PremierInvestor.net Newsletter Wednesday 11-17-2004 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: A Complicated Dance Watch List: Semiconductors to Oil and more =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 11-17-2004 High Low Volume Adv/Dcl DJIA 10549.57 + 61.92 10602.85 10481.83 2.12 bln 1932/ 889 NASDAQ 2099.68 + 21.06 2112.18 2090.72 2.20 bln 2009/1050 S&P 100 565.72 + 3.46 568.67 562.26 Totals 3941/1939 S&P 500 1181.94 + 6.51 1188.46 1175.43 SOX 439.85 + 12.24 445.64 427.61 RUS 2000 622.97 + 5.08 627.89 617.89 DJ TRANS 3600.46 + 28.27 3631.53 3571.78 VIX 13.21 + 0.00 13.39 12.77 VXO (VIX-O)13.64 - 0.36 14.02 13.57 VXN 18.50 - 0.10 18.63 17.36 Total Volume 4,320M Total UpVol 3,283M Total DnVol 993M Total Adv 3941 Total Dcl 1939 52wk Highs 482 52wk Lows 30 TRIN 0.57 PUT/CALL 0.71 =============================================================== =========== Market Wrap =========== A Complicated Dance Linda Piazza The relationship among costs, the dollar's behavior, and equities' performance composes a complicated dance. That's particularly apparent when the costs being considered are fuel costs, paid for in dollars. A record jump in the PPI on Tuesday and an overnight plummet in the dollar against the euro and yen focused particular attention on Wednesday's CPI and crude inventories numbers. Against a background of a weakening dollar and the specter of increasing costs, equity investors needed to see satisfactory crude inventories. At least, that's what the dance program suggested. The day didn't turn out that way. The combination of a higher-than- expected rise in CPI; disappointing crude, gasoline, and distillate inventories; and continuing weakness in the dollar should have pressured equities. That dance program was ignored, although the strengthening bonds suggested that it should not be, until later in the session. Crude finally bounced, pressuring equities. Annotated Daily Chart of Crude Futures for December Delivery: It was the TRAN that first demonstrated the effect of the rising crude prices. The TRAN often serves as an indicator index, being particularly sensitive to both crude and economic developments. Watch the TRAN for clues as to how the S&P's and Dow might react, as the TRAN sometimes leads these other indices. Annotated Daily Chart for the TRAN: Visible on the TRAN's 60-minute chart is a potential triple-top formation. The TRAN, however, did not break down out of its recently established consolidation pattern, and so has not yet confirmed that triple top. A break higher remains possible, with such a break starting a new leg higher. The charts of the two S&P's and the Dow show similar characteristics. Annotated Daily Chart for the Dow: Annotated Daily Chart for the SPX: Like the TRAN, both the Dow and the SPX ended the day within the recently built consolidation zones. Unlike the TRAN, both had attempted breakouts above that zone, only to be hit by selling. The tech-related indices present somewhat different pictures. The SOX's successful move above the 200-ema predicted a test of the 200-sma. That test occurred today, ahead of AMAT's after- hours earnings release. Annotated Daily Chart for the SOX: Note the breakout above the long-term descending red trendline. This chart suggests the danger in acting on a warning, such as the confirmed CCI H&S, rather than letting price be the ultimate guide. Bulls in semi-related stocks do not want to see the SOX retreat back beneath the 200-ema and that red trendline tomorrow, however, as quick reversals after a breakout suggest danger to long positions. Annotated Daily Chart for the Nasdaq: In general, the day's trading produced several attempts to break out, met with strong selling when the dollar collapsed again and crude rose again. Tech-related indices kept climbing, but may be vulnerable to sell-the-news effects after AMAT's earnings, as strong as that earnings report appeared to be. With new orders beating expectations, AMAT reported earnings of $0.27/share against expectations of $0.26/share and compared with $0.01/share a year ago. The company reported that it had gained market share. Net sales rose from last year's $1.22 billion to this year's $2.20 billion. The report was mostly in-line with expectations, although some had worried that orders would decrease. The chief executive did note some cautiousness among customers due to increasing chip inventories. However, some evidence of excessive bullishness exists in AMAT's trading. As noted by Marc Eckelberry of OIN's Futures Monitor, short interest declined to 8 percent over the last month, with put/call rations declining, too. That sell-the-rumor effect may already be reflected in after-hours behavior, with AMAT last at $16.77 as this report was prepared, down from the cash close of $17.34. We can't always trust after-hours behavior, however, and there's more to consider in that complicated dance among equities, the dollar's behavior and costs. This morning's CPI added one step to that dance. Last month, CPI had risen 0.2 percent, with the ex-food-and- energy component rising 0.3 percent. October produced a 0.6 percent rise against expectations of a gain of 0.4 percent, with over half that rise coming from energy costs. The core CPI rose 0.2 percent, in line with expectations. The number emphasized the importance of energy costs and the need for crude to continue its recent pullback if inflation is not to rear its head. Although less attention was paid to other economic releases, this Wednesday's economic calendar was almost as full as last Wednesday's, beginning with the MBA Refinancing Index at 7:00, and continuing with that CPI and Housing Starts and Building Permits at 8:30. Despite the holiday-shortened preceding week, the Composite Index of mortgage loan applications rose 4.3 percent, week-over-week, on a seasonally adjusted basis. Not adjusted for seasonality, applications decreased. Refinancing activity increased 10.6 percent, with the refinance share rising to 48.6 percent of all applications. The seasonally adjusted Purchase Index decreased 0.6 percent. Finance activity revealed some worrisome tendencies, and housing starts and building permits provided a mixed impression. Housing starts zoomed up 6.4 percent, but building permits dropped 0.7 percent. Some seasonality issues might have produced the decrease in permits. At 9:30, October's Industrial Production and Capacity Utilization followed, leading into the 10:30 release of crude, gasoline, and distillate inventories. October's industrial production rose a much greater-than-expected 0.7 percent, with capacity utilization increasing a greater-than-expected 77.7 percent. The Federal Reserve noted that September's number had been affected by hurricanes in the Southeast, and termed Monday's number a possible bounce back from that hurricane-slowed production. The American Petroleum Institute scooped the Department of Energy, releasing figures showing crude imports up 4.5 percent from the year-ago level. The API reported a rise of 3 million barrels in crude inventories, but a drop of 1.5 million barrels in distillates and a rise of 126,000 million barrels in gasoline inventories. With winter months approaching, attention has focused on distillate stocks, with expectations among analysts for a rise instead of the actual decline. Distillate supplies include heating oil. While weather forecasts are for a mild winter, some worry that a hard cold snap would deplete supplies and drive up prices. The Department of Energy's later release revealed crude inventories higher by 800,000 barrels, but distillate and gasoline inventories down 1 million and 400,000 barrels, respectively. These numbers fell below expectations for a rise of 2.3 million barrels. Economic releases tapered off, but the pre-market shakeup created by the Kmart (KMRT) and Sears (S) merger announcement continued. Both had bounced in pre-market trade, with KMRT closing higher by 7.69 percent and S, by 17.23 percent. Competitors Wal-Mart (WMT), Home Depot (HD) and Lowes (LOW) didn't fare so well, with WMT closing lower by 0.65 percent; HD, 1.67 percent and LOW, 0.41 percent. The net effect on the retail index, the RLX, was to close it higher by 0.37 percent. The merged company will be named Sears Holdings Corporation, and will be the third-largest retailer in the U.S., although both companies will keep their original brand names. The structuring of the deal gives Sears' shareholders a 10.6 percent premium over Tuesday's closing price. The companies expect the merger to be finalized by March 2005. Cost savings and an increase in incremental gross margin will benefit the companies, executives believe. Reviewing the moves of that complicated dance show that crude bounced and the dollar declined, with that combination proving somewhat difficult for equities to negotiate. Yet if equities face resistance just ahead, so does crude, and it's not yet clear which will take the lead in this complicated dance. Equities pause, but might glide through either resistance or support, not yet having clearly broken through in either direction. CCI flutters into H&S formations, hinting that the indices might be tiring and might need at least minimal retracements, but that probably depends on both crude costs and the SOX's reaction to AMAT's earnings release. Watch the recently established consolidation zones, the SOX's 200-ema and Nasdaq 2100 for clues. Thursday's economic releases begin with the usual 8:30 release of jobless claims, but tomorrow's economic calendar rivals today's in number, if not in importance. At 10:00, October's Leading Indicators will be released, followed by Natural Gas Inventories at 10:30, and November's Philly Fed Index at noon. The Leading Indicators number is generally not considered market-moving, but I've seen it do just that. The Money Supply number will be released at 4:30. One report suggests that the Semi Book-to-Bill number also appears tomorrow, but the official site at wps2a.semi.org (formerly semi.org) lists November 22 as the release date. Be ready for the next big move, but be willing to be wrong, too, reversing course if necessary. ================================================================= 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 --------------------------------- Intersil Corp - ISIL - close: 17.54 change: +0.91 WHAT TO WATCH: We came very close to adding ISIL to the play list as a high risk/reward bullish candidate. The rally in the semiconductors helped push ISIL through resistance at $17.00 and its simple 100-dma. Volume was very strong at about 50 percent above the norm. The P&F chart shows the same bullish breakout over resistance and a new buy signal with a $22 target. We would consider this high risk because ISIL still has technical resistance at its simple and exponential 200-dma's overhead. --- Tesoro Corp - TSO - close: 31.66 change: +1.98 WHAT TO WATCH: Energy stocks look ready to breakout into a new leg higher and TSO could help lead the way. Shares added 6.6 percent on very strong volume. TSO's technicals have turned bullish with the MACD producing a new buy signal. The P&F chart is very bullish with a $59 target. We would watch for a move over $32.00 and use it as an entry point. The next level of resistance would be $35.00. --- Valero Energy - VLO - close: 43.68 change: +1.74 WHAT TO WATCH: VLO is another energy/oil-related stock that looks ready to breakout from its six-week consolidation. Technicals are turning positive and its MACD is nearing a new buy signal. We would watch for a move over $44.50-45.00 as a new bullish entry point. --- ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- BRCM $30.95 +1.01 - BRCM has broken out from its three-month trading range and produced a new P&F buy signal. CVG $15.00 +0.54 - This networking stock has broken through resistance at $14.50 and its simple 200-dma. It could be a bullish entry point. MAY $30.75 +2.23 - MAY has been climbing on strong volume the last couple of weeks and today's 7.8 percent rally broke through resistance at $30.00. SWIR $19.56 +1.17 - SWIR has been stuck in a trading range between $15 and $20 for the past three months. A breakout over $20 would certainly be positive. ========================================================== 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 11-17-2004 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: SEBL Active Trader (Non-tech Stocks) New Bullish plays: ONXX Closed Bearish Plays: WGR Stock Splits Announcements: LCAV 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 ----------------- Siebel Systems - SEBL - close: 10.18 change: +0.55 stop: 9.49 Company Description: Siebel Systems, Inc. is a leading provider of business applications software, enabling corporations to sell to, market to, and serve customers across multiple channels and lines of business. With more than 4,000 customer deployments worldwide, Siebel Systems provides organizations with a proven set of industry-specific best practices, CRM applications, market- leading analytics products, and business processes, empowering them to consistently deliver superior customer experiences and establish more profitable customer relationships. Siebel Systems' sales and service facilities are located in more than 30 countries. (source: company press release) Why We Like It: We have recently had SEBL on the watch list for a breakout over round-number psychological resistance at the $10.00 mark and technical resistance at its simple 200-dma. Today's 5.7 percent rally on twice its average volume broke through both levels. This is purely a technical breakout play but we did hear there are rumors circulating that IBM could make a bid to buy SEBL. P&F chart readers will point out that SEBL is still in a sell signal and fighting a downtrend. We also want to suggest caution given how overbought and extended the GSO software index is. If you're not comfortable with any of these observations then don't play SEBL. There will always be another trade later. We're going to try and minimize our risk with a stop loss at $9.49. Our target is the $11.50-12.00 range. Annotated Chart: Picked on November 17 at $10.18 Gain since picked: + 0.00 Earnings Date 10/20/04 (confirmed) Average Daily Volume: 7.5 million ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- ONYX Pharma - ONXX - close: 31.05 change: +0.81 stop: 29.95 Company Description: Onyx Pharmaceuticals is engaged in the development of novel cancer therapies that target the molecular basis of cancer. With its collaborators, the company is developing small molecule drugs, including BAY 43-9006 with Bayer Pharmaceuticals Corporation (source: company press release) Why We Like It: ONXX looks ready to fill the gap and the oversold bounce has brought the stock back to the bottom of the gap down. Normally the tops and bottoms of a gap tend to be resistance. If ONXX can break into the gap it has a chance to fill it. The stock gapped down on October 25th after the company reported on some Phase II trial news for its leading drug in development. Analysts are suggesting that the reaction was overdone as the company still plans to submit for an FDA approval after Phase III results come in. Yesterday Piper Jaffray upgraded the stock to an "out perform" and this morning A.G.Edwards upgraded the stock to a "buy" with a $39.00 target. We are going to use a TRIGGER at $31.26 to open the play. That means ONXX will have to break through resistance at $31.20 or the gap down from Oct. 25th. Once triggered we'll use a stop loss at $29.95. Our target will be a move into the $35-36 range so we're not actually targeting an entire move to the top of the gap near $40. Annotated Chart: Picked on November xx at $xx.xx <-- see TRIGGER Gain since picked: + 0.00 Earnings Date 11/04/04 (confirmed) Average Daily Volume: 1.0 million ============ Closed Plays ============ Closed Bearish Plays -------------------- Western Gas - WGR - close: 29.64 change: +0.72 stop: 29.31 The oversold bounce has been much stronger than expected but then the oil/natural gas sectors have not been exactly weak the past few days. There was no follow through on WGR's breakdown and WGR is now challenging resistance at the $30.00 level with rising volume. Yes, the P&F chart still looks very bearish but a breakout over $30.00 could put shorts on the run. We've been stopped out at $29.31. Picked on November 07 at $27.01 Gain since picked: + 2.63 Earnings Date 11/05/04 (confirmed) Average Daily Volume: 506 thousand ================================================================== Stock Splits ================================================================== Announcements ------------- LCAV announces 3-for-2 stock split Wednesday morning before the market's opening bell LCA-Vision Inc. (NASDAQ:LCAV) announced that its Board of Directors had approved a 3-for-2 stock split of its common shares. The Board also approved an increase in their cash dividend to 8 cents per share payable on a post-split basis. The stock split will take the form of a 50 percent stock dividend payable on December 15th, 2004 to shareholders on record as of December 6th. About the company: LCA-Vision currently operates 43 laser vision correction centers, including 40 wholly owned LasikPlus vision centers located in large metropolitan markets throughout the United States and three joint ventures in Canada. (source: company press release) ================== 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 TOT Total Sa (ADS) 107.91 +1.84 BP BP Plc 59.70 +0.74 XOM Exxon Mobil Corp 50.00 +0.59 MO Altria Group 57.42 +3.03 MWD Morgan Stanley 53.23 +0.72 BR Burlington Resources 41.80 +0.86 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- FSL Freescale Semiconductor 17.95 +1.11 AUO Au Optronics 12.94 +1.35 IDCC Interdigital Community 19.90 +1.65 MICU Vicuron Pharma 17.58 +1.58 ABGX Abgenix Inc 10.14 +1.02 ABMD Abiomed Inc 17.48 +1.71 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- FD Federated Dept Stores 56.68 +1.31 BRCM Broadcom Corp 30.95 +1.01 VRTS Veritas Software 23.11 +1.04 NTAP Network Appliance 29.57 +4.55 MAY May Dept Stores 30.75 +2.23 CHIR Chiron Corp 33.46 +2.09 WHR Whirlpool Corp 66.43 +2.90 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- KSS Kohl's Corp 49.70 -1.40 FRX Forest Labs 40.68 -1.93 CELG Celgene 27.87 -1.49 FSH Fisher Scientific 53.49 -1.43 INSP Infospace Inc 44.34 -4.83 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- URBN Urban Outfitters 44.02 -1.75 FS Four Seasons Hotels 68.70 -1.28 IPCR IPC Holdings 41.16 -1.26 CBI Chicago Bridge & Iron 36.75 -1.11 IOC Interoil Corp 30.69 -1.26 SKT Tanger Factory Outlet 48.80 -1.27 ================================================================= 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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