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.
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.
To ensure you continue to receive email from Option Investor please add "email@example.com"
Option Investor Inc