Option Investor
Newsletter

Daily Newsletter, Monday, 07/26/2004

HAVING TROUBLE PRINTING?
Printer friendly version
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.





DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives