PremierInvestor.net Newsletter Wednesday 10-27-2004 section 1 of 2 Copyright (c) 2004, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= In section one: Market Wrap: Recipe for a Rally Watch List: Semiconductors to Networking and more! =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 10-27-2004 High Low Volume Adv/Dcl DJIA 10002.03 +113.55 10018.55 9841.95 2.15 bln 1941/ 854 NASDAQ 1969.99 + 41.20 1971.28 1926.25 2.06 bln 2092/ 906 S&P 100 537.78 + 6.09 538.41 529.30 Totals 4033/1760 S&P 500 1125.40 + 14.31 1126.29 1107.43 SOX 410.90 + 14.13 411.49 397.01 RUS 2000 587.18 + 9.57 587.18 577.53 DJ TRANS 3475.20 + 39.59 3475.78 3406.64 VIX 15.72 - 0.67 16.53 15.66 VXO (VIX-O)16.13 - 0.35 17.39 15.97 VXN 21.52 - 0.95 22.65 21.21 Total Volume 4,215M Total UpVol 3,253M Total DnVol 915M Total Adv 4033 Total Dcl 1760 52wk Highs 312 52wk Lows 47 TRIN 0.56 PUT/CALL 0.70 =============================================================== =========== Market Wrap =========== Recipe for a Rally Jane Fox The U.S. petroleum inventories morning report was the fuel needed for a huge drop in oil prices and a massive climb in the stock market. The DOW closed above 10000 at 10002.30 for a daily rally of 113.80 points. But the fuel based climb was not just restricted to the DOW, the broader market ignited also. The SPX was up 14.31, or 1.3%, to 1125.40 and the Nasdaq gained 41.20, or 2.1%, to 1969.99. On the other hand, the bond market got crushed, as were oil prices, which plunged $2.71 to about $52.46 a barrel -- a 4% plunge. Even though oil may have retreated today it has been on a meteoric rise for the last few months and one would think the economy would be suffering for it but economists will be the first to say this is just not so, oil prices haven’t held back the economy so far. However, that may be about to change. According to 54 economists who participated in a Wall Street Journal survey, a sustained move above $50/bbl will be the point when higher oil prices begin to take a greater toll on growth. A move into the $50 to $59-a-barrel range that is sustained for a complete quarter, would force them to shave their gross domestic product forecasts by one-half point. But so far, the move to $50-plus oil hasn't lasted long enough to cause economists to pare back their forecasts. As a matter of fact the economists lifted their estimates for third quarter growth to a 4.0% inflation-adjusted annual rate, from the 3.6% average forecast they made in September. Economic Reports: Durable Goods: Although economists had predicted Durable-goods orders would gain 0.6%, the Commerce Department report for September durable goods, products meant to last three years or more, increased only 0.2% to $195.7 billion after a revised 0.6% decline in August. The barometer of business spending, orders for non-defense capital goods excluding aircraft, rose 2.6% after a 0.3% increase in August. The durable-goods data are some of the most volatile reported by the government so forecasters are wary of using monthly fluctuations to get a read on the overall state of the economy. New Homes Sales: Augmented by lower mortgage rates, new home sales in September unexpectedly rose to the third highest total on record suggesting housing is helping spur the economy. The Commerce Department said single-family home sales rose 3.5 percent to a 1.206 million annual pace last month from a revised 1.165 million rate in August. Sales rose in the every region except the West. The median selling price dropped 8.4 percent in September to $197,700 from August's $215,900. According to the latest forecast by the National Association of Home Builders, sales of new homes this year will reach 1.164 million, surpassing last year's record 1.089 million. Department of Energy crude, distillate, and gasoline inventories: In the biggest decline since Sept. 10, crude oil futures fell from a daily high of 55.65/bbl after an Energy Department report showed that U.S. stockpiles rose more than expected. In the week ended Oct. 22, supplies climbed 3.9 million barrels to 283.4 million when an increase of 1 million barrels was expected. Inventories were 2.9 percent lower than a year earlier. Stockpiles of distillate fuel, which includes heating oil and diesel, declined more than expected last week. Fed Beige Book: The Fed Beige book is a monthly snapshot of business conditions compiled from reports submitted by the Fed's 12 regional banks. This survey, released at 2:00EDT, showed the U.S. economy continued to grow in September and early October despite being hit by rising energy costs and increased uncertainty surrounding the election. It gave a picture of an economy that is moving ahead and even the hard-hit manufacturing sector is showing signs of regaining its foothold. The report found that the pace of activity had quickened in the Richmond and Dallas districts and the other five districts, Boston, Philadelphia, Chicago, Minneapolis and Kansas City, reported steady expansions. Central bank policy-makers use this report when they next meet to decide whether to raise interest rates or not. Most economists believe that they will continue to raise rates to make sure that economy does not get overheated and cause inflation. Earnings Reports: In its fiscal first quarter, Procter & Gamble's (PG) net profit rose 14% on volume growth and a net gain from selling its juice business. The company also maintained its fiscal 2005 guidance although costs have been increasing. PG posted a net income of $2 billion, or 73 cents a share, up from $1.76 billion, or 63 cents a share, in last year's first quarter. PG ended the day at $51.78 down 1.73. Hit by tough conditions in Europe and Asia, Unilever (UN) said its business suffered in the third quarter but has maintained its forecast for low earnings-per-share growth for the full year. The maker of brands such as Dove soap and Lipton tea, reported its net increased 4.2% to $1.13 billion. UN stated conditions in Europe continue to be difficult because of weak consumer confidence and the growth of discount retailers. They also sited poor weather as the cause for lower sales of ice cream and ready- to-drink tea in the region. UN closed the day at 57.92 down 0.13. The Philadelphia cable-television and Internet provider Comcast's (CMCSA) net income fell sharply from the previous year's third quarter because the previous year's quarter's results included a $3.29 billion gain from the sale of the company's interest in home-shopping network QVC. CMCSA reported its net income dropped 93% to $220 million, or 10 cents a share, from $3.18 billion, or $1.41 a share, a year earlier. Revenue jumped 12% to $5.1 billion from $4.55 billion a year earlier. CMCSA ended the day at 29.47 up 0.55. Blockbuster (BBI), who earlier this month split off from its former corporate parent Viacom, is suffering from a continued decline in its video-rental business and reported a sizeable loss in the third quarter. The company reported a net loss of $1.42 billion, or $7.82 a share, compared with net income of $63.7 million, or 35 cents a share, a year earlier. Revenue rose 1.8% to $1.41 billion from $1.38 billion a year earlier. BBI ended the day at 6.81 down 0.28. ConocoPhillips (COP) reported a net income gain in the third quarter as record high oil prices overcame declining production and higher exploration costs. Although some large oil companies like COP are faced with fewer and fewer ways to reinvest their windfall profits into projects that will grow production in future years, COP is using its cash to invest in the Russian oil industry. COP has announced a $2.4 billion strategic alliance with Russian oil giant OAO Lukoil, under which COP can purchase a 7.6% stake of the company and develop joint exploration projects. COP ended the day at 84.92 down 1.01. The world's largest aerospace company, Boeing's (BA), attributed its third-quarter 78% surge in net income to double-digit growth in its military unit more than offsetting the losses in its commercial-aviation unit. In absolute dollars net income was $456 million, or 56 cents a share, up from $256 million, or 32 cents a share, a year earlier. Revenue increased 7.9% to $13.15 billion from $12.18 billion during last year's third quarter. BA finished the day at 50.10 up 0.12. After hours we will be getting earnings from many companies but the most noteworthy are ASKJ, BIIB, JDSU, SWKS and THQI. Annotated Weekly Chart of the DOW: Here is a weekly chart of the DOW, which I think shows why we may see a more upward pressure in the next few days. I am not a huge fan of MAs - they seem just a little too esoteric for for me but there is one I use because a lot of other analysts use it also - it is the 200 MA. However, I have a problem because there are two 200 MAs, the simple and the exponential and as you can see from the chart above they can be quite divergent. To solve this problem I have put both on the chart and lo and behold they are merging so I don't have to decide between them. But the really cool thing is that they are merging right at the bottom of the DOW's weekly regression channel. Then you have the positive divergence in the MACD and stochastics, the election next week and the end of October and you have a recipe for a rally. Annotated Weekly Chart of the SPX: As you can see from this chart the weekly SPX is much more bullish than the weekly chart of the DOW. First of all the regression channel is almost sideways while the DOW weekly chart points downward. Also both 200 MAs - the simple and exponential, are above the bottom channel. And then there is the bullish reverse H&S forming with the neckline at the top channel line. More ingredients in our rally recipe. Annotated Weekly Chart of the NASDAQ: The weekly chart of the Nasdaq is much harder to read than the DOW and the SPX. The regression channel did not completely contain price like it did in the other two weekly charts. The two 200 MAs are much more divergent here but I looks like the exponential is the best one to use. It also looks like this index is ready to retreat and visit the bottom of the channel exactly opposite of what we are seeing in the DOW's chart. Of course you have to take into consideration the fact that the Nasdaq has been much more bullish than the DOW in the last few weeks. However you want to explain it, markets "work" much better when you have all the pieces in sync and that is not the case now. Annotated Daily Chart of the DWC - Wilshire 5000: Instead of showing a chart of the Russell 2000 I decided to show you a chart of the Wilshire 5000, which is the total market. Surprisingly the two are very similar. I think what is most noteworthy here is the bullish reverse H&S forming with the head right at where the two 200 MAs converge. The only problem (isn't there always a problem?) is that reverse H&S are most relevant when a market is making a bottom and although I guess you could call this a falling market but on the weekly chart it is hard case to make. The Market Tomorrow Thursday's economic releases begin with the usual 8:30 release of jobless claims, with those claims last week showing a decrease beneath the benchmark 350 thousand to 329 thousand. At 10:00, the Help-Wanted Index will be released, with natural gas inventories next, near 10:30. The Money Supply number will be seen after Thursday's market close, at 4:30. The most noteworthy earnings tomorrow will come from CCMP, COLM, DCX, XOM, GTW, GSK, IMCL, JBLU, LTR, MSO, MLNM, PNRA, RTN, G, VZ, VIA. Have a great evening. Jane ================================================================= 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 --------------------------------- Intel Corp - INTC - close: 22.00 change: +0.60 WHAT TO WATCH: The SOX semiconductor index turned in a strong 3.5 percent rally that helped lead the NASDAQ to a 2 percent gain. Chip-giant Intel added 2.8 percent and closed right at $22.00 resistance. It would appear that INTC may have put in a bottom near the $19.65 level and now semiconductor bulls can target a rebound - at least to the $25 region. Odds are that if the market produces a post-election rally INTC will participate. However, bears will point out that the stock's P&F chart remains very negative. --- Juniper Networks - JNPR - close: 25.82 change: +1.57 WHAT TO WATCH: Technology stocks lead the day on Wednesday and the NWX networking index added 3.11 percent. Shares of JNPR out performed most of its peers with a 6.47 percent climb on strong volume. Unfortunately, JNPR couldn't power through resistance at the $26.00 level, at least not yet. A move over $26 would reverse its P&F sell signal into a buy signal. Considering the technicals and MACD signal that breakout could happen soon. --- J.B.Hunt Transport - JBHT - close: 40.85 change: +0.72 WHAT TO WATCH: The Transportation sector is on fire. The rise in oil has not slowed it down at all and today's reversal in crude prices helped lift the Dow transports to another new five-year high. Meanwhile JBHT is consolidating its recent breakout over the $39-40 region. We suspect that the rebound from $39 yesterday and today's follow through looks like a bullish entry point. However, readers may want to wait and watch for a trade over the $41.00 mark. The recent move has produced a quadruple- top breakout buy signal on its P&F chart. --- Omnicare Inc - OCR - close: 30.13 change: +0.83 WHAT TO WATCH: Ready for the rebound? OCR crashed and burned back in July after missing earnings estimates and then warning for the future quarters. Since then it has been a slow and dreary consolidation under resistance at $30.00 (actually the $30.20 level). Fortunately for new traders to the stock the current three-month trend is one of higher lows. Today's breakout and close over $30.00 is very bullish. We would consider new positions if OCR trades above $30.21. If this occurs our short-term target would be the bottom of the gap near $34.00. Watch for earnings tomorrow morning before the opening bell. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- SYY $31.97 +0.90 - Today's breakout looks like a great bullish entry point to buy the rebound but SYY is due to report earnings on Monday. We don't want to hold over the report. ELN $26.53 +1.28 - Today's 5 percent again and new high over major resistance is very bullish but ELN should report earnings tomorrow. BBBY $40.42 +0.42 - There you go! We highlighted BBBY yesterday on the watch list for a breakout over $40. Now we got it. This looks like a bullish entry point. Target $44.00. BRCD $6.61 +0.30 - Today's 4.75 percent gain and breakout over $6.50 could be a bullish entry point but BRCD requires more research. ROST $24.82 +1.00 - Retailer ROST is trying to put in a bottom after a very ugly summer. Shares are challenging the exponential 200-dma. Traders might want to consider longs over $25.05. CHRS $7.66 +0.20 - High risk traders may want to watch CHRS for a breakout over $7.75. ========================================================== 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 10-27-2004 section 2 of 2 Copyright (c) 2004, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= In section two: Stop Loss Adjustments: PLAB Net Bulls (Tech Stocks) Closed Bearish Plays: NVLS Active Trader (Non-tech Stocks) Closed Bullish Plays: BC, BG High Risk/Reward Closed Bearish Plays: MLNM 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 ================================================================== PLAB - tech stock long - PLAB is bouncing higher as expected and closed above the $18 level on Wednesday. We are going to raise our stop loss from $16.25 to $16.75. ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ============ Closed Plays ============ Closed Bearish Plays -------------------- Novellus Systems - NVLS - close: 26.29 change: +1.03 stop: 26.26 It's pretty tough to be a bear when the NASDAQ Composite soars 2.13 percent and breaks out over its simple 200-dma while the SOX semiconductor index adds 3.56 percent. We tried. NVLS was trying to cooperate with resistance at the $26 level but today's rally was probably fueled by a combination of worried shorts and eager bulls. We are stopped out at $26.26. Picked on October 17 at $24.22 Gain since picked: - 2.07 Earnings Date 10/13/04 (confirmed) Average Daily Volume: 5.0 million ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== ============ Closed Plays ============ Closed Bullish Plays -------------------- Brunswick Corp - BC - close: 48.27 change: +0.74 stop: 44.64 BC has turned in a pretty decent week so far. The stock is up three days in a row on a bounce from the $45 level. Yesterday's gain pushed it through resistance at $47 on very strong volume. Today's gain was also produced on strong volume. In the news BC announced that its Board of Directors had raised its cash dividend from 50 cents to 60 cents a share. The current dividend is payable on December 15th, 2004 to shareholders on record as of November 22nd. Per our trading plan we are closing BC ahead of its earnings report due out Thursday morning before the opening bell. Wall Street is looking for 64 cents a share. Picked on October 17 at $45.70 Gain since picked: + 2.57 Earnings Date 10/28/04 (confirmed) Average Daily Volume: 717 thousand --- Bunge Ltd - BG - close: 43.52 change: -0.64 stop: 41.75 Time is up! Per our trading plan we are exiting the bullish BG play before its earnings report. The company is due to release its Q3 earnings on Thursday morning before the opening bell. Analysts are looking for BG to turn in a profit of 82 cents a share. Picked on October 17 at $41.96 Gain since picked: + 1.56 Earnings Date 10/28/04 (confirmed) Average Daily Volume: 625 thousand ================================================================== High Risk/Reward (HR) Stock section ================================================================== ============ Closed Plays ============ Closed Bearish Plays -------------------- Millenium Pharma - MLNM - cls: 12.30 chg: +0.29 stop: 12.41 We are trying to keep losses to a minimum and thus MLNM's 2.4 percent rally back over the $12.00 is forcing our hand. We've not yet been stopped out and MLNM has not yet broken through resistance at its simple 50-dma and the simple 100-dma but we don't want to fight it. The BTK biotech index has bounced very sharply in the past two days with the broader market rebound. Odds look good that MLNM will continue for a couple of more days. Picked on October 13 at $11.99 Gain since picked: + 0.31 Earnings Date 10/28/04 (unconfirmed) Average Daily Volume: 2.7 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 TM Toyota Motor Corp 76.72 +1.50 SC Shell Transport & Trading 46.77 +0.81 RD Royal Dutch Petrol 53.84 +0.69 HD Home Depot 40.79 +1.12 KO Coca-Cola 40.40 +1.10 IBM Intl Business Machines 90.02 +1.02 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- PKI Perkin Elmer Inc 19.00 +1.12 AKAM Akamai Technologies 16.42 +1.41 QSFT Quest Software 13.99 +1.34 NTIQ NetIQ Corp 12.84 +1.27 CKP Checkpoint Systems 17.32 +1.25 CVTX CV Therepeutics 14.75 +2.24 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- WYE Wyeth 39.57 +1.74 EMR Emerson Electric 64.76 +1.54 SYMC Symantec 62.20 +3.21 AAPL Apple Computer 50.30 +2.33 MON Monsanto 41.79 +1.37 MCO Moody's Corp 76.84 +1.84 ELN Elan Corp 26.54 +1.29 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- SLB Schlumberger Ltd 63.07 -2.42 AFL Aflac Inc 35.80 -1.84 ZBRA Zebra Technologies 54.58 -4.01 TIN Temple Inland 58.24 -1.50 SRCL Stericycle Inc 41.80 -2.44 FMC FMC Corp 44.04 -4.81 MLI Mueller Industries 26.15 -14.62 FLS Flowserve Corp 21.01 -2.79 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- OXY Occidental Petroleum 56.62 -1.16 SU Suncor Energy 34.22 -1.23 XTO XTO Energy 33.74 -1.29 EOG EOG Resources 67.80 -1.92 NBL Noble Energy 58.76 -1.59 OSG Overseas Shipholding 56.54 -2.70 ARLP Alliance Resource Prtnrs 62.23 -3.22 ================================================================= 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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