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Daily Newsletter, Wednesday, 10/20/2004

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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.








DISCLAIMER

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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.

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