PremierInvestor.net Newsletter Monday 09-27-2004 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: Lower Highs, Lower Lows Watch List: Tech, Biotech and more! =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 09-27-2004 High Low Volume Adv/Dcl DJIA 9988.54 - 58.70 10046.65 9985.37 1.54 bln 902/1918 NASDAQ 1859.88 - 19.60 1871.94 1858.88 1.31 bln 833/2177 S&P 100 531.02 - 3.35 534.37 530.84 Totals 1735/4095 S&P 500 1103.52 - 6.59 1110.11 1103.24 SOX 376.96 - 5.59 383.47 375.67 RUS 2000 558.36 - 7.61 565.97 558.36 DJ TRANS 3177.35 - 24.76 3201.29 3166.94 VIX 14.62 + 0.34 15.06 14.55 VXO (VIX-O)14.30 + 0.16 14.76 14.07 VXN 21.92 + 0.82 22.34 21.73 Total Volume 2,864M Total UpVol 637M Total DnVol 2,203M Total Adv 1735 Total Dcl 4095 52wk Highs 107 52wk Lows 95 TRIN 1.68 PUT/CALL 0.99 =============================================================== =========== Market Wrap =========== Lower Highs, Lower Lows Jonathan Levinson The indices gapped lower today and failed at or just below Friday's lows. A narrow range emerged following the gap open, but an afternoon breakdown drove the indices below the intraday range to finish at the lows. Breadth was negative and volume was light, with declining volume exceeding advancing volume 2.98:1 on the NYSE and 3.92:1 on the Nasdaq. Volatility rose, with the OEX Volatility Index (VXO) adding 6.72% to close at 14.30 and the QQQ Volatility Index (QQV) +6.16% to close at 19.99. Daily Dow Chart The daily chart of the Dow shows today's break below 10000 completing Friday's bearish consolidation at the lows. Price is walking down the lower daily Bollinger band in what is so far a strong daily cycle downphase. 9950-60 is next support, below which bears will be targeting the August lows. Daily S&P 500 Chart The SPX is in the earlier stages of its daily cycle downphase, still working on support from 1096-1102. Below this level, the downphase will strengthen, with next support in the low 1080s. 1112-1115 is new resistance. Daily Nasdaq Chart The Nasdaq is showing a bearish unfilled breakaway gap this morning, with the daily cycle downphase just getting started. Support below is at 1850-55, below which 1825-30 comes into view. Note the pattern of lower highs and lower lows from the daily cycle over the past 6 months. It was a light day for economic news, with New Home Sales as the only major release. The Commerce Department reported that new home sales in the US rose 9.4% to an annual rate of 1.184M homes (seasonally adjusted). This was the largest jump in 4 years, with 404,000 new homes up for sale, which represents an inventory of 4.4 months at August's sales rate and the highest level in 25 years. The median price of a new home fell from $214,400 to $208,900, still a 9.7% year-on-year increase but the lowest median price in 8 months. Standard & Poor's announced its estimate for Q3 SPX operating earnings at $16.42, which represents a 13.9% increase from Q3 2003. It's estimate for Q4 is for a 15.5% rise over 2004's levels. Weekly TNX Chart Ten year treasury bonds pulled back briefly on the New Home Sales news, but the decline proved to be a mere pause in the morning's gains. Ten year note yields (TNX) continued lower through 4% and failed on a bounce attempt back to that level to close lower by 3.4 bps at 3.997%. The weekly chart of TNX shows descending trendline support in play at current levels, while the rising support line connecting the lows of the past 18 months is just below in the 3.85% area. A break below that lower line would suggest a bear wedge breakout targeting 3.55% on the way to a downside objective of 3.05%. Weekly chart of Crude oil Investor awoke to crude oil trading north of $49 per barrel today, with crude futures reaching a new record high of 49.75 on the Nymex this morning. This time it was concerns over Nigeria, the number five OPEC producer, where rebels pushing for political reforms said that they would seek to extend the current uprising to the countries entire southern delta oil region. Royal Dutch/Shell closed down their 30,000 bpd output as a precaution. Nigeria had already been forced to cut back from its peak capacity of 2.55 mbpd due to aging facilities, and the current disruptions compound existing factors in Nigeria in a climate of global supply concerns and strong demand. The weekly chart of Nymex crude, whose most recent green candle is comprised only of today's data, points an unequivocally bullish picture. Current support is at 48, followed by 46.50. For the day, Nymex crude close higher by 80 cents or 1.64% at 49.675, a new record close. Nigeria wasn't the only fly in the ointment. Insurgent forces in Iraq attacked the oil ministry building Saturday, causing no injuries and minor damage. Iraq's export levels remain at relative highs for the year despite the various attacks on production facilities. OPEC continues to produce oil at 25 year high levels, but traders and analysts cite an absence of excess capacity with which to cushion external shocks such as the recent Nigerian developments. Again referring to the weekly chart, this year's rally has merely steepened an already bullish trend, and I'm personally not persuaded by arguments attributing the rally in oil to terrorism or other such purely external factors. In a report to its private clients released today, Morgan Stanley stated that it believes "crude oil could reach $61 before a meaningful sell-off occurs. The Amex Airline Index ($XAL) fell 4.01% or 1.72 to close at 41.18, with AMR losing 6.69% to close at 6.97, a new 52-week low. Weekly chart of Amex Airline Index ($XAL) In other news, UBS reported that its Index of Investor Optimism, maintained in collaboration with Gallup, declined to a 4-month low of 74 in September from 77 in August. 56% of investors polled believe that now is a good time to invest in the financial markets, down from 60% in August, though expected average rates of return rose from 9.3% in August to 10.1% in the current report. In corporate news, FNM was announced its agreement with its regulator, the Office of Federal Housing Enterprise Oversight, to create a 30% capital surplus within 270 days and review its internal accounting controls. FNM's minimum capital requirement is 2.5% of assets plus 0.45% of off-balance-sheet/derivative obligations, which Reuters reported to be equal to approximately $31B based on most recent data. The company agreed to submit to the OFHEO with 45 days details of strategies to meet these new commitments and their impact on the company. This comes in the wake of Wednesday's OFHEO charges that FNM has been employing improper "cookie jar" accounting methods to smooth earnings and, on at least one occasion, deferred its reporting of expenses, possibly to reach bonus compensation targets for management. The SEC announced that it is conducting an inquiry into these findings. Morgan Stanley had downgraded FNM earlier in the morning to equal weight from overweight, citing uncertainty from the ongoing OFHEO examination and "a wide range of possible outcomes", and Prudential followed with its own downgrade to "neutral" following the announcement. Later in the day, it was announced that a subcommittee of the House Committee on Financial Services will hold a hearing titled "The OFHEO Report: Allegations of Accounting and Management Failure at Fannie Mae" will be convened on Oct. 6 at 10AM EST. Notwithstanding all of the foregoing, FNM's ticker showed some much needed green following last week's washout, closing higher by 1.51% at 66.50. Hurricane Jeanne moved out of Florida today, leaving at least 4 people in the State and approximately 5.2M people without power. Reuters reported that the storm dropped up to 10 inches of rain, and a close friend of mine in Florida told me that crews had yet to clean up much of the debris left by Ivan. Sewage and drainage systems were waterlogged before Jeanne swept through, and flooding remains a serious concern. Current damage estimates are between $4B and $8B. The President declared a major disaster for the state, rendering it eligible for federal aid. While the Orlando/Orange County Convention and Visitors Bureau said that its tourism areas were unaffected, operational and open for business, investors sold shares in DIS, which closed 1.19% lower for the day at 23.18. EMRG announced that it is redirecting customer service operations from its Sebastian FL location to its Fort Worth, TX branch. Tampa Electric, a division of TE, announced that its infrastructure has sustained extensive damage in eastern FL, and that 228,000 of its customers are without power. Insurer ANAT announced that the combination of Charley, Frances and Ivan will cost its subsidiaries $22M in pre-tax earnings, with total gross losses estimated at $37.2M, part of which will be recovered from the Florida Hurricane Catastrophe Fund and part from its reinsurance agreements. Insurer EMCI estimated its losses at $6.9M, which will translate to an earnings hit of $4.5M. Both EMCI and ANAT had not yet tallied the damage resulting from Hurricane Jeanne. BLS reported that 30,000 of its customers in Georgia have experienced service interruptions due to Hurricane Jeanne. In other news, TOM got smoked for 21.79% or 2.87 to close at 10.30 on news of a federal grand jury subpoena from the US Attorney, examining the commission rates paid by its US subsidiary to its non-US subsidiary since 1990. Pharmaceutical company NSTK rose 69.90% or 5.41 to close at 13.15 on news of a contract with Merck to develop a nasal spray treatment for obesity. Tomorrow's lone economic report is Consumer Confidence for September to be released at 10AM, estimated at 99.5 and down from August's 98.2. With oil mere pennies away from the $50 mark and getting a lot of attention, with the volatility indices beginning to rise but still in the range of multiyear lows, with S&P announcing optimistic expectations for Q3 earnings, my current bias is aligned with the daily cycle oscillators on the indices. With the previous daily cycle upphase failing from its third lower high in the past 6 months, the trend on this timeframe remains to the downside. The current daily cycle downphase suggests a strategy of shorting overbought bounces on the 30 minute or 60 minute cycles with stops just above resistance. Until it reverses, this cycle should continue to deliver a pattern of lower highs and lower lows on these intraday timeframes. ================================================================== 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 --------------------------------- Hyperion Solutions - HYSL - close: 33.08 change: -1.92 WHAT TO WATCH: We've mentioned HYSL before and now the stock has broken its long-term trendline of support in addition to breaking support at the $34.00 level. Aggressive traders can chase it here but patient types can wait to see if HYSL bounces back toward $34.00 and then consider a short entry on the bounce. The latest drop has produced a double-bottom breakdown on its P&F chart with a $28.00 target. We may add HYSL to the play list tomorrow if conditions look favorable. --- Digene Corp - DIGE - close: 25.37 change: -0.84 WHAT TO WATCH: The oversold bounce from the August gap down failed under the $28 level. Now DIGE has been consolidating sideways between $25 and $28 for over a month. Yet the most recent rally is now suffering under the simple 40-dma and DIGE is suggesting it could breakdown under support at $25.00-24.70. Watch for a breakdown and target $21-20. --- Escalon Medical - ESMC - close: 11.95 change: -1.28 WHAT TO WATCH: The August to September rally in ESMC has failed near the $15.00 level. Now the stock is rolling over and has broken support at its simple 200-dma. Technical oscillators are bearish and its MACD indicator is extremely close to a new sell signal. We would look for ESMC to retest support at the $10.00 mark (maybe lower). --- Redback Networks - RBAK - close: 5.11 change: -0.59 WHAT TO WATCH: After three weeks of trying RBAK could not breakout over resistance near $6.50. Now the stock has broken support near $5.50 and its simple 40, 50, 100 and 200-dma's. Aggressive traders could target a drop back toward $4.25-4.00. The P&F chart is bearish and points to a $2.00 target but we would expect the $4.00 level to act as tough support. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- CIG $20.76 +1.03 - This electric utility is breaking out to new highs over resistance at $20.00. CHINA $4.60 -0.40 - China.com has fallen 8 percent on Monday on strong volume. The next stop could be the $4.00 region. CALM $10.93 -1.12 - CALM has been stuck in a trading range between $10 and $13 for a couple of months now. Watch for a possible breakdown under $10.00. ================================================================= 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 09-27-2004 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: IMN, PHTN, ETM, AMLN, LSCP Stock Splits Announcements: DVN 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 ================================================================== IMN - tech stock short - Heads up! IMN finally broke down and its MACD is really showing the new sell signal now. PHTN - tech stock short - Good news! PHTN dropped 2.74 percent and broke down under round-number, psychological support at the $20.00 mark. ETM - non-tech short - ETM came very close to our exit at $32.00 with today's low at $32.63. Prepare to exit. AMLN - non-tech short - Good news! AMLN dropped more than 2 percent on Monday and broke down under the $20.00 mark. We are lowering our stop loss from $22.01 to $21.26 LSCP - non-tech short - More good news! LSCP declined 3.8 percent on Monday to hit new three-week lows near $19.00. ================================================================== Stock Splits ================================================================== DVN energizes 2:1 split Shortly after this evening's closing bell Devon Energy Corp. (AMEX:DVN) announced that its Board of Directors had approved a 2- for-1 stock split of its common shares. The stock split will take the form of a stock dividend payable on November 15th, 2004 to shareholders on record as of October 29th. Post-split DVN will have approximately 485 million shares outstanding. The company also reported plans to move its listing from the American exchange to the New York Stock Exchange. Plus, DVN plans to begin a stock buy back program. About the company: Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration, production and property acquisitions. Devon is the largest U.S.-based independent oil and gas producer and is included in the S&P 500 Index. (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 FNM Fannie Mae 66.50 +0.99 STI Suntrust Banks Inc 69.25 +0.63 SU Suncor Energy 31.06 +0.67 AET Aetna Inc 95.96 +0.88 BSC Bear Stearns Cos 91.99 +1.88 MDC M.D.C.Holdings 74.68 +1.30 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- SCS Steelcase Inc 14.50 +1.17 IMA Inverness Medical Tech 19.27 +1.40 SYPR Sypris Solutions 14.23 +1.14 NSTK Nastech Pharma 13.15 +5.41 PARL Parlux Fragrances 12.11 +1.49 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- WYNN Wynn Resorts Ltd 50.08 +2.29 KBH KB Home 85.54 +2.02 UPL Ultra Petroleum Corp 49.61 +3.31 THX Houston Exploration 58.35 +1.17 TXI Texas Industries 51.40 +3.72 ATW Atwood Oceanics 48.14 +1.62 DWSN Dawson Geophysical 21.28 +1.72 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- STA The St. Paul Travelers Co 32.73 -1.59 DST DST Systems 43.51 -1.49 JBLU JetBlue Airways 20.56 -1.31 TBL Timberland Co 55.87 -2.25 LEE Lee Enterprises 44.89 -1.29 THO Thor Industries 25.90 -1.27 HYSL Hyperion Solutions 33.08 -1.92 ISRG Intuitive Surgical 24.97 -1.10 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- BAK Braksem Sa 31.30 -1.02 WGO Winnebago Industries 33.72 -2.10 GLDN Golden Telecom 28.62 -1.18 ALL Allstate Corp 47.41 -0.84 DOX Amdocs Ltd 21.54 -0.62 CMP Compass Minerals Intl 21.71 -0.46 SEB Seabord Corp 609.99 -25.00 ================================================================= 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 (c) 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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