Email Version, Section 1, Sunday 06/10/2001
The SplitTrader.com Newsletter Sunday 06/10/01 1 of 2
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In This Newsletter:
Market Commentary - Chicken Or The Egg
Definition of the Day
Friday's Split Announcements - HOC
Event Calendar - Next Week's Economic reports
Upcoming Splits for next two weeks
Successful Announcements - Last Week
New Candidates List
Expected/Likely Announcements for the Coming Week
Market Stats For the Week
Index Close Change Support Resistance
DJIA (INDU) 11,301.74 +480.43 11,000 11,450
Nasdaq (COMPX) 2,198.88 + 91.52 1,850 2,250
S&P 500 (SPX) 1,291.96 + 46.31 1,265 1,300
Russell 2000 (RUT) 506.80 + 19.44 485 515
PHLX Semi (SOX) 657.43 + 40.65 575 725
Chicken Or The Egg
Or in this case, networking companies or the semiconductors. One
day after the semiconductor stocks popped higher on good sales
news out of Intel (NASDAQ:INTC), they gave back their gains due
to bad news out of Juniper Networks (NASDAQ:JNPR). Now investors
within the chip arena are back peddling. The big question
remains, "Can the semiconductor stocks recover if their biggest
customers, the networking companies, are still stuck in a rut?"
On Friday, Juniper said that second-quarter sales would come in
between $200-$210 million, just a wee-bit lower than prior
estimates of $300-$330 million. In addition, earnings are now
expected to be $0.08-$0.09 per share versus estimates of $0.24
per share. Juniper also said that it would be cutting 8-9% of
its workforce, resulting in a $45 million charge. Needless to
say, investors took a chainsaw to shares of JNPR, trimming $8.61,
or 18.5% off Thursday's closing price. The stock closed just off
its lows of the session at $38.02.
The recently revived chip stocks took their cue from Juniper and
also headed south. Intel closed down $0.47 to $30.67, Texas
Instruments (NYSE:TXN) gave up $1.40 to close at $37.99 and
Xilinx (NASDAQ:XLNX) surrendered $2.96 to close at $46.41.
However, one chip stock that seems impervious to all the doubts
about a turnaround is Microsemi Corp (NASDAQ:MSCC). Shares of
MSCC have been on fire this year and set a new high Friday by
closing up $1.08 to $65.75. The stock just broke out of a tight
three-week base on Wednesday and is showing no signs of letting
Although the chips and networking stocks were the talk of the
town early on, all that changed at around 10 a.m. Eastern time
when trading within all of the NYSE's 3,500 stocks was halted due
to a software glitch. Trading stopped at about 10:10 a.m. and
didn't resume until about 11:35 a.m. This of course put a monkey
wrench into any hopes of having a positive end to the week, as
the market was clearly shaken by the disturbance.
Add one part NYSE shutdown, two parts getaway Friday and three
parts earnings warnings and you have the recipe for a market
meltdown. Both the NASDAQ (COMPX) and the Dow (INDU) found the
floor of Friday's trading ranges early on and were content to lie
around at these lower levels for the duration of the trading day.
The NASDAQ had the benefit of not breaking down mid morning like
its NYSE counterpart. Although the tech heavy index might have
been better off if it too took a morning siesta. Traders used
discouraging news out of the networking sector as an excuse to
take profits off the table in a number of diverse sectors. On
Friday, the NASDAQ closed down 48.90, or 2.16% to 2215.10. For
the week, it managed a 65.66 gain.
The Dow didn't fare much better on Friday and in fact was more
adversely effected by the NYSE glitch, as most of the stocks
within its makeup are listed stocks. The Dow suffered a 113.74
loss on Friday, closing the week at 10977.00. For the week, it
was essentially flat, losing only 13.41 points.
Treasurys headed lower on Friday, with the 10-year note losing
9/32 to yield 5.365% and the 30-year bond giving up 5/32 to yield
5.74%. No economic data was released on Friday.
Stocks and Sectors on the Move
Two industry groups that had a hard time putting anything
together all week were the financials and the drugs. The S&P
Banking Index (BIX.X) closed the week out by continuing to pull
back from its four-month high that was set on Tuesday. The BIX.X
is looking technically weak and is now testing its uptrend line.
One more down day like Friday's and the BIX.X will be headed for
the first leg of a new downtrend.
Some stocks worth mentioning within the banking sector are Wells
Fargo (WFC) and J.P. Morgan Chase (JPM). The former lost $1.22
to $46.44 Friday on its way to a retest of the bottom of its
downtrend channel. The latter gave up $1.43 to $44.20 and has
already fallen out of bed, having sliced through the bottom of
its three-month base on Thursday.
The drug sector has also produced some goats as of late. What
could have been a bullish breakout of an inverse head and
shoulders on the S&P Drug Index (DRG.X) this week, instead, looks
to be the start of a bearish triple top. The DRG.X was turned
back from the 415 level for the third time since March and now
appears to be headed for a retest of support at 395.
Investors seem to be turning away from traditional drug stocks in
favor of the more exciting biotechs. Some drug stocks that
appear to be weakening lately include Merk (NYSE:MRK) down $0.59
to $74.22 and Abbott Labs (NYSE:ABT) down $0.13 to $51.52. Both
stocks are having trouble getting above resistance and look ready
One group of stocks that I keep expecting to rollover, but that
just won't are the retailers. The S&P Retail Index (RLX.X) is
recovering nicely from a bout of profit taking in late May and
now looks to be ready to start a new uptrend. As such,
Splittrader has recently added two retail standouts to our
Current Play list, Lowes (NYSE:LOW) and BEBE (NASDAQ:BEBE). Both
have recently emerged bullish formations and look to have plenty
of institutional support as evidenced by the strong volume
accompanying their respective breakout days.
Another retailer that has been outperforming the broader market
has been none other than J.C. Penny (NYSE:JCP). The company with
the traditional department store business model just posted a new
high on Friday, having closed up $0.93 to $23.96. It's now up
117% for the year and won't face any real resistance until the
Looking Forward, Always Forward
Speaking of retailers, we won't get anything in the way of
economic data until Wednesday when retail sales for May are
released. Sales are expected to have risen 0.3%, which will
appear soft when compared to April's 1.1% rise. However, due to
the relatively robust same store sales figures that we received
last week and the low expectations, there is definitely room for
some upside surprise in this number.
We also get a good read on the inflation picture later in the
week with the PPI number on Thursday and the CPI number on
Friday. However, pre-announcement season will no doubt kick it
up a notch next week and steal the spotlight, as more companies
decide to wave the white flag on the sales and earnings front.
We will be watching to see if the intermittent earnings bombs
affect a broad swath of stocks or whether their damage is
contained to a select group of competitors. Thus far, damage
from these confessionary sessions has been fairly local, which is
a good sign that investors are still looking ahead to better
Can we get an honest rally before earnings improve? Which comes
first, the chicken or the egg?
Enjoy Your Weekend
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seminar at 8:00 PM EST, on Sunday June 10th. Eric will teach
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Definition of the Day
Many investors equate playing the market to sporting events. For
example, if stock goes up tenfold over a period of time, that
person may say he/she hit a "home run." But some investors aren't
as interested in taking big risks looking for home runs, and are
content with trading more often, looking to accumulate wealth
through smaller gains and lots of them.
For the complete definition, please go to:
Friday's Split Announcements
Friday, June 08, 2001, During the Market
SplitTrader predicts this week's lone split announcement
During regular trading, Holly Corporation (AMEX:HOC) announced a
2-for-1 stock split as approved by the Board of Directors on
Friday. Qualifying shareholders will receive one additional
common share for each common shared owned, payable on July 6,
2001. Outstanding shares will increase to approximately 15.4
million and the float will rise to 6 million. Holly announced one
prior stock split in its history, a 2:1 in 1988.
SplitTrader has Holly Corp. posted on our "Expected" list,
accurately predicting today's split announcement. Please check
back for updates as analysts watch for the opportunity of a Split
Run Play recommendation.
For the complete announcement, please go to:
Monday's Expirations by Payable Date
Trading Split-Adjusted June 12
ONEOK, Inc. (OKE) splits 2:1
Equitable Resources (EQT) splits 2:1
Lab Corp of America (LH) splits 2:1
For the week of June 11th, 2001
Export Prices ex-ag May Forecast: NA Previous: 0.0%
Import Prices ex-oil May Forecast: NA Previous: -0.5%
Retail Sales May Forecast: 0.3% Previous: 1.1%
Retail Sales ex-auto May Forecast: 0.4% Previous: 0.8%
Initial Claims 6/9 Forecast: 425K Previous: 432K
PPI May Forecast: 0.3% Previous: 0.3%
Core PPI May Forecast: 0.2% Previous: 0.2%
Business Investories Apr Forecast: -0.1% Previous: -0.3%
CPI May Forecast: 0.4% Previous: 0.3%
Core CPI May Forecast: 0.2% Previous: 0.2%
Industrial Prod. May Forecast: -0.3% Previous: -0.3%
Capacity Utilization May Forecast: 78.0% Previous: 78.5%
Mich Sentiment-prel Jun Forecast: NA Previous: 92.0%
Week of June 18th
Jun 19 Housing Starts
Jun 19 Building Permits
Jun 20 Leading Indicators
Jun 20 Treasury Budget
Jun 21 Initial Claims
Jun 21 Trade Balance
Jun 21 Current Account
Jun 21 Philadelphia Fed
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Symbol Company Name Splits Payable Executable
IVX - IVAX Corporation 5:4 05/18/2001 05/21/2001
CNL - Cleco Corp. 2:1 05/21/2001 05/22/2001
STT - State Street Corp. 2:1 05/30/2001 05/31/2001
BAX - Baxter International 2:1 05/30/2001 05/31/2001
DGX - Quest Diagnostics 2:1 05/30/2001 05/31/2001
HTLD - Heartland Express 5:4 05/31/2001 06/01/2001
BJ - BJ Services 2:1 05/31/2001 06/01/2001
PKI - PerkinElmer 2:1 06/01/2001 06/04/2001
UHS - Universal Health Services 2:1 06/01/2001 06/04/2001
KNGT - Knight Transportation 3:2 06/01/2001 06/04/2001
CRTQ - Cortech 2:1 06/01/2001 06/04/2001
FIC - Fair, Isaac & Co. 3:2 06/04/2001 06/05/2001
COLM - Columbia Sportswear 3:2 06/04/2001 06/05/2001
WFMI - Whole Foods Market 2:1 06/04/2001 06/05/2001
XTO - Cross Timbers 3:2 06/05/2001 06/06/2001
EQT - Equitable Resources 2:1 06/11/2001 06/12/2001
OKE - ONEOK 2:1 06/11/2001 06/12/2001
APPB - Applebee's 3:2 06/12/2001 06/13/2001
JNJ - Johnson & Johnson 2:1 06/12/2001 06/13/2001
KKD - Krispy Kreme Doughnuts 2:1 06/14/2001 06/15/2001
GNWR - Genesee & Wyoming 3:2 06/15/2001 06/18/2001
IBOC - Int'l. Bancorp 5:4 06/15/2001 06/18/2001
EGBN - Eagle Bancorp 7:5 06/15/2001 06/18/2001
SDS - SunGard Data Systems 2:1 06/18/2001 06/19/2001
Successful Announcement Predictions For The Past Week
Symbol Company Date Announced
HOC Holly Corporation 06/10
NEW SPLIT CANDIDATES LIST
New Split Candidates:
CACI - CACI International $42.37 (+1.37)
Stock prices continue to reach for uncharted territory for the
last three months with an accompanying increase in volume. With
the company recently receiving a $14.5 billion contract with the
Navy, we anticipate that this trend may continue. The current
range of $40-$45 is at prior split-levels. There are 40 million
shares authorized and 11.3 outstanding, plenty of room for a
split with the next BoD meeting or with Q4 earnings due out next
DFXI - Direct Focus, Inc. $40.52 (+5.99)
Direct Focus announced a 3:2 split in June 2000 at $44 and again
in January 2001 at $45. Once again, prices aren't far off from
those levels so we're going to keep a close watch on this stock.
There are 75 million shares authorized and 23 million outstanding
- just right for at least a 3:2 split. In recent news, DFXI was
ranked number 2 on Business Week's listing of "Hot Growth
Companies." That can't hurt.
EPIQ - EPIQ Systems $32.30 (+0.75)
EPIQ announced its last split in February when the stock was
trading at $23.63. Prices continue to make new 52-week highs
this year with accompanying volume. With the stock trading at
$30, we feel that it may be time for at least a 3:2 split. Watch
for an announcement with the next BoD meeting or earnings.
RMD - ResMed, Inc. $53.80 (-0.58)
The RMD Board of Directors likes to announce 2:1 splits at the
$50-$65 level. With prices currently at $55, we'll keep a close
watch for upcoming meetings. There are 100M shares authorized and
31 million are outstanding, therefore a shareholder meeting would
not have to preclude execution of the next split. The next
earnings release is expected during the first week of August.
IDPH - IDEC Pharmaceuticals $71.66 (+9.93)
IDEC has let prices get as high as $178 (last November) before
announcing a split, but a rare 3:1 was delivered at that time.
Current prices are at $73 but are on a tremendous uptrend this
year. The real kicker here is that IDEC shareholders just
boosted the number of authorized shares from 200M to 500M. Watch
for the next split announcement with earnings the third week of
July or with an impromptu BoD meeting.
Expected/Likely Announcements for the Coming Week
Please use courier new font to view table
Symbol Company To Announce
PDLI Protein Design Labs 6/14
PDLI - Protein Design Labs $84.69 (+10.58)
PDLI declared their last split at $187, but the current price
of $89 is nearing popular psychological levels for
split announcements. The company is holding a shareholder meeting
on 6/14 to increase authorize shares from 90 million to 250
million, giving us an indication that if PDLI is thinking about
splitting. We are targeting 6/14 as the most likely date for
another 2:1 split announcement.
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