PremierInvestor.net Newsletter Wednesday 09-22-2004 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: The Good the Bad and the Low Carb Diet Watch List: The "A" List =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 09-22-2004 High Low Volume Adv/Dcl DJIA 10109.18 -135.75 10244.05 10097.37 1.68 bln 759/2058 NASDAQ 1885.71 - 35.47 1910.23 1884.85 1.58 bln 755/2232 S&P 100 536.84 - 7.90 544.74 536.20 Totals 1514/4290 S&P 500 1113.56 - 15.74 1129.30 1112.67 SOX 391.74 - 12.01 403.75 391.08 RUS 2000 565.89 - 11.03 576.92 565.53 DJ TRANS 3194.66 - 76.56 3270.33 3191.45 VIX 14.74 + 1.80 15.30 13.95 VXO (VIX-O)14.63 + 1.77 14.96 13.80 VXN 21.06 + 0.76 21.19 20.66 Total Volume 3,264M Total UpVol 615M Total DnVol 2,649M Total Adv 4290 Total Dcl 1514 52wk Highs 189 52wk Lows 60 TRIN 1.81 PUT/CALL 1.10 =============================================================== =========== Market Wrap =========== The Good the Bad and the Low Carb Diet Jane Fox The Low Carb Diet I tell you at some point the Low Carb diet will be blamed for the high price of oil. The latest to use this diet as a scagegoat is the makers of Twinkies and Wonder Bread Interstate Bakeries (IBC) when they filed for Chapter 11 bankruptcy reorganization. Although many factors were sited for the company’s woes including declining sales, a high fixed- cost structure, excess industry capacity, rising employee benefits costs, higher costs for ingredients and energy, they had to jump on the bandwagon and include the low-carb diet. I have always contented that anyone who ate Twinkies or Krispy Kreme doughnuts didn't worry about dieting and didn't cut back on these luxuries because of a diet. But anything that flows your boat. IBC ended the day at 2.05 This is one bearish chart. The Bad Morgan Stanley (MWD) had positioned itself for a rise in interest rates that did not pan out because of the unexpectedly low unemployment data (or so they say) and due to this bond miscalculation, earnings came in at 0.76/share instead of the expected 0.95/share, a huge miss, and quarterly earnings dropped by 34%. MWD has also agreed to settle several disputes with the NYSE to the tune of $19 million. MWD ended the day at 48.72 down -3.66. After an eight-month investigation by its main regulator that found evidence of earnings manipulation, the SEC has opened an informal inquiry into Fannie Mae's (FNM) accounting practices. The Office of Federal Housing Enterprise Oversight launched its probe of FNM after widespread problems surfaced last year and today presented its report to the company's board detailing accounting deficiencies and violations of generally accepted accounting principles. The OFHEO stated FNM has "maintained a culture that emphasized stable earnings at the expense of accurate financial disclosures." FNM closed the day at 70.69 down - 4.96. The Good Today FedEx (FDX) reported strong gains in shipment volume across almost all its levels of business and a fiscal first quarter profit that more than doubled. Although FDX's average load of 5.5 million packages/day was up 6.4% from a year earlier, the company noted air shipments in the U.S. continue to be hurt by the shift toward cheaper ground deliveries. This phenomenon seems to be restricted to the US however, because deliveries outside the U.S. climbed 13%, including a 52% surge in export shipments from China. FDX ended the day at 85.21 down -3.48. Looks like they wanted to sell today and no matter how pretty the books looked you got sold. 30-year mortgage rates eased to their lowest level since early April spurring a rise in mortgage refinancings last week and new applications for U.S. home loans. The Mortgage Bankers Association said its seasonally adjusted market index, a measure of mortgage activity, rose for the week ending Sept 17 by 1.8 percent to 690.7 from the previous week's 678.2. The Department of Energy reported commercial crude inventories fell 9.1 million barrels to the lowest level in seven months, caused by the disruption of imports when Hurricane Ivan hit the East coast. The greater than expected drop for the week ended Sept. 17, left commercial crude inventories well below the lower end of the average range for this time of year. Once the ships are able to dock again, there should be a substantial increase in imports next week that will build up inventories. On to the charts. The last time I did a market wrap I was quite bearish except for the NYA. Well things have definitely changed since then. But before we get to the charts I would like to say that I am going to use a more conventional MACD setting (12, 26, 9), which coincides with the other OI analysts. Annotated Weekly Chart of the SPX: Here is a weekly chart of the SPX and as you can see it is up against that red downward trendline, which seems to be well-fit trendline. You can also see SPX is trading above the 50 and 200EMA. Support should come in at the August 12 low where you also find the 200EMA. Annotated Daily Chart of the SPX: Here is the same time frame but on the daily chart and you see how important that red downward trendline has become as resistance. Now for support I have talked a lot about the swing high made on August 2nd as an important level for the bulls to break from below (which they did) and it is now an important level for the bulls to defend from above. I have marked the August 2nd swing high with a blue arrow. This arrow also coincides with the 50 EMA at 1109 confirming it as support. I also see an ominous MACD cross but those can be negated easily enough with a push upward and a positive MACD divergence that cannot be ignored. Annotated Weekly Chart of the DOW: Here is the weekly DOW and the same well fit red downward trendline in place. The DOW is also trading above 50 and 200EMA. Annotated Daily Chart of the DOW: The daily DOW chart has already traded past the August 2nd swing high and below the 50 and 200 EMAs on the daily chart so the DOW is more bearish than the SPX. Also the positive MACD divergence is not quite as prevalent in this market. Annotated Weekly Chart of the Nasdaq: The weekly chart of the NAZ shows that it didn't even make it all the way to the red downward trendline and is trading right at the 50 and 200EMAs. This market is still the most bearish of the three above charts. Annotated Daily Chart of the Nasdaq: The daily chart of the NAZ shows that it has not printed above the 200EMA but is above the 50EMA and also right at the August 2nd swing high. Support and resistance is very clear in this market and may help to determine where the rest of the market may go. If the NAZ closes below the 50EMA take a look at the other markets to see if they are closing below their support levels also for bearish confirmation. If you see all three closing below support a revisit of August 12th lows is possible. On the other hand if you see the NAZ close above the 200EMA look to see if the SPX and DOW have broken above their red downward trendlines for a confirmation of bullishness. Annotated Weekly Chart of the Russell 2000: Here we have the same red downward trendline but note where the 50 and 200EMAs are. Annotated Daily Chart of the Russell 2000: This chart looks more like the SPX than the DOW or NAZ. Support is where the blue arrow and the 200EMA converge. It also has a positive MACD divergence. MACD has not yet crossed. Annotated Weekly Chart of the NYA: This is the most bullish of all charts because the red downward trendline has been broken but NYA was stopped at the June swing high (blue line) making a double top, which is bearish if confirmed. That confirmation is a trade below the double bottom formed at August 12th. As a matter of fact we have a double bottom and a double top giving us very clear support and resistance. If so inclined, one could trade this range and have a very clear idea of where to put stops. Annotated Daily Chart of the NYA: On the daily chart NYA should find support at the red downward trendline that converges with the 50EMA. Tomorrows Economic Reports and Earnings Thursday's economic releases will begin with the usual weekly 8:30EDT release of initial claims. Last week's number was a lighter-than- expected 333 thousand claims, with this week's expectations at 335,000- 338,000. Of course, we could expect some disruption due to Hurricane Ivan's swath through the U.S. and a much-lower-than-expected claims number might be discounted resulting in little market reaction. For the week ending September 18th the consensus is +8K. At 10:00EDT, the Conference Board releases the Leading Indicators number; one whose title would seem to make it an attention-grabber, but the truth is that many components are already known before this number is released. Consensus is +0.2% Also at 10:00EDT is the Chicago Fed National Activity Index and the DJ/BTM Business Barometer along with the Fed's Gramlich speaking on monetary supply. Gramlich detoured from recent Fedspeak in his talk last week on oil supply, so stay tuned on what he has to say about monetary supply, too. Natural gas inventories follow about thirty minutes later. Perhaps drawing more attention will be the FOMC Minutes from the August 10th meeting, to be released at 2:00. HAL, CAG and WSTL will hold investor or shareholder meetings, while many of Wednesday's conferences continue, with WR Hambrecht joining in with a Display Technology Conference. Among the companies reporting tomorrow are AGE, RAD, SCS, CMGI and RAZF. Remember trade your plan and plan your trade. ================================================================= 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 --------------------------------- Abbott Labs - ABT - close: 42.01 change: -1.03 WHAT TO WATCH: The DRG drug index is showing new weakness today and appears to have rolled over into a new downtrend. ABT is showing a bit more strength but looks vulnerable to more profit taking. ABT's MACD indicator has produced a new "sell" signal but we'd watch for a breakdown under the exponential 200-dma as a potential trigger. --- ADTRAN Inc - ADTN - close: 23.77 change: -1.21 WHAT TO WATCH: Technical oscillators on ADTN have all turned bearish and today's breakdown under support at $24.00 looks like a new entry point especially with the better than average volume. Unfortunately, the stock is testing P&F support. Look for a new relative low under $22.50 before considering bearish positions. --- Aracruz Celulose - ARA - close: 32.53 change: -1.17 WHAT TO WATCH: ARA has broken its rising channel and now the stock has broken through its simple 100 and 200-dma's and the exponential 200-dma. We can't find any news but today's 3.4 percent sell-off was fueled by very big volume. Its P&F chart is bearish and points to an $18 target. Watch for a drop under $32 and target a move toward $28-29. --- Abgenix Inc - ABGX - close: 10.32 change: -0.57 WHAT TO WATCH: Drug and biotech stocks experienced a lot of profit taking today and ABGX dropped more than five percent. The move broke through ABGX's narrow rising channel and support at the simple 10-dma. ABGX's MACD is also very close to a new sell signal. Readers can watch for a breakdown under round-number psychological support at $10.00 as a potential entry point. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- ALOG $41.21 -1.64 - We haven't checked the news but today is a massive bearish engulfing candlestick on ALOG's chart. Watch for any follow through. TELK $20.82 -0.84 - The rebound from its August lows is starting to fade and TELK is back under its simple 10 and 100-dma's and the exponential 200-dma. A breakdown under $20.00 may be an entry point. ========================================================== 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 09-22-2004 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: ARB, DPH Active Trader (Non-tech Stocks) New Bearish Plays: AMLN, FRX, LSCP Closed Bullish Plays: MVK High Risk/Reward Closed Bearish Plays: CTMI, PCLN Stock Splits Announcements: None 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 ================================================================== ARB - tech stock short - We're going to lower our stop from $40.01 to $38.51 DPH - non-tech short - The lack of weakness here is not a good sign. We're turning cautious and do not suggest new positions unless DPH trades under $8.80. ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== ================= New Bearish Plays ================= Amylin Pharma - AMLN - close: 20.30 change: -0.34 stop: 22.01 Company Description: Amylin Pharmaceuticals is committed to improving the lives of people with diabetes and other metabolic diseases through the discovery, development and commercialization of innovative, cost- effective medicines. (source: company press release) Why We Like It: We are adding AMLN to the play list as a short based on its relative weakness, the recent failed rally at resistance and the new weakness in the DRG drug index today. AMLN has already been suffering from a trend of lower highs and lower lows for months with clear resistance at the simple 200-dma dating back to June. Yet now the stock is offering a decent bearish entry point given its rebound from the August lows and recent failure at $22.00 and its 200-dma. Shares broke down under minor support at $20.50 yesterday while producing a new "sell" signal in its MACD indicator. Its P&F chart is already bearish with a $17.00 target and very clear resistance. Given what appears to be a new top in the market the bearish momentum in AMLN should pick up. We're going to target a drop to $18.00 with a secondary target near $17.00. We highly suggest that readers use a trigger under $20.00 and/or its simple 40-dma at $19.80. Annotated Chart: Picked on September 22 at $20.30 Gain since picked: - 0.00 Earnings Date 11/02/04 (unconfirmed) Average Daily Volume: 821 thousand --- Forest Labs - FRX - close: 43.49 change: -1.25 stop: 45.33 Company Description: Forest Laboratories' growing line of products includes: Namenda® (memantine HCl), an N-methyl-D-aspartate (NMDA)-receptor antagonist indicated for the treatment of moderate to severe Alzheimer's disease; Lexapro® (escitalopram oxalate), an SSRI antidepressant indicated for the initial and maintenance treatment of major depressive disorder and for generalized anxiety disorder; Celexa® (citalopram HBr), an antidepressant; Benicar® * (olmesartan medoxomil), an angiotensin receptor blocker indicated for the treatment of hypertension; Benicar HCT(TM) (olmesartan medoxomil hydrochlorothiazide), an angiotensin receptor blocker and diuretic combination product indicated for the second-line treatment of hypertension; Campral® (acamprosate calcium), a glutamate receptor modulator, indicated for the maintenance of abstinence from alcohol in patients with alcohol dependence who are abstinent at treatment initiation when used in combination with psychosocial support; Aerobid® (flunisolide), an inhaled steroid indicated for the treatment of asthma; and Tiazac® (diltiazem HCl), a once-daily diltiazem, indicated for the treatment of angina and hypertension. (source: company press release) Why We Like It: Forest Labs has been channeling lower with a steady series of lower highs for months. The latest oversold rebound almost filled the gap from September 1st when JPMorgan removed FRX from its Focus List. Now that FRX is rolling over again we want to take advantage of its position near resistance and open a bearish positions (hypothetically for us). RSI and stochastics have already begun to roll over and the MACD should be far behind. It's worth noting that while FRX's P&F chart is extremely bearish the $52 price target has been surpassed. We're going to use a stop loss just over the recent high at $45.33 and target a drop to $40.00 possibly lower. Annotated Chart: Picked on September 22 at $43.49 Gain since picked: - 0.00 Earnings Date 10/19/04 (unconfirmed) Average Daily Volume: 2.6 million --- LaserScope - LSCP - close: 19.85 change: -0.75 stop: 22.01 Company Description: Laserscope designs, manufactures, sells and services on a worldwide basis an advanced line of medical laser systems and related energy delivery devices for the office, outpatient surgical center, and hospital markets. (source: company press release) Why We Like It: The oversold bounce in LSCP is over and shares are rolling over under resistance at $22.00 and its simple 200-dma. Actually the exponential 200-dma has had more of an affect on the stock. LSCP has been suffering under a series of lower highs ever since it peaked back in April. Now its technical oscillators are turning bearish and its MACD is on the cusp of a new sell signal. We want to take advantage of the breakdown under $20.00. We'll start the play with a stop loss at $22.01, which is a little wide. Hopefully as LSCP moves in our favor we'll readjust the stop lower. Our short-term target is $17.50 but we're really shooting for the $15.50 level. More conservative traders might consider a stop loss near $21.00 instead. Annotated Chart: Picked on September 22 at $19.85 Gain since picked: - 0.00 Earnings Date 07/28/04 (confirmed) Average Daily Volume: 477 thousand ============ Closed Plays ============ Closed Bullish Plays -------------------- Maverick Tube Corp - MVK - close: 29.76 chg: -0.38 stop: 29.25 We haven't been stopped out yet but we feel that it's best to close the play in MVK now. Yesterday Deutsche Securities downgraded MVK from a "buy" to a "hold" and shares dropped under support at $30.00 only to bounce back above this pivotal level by the close. Today the stock sank back below the $30 mark to test technical support at the simple 40-dma. While there is hope that MVK could rally from $29.50 we're not going to bet on it. The afternoon bounce on Wednesday failed under the $30.00 mark and we're expecting more weakness by the end of the week. Picked on September 01 at $30.60 Gain since picked: - 0.84 Earnings Date 07/20/04 (confirmed) Average Daily Volume: 713 thousand ================================================================== High Risk/Reward (HR) Stock section ================================================================== ============ Closed Plays ============ Closed Bearish Plays -------------------- CTI Molecular Imaging - CTMI - cls: 8.16 chg: -0.05 stop: 9.01 To the best of our knowledge CTMI has not traded above the $9.00 level since September 2nd of this month. If you look at most of the intraday charts available you can see that and the spike to $9.00 last Friday. Unfortunately, a bad tick/bad trade at $9.22 is still showing up as the high on Friday and it has not been corrected. While we remain bearish on CTMI and expect the stock to continue to sink we cannot in good conscious keep the play open. If you think CTMI has more downside to go then by all means capitalize on it. Picked on August 15 at $ 9.67 Gain since picked: - 1.51 Earnings Date 08/05/04 (confirmed) Average Daily Volume: 322 thousand --- Priceline.com - PCLN - close: 21.25 chg: +1.65 stop: 21.05 Ouch! Now that's frustrating. PCLN was shaping up into a nice short candidate. Unfortunately the company issued good news last night and raised their Q4 estimates. Traders naturally responded positively and shares gapped open this morning to $20.25 before running to $21.68. We have been stopped out at $21.05. Picked on September 07 at $19.85 Gain since picked: + 1.40 Earnings Date 08/02/04 (confirmed) Average Daily Volume: 478 thousand ================================================================== Stock Splits ================================================================== Announcements ------------- None ================== 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 FITB Fifth Third Bancorp 49.38 +0.79 BNN Brascan Corp 30.86 +0.88 PD Phels Dodge 87.20 +1.31 LEN Lennar Corp 48.30 +1.06 KRI Knight-Ridder Inc 65.31 +0.94 PCU Southern Peru Copper 46.90 +0.70 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- ADBL Audible Inc 16.79 +1.86 CAMP Calamp Corp 7.80 +1.05 TRMM TRM Corp 19.40 +1.21 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- KBH KB Home 84.39 +1.03 STR Questar Corp 46.00 +3.00 TK Teekay Shipping 40.50 +1.08 NCEN New Century Financial 62.75 +1.37 EAC Encore Acquisition 32.56 +1.56 CWTR Coldwater Creek Inc 22.35 +1.15 PETD Petroleum Development 40.90 +4.50 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- C Citigroup 44.38 -1.27 FNM Fannie Mae 70.69 -4.96 MWD Morgan Stanley 48.72 -3.66 FRE Freddie Mac 66.40 -2.60 TEVA Teva Pharma 26.13 -1.07 PAYX Paychex Inc 30.63 -1.09 CDWC CDW Corp 57.44 -1.29 RMK Aramark Worldwide 23.44 -1.42 WEN Wendy's Intl Inc 33.34 -2.16 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- UPS United Parcel Service 73.39 -1.64 FDX Fedex Corp 85.21 -3.48 SCSC Scansource Inc 64.13 -4.18 BA Boeing Co 53.68 -1.02 SDA Sadia S.A. 54.30 -3.38 ================================================================= 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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