PremierInvestor.net Newsletter Monday 09-13-2004 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: Higher Highs Watch List: Natural Foods to Biotech =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== =============================================================== =========== Market Wrap =========== Higher Highs Jonathan Levinson The markets marched higher today on solid volume, breaking Friday's highs and setting new highs as the volatility indices scoped multiyear lows. The indices peaked at lunch and began a slow rollover that picked up speed until the final half hour of the cash session, from which time the indices began a sharp bounce to correct the better part of the afternoon weakness. The strength today extended what had become a trending move across the intraday cycles and continued the upside whipsaw in the daily cycles that we followed last week. The lack of pullback was sufficient to generate the first stochastic buy signals on the weekly timeframe, the first such signal since before the summer. Weekly Dow Chart The Dow closed flat for the day, up 1.69 at 10314, failing at a high of 10348. The move higher started this week's candle just below the upper descending resistance line of the bull flag in play from the January highs. A move above the 10350-10400 zone on a weekly closing basis would set up a move to 10500 resistance, but the bull flag breakout would imply a move to the year highs and beyond. Confirming this bullish picture is a slightly higher stochastic and Macd histogram low as highlighted above, forming a bullish oscillator divergence. A rollover below the 10300 level would start a retracement of the gains over the past month, but on this weekly timeframe, the trend is in the process of reversing to the upside. Daily Dow Chart The higher open on the Dow kept the day's candle right on the steeply rising daily trendline, but all of the day's gains had blown off in a doji spike by time of the cash close, setting up a bearish gravestone doji formation. A break below today's low of 10292 would bring us closer to a bearish Macd cross to confirm the rollover in the 10-day stochastic. Next support is at 10260, followed by 10190-10200. The daily cycle oscillators combine with today's upper doji shadow to paint a picture of an imminent daily cycle downphase, but it will take a close below 10260 to break last week's range and put a bearish tint on the consolidation. The weekly cycle buy signal discussed above suggests that a daily cycle downphase from here should find support at a higher low- how high or how low that daily cycle bottom proves to be will tell us a great deal about the fate of the bullish weekly formation that bulls have been eyeing all year. Weekly Nasdaq Chart The Nasdaq outperformed the Dow again today, closing higher by 16.1 points at 1910.4. The high was at 1919.21, but bulls were happy to have closed above the 1890 confluence line. As on the Dow, the lack of pullback for the past month was enough to generate the first weekly cycle buy signals. Confluence, Fibonacci and trendline resistance line up at the 1940 level, above which bulls will be looking to the 2000 and 2025-30 levels. As with the Dow, a break above the descending upper flag resistance line has very bullish implications, suggesting that the decline this year was merely corrective following 2003's impulsive rally. While the decline this year looks longer than a bull flag would ideally be, the upper resistance line is nevertheless set up as a key watershed between bull and bear territory. Daily Nasdaq Chart The daily Nasdaq looks considerably more bullish than the daily Dow, with an unfilled upside breakaway gap printed by today's open. On this chart, there's rising resistance in the 1930 area but if the bulls manage another advance tomorrow, the 10-day stochastic should complete its upside whipsaw with a new buy signal. That would be a very bullish development, but as noted last week in the Market Monitor, bulls need to continue their advance. The upside whipsaw in the 10-day stochastic stopped what had been daily cycle downphase, but until the previous oscillator high is either matched or exceeded, there remains the risk of a bearish divergence against the higher price high. A rollover in price from here would suggest a strong daily cycled downphase to follow, with the implication that the daily cycle upphase from the August low has been a corrective bear flag. 1870-80 is key downside support, following which the lower rising trendline and the 1835 levels will be in play. Weekly TNX Chart Treasury bonds rose today, with the ten year note yield (TNX) declining 2.9 basis points to close at 4.151% for a .69% move on the day. On the weekly chart above, this week's candle (comprised solely of today's data) remained within the lower end of last week's range, and appropriately, there were no particular sharp or impressive moves in either direction. Rising weekly support at 4.1% remains unbroken, with the lower spike 2 weeks ago repelled with authority from the lower line, bouncing higher in a doji hammer. The weekly cycle oscillators are turning up, with the 10-week stochastic printing a buy signal today. This suggests that the lower wedge support line is likely to hold on this run, and that higher yields / weaker bonds are on deck, at least in this weekly timeframe. A break below 4% would suggest a bear wedge breakdown targeting the 3.1% support level, while a bounce from the line will have resistance at 4.4%, 4.88% and ultimately 5% at the top of the wedge. Weekly chart of Crude oil Crude oil rose strongly today, adding 2.45% or 1.05 to close the day session at 43.85 on the Nymex. The weekly chart of front- month crude futures shows a bearish stochastic divergence, and the sharp break from the bear wedge apex 4 weeks ago suggests more weakness to come. However, the bearish divergence is of limited reliability because the weekly stochastic has been trending in overbought for months. I would be more impressed with a break below the rising channel support confirmed with a move below 41 confluence. The media attributed today's strong rise to the threat posed by Hurricane Ivan, whose flight path has edged westward and now threatens the Gulf of Mexico. Hurricane Ivan, which remains the strongest of this year's series of hurricanes and is still measuring force-5, threatens not only damage to key infrastructure in the Gulf, but also the threat of downtime due to evacuations and delays. Reuters reported that energy companies have already moved more than 3,000 workers off rigs in the area as a precaution. Compounding this turn of events was uncertainty due to the plethora of stories to cover last Thursday's explosions in North Korea. The story was reported after the fact as being one explosion with a "mushroom cloud" that left a crater and a mushroom cloud more than 3 kilometers wide. The uncertainty was nearly total, with National Security Adviser Condoleezza Rice saying, "We don't think ... that it was a nuclear event. But we're looking at it and we'll get further analysis. There are ... all kinds of assessments that are going on. Maybe it was a fire, some kind of forest fire." The uncertainty resolved somewhat today, with North Korean Foreign Minister Paek Nam-sun saying that that the explosions were deliberately set as part of the construction of a hydroelectric dam project. North korea has invited foreign envoys to visit the scene and see for themselves, but it remains a mystery why no statements were made 4 days earlier to explain a matter of global concern. The Commerce Department reported that revenues in three major US service industries accounting for approximately 15% of the US GDP increased by 5.4% from Q1 to Q2 2004, reaching $598.1B. The data is the conclusion of a new quarterly survey covering following sectors: professional, scientific and technical services; information services; and administrative, support and waste management services. At 2PM it was announced that the US federal budget deficit declined to 41.1B in August, down from the 76.6B last August. The cumulative deficit for FY 2004 is 436.9B with one month to go. At this time in 2003, that figure was 401B. The 41.1B deficit exceeded the 40B level projected by the Congressional Budget Office. U.S Airways (UAIR) is seeking protection from its creditors for the second time in the past 10 years, filing a Chapter 11 proceeding over the weekend. The filing comes following the airline's failed attempt to obtain cost concessions from labor unions, some of which Reuters reported to be key shareholders of the company as well. The company has assets of approximately 8.8B and liabilities of 8.7B, though those assets include some 2.5B of goodwill. Another 1.45B of its assets is cash and cash- equivalents. Later in the afternoon, the Association of Flight Attendants-CWA (the union represent UAIR flight attendants) claimed that it never received the full details of the company's latest contract proposal, and that there were important delays in its receiving information from the company. UAIR closed lower by 29.45% at 1.03. For tomorrow, bulls will hoping for a shallow or sideways correction to relieve the overbought intraday cycles, and particularly the 30 minute cycles which were in a downphase at the cash close. The daily cycle is still up for grabs on the Nasdaq and Dow, both of which suggesting that the easy part of the recent rise has been seen. On the other hand, the weekly cycle, which obviously lags its shorter-term counterparts, is only now printing buy signals. That's a bullish sign for longer term traders, and sets up a bullish expectation for higher highs and higher lows for the daily cycle. My own feeling is that a daily cycle correction, most likely to a higher low, is the next major move on the daily horizon. If I'm wrong and the daily cycle begins trending in overbought from here, we will be much more likely to see a retest of the year highs within the context of a weekly bull flag breakout led by the Dow. For that reason, the trendlines on the weekly chart highlighted above are the key upside levels to watch in the event of further strength this week. ================================================================== 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 --------------------------------- Hansen Natural - HANS - close: 25.56 change: -2.92 WHAT TO WATCH: Whoa! That's a really big bearish engulfing candlestick painted today. HANS gapped higher and ticked above the $30.00 mark and then completely failed. Volume soared to almost seven times the average. This is a major bearish reversal signal. We would watch for a breakdown under $25.00 and target a drop towards the simple 100-dma (21.75) and potentially the $20 mark. --- Dollar Tree - DLTR - close: 26.06 change: +0.60 WHAT TO WATCH: DLTR has broken through overhead resistance at its simple 50-dma and the $26.00 level. The rally today was fueled by better than average volume and it would appear that DLTR is trying to change direction. The stock has been suffering under a long-term trend of lower highs since late 2003. A breakout over its simple 100-dma near $26.50 would be a good start to a new trend change. Just be careful and watch for more resistance at its 200-dma's overhead. The P&F chart remains bearish. --- Taro Pharmaceutical - TARO - close: 23.32 change: +0.73 WHAT TO WATCH: The BTK biotech index was one of Monday's best performing sectors. TARO outpaced most of its peers with a 3.2% rally. We feel that bulls can watch TARO for a breakout above the bottom of its gap. If TARO can push through the $24.75-25.00 level then we can play a "fill the gap" strategy and target the $30.00 level. However, the bottom of the gap could be tough resistance and bears will be watching for a failed rally to short it back to $20. --- Ask Jeeves - ASKJ - close: 27.00 change: +1.62 WHAT TO WATCH: Wow! News that Fidelity took a big position in GOOG's IPO sent the Internet search stocks higher. ASKJ added more than 6.3% and broke through its simple 40-dma. Volume was above average and suggests more upside. Watch for a breakout over resistance at $28.00 and/or the simple 200-dma ($28.95) still overhead. The P&F chart suggests this might be a good place to consider speculating on a bounce with ASKJ testing P&F support. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- OVTI $12.97 +0.85 - OVTI, a semiconductor stock, soared more than 7 percent on Monday. The breakout over $12.50 looks good but shares look overbought. Watch for a pull back and consider a bounce from $11.00 (or short the drop to $11.00, which would be very aggressive). AMZN $40.01 +1.44 - Surprise! AMZN has rallied more than 3.7% on Monday with decent volume. The breakout over the 40-dma was certainly a surprise. Watch for a new high over $41.00. ================================================================= 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 09-13-2004 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: None Stock Splits Announcements: WBNK 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 Adjustments ================================================================== None ================================================================== Stock Splits ================================================================== WBNK cashes in with a 2-for-1 stock split This afternoon a few minutes after the closing bell Waccamaw Bankshares (NASDAQ:WBNK) announced that its Board of Directors had approved a 2-for-1 stock split. The split will be in the form of a stock dividend payable on September 30th, 2004 to shareholders on record as of September 15th. About the company: Waccamaw Bankshares, headquartered in Whiteville, NC serves Southeastern North Carolina with a network of six financial centers and offers a full line of consumer and commercial banking services. Waccamaw Bank's offices are located in Whiteville, Wilmington, Holden Beach, Shallotte, Tabor City, and Chadbourn. (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 TOT Total Sa (ADS) 100.70 +0.58 KMB Kimberly Clark 67.58 +0.55 MET Metlife Inc 38.73 +0.57 OXY Occidental Petroleum 53.48 +0.88 COF Capital One Financial 73.30 +0.75 MAS Masco Corp 33.47 +0.60 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- AVT Avnet Inc 18.02 +1.02 MKSI MKS Instruments 15.74 +1.88 ULCM Ulticom Inc 13.16 +1.02 AUDC Audiocodes Ltd 12.78 +1.28 ACTL Actel Corp 15.28 +1.01 INTX Intersections 16.74 +2.27 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- XLNX Xilinx Inc 29.19 +1.17 BRCM Broadcom 30.30 +2.60 GWW W.W.Grainger 55.41 +1.74 JBL Jabil Circuit Inc 22.79 +1.01 NVLS Novellus Systems 26.62 +1.04 MERQ Mercury Interactive 37.19 +2.05 TRMB Trimble Navigation 30.18 +2.20 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- AZN AstraZeneca 41.80 -1.94 TRB Tribune Co 40.00 -1.35 MHS Medco Health Solutions 30.67 -1.23 CBT Cabot Corp 36.74 -1.04 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- APSG Applied Signal Tech Inc 34.31 -3.26 BMHC Building Materials 23.53 -2.45 HANS Hansen Natural 25.56 -2.92 WLB Westmoreland Coal 26.85 -1.73 SKE Spinnaker Exploration 34.43 -0.86 SMT Summit Properties 26.70 -0.42 ================================================================= 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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