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Daily Newsletter, Wednesday, 12/08/2004

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PremierInvestor.net Newsletter               Wednesday 12-08-2004
                                                   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: It's Snowing
Watch List:  Another Mixed Bag of Candidates


===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
      12-08-2004           High     Low     Volume   Adv/Dcl
DJIA    10494.23 + 53.65 10506.85 10438.66 1.91 bln 1663/1145
NASDAQ   2126.11 + 11.45  2130.76  2110.57 2.38 bln 1711/1354
S&P 100   563.81 +  2.87   564.38   560.94   Totals 3374/2499
S&P 500  1182.81 +  5.74  1184.05  1176.80
SOX       431.91 -  5.60   437.22   429.84
RUS 2000  631.15 +  5.65   631.36   624.99
DJ TRANS 3723.93 + 54.27  3728.47  3669.88
VIX        13.19 -  0.48    13.68    13.18
VXO (VIX-O)13.72 -  0.46    14.55    13.65
VXN        20.01 -  0.27    20.39    19.93
Total Volume 4,302M
Total UpVol  1,946M
Total DnVol  2,320M
Total Adv  3374
Total Dcl  2499
52wk Highs  127 
52wk Lows    26
TRIN       1.24
PUT/CALL   0.89
===============================================================

===========
Market Wrap
===========

It's Snowing
Linda Piazza

Wednesday, President Bush asked U.S. Treasury Secretary John Snow
to stay on as a member of his cabinet.  With few economic
releases due Wednesday, focus had shifted early in the morning
onto the wild overnight moves in the currency markets and
developments in semiconductors, Merck, Wal-Mart, General
Electric, IBM and Texas Instruments.  Just ahead of the U.S.
open, the dollar began a retracement from its overnight highs
that lasted until about the time the announcement came out that
"Strong Dollar" Snow had been asked to stay.

With those wild currency moves and other developments, market
participants had much to consider.  One article advised that the
U.S. markets would likely get off to a cautious start due to that
mix of information, and the article's author was right.  The day
began cautiously, and choppy trading conditions prevailed all day
despite advancers beating decliners most of the day.  On the
Nasdaq, down volume bested up volume, however, perhaps capping
gains.  Indices performing strongly included the HMO, the Morgan
Stanley Healthcare Index, gaining 2.48 percent; the BTK, the
Biotechnology Index, gaining 2.34 percent; the DDX, the Disk
Drive Index, gaining 1.65 percent and the RLX, the S&P Retail
Index, gaining 1.26 percent.  Miners declined, with the XAU
falling 1.44 percent and the HUI, 1.61 percent.  Other decliners
included the SOX, falling 1.32 percent.

The major indices ended the day with gains, but with mixed chart
characteristics in some cases.

Annotated Daily Chart of the SPX:

 

Annotated Daily Chart of the Nasdaq:

 

Annotated Daily Chart of the Dow:

 

Annotated Daily Chart of the Russell 2000:

 

A disappointing Japanese GDP number may have helped prompt the
dollar's stunning overnight rise against the yen and euro, but
the dollar had been rising against the yen all week, preparing
the way for such a bounce.  Some termed that bounce a technical
bounce, one that was echoed in the dollar's move against the
euro.  The dollar's steep decline against the yen since mid-
September allows for an even steeper climb against the yen before
a 38.2 percent retracement is reached.  For a time during the
overnight session, traders seemed determined to drive the dollar
all the way through that 38.2 percent retracement in a single
day.  The higher dollar impacted metals and basic materials
negatively.  

News Wednesday included Goldman's downgrade of retailing giant
Wal-Mart to an inline rating due to concerns about same-store
sales.  The firm feels that WMT's decision to concentrate its
supercenters close together could dilute same-store sales. 
Despite that downgrade, WMT ended flat and the RLX, the S&P
Retail Index, posted that already-mentioned 1.26 percent gain. 
WMT, of course, has been pummeled enough lately that one more
downgrade might not have made much difference, but the stock's
performance might also have been helped because Banc of America
disputed Goldman's view to some degree, speaking in favor of the
company.

Banc of America had less favorable comments about some semi-
related stocks, however.  The firm downgraded several chip-
related stocks to sell ratings.  Actel (ACTL), Altera (ALTR),
Analog Devices (ADI), Intersil (ISIL), National Semiconductor
(NSM), Semtech (SMTC) and Xilinx (XLNX) garnered those
downgrades. By the close, all had posted hefty declines along
with the SOX. As Jim Brown noted after-hours in the Futures
Monitor, both ALTR and XLNX warned after the bell.  

Annotated Daily Chart of the SOX:

 

When downgrading the named semi-related stocks, Banc of America
mentioned valuations as well as concerns about revenues and
utilization rates.  Texas Instruments (TXN), of course, had
updated analysts on Q4 earnings Tuesday afternoon, news already
covered in last night's Market Wrap.  TXN declined 0.97 points or
3.88 percent in Wednesday's trading.

In addition to the news relating to semiconductors, other stocks
gathered attention.  Merck (MRK) narrowed its projections for
2005's earnings, with the narrowed $2.42-$2.52 per share range
below average predictions of $2.57.  The company cited weak sales
of key drugs.  MRK did reaffirm its Q4 and 2004 guidance,
however, and investors appeared to have been reassured, sending
the embattled stock $0.80 or 2.87 percent higher.

Countering those developments, not as uniformly bearish as they
might have been, was Lehman Brother's upgrade of General Electric
(GE) to an overweight rating and confirmation that IBM had sold
its PC business to Lenovo.  Lehman Brothers thought that GE's
possible earnings per share growth was not priced into the stock,
and the stock gained $0.40 or 1.13 percent.  CSFB upgraded
Federal Express (FDX) to an outperform rating, with the firm
mentioning likely strong growth in its international business and
margins.  FDX gained $2.77 or 2.88 percent.  In addition, the
disk drive index benefited from Seagate Technology's (STX)
raising of guidance Tuesday after the close.

Wednesday's economic reports included only the usual Mortgage
Bankers Association report on mortgage activity and the mid-
morning report on crude inventories, but the inventories number
sparked an initial flaring higher of crude prices.  Crude
inventories increased by 600,000 barrels last week, according the
Department of Energy.  Distillates rose 1.4 million barrels and
gasoline increased 2.4 million barrels.  Market watchers expected
an increase in crude inventories of 750,000 barrels and
distillates of 1.5 million.  

Although the reported numbers proved only slightly below
expectations, inventories have seen an upward trajectory over the
last weeks and that's beginning to be less of a dampening
pressure on crude prices than it once was.  That increase in
inventories leads some to speculate the OPEC ministers might cut
production when they meet Friday.  Crude futures initially
bounced after the numbers, although they could not hold onto all
the gains.  The bounce may also have been partially attributable
to the American Petroleum Institute's competing release of
inventories, with the API showing a decrease in distillate
inventories.  

Annotated Daily Chart of Crude Futures for January Delivery:

 

The only other economic release today occurred pre-market.  Last
week, the MBA had blamed the Thanksgiving holiday for the poor
showing in mortgage activity, and the week ending December 3 did
show a pickup in some measures. On a seasonally adjusted basis,
the Composite Index rose 3.4 percent over the previous week's,
and the Purchase Index increased 6.6 percent over the previous
week's and 22.7 percent from the same week a year ago.  The MBA
defines the Composite Index as a gauge of mortgage loan
application volume.  The Refinancing Index decreased 1.1 percent,
however, from the previous week's number, and the percentage of
refinancings to all mortgage activity fell to 45.6 percent
against the previous week's 46.4 percent.  Interest rates on
thirty-year fixed-rate mortgages fell to 5.09 percent, down from
the previous week's 5.17 percent.

When I scan these charts, I see a mixture of bullish and bearish 
characteristics, and that same mixture is seen when a search is
broadened to include other indices.  The BIX has come dangerously
close to confirming a double top on its daily chart, and for a
while today, refused to bounce along with other indices although
it eventually cooperated.  The ALTR and XLNX warnings may send
the SOX down to that 200-ema, with the outcome of this test not
known.  The broadening patterns seen on the Dow and the OEX are
notoriously difficult to trade because each breakout or breakdown
is soon reversed.  One index's action sometimes is juxtaposed
with that of another.  

All these various factors will coalesce soon and send the markets
one direction or the other, but trading conditions have been
particularly difficult recently.  Your main goal is to avoid
getting whipsawed so many times that you're trading capital is
depleted.  There will be another trade and perhaps a better one,
so preserve that capital.  I've listed some potential entry
points, both bullish and bearish, but enter with trepidation and
only if as many factors are going the direction of the trade as
possible.  

Jonathan Levinson will be discussing the impact of the dollar's
action and its interaction with equities, bonds and commodities
in his Futures Wrap.  The dollar spent much of the day retracing
some of the overnight gains, but it's uncertain as yet how it
will behave during tonight's overnight sessions and how that will
impact our markets.  Thursday's economic releases include only a
few more than Wednesday's, with the usual 8:30 release of jobless
claims and 10:30 figures on natural gas inventories joined by
October's Wholesale Inventories at 10:00 and the Money Supply
number at 4:30.  None of those should have the impact of Friday's
numbers, but fear of those numbers and the OPEC decision, and the
resultant impact on crude futures may be important to watch
tomorrow.


=================================================================
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
---------------------------------

Micron Technology - MU - close: 11.20 change: -0.20

WHAT TO WATCH: The semiconductor sector looks vulnerable to more 
weakness.  Bank of America downgraded several stocks to "sell" 
today.  Coincidentally the SOX index is failing at its 50-week 
and 200-week moving averages.  MU is not one of the stocks BAC 
downgraded but that did not stop MU from painting a bearish 
engulfing candlestick in today's session.  We would watch for a 
breakdown under support at the $11.00 (10.88) level as a 
potential bearish entry point.  




---

Wright Medical Group - WMGI - close: 28.60 change: +2.52

WHAT TO WATCH: In spite of lackluster earnings guidance for 2005 
today shares of WMGI soared almost 10 percent on strong volume.  
Shares broke out over resistance at $28.00 and its exponential 
200-dma.  It almost looks like an inverse or bullish Head & 
Shoulders pattern.  Watch the gap from July and the 200-dma 
overhead for resistance.  The new P&F price target is $43.




---

Xerox Corp - XRX - close: 16.12 change: +0.42

WHAT TO WATCH: This looks like a new bullish entry point on XRX.  
Shares soared higher back in early November breaking several 
layers of resistance.  Since then the stock has been 
consolidating its gains.  Now technicals are turning positive 
again and XRX is pushing through the $16.00 level.  The P&F chart 
is bullish and points to $25.  Watch the MACD for a new buy 
signal soon.  




---

Universal Health - UHS - close: 46.71 change: +1.22

WHAT TO WATCH: While today's 2.6 percent rally looks tempting we 
would not consider bullish positions just yet.  Readers can watch 
for a move over $47.00 or a move over $48.00.  Both are overhead 
resistance but a move over $47 would produce a new quadruple top 
breakout buy signal on its P&F chart.  A move over $48.00 would 
break through the bottom of its gap down, which is traditionally 
resistance.  



 

==========================================================
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 12-08-2004
                                                   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:  SEBL, PDCO

Active Trader (Non-tech Stocks)
  New Bearish Plays:    ED

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
==================================================================

SEBL - tech stock long -
  Uh-oh!  Things are not looking good for SEBL.  
  The stock lost another 2.4 percent when the 
  NASDAQ and the GSO software sector both 
  closed in the green.  There is still a chance that
  SEBL can bounce from the $10.00 level but we
  are going to raise our stop loss to $9.85 to reduce
  our risk.
 
 
PDCO - non-tech long -
  PDCO bounced sharply with a 2.2 percent gain on
  Wednesday.  This looks like a new bullish entry point.


==================================================================
Active Trader (AT) Non-Tech Stock section
==================================================================

---------
New Plays
---------

  New Bearish Plays
  -----------------

Consolidated Edison - ED - close: 43.49 chg: -0.24 stop: 44.26

Company Description:
Con Edison is a subsidiary of Consolidated Edison, Inc., one of 
the nation's largest investor-owned energy companies, with $10 
billion in annual revenues and $22 billion in assets. The utility 
provides electric, gas and steam service to more than 3 million 
customers in New York City and Westchester County, New York. 
(source: company press release)

Why We Like It:
We like ED as a short candidate based on its recent technical 
breakdown.  The stock has been a consistent winner ever since it 
bottomed in May of 2004.  Shares have been quietly channeling 
higher.  Yet in mid-November ED began to struggle at the $45.50 
level, which should not be a surprise.  The stock has been 
struggling with resistance in the $45-46 level for years.  At the 
very end of November there was some relatively steep profit 
taking and ED broke support at the $44.00 level.  A few days 
later ED broke down through the bottom of its six-month rising 
channel.  Suspiciously during this time as it was in the process 
of breaking down two brokerages upgraded the stock to "neutral", 
which means they had an under perform or sell on the stock during 
its six-month climb.  The fundamental trader will wisely point 
out that ED has a 5.2 percent yield.  We would find that very 
attractive as a long-term investor and the current lowered 
dividend tax rate.  However, the pattern is suggesting that ED is 
due for a correction.  This will not be a very fast play.  We 
have to have patience.  Our initial goal will be the $40.00 
region and we do expect ED to churn for a while around its 200-
dma before continuing its decline.  We will start the play with a 
tight stop at $44.26.

Annotated Chart:

 

Picked on December 08 at $43.49 
Gain since picked:       - 0.00
Earnings Date          10/21/04 (confirmed)
Average Daily Volume:       817 thousand




==================================================================
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

WB      Wachovia Corp              52.97     +0.81
HD      Home Depot                 42.56     +0.79
MRK     Merck & Co                 28.69     +0.80
UTX     United Technology          98.19     +1.54
HCA     HCA Inc                    40.80     +0.72
CFC     Countrywide Financial      34.35     +0.70

---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------

TZIX    Trizetto Group              8.04     +1.20
RSYS    Radisys Corp               17.74     +2.02
ALOY    Alloy Online                5.70     +1.08
GEPT    Global E-Point              5.44     +1.24
TRFDF   Tramford Intl Ltd           5.30     +2.31

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
FDX     Fedex Corp                 99.03     +2.77
BIIB    Biogen IDEC                64.53     +3.06
LFC     China Life Insurance       30.60     +1.35
FLR     Fluor Corp                 54.54     +2.74
LSTR    Landstar System            72.30     +2.85
TTC     Toro Co                    77.48     +4.78
NFI     Novastar Financial         51.00     +3.00

-------------------------------------------
Breakout to Downside (Stocks over $20)
-------------------------------------------

PTR     PetroChina                 52.99     -1.07
NOC     Northrop Grumman           55.09     -1.99
MBT     Mobile Telesys            125.06     -13.13
PIXR    Pixar                      86.77     -4.29
CCJ     Cameco                     88.77     -1.23
VIP     Vimpel Comm.               30.10     -8.38
GGC     Georgia Gulf               48.48     -1.05
ALDN    Aladdin Knowledge          25.01     -1.96

-----------------------------------------
Recently Overbought With Bearish Signals (Stocks over $20)
-----------------------------------------

NCX     Nova Chemicals             43.81     -1.69
AIB     Allied Irish Banks         39.00     -0.26
UDI     United Defense Ind.        44.60     -1.00
SHFL    Shuffle Master             44.73     -1.92
KSWS    K-Swiss                    27.18     -0.76


=================================================================
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

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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