PremierInvestor.net Newsletter Monday 12-13-2004 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: High Anxiety Watch List: Energy to Video games and more =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 12-13-2004 High Low Volume Adv/Dcl DJIA 10638.32 + 95.10 10642.53 10543.21 1.79 bln 1930/ 882 NASDAQ 2148.50 + 20.43 2148.50 2132.19 2.06 bln 1886/1150 S&P 100 570.41 + 4.91 570.55 565.50 Totals 3816/2032 S&P 500 1198.68 + 10.68 1198.77 1188.00 SOX 425.10 + 2.35 427.59 423.10 RUS 2000 638.03 + 5.79 638.08 631.65 DJ TRANS 3724.96 + 38.93 3724.96 3685.27 VIX 12.54 - 0.22 12.61 12.13 VXO (VIX-O)13.55 + 0.35 13.77 12.80 VXN 18.78 - 0.79 19.64 18.71 Total Volume 3,863M Total UpVol 2,791M Total DnVol 971M Total Adv 3816 Total Dcl 2032 52wk Highs 375 52wk Lows 28 TRIN 0.72 PUT/CALL 0.72 =============================================================== =========== Market Wrap =========== High Anxiety Jonathan Levinson The equity indices probed the highs today, with SPX setting a nominal new high as the Dow and Nasdaq rose below theirs. Volatility as measured by the VXO and QQV rose along with price as tensions mounted ahead of tomorrow's FOMC meeting. Breadth was solidly positive and volume solid despite very light QQQQ volume, with the number of advancing shares traded nearly tripling declining volume on both the NYSE and Nasdaq. Daily Dow Chart The Dow revisited the rally high today, finishing 4 points below the high of the day at 10642.53. Just as we saw several times last week, bearish intraday cycle setups went net nowhere, with sellers displaying a perfect absence of strength. The daily chart itself is an example of this, with the daily cycle oscillators aborting a pathetic 2 week downphase and today printing early an early buy signal, the first step of a new upphase. This oscillator action lines up with the interpretation of the past month's range as a bullish continuation pattern. On the flip side of that coin, the current chart pattern resembles that seen in June and in September, when the flag atop a flagpole rally degenerated into a complex top as the price simply collapsed. In June, that occurred from a similar pattern of higher flag highs. There's no telling whether this will repeat again, and it's worth repeating that the bears have been a no-show on most of their intraday downphases as well as on the current daily cycle downphase. Food for thought. Daily S&P 500 Chart The SPX gained 10.68 points to close at 1198.68, one tenth of a point off its high of the day and 52-week high. The same bullish uptick in the daily cycle oscillators is evident here as on the Dow above, and with upper expanding wedge resistance in play at current levels, tomorrow will be do or doo-doo time for the bears. Support is below at 1180, and unless the bears can drill the price down to at least that area tomorrow, the daily cycle upphase will begin catching up to the price, starting from a much higher price and oscillator low than the previous one did- a very bullish scenario. Daily Nasdaq Chart Whereas the Dow and SPX have been either topping or consolidating at the highs for the past month, the Nasdaq has just been rising. Despite this, the daily cycle downphase is more persistent than it is on the SPX and Dow. That's either an important bearish divergence, or a very bullish consolidation- a downphase in which the price continues to rise. In either case, the bears need to get the price below the 2100 level for starters. The Nasdaq feel 16 points short of its year high today, another potentially bearish divergence when compared with the SPX. With the price persisting at these levels, the daily cycle downphase is on borrowed time and should abort if the price doesn't pull back tomorrow. Either way, it will be helpful to get the indicators back in line with the price. Weekly TNX Chart Bonds were firm last week and kicked off this week on a positive note as ten year note yields (TNX) declined, finishing lower by .5 bps at 4.151%. Last week's decline was sufficient to stall the weekly cycle upphase, with the 10-week stochastic currently on a bearish kiss. With rising bear wedge support just below in the 4.0%-4.02% area, bond bulls are now eyeing what could be a large price with a wedge target in the low 3% area. TNX bears will want to see the previous low in the 3.9% support area taken out to target 3.55%-3.6% support. For TNX bulls, a move above 4.4%-4.44% should be sufficient to reignite the stalled weekly cycle upphase. Weekly chart of Crude oil Forecasts of colder than average temperatures for the next 5 days in the northeast and sabotage in Iraq contributed to a strong open for crude oil this morning following OPEC's weekend statements to cut back 1M bpd of "excess" output. OPEC, which produces 1/3 of the world's oil, resolved that Saudi Arabia, Kuwait, the United Arab Emirates, Nigeria, Libya, Algeria and Qatar will each reduce output by 5%, and that the cuts will impact not just the lower grade "Arab heavy" but also higher grades, though few details were given. Over the weekend, delivery of oil through Iraq's northern export pipeline to Ceyhan was stopped on Sunday, following a 12-day halt caused by an explosion at the November. Despite this, the OPEC announcement and the colder weather, prices were steady, with January crude trading a narrow range on both sides of unchanged for much of the daytime session and closing at 41. On the weekly chart, the 30 minute cycle downphase continues, with price confluence support in the 40-42 range currently being tested. As 40 was a major resistance area on the way up, we can expect support to assert itself here. Added to that is the news from the CFTC as reported by Reuters to the effect that crude oil specs had moved to a net short position of 17440 contracts for the week ended December 3rd from a 5815 net long position the previous week. On a contrarian basis, this would be bullish for oil prices. At 8:30AM, the Commerce Department released the November retail sales report which showed a 0.1% increase vs. expectations for no change. The bigger news was the large upward revision in the October report from a 0.2% gain to a 0.8% gain. As expected, automobile sales were weak, declining 1.3%, but that decline was expected. Excluding auto sales, November retail sales were higher by 0.5% for the month and 8.6% for the year. At 10AM, the Commerce Department reported that business inventories rose 0.2% in October, missing economists' expectations for a 0.5% increase. Retail inventories declined 0.6%, while sales rose 1.2%, the largest increase since March. The inventory-to-sale ratio fell to 1.3 for the month, falling back below September's 1.31 reading to the record low set in May of this year. The inventory-to-sales ratio for the manufacturing sector remained at 1.25, for the wholesale sector 1.15, and for the automobile sector it declined from 1.62 in September to 1.59 for October. Mastercard reported on Sunday that transaction volume for the prior week was 7.8% higher than it was one year ago, with 67.7M transactions processed during those seven days. This is the third consecutive week of transaction volume growth on a year-on- year basis reported by Mastercard. Agence France-Press reported that China will impose export duties on textiles and clothing. This news comes to the great relief of global textile producers fearing a flood of Chinese product when China's quota system is lifted next month. The report went to quote spokesman Chong Quan from China's Ministry of Commerce, who explained that the new tariffs will be assessed on volume rather than price, which should bolster the production of high-end fabrics. In corporate news, TOY was up strongly this morning following a weekend report from the Financial Times to the effect that European firm Permira and US firm Apollo were collaborating on a takeover bid for TOY. The article stated that KKR, Cerberus and Bain Capital were also among the suitors, and that CSFB is conducting the auction with bids due after Christmas. TOY closed higher by 2.81% at 20.47. PSFT and ORCL have finally reached an agreement to conclude their 18-month takeover saga, announcing PSFT's acceptance of ORCL's $26.50 per share bid in a 10.3B deal. ORCL had previously stated that $24 was its final offer. PSFT, which had closed at $23.95 on Friday, was up to 26.40 in premarket trading and closed higher by 10.31% at 26.42, while ORCL rose as well, closing higher by 10.17% at $14.63. Oracle's Larry Ellison said, "This merger works because we will have more customers, which increases our ability to invest more in applications development and support." ORCL expects that the deal will add 1 cent to its fiscal Q4 EPS, 2 cents per quarter in fiscal 2006, and "a bit more" in 2007. Cardinal Health (CAH) announced a 3-year restructuring plan that includes a 500M stock buyback and the dismissal of 4200 employees, just over 7% of its workforce in a bid to boost earnings by 500M. The company is forecasting a 15% drop in EPS for 2005, which should bring earnings growth down to the "low single digits" compared with its prior expectation of double- digits. CAH closed lower by 1.76% at 55.76. Tenet Healthcare (THC) warned as well, citing lower patient volumes and high levels of bad debt from patients. THC's Q3 net loss reported in November totaled 15 cents per share or 70M on revenue of 2.44B, 3.2% lower than Q3 2003. With 3748 fewer admissions in tenet-operated hospitals and an increase in admissions of uninsured patients from 3.5% to 3.8% of the total, THC is expecting to record charges that could exceed 1B in Q4 2004. THC lost 8.06% to close at 11.07. The Nasdaq 100 Index (NDX) added the following 8 stocks to the index late Friday: XMSR, ADSK, LBTYA, NTLI, MCIP, WYNN, ERICY, SIRI. The following 8 were removed: CEPH, CPWR, FHCC, GNTX, HSIC, NVDA, PTEN, RYAAY. XMSR reached a 4 year high of 39.60 following that news and on the announcement that GM has signed its one millionth XMSR subscriber. These changes become effective on December 20th. USA Today reported over the weekend on an "avalanche" of IPOs set to commence trading this week, as many as 17. This is the highest number of IPOs in a single week since August 11, 2000, when there 26 in that week. This year's 196 total IPOs also harkens back the dotcom bubble. The article noted that IPOs have been largely successful this year, up an average of 31% from their IPO price, the best such showing since 1999. Tomorrow is the FOMC meeting and at 2:15 we get the Fed's rate announcement. This is always good for a rollercoaster afternoon, with quiet, low volume in the hours preceding the announcement and then whippy moves in both directions after 2:15PM. On the one hand, rates remain very low at current levels, as conceded in the numerous speeches from the Fed's governors and Chairman. On the other hand, demand for US debt has been firm as evidenced by the recent treasury auctions. This morning's upward revision to the October retail sales report was treated by some mainstream media channels as sealing the deal on a 25 bp rate hike tomorrow. With equities, commodities and foreign currencies still very strong this year against the US Dollar, even following last week's bounce, there are strong arguments to support a rate increase, even despite the Fed's reticence to tighten during the less liquid December period. Time will tell. Aside from the FOMC announcement, we'll get the 8:30AM announcement of the October trade balance, est. 53B, then at 9:15 Industrial Production and Capacity Utilization, est. +0.2% and 77.8% respectively. With op-ex week and FOMC trading patterns, the potential for headfakes, false breaks, stop runs and whipsaws could scarcely be higher. Tomorrow is a good day during which to be extra careful out there. ================================================================== 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 --------------------------------- Progress Energy - PGN - close: 44.75 change: +0.93 WHAT TO WATCH: PGN jumped more than two percent on Monday. More importantly PGN broke out over resistance at $44.50 to hit new seven-month highs. This could be a new bullish entry point for a run towards resistance at $48.00. A move over $45 will reverse the P&F chart back into a buy signal with a triple-top breakout pattern. --- Sony Corp - SNE - close: 37.63 change: +1.52 WHAT TO WATCH: Video game makers soared today with SNE adding 4.2 percent on huge volume that was about four times stronger than normal. We're impressed. The latest news we read suggested there would be a playstation 2 shortage in the U.S. for Christmas due to a delay at the Panama canal. The rally in SNE pushed shares through resistance at $37 and its simple 200-dma. This could be a momentum entry point for a run toward $42.50 but we would expect some resistance at $40. --- RPM Intl Inc - RPM - close: 19.14 change: +1.04 WHAT TO WATCH: RPM would probably make a better stock symbol for NASCAR but the company is actually a specialty paint and coatings maker. Shares certainly revved higher today with a 5.7 percent breakout on very strong volume. The move is significant because RPM had been stuck in a trading range the past five weeks. Unfortunately, we can't find the catalyst for today's move. Watch for a move over $19.50 as a potential entry point. --- Exelon Corp - EXC - close: 42.89 change: +0.91 WHAT TO WATCH: This electric utility stock just added its third gain in a row. Technicals are turning positive and its MACD is hinting at a new buy signal soon. Readers can watch it for a breakout over $42.00, which is the top of its trading range for the past four weeks. Dividend players may be adding to EXC with its annual yield of 3.8 percent. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- OKE $28.13 +0.57 - This natural gas stock is rebounding and looks ready to breakout to new highs over $28.50. MXRE $20.00 +0.72 - This insurance stock just added 3.7 percent to breakout over its simple 200-dma. HELE $30.21 +1.10 - HELE soared more than 3.7 percent on strong volume to breakout over its 200-dma and the $30.00 level. APPX $35.19 +2.83 - APPX just broke out over its simple 200-dma on big volume. Watch for a dip back towards $34-33 and consider a bounce. BEAS $8.61 -0.09 - BEAS tried to breakout over the $9.00 level and its 200-dma but failed (again). Wait for the move over $9.00 before considering bullish positions. ================================================================= 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 Monday 12-13-2004 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: ONXX, KFY, ED Tech Stocks New Bullish Play: MNST Active Trader (Non-tech) New Bullish Play: ACI 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 ================================================================== ONXX - non-tech long - Good news! ONXX added 4.4 percent on decent volume to breakout to new relative highs. KFY - non-tech long - Traders quickly bought the dip this morning to $20.57 before pushing KFY back towards the Friday close. ED - non-tech short - Uh-oh! We may need to abort this play. Shares of ED surprised us with a 1.8 percent gain following Friday's failed rally. The move today was fueled by news that ED has decided to sell its telecom unit to FiberNet for $37 million. We are not suggesting new positions until ED trades under $43.25 ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ======== NEW PLAY ======== ---------------- New Bullish Play ---------------- Monster Worldwide - MNST - close: 29.50 chg: +1.25 stop: 26.99 Company Description: Founded in 1967, Monster Worldwide, Inc. is the parent company of Monster®, the leading global online careers property. The company also owns TMP Worldwide, the world's largest Yellow Pages advertising agency and one of the world's largest Recruitment Advertising agency networks. TMP Worldwide is also a provider of direct marketing services. Headquartered in New York with approximately 5,000 employees in 26 countries (source: company press release) Why We Like It: Formerly known as TMPW or TMP Worldwide the company changed its name to Monster Worldwide and its stock symbol to MNST back in early 2003. Looking at the long-term chart we can see that MNST has been stuck in a wide trading range for the past 18 months with resistance at the $30.00 level. Yet now after six weeks of consolidating sideways between $27 and $30 shares of MNST look poised to breakout over the $30 mark and hit new highs. Technicals are positive and its MACD is very close to a new buy signal. The P&F chart is bullish with a $51 target. Today's 4.4 percent rally was fueled by volume over twice the norm and that could have shorts worried. The most recent data put short-interest at 11 percent of the float. A breakout over $30 could produce a short-squeeze. We are going to use a TRIGGER at $30.11 to open the play. Until MNST trades at or above our entry point we'll sit on the sidelines. Once triggered we'll target a quick move into the $34-36 range. Annotated Chart: Picked on December xx at $xx.xx <-- see TRIGGER Gain since picked: + 0.00 Earnings Date 00/00/00 (unconfirmed) Average Daily Volume: 1.4 million ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bullish Plays ----------------- Arch Coal - ACI - close: 34.71 change: +1.59 stop: 31.99 Company Description: St. Louis-based Arch Coal is the nation's second largest coal producer and mines low-sulfur coal exclusively. Through its subsidiary operations in West Virginia, Kentucky, Virginia, Wyoming, Colorado and Utah, Arch provides the fuel for approximately 7 percent of the electricity generated in the United States. (source: company press release) Why We Like It: A Reuters article out this morning reported that coal prices, which have already doubled in the last two years, could still climb higher with heavy demand from steel producers. That kind of news should be good for fundamental investors. Plus, crude oil remains at relatively high levels above $40 a barrel, which will keep some focus on alternative energy sources. We think ACI is also tempting on a technical basis. Shares have been consistently bouncing from its rising simple and exponential 200-dma's for months. You can see ACI's rising channel more clearly on the weekly chart. The stock just bounced near the bottom of its channel from its simple 200-dma. We want to target a run toward the top of the channel at $40.00. In other news S&P just announced its semi-annual adjustments to its growth and value indices. The firm is moving ACI from a "value" label to a "growth" index. Annotated Chart: Picked on December 13 at $34.71 Gain since picked: + 0.00 Earnings Date 01/29/05 (unconfirmed) Average Daily Volume: 951 thousand ================================================================== Stock Splits ================================================================== 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 --------------------------------- Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change TOT Total Sa 107.99 +1.74 WB Wachovia Corp 54.11 +0.73 GSK GlaxoSmithKline 45.80 +0.98 RD Royal Dutch Petrol 56.81 +1.04 BCS Barclays Plc 43.74 +0.74 C Citigroup 46.77 +0.86 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- ORCL Oracle 14.63 +1.35 RPM RPM Intl 19.14 +1.04 CTMI CTI Molecular Imaging 14.68 +1.31 VISG Viisage Technology 8.99 +1.27 PDFS PDF Solutions 15.75 +1.61 BLTI Biolase Technology 10.69 +1.64 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- DD Dupont E Nemours & Co 47.06 +1.08 SNE Sony Corp 37.63 +1.52 ERTS Electronic Arts 57.57 +3.38 AT Alltel Corp 60.56 +2.66 MAR Marriott Intl Inc 61.75 +1.50 COH Coach Inc 55.86 +2.24 MNST Monster Worldwide 29.50 +1.25 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- TUES Tuesday Morning 30.01 -6.27 ABM ABM Industries 20.05 -1.44 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- ANF Abercrombie & Fitch 43.85 -1.14 SSI Spectrasite Inc 55.05 -1.27 IIVI II-VI Inc 41.31 -2.17 OKSB Southwest Bancorp 26.25 -0.38 ================================================================= 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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