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Email Version, Section 1, Sunday, 07/16/2000
The SplitTrader.com Newsletter Sunday 07/16/00 1 of 1
Copyright 2000, All rights reserved.
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In This Newsletter:
===================
Market Commentary - Summer Rally Heats Up
Definition of the Day
Friday's Split Announcements - VRTX
Sector Watch - - Breakdown by sector of market performance.
Event Calendar - Next Week's Economic reports
Monday’s Expirations
Split Play-of-the-Day –None Chosen
Split Plays - New - Updates - Drops
================================================================
Market Commentary
=================
Summer Rally Heats Up
What a great week for the bulls, we’re back in greener pastures
again! So far, those forecasts of fantastic earnings have proven
true and investors have been in a buying frenzy. Question is, is
this bull young and frisky or getting old and tired?
You could argue that this rally has legs, because we have several
more weeks of income reporting to go and there is no reason to
expect that the majority of remaining earnings will be any less
spectacular. What’s more, the rally was broad based this week.
The S&P 500 increased 2.2%, the Dow Industrials average was up
1.7% and the NASDAQ Composite screamed forward by 5.2% on
increasing volume. Each of those indices has broken out of their
respective trading ranges. In other words, this rising tide is
lifting all boats, a good sign for an extended rally.
Chart of the Compx, INDU, and S&P 500 Daily:
On the other hand, bears may have an argument that we
are in the waning days of a rally. The NASDAQ Composite and
NASDAQ 100 are both very near a key resistance area that could
signal profit taking (no – not the 4500 level that CNBC talks
about, but we’ll get to that later). Also interesting is that we
have seen BUYING on good earnings news, instead of the usual
selling after earnings. That’s likely to change this week because
many stocks are now beginning to post large gains in advance of
their report, setting up the typical buy the rumor, sell the fact
scenario.
Either way, the current broad-based rally is likely to narrow and
become more of a stock picker’s market as we head deeper into
earnings, so be sure to double check the earnings schedule of
stocks that you own, as well as those of leading competitors. As
usual, any rising market will climb the proverbial “wall of
worry’.
Friday’s Numbers
Retail sales, the Producer Price Index and Industrial Production,
the only economic reports worth noting last week, were out Friday
and had little effect on the market, other than on financial
stocks. Retail sales were stronger than the expected 0.3%
increase, coming in at 0.5%, most of that was from strong auto
sales. PPI was in-line with estimates, but core PPI was actually
weaker than expected at a 0.1% decrease. Industrial Production
was the slowest increase in nine months at 0.2% compared to the
expected 0.3%.
Benign economic numbers aside, the markets continued their push
to the upside. The Dow Industrials (INDU) finished up 24 points
to close at 10813. Volume at the NYSE exchange was moderately
heavy at 951 billion shares traded and advancing issues led
decliners 1586 to 1280.
The NASDAQ Composite (COMPX) gained 71 points to close at 4246.
Volume is looking better and better here, at 1.66 billion shares
traded Friday. Up issues trounced losers 2183 to 1787.
The S&P 500 (SPX) scored a break above the 1500 resistance area
to close at 1509, up 14 points or 0.94%. Friday’s rally did not
cover all the bases though, since the Russell 2000 (RUT) finished
off 0.02%. Not to worry, the RUT was still up 2.6% for the week.
Treasury yields jumped higher Friday and that may have
implications for the equity markets if rates continue moving up.
With stronger than expected retail sales and rallying technology
stocks, bond traders are sensing an increased risk that the Fed
may still have another rate increase in store for us. The yield
on the 10-year note was up 10 basis points to close at 6.09%.
The 30-year bond yield gained 6 basis points to close at 5.87%.
Sector Movements
For an almost unbelievable third consecutive day, Internet stocks
have outperformed all other sectors on a percentage basis and
lighted the fire on the tech rally. Salomon Smith Barney raised
estimates for Amazon.com (AMZN) Friday in a “ride the wave” move
to capitalize on momentum in the sector. During those three
days, the Street Internet index gained 14% while the CBOE
Internet index gained a whopping 25%.
The Philadelphia Semiconductor Index (SOX) reasserted itself
Friday following great earnings news from a number of companies,
including PMC Sierra (PMCS), Motorola (MOT). Industry leader
Intel (INTC) closed at a record high. The Index has now broken
out of a short downturn and may reassume its role as the tech
bellwether.
Chart of the Semiconductor Sector Index:
The Networking index (NWS) was definitely the overall leader of
the tech sector last week, but can it continue? Three
consecutive record closes put the polish on a 9% gain for the
week. News of the JDS Uniphase (JDSU) acquisition of SDL Labs
(SDLI) turned up the heat in what was arguably the hottest sector
already. Chasing these stocks in the short term may be a risky
move unless you can watch them closely, because they are
overextended at this level.
Biotechs rotated out of favor after Tuesday last week. Now they
are at trendline support, but have lost support at the 700 level
on the Biotech index. If we see weakness in Internets and
Networking, we may get a rotation back to Biotechs because the
sector is still in a strong uptrend. Otherwise, if they slip
further past trendline, next support is at 650.
Chart of the Biotechnology Index:
In the old economy, slow growth, or whatever you wanna call-it
arena, drug stocks sunk on profit taking, at least last week.
The Pharmaceutical index has violated trendline support, but did
stop on the 50-dma so we could see an upward bounce if the tech
stocks weaken. Keep in mind though, that we have an ugly looking
spread double top in place on the weekly chart, which is bearish
for the long term unless the drugs can rally sharply past the 425
level once more.
In other notable sectors, Financial stocks reasserted themselves
in a close over 800 on the BKX index, Transports continue to
rally (especially airlines), and the Utility index is near a key
resistance area at 500, by closing at 498 Friday.
And finally, I would be remiss not to mention that tobacco stocks
took another hit with a Florida jury ruling to pay out $145
billion in punitive damages. The news was pretty much priced in
these stocks; nevertheless, Philip Morris (MO) was off 0.38 and
R.J. Reynolds (RJR) was down 0.94.
Next Week:
Last week I said that it’s earnings, earnings, earnings. This
time I should say that its earnings to the 10th power. There are
far, far too many to list, but the biggies are IDPH and NOVL
(Monday), JNJ, MER, TWX, AAPL, BRCM and RMBS (Tuesday), F, EMC,
UAL, AMD, EXDS, IBM and QCOM (Wednesday) and AOL, BVSN, SDLI and
SUNW (Thursday). Please do not fire off an email chastising me
for leaving something out here – there are hundreds! Be sure to
double check on stocks you own, and be sure to confirm if they
report BEFORE or AFTER the market!
Economic reports will be secondary to earnings news, but there
are some important ones this week. CPI will be reported Tuesday
morning, Balance of Trade is Wednesday and Housing Starts will be
out Thursday.
Going back to those key resistance levels I mentioned in my
introduction, both NASDAQ Composite and the NASDAQ 100 charts are
sitting just under a 62% retracement. That’s a standard
Fibonacci level, which is often difficult to break through on the
first try. Also note that Stochastic is in an overbought signal
which may trigger some profit taking. On the other hand,
Momentum, MACD, and volume are very strong and building, which
could power the COMPX forward.
Chart of the Nasdaq Composite and Nasdaq 100:
The INDU closed above 10,800, which is a level that has been
problematic in the past. It also closed above the 150 day moving
average. MACD is moving over the zero line, which is bullish.
Since this index is composed of so many sectors, the key to
continuing this rally will be continued strength in the old
growth stocks, which will rely on inflation concerns. Also key
is a reasonable (translate methodical) rally in technology. If a
frenzied rally develops over in the NASDAQ, the INDU is likely to
suffer.
For the next week, bulls are likely to have the better argument,
at least for technology issues, because earnings will remain the
focus of attention. If profit taking does develop, buying on the
dips will probably be rewarded. Be careful not to chase the
overextended sectors, unless you can watch your stocks closely.
Remember that when everyone becomes too bullish, that’s often a
contrary indicator that a top is nearby.
Good Luck!
Steve Pekarek
Editor
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==================================================================
Definition of the Day
=====================
Growth Stock
A company that, relative to other companies, is growing at an
accelerated rate.
For the complete definition, please go to:
http://www.splittrader.com/glossary/viewglossary.asp?glossaryid=164
============================
Friday's Split Announcements
============================
Friday, July 14, 2000 During the Market
Fast Moving Pharmaceutical Company Sets First Stock Split
Following the opening bell today, Vertex Pharmaceuticals Inc.
(Nasdaq: VRTX) announced the Board of Directors approval for a
two-for-one stock split. The split will be issued in the form of a
100% stock dividend payable August 23, 2000 for shareholders of
record at the close of the market on August 9, 2000.
For the complete announcement, please go to:
http://www.splittrader.com/announcements/071400_1.asp
============
Sector Watch
============
As of Market Close - Sunday, July 16, 2000
Key Benchmarks
Broad Market Bearish/Bullish Last Posture/Since Alert
****************************************************************
DOW Industrials 10,450 10,850 10,801 Neutral 7.07
SPX S&P 500 1,435 1,510 1,509 BULLISH 7.13
OEX S&P 100 775 816 815 BULLISH 7.13
RUT Russell 2000 470 545 542 BULLISH 7.13
NDX NASD 100 3,450 4,055 4,041 BULLISH 7.16 **
MSH High Tech 965 1,082 1,080 BULLISH 7.13
XCI Hardware 1,440 1,600 1,549 BULLISH 7.13
CWX Software 1,160 1,300 1,285 Neutral 6.06
SOX Semiconductor 1,060 1,281 1,238 BULLISH 7.16 **
NWX Networking 1,150 1,385 1,381 Neutral 7.13
INX Internet 470 637 593 Neutral 7.16 **
BIX Banking 520 565 558 Neutral 7.07
XBD Brokerage 480 590 587 BULLISH 7.11
IUX Insurance 610 660 649 Neutral 6.20
RLX Retail 860 960 932 Neutral 7.07
DRG Drug 380 430 394 BULLISH 7.11
HCX Healthcare 795 880 813 BULLISH 7.11
XAL Airline 152 180 176 BULLISH 5.25
OIX Oil & Gas 285 315 292 Neutral 7.13
Sector Watch
The NDX, SOX and INX took out further resistance warranting
upgrades. Markets can get nervous when so many indicators are
bullish. A few facts … The SPX is up 2.7% for the YEAR. The XBD
is up 15.5% for the WEEK. The DRG is down 7.7% in 3 days. Snug
up those stops!
Sector Changes: Bearish to Neutral (INX)
Neutral to Bullish (NDX, SOX)
This section of the investment advisory website highlights
SplitTrader.com's stated Sector Watch across broad market indices
and industry sectors. SplitTrader.com is the only website that
states and regularly updates its Sector Watch across industry
sectors. Investors who reference this section first before
planning their trades will gain a decided advantage. The time
horizon of our stated Sector Watch is generally 2-3 weeks and is
based upon a number of fundamental, technical and sentiment
indicators.
An important feature to our stated Sector Watch is the key
benchmark levels. These levels represent important near-term
support and resistance points. By viewing the sliding bar for
each index, investors can quickly view the relative strength of
our position and better anticipate when we are likely to change
our Sector Watch. These benchmarks are determined using technical
and sentiment indicators. It's important to realize that our
Sector Watch may be contrary to the overall trend when compared
to longer-term moving averages. This is because our stated Sector
Watch is designed to help investors take positions before others
see major trend reversals. For each sector, we highlight the index
symbol, key benchmarks, last level, stated Sector Watch and the
date we changed our position (since).
For industry sectors signaling BULLISH, investors may want to
consider long/call positions. For sectors signaling BEARISH,
investors may want to explore short/put positions. For sectors
flashing Neutral, investors may want to develop hedge positions.
As investors allocate capital, we encourage BULLISH traders to
pursue industry sectors that are trending higher and trading above
moving averages and BEARISH traders to pursue sectors trading
below declining moving averages. Investors can view these moving
averages over a six-month chart by double clicking on the industry
indexes links within the matrix.
==============
Event Calendar
==============
*************
COMING EVENTS
*************
For the week of July 17, 2000
Monday
Business Inventories May Forecast: 0.3% Previous: 0.4%
Tuesday
CPI Jun Forecast: 0.4% Previous: 0.1%
Core CPI Jun Forecast: 0.2% Previous: 0.2%
Wednesday
Trade Balance May Forecast:-$30.5B Previous:-$30.4B
Thursday
Initial Claims 07/15 Forecast: 315K Previous: 319K
Housing Starts Jun Forecast: 1.570M Previous: 1.592M
Building Permits Jun Forecast: 1.540M Previous: 1.511M
Philadelphia Fed Jul Forecast: 7.0% Previous: 1.7%
Friday
Treasury Budget Jun Forecast: $55.0B Previous: $53.6B
Week of July 24th
07/25 Existing Home Sales
07/25 Consumer Confidence
07/27 Employment Cost Index
07/27 Durable Orders
07/27 Initial Claims
07/27 Help-Wanted Index
07/28 GDP
07/28 GDP Chain Deflator
07/28 Michigan Sentiment
====================================
Monday’s Expirations by Payable Date
====================================
Xeta Corporation (XETA) splits 2:1
Shoreline Financial Corp. (SLFC) splits 21:20
Timberland Company (TBL) splits 2:1
Station Casinos, Inc. (STN) splits 3:2
ADC Telecommunications (ADCT) splits 2:1
Federated Investors, Inc. (FII) splits 3:2
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=====================
SplitTrader.com Plays
=====================
The PLAY LEGEND:
SplitTrader.com Split Run Play Recommendations.
Split Run Play-of-the-Day is our number one split run play
recommendation for the following trading day.
Updates are just that - updates on continuing plays
New plays are brand new for the newsletter.
Drops are closing plays that we feel have lost the advantage.
You will see:
Stock Symbol, Company Name, Closing Price, (change for the week)
Picked at date and Change since picked
Terms:
BoD = Board of Directors meeting
ADV = Average Daily Volume
dma = daily moving average
At the SplitTrader.com website, we have comprehensive profiles
for each stock that we are playing or have played in the past, as
well as hundreds of others. Please take the time to visit the site
to view the profile of the stock(s) you wish to learn more about.
================================================================
SPLIT RUN PLAY-OF-THE-DAY
=========================
No Play-of-the-Day chosen
NEW SPLIT RUN PLAYS 07/16/00
============================
NONE
SPLIT RUN PLAY UPDATES 07/16/00
===============================
CHKP – Check Point Software Ltd. $234.25 (+9.25)
Maintaining its dominance in the firewall market, CHKP is
estimated to control 32% of the total worldwide market, more than
double its closest competitor. This leadership position can be
attributed to its early entrance in the network security market,
which began with its Firewall-1 in 1994. With the stock edging out
of its long consolidation this week, we’re looking for the
resumption of good daily volume (1.5m shares or better) to fuel an
advance to the $250 resistance mark. With a previous high at this
level, look for opposition to be firm. The next resistance point
could follow at the $260 mark. As for support, we are looking at
the top of the consolidation ($230), to provide a good area for
intra-day bounces. Additional declines should find a foundation at
$220, bolstered by both the 20 and 30-dma’s ($220.26 and
($220.02). We’ve updated our stop to $219, to protect against
further weakness. Also, if we get a move above $241, then we
recommend raising stops to $229 to lock in gains. Use firm bounces
off support to trigger entries, when good daily volume is present.
We’re possibly looking to hold the stock over earnings for an exit
ahead of the payable date. Look for a special update on Tuesday
(prior to Wednesday’s earnings) for our hold or drop decision.
Picked on July 13th @ $234.94
Change since picked –0.69
SPLIT RUN PLAY DROPS 07/16/00
=============================
NONE
In This Candidate Newsletter:
=============================
New Split Candidates
Successful Announcement Predictions for the Past Week
Expected/Likely Announcements for the Coming Week
Notes from SplitTrader
Monday’s Candidate Play-of-the-Day –FDRY
Split Candidate Plays - New - Updates - Drops
=================================================================
==================================================
NEW SPLIT CANDIDATES / MOMENTUM STOCKS 7/17 - 7/21
==================================================
SplitTrader.com strives to be the very best at identifying
profitable split candidates and momentum stocks. Every week
we will list those whom have made the cut. You can view the
details of these new candidates by checking out the complete
profile for each stock at the SplitTrader.com website.
ADRX ANDRX CP HD HOME DEPOT INC
AMSC AMER SUPERCOND JBL JABIL CIRCUIT
BBY BEST BUY CO INC KSS KOHLS CORP
BKHM BOOKHAM TECH LH LAB CRP OF AMER
BVF BIOVAIL CORP MAXY MAXYGEN INC
CAMP CALIFORNIA AMP MEDI MEDIMMUNE INC
CFLO CACHEFLOW INC ORCH ORCHID BIOSCI
CVTX CV THERAPEUTICS PEB PE CORP PE BIO
DEX DEXTER CORP SONS SONUS NETWORKS
ELN ELAN CORP PLC TEF TELEFONICA ADR
ESRX EXPRESS SCRIPTS TGT TARGET CORP
FPL FPL GROUP INC VARI VARIAN INC
VITR VITRIA TECH
=====================================================
Successful Announcement Predictions For The Past Week
=====================================================
Symbol Company Date Announced
=================================================
ALTR ALTERA CORP 7/13
NMSS NATURAL MICROSYSTEMS 7/13
WAT WATERS CORP 7/13
ACTU ACTUATE CORP 7/12
RATL RATIONAL SOFTWARE 7/12
=================================================
Expected/Likely Announcements For The Coming Week
=================================================
Date Expected
Symbol Company To Announce*
=================================================
MER MERCK 7/17
DNA GENETECH 7/17
CMTN COPPER MTN NETWORKS 7/17
LSCC LATTICE SEMICONDUCTOR 7/17
SANM SANMINA CORP 7/17
IDPH IDEC PHARMACEUTICAL 7/17
DYN DYNERGY 7/18
FRX FOREST LABS 7/18
ISSX ISS GROUP 7/18
BRCM BROADCOM CORP 7/18
DIGL DIGITAL LIGHTWAVE 7/18
ELNT ELANTEC SEMICONDUCTOR 7/18
PHTN PHOTON DYNAMICS 7/18
POS CATALINA MARKETING 7/18
AMD ADVANCED MICRO DEVICES 7/19
CORR COR THERAPEUTICS 7/19
TSTN TURNSTONE SYSTEMS 7/19
APH AMPHENOL CORP 7/19
LLY ELI LILLY 7/20
ATON ALTEON WEBSYSTEMS 7/20
DCTM DOCUMENTUM 7/20
*Date expected to announce is a rough estimate.
Corporate management is not exempt from using a
split announcement to buoy the stock price if negative
news (or earnings) is affecting their stock price.
Additionally, there is still the uncommon trend of
a delayed split announcement post-earnings.
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================================================================
Notes From SplitTrader
=======================
Recently, the new features FAQ and In Play have been added to the
SplitTrader site to expand out client service base. FAQ includes
a list of our most Frequently Asked Questions, as well answers to
them provided by our staff. The In Play section is a daily update
of our current plays and includes recommended stop prices. We
will continue to offer full write-ups of our plays every Tuesday,
Thursday, and Sunday in addition to this new daily update list.
Please continue to watch for new features on our SplitTrader
Site. We are continually expanding to improve services and
increase client satisfaction.
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buying experience.
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=================================================================
=====================
SplitTrader.com Plays
=====================
The PLAY LEGEND:
SplitTrader.com Candidate Play Recommendations.
Candidate Play-of-the-Day is our number one candidate
recommendation for the following trading day.
Updates are just that - updates on continuing plays
New plays are brand new for the newsletter.
Drops are closing plays that we feel have lost the advantage.
You will see:
Stock Symbol, Company Name, Closing Price, (change for the week)
Picked at date and Change since picked
Terms:
BoD = Board of Directors meeting
ADV = Average Daily Volume
dma = daily moving average
At the SplitTrader.com website, we have comprehensive profiles
for each stock that we are playing or have played in the past, as
well as hundreds of others. Please take the time to visit the site
to view the profile of the stock(s) you wish to learn more about.
=================================================================
CANDIDATE PLAY-OF-THE-DAY
=========================
FDRY - Foundry Networks $131.00 (+11.19)
Please see details in the Split Candidate Update section below.
Picked on Jul 13th @ $121.69
Change since picked +9.31
NEW SPLIT CANDIDATE PLAYS 07/16/00
==================================
AMGN - Amgen $70.75 (-3.19)
Twenty-year old Amgen Inc. is one of the largest biotechnology
companies in the world. The Company discovers, and develops human
therapeutics based on advances in cellular and molecular biology.
They currently manufacture four different products that stimulate
blood cells and fight various blood diseases and viral infections
such as hepatitis C and anemia. AMGN has been a steady performer
as a publicly traded company. On July 7th, the stock hit an
intra-day high of $76. In the last week, AMGN has pulled back and
we feel that it may have found a bottom on Friday and could make
a strong earnings run. The Company is expected to announce
earnings on 7/26 after the bell and we would not be surprised to
see a split announcement with the release. Amgen currently has
1.02 billion shares outstanding with 2.75 billion shares
authorized and the stock is trading around historic split levels.
Their last split announcement came with an earnings report when
the stock was trading at $86.13. For now, the stock has support
at $70 with additional support at $68. Resistance is the 5-dma at
$72 and then $77. Use a bounce off of $70 or a move above $72 to
initiate new plays. We recommend setting stops at $67 if you
decide to enter. Plan to exit by 7/26.
Picked on Jul 16th @ $70.75
Change since picked +0.00
===
COHR - Coherent Inc $89.19 (+0.32)
Coherent is a global leader in providing a myriad number of laser
products that are used in a variety of industries, everything
from Doctor's offices to semiconductor manufacturing. Vanity
sells, and COHR's lasers used for Opthamology and Dermatology are
perhaps their highest profile products. We have an aging
population that does not want to look aged and they have the
disposable income to pay for many of the new surgical techniques
that are now available due to COHR's products. It also does not
hurt the stock to have a foothold in the semiconductor industry,
which is currently leading this market higher. Coherent last
split its shares 2:1 at the relatively low stock price of $45 and
change two years ago. With 100 million shares authorized and
only 25.1 million shares outstanding a split could be announced
and effected at almost anytime. Although the company's PE is
pretty high at 127 it is nevertheless a profitable company which
is something many of the hottest stocks in the market cannot
claim. Earnings will be released July 25th so an anticipatory
earnings run is certainly possible. COHR has a familiar looking
chart. The 200-DMA maintained its up trend throughout the
correction and the 50-DMA has reversed course from a springtime
downtrend to a current upslope. After a nice comeback rally it
looked like COHR was ready to rollover. Looks like a fakeout,
because the current recovery is on the verge of breaking out as
the stock attempts to recapture all of its losses. A move above
$91.00 would be very bullish and could signal a nice run for the
stock, especially if it is combined with heavy volume. To be
honest, volume has been somewhat anemic recently so some traders
may be waiting for a volume spike before getting interested.
Money Flow is positive and rising but OBV is only neutral. The
MACD almost crossed over and produced a sell signal but the
uptrend will continue to signal more gains if COHR can start the
week on a positive track. A negative start to next week and you
may want to avoid this play. We are setting our initial stop at
$83.88 and we will leave this play if there is a split
announcement or just before the earnings release, whichever event
occurs first.
Picked on July 16th @ $89.19
Change since picked +0.00
===
GSPN - GlobeSpan Inc. $146.00 (+26.44)
Name a company that has had a 22% gain in the last week, survey
says GlobeSpan. Wow this company sure likes to do things quickly
and why not they are a leading provider of integrated circuit,
software, and system designs for digital subscriber line (DSL)
applications. Their technology enables high-speed data
transmission over existing copper wire telephone lines at rates
over 100 times faster than today's 56-Kilobit modems. GSPN has
been aggressively making acquisitions in the last year with its
most recent occurring just days ago when they completed a deal to
buy iCompression Inc. The company is due to report earnings on
July 31st with expectations for a profit of 1 cent versus last
years same quarter loss of 8 cents. The company has beat earnings
expectations the last 3 quarters. To date they have had one split
in February of this year. In June shareholders approved a vote to
increase the number of outstanding shares to 400 million paving
the way for future stock splits. In light of the recent gains we
view this play as very risky and not for everyone. You should
enter it only if you can watch this one closely. However, we
would like to catch part of this fever while it lasts. Friday's
volume came in about average at 1.3 million shares. Support if
now located at $145 with resistance up around $150 and then the
old high at $167. Be sure that volume is good before engaging
this play and that support from the NASDAQ and the SOX Index is
in place. We would expect further positive earnings in the sector
to bolster investor interest in the stock. We will place a tight
stop at $139 in case of panic selling.
Picked on July 16th @ $146.00
Change since picked 0.00
===
HGSI - Human Genome Sciences $153.25 (-10.75)
An interesting candle stick chart pattern has developed on Human
Genome known as a long-legged Doji, more on that in a moment. Our
biorhythm told us it was time to initiate coverage of a biotech
stock so here we are with HGSI which researches and develops
novel compounds for treating and diagnosing human diseases based
on the discovery and understanding of the medical usefulness of
genes. The most positive news of late was that the Genomics.com
Fund was the top-performing fund in the second quarter with a
gain of 39.01%. Included in this fund of specific genomic related
stocks is of course, HGSI. The company is due to report earnings
on July 27th with expectation for a loss of -.16 cents versus a
loss of -.14 in the same quarter last year. We see the company as
a split candidate at $150 and with 250 million authorized shares,
a split announcement would not pose a problem. To date the
company has effected one stock split in January of this year. Now
about the opening remarks, a long-legged Doji is a Japanese
candlestick-charting pattern. Basically it means that the stock
opened at point A, ran way up then ran way below point A, only to
close right back at where it started at point A. Picture a tug of
war where it goes back and forth only to end in a draw. Friday's
nearly triple volume also confirms the extreme indecision in the
stock. Finally the stock has now retraced almost 66% off its
recent high at $187.50. The stock is now poised just above
support at the 20-dma at $149. Resistance can be measured at the
5-dma at $157 and then up at $180. On Monday look for good volume
with a bounce off the 20-dma supported by positive momentum in
the NASDAQ and the Biotech Index (BTK). If Monday turns into a
day of profit taking from last week's 3 up days, wait for a
buyable dip which could extend below support. For that reason we
will place our stop at $143, slightly below support so as not to
get picked off in a panic of selling.
Picked on July 16th @ $153.25
Change Since Picked 0.00
===
LAMR – Lamar Advertising Company $46.75 (+3.38)
Applying one of the world’s oldest methods for promotion, outdoor
advertising, Lamar (LAMR) uses state of the art technology to
create eye-catching billboards. So why would this age-old media
tool suddenly be in the spot light? External factors like the
fragmentation of traditional media (cable and radio) and
declining readership in newspapers and magazines have allowed
outdoor advertising to remain an easier route to reach its
audience. Currently, with 175 million shares authorized and 88.6
million shares issued, the company is just shy of having enough
shares to split 2:1. However, the company’s last split was 3:2 at
a price of $50.44, so there still is some potential for a split
near current levels. Most recently, the stock may now be
positioned to run to the half century mark ($50), after Friday’s
strong advance through the 100-dma ($44.72). In order for LAMR to
reach the $50 mark or beyond, the stock will likely need to fuel
its advance with good daily volume of 750k shares or more.
Looking beyond the $50 level, we must assume that the stock will
be further challenged by a potent 200-dma at $51.17. For that
reason, we will likely look to take profits near $50. For
support, we’ll initially be looking at the 100-dma (previously
resistance) to bolster the $45 mark and provide a good potential
intra-day buying level. Further down, the 50-dma at $42.94
promises good support ahead of our $42 stop. Look for potential
entries as prices advance from current levels or give hard
bounces off support on good volume. Implement trailing stops to
capture future profits. We'll be using chart indications for our
buy/sell signals since earnings are not due until August (8/2).
Picked on July 16th @ $46.75
Change since picked 0.00
===
VIA – Viacom Incorporated $71.69 (+5.00)
Just about anywhere you look Viacom (VIA) has made its presence
felt. Whether in theaters, desktops, or your local video store,
VIA has become a leader in entertainment and publishing within
the media industry. With names like Paramount, Showtime,
Blockbuster and now CBS, its no wonder why VIA carries a P/E
ratio more than twice that of the industry average. Shares are
trading well above their previous split levels ($41.66 and
$13.84), but because of the company’s recent merger with CBS
there is currently no share allocation for the stock. Because of
this, we don’t anticipate a stock split occurring until the
merged companies have announced their share allocation. We’ll
keep you posted as this information becomes publicized. With this
in mind, the real reason for our play is that VIA may have just
signaled that it’s ready for an advance into new territory.
Closing at an all time high on Friday, good volume (mainly above
400K) this past week suggests the stock is ready for yet another
climb. Keep your attention focused on the $75 mark as the next
potential resistance point. However, if we do get some retracing
ahead of an advance, we’ll initially look for near term support
to be present near $70, bolstered by the 5-dma of $69.99. The 5-
dma provided good trendline like support all week and could
represent a intra-day buying point should shares reverse sharply
from it. Secondary support should be potent at the $68 mark,
reinforced by both the 10 and 20-dma’s ($68.70 and $67.95). We
recommend placing a stop just below this level at $67.88, to
protect against a meltdown. Look for buy opportunities if good
volume follows a sharp bounce from our mentioned levels of
support. Plan to use trailing stops for locking in future gains.
Our target date for exiting the stock with be at the end of the
trading day on 7/25, since earnings will follow the next morning.
Picked on July 16th @ $71.69
Change since picked 0.00
SPLIT CANDIDATE PLAY UPDATES 07/16/00
=====================================
ADI - Analog Devices Inc $86.38 (+10.38)
Semiconductor stocks are leading us higher yet again. Some of
the rally can be attributed to solid earnings reports from
companies within this sector but another factor has to be the
relatively low valuations and very solid demand for the
industry's products as a whole. ADI has the added advantage of
being the fastest growing manufacturer of a high profile product;
semiconductors for V.90 modem chips. ADI will not be posting
earnings until the middle of August so in the meantime the stock
will need to rally on the basis of solid numbers coming out from
its peers. There is the possibility that ADI may announce a
split. The company needs to increase the number of authorized
shares if it wants to split 2:1. Having said that, ADI does have
a history of effecting splits of unusual ratios, so an increase
in the number of authorized shares is not necessarily a
prerequisite for a split. ADI really starting taking off last
week once it traded above the 50-DMA. The last time ADI did this
it staged a substantial rally over four days. If history repeats
itself, ADI has some room left to continue this rally. The RSI
confirms this possibility because it will be a while before this
indicator signals an overbought condition. OBV is picking up but
we would like to see some more positive volume next week. The
MACD is turning up from a severely oversold level. Overall, it
looks like ADI has a short to increase its comeback momentum that
may even carry it to its June high at $100. Our suggested stop
is $82.88. If ADI rallies past $91.00 we will raise our stop to
$88.00. If we are not stopped out we will exit this position if
there is a split announcement. Otherwise we will exit before the
earnings release.
Picked on July 13th @ $82.75
Change since picked +3.63
===
ANDW – Andrew Corporation $31.94 (+0.94)
A cost-restructuring program implemented last July has helped
ANDW to offset a slowdown in foreign markets and post solid
earning results. The year-end quarter was the first year-to-year
sales gain for the company in nearly two years. What’s more? In
the March period, the company posted $.21 versus $.09 per share
earnings, an increase of 133%! These strong numbers were likely
the catalysts for a 100% increase in the stock from April to
June. We hope to see more of this strength in the upcoming week.
Currently, we’re looking for an advance through the 50-dma
($33.93) to indicate higher prices. Ending the week with a near
term trend reversal, shares managed to hold onto their gains and
inch higher toward the 50-dma ($33.93). Good volume (1.0m shares
or better) will likely need to continue in order for the near
term trend to remain up. With this in mind, we’ll now be looking
for ANDW to break back above its 50-dma ($139.29), as
confirmation of this shift. If this scenario does unfold, look
for more resistance to be felt at the $35 mark, bolstered by a
previous high. As for support, the $31 mark, braced by the 10-dma
($31.32) should offer our first level. Beyond this point, the $30
level, aided by the 100-dma ($29.69) should provide even greater
resistance. Set stops at $29.50. Target your entries when prices
bounce off support or run through these resistance levels. Design
your exits ahead of the earnings announcement of 7/20, since they
will be reported before the bell.
Picked on July 13th @ $31.94
Change since picked 0.00
===
CI - Cigna Corporation $99.75 (+2.63)
Investor interest is certainly picking up in the Financial
sector. These stocks are very vulnerable to interest rate hikes.
Once rates level off these companies can go back to the business
of making profits on spreads, the difference between what it
costs them to borrow money and what they loan it out for.
Insurance companies such as Cigna have also been on an aggressive
campaign to raise premiums. Sometimes this is a risky venture
and can deter business. For now the premium increases appear to
be holding and Cigna should benefit with some nice profits.
Earnings are expected to be reported on August 1st and estimates
are for a profit of $1.56 which is pretty healthy when compared
to the technology stocks. This fact may encourage a little buying
interest from investors who still care about valuations. Cigna
has not split its stock in just over two years. Long term
shareholders are probably expecting a split soon, especially now
that the stock has managed to climb back up to $100. There are
enough authorized shares to enact a 2:1 split. In Thursday's
update we warned that CI may have reached a short term peak on
Wednesday and that a little pullback was probably in order.
Longer term Cigna looks pretty good. The uptrending channel is
solid and Cigna should be able to stair-step and continue to make
new highs as long as this trend does not reverse. Strangely, the
MACD is just meandering and is not indicating anything right now.
A more positive indicator has been the OBV which remains solid.
RSI has pulled back from overbought levels and do not be
surprised if it pulls back some more, especially now that the
stock has dropped below psychological support at $100. A little
patience and you should be able to enter this position at more
advantageous prices. For those of you already in the stock we
still want to protect our initial positions with a stop at
$97.88. If we are stopped out do not be surprised if we jump
right back in after this pullback ends. If we are not stopped
out, we will exit this position before the earnings release.
Picked on July 11th @ $99.81
Change since picked -0.06
===
CSCO - Cisco Systems $68.25 (+2.88)
In light of the huge NASDAQ run, CSCO had a pretty mediocre week.
Sure, small profits are better than the alternative, but remember
the good old days when CSCO was leading the market higher and
when you were in doubt of which stock to buy you could just buy
CSCO and sit back? CSCO's old friends may be starting to be
unfaithful as they piled into the young upstart router
competitor, Juniper Networks (JNPR) which shot to new highs in
the wake of a nice earnigs report. Is this a trend or a
temporary condition? Next week will likely tell the story and
there is no reason why many stocks within a sector cannot rally
together. Cisco Systems may be helped next week by options
expiration because the bullish bias during expiration typically
is concentrated in larger cap issues because the trading is
dominated by institutions. CSCO does seem to be rallying solely
because of the strength of the overall market, which is fine as
long as momentum continues. A split seems unlikely at the
current stock price and earnings are not expected to be reported
until August 8th, which is too far away to expect an earnings
anticipation run. On the plus side, CSCO did post some decent
volume during Friday's move so a test of resistance just under
$70 on Monday seems likely. If CSCO cannot close above that
resistance, short-term traders would be justified in taking
profits. The MACD and OBV are both issuing buy signals right now
so perhaps we can get some more momentum and some market
outperformance next week, it just better happen sooner rather
than later. We are raising our stop to $65.88 and we will raise
it again to $68.00 if CSCO can crack resistance and move above
$71.00. Otherwise we will exit this position before the August
earnings release.
Picked on July 2nd @ $63.56
Change since picked +4.69
===
EMC - EMC Corporation $80.50 (+3.00)
Traders are snooping around looking for the next earnings related
run. Last week saw some very nice gains for some Internet
shares, particularly B2B companies and semiconductors. Is it
EMC's turn? Could be, after all, EMC has a history of stable
earnings and last quarter the company beat the Street's estimates
by a penny. By all accounts, it has been a strong quarter for
equipment companies and EMC, the unquestioned leader of providing
data storage systems should announce a solid quarter. The shares
of EMC did take a back seat to other technology shares last week
but the stock did make a strong attempt to catch up on Friday.
The most recent split occurred in May so do not expect another
split announcement anytime soon. Technically it appears that EMC
took a break and attempted to consolidate after making new highs
two weeks ago. The sideways action on low volume is a perfectly
natural occurrence. Friday's move may be tipping us off that EMC
is ready to start making another move, as long as the bulls stay
alive next week. Volume has picked up although it is less than
the volume that coincided with the stock's last run. It is an
encouraging trend nevertheless. In each of the last several
updates we have remarked that the MACD is negative and despite
Friday's up day, this technical indicator remains negative. This
fact should make one cautious about EMC's next move. The RSI
tells us that there is some room on the upside. By possessing
one of the strongest trends in the market all year it is not
surprising that EMC is comfortably above both the 50 and 200-
DMA's. The 5 and 10-DMA's are sitting just below $77.00 and
should provide support if the rally subsides. Our trailing stop
strategy will attempt to lock in profits at $78.00, to avoid a
reversal should support at the 5 and 10-DMA's fail. If EMC moves
into new high ground over $86.00 we will raise our stop to
$81.00. Do not forget to exit this position before Wednesday's
earnings release.
Picked on June 28th @ $75.25
Change since picked +5.25
===
FDRY - Foundry Networks $131.00 (+11.19)
FDRY was lifted early in Friday’s session on continued strength
in the networking group. Shares of FDRY traded as high as $134.38
before pulling back to close at $131 on 5 x ADV. The stock is
getting hot as we move closer to the earnings release on Tuesday
after the bell. We are looking for a possible split announcement
to come with announcement, or out of the BoD meeting on 7/19.
They already have enough shares to split and their last split
announcement came out of a BoD meeting. Going forward, FDRY has
light support at $130 with additional support at $125. Set stops
at $124.88 to protect gains. We recommend moving stops up to $129
if FDRY trades above $135 Monday. We will tighten the stops for
Tuesday’s session – look at our In Play section for our stop.
Resistance is just above Friday’s high at $135 and then $145.
Start new plays on a bounce off of $130 or a move above $135 on
midday volume greater than 800,000 shares. Confirm market
sentiment and sector direction before opening new positions.
Look for an exit no later than Tuesday’s close.
Picked on Jul 13th @ $121.69
Change since picked +9.31
===
KANA - Kana Communications $70.44 (+9.50)
KANA shareholders can go ahead and send their fruit baskets over
to Ariba (ARBA) Headquarters. ARBA, the leader of B2B
development, reported excellent earnings and knocked KANA out of
its doldrums by sparking a rally in other business Internet
software developers. The question remains as whether this rally
still has some gas left. KANA will attempt to justify its share
price on its own merits by reporting earnings on July 26th. KANA
is looking to report a loss of $0.27 but ARBA's numbers have
increased expectations that KANA could beat those numbers and get
a little closer to actually reporting a profit. A split is
rather unlikely at the current stock price but you never know
with these young companies that like to break the rules. If KANA
wants to split it will have to increase the number of authorized
shares. Since mid-June KANA's share price has formed a nice up
sloping channel. Interest in the stock really picked up once it
crossed the 50-DMA which has reversed its decent and is now in an
up trend, a good sign that KANA's correction is over. The 200-
DMA should probably provide a fair amount of resistance at
$77.00. Therefore, this rally may exhaust itself soon, at least
in the short term. Technical indicators such as the MACD and OBV
are indicating that a longer term up trend can continue, just do
not be surprised if there is a small pullback, especially since
the RSI is indicating an overbought condition. We are keeping
our stop in there at $66.00, but do not be afraid to use your own
parameters for determining when to take a profit, we are simply
offering a guideline. If KANA trades over $75.00 we will raise
our stop to $69.00. We will not hold KANA through the earnings
release on July 26th.
Picked on July 2nd @ $61.88
Change since picked +8.56
===
LSI - LSI Logic Corporation $58.75 (+2.25)
Wall Street expects great things from LSI in the second quarter.
The pressure to measure up in the eyes of Wall Street analysts
can be brutal, especially when those expectations are not met. On
July 25th LSI will report their progress for this quarter. Last
year in the same quarter the company showed no profit, this year
expectations are for a profit of 28 cents. Quite a change
wouldn't you say? The stock recently seems to have found support
at $50 as exhibited by the double bottom pattern. The SOX Index
and especially the semiconductor stocks are paving the way for
gains with good numbers flowing in daily. LSI is a leading
supplier of communication chips for broadband applications. We
now see support at the 50-dma at $55 with the first level of
resistance being measured at the 20-dma at $59 followed by the
100-dma at $62. Look for a strong move through resistance or a
bounce off support on good volume as good entry points. Average
daily volume is 4.3 million shares; Friday's gains were achieved
on volume of 4.6 million shares. We will place a stop at $54.88
but a move over $61 will cause us to adjust that stop to $58.50.
Picked on July 13th @ $56.00
Change since picked +2.75
===
NT - Nortel Networks $77.75 (+6.63)
NT continued to move higher Friday after a huge earnings
announcement from Juniper (JNPR) on Thursday evening. Shares of
NT hit an all-time high of $79.56 but could not break through
resistance at $80. The stock finished slightly off of the day’s
high on strong volume. Sector momentum is getting stronger as we
enter into earnings season. NT is scheduled to announce earnings
on 7/25 after the bell and we are looking for a split
announcement with the earnings release. They have an unlimited
number of shares authorized but the share price is below previous
split-levels. Until then, NT has support at $77 with additional
support at the 5-dma, now at $75. Place stops at $74.88 to lock
in gains. We recommend changing stops to $77.50 if the stock
trades above $81. Resistance remains at $80 and then $85.
Initiate new positions on a bounce off of $77 or a move above
$80. Plan to exit by 7/25.
Picked on Jul 2nd @ $68.22
Change since picked +9.52
===
QSFT - Quest Software $61.19 (+7.38)
Shares of QSFT took a rest on Friday after a strong run from $51
on July 6th. Friday, the stock hit an intra-day low of $60.31
and closed the day with a $2.56 loss on average volume. The
Company is scheduled to announce earnings on 7/26 after the bell
and we are looking for a split announcement with the earnings
release. They have 150 million shares authorized and 85 million
shares issued so they could set a 3:2 or a 2:1 pending
shareholder approval. We are leaning towards a 3:2 due to the
current stock price. In the meantime, QSFT has support at $60
with stronger support at the 5-dma, now up to $58. We recommend
placing stops at $57.88 to limit losses. Move stops up to $61 if
QSFT trades above $66. Resistance is $65 and then $70. Look for a
bounce off of $60 or a move above $65 on midday volume greater
than 200,000 shares to open new positions. Confirm market
direction and sector momentum before starting new plays. Plan to
exit no later than 7/26.
Picked on Jul 13th @ $61.19
Change since picked -2.56
===
SANM - Sanmina Corporation $96.94 (+5.94)
Sanmina joins the century club but just for a moment. On Friday
SANM hit a new intra-day high of $100.37 before easing back the
rest of the day. Ahead of Monday's earnings the stock traded on
lower than average of 1.9 million shares. As mentioned in
Thursday's write up, often investors use the 100 mark as a good
psychological place to take a profit. Who can blame them with a
stock that has appreciated +50 points in the last 3 months. The
stock is now in split range and that announcement could come with
earnings after the bell on Monday. This is now a one-day play as
far as we are concerned, as we will exit on Monday. Support is
now at $96 with resistance still at $100. Look for earnings to
push the stock higher on Monday coupled with positive movement in
the COMPX. We'd like to see volume move back above 2.8 million
shares also to prove buyer's conviction is sincere. Because of
the extremely short time left in this play we are tightening our
stop to $96. Per our normal policy of not holding through
earnings this will be our last report on SANM for now.
Picked on July 9th @ $91.00
Change since Picked +5.94
===
SBC – SBC Communications Inc. $45.38 (+0.69)
Doing its part to alleviate the worldwide wait, SBC plans an
aggressive campaign to service 1 million new DSL (Digital
Subscriber Line) customers this year. With news from the company
indicating that they’re on track to meet this goal, we feel that
excitement could build up this week ahead of Friday’s earnings
announcement. With this in mind, what we’d like to see is a
strong break above the 200-dma ($45.86) to get us started.
Attempting another shot at this mark on Friday, the stock was
unable to muster enough strength to exceed this level. With 3
tests of this level in the last week, we’re convinced resistance
remains a force at this mark. Good volume (5.0m shares or more)
will likely need to follow a break through this resistance before
shares can proceed further. Secondary resistance should be firm
at $50 (previous high). On the downside, we’ll be looking at the
$45 level, reinforced by the 50-dma ($45.05) to present a firm
support base. Below this level the 100-dma ($44.13), bolsters the
$44 level ahead of our stop of $43.88. Trailing stops can also be
incorporated to lock in gains or limit losses. Use sharp bounces
from support (50 and 100-dma’s) or advances through resistance
(100-dma) as potential entry points, when followed by good
volume. Our target date for exiting the stock with be at the end
of the trading day on 7/19, since earnings will follow the next
morning.
Picked on July 9th @ $44.69
Change since picked +0.69
===
TXN-Texas Instruments $72.50 (+3.50)
Yee-haw, Texas Instruments was bouncing around like a bucking
bronco on Friday. The world's largest producer of signal
processor chips started the day up and then quickly sold off only
to juggernaut around before closing on a high note for the day.
Volume was recorded slightly above average at 6.7 million shares
changing hands. Like so many companies, TXN is just days away
from announcing their second quarter numbers. Expectations are
for a profit of 29 cents compared to 6 cents last year. The
majority of good earnings reports have been coming from the
semiconductor sector in companies like TXN. A peek at the chart
would reveal that TXN now has light support at $70 and resistance
is just above at the 20-dma at $73.50 followed by the 100-dma at
$77. On Monday we'd like to see buyer enthusiasm continue in the
sector, however some profit taking may ensue. This could provide
a nice buying opportunity if applied correctly. Watch for support
levels to be tested in both the stock and the index. Use a bounce
off support on TXN or a strong move up in conjunction with the
COMPX and the SOX as entry points. Use big volume as a leading
indicator of sincere buyer interest. We will have a stop in place
at $69 but if the stock hits $76 we will adjust that stop up to
$72.
Picked on July 13th @ $70.88
Change since picked +1.62
===
XLNX- Xilinx Incorporated $95.44 (+8.06)
Xilinx closed higher on 60% increased volume Friday. Buyers came
in droves to gobble up 8.9 million shares of the company that
makes customized programmable semiconductor chips. Right out of
the gate XLNX traded higher, reaching its intra-day high of $98
only minutes into the trading day. Next Thursday XLNX will report
its second quarter numbers and speculation is running high that a
split announcement will come on that date too. To quickly recap,
in August a vote to increase shares from 500M to 2 Billion will
be brought before the shareholders. XLNX has been in the
acquisition mode in the last few months and their bottom line may
look pretty good come Thursday. Technically we now see support at
$93 with resistance up at $98 and then $100. We will look for
good earnings in the semi's to bolster investor confidence in the
coming days. Look for a bounce off support on good volume in
conjunction with bullishness in the COMPX and the SOX. It is
possible that investors may warrant some profit taking in light
of the 3 straight days of gains in the COMPX, so use these dips
as buying opportunities. We will have a stop on XLNX at $92.88
but if the stock moves above $98.50 we will adjust our stop to
$94.88.
Picked on July 13th @ $92.62
Change since picked +2.82
SPLIT CANDIDATE PLAY DROPS 07/16/00
===================================
BEAS - BEA Systems $57.50 (+0.50)
BEA Systems popped above $60 Friday, however, the stock could not
hold above resistance and reversed directions. Shares of BEAS hit
an intra-day low of $55.88, triggering our stops at $57.88. As
expected, we are dropping this play tonight. If you still have
open positions on BEAS, earnings are on August 15th, so you will
need to rely on support/resistance as your guide.
Picked on Jul 6th @ $51.00
Profit/Loss = +6.88 (+13%) (Stopped out @ $57.88)
Best Profit = +11.50 (+23%)
===
MUSE - Micromuse $184.50 (+15.44)
Micromuse moved up slightly on Friday morning but that did not
last for very long. Shares of MUSE traded down to an intra-day
low of $175.25, hitting our stops at $179 along the way. WE are
dropping MUSE tonight as we are going to take our gains and move
on. If you are still holding the stock, be aware that earnings
are on Wednesday, July 19th, after the bell.
Picked on Jul 9th @ $169.06
Profit/Loss +9.94 (+6%) (Stopped out @ $179.00)
Best Profit +20.69 (+12%)
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