stock trading, stock prices

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Tech Traders 6/21/01 Update
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Technical Traders Subscribers:

THE PLAYS: DGX gapped up then broke out on solid volume, and remains a buy up to 73.79 on this move. NCC continued its breakout. BORL looks good in its little pennant. OCLR looks like it has finished testing support again. GDW made another good move; AVIR bounced up from yesterday's doji (see the long report for buy point). BLPG still looks good, showing a star doji on a low-volume pullback. Of previously covered plays, DMRC, QTRN made a good move,

Continuing Plays: FITB and BGEN broke out!

FITB (Fifth Third Bancorp--$62.65; +2.41; optionable (FTQ):
http://biz.yahoo.com/p/f/fitb.html
STATUS: Broke out on strong volume (5.2 million; avg. 1.8 million). The stock remains a buy on this move. Had to be patient on this one, but it was worth it. Great money flow, high relative strength and good buying. Target: $67-70.
BUY POINT: A buy on the breakout up to 64.30. Stop: 58.26 (50 day MVA, 57.43).
POSITION: Stock and/or August $55 calls to buy (FTQ HL).

BGEN (Biogen--$66.80; +2.62; optionable (BGQ): Biotech
http://biz.yahoo.com/p/b/bgen.html
STATUS: Made the buy point of 66.13 as volume shot above average to 5 million (avg. 3.4 million), breaking out of the ascending wedge pattern. We are looking for a continued move here; the stock remains within our 5% limit for buying on a breakout. Looks good target is $75.
BUY POINT: A buy on the move up to 69.44 on continued strong volume. Stop: 62.12 (50 day MVA, 62.83).
POSITION: Stock and/or October $60 calls to buy (BGQ JL).

IDPH (Idec Pharm--$68.61; -2.23; optionable (IHD): Biotech
http://biz.yahoo.com/p/i/idph.html
STATUS: Volume remains high (4.4 million; avg. 4 million) as the stock pulled back, testing the 18 day MVA on the low of 67.34. We are looking for a bounce back up from a re-test of that support, for a strong move back up toward breakout. The stock is in the double handle to its cup base. Target: $83-86.
BUY POINT: Aggressive: On a strong bounce from 67.72 (18 day) on rising volume. Stop: 63.
POSITION: Stock and/or October $60 calls to buy (IHD JL).

New or revisited plays: WSM (retail) is breaking out of a cup with handle, AZN is in an interesting pattern (wedge/pennant). Of formerly covered stocks, RE moved up in a handle today; volume was lower, but the pattern looks good.

RE (Everest Re--$71.41; +1.09; optionable ( ): Insurance
http://biz.yahoo.com/p/r/re.html
STATUS: Moving laterally for the past week on below average volume (216,500; average is 314,954), today RE made a stronger move, trying to make the next leg higher. On stronger volume it should do just that. Good relative strength and price/volume action.
BUY POINTS: 72.13 on above average volume.
POSITION: Stock and/or August $65 or $70 calls to buy (RE HM and RE HN, respectively).

AMGN (Amgen--$67.30; -0.14; optionable (YAA): Biotech
http://biz.yahoo.com/p/a/amgn.html
STATUS: In a lateral consolidation above the 18 day MVA (66.92) that is serving as a handle to a 16-week base. Volume has been building over the last three days, up to 9.6 million today (avg. 10 million). Looking for the rising volume to pop the stock out of the pattern. Target: $78-82.
BUY POINT: Aggressive: from here on continued strong volume. Over resistance: 70.73, on volume of 15 million or better. Stop: 65.78.
POSITION: Stock and/or October $60 calls to buy (YAA JL).

CERS (Cerus--$68.93; -0.57; optionable (CEQ): Biotech
http://biz.yahoo.com/p/c/cers.html
STATUS: At support after pulling back in the handle to a 5-month cup. Volume continues to fall below average in an orderly manner, which we like, reaching 31,000 today (avg. 92,045). Looking for a move up from the doji (above the 18 day MVA, 68.13) for a breakout. High money flow and good buying. Target: $84-87.
BUY POINT: Aggressive: Up from here on rising volume. Stop: 64.10. Breakout: 76.13, on volume of 138,000. Stop: 70.80.
POSITION: Aggressive: Stock and/or October $60 calls to buy (CEQ JL). Breakout: Stock and/or October $70 calls to buy (CEQ JN).

ABT (Abbott Labs--$53.00; +0.75; optionable (ABT): Drug maker
http://biz.yahoo.com/p/a/abt.html
STATUS: Moving up on strong volume (6.3 million; avg. 3.5 million) after reaffirming earnings estimates. The stock is in a cup with handle of 6.5 months duration, and looks ready to take on the handle high (54). Shows strong money flow, and relative strength has broken out ahead of price. Target: $59-62.
BUY POINT: 54.13, on continued rising volume (minimum breakout volume is 5.3 million). Stop: 50 (50 day MVA).
POSITION: Stock and/or August $50 calls to buy (ABT HJ).

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TONIGHT:
- The market notches another gain on rising volume but again stops at resistance.
- Economic news continues to improve but you would not know it listening to the financial reporters.
- MU earnings stink for the past quarter, and it does not give anything near a glowing view of the future.
- Team Trades

THE SUMMARY

A second gain on stronger volume, but the indexes stop at resistance.

It was the kind of day you like to see, softer open followed by a late rally on very solid volume. Of course, it was accompanied by several breakouts along the way that were also on higher volume. That is another thing we like to see on any solid move. That was the good side.

Then we have the other side. The Nasdaq was up 44 points and looked to be cruising on strong volume. But we all knew that there was still resistance to contend with in the form of the bottom of the trading range the Nasdaq recently fell through. It cleared 2052 (the intraday low on of the range) and made it up to the closing low in the range (2077.98) on the high (2077.43), but then turned and dropped about 15 points to the close. The bottom of this trading range is flexing its muscles as resistance. Same thing on the S&P 500 as it hit 1240.24 on the high, right at the closing lows of its trading range that it dropped out of a week ago. The Dow had the same problem; it ran up to the 50 day MVA at and down trendline at 10,759.64 on the high and dropped back to 10,715.43 to close. Each index ran into some trouble at resistance, and even with the stronger, above average volume, they were unable to penetrate that level for now.

THE ECONOMY

More signs of an economy that is starting to improve.

The economy is the key, and we have been writing about our belief that economic reports were going to start to improve. Sentiment has been so negative about the economy and the numbers have easily jumped to their worst levels, and that is typically the time of turn, especially when the Fed has been busy cutting rates for six months. Earlier this week it was the LEI up more than expected and building permits surging back up. Today it was jobless claims falling and the Philly Fed report looking better for the latest round of improving economic news.

Jobless claims drop again.

New claims fell to 400,000, the first time in a long time they have even approached the sub-400k level. The prior week was 434,000, revised higher from the 428,000 previously reported and the 425,000 forecast. Perhaps the job cutting is abating, and that is nice. But again, this is now not such a good leading indicator as companies will wait to rehire until they absolutely have to. The 4-week average fell to 422,500 from 425,250 last week. Continuing claims rose to 2.99 million, up from the 2.92 million last week. Those losing jobs are not finding them just yet. That is what we mean by more of a lagging indicator: job losses can slow, but hiring has not yet started. Still, it is a good sign to see jobless claims fall two weeks in a row.

Book to Bill ratio better, but below expectations.

Semiconductor sales forecasts rose to 0.46, topping the 0.44 level for the previous month. Still, that was less than the 0.50 anticipated.

Philly Fed report shows surprising improvement.

The June manufacturing report from the Philadelphia Fed was still negative, but it was much, much better than it has been and what was expected. The index rose to -3.7 versus -8.8 in May. This is the highest reading since +4.7 in November 2000. It is still a contraction, but it is a dramatic improvement in the manufacturing sector. Future expectations jumped sharply to 58.2, the highest reading since 64 in February 1993. Present orders fell to their lowest in four months, but new order expectations shot higher. Nothing significant for the present day, but this holds promise for the future, and that is the name of the game at this point.

Still not enough to stop the Fed. We still look for the Fed to cut again. 25 or 50 basis points? 25 for sure, 50 is a guess. We say 25 is the call and the Fed will say something to the effect it is done unless it sees some real problems. That is good because it will tell investors the Fed is comfortable with the economic reports improving, and it will let the market get back to worrying about future earnings.

Of course, there was another story out today saying that the Fed was worried its rate cuts were not working. Well, let's see, it takes 6 months minimum for a hike or a cut to hit the economy. It has not even been 6 months yet since the first cut. If the Fed is worrying its cuts have not already helped the economy, then it needs to go and re-examine its criteria once again. These are the kind of stories that you hear and that just make no sense. But, they go hand in hand with the continued gloom on the financial stations despite signs that the economy is starting to stumble back upward on its own accord. Again, it will not be an across the board gain, but we are going to see recovery. The problem with the analysts: they see it as black or white and hardly anything is black or white. The result is continued gloom that is totally unwarranted. Of course, the financial stations will deny it to their last breath that they just report the news, but as we have chronicled time and again, their emotions bleed over into their 'reporting' each day. If they just gave the news they could reduce their airtime to about 2 hours per day and that is generous.

THE MARKET

MU announced earnings after hours that were not even close, coming in at a -0.50 loss versus a -0.15 expected loss. That was some cold water, but all eyes were focused on the conference call. At the call MU gave a few glimmers of hope, noting that "shipments out the door have been very strong" three weeks into the current quarter. This is attributed to the spot market where speculators are estimating a bottom in chip prices has been put in and they are thus buying them. Customers are still being "very cautious" about new orders though MU indicated it appeared as if the inventory problems customers had were ending or have ended. Customers, however, are not buying just yet because they do not want to get in the same position as having capital tied up in excess inventory. MU also said it expected 40% to 45% sequential production growth in this quarter. Not bad news, just nothing really strong about the future looking a lot better and the like. Orders thus far this quarter are strong, but MU would not go out beyond that.

It remains to see how the MU news is received. The stock recovered off of its after hours lows, but it was not racing higher on the news. It was a mammoth loss and the company was not telling anyone not to worry, that things looked good in the future. Still, the company used some strong words about the quarter thus far, and that may be interpreted well. In any event, futures were down on the news, and the close just off resistance points leaves the door open for some Friday weakness if someone does not interpret this call as a positive. It was both, but it was not a strong endorsement.

Before MU we had many breakouts today as the plays on the reports were popping: FITB, CEFT, LOW, ASFC, DGX, BGEN, GDW, FRED and HI all posted solid gains for the session, and they did it on solid volume. As we have been saying, the patterns and the right sectors are the key, and we are hammering the drugs, retail, financial and selected techs.

End Part 1 of 2

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