PremierInvestor.net Newsletter Wednesday 12-01-2004 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: Chipping Away Watch List: Technology to Toys =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 12-01-2004 High Low Volume Adv/Dcl DJIA 10590.22 +162.20 10590.22 10425.76 2.19 bln 2012/ 830 NASDAQ 2138.23 + 41.42 2138.32 2104.58 2.20 bln 2075/ 989 S&P 100 566.21 + 8.74 566.21 557.47 Totals 4087/1819 S&P 500 1191.37 + 17.55 1191.37 1173.78 SOX 440.09 + 16.22 440.24 426.36 RUS 2000 643.68 + 9.91 644.21 633.77 DJ TRANS 3736.79 + 78.08 3738.08 3656.78 VIX 12.97 - 0.27 13.12 12.77 VXO (VIX-O)13.46 - 0.08 13.85 13.26 VXN 18.24 - 0.60 18.89 17.83 Total Volume 4,393M Total UpVol 3,533M Total DnVol 817M Total Adv 4087 Total Dcl 1819 52wk Highs 619 52wk Lows 20 TRIN 0.61 PUT/CALL 0.73 =============================================================== =========== Market Wrap =========== Chipping Away Linda Piazza Ignoring dire headlines such as "British Pound Advances to Twelve-Year High against the Dollar" and downgrades in several semi-related stocks, indices chipped through overhead resistance in Wednesday's trading. Futures rose pre-market, chiseling into that resistance. Indices built on those chiseled steps, climbing from the open into the close, through several economic releases. They climbed on strong volume, with the SOX, NWX, DDX, XBD, HMO, TRAN, DJUSHB, GSO and GHA among the sector-related indices that posted gains in excess of two percent. Some posted gains much in excess of that figure. Before the open, an attempt was made to whittle enthusisam for semi-related stocks. That effort couldn't dent enthusiasm ahead of Intel's mid-quarter update Thursday, especially in the face of good news from two of the sector's stocks. The SOX gapped above its 200-ema and traveled straight up to test its 200-sma, gaining 3.82 percent. Annotated Daily Chart of the SOX: Efforts to whittle enthusiasm came from several sources and did pressure European semi-related stocks. Merrill Lynch had warned that analysts might be too optimistic about Intel's earnings ahead of its mid-quarter report on Thursday. The U.S. Semiconductor Equipment and Materials International reported its expectation that demand for chip manufacturing equipment would rise 59 percent this year but then perhaps fall as much as 5.1 percent next year. Although markets reputedly look ahead and discount future developments, U.S. markets appeared to concentrate more on this year's expected sharp gains than on next year's expected declines. In addition, European chip-related companies Infineon Technologies and STMicroelectronics received downgrades. Merrill Lynch downgraded Infineon Technologies to a sell rating from its previous neutral rating. The firm cited specific problems within Infineon as well as industry pricing and inventory surplus problems. Deutsche Bank downgraded STMicroelectronics to a hold rating from the previous buy rating. U.S. investors ignored that news and focused on better news from Fairchild Semiconductor (FCS) and Novellus (NVLS). Both countered the drearier reports, with FCS revising its Q4 outlook to the higher end of previous forecasts for a decline of 5-10 percent. FCS did note that gross margins would come in at the lower end of previous estimates. NVLS said that its Q4 results would likely be in the top half of its predicted range, despite a business climate for chip manufacturing equipment that remained listless. Pre-market, pharmaceuticals also garnered attention, with Pfizer (PFE) reaffirming its earnings forecast for the full year and telling investors that it has twenty more drugs for which it will seek approval by the end of 2006. PFE closed 1.65 percent higher. Geopharma (GORX) also announced that its Belcher Pharmaceuticals unit had received FDA approval for a drug used to treat mucositis, an oral inflammation sometimes suffered by cancer patients receiving radiation or chemotherapy. That stock was halted mid-afternoon, however, with some confusion persisting as to whether that approval had been gained after all. Drugmakers had also been a focus sector in Europe, with AstraZeneca (AZN) and GlaxoSmithKline (GSK) gaining ahead of our open. Gains in pharmaceuticals had helped lead the FTSE 100 higher, and our markets followed. Annotated Daily Chart of the SPX: Annotated Daily Chart for the Nasdaq: Annotated Daily Chart of the Dow: Annotated Daily Chart of the Russell 2000: A grouping of mostly encouraging economic news helped indices chisel through resistance. The first of the reports wasn't the most encouraging. The latest slate of survey information from the Mortgage Bankers Association revealed that mortgage activity slowed during Thanksgiving week. The Composite Index dropped 5.8 percent; the Purchase Index, 0.6 percent and the Refinance Index, 12.3 percent, all on a seasonally adjusted basis and in comparison to the previous week's numbers. Although the MBA pegged most of the blame on Thanksgiving week, the later release of the Fed's Beige Book suggested otherwise. The MBA noted that the percentage share of FHA loans to all loans had dropped markedly during 2004. This suggests that first-time buyers dropped away, perhaps signaling trouble for the home builders. Mortgage payments cheaper than rent had helped drive new home sales, but those buyers might be tapped out. The news didn't impact the DJUSH, the Dow Jones US Home Construction Index, negatively, with that index posting a 2.56 percent gain for the day, one of the many indices posting more than 2 percent gains. The average interest rate for a 30-year fixed-rate mortgage rose to 5.78 percent, up from the previous week's 5.64 percent. Wednesday's slate of economic releases also included October's Personal Income and Personal Spending, both released at 8:30. October's Personal income rose 0.6 percent, beating expectations for a 0.5 percent climb. September's rise had been only 0.2 percent. Personal Spending rose a respectable 0.7 percent, with September also having seen a respectable rise of 0.6 percent. Expectations had been for a rise of 0.4 percent. The savings rate was troubling, however, with the 0.2 percent rate touted as the lowest since October 2001. October's Construction Spending and November's ISM Index were both released at 10:00, with one a disappointment and one an upside surprise. Construction Spending was flat against an expected rise of 0.8 percent, with lower spending on homebuilding responsible for the flat number. November's ISM surprised to the upside, rising to 57.8 percent from October's 56.8 percent. Economists had expected a flat number. Perhaps the drop in crude prices did more than all those economic releases to help equities chip at resistance. Crude prices dropped from the open, with that drop accelerating after the release of crude inventories near 10:30 EST. With winter upon us, distillates are the new focus of those numbers because distillates include heating oil. Distillates rose 2.3 million barrels according to the Department of Energy. Crude inventories rose 900,000 barrels and gasoline inventories increased 3 million barrels, with both those figures also supplied by the Department of Energy. Annotated Daily Chart for Crude Futures for January Delivery: November's Auto and Truck Sales were also released, with the figures showing that Ford's (F) sales declined seven percent, with the company also revealing that it would trim Q1 production by eight percent. DaimlerChrylser (DCX) saw sales increase by four percent. Nissan North America (NSANY), Toyota Motor (TM), and Subaru saw sales increase, although Nissan outshone the others by posting a 31 percent gain. Mazda North American Operations saw November sales 8.7 percent lower than last year's for the same month. The Fed's Beige Book followed at 2:00, with the Fed generally upbeat about continued economic growth. All districts except Chicago reported increases in economic activity. The Fed noted that overall consumer spending and lending activity were uneven or mixed throughout the districts, while manufacturing and service sector activity were strong or increasing throughout the districts. Not all districts report service sector activity. As has been apparent from recent MBA reports, residential mortgage lending and refinancing ebbed. Demand for transportation services was characterized as robust. So was residential real estate activity, although some districts reported some cooling. Commercial real estate presented a different story. High vacancies and pricing pressures remained, although some districts noted that the excess capacity was being reduced. Information on commercial real estate was mixed across the districts, with the situation in Dallas and Richmond appearing to improve while that in New York appeared to be worsening. The Fed noted that large or even record crop production might be seen in many regions, with quality and yields both expected to be above average. Labor markets improved. The section dealing with prices detailed increased price pressures, with energy-related costs rising. Some industries were able to pass cost increases on to consumers, with retailers less able to do so than manufacturers. Costs for building materials, particularly cement and steel, rose at the same time that home sales cooled. Dallas, particularly, saw a softening in home sales. With mostly encouraging economic news and a steep fall in crude prices, investors were willing to overlook the dollar's weakness, worries about the U.S. deficit's effect on foreign investment in U.S. companies and bonds, and bothersome signs from analysts commenting on the semi-related stocks. Bulls want to see excitement from Intel's mid-quarter update, a continued decline in crude prices and a building on the breakouts made today. If those breakout levels are lost tomorrow, trade carefully, especially ahead of Intel's mid-quarter update after the close tomorrow. Charts look great, the breakouts are there, but sentiment measures perhaps show too much bullishness in the markets, as if they're banking a bit too much on gains that will come due to the MSFT dividend and Intel update. Late-day developments include a shakeup in California's pension giant Calpers, with President Sean Harrigan voted off his seat on the board of directors. Harrigan had been guiding the pension giant into a leadership role in business reform, and was reportedly targeted by pro-business groups that had the ear of Governor Arnold Schwarzenegger. After-hours developments included same-store sales and a few earnings reports, with same-store sales continuing tomorrow. Software maker Synopsis (SNPS) dropped after hours, last at $18.23 after closing at $18.64. The company reported a $0.19 per share loss against an expectation of a $0.03 gain for the fourth quarter. Dollar General (DG) reported, saying that higher gasoline prices were responsible for the company's eight percent decrease in net income. Starbucks (SBUX) same-store sales rose 13 percent, Men's Wearhouse (MW) gained 7.8 percent, and American Eagle's (AEOS) surged 24.3 percent, with these among other companies reporting. Thursday's economic releases include the usual 8:30 release of jobless claims, followed by the 10:00 release of October's Factory Orders. Intel will provide its mid-quarter update on Thursday after the close, so investors have a full day of pre- Intel-release volatility to maneuver around on Thursday. ================================================================= 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 --------------------------------- OmniVision - OVTI - close: 19.42 change: +1.58 WHAT TO WATCH: Specialty semiconductor maker OVTI reported earnings yesterday that beat estimates by four cents per share. A handful of equity analysts followed up this morning with a wave of upgrades for the stock. Shares of OVTI gapped higher above resistance at $19.00 and its simple 200-dma for an 8.8 percent gain. While bulls can be encouraged that OVTI has now broken into its June gap down the stock is still under round-number resistance at $20.00, which just happens to be P&F resistance. Watch for the follow through on the breakout. The P&F chart points to $35. --- Hasbro Inc - HAS - close: 19.62 change: +0.59 WHAT TO WATCH: Traders may want to consider HAS as a bullish seasonal play. The toy maker rallied more than three percent on Wednesday to breakout over resistance at $19.25 and its simple 200-dma. We would watch for some follow through for a move over the $20.00 mark. The P&F chart has reversed back into a buy signal with a $25 target. --- YUM Brands - YUM - close: 46.95 change: +1.55 WHAT TO WATCH: YUM has been a strong momentum candidate the last few months and shares just broke out over resistance at $46. The recent three-week consolidation has given technicals enough time to reset so they can turn bullish again. The MACD just produced another buy signal. The P&F chart looks very bullish with a $74 target. We'd probably consider a stop loss near $44 to start. --- Sierra Wireless - SWIR - close: 21.24 change: +2.35 WHAT TO WATCH: We've been watching SWIR for days as the stock coiled for a breakout over the $20.00 level. Now the breakout has occurred on very strong volume. This looks like a bullish entry point. Watch out for the exponential 200-dma and target a run towards $25.00. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- RYAAY $42.23 +3.08 - Brave traders may want to take another look at RYAAY. Shares have broken through resistance at $40.00 to hit new one-year highs. UTSI $21.35 +1.81 - We've been watching UTSI for a breakout over the $20.00 level and that move occurred today. There is technical resistance at the simple and exponential 200-dma's but traders can watch for UTSI to fill the gap toward $25. TBH $31.00 +0.21 - We still like TBH as a potential bullish candidate. Currently shares are testing its 200-week moving average. We're watching for a move over $31.50. RYN $48.80 +1.05 - After weeks of trading sideways between $46 and $48 shares of RYN are breaking out to new highs. ========================================================== 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 12-01-2004 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 Active Trader (Non-tech Stocks) New Bullish plays: PDCO, TARO Stock Splits Announcements: CPO, NCR 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 ================================================================== Active Trader (AT) Non-Tech Stock section ================================================================== --------- New Plays --------- New Bullish Plays ----------------- Patterson Companies - PDCO - close: 42.06 chg: +1.20 stop: 37.99 Company Description: Patterson Companies, Inc. is a value-added distributor serving the dental, companion-pet veterinarian and rehabilitation supply markets. Dental Market - As Patterson's largest business, Patterson Dental Supply provides a virtually complete range of consumable dental products, equipment and software, turnkey digital solutions and value-added services to dentists and dental laboratories throughout North America. Veterinary Market - Webster Veterinary Supply is the nation's second largest distributor of consumable veterinary supplies, equipment, diagnostic products, vaccines and pharmaceuticals to companion-pet veterinary clinics. Rehabilitation Market - AbilityOne Products Corp. is the world's leading distributor of rehabilitation supplies and non-wheelchair assistive patient products to the physical and occupational therapy markets. The unit's global customer base includes hospitals, long-term care facilities, clinics and dealers. (source: company press release) Why We Like It: PDCO shook of a lackluster earnings report to breakout through the top of its eight-month trading range last week. Traders stepped in to buy the dip at $37.50 and the stock has been inching higher ever since. One of the reasons we like this bullish technical breakout is the volume. Volume has been significantly above average four out of the last five sessions (the one session it wasn't was post- Thanksgiving Friday). The bullish P&F chart shows a fresh triple- top breakout buy signal with a $54 price target. We believe that patient traders can probably see PDCO climb towards the $50 region over the next couple of months. We're willing to jump in at current levels but a dip towards $40.00 would also be an entry point. Annotated chart: Picked on December 01 at $42.06 Gain since picked: + 0.00 Earnings Date 11/24/04 (confirmed) Average Daily Volume: 378 thousand --- Taro Pharmaceuticals - TARO - cls: 30.90 chg: +1.26 stop: 27.75 Company Description: Taro Pharmaceutical Industries Ltd. is a multinational, science- based pharmaceutical company dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. (source: company press release) Why We Like It: It has taken a little more than four months but TARO has finally filled the gap down from last July. We've had TARO on our watch list before as a bullish candidate on a breakout over resistance at $30.00. Today's market rally and rebound in the DRG drug index helped push TARO up more than four percent to breakout. Given what appears to be a potential bullish reversal in the DRG drug index over the last few weeks we're optimistic about TARO's ability to follow through on today's breakout. The P&F chart for TARO shows a triple-top breakout buy signal with a $49 target. We're not quite that enthusiastic. TARO still has technical resistance at the exponential 200-dma near $35 and its simple 200-dma near $39. Our initial target will be the $35 region. Annotated chart: Picked on December 01 at $30.90 Gain since picked: + 0.00 Earnings Date 10/28/04 (confirmed) Average Daily Volume: 629 thousand ================================================================== Stock Splits ================================================================== Announcements ------------- CPO grows a 2-for-1 stock split This afternoon Corn Products Intl, Inc. (NYSE:CPO) announced that its Board of Directors had approved a 2-for-1 stock split of its common shares. The Board also approved a quarterly cash dividend of 14 cents per share payable on January 25th, 2005 to shareholders on record as of January 4th. It would appear the cash dividend is payable on a pre-split basis. The 2-for-1 split is payable as a 100 percent stock dividend on January 25th, 2005 to shareholders on record as of January 4th. About the company: Corn Products International, Inc. is one of the world's largest corn refiners and a major supplier of high-quality food ingredients and industrial products derived from the wet milling and processing of corn and other starch- based materials. The Company is the number-one worldwide producer of dextrose and a leading regional producer of starch, high fructose corn syrup and glucose. In 2003, the Company recorded net sales of $2.1 billion with operations in 19 countries at 37 plants, including wholly owned businesses, affiliates and alliances. Headquartered in Westchester, Ill., it was founded in 1906 (source: company press release) -- NCR announces a 2-for-1 stock split This morning before the market's opening bell NCR Corp. (NYSE:NCR) announced that its Board of Directors had approved a 2-for-1 stock split of its common shares. The split will be payable in the form of a 100 percent stock dividend on January 21, 2005 to shareholders on record as of December 31st, 2004. About the company: NCR Corporation is a leading global technology company helping businesses build stronger relationships with their customers. NCR's ATMs, retail systems, Teradata data warehouses and IT services provide Relationship Technology solutions that maximize the value of customer interactions and help organizations create a stronger competitive position. NCR (www.ncr.com) is based in Dayton, Ohio. (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 CHL China Mobile Ltd 17.05 +0.73 ING ING Groep 28.04 +0.61 WFC Wells Fargo & Co 62.88 +1.11 FNM Fannie Mae 71.70 +3.00 JNJ Johnson & Johnson 61.19 +0.87 AIG American Intl Group 64.73 +1.38 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- STX Seagate Tech Holdings 16.47 +1.49 SNPS Synopsys 18.64 +1.01 FCS Fairchild Semiconductor 16.70 +1.40 OVTI Omnivision Technologies 19.42 +1.58 WPP Wausau Paper 19.12 +1.17 TOMO Tom Online 16.18 +1.46 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- UTX United Technologies 100.15 +2.57 GIS General Mills 46.63 +1.14 IR Ingersoll-Rand 77.42 +3.00 NTAP Network Appliance 32.13 +1.97 CI Cigna Corp 75.80 +5.78 VRSN Verisign Inc 34.52 +1.62 RYAAY Ryanair Holdings 42.23 +3.08 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- FE FirstEnergy 39.48 -2.75 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- TXU TXU Corp 61.08 -1.74 TK Teekay Shipping 50.36 -2.90 FRO Frontline Ltd 57.65 -2.40 FDG Fording Canadian Coal 72.01 -2.59 VLCCF Knightsbridge Tankers 36.17 -2.74 BCE BCE Inc 24.08 -0.17 ================================================================= 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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