PremierInvestor.net Newsletter Wednesday 10-20-2004 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: Bull in a China Shop Watch List: Tech stocks to insurance and more =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 10-20-2004 High Low Volume Adv/Dcl DJIA 9886.93 - 10.69 9895.70 9804.19 2.12 bln 1520/1269 NASDAQ 1932.97 + 10.07 1934.32 1910.83 1.65 bln 1672/1307 S&P 100 530.72 - 0.27 531.15 526.62 Totals 3192/2576 S&P 500 1103.66 + 0.43 1104.09 1094.25 SOX 393.36 + 5.07 396.70 382.91 RUS 2000 570.13 + 3.46 570.35 562.82 DJ TRANS 3386.74 + 41.40 3387.07 3337.15 VIX 14.85 - 0.28 15.53 14.80 VXO (VIX-O)15.10 - 0.53 16.25 15.05 VXN 20.65 - 0.19 21.36 20.35 Total Volume 3,770M Total UpVol 2,046M Total DnVol 1,659M Total Adv 3192 Total Dcl 2576 52wk Highs 101 52wk Lows 100 TRIN 0.94 =============================================================== =========== Market Wrap =========== Bull in a China Shop Linda Piazza In a twist on the usual version of the bull-in-a-china-shop story, today China delivered a blow to bulls. Fears about China's slowdown, perhaps to be revealed in the GDP number to be released this week, smashed overnight markets. Almost all posted losses. The dollar dropped to new recent lows against both the euro and the yen. Coming into Wednesday's trading, many must have wondered if China would do the same to U.S. markets, but we had a few plate throwers of our own. U.S. futures showed no sign of reacting as overseas markets had, even climbing off the low reached in after- hours Tuesday night as Motorola lowered its forecast. Whirlpool perhaps cast that first plate at the bulls' muzzles. The company used the wee hours of the morning to trim its outlook, citing high commodity costs. By the time cash markets opened, JP Morgan (JPM), Pfizer (PFE) and Coca-Cola Bottling Consolidated (COKE) had hurled plates at the bulls, with those missiles taking the form of disappointing earnings or lowered expectations. Citigroup was rumored to be considering a corporate reshuffle, the SEC's probe of Fannie Mae (FNM) had been termed a formal investigation and Spitzer broadened his probe into bidding practices to include the health insurance sector. By the time the plate-throwing was over, bulls were backing out of the shop, stampeding off before the crude inventories could be released, tiptoeing tentatively back afterwards. Annotated Five-Minute Chart of the SPX: When seen on a daily chart, this action produced a bullish hammer, but MACD continued its turn down through the signal line, its bearish outlook unchanged as yet. Horizontal S/R and the 200-ema provide benchmarks by which to assess bullishness and bearishness in this index. Annotated Daily Chart of the SPX: While all movements of the SPX Wednesday could not be pegged on crude inventories, the release of those inventories clearly affected the SPX's behavior near 10:30. Those inventories showed declines of 1.9 million barrels in distillates according to the Department of Energy and 1.2 million barrels according to the American Petroleum Institute. Declines in distillate inventories were expected, but declines in gasoline inventories weren't, and those declined 700,000 barrels according to the DOE and 2.4 million barrels according to the API. That decline sent the average price of regular unleaded gasoline to $2.019 per gallon. Crude inventories climbed 1.2 million barrels according to the DOE but fell 972,000 barrels according to the API. Market watchers deemed those numbers disappointing. Only a loan from the Strategic Petroleum Reserve saved the DOE from having to report a drop in crude inventories, some mentioned. The disappointment in inventories numbers sent crude costs higher again. Annotated Weekly Chart of Crude Futures for December Delivery: Perhaps inventory numbers weren't the only influence on crude prices. Crude futures for November delivery stopped trading today. During the last opex cycle, shorts drove the contract higher as they rushed to cover after it became apparent that the expected pullback wasn't going to occur. After the turnover to the November contract, crude futures did pull back for a few days before shooting higher again. Market watchers should perhaps be on the lookout for similar behavior this cycle. A pullback in crude futures might lift some pressure from the equities, but damage may already have been done, as was apparent by the SPX's drop below 1100 and close at resistance after the rebound Wednesday. Some reporting companies cite higher commodity costs when they list their concerns about the next quarter or pressures during the just-concluded one. The XAL, the Airline Index, has been in a tailspin through the summer, and may now be forming an ominous bearish right triangle at the bottom of its decline. Annotated Daily Chart of the XAL: While there's nothing yet to encourage bulls in that sector, one beaten-down sector does offer hope of at least an oversold bounce, if only New York Attorney General Eliot Spitzer would give his plate-throwing arm a little rest and allow sector bulls to venture forward again. Annotated Daily Chart of the IUX: Another beaten-down sector showed promise, too, or did it? Annotated Daily Chart of the SOX: These diamond formations typically form at market tops rather than market bottoms, but can occasionally serve as continuation rather than reversal patterns. Be forewarned that the formation suggests weakness rather than strength, but as always wait for price to tell you what direction the breakout will occur. Be prepared to be whipsawed by a false breakout. The Nasdaq sports a similar formation. Although the Nasdaq's version isn't as cleanly formed, it's somewhat ominous that the diamond forms under the 200-sma's resistance. Annotated Daily Chart of the Nasdaq: The Russell 2000 also sports a diamond shape at the top of its climb. Annotated Daily Chart of the Russell 2000: Although the Russell 2000, SOX, Nasdaq, and SPX, were able to post gains, minimal in the case of the SPX, the Dow may have suffered the biggest blow. Dow bulls spent the day dodging all those plates lobbed their direction. Dow blue chips JPM and PFE dropped 1.92 and 2.41 percent, respectively. The Dow did not manage a climb into positive territory, nor was it able to regain 9900. The Dow did manage a bullish hammer, however. Annotated Daily Chart of the Dow: Many indices posted small gains or potential reversal signals, but bulls stumble around with tender muzzles, perhaps made gun- or plate-shy, especially with earnings season getting into full gear amid signs of a global slowdown in demand. Today, Bear Sterns downgraded McDonald's (MCD) on fears that Europe's turnaround had stalled. One report speculated that the Bank of Japan would be unable to undo its accommodative status and begin raising rates due to a feared slowdown in the markets to which Japan exports. Don't forget that all the plate-throwing today began with fears about China's GDP growth, too. Despite some bullish signs on the charts, selling rallies may still be the preferred tactic, but you don't have to take my word for that. Charts set up beautiful bullish/bearish benchmarks. Watch those diamond shapes in the SOX, Russell 2000, and Nasdaq for bullish or bearish breakouts. Watch 3389-3400 on the TRAN for signs of an upside breakout or a continued rolling down from the potential double top. Watch 9,500-10,000 in the Dow, with breaks above that zone bullish and rollovers beneath it bearish. Watch 1100-1104 on the SPX, with a break above that zone tentatively bullish and a rollover beneath it bearish. Whatever position taken, be prepared to be whipsawed and change sides if markets prove that the original breakout or breakdown was a false one. Futures stayed steady after the cash close. After-hours developments included raised guidance from eBay (EBAY) with sales up 52 percent. Chiron (CHIR), the company unable to deliver flu vaccine this season, was due to report, but had not done so as this report was prepared. Software manufacturer Siebel Systems (SEBL), biotechnology company Amgen (AMGN), Capital One Financial (COF), chip manufacturer STMicrolectronics (STM), and insurer Allstate (ALL) all reported or were due to report, representing a variety of industries and a variety of results. SEBL missed, and AMGN and COF beat expectations. Other companies reporting after the bell included AFFX, ALTR, CRUS, CTXS, CA, ERES, SYMC and VRSN. Thursday morning continues the reports, with T, COCO, GDT and STMP reporting before the bell. Also being announced before the bell are the initial jobless claims. Last week's number was 352 thousand, above the benchmark 350 thousand. Economic reports trickle in through the rest of the day, with September's leading indicators and the DJ/BTM Business Barometer released at 10:00, natural gas inventories at 10:30, the October Philly Fed Index at noon and the Money Supply figure after the close at 4:30. ================================================================= 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 --------------------------------- Agilent Tech - A - close: 23.73 change: +1.01 WHAT TO WATCH: The H&P spin-off appears to have put in a bottom at the $20 level back in August and September. Now shares are slowly working their way higher. Today's 4.4 percent rally was impressive but A is struggling with the simple 100-dma. The P&F chart is still bearish but more aggressive traders may want to consider positions if A can breakout over the $24 level. Earnings are expected in mid-November. --- Vicor Corp - VICR - close: 9.44 change: -0.52 WHAT TO WATCH: VICR fell another 5.2 percent on Wednesday with volume well above average. This appears to be a new one-year low for the stock and probably not the last. Earnings were last night and the Street was not impressed. The P&F chart is bearish with a $1.50 target. Traders might want to consider a stop loss above $10.50 and see how low VICR can fall. Shares have very strong support near the $6 level. --- Universal Health Service - UHS - close: 40.89 change: -0.32 WHAT TO WATCH: UHS churned sideways in a trading range between $42 and $46 for several months. The stock just recently broke down below the bottom of that trading range on heavy volume. You can probably guess why. The Spitzer probe into the insurance industry has widened into health insurance as well. UHS is due to report earnings tomorrow on Oct. 21st. We're going to watch and see how investors react to the numbers. Currently the P&F chart shows a fresh quadruple-bottom breakdown sell signal with a $33 target. --- Rambus Inc - RMBS - close: 17.60 change: +1.20 WHAT TO WATCH: RMBS turned in a very strong day with a 7.3 percent rally on above average volume. This is a new three-month high for the semiconductor maker. Its MACD is back in a new buy signal and the stock looks poised for more gains. We considered adding RMBS to the play list but we normally don't like to chase a stock that's moved more than 5 percent. Plus, RMBS still has potential technical resistance at its exponential 200-dma near $18.65. However, we will note that RMBS has turned its P&F chart around from a sell signal to a new buy signal with a $23 target. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- AFG $27.95 -0.14 - Here's another insurance stock that has fallen through the bottom of a multi-month trading range. Look for earnings tomorrow Oct. 21st. ========================================================== 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 10-20-2004 section 2 of 2 Copyright (c) 2004, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= In section two: Stop Loss Adjustments: None Net Bulls (Tech Stocks) New Bullish plays: OVTI, PLAB 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 ================================================================== None ================================================================== Net Bulls (NB) Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- OmniVision Tech - OVTI - close: 15.03 change: +0.34 stop: 13.99 Company Description: OmniVision Technologies designs and markets high-performance semiconductor image sensors. Its OmniPixel and CameraChip products are highly integrated single-chip CMOS image sensors for mass- market consumer and commercial applications such as mobile phones, digital still cameras, security and surveillance systems, interactive video games, PCs, and automotive imaging systems. (source: company press release) Why We Like It: It probably feels a little aggressive to be adding semiconductor stocks when the Dow looks weak and the S&P 500 just dipped under the 1100 mark for the first time since August. Yet so far OVTI has been showing some decent relative strength. The stock has been out performing the SOX index and tends to stair-step higher. Now after 2 1/2 weeks of consolidating between $14-15 OVTI looks ready to stair-step higher again. Actually the company has been getting some positive comments lately from the brokerage community and Wells Fargo just reiterated their "buy" rating today while upping their price target to $18. Currently the P&F chart is pretty bullish with a $24 target. We are willing to speculate on a long position now with the close over $15.00. Our initial target is the $17.00-17.50 range under the exponential 200-dma. More conservative traders may want to wait to enter and look for OVTI to trade above the early October highs near $15.20. Readers should note that OVTI is expected to announce earnings around November 17th but that date is not confirmed. Annotated Chart: Picked on October 20 at $15.03 Gain since picked: + 0.00 Earnings Date 11/17/04 (unconfirmed) Average Daily Volume: 5.0 million --- Photronics - PLAB - close: 17.48 change: +0.62 stop: 16.25 Company Description: Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors and flat panel displays, photomasks are used to transfer circuit patterns onto semiconductor wafers during the fabrication of integrated circuits. They are produced in accordance with circuit designs provided by customers at strategically located manufacturing facilities in Asia, Europe, and North America. (source: company press release) Why We Like It: We like PLAB because the stock it out performing most of its peers in the semiconductor sector. The rebound from the August lows has been somewhat choppy but the rallies witnessed strong volume and shares are climbing on a trend of higher lows. The rebound bounce put it back above resistance near $17 and its simple and exponential 200-dma's. Short-term technicals are positive and PLAB looks poised to run back toward its early October highs. A lot of these semis stocks are starting to move higher based on the expectation that all the bad news is already factored in. Annotated Chart: Picked on October 20 at $17.48 Gain since picked: + 0.00 Earnings Date 08/18/04 (confirmed) Average Daily Volume: 576 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 ExxonMobil 48.87 +0.56 JNJ Johnson & Johnson 57.50 +0.89 INTC Intel Corp 21.45 +0.65 CL Colgate-Palmolive 45.35 +2.29 BK Bank of New York 31.32 +0.57 AZO AutoZone Inc 80.59 +1.68 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- OI Owens Illinois Inc 17.30 +1.64 RMBS Rambus Inc 17.61 +1.21 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- DHR Danaher Corp 54.38 +1.11 RIMM Research In Motion 87.55 +3.60 CHRW C.H.Robinson Worldwide 50.44 +3.77 DO Diamond Offshore 35.36 +2.50 AAP Advance Auto Parts 38.71 +4.75 CAKE Cheesecake Factory 44.43 +1.53 AME Ametek Inc 31.76 +1.47 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- WM Washington Mutual 37.85 -1.11 HON Honeywell Intl 33.80 -1.64 FRX Forest Labs 43.88 -2.13 CFC Countrywide Financial 33.17 -4.33 CAH Cardinal Health 37.65 -2.56 ERTS Electronic Arts 44.79 -1.87 EK Eastman Kodak 29.50 -3.05 AVY Avery Dennison Corp 59.25 -1.50 RX IMS Health 21.10 -1.64 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- HRS Harris Corp 57.49 -1.13 CTXS Citrix Systems 20.68 -1.15 FED FirstFed Financial 49.25 -1.48 TXU TXU Corp 50.20 -0.40 ================================================================= 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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