG natural gas index with a 3.3 percent drop of its own. Shares of WMB gapped higher and then promptly turned tail to break support at the $12.00 level and the simple 50-dma. Closing near the low of the session is very bearish for tomorrow. We can't find any specific news or catalyst for today's drop. We are stopped out at $11.79. Picked on July 18 at $12.48 Gain since picked: - 0.83 Earnings Date 08/05/04 (confirmed) Average Daily Volume: 3.3 million ================================================================== 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 SBC SBC Communications Inc 24.75 +0.53 AXP American Express Co 48.90 +0.79 AIG American Internat Group 69.00 +0.90 UTX United Technologies 93.00 +0.91 UNH InitedHealth Group Inc 63.69 +0.79 BLS Bellsouth Corp 26.81 +0.91 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- KG King Pharmaceuticals Inc 12.89 +2.52 MANT Mantech International A 14.82 +1.18 NTMD Nitromed Inc 18.90 +1.78 AGYS Agilsys Inc 13.14 +2.39 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- VZ Verizon Communications 36.50 +1.18 CEO Cnooc Ltd (ADR) 46.30 +1.08 PCAR Paccar Inc 58.71 +2.43 TXT Textron Inc 60.72 +1.13 CVH Coventry Health Care Inc 53.30 +3.67 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- NTT Nippon Tel & Tel (ADS) 23.96 -1.32 WLP Wellpoint Health Network 105.21 -4.57 AMZN Amazon.Com Inc 38.78 -1.20 MI Marshall & Iisley Corp 37.32 -1.19 MHS Medco Health Solutions 31.95 -1.28 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- ECA Encana Corporation 43.96 -0.74 SHI Shanghai Petrochemical 35.57 -0.64 JHX James Hardie Industries Nv 21.80 -0.31 UCO Universal Cmprssn Hldgs 32.41 -0.38 HOC Holly Corp 38.65 -0.39 ================================================================= 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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