Option Investor
Newsletter

Daily Newsletter, Wednesday, 10/13/2004

HAVING TROUBLE PRINTING?
Printer friendly version
PremierInvestor.net Newsletter               Wednesday 10-13-2004
                                                   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: Oil Slick
Watch List:  Industrials to Retailers and more

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
      10-13-2004           High     Low     Volume   Adv/Dcl
DJIA    10002.33 - 74.85 10127.17  9957.79 1.89 bln  821/1997
NASDAQ   1920.53 -  4.64  1948.01  1914.46 1.77 bln 1156/1838
S&P 100   535.48 -  3.74   541.94   533.55   Totals 1977/3835
S&P 500  1113.65 -  8.19  1127.01  1109.63
SOX       393.25 +  6.89   399.67   386.36
RUS 2000  569.42 -  7.29   580.74   568.51
DJ TRANS 3282.43 - 56.55  3359.80  3272.60
VIX        15.42 +  0.37    15.63    13.92
VXO (VIX-O)16.25 +  1.08    16.70    14.99
VXN        22.13 +  1.20    22.94    20.52
Total Volume 3,660M
Total UpVol  1,393M
Total DnVol  2,174M
Total Adv  1977
Total Dcl  3835
52wk Highs   80 
52wk Lows    62
TRIN       0.97
PUT/CALL   1.07
===============================================================

===========
Market Wrap
===========

	Oil Slick
Jonathan Levinson

Bulls lost their footing as oil staged a dramatic intraday 
reversal from lows below the 52 level, giving up gains across the 
indices and diving to mid-afternoon lows.  A hesitant rangebound 
bounce ensued, with equities finishing the day in light negative 
territory.

The rejections at both the day highs and lows lined up with solid 
volume on the indices, as the market delivered enough to confound 
bulls and bears alike.  Volatility increased overall, with the 
NDX volatility index (QQV) rising 4.75% to close at 21.15, while 
the OEX equivalent (VXO) tacked on a whopping 21.27%.  While it's 
tempting to ignore external factors such as options expiration 
week and just focus on the charts, I don't believe that this 
factor can be safely ignored in assessing the volatility data.  
With op-ex week nearing its crescendo, I'm inclined to take not 
just the volatility indices but even the index price charts with 
a grain of salt.



Daily Dow Chart


The Dow managed to close above 10,002.33 after keeping traders on 
the edge of their seats until the final second.  While the 
headline number may have closed above the 10K line, there's 
simply nothing bullish about the day's candle print.  The  
rejection at the high left an upper doji shadow, and what 
followed was the first daily close below the rising pennant 
support line since the August lows.  The bounce from above 9950 
left a bullish lower shadow as well, but the close below the 
rising support line on strong volume has all the makings of a 
downside breakout.  Below 9990, next support is at 9940-50, below 
which there's light support at 9860 before the stronger line at 
9800.



Daily S&P 500 Chart


The SPX went out at 1113.64%.  Like the Dow, it too printed the 
first sell signals of a daily cycle downphase.  This downphase 
launched from lower oscillator highs as indicated on the chart, 
which, combined with the higher price high gives bears a 
confirmed bearish divergence.  It closed below the rising support 
line at 1119, and if bulls fail to regain the line tomorrow, we 
should see a retest of 1110 on the way to 1104 and 1096 support.


	Daily Nasdaq Chart


Relative to its peers, the Nasdaq is a beacon of strength on the 
daily chart, with both the rising support line from August and 
even yesterday's lows holding firm.  I suspect that the 
widespread angst over the oil rally is sparing the tech-centric 
Nasdaq, though I don't expect to see the Naz diverge from its 
peers for long.  It too is sporting a bearish oscillator 
divergence and fresh sell signals today.  Below its closing 
support line at 1920, there's trendline support at 1912 and 
confluence support at 1895, followed by 1880 and 1840-45.



	Weekly TNX Chart


Bonds traded in a world of their own again today, with ten year 
treasuries gapping lower at the open and then rising for the 
remainder of the day to take out yesterday's high.  For the day, 
ten year note yields (TNX) declined 2.4 bps or .59% to close at 
4.078%.  On the weekly chart, this week's TNX decline occurs in 
the context of an attempted weekly cycle upphase from a higher 
price low.  However, the rise off the 2003 yield low/treasury 
high is taking the shape of a broad bearish rising wedge which, 
if 3.9% support fails, projects back to the 3.05% lows.  Traders 
will be watching the 3.9%-4.25% range.  While the weekly cycle 
favors an upside move, a break of either level should be 
directional.



Weekly chart of Crude oil


Crude oil opened very weak, extending yesterday's key downside 
reversal and breaking below 52 after posting a record high at 
$54.45 yesterday.  This reversal followed the International 
Energy Agency's comments yesterday to the effect that oil demand 
will grow by 2.71M bpd this year, the largest increase in 24 
years, but that demand should slow to a 1.45M bpd increase in 
2005.  The IEA also noted that China is seeking to reduce its 
consumption of oil via conservation and alternative sources of 
energy.  The fact that oil has become overbought on multiple 
timeframes following the nearly vertical price climbs in recent 
sessions no doubt contributed to the morning weakness as well.

The weakness was not to last, however, and the bearish arguments 
sound hollow.  Supply remains tight and the market sensitive to 
supply disruptions.  Currently, more than a quarter of production 
from the Gulf of Mexico is still trying to recover from Hurricane 
Ivan, and the Nigerian labor disputes have yet to be resolved.  
Perhaps more significantly, however, the steep weekly uptrend on 
the 3 year chart, with the price of crude nearly tripling during 
this period, has yet to be seriously tested by this week's 
pullback.  

These bullish factors reasserted themselves in the early
afternoon, with Nymex crude bouncing from a session low of 51.475 
to close at 53.625.  Oil traders will be watching the tomorrow's 
releases of this week's inventory updates from the Energy 
Department and the American Petroleum Institute, delayed because 
of the Columbus Day holiday.

The API released its “October Monthly Statistical Report” today, 
notably reporting that US production in September is 15% below 
its September 2003 level to 4.85M bpd, its lowest monthly level 
in 50 years.  The report attributed the drop to Hurricane Ivan, 
with refinery activity on the Louisiana Gulf Coast falling to 65% 
of capacity.  This was exacerbated by the utilization rate 
holding above 90%.  This remains the “story” for oil- high 
inelastic demand causing prices to remain vulnerable to any 
disruption in supply.

It was a quiet day for economic reports, with the real action 
commencing tomorrow with the August trade balance, September 
export prices ex-agriculture and import price ex-oil, as well as 
initial claims for the week ending October 9th.  The most 
significant data released today was from the Mortgage Bankers 
Association, which announced that overall demand for US Mortgages 
fell, with applications dropping 9.2% last week.  The Purchase 
Index, which measures mortgage applications for new homes, fell 
4.9%.  The Refi Index dropped 14.2%.  This is generally volatile 
data from week to week, but the decline in mortgage activity 
occurred alongside a decline in rates- usually, we would expect 
to see the reverse.

Blue chips got a boost in the premarket from MCD, which reported 
that Q3 earnings rose 42% on a pro forma basis.  The company 
reported earnings of 61 cents per share, blowing away analyst 
forecasts of 49 cents per share, with sales at namesake 
restaurants rising 7.3% in September and 5.8% for the quarter.  
MCD supersized its gains, closing higher by 4.61% to close at 
28.82.

HDI announced record quarterly earnings, with Q3 net income up 
more than 20% to 77 cents per share, beating average analyst 
expectations by 2 cents.  Revenue rose nearly 15% from 1.13B to 
1.3B in Q3 on sales of $996.6M.  The company cited higher gross 
margins resulting from US Dollar weakness and improved 
operational efficiency.  However, projections for slower sales 
and a drop in US retail sales of motorcycles dominated, with the 
stock getting hit for a 1.71% loss to close at 58.72.  The 
company noted that 2003 saw a surge in sales for Harley 
Davidson's Centennial anniversary, which contributed to this 
year's relative drop.  

HMT came in with good news, reporting a reduction of its 
quarterly net loss from 35 cents per share in Q3 2003 to 17 cents 
per share or $47M.  The hotel owner cited increased revenues 
resulting from a hike in room rates.  The stock bucked the 
broader market, rising .41% to close at 14.54.

After the bell, NVLS announced Q3 earnings of 45 cents per share 
on sales of 415.9M which amounted to 38 cents per share net of 
one-time benefits, meeting analyst expectations.  NVLS got 
clocked on the announcement, dropping 3.24% afterhours from  its 
close of 26.88 (an intraday gain of 1.28% preceding the news).  
This amounted to a paragon of strength compared with SNDK, which 
was down 16.03% as of this writing at 23.68 after the company 
announced a 5 cent miss for Q3, with net earnings of 29 cents on 
sales of 408M from 281M one year ago.  QLGC was lower by 1.06% at 
29.80 afterhours after beating expectations of 36 cents by 4 
cents, while AAPL was up 7.99% at 41.35 after blowing away 
expectations for 18 cents on 2.15B revenue with earnings of 27 
cents on 2.35B in revenue.

For tomorrow, as if the technical picture wasn't cloudy enough, 
there's the array of economic data noted above, scheduled for 
release at 8:30.  While the financial press correlated the sudden 
dollar drop in the afternoon with the spike higher in oil, I'm 
far from convinced that the oil move prompted the dollar's dive.  
In fact, the forex market is by far the larger market.  Whether 
it was speculation or sudden inspiration as to the contents of 
tomorrow morning's economic data, we can only guess.  The 
indicators are pointing south, but they were yesterday morning 
before the enormous runup that reversed today.  With op-ex week 
in full-swing, technical signals are less reliable than usual.  
For the time being, however, the bears appear to be in control of 
the Dow and SPX with the Nasdaq trailing behind, while the bulls 
remain in control of crude oil.


=================================================================
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
---------------------------------

Trinity Industries - TRN - close: 29.14 change: -0.99

WHAT TO WATCH: Uh-oh!  This industrial production company (who 
makes things like railway cars) is suddenly seeing some strong 
profit taking.  TRN was a steady climber from its August lows 
through early October.  Yet now shares are breaking down.  The 
MACD is in a new sell signal and TRN just broke down under round-
number support at $30 and its simple 200-dma.  Over the past year 
TRN has been trading in a very wide descending channel.  The 
recent peak was near the top of the channel.  Bears can target a 
drop toward $25.




---

HCA Inc - HCA - close: 36.18 change: -1.19

WHAT TO WATCH: We strongly considered adding HCA to the play list 
tonight as a short candidate.  The failed rally at its simple 10-
dma near $37.70 looks like a very strong reversal.  Plus, the 
move was fueled by huge volume several times over the average.  
The whole move was started by HCA's earnings warning this 
morning.  Given the new 11-month low we are expecting to see some 
follow through.  The P&F chart points to a $29 target.




---

MAY Dept Stores - MAY - close: 24.29 change: -0.21

WHAT TO WATCH: Some of the retail stocks have been suffering 
lately and MAY is now down about six days in a row.  The stock is 
nearing the bottom of its trading range near $24.00.  Bulls can 
watch for a bounce but given the overall trend traders may want 
to watch for a drop under support.  Such a decline would send MAY 
to new one-year lows.  The P&F chart is very bearish with an $11 
target.   




---

Coach Inc - COH - close: 39.90 change: -0.58

WHAT TO WATCH: COH is another retailer that has been suffering 
lately.  In the last two sessions COH has broken down under 
technical support at its simple 50 and 200-dma and the 
exponential 200-dma, plus the $40.00 mark and all of this on 
rising volume.  The decline looks like a bearish entry point to 
short the stock with a $36.00-35.50 target.  The P&F chart is 
bearish with a $27 target.  Be sure to plan any trade knowing 
that COH is due to report earnings on October 26th. 




---

PETsMART - PETM - close: 29.95 change: +0.79

WHAT TO WATCH: If you're looking for a bullish candidate keep an 
eye on PETM.  Shares have recently bounced from technical support 
at its simple 200-dma and the stock appears to be forming a 
bottom or a base of support between $28 and $30.  In the last 
couple of sessions PETM has managed to rally toward the $30 mark 
and its simple 100-dma.  Consider using a move over $30.50 as an 
entry point to go long and target the June highs under $34.





-----------------------------------
RADAR SCREEN - more stocks to watch
-----------------------------------

BEAS $7.43 +0.06 - BEAS saw some follow through on yesterday's 
rebound from the bottom of its rising channel.  We're still 
bullish and think BEAS can trade to the top of its channel.

DLTR $25.29 -0.18 - DLTR looks vulnerable to more selling here 
with two failed rallies near $26.11 in three days.  

EC $26.96 -0.13 - EC has been falling on very strong volume.  It 
bounced today but we would watch for a new low under $26.50.

ALVR $14.98 +1.47 - ALVR soared to a new seven-month high on huge 
volume.  Consider buying a dip.

DJ $42.74 +1.44 - DJ has surged higher in the last two sessions 
and today's 3.4% gain is a breakout to new two-month highs.



==========================================================
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 10-13-2004
                                                   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:  MACR, MLNM

Active Trader (Non-tech Stocks)
  New Bearish Plays:    TIF

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 -
  Heads up!  MACR bucked the market weakness today and added
  another 2.12 percent.  The stock is poised to breakout over 
  resistance at $23.00.  Remember that our exit/profit target is
  the $23.50-24.00 range.  
 
 
MLNM - high risk short -
  Entry point!  MLNM fell 2.5 percent today and broke down to a new
  relative low and under its simple 50-dma.  Shares actually hit $11.99
  late in the session, which happened to be our trigger to short the stock.


==================================================================
Active Trader (AT) Non-Tech Stock section
==================================================================

---------
New Plays
---------


  New Bearish Plays
  -----------------


Tiffany & Co - TIF - close: 29.00 change: -0.76 stop: 31.51

Company Description:
Tiffany & Co. operates jewelry and specialty retail stores and 
manufactures products through its subsidiary corporations. Its 
principal subsidiary is Tiffany and Company ("Tiffany"). Founded 
in 1837, Tiffany now operates more than 140 TIFFANY & CO. retail 
stores and boutiques in the Americas, Asia-Pacific and Europe and 
engages in direct selling through Internet, catalog and business 
gift operations. The Company's Specialty Retail operations 
include consolidated results from retail ventures operated by 
subsidiaries other than Tiffany under separate trademarks or 
trade names. Worldwide sales were $2.0 billion in 2003.
(source: company press release)

Why We Like It:
We like TIF as a short because it's a great relative strength 
play. Correction - it's a great lack of relative strength play.  
The stock has been sinking under a long-term trend of lower highs 
for months.  The September peak was a failed rally under its 
simple 50-dma and the stock has slowly consolidated lower under 
the trendline (see chart) until four days ago when the stock hit 
a new relative low on above average volume.  We don't know why 
TIF is dropping other than concerns over retail in general and 
thoughts that jewelry may not do well with the economy slowing.  
Technically the MACD is in a new sell signal and the P&F chart is 
bearish.  Let us offer at least two caveats.  First the stock is 
long-term oversold (but in contrast the trend is your friend, 
right?).  Second, the P&F chart's bearish target has already been 
achieved but then again they're just targets and they can be 
exceeded.   We're patient so we're going to target a drop towards 
$25.00-24.00 but we're not going to hold over the November 
earnings report.

Annotated Chart:

 


Picked on October 13 at $29.00
Gain since picked:      - 0.00
Earnings Date         11/11/04 (unconfirmed)
Average Daily Volume:      1.3 million 




==================================================================
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

FNM     Fannie Mae                 68.77     +0.51
MCD     McDonald's Corp            28.86     +1.31
STI     Suntrust Banks             69.49     +0.54
XL      XL Capital Ltd             73.94     +0.60
AXS     Axis Capital               25.89     +0.68
RE      Everest Re Group           76.50     +1.29

---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------

ALVR    Alvarion Ltd                14.98     +1.47
JUPM    JupiterMedia                19.88     +2.82
ENER    Energy Conversion Devices   18.40     +2.27

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
INFY    Infosys Tech.              60.38     +1.49
STJ     St. Jude Medical           76.06     +1.06
DJ      Dow Jones & Co             42.74     +1.44
ADS     Alliance Data              42.10     +1.41
LNCR    Lincare Holdings           36.99     +5.68
PETC    Petco Animal Supplies      36.02     +2.02
OZRK    Bank of the Ozarks         31.10     +1.33

-------------------------------------------
Breakout to Downside (Stocks over $20)
-------------------------------------------

COP     ConocoPhillips             83.01     -2.39
SLB     Schlumberger Ltd           65.22     -1.35
ACN     Accenture Ltd              23.93     -2.65
GCI     Gannett Co                 81.90     -1.35
HCA     HCA Inc                    36.18     -1.19
DE      Deere & Co                 59.57     -2.62
PD      Phelps Dodge               83.10     -8.64
AU      Anglogold Ashanti          36.17     -1.10
N       Inco Ltd                   35.26     -2.24

-----------------------------------------
Recently Overbought With Bearish Signals (Stocks over $20)
-----------------------------------------

OXY     Occidental Petroleum       54.91     -2.04
PBR     Petroleo Brasileiro        35.03     -1.43
SYMC    Symantec                   53.00     -2.38
APC     Anadarko Petroleum         66.92     -1.21
APA     Apache Corp                50.58     -1.06
UNP     Union Pacific              60.33     -1.18
KMG     Kerr-Mcgee                 56.71     -1.97
NUE     Nucor                      88.61     -4.49


=================================================================
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.








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