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us stock market, stock watch
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6/20/01 Stock Split Report Market Summary
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Stock Split Report Subscribers:
PLAYS TO LOOK AT: Some huge movers today, including BMET, FISV, LOW, LNCR, FHCC, CECO, DGX and GENZ!
PRE-ANNOUNCEMENTS: FISV continues its big breakout move, FDC could be ready to move back up, and ADVP is still a possible put.
FITB ($60.24; +0.80): Forecast to announce a split on Thursday with a board meeting. Earnings are set to be announced 7-16-01 before the market open. Right in split range, and started a move today out of its nice-looking consolidation. Volume was solid on the move, up to 1.68 million (average 1.8 million), but it is perhaps concerning that the stock finished off of its high of 60.81. We will see if it continues up toward the recent high at 61.11, providing a solid entry point going into the forecast. On a move up on increased volume, stock and/or August $55 calls to buy (FTQ HK).
BMET ($48.10; +2.05): Forecast to announce a split with a board meeting 6-29-01. Big move today by BMET, running hard off of the support of the 18 day MVA (45.47). The stock hit a new high at 48.95 intraday, and volume was big at 2.68 million (average is 1.78 million). Looking like a leader going toward the forecast, and on a continued move, stock and/or October $45 calls to buy (BIQ JI).
KG ($56.56; -0.09): Forecast to announce a split on 6-22-01 in conjunction with its annual shareholder meeting. After a breakout move that showed an immediate topping sign, the stock tested back near its 10 day MVA (54.34) at its low of 54.75, but pulled back up to close with a second consecutive doji. Volume continued to be strong, increasing to 1.92 million (average 1.1 million), and we will see if the momentum can continue. On a move over 57.50 on continued strong volume, stock and/or October $55 calls to buy (KG JJ).
CHBS ($31.20; -0.84): Forecast to announce a split on Thursday before the open in conjunction with earnings. Did nothing going into tomorrow morning's earnings announcement, continuing in the recent, tight range formed since making a big drop. It did manage to pull back up from a low of 29.60 to close, so on an announcement we will see if it can make a bit of a momentum move. It faces resistance at recent highs at 33.30, with the 10 day MVA at 34.04. A very aggressive play; remember also that option prices can be inflated just after an announcement. On the move with an announcement, ready to exit upon weakness, stock and/or September $30 calls to buy (URH IF).
PRE-SPLITS:
LOW ($77.39; +1.43): Splits 2:1 on or about June 29. Continued the move started as it broke out Monday from its small ascending wedge. It closed off of its intraday high of 78.45, so we could get a pullback here; however, we will watch for a move from here as well, and is still a buy up to 77.70. However, on a continued move from here we will carefully protect positions with stops. On a pullback we will look for LOW to hold 75, and then give us another move to play going into next week's split. From here, stock and/or August $75 calls to buy (LOW HO). On a move up after a pullback, stock and/or August $70 calls to buy (LOW HN).
ESRX ($108.14; +1.77): Splits 2:1 effective on or about June 25. A couple more sessions before the split, and we will see if the stock can make another move. It held what has been steady support at its 10 day MVA (106.22) on the last drop, moving back up from that level today. It closed off of its high of 109.14, so we will see if it can continue up, but we will look to see if it takes a bit of a dip first. The high of 110.35 is just ahead. On a move, stock and/or August $105 calls to buy (XTQ HA).
LNCR ($66.76; +2.81): Splits 2:1 effective 6-25-01. The momentum appeared to be slowing on this strong stock, but Wednesday saw it take another big jump on high volume of 786,800 (average 601,000). The move made a new high for the stock, and on a continued move, stock and/or August $60 calls to buy (LQN HL).
FHCC ($51.77; +1.32): Splits 2:1 effective 6-26-01. Continued its very solid, consistent move up today, rising to close at its most recent high as volume remained huge (2.04 million; average 474,200). We have a few more days before the split, and the momentum still appears to be there. The high is 55.15. On a continued move, stock and/or August $45 calls to buy (FHQ HI - low open interest).
CONTINUING CANDIDATES: IGT still a possible, NVDA responding well at its 50 day MVA, and MERQ could still turn out to be a solid put.
MIKE ($40.14; +0.19): Ready to break out again? It showed us a third consecutive doji Wednesday, but we got a 'get ready' volume spike (way up to 548,100; average 213,200). Looking for a breakout over 40.62 on continued strong volume, with stock and/or September $35 calls to buy (IKQ IF).
ASFC ($57.40; +0.19): Has made a solid move back up off of its 50 day MVA (56.20). Today it gapped down slightly but pushed back up to close right at its early-June high (57.50), with volume continuing to be strong and above average (420,900; average 363,400). Looking for a continued strong move toward the high of 58.50. For the aggressive, on a strong move up from here on continued strong volume, or on the breakout on a move over 58.50, stock and/or July $55 calls to buy (AQR GK).
CECO ($57.85; +4.85): Held the 18 day MVA (53.26) rather than revisiting its 50 day MVA (51.11), breaking out on volume much bigger than we have seen (250,400; average 273,000). Still a buy up to 58.80, with stock.
POST SPLITS: BRCD still a put possibility, with LH perhaps looking for a bounce.
DGX ($66.92; +2.94): Finally made a move it could hold, jumping up from its 18 day MVA (63.51) on solid volume (653,800; average 397,700). The stock had been pulling back from this level intraday, but now could be trying to sustain a move. The intraday high from early June is up at 70.15. On a move over today's high of 67.70, stock and/or August $60 calls to buy (DGX HL).
GENZ ($55.49; +3.01): Made a good move back up off of the 50 day MVA (52.13, in the lower range of its May consolidation), back up in its recent range. A solid move, with volume coming in at 3.37 million (average 3 million). Looking for a continued run, with the high ahead at 58.44. Stock and/or October $50 calls to buy (GZQ JK).
* * THE SUMMARY * * *
TONIGHT:
- Analysts again made a run at the market, but good news won out.
- INTC sees decent third and fourth quarters and AOL sees ad spending firming.
- Leading Economic Indicators stronger than expected as we expected.
- Greenspan: Banks lend the money!
- Indexes rise late on stronger volume, finally demonstrating some bullish action.
- Team Trades
THE SUMMARY
Dan Niles gets his two cents in on INTC, but good news finally prevails.
In yet another demonstration of analytical prowess, more analysts and brokerage houses came out with downgrades in the tech sector on stocks that are mere husks of their former selves. Dan Niles renewed his vendetta against Intel, no doubt upset at being upstaged by Joe Osha's Tuesday attack on INTC. Dan continues to harp on INTC as if he has something personal against the company. Did management snub him at some point in the past? Frankly, it appears obvious to us there is some bad blood there, and it is hard to take Niles seriously because of it. If he has anything to say, seems INTC is the target of his analysis. Well, the investing public could use a bit more analysis that is useful other than his continued diatribe that INTC is going nowhere anytime soon.
Of course, this is in contrast to what Intel management is saying. Today the company stated that it was somewhat positive on Q3 and Q4; not a glowing forecast, but it was positive and cited stabilization in their business. That ultimately overcame the analyst comments and the stock was up on the session along with the rest of the market.
Good news helps overrun the incredibly negative and incredibly late analyst downgrades.
We said it awhile back: all of the analyst downgrades the past few months were way too late to do anyone any good. They say sell when you should be buying, they say buy when you should be selling. At least that is the way it has worked out over the past two years. The wave after wave of downgrades and negative comments the past month has only helped to affirm our belief that things are indeed at their worst right now. Much as with our stated position that the economic data is its worst right before it improves, the analyst downgrades and negative views crescendo just as things are ready to turn.
And the analysts are not the only ones. As soon as the market closed CNBC anchor Liz Claman noted the good Nasdaq volume on an up day, but she said it was most likely just selling volume into another rally. Talk about a trained monkey. The Nasdaq rose almost 55 points in the last two hours from the low to the high on the session. Now we have only been at this for 20 years or so, but that sure looks like buying into the rally, not selling. Then there is Bob Pisani who for the past three sessions has single-handedly declared any V recovery in the economy dead. He was at it again after the close today. Bob, what about the LEI that were stronger and look 3 to 6 months down the road? Bob, what about ORCL's comments, INTC's comments once again, and the jump back up in housing and building permits? Bob, you are listening to your 'sources' too closely without an objective eye and ear.
The point: the media is picking up on how negative the analysts are and they are spreading that same tripe over the airwaves. Same result: incredible negative attitudes lead to turns in the market. Even when they see it they don't believe it, and that is what makes it so incredible. They really don't have a clue, they just read lines. If they have to ad lib it is almost painful to watch but for how hilarious it is. Comedy Channel, you have met your match.
In any event, the good LEI, Intel comments, AOL's comment that the ad market was firming, and upgrades on EBAY (finally someone hit one right) and others helped to overcome the downward momentum for a gain on stronger volume. Not a big turnaround day as no milestones were passed, but it was positive action after investors said 'enough' to the analysts and started looking down the road again. The pieces of the future puzzle, not the one in the past, are beginning to piece together as we said they would: better economic numbers start coming out along with positive guidance by companies. It is very hard to fight what will be six rate cuts in 6 months, a tax cut, and a prolonged bear market. Those tend to lead to raging bull runs, and we say that despite all of the daily reporting about how the market will not recover for years.
We are going to see more good news, and the market will respond. Indeed, it is already responding as last night we noted the retailers and financial sectors have already started to move higher. These move well when a recovery is anticipated. Investors were anticipating better economic news as they started to buy into these stocks. We saw the move starting and that is why we put stocks such as FITB, NCC, GDW, LOW, AEOS, ANF, and BBBY on the reports.
THE ECONOMY
LEI up smartly.
The Leading Economic Indicators rose 0.5% in May versus a 0.1% gain in April and an expected 0.2% gain. This is the biggest gain in the LEI since December 1999. Manufacturers' new orders for consumer goods and materials held steady in May, a potentially positive sign for manufacturing. This indicator looks 3 to 6 months down the road. It shows things are improving ahead. Some economists think it will still be slow growth, but with the indicator up to the highest level it has been since the economy started its very strong run, you have to be encouraged by the numbers.
Greenspan gets on the banks: lend the money!
Greenspan was speaking today to the Senate banking committee, and he noted low pricing pressure continued consumer strength are keeping inflation at bay, and that is a necessary prerequisite to economic prosperity. He then talked of banking lending policies and noted that banks were getting better at lending in economic downturns, implying that they still had a ways to go. The message was clear: the Fed has lowered rates, so go out and get that liquidity into the economy!
As we have said before, we anticipate continuing economic improvement despite all of the gloom we hear each day. It would be highly unusual for the work done thus far not to have a positive impact in Q3 and Q4. We are seeing improvement already in the numbers, and we anticipate even further improvement from the LEADING indicators, not those telling a history lesson. By leading we mean the LEI, building permits as we saw on Tuesday (home sales in Houston, Texas were up 50% in May 2001 compared to May 2000), and confidence. All are doing much better. We will see ups and downs still; that happens when markets or economies turn. Still, we think the LEI shows us that we are in fact in the bottom of the trough.
End Part 1 of 2
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