PremierInvestor.net Newsletter Wednesday 10-06-2004 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: Leaning into the Wind Watch List: Natural Gas to Games =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 10-06-2004 High Low Volume Adv/Dcl DJIA 10239.92 + 62.24 10240.14 10157.99 1.77 bln 1913/ 859 NASDAQ 1971.03 + 15.53 1971.04 1947.24 1.92 bln 1877/1116 S&P 100 547.89 + 3.41 547.89 543.38 Totals 3790/1975 S&P 500 1142.05 + 7.57 1142.05 1132.94 SOX 406.20 + 1.62 406.22 398.84 RUS 2000 592.66 + 5.32 592.66 586.55 DJ TRANS 3388.72 + 53.12 3388.72 3334.44 VIX 13.28 - 0.67 14.10 13.24 VXO (VIX-O)13.00 - 0.27 14.18 12.91 VXN 19.77 - 0.25 20.53 19.74 Total Volume 3,697M Total UpVol 2,652M Total DnVol 979M Total Adv 3790 Total Dcl 1975 52wk Highs 487 52wk Lows 51 TRIN 0.64 PUT/CALL 0.78 =============================================================== =========== Market Wrap =========== Leaning into the Wind Linda Piazza The market day didn't feel like one beset with heavy winds, but that was because the indices' strength matched the strength of those winds. When the winds abated late in the day, indices pitched forward. With hurricanes hitting the U.S. one after another during this hurricane season, all have watched evening news programs showing reporters leaning into wind-driven rain to deliver news about the hurricanes' expected trajectories. Wednesday morning, markets appeared to be leaning into winds caused by record highs on crude and warnings from AmerisourceBergen (ABC) and multiple tech stocks. Fannie Mae's Raines was scheduled to appear before a U.S. House Panel Meeting to discuss the company's accounting practices. The stalwart TRAN, the Dow Jones Transportation Index, and the weakened-but-attempting-to-recover DJUSHB, the Dow Jones US Home Construction Index, leaned far into the wind Wednesday morning. They tried to buffer markets and tug the lagging techs and healthcare stocks along with them. Late in the day, Verizon (VZ) and Computer Associates (CA) helped by giving positive capital expenditure guidance (VZ) and raising expectations (CA). Still, it was the TRAN's performance that most buffered the effect of those winds. When the winds abated, the indices leaped forward. Annotated Daily Chart of the TRAN: With Herculean effort the TRAN's performance and that of other indices finally managed to tug the SOX higher in the last hour of trading, although the SOX remains below its next breakout zone. Annotated Daily Chart of the SOX: The SOX may not be playing the leadership role in tech gains that it has in the past, however, and tech traders might look to the GHA and GSO, two sectors performing more strongly of late, for leadership either to the upside or downside. They posted 1.35 and 1.25 percent gains, respectively, in Wednesday's trading. With their help and the reluctant help of the SOX, the Nasdaq pushed above its 200-sma in late-day trading, although it remains below 1975 potential resistance. Annotated Daily Chart of the Nasdaq: Those currently in bullish positions should make plans to protect profits near 1975 and again near 2000. Those seeking new bullish positions should watch for retests and bounces from the 200-sma and that 19.1 percent retracement level or wait for a breakout over 2000. Those seeking new bearish positions should watch for a rollover beneath this week's low or wait for a potential rollover beneath 2000. Despite the TRAN's best efforts, it could not produce much of a breakout on its sister index, the Dow. Although the Dow did break out of a bull flag on the 30-minute chart, it couldn't break above Monday's high. Annotated Daily Chart of the Dow: The SPX did break above Monday's high. Annotated Daily Chart of the SPX: The day's economic numbers began as usual with information released by the Mortgage Bankers' Association at 7:00 EST. Last week's figures showed a 7.7 percent rise in refinancing activity, with refinancing activity up a more modest 2.7 percent for this reporting week. New applications for home loans remained flat, while the purchase index rose 2.2 percent. The DJUSHB rose from its 50-dma, closing 1.66 percent higher, but some consider that a bounce was due after the recent drubbing this index received. While the TRAN didn't wait around for the release of crude inventories, the American Petroleum Institute was delayed in releasing its figures, releasing them more than thirty minutes later than the Department of Energy due to a glitch in the new system the API has adopted to report those inventories. The API's figures differed as usual from the Department of Energy's. The API reported that crude stocks rose by 268,000 barrels, far less than the DOE's report of a rise by 1.1 million barrels. Both came in well below the expectation for a rise of 2.75 million barrels. Some thought that Hurricane Ivan's effect was still being felt. The hurricane damaged several oil rigs in the Gulf of Mexico, and they may not be able to ramp up production to meet the shortfall some anticipate. Crude hit the morning's $50.70 low as the release of the DOE's figures approached, and then quickly soared to new record highs. Some also blamed worries about Nigeria and winter demand for the higher prices. Previous to the DOE's inventories announcement, the Department of Energy had noted that U.S. petroleum demand was expected to rise 1.9 percent this year. The department anticipated home heating oil prices would rise 29 percent this winter. The department also noted that an anticipated 1.5 percent increase in demand for natural gas would help drive residential prices higher by an expected 11 percent, although natural gas stocks were expected to reach a 14-year-high when announced Thursday. Electricity demand was expected to rise by 1.7 percent. The Dow Jones Transportation Index, the TRAN, often a fair barometer of the market's reaction to rising crude costs, had been driving higher before the release, but took a blow as the inventories numbers were released. That blow proved to be only temporary, however, with the TRAN eventually closing 1.59 percent higher, at levels not seen since the summer of 1999. The API reported distillate inventories falling by 286,000 barrels, with the DOE reporting a drop of 2.1 million barrels. API reported gasoline stocks declining 337,000 barrels with the DOE reporting those inventories climbing by 600,000 barrels. The U.S. House Panel Meeting on Fannie Mae's (FNM) accounting issues opened today, adding to the ill winds as Armando Falcon Jr., Director of the Office of Federal Housing Enterprise Oversight, FNM's government regulator, testified that FNM chose not to follow accounting rules. FNM's CEO Raines denied that the company managed earnings, and the CFO testified that generally accepted accounting principles were met "at all times." After the close, retailers began announcing September's same- store sales reports, with those reports to continue Thursday morning before the bell. Hurricane winds impacted those reports, at least according to MW, Men's Wearhouse. Others avoided the easy hurricane excuse. Analysts in the sector commented that retailers in regions impacted by the hurricanes showed the same pattern as those elsewhere. SBUX same-store sales disappointed. Big Lots Inc. (BLI) warned that Q3 losses would be much wider than previously expected, with September's sales disappointing. Some retail analysts began trimming estimates of same-store sales for the sector, with Thomson First call lowering estimates of gains to 2.4 percent from its previous estimate of a 2.8 percent gain. Property and casualty insurance company United National Group (UNGL) was impacted by those hurricane winds, however, saying that Frances' impact would hurt earnings by 4-5 cents per share. Companies warning included WMAR, SPN and LAVA, with SPN saying that hurricanes caused ten days of downtime. Genentech (DNA) reported earnings after the bell and beat eps estimates. In after-hours trading, DNA traded at $51.15, up from the closing level of $50.25. SBC was also to report earnings, but no report had appeared at the time of this report. Indices appear to be holding a hurricane party. Watch futures' developments overnight to make sure the party continues. If it does, gains might continue into tomorrow morning, but watch carefully tomorrow afternoon for possible profit-taking ahead of Friday's jobs numbers and second presidential debate. Those currently in bullish plays should protect profits as the SPX approaches 1144-1146; the Dow, its 200-sma; the Nasdaq, 1975 and then 2000; and the TRAN, the top of its ascending regression channel. The TRAN approaches that channel's resistance now. Crude continues to charge higher, but travels a greater distance away from its 50-dma than it usually does. Markets may already be discounting an expected pullback or sideways consolidation to retest the 50-dma's support. So far, crude's upward trend remains intact, with each pullback honoring the previous swing high's support. If crude continues its upward pattern without violating the support of its 100-sma or previous swing highs, those long equities should perhaps retain some skepticism of gains. Earnings season is upon the markets now, and some companies might begin reporting the anticipated future effect of crude's rise. It's the outlook statements market participants should watch. Thursday's economic releases begin with the usual 8:30 release of jobless claims and continue with the 10:30 release of natural gas inventories and the 3:00 release of August's Consumer Credit. ================================================================= 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 --------------------------------- Williams Co - WMB - close: 12.95 change: +0.25 WHAT TO WATCH: There's a lot of interest in energy stocks these days and natural gas stock WMB is surging to new highs. The breakout over $12.50 looks positive and volume is rising on the rally, which is bullish. Traders can watch for a breakout over $13.00 or a dip to $12.50. The P&F chart is very bullish with a $22 target. --- United States Steel - X - close: 41.70 change: +1.21 WHAT TO WATCH: If you missed the entry point two days ago now you can buy the rebound from $40. X has broken out over major resistance at $40.00 and consolidated for a session but held new support/resistance at $40. Steel and commodity stocks have been very strong recently and now X has produced a bullish catapult breakout on its P&F chart with a $49 target. --- Scientific Games - SGMS - close: 19.88 change: +1.22 WHAT TO WATCH: The rally in SGMS surged to the $20.00 mark in mid-September and then shares began to consolidate. The consolidation appears to be over and SGMS is trying to breakout over the $20.00 mark. Given the intraday action on Wednesday's session we could see a breakout soon. Consider using a trigger over $20.09 and targeting a run to $22. The P&F chart is bullish and points to a $28.50. ========================================================== 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 10-06-2004 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: MACR, SPN, UCL, PSSI, LSCP High Risk/Reward Closed Bearish Plays: -- ETM 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 ================================================================== MACR - tech stock long - The breakout continues for MACR. Shares added another 5.2 percent on Wednesday with strong volume behind the move. MACR is very close to our $23.50-24.00 target range. Short-term traders can prepared to exit for a profit. We are raising our stop loss from $18.99 to $20.99. SPN - non-tech long - We are still suggesting that readers consider taking profits now in SPN even though the stock has not yet hit our profit target. UCL - non-tech long - Heads up! UCL is very close to our profit target at $44.00. We are ready to exit on an intraday spike higher. PSSI - non-tech short - Uh-oh! PSSI has almost completely reversed yesterday's losses. That's bad news for the bears. We are going to lower our stop loss to $10.51. LSCP - non-tech short - Heads up! LSCP is showing strength again with a bounce from $20.00. We are not suggesting new bearish positions and we would suggest traders exit the play if LSCP trades over $21.00 or its exponential 200-dma near $21.20. ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== ============ Closed Plays ============ Closed Bearish Plays -------------------- Entercom Comm. - ETM - close: 33.20 change: +0.29 stop: 33.25 It finally happened. Buyers managed enough momentum to push ETM past our stop loss at $33.25. The recent bounce has been fed by relatively low volume so we don't put a lot of confidence behind it but we do acknowledge that ETM is way over due for a bounce. Today's trade at $33.25 closes this play with a $3.75 drop. Picked on September 08 at $37.00 Gain since picked: - 3.80 Earnings Date 08/03/04 (confirmed) Average Daily Volume: 463 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 XOM Exxon Mobil Corp 50.03 +0.71 NTT Nippon Telephone 20.92 +0.58 BAC Bank of America 45.25 +0.53 IBM Intl Business Machines 88.04 +0.72 WB Wachovia Corp 48.24 +0.54 MER Merrill Lynch 51.61 +0.79 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- SGMS Scientific Games 19.88 +1.22 GLNG Golar LNG Ltd 17.60 +1.30 NTGR Netgear 13.51 +1.07 TOPT Top Tankers Inc 18.45 +1.04 ATPG ATP Oil & Gas 14.09 +1.24 EPEX Edge Petroleum 17.49 +1.44 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- UNP Union Pacific 61.54 +1.99 PCZ Petro-Canada 55.03 +1.68 DHR Danaher Corp 54.90 +2.90 AHC Amerada Hess 92.91 +2.48 PH Parker Hannifin 62.78 +1.79 CSX CSX Corp 35.42 +1.28 CELG Celgene Corp 63.14 +1.18 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- MRK Merck & Co 31.67 -1.76 RYAAY RyanAir Holdings 27.06 -1.01 RESP Respironics Inc 47.74 -1.43 APPX American Pharma 25.15 -1.96 ADTN Adtran Inc 20.79 -2.70 RMD Resmed Inc 44.20 -2.62 JAS Jo-Ann Stores 26.10 -2.45 TGI Triumph Group 31.88 -2.29 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- MIK Michaels Stores 58.20 -1.87 BRL Barr Labs 40.47 -1.58 INSP InfoSpace Inc 46.49 -3.76 UTHR United Therapeutics 34.01 -0.78 BGFV Big Five Sporting Goods 22.40 -0.35 ================================================================= 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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