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Daily Newsletter, Monday, 04/25/2005

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Table of Contents

  1. Market Wrap
  2. New Plays
  3. In Play Updates and Reviews

Market Wrap

Wall of Worry

New Plays

Most Recent Plays

New Plays
Long Plays
Short Plays
NFLD None
TSFG  

New Long Plays

Northfield Labs - NFLD - close: 15.39 chg: +0.92 stop: 14.14

Company Description:
Northfield Laboratories Inc. is a leader in developing an oxygen-carrying resuscitative fluid, PolyHeme, for the treatment of urgent, large volume blood loss in trauma and resultant surgical settings. PolyHeme is a solution of chemically modified human hemoglobin that requires no cross matching and is therefore compatible with all blood types. It has a shelf life of over 12 months. Enrollment is currently underway in a pivotal Phase III study of PolyHeme beginning in the pre-hospital setting. (source: company press release)

Why We Like It:
Nowadays we have to label almost every biotech play as high-risk and aggressive. It doesn't matter if we're bullish or bearish. With so much riding on new drug development that any sort of new release could send the stock rocketing one way or the other. That's great if you're on the right side of the trade and it's stomach turning if you're not. Traders absolutely need to play with stop losses here but even stop losses won't save us from a gap down. Okay, enough with the cautionary comments. We like NFLD because the trend has changed. The stock sank from January through March in a very consistent manner. Then the stock began to bounce ahead of its Q1 (actually Q3 for NFLD) earnings report. Then, despite a worse loss than expected, the stock soared after the company reported good news for its blood substitute. The product is called PolyHeme and NFLD said the phase III study has been allowed to continue after an independent safety panel recommended the study go on without change. If this product is eventually approved it could be worth billions. Looking at the daily chart of NFLD we see that shares consolidated sideways after the initial reaction on April 11th. Then as the stock coiled into a tighter and tighter range it has now broken out to the upside. Today's 6.3 percent gain pushed NFLD above its simple and exponential 200-dma. As bulls on the stock we are fighting against a bearish P&F chart but we believe the trend has changed. Our target is the $18.00 level but watch out for the simple 100-dma, currently near $17.00, it could be resistance. Our time frame is six to eight weeks.

Picked on April 25 at $15.39
Change since picked: + 0.00
Earnings Date 04/11/05 (confirmed)
Average Daily Volume: 471 thousand

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The South Fincl Group - TSFG - cls: 27.05 chg: +0.87 stop: 26.05

Company Description:
The South Financial Group is a financial services company, headquartered in Greenville, South Carolina with approximately $14.7 billion in total assets and 155 branch offices in Florida, North Carolina, and South Carolina. TSFG focuses on fast-growing banking markets in the Southeast and concentrates its growth in metropolitan statistical areas. TSFG operates two subsidiary banks. Carolina First Bank, the largest South Carolina-based commercial bank, operates in North Carolina, South Carolina and on the Internet under the brand name, Bank CaroLine. Mercantile Bank operates in select Florida markets. (source: company press release)

Why We Like It:
Pure and simple this is an oversold bounce play. Shares of TSFG broke down below support near $29.50 a couple of weeks ago and has sunk toward its May 2004 lows (see chart). Now with financial stocks on the rebound in addition to the major market averages bouncing higher shares of TSFG are finding bargain hunters. We like today's bullish engulfing candlestick pattern, which is typically seen as a bullish reversal especially at the end of a downtrend. More conservative investors may want to wait for confirmation of the pattern with some follow through tomorrow. We're aiming for a move to $29.00 but we'll pay attention to possible resistance at the 10-dma. If the bounce falters too much we'll jump out.

Picked on April 25 at $27.05
Change since picked: + 0.00
Earnings Date 04/18/05 (confirmed)
Average Daily Volume: 291 thousand
 

New Short Plays

None today.
 

Play Updates

Updates On Latest Picks

Long Play Updates

Electro Sci. Ind. - ESIO - close: 17.25 chg: -0.52 stop: 16.79

Uh-oh! Bulls need to turn more defensive. ESIO's lack of participation in today's market rally is a concern. The stock is fighting with resistance at the $18.00 level. More aggressive players may want to consider new bullish positions on a dip towards $17.00. We would prefer to wait for ESIO to trade above the $18.00 level before initiating new positions.

Picked on April 21 at $17.93
Change since picked: - 0.68
Earnings Date 03/22/05 (confirmed)
Average Daily Volume: 181 thousand
 

Short Play Updates

BEA Systems - BEAS - close: 7.20 chg: +0.07 stop: 7.71

No change from our previous update on 04/24/05.

Picked on April 15 at $ 7.68
Change since picked: - 0.48
Earnings Date 05/18/05 (unconfirmed)
Average Daily Volume: 7.6 million

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Boston Scientific - BSX - cls: 29.60 chg: +0.25 stop: 31.51

No change from our previous update on 04/24/05.

Picked on April 19 at $29.05
Change since picked: + 0.55
Earnings Date 04/19/05 (confirmed)
Average Daily Volume: 5.4 million

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Flextronics - FLEX - close: 11.29 chg: +0.08 stop: 11.76

No change from our previous update on 04/24/05. Remember that we plan to exit on Wednesday afternoon to avoid FLEX's earnings report on Thursday.

Picked on March 16 at $11.95
Change since picked: - 0.66
Earnings Date 04/28/05 (confirmed)
Average Daily Volume: 5.5 million

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Greenbrier Co - GBX - close: 32.80 chg: +1.22 stop: 34.25

Whoa! Shares of GBX added 3.8 percent on Monday. This was unexpected. It looks like the stock has found new support at its 40-dma. Shares remain under resistance at the $34.00 level but the technical picture is starting to turn against us as bears. More conservative traders may actually want to exit early to avoid any losses. We're going to keep the play open to see if shares fail again at the 21-dma just overhead.

Picked on April 11 at $33.20
Change since picked: - 0.40
Earnings Date 03/30/05 (confirmed)
Average Daily Volume: 123 thousand

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Lowes Companies - LOW - cls: 52.03 change: +0.15 stop: 54.01

No change from our previous update on 04/24/05.

Picked on April 10 at $54.81
Change since picked: - 2.78
Earnings Date 05/16/05 (unconfirmed)
Average Daily Volume: 3.0 million

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Catalina Mktg - POS - close: 23.98 chg: -0.23 stop: 25.25

No change from our previous update on 04/24/05.

Picked on April 22 at $23.80
Change since picked: + 0.18
Earnings Date 05/18/05 (unconfirmed)
Average Daily Volume: 468 thousand

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Sina Corp - SINA - close: 26.43 chg: -0.52 stop: 28.61 *new*

SINA continues to sink and has now broken down under short-term support at the $27.00 level. We are lowering our stop loss to $28.61. Conservative traders may want to consider early exits to avoid the rush as the stock nears our target at the $25.00 level.

Picked on April 13 at $28.52
Change since picked: - 2.09
Earnings Date 05/05/05 (confirmed)
Average Daily Volume: 3.5 million

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Westlake Chem. - WLK - close: 28.03 chg: +0.63 stop: 30.01

Heads up! On Sunday we mentioned that WLK was oversold and due for a bounce. Well it got one today. More importantly the short-term technical oscillators are turning positive and its MACD just produced a new buy signal. Conservative traders may want to consider exiting early with a small profit now. We expect WLK to bounce into the $28.50-28.75 range before encountering any short-term resistance. The stock could easily bounce back toward the $30.00 level before hitting resistance. Be prepared.

Picked on April 08 at $29.19
Change since picked: - 1.16
Earnings Date 05/04/05 (confirmed)
Average Daily Volume: 207 thousand

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West Marine - WMAR - close: 20.18 chg: +0.19 stop: 20.75

No change from our previous update on 04/24/05. Remember that we plan to exit on Wednesday afternoon to avoid WMAR's Thursday earnings report.

Picked on March 17 at $21.20
Change since picked: - 1.02
Earnings Date 04/28/05 (confirmed)
Average Daily Volume: 155 thousand

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XM Satellite Radio - XMSR - cls: 27.40 chg: +0.87 stop: 30.01

XMSR produced an oversold bounce today. Look for resistance in the $28.00-28.50 range. More conservative traders may want to exit early for a profit. No change from our previous update on 04/24/05.

Picked on April 10 at $30.67
Change since picked: - 3.27
Earnings Date 04/27/05 (confirmed)
Average Daily Volume: 5.2 million
 

Closed Long Plays

Body

Closed Short Plays

Knightsbridge Tankers - VLCCF - cls: 44.45 chg: +1.90 stop: 38.90

Target achieved. Another strong day for oil stocks and a little M&A activity in the oil services sector didn't hurt shares of VLCCF. The stock added another 4.4 percent on decent volume to trade into our target range of $44-45. The high today was $44.81. We are closing the play at $44.00. We will keep an eye on VLCCF for a pull back and another opportunity to go long.

Picked on April 19 at $40.31
Change since picked: + 4.14
Earnings Date 05/05/05 (unconfirmed)
Average Daily Volume: 366 thousand
 

Today's Newsletter Notes: Market Wrap by Jonathan Levinson and all other plays and content by the Option Investor staff.

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