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Daily Newsletter, Wednesday, 11/03/2004

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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.

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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.








DISCLAIMER

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