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Email Version, Section 1, Tuesday, 10/17/2000
The SplitTrader.com Newsletter Tuesday 10/17/2000 1 of 1
Copyright 2000, All rights reserved.
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In This Newsletter:
===================
Market Commentary - Just Another Brick in the Wall
Definition of the Day
Tuesday's Split Announcements - IWOV, ITWO
Sector Watch - Breakdown by sector of market performance
Wednesday's Expirations
Wednesday's Play-of-the-Day - TRMS
Plays - New - Updates - Drops
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Market Commentary
=================
Just Another Brick in the Wall
This wall of worry that we are climbing gets bigger everyday
and now appears to be topped with barbed wire to boot. We've
worried over war, shown unease regarding earnings, lost sleep
over oil and reeled over revenues. It doesn't get any better
than this if you are invested in aspirin or antacid. What's
bad for the head and stomach, however, is usually good for the
market. We need more margin calls, more gap downs and more
panic before this market is going to go up with any
conviction. Almost all the ingredients are now in the
market's scary Halloween brew, however, so we may be close to
shaking the ghosts of bear markets past.
Investors have wanted to see proof in the numbers before
placing their money on the table. Earnings reports have taken
on new significance in this current market; a market that
actually looks at valuations such as price to earnings ratios.
However, because of the "back to the basics" attitude that
prevails, investors are also looking forward to next quarter
and beyond for guidance on top line and bottom line growth.
Companies have surpassed their current quarter's numbers only
to be punished because guidance on future revenues may be off
the mark.
A prime example of how different this market is to last year's
market is the fact that the semiconductor stocks have taken a
beating on excellent earnings reports. Teradyne (TER) lost
$9.44 or 27.40% to $25 today, after the company reported
earnings of $0.84 a share, a penny over estimates. The catch
was that the company warned of an earnings slowdown in the 4th
quarter in a conference call. Investors are not even waiting
to hear why there might be a slowdown before selling their
shares. In Teradyne's case, it has indicated that it will
shift away from its more profitable chip testing equipment
business. Last year, momentum players might have put on the
blind folds and bought anyway.
Many earnings reports hit the Street today and tomorrow and
continue in earnest next week. It is a risky time to be in
stocks for the reasons outlined above, but hopefully it may be
some of these earnings numbers that end up being fodder for
the bulls. For example, Intel (INTC) now a DOW and NASDAQ
stock, reported 3rd quarter earnings of $0.41 a share, above
lowered estimates of $0.38 a share. Guidance towards the 4th
quarter revenue numbers, however, came in short at 4-8%
sequential growth. We shall see how this plays out tomorrow
morning.
Tuesday's Happenings:
The NASDAQ Composite ended the day down 76.32 points or 2.3%
to 3,213.96. The chip sector was responsible for a large part
of the sell off, with the Semiconductor Index (SOX.X) off 66
to 648. To add to the NASDAQ blues, many of the tech darlings
that made everyone a genius last year, and that have held up
fairly well so far this year, succumbed to the October
willies. Sun Microsystems (SUNW) fell $3.19 to $111.39, EMC
Corporation (EMC) couldn't break through its 40-dma and fell
$1.75 to $94.87. The breadth of the NASDAQ was negative as
well, with decliners beating advancers 2779 to 1234. New lows
on the NASDAQ swamped new highs 364 to 30.
The story was more of the same over in the DOW (INDU). The
index stumbled 149 or 1.46% to close at 10,089.71. After
opening in the positive, the index succumbed to selling
pressures from the likes of J.P. Morgan (JPM), down $5.39 to
$137.63. The DOW then proceeded to dip within 26 points of
the psychologically important 10,000 level. It hit 10,026 at
around 2 p.m. and then rallied unconvincingly into the close.
Advancers bowed to the decliners on the NYSE, 2110 to 818 and
239 stocks hit 52-week lows as opposed to 36 stocks making 52-
week highs.
The broader market also closed in the red, with the S&P 500
shedding 24.65, or 1.79%, to close at 1349.97. With S&P
company valuations getting cheaper by the day, many of these
large firms should now be starting to show up on the screens
of value-fund managers.
Treasuries were the big beneficiary of today's equity stumble.
The benchmark 10-year was up 15/32 to yield 5.68%, while the
30-year was up 22/32 to yield 5.77%. Dipping oil prices
helped the inflation sensitive long end of the bond market as
did expectations of another government buyback of old debt to
take place on Thursday. There is a lot of money sitting on
the sidelines right now, with nowhere to go but to the
relative safety of bonds.
Sectors and Stocks On the Move:
The internets took it on the homepage today as investors took
a closer look at advertising revenues and valuations and
decided enough is enough. Shareholders don't seem willing to
wait to see if their company is going to be the one standing
after the much-heralded consolidation in this once golden
sector. America Online (AOL) plummeted $9.01 or over 17% to a
new 52-week low of $43.60. Yahoo! (YHOO) lost $6.31 or 11.4%
to $48.94 and Amazon (AMZN) dropped $2.38 or almost 10% to
$21.94.
Financial stocks, especially the brokers, faltered even
amongst some good earnings reports. The AM/EX Broker/Dealer
index (XBD.X) ended down 2.8%, unable to break its 10-dma.
Merrill "mother Merrill" Lynch (MER), reported earnings of
$0.94 a share, handily beating estimates of $0.86 a share.
The stock dropped $0.56 on the day, however, to $57.81. The
worries in this sector continue to be lower trading volumes
and also trading losses in the high-yield arena. Joining MER
in reporting earnings was Charles Schwab (SCH). Chucky "S"
reported earnings in line with estimates of $0.12 a share, but
followed its peers lower, falling $0.88 to $30.63.
Looking Forward, Always Forward:
Wednesday morning brings with it more fear and uncertainty as
the market digests the latest batch of earnings reports.
Every word will be dissected as to what the company actually
meant and every income statement and balance sheet item will
be compared with historical numbers. Then the magic of the
efficient market theory will take over once the bell rings.
This theory states that any public knowledge about a company
is immediately priced into stock prices, so that no one
investor can benefit by price imbalances. Try telling this to
investors in Lexmark (LXK), Kodak (EK) or Intel (INTC) who
woke up to stock prices with different handles (the first
digit in the stock price) than the night before.
Again, it is more fear (unfortunately) that will ultimately
drive this market up. We have one economic report to keep our
eyes on Wednesday and that is the Consumer Price Index (CPI).
Expectations are for prices to have risen by 0.4% overall and
by 0.2% at the core, which excludes the volatile food and
energy sectors. While the earnings reports will probably take
center stage, there is always the chance that we get a higher
number than expected, reviving worries of inflationary
pressures.
One look at the NASDAQ (COMPX) tells the whole story. Any
good attempt at a rally is met with healthy selling. Our most
recent attempt at breaking the 10-dma (a 2-week trading
period) was squelched today.
Chart of the Nasdaq:
One other thing to remember when picking stocks at this point
in time is that October is traditionally "year-end" for about
half of all mutual funds out there. Since funds have seen
losses mount in many of the beaten down techs and financials,
they will be looking to continue some tax selling to lock in
losses. These losses work to offset any gains that the funds
have experienced on the year. The bottom line is that the
selling pressure may continue in the stocks that have been hit
the hardest. So before you take out the rod and reel to do
some bottom fishing, you might want to wait to see if some of
these beaten down stocks have either a good support level to
place a stop order, or wait until they show signs of life
before casting that hook.
Trade Smart!
Craig Seidler
Assistant Editor
*****************************
OCTOBER OPTIONS WORKSHOP
DENVER - Oct 27-30th
*****************************
We May Be Close To A Bottom,
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Check out an outline of events here:
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FALL SEMINAR SCHEDULE
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The San Francisco seminar is October 19-21. Options
expiration is over and earnings still several weeks
away. Here is your chance to learn from the pros. The
three day Technical Analysis Stock and Option Fall Seminar
Series. Three days of in-depth education. Don't miss it!
Some comments from recent attendees:
I want to thank Chris, Steve and Scott for the excellent workshop
held in Detroit last week. Having been to the Expo in Denver in
March (which was fabulous), I was ready for a smaller, hands-on
approach to hone my less-than-perfect skills. I was not disappointed.
One can never get too much education in options investing, and Chris
and Steve offer terrific, unique approaches. Laurie
Chris & Steve, I would like to thank both of you for a great
experience at the Atlanta Workshop. I learned more in the
three days of the workshop about investing and trading than
all of my undergraduate and graduate courses combined. It
was a lot of information in a short time and I hope to put
it to use very soon. Mike
I attended the Atlanta seminar and wanted to forward my positive
comments. The seminar "really lit my fire". I have been a trader
for 20 years and often go to seminars and this was the first one
that really taught me the most. Dr Lloyd
Jim, I had the good fortune of attending the meeting in Orlando.
Like your newsletter, it was a CLASS ACT. Chris and the others did
a great job. Chris was by far the best performer but the gentlemen
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JC
I am writing this note to compliment you and your staff on the
great job they did in Atlanta. But more importantly I would like
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on technical analysis that I have ever had the pleasure of hearing.
I am doing my best to persuade other members of the two investment
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Sincerely, ML
We guarantee you will not be disappointed. The class size
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At less than the cost of a bad trade you can learn how
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Date City
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Nov 02-04 Phoenix
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Has the market been beating you up? Did you give back
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Definition of the Day
=====================
Whisper Number
Oftentimes, securities analysts will offer an unofficial earnings
estimate (generally off the record), which may be higher or lower
then the consensus estimate.
For the complete definition, please go to:
http://www.splittrader.com/glossary/viewglossary.asp?glossaryid=403
Tuesday's Split Announcements
=============================
Tuesday, October 17, 2000, Before the Bell
Before today's opening bell, Interwoven, Inc. (Nasdaq: IWOV) reported
third quarter results of a penny per share, shining over analyst's
expectations of a loss of two cents per share. The Board of Directors
also announced authorization of a 2-for-1 stock split of the Company's
common shares.
For the complete announcement, please go to:
http://www.splittrader.com/announcements/101700_1.asp
===
Tuesday, October 17, 2000, After the Close
After Tuesday's closing bell, i2 Technologies Inc. (Nasdaq:ITWO)
announced better-than-expected third quarter results plus a 2-
for-1 stock split.
For the complete announcement, please go to:
http://www.splittrader.com/announcements/101700_2.asp
============
Sector Watch
============
As of Market Close - Tuesday, 10/17/2000
Key Benchmarks
Broad Market Last Support/Resistance Alert
****************************************************************
DOW Industrials 10,089 10,000 10,600
SPX S&P 500 1,349 1,325 1,400
COMPX NASD Composite 3,213 3,040 3,500
OEX S&P 100 711 700 750
RUT Russell 2000 470 460 500
NDX NASD 100 3,172 3,000 3,350
MSH High Tech 868 825 935
BTK Biotech 707 630 740
XCI Hardware 1,174 1,120 1,310
GSO.X Software 388 355 435
SOX Semiconductor 648 620 800 **
NWX Networking 1,093 1,010 1,170
INX Internet 319 310 420 **
BIX Banking 539 525 600
XBD Brokerage 584 555 640
IUX Insurance 736 720 790
RLX Retail 728 695 810
DRG Drug 421 370 425
HCX Healthcare 870 825 875
XAL Airline 129 126 140 **
OIX Oil & Gas 313 308 328 **
The SOX, INX, XAL and OIX triggered support levels in the past two
sessions. The XAL triggered our alert at 129, but managed to
finish fractionally higher. Watch the Dow here. If the bears are
able to break the 10,000 level, there could be trouble. Lowering
support (SOX, INX, XAL, OIX). Lowering resistance (SOX, INX, XAL,
OIX).
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.
=======================================
Wednesday's Expirations by Payable Date
=======================================
Greater Bay Bancorp (GBBK) splits 2:1
Medarex, Inc. (MEDX) splits 2:1
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=====================
SplitTrader.com Plays
=====================
The PLAY LEGEND:
SplitTrader.com Play Recommendations.
Updates are just that - updates on continuing plays
New plays are brand new for the newsletter.
Closing plays are 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
On the SplitTrader.com website we have very detailed profiles
for the stocks we play. Please take the time to visit the site
and look up a stock's profile if you are interested in more
information.
================================================================
WEDNESDAY'S PLAY-OF-THE-DAY
===========================
Tuesday, October 17, 2000
=============================
TRMS - Trimeris, Inc. $70.63 +0.63 (+2.94)
Tuesday's Comment:
Trimeris is a biopharmaceutical research and development
company that focuses on the discovery and development of
therapeutic agents. The company's main product is called T-20,
a synthetic peptide that inhibits HIV infection from fusing
with host blood cells. Shares of TRMS have been on the rise
for almost two years. The stock has come from $5 in 1998 to an
all-time high of $75.63 on July 10th. Since then, TRMS has
traded as low as $51.38 and as high as $72.25 on Tuesday. We
believe that TMRS could be ready to challenge the all-time
high of $76.00. We are also hoping for a split announcement
with the Company's next earnings release, expected on November
2 before the bell. TMRS has enough shares for a split with 60
million shares authorized, with 15.6 million shares
outstanding. Going forward, support is the 5-dma at $68.25
with stronger support at the 10-dma, now up to $67. Resistance
is Tuesday's high of $72.25 and then the July 12 high of $74.
We are looking for entry points on a bounce off $68.25 or a
move above $72.25 on volume of at least 75,000 shares by
midday. We plan to set stops at $66 as protection.
Picked on Oct 17th @ $70.63
Change since picked +0.00
Chart = 
NEW SPLIT RUN PLAYS 10/17/00
============================
None
NEW SPLIT CANDIDATE PLAYS 10/17/00
==================================
TRMS - Trimeris Inc. $70.63 +0.63 (+2.94)
Trimeris is a biopharmaceutical research and development
company that focuses on the discovery and development of
therapeutic agents. The company's main product is called T-20,
a synthetic peptide that inhibits HIV infection from fusing
with host blood cells. Shares of TRMS have been on the rise for
almost two years. The stock has come from $5 in 1998 to an all-
time high of $75.63 on July 10th. Since then, TRMS has traded
as low as $51.38 and as high as $72.25 on Tuesday. We believe
that TMRS could be ready to challenge the all-time high of
$76.00. We are also hoping for a split announcement with the
Company's next earnings release, expected on November 2 before
the bell. TMRS has enough shares for a split with 60 million
shares authorized, with 15.6 million shares outstanding. Going
forward, support is the 5-dma at $68.25 with stronger support
at the 10-dma, now up to $67. Resistance is Tuesday's high of
$72.25 and then the July 12 high of $74. We are looking for
entry points on a bounce off $68.25 or a move above $72.25 on
volume of at least 75,000 shares by midday. We plan to set
stops at $66 as protection.
Picked on Oct 17th @ $70.63
Change since picked +0.00
SPLIT RUN PLAY UPDATES 10/17/00
===============================
None
SPLIT CANDIDATE PLAY UPDATES 10/17/00
=====================================
IGT - International Game Technology $35.38 +1.38 (+1.63)
International Game Technology, the leading supplier of
computerized casino games, popped up on Tuesday after three
sessions of consolidation. Shares of IGT hit an intra-day
high of $35.75 before pulling back to a close of $35.38 on
above average volume of 806 thousand shares. The move comes
one day prior to the World Gaming Congress & Expo at the
Las Vegas Convention Center. IGT plans to debut over 60 of
its new slot and video games during the show. Hopefully,
Tuesday's advance will turn out to be more than a "buy on
the rumor, sell on the news" situation. IGT has already
pre-announced an earnings surprise but a possible split
announcement should buoy the stock into the formal earnings
release, expected on November 7 before the bell. Until
then, support has moved up to the October 11 intra-day high
of $34.94, with additional support at the 5-dma and Tuesday's
low of $34. There is resistance at the October 10 intra-day
high of $35.88 and then $38. We would like to open new
positions on a bounce off of $34 or a breakout above $35.88
on midday volume greater than 400,000 shares. Our stops
remain at $32.50 to limit potential losses.
Picked on Oct 10th @ $34.88
Change since picked +0.50
===
BMY - Bristol-Myers Squibb $59.56 -0.44 (+1.06)
Defense! This is the rallying cry among traders who are saddled
with cash and feel they just have to buy something. It is
becoming increasingly clear that this money is going into
stocks that offer stable earnings and relatively low
price/earnings ratios. This trend brings us to pharmaceutical
stocks. The AMEX Pharmaceutical Index (DRG) posted another
decent gain today despite some strong across-the-board selling
in the overall market. The DRG gained 4.68 to 421.02, which
made it one of the few groups to make any progress today. BMY
followed along for most of the day only to finish with a slight
loss. The company will be reporting its earnings before
Thursday's open. Consensus estimates are looking for profits
of $0.61 per share. In accordance with our trading rules, we
will not hold this position through the earnings report, so we
will exit this position no later than tomorrow's close. We are
raising our stop to $58.00, just in case tomorrow turns into
another negative day. Longer term BMY looks decent and we may
revisit this play after the earnings.
Picked on September 21st @ $56.69
Change since picked +2.87
===
BLDP - Ballard Power Systems Inc. $96.00 -3.88 (-2.00)
On Tuesday, shares of Ballard Power Systems were trimmed by 4%
in a decidedly negative day in the market. Unbridled pessimism
sent fearful investors running for cover and BLDP was no match
for the selling pressure. This Canadian Company, which
specializes in alternative methods of producing electricity,
has been making decent gains recently. On Tuesday, the stock
gapped open and traded as high as $104.00 before succumbing to
the across-the-board selling pressure. The trading volume was
lighter than usual with only 292 thousand shares changing
hands. BLDP is just 2 weeks away from their earnings report
date scheduled for November 1st. The company is a split
candidate at $100 and has the authorized shares to set a
split. Going forward we would like to see the century mark
conquered on good volume ahead of earnings. At this level, the
stock should find support at the 10-dma at $95.00 and then
$90. Resistance will pose a threat at the 50-dma of $101 and
then at $104. Before considering a new play on this stock,
look for confirming indicators to take the stock higher. A
quick bounce off support followed by good volume might trigger
a good entry point. We will continue to keep our stop below
support at $87.00.
Picked on October 15th @ $98.00
Change since picked -2.00
===
MRK - Merck and Company $78.19 +1.31 (+2.00)
Shares of the global research-driven pharmaceutical company
were given a boost today, when IMS Health reported a 137%
increase ($3 billion) in sales for Cox-2 inhibitors. MRK's
arthritis drug Vioxx, a Cox-2 inhibitor, effectively reduces
inflation and is much safer on the stomach than existing drugs.
Deemed the "Biggest, fastest and best drug launch ever" by the
company, Vioxx is currently the fastest growing prescription
arthritis medicine in the U.S., with worldwide sales expected
to exceed $1.5 billion this year. For our play, the sales data
from today's release helped propel the stock above intermediate
highs ($77.81), which came on good daily volume of 5.35 million
shares traded. With the broader markets continuing to slide, we
feel the smart money may once again start pushing the drug
sector higher. We'll look for confirmation of a breakout in the
AMEX Pharmaceutical Index (DRG), which is presently on route to
test all time highs of 428.26. Should a breakout come to
fruition, look for the $80 mark to represent initial resistance
level, with strong opposition coming higher at the 52-week high
of $81.13. For support, we'll look for a near-term base to come
at $77.81 (previously resistance). Further down, the $75 level,
bolstered by a recent high and the 20-dma of $74.22 will
present a strong foothold ahead of our stop at $73.25. Use the
DRG to confirm strength or weakness in the stock and use sharp
bounces from support or runs through resistance, before opening
new positions.
Picked on October 8th @ $76.06
Change since picked +2.13
===
DVN - Devon Energy $61.09 +0.59 (-0.98)
How much higher can the price of oil climb? We're not exactly
sure, but if more war breaks out in the Mid-East, we'll look
for strong oil companies, like DVN, to breakout as well.
Becoming the fifth-largest independent U.S.-based oil and gas
exploration company this year, DVN's merger with Santa Fe
Snyder increased the company's oil reserves by 55%. As for the
stock, shares have fallen back below support at $62.50, which
has probably been the result of easing tensions in the Middle
East. Near-term support should now come at the $60 mark,
bolstered by the 15-dma of $60.16. Just lower, the 20-dma of
$59.63 is likely to add another layer of support ahead of our
stop at $58. However, light volume (about 700 thousand shares)
on this week's decline is a good indication that selling is
already drying up. With this in mind, if good news in the
sector is released or the stock bounces sharply from support,
then we'll look to regain lost ground at the $62.50 mark.
Resistance at the 52-week high of $64.74 will next challenge a
break above this level. Good volume of 1 million shares traded
will help to confirm a true breakout and higher prices to
follow. If weaker than average volume is able to push the stock
up to resistance levels, then a trailing stop could help
protect profits. We'll look for strength or weakness in the XOI
around support and resistance levels to help confirm our
entries/exits.
Picked on October 12th @ $64.00
Change since picked -2.91
===
BEAS - BEA Systems $82.88 +1.38 (+5.63)
It's been difficult to find a technology stock that will rise
in this market, but we think we found one with BEA Systems.
E-commerce stocks like Amazon (AMZN) may be making new lows but
evidently they are still spending money upgrading their e-
commerce application software. To that end, BEAS develops the
software that is the industry standard. The company secured a
new contract today from Fujimic, a division of Fuji Television
in Japan, to implement the BEA WebLogic Server as the platform
to power Fujimic's wireless subscription service for content on
demand. Some of the excitement for BEAS is due to the growing
belief that BEAS' software will become the de facto standard
for wireless commerce transactions. The recent market
correction has not dampened investors' belief that BEAS has a
very bright future. BEAS made a new high yesterday. As soon
as the NASDAQ recovers, we fully expect this relative strength
leader to move closer to $100.00. The MACD is still negative,
but it could offer a buy signal if we can get another up day.
Yesterday's move was accompanied by good volume. Therefore,
OBV extended its solid up trend. Money Flow is also very
strong and the RSI still has some room before indicating an
overbought condition. Resistance is the old high of $85.44,
and momentum investors may jump on board if this resistance can
be surpassed. We have decided to lock in profits by raising
our stop to $80.00, which is the very short-term support
established by today's low trade. Earnings are still a month
away, so we will most likely exit this position either through
a stop or if there is a split announcement. We have placed a
trailing stop suggestion in our In Play section.
Picked on October 15th @ $77.25
Change since picked +5.63
=====
DROPS
=====
SPLIT RUN PLAY DROPS 10/17/00
=============================
None
SPLIT CANDIDATE PLAY DROPS 10/17/00
===================================
SGR - Shaw Group Inc. $75.63 -5.88 (-2.68)
On Tuesday, shares of Shaw Group dropped below our stop, thus
we are out of this play for now at $78.00. The stock is due to
report earnings on Thursday and this may be some profit taking
ahead of that report. Regardless, the effective use of a stop
loss has once again yielded us a nice profit. We will continue
to watch SGR for other trading opportunities in the future.
Picked on October 10th @ $72.62
Profit/Loss +5.37 (+7%) (Stopped out Tuesday at $78.00)
Best Profit +8.88 (+12%)
===========
SHORT PLAYS
===========
NEW SHORT PLAYS 10/17/00
========================
BJS - BJ Services Company $53.75 -0.38 (-2.88)
BJ Services Company provides pressure pumping and other
oilfield services to the petroleum industry. The Company's
pressure pumping services consist of cementing and stimulation
services used in the completion of new oil and natural gas
wells and in remedial work on existing wells, both onshore and
offshore. For the third day in a row, the stock has lost
ground on increased volume. We begin coverage of this company
as a short play and view the near term direction to be
bearish. The stock is now in a very precarious position, for
the third time it is challenging a support level that dates
back to March of this year. Three times the stock has flirted
with the $53.00 level and has been spared. This pattern
commonly known as a triple bottom may not hold if the selling
pressure were to increase. The company is due to report
earnings at the end of the month. First Call estimates are for
a profit of $0.45 cents versus a loss of $0.06 cents in the
same quarter last year. Currently, the stock has light support
at $53.00 and then at the half-century mark. The stock is
likely to face resistance at $55.00, the 5-dma at $56.24 and
then the 10-dma at $56.63. If you are considering opening a
short position on this stock, look for weakness in the Oil
Service Sector (OSX). Watch for a bounce off resistance
coupled with good selling volume, over 1 million shares, as
another indicator. We will place a stop loss just above
resistance at $58.00 in the event of a strong rally attempt.
Picked on October 17th @ $53.75
Change since picked 0.00
SHORT PLAY UPDATES 10/17/00
===========================
CAKE - The Cheesecake Factory $37.75 -1.00 (-1.25)
The Cheesecake Factory showed a bit of strength early Monday.
However, the stock soon reversed direction and headed lower,
hitting an intra-day low of $37.38 before bouncing back to
close at $38.75 on light volume. Shares of CAKE, a baked goods
distributor and family-style restaurateur, continued to fall
on Tuesday as negative sentiment returned to the NASDAQ.
The stock is hitting resistance at the 5-dma and it has made
lower lows in three of the last four sessions on declining
volume. The stock looks weak as we move closer to CAKE's
earnings announcement, scheduled for October 26 after the
bell. On the technical side, support is now Tuesday's low of
$36.13 with stronger support at $35.25, the September 19
intra-day low. Light resistance has come in at the 5-dma,
currently at $38.56 and then 20-dma of $39.88. We are looking
for a dip below $36.13 or a failed rally at $38.56 on midday
volume greater than 150,000 shares before we start new plays.
We have kept our stops at $41 to minimize risk.
Picked on Oct 12th @ $36.50
Change since picked -1.25
===
UAL - UAL Corporation $37.31 -0.56 (-1.07)
A slowdown in the oil futures rally today did not help UAL
much. Perhaps rising fuel prices are just one of the myriad
number of problems that have besieged this once proud airliner.
UAL suffered from bad press last summer over poor customer
service. This high-profile problem started the stock's decent
but the drop is continuing due to the perception that business
has already peaked. UAL will be releasing its earnings before
the market opens on Thursday. Therefore, this will be our last
update of this play because we will exit this position no later
than tomorrow's close. Just in case UAL starts soaring, we are
keeping our stop at $43.50. UAL is expected to post a loss of
$0.42. These earnings will compare miserably to last year's
earnings of $3.75 in the same quarter. If some of the
skirmishes that are currently going on in the Middle East
become more serious overnight, look for oil prices to rise
again tomorrow, which could be a little icing on the cake
before we have to exit this position. The first support we see
for the share price of UAL is today's low of $37.00. Look for
more weakness if that support fails. Just to reiterate, we
will be exiting this position no later than tomorrow's closing
price.
Picked on October 12th @ $38.00
Change since picked +0.69
===
DY - Dycom Industries $41.94 +0.25 (+0.88)
It looks like the sellers have grown weary of pummeling Dycom's
stock. However, it could be just a breather, a bit of a bounce
off oversold levels. We warned that it appeared like the
selling enthusiasm could soften. Dycom runs a pretty
profitable business by providing a wide variety of services to
the telecommunications industry. Technically speaking, Dycom
is bouncing off oversold levels that were indicated by the RSI.
Our current stop is $45.00, and it looks like Dycom will test
this level, which is just below the 200-DMA of $45.19. We are
still in this short play because the longer-term trend is still
negative. If Dycom tests resistance and then fails, a drop to
$35.00 seems very possible. A drop below today's low of $40.94
may also signal the end of this bounce. It does appear that
the bounce is losing conviction because volume was pretty low
today. If we are not stopped out and the stock can resume its
downward course, you can find a trailing stop suggestion in our
In Play section.
Picked on October 1st @ $41.63
Change since picked +0.31
SHORT PLAY DROPS 10/17/00
=========================
LOW - Lowes Companies Incorporated $37.44 -1.81 (-1.38)
The shorts came away victorious on this play! From our original
sell point, our short play on LOW managed a steady fall to new
52-week lows, netting us a 13% return (stop @ $39) in a two
week period. This steady fall was compounded by earnings
warnings from the company and from the retail sector as a
whole. Making matters worse, Home Depot's earnings warning put
the brunt of the sell pressure on the home improvement side of
the group, which caused the drop to $34.25 (52-week low).
Picked on October 1st @ $44.88
Profit/Loss = +5.88 (+13%) (Stopped out Monday @ $39.00)
Best Profit = +10.63 (+24%)
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==========
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==========
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