PremierInvestor.net Newsletter Wednesday 11-03-2004 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: Hot Potato Watch List: Transports to retail and more! =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 11-03-2004 High Low Volume Adv/Dcl DJIA 10137.05 +101.32 10215.51 10037.43 2.13 bln 2165/ 655 NASDAQ 2004.33 + 19.54 2020.03 1992.70 1.93 bln 2048/ 936 S&P 100 546.73 + 6.08 549.47 540.65 Totals 4213/1591 S&P 500 1143.20 + 12.64 1147.60 1130.54 SOX 410.08 - 4.15 424.25 408.51 RUS 2000 595.33 + 9.89 596.59 585.44 DJ TRANS 3494.64 + 45.02 3496.33 3449.89 VIX 14.04 - 2.14 15.18 13.79 VXO (VIX-O)14.18 - 2.67 15.34 14.01 VXN 20.82 - 2.15 22.20 20.45 Total Volume 4,072M Total UpVol 2,807M Total DnVol 1,209M Total Adv 4213 Total Dcl 1591 52wk Highs 415 52wk Lows 40 TRIN 1.03 PUT/CALL 0.77 =============================================================== =========== Market Wrap =========== Hot Potato Linda Piazza Traders in the pits must have had a busy morning Wednesday morning, juggling the implications of election results and then earnings and economic releases. The recent relationships between dollar strength, crude price, and equity behavior weren't holding true just before the cash open, with crude higher, the dollar dropping after its attempt to strengthen against the yen and euro, and equity futures gaining. Pit traders must have been afraid they'd be left holding the hot potato as they tossed around the implications of election outcomes and economic releases. They dropped that hot potato long enough to send the indices soaring to their day's highs in the first ten minutes of trading, but then picked it up again as they awaited economic releases and Kerry's concession. Tossing it back and forth, they kept the indices trading in symmetrical triangles at the top of their ranges. Those triangles formed, widened, and reformed while the October ISM Non-Manufacturing Index and Factory Orders numbers and crude inventories were released. Annotated Three-Minute Chart of the OEX at 11:30 EST: Hot potato issues included an unexpected decline in factory orders for September. Those orders fell 0.4 percent against an expected rise of 0.4 percent. Nondurable goods orders, transportation equipment orders, and factory shipments fell while unfilled orders and inventories rose. Perhaps traders were too busy juggling a better-than-expected service economy ISM number, because indices seemed little affected and continued coiling. October's ISM was 59.8 percent, above the estimated 58.0 and rising from September's 56.7 percent. The employment component gained. Traders had to juggle information on crude prices, too. Crude prices had risen to $50.00 before the 10:30 release of inventories numbers. Those numbers showed crude and gasoline inventories rising 6.3 million and 500,000 barrels, respectively, according to the Department of Energy. Distillate inventories dropped 900,000 million barrels. Despite an attack on a pipeline in Iraq that could disrupt exports from the north for up to ten days, a potential strike in Nigeria, and a statement from Yukos' chief executive that the company was in danger of insolvency, crude prices plummeted. One market pundit suggested they would fall below $40/barrel by the end of the year. So far, however, nothing too bearish for crude prices has occurred. Crude prices fell to the 50-dma and the 50 percent retracement of its latest climb off the August 30 low before finding support. Annotated Daily Chart of Crude Futures for December Delivery: Although the inverse relationship between crude costs and equity performance sometimes disconnects, market bulls do not want crude to continue climbing. News sources began reporting Kerry's concession, and still the OEX, SPX, Dow, and Nasdaq coiled. The Russell 2000 wasn't going to be a follower, but a leader, and it led to the upside. The SOX was performing a leadership role, too, but to the downside. The SOX was doing a swan dive, closing the morning's gap and diving below the surface into negative territory. Annotated Daily Chart of the SOX: QCOM and RIMM were drags on the Nasdaq, too, with QCOM diving ahead of its after-the-close earnings report. When it came after hours, QCOM dropped further, with investors disappointed with the company's outlook. The TRAN was zooming everywhere, its intraday chart defying categorization. The juggling act finally became too hot for traders to handle. The breakdown out of those symmetrical triangles came as Kerry conceded but also as Nymex closed for the day, with crude closing at $50.90, higher by $1.28. It proved difficult to pinpoint the decline on any one event. As President Bush spoke following Kerry's concession, markets climbed off their lows, perhaps pointing to an election effect after all. Market pundits predicted a 1 percent rally if Bush won reelection. Tuesday, the Dow closed at 10,035.73, with a 1 percent rally bring the index to 10,136.09. Wednesday's high was 10,215.51. A 1 percent rally on the SPX would bring it up to 1141.87, with Wednesday's high at 1147.60. A 1 percent rally on the Nasdaq would bring it up to 2003.54. Wednesday's high was 2020.03. Those figures and the pullbacks from the day's highs prompt questions about whether the post-Bush-election rally occurred and was finished within ten minutes of Wednesday's open. Let's see what charts have to say. The SPX presents a confusing picture. Annotated Daily Chart of the SPX: The SPX punched above the October and June highs, breaking the trend of lower highs, but it trades within a broadening formation. Those are notoriously difficult to trade because they broaden. Where's the upside breakout point? Where's the downside one? When coming at the top of a climb, these are typically bearish, and usually see two touches of the top trendline and a third attempt before failing. However, this climb was not pronounced in relationship to the size of the broadening formation, and chart patterns such as H&S's, wedges, and broadening formations fail to follow through on expected outcomes as more market participants recognize them. They lose some of their predictive abilities. Still, the upside trendline's resistance coincides with the 50 percent retracement of the decline from the March 2000 high to the October 2002 low. A breakout above these trendlines appears to be a bullish signal while a rollover from them appears to be a possible site for a bearish entry. Between the SPX's current level and 1160 is a minefield because of the bearish nature of such broadening formations and the bearish price/MACD divergence on the daily chart. It's possible that the SPX will never see the 1160 level and will roll down soon, perhaps beginning a rollover Wednesday morning. One benchmark for a potential rollover might be found on the SPX's 15-minute chart. Annotated 15-Minute Chart of the SPX: The Dow also pulled back from its day's high. Annotated Daily Chart of the Dow: Like the SPX, however, it's possible that the Dow will not see the resistance pinpointed here. Those looking for a breakdown entry might watch the same averages pinpointed on the SPX's 15- minute chart, as those averages also correspond to a rising trendline on the Dow's chart. Annotated 15-minute Chart of the Dow: Using these averages as a benchmark for a breakdown entry on the Dow ensures that the DOW has dropped below the 50-dma and 200- ema, at 10,108 and 10,077, respectively, but it's an entry just above known historical S/R on the Dow, presenting its own difficulties. This is particularly true since the 60-minute chart shows the potential for a H&S to form with a neckline just above 10,000. An entry on a breakdown below the trendline and the 15-minute 100/130-ema's might constitute a trap as the Dow rises immediately into a right shoulder, so any considering such a breakdown entry should be aware of the dangers. Because of the same possibility of a H&S, any entering on a bounce from those 15-minute averages should have profit- protecting plans in mind for the potential right-shoulder area, near 10,130. The Nasdaq did reach down to test those 15-minute averages, but its action offers a caution for those considering buying other indices on bounces from their 15-minute 100/130-ema's and latest rising trendlines. Annotated 15-Minute Chart of the Nasdaq: Watch for the possibility that the Nasdaq could be turned back at gap resistance, into a lower high. As with the Dow, using those benchmarks presents a special difficulty for those entering a bearish play. That may constitute an entry just ahead of a descending trendline off the year's high, with that trendline perhaps crossing at about 1980, depending on how thickly it's drawn. A bearish entry on a roll down from the top of the ascending regression channel, at today's high, made a safer entry, but should have had profit protecting plans in place as those 15-minute averages were approached. Annotated Daily Chart of the Nasdaq: One other index bears watching tomorrow because of its relationship to trading patterns in recent weeks. That's the IUX, the S&P Insurance Index. Annotated Daily Chart of the IUX: The SPX's broadening formation is echoed on the Wilshire 5000 (DWC), the broadest of our markets. If some traders are confused, they should at least feel consoled by the difficulties of trading such formations or determining their implications. Breakouts are bought or sold, only to see the index reverse course soon afterwards. Trade carefully. Remain aware that such formations traditionally had bearish implications and traditionally saw only two touches of the upper, rising trendline, with the third attempt failing to touch that trendline. Multiple ugly daily candles on the Wilshire, SPX, Dow and OEX should not be ignored when the two broadest of our markets, the SPX and Wilshire 5000, trade within potentially bearish broadening formations. Perhaps a further warning occurred when the TRAN did not follow the example of other indices and print a new high today. Ugly daily candles or not, bearish divergences or not, indices have climbed. We've seen potential reversal signal after reversal signal followed by higher prices. Remain open to the possibility that an unexpected upside break could occur instead, as has happened multiple times over the last year. Points in the bulls' favor include the OEX's close above its 200-sma, the SPX's and Wilshire 5000's closes above their October highs and the Nasdaq's close above 2000. Bulls have much to cheer, too, and will not easily give up. After the bell, retailers began releasing same-store sales figures, with retailers to continue releasing numbers Thursday morning. J. Jill Group (JILL) reported SSS higher by 4.7 percent, Starbucks (SBUX) by 11 percent and Men's Wearhouse (MW) by 12.5 percent. BOBJ, QCOM and SONS released earnings, with all three falling in after-hours trade as this report was prepared. EDS delayed the release of its results for the third quarter, dropping more than 4 percent after investors grew discouraged with this second delay. Thursday's economic releases begin with the usual 8:30 release of jobless claims along with the third quarter's Preliminary Non- farm Productivity and Unit Labor Costs. Natural gas inventories have been gaining more attention and will be released at 10:30, but looming Friday's nonfarm payrolls may assume more importance than any of those numbers. ================================================================= 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 --------------------------------- J.B.Hunt Transport - JBHT - close: 41.26 change: +1.67 WHAT TO WATCH: We considered adding JBHT to the play list tonight as a bullish candidate. The rebound back over the $40.00 level in spite of the rise in oil is certainly bullish. Of course the transports have been ignoring the rise in crude for weeks now. This appears to be a new all-time closing high for JBHT and is also looks like a bullish entry point. The P&F chart looks very bullish with a clean quadruple-top breakout buy signal. Unfortunately, the P&F vertical count (target) has already been achieved at $29. Momentum traders may want to consider long plays over $41.50. --- J.C.Penney - JCP - close: 34.60 change: +0.27 WHAT TO WATCH: The RLX retail index rose to new all-time highs today with the post-election rally. Yet shares of JCP continue to languish under recent support at $35.00 and its simple 200- dma. Volume has been very heavy on the recent sell-off and we suspect JCP has further to fall. The P&F chart already points to a $28 target. Readers may want to consider bearish positions under $34.00. Our immediate target would be $30.00. --- El Paso Corp - EP - close: 9.22 change: +0.38 WHAT TO WATCH: We are still watching EP. Today's 4.2 percent gain was a big move for this stock. We like the breakout over round-number resistance at $9.00 but didn't want to chase it. Given the tight natural gas supplies the stock is likely to keep its up trend but bulls need to pick their entry. We'll watch for a bounce from $9.00 and target $10.00. --- The Stanley Works - SWK - close: 46.10 change: +1.00 WHAT TO WATCH: We strongly considered adding SWK to the play list tonight. The stock has been stuck in a trading range between $40 and $46 since April. Today's 2.2 percent rally on above average volume is a new two-year high and breakout above the top of the range. The P&F chart looks bullish as well with a new double-top breakout and a $57 target. We chose to wait and see if SWK dipped back to $45 or experiences any follow through tomorrow. ========================================================== 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 11-03-2004 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, SFNT, AFG 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 - Heads up! PLAB slipped under its trendline of support dating back to August. Shares did find support at $17 and its simple 40-dma but we need to see a bounce. SFNT - tech stock long - Exit Alert! The rising volume-powered rally in SFNT is nearing resistance at $33.75 a.k.a. the bottom of the gap down. Short-term traders can prepare to exit in the $33.75-34.00 range. AFG - non-tech short - This is it! AFG has rallied right to major resistance at the $31.00 mark. If it breaks out here we'll be stopped out! ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== ============ Closed Plays ============ Closed Bearish Plays -------------------- Boston Scientific - BSX - close: 36.10 chg: +1.23 stop: 36.01 Drug stocks rallied as Wall Street celebrated a Bush victory last night. This wave of buying hit BSX and shares quickly broke out over its simple 10-dma and closed over round-number resistance at $36.00. We were stopped out at $36.01 for an 80-cent loss. In the news BSX announced positive news for a follow up study on its Enteryx treatment. Picked on October 24 at $35.21 Gain since picked: + 0.89 Earnings Date 10/19/04 (confirmed) Average Daily Volume: 5.6 million --- Tiffany & Co - TIF - close: 29.98 change: +0.06 stop: 30.51 The RLX retail index shot to new all-time highs in the post- election rally. Shares of TIF were caught up in the excitement and gapped higher at $30.80. This was above our stop loss and immediately stopped us out for a $1.80 loss. What traders will find interesting is that the stock immediately sold off and barely close positive. Furthermore TIF could not hold its gains above the $30.00 mark. With volume pretty strong today this could be a failed rally. While we are stopped out readers may want to keep an eye on TIF. A drop back through the $29.00 level may be a bearish entry point. Picked on October 13 at $29.00 Gain since picked: + 0.98 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 BP BP Plc 59.28 +1.28 WB Wachovia Corp 50.35 +1.04 GSK GlaxoSmithKline 44.15 +1.31 MO Altria Group Inc 50.00 +1.43 IBM Intl Business Machines 91.20 +0.73 JNJ Johnson & Johnson 59.45 +1.41 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- OI Owens Illinois Inc 19.28 +1.31 OIS Oil States Intl 19.40 +1.31 GRA W.R.Grace & Co 12.10 +1.51 WLT Walter Industries 18.95 +1.35 TKTX Transkaryotic Therapies 18.26 +1.12 ORB Orbital Sciences 12.22 +1.45 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- HBC HSBC Holdings 83.59 +1.27 NVS Novartis Ag (ADS) 49.38 +1.69 AMGN Amgen 58.55 +3.56 ABT Abbott Labs 43.61 +1.30 UNH UnitedHealth Group 75.53 +3.60 SLM SLM Corp 49.22 +4.61 GD General Dynamics 104.27 +3.79 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- ENDP Endo Pharmaceuticals 20.37 -1.32 REY Reynolds & Reynolds Co 23.35 -1.46 GPRO Gen Probe Inc 31.95 -1.21 UNIZ Unizan Financial 24.45 -1.86 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- QCOM Qualcomm 39.87 -1.01 RIMM Research In Motion 84.52 -9.44 NTLI NTL Inc 63.10 -2.64 CBH Commerce Bancorp 58.40 -1.23 DRIV Digital River 31.80 -1.50 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright (c) 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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