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Email Version, Section 1, Monday, 04/17/2000
The Newsletter          Monday 04/17/00 1 of 1 
Copyright 2000, All rights reserved.  
Redistribution in any form is strictly prohibited.  

 - Your World Leader for Trading Stock Splits on the Internet - 

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In This Newsletter:

Market Commentary - Doctor! It Has a Pulse!
Reader's Write
Monday's Split Announcements - None
Editorial - Citigroup Posts Strong 1Q Results
Monday's Expirations - PHG and MFNX
Play-of-the-Day - SDLI


Market Commentary

Doctor! It Has a Pulse!

Our amoral mistress again reached out to embrace us as the stock 
market staged a solid rally off of last week's severe punishment.  
This stage of the correction could be most accurately described 
as a margin massacre.  In this column I have repeatedly urged you 
to stay off of margin and if you buy anything, make sure it is a 
major name with solid fundamentals.  Margin calls are destroying 
the former favorites of the individual momentum investor.  It has 
long been suspected that much of the rise in the likes of ARBA, 
MSTR, PUMA, AFFX, PDLI, INSP and (list your high-flyer here) was 
due to small lot buying (orders of 1000 shares or fewer) from 
individuals pressing their profits.  When the margin calls came 
last week there was nothing left to sell except these free 
falling stocks which just exacerbated the price decline.  Tech 
stocks with heavy institutional sponsorship, INTC, CSCO, AMAT and 
EMC were also hit with suspected Hedge Fund margin call selling 
on Friday.  But these stocks were the first to attract the 
sideline cash from Mutual Funds while the secondary and tertiary 
tech stocks were left lying on the backs of their shells like so 
many flipped turtles in the sun.  

There has been a lot of talk that we have not seen a bottom yet, 
because investors are still too complacent and there has not been 
enough pain.  In my informal weekend poll I found a lot of pain 
out there.  I strongly suspect that those that kept averaging 
down on their favorite stocks from the October-March rally have 
suffered as much pain as they can handle.  Those commercials 
where people are subletting their kid's bedrooms could become 
reality and I strongly suspect that people who have quit their 
jobs to trade for a living are seriously rethinking that 
decision.  There is plenty of pain out there to signal a bottom.

The NASDAQ enjoyed its largest point gain ever on the third 
largest volume day in history.  The NASDAQ was up 217 points to 
close above resistance of 3500 at 3539.  Despite the strength in 
the Index, it was dominated by the big names as advancers failed 
to keep pace with decliners at a 17-26 ratio.  Volume was 2.4 
billion shares.  The leaders were chip stocks, with INTC up 12 
1/2 ahead of tomorrow's earnings report. ALTR was up 11 7/8 
because the stock will be added to the S&P 500, AMCC up 33 1/8 
and AMAT up an incredible 16 5/16 to close at 96 5/8, after 
trading as low as 78 3/16 in the early going.  Other huge winners 
included CSCO up 9 1/2, QCOM up 11 11/16, ORCL up 11 9/16, CMGI 
up 12 15/16 and JDSU up 18 3/8.  All of the stocks mentioned 
above are components of the NASDAQ 100 Index (NDX) which greatly 
outperformed the overall NASDAQ Index.  It was a very strong 
rally today.  We got the opening capitulation selloff followed by 
the predictable bounce.  The ensuing rally was strong and mostly 
stable throughout the day with a brief pullback that saw the 
Index get back to nearly even, probably due to some more mid-day 
margin selling.  The powerful rally into the close is an 
encouraging sign that the rebound is not over and we could see 
some more gains this week.

The story was nearly the same over at the DOW, which was 
primarily driven by the tech names that are a part of the Index.  
The DOW was up 276 to close at 10582 with volume on the NYSE of 
1.2 billion.  There were 13 advancers versus 17 decliners as the 
money showed for the biggest names. The big winners in the DOW 
included IBM up 8 1/4, HWP up 10 3/4 and INTC up 12 1/2.  One 
noticeable laggard was MSFT, which only managed a 1 3/4 gain.  
Outside of tech were the following advancers; GE up 7 3/8, PG up 
6 3/8 and JNJ up 3 15/16 on an upgrade from Bear Stearns.  
Citigroup had a very nice day after posting a solid earnings 
report that saw the company beat the Street by a whopping $0.26. 
The $1.04 compares favorably to last years report of $0.68. 
Citigroup was up 2 to $59 5/8, still below the 52-week high set 
last week at $65 7/16.  Another DOW component, Ford (F), posted 
excellent earnings of $1.70 a share beating estimates by $0.12.  
Merrill Lynch (MER), another important denizen of the NYSE, 
announced a first quarter profit of $2.38 which blew away 
estimates by $.55.  MER closed unchanged at $90.  Texas 
Instruments was very strong all day in anticipation of the 
earnings announcement after the close.  TXN was up 25 3/16.  The 
Company reported earnings of $0.55/share, which was $0.02 ahead 
of estimates.  TXN was down 4 in after hours trading at the time 
of this writing.

The big sector index winners were; Semiconductor's (SOX) up 117 
points or 13%, Computer Tech (XCI) up 139.28 or 10%, 
Pharmaceuticals (DRG) up 6 or 2% and Banks (BKX) up 13 or 2%.  
Losers included; Oil and Gas (XOI) down 13 or 3% and Gold and 
Silver (XAU) down 1 or 2%.

Treasury's were last week's safe haven for fleeing stock cash, 
and predictably, the bond market was beat up badly as stocks 
rose.  The 10-year was down a full point and is now yielding 
6.03%. The 30-year was down 2 points and is now yielding 5.93%.

We had a bit of merger news emerge from last weekend as major 
electronics manufacturer, Sanmina (SANM) agreed to acquire rival 
Hadco (HDC) for $1.3 billion in stock.  SANM was up 1 5/8 to 
close at $50 15/16 and HDC was up a paltry 7/8 to close at $60 
1/2.  In the consolidating Casino Industry, Harvey's has agreed 
to buy Pinnacle Entertainment (PNK) for $631 million.  Although 
the offer prices PNK at $24, the stock only managed to climb to 
$20 1/16 due to the fact that Harvey's (which is not publicly 
traded) has not yet secured financing for the deal.

Here are some of the biggest earnings reports for Monday, that 
have not already been mentioned.

Vitesse Semiconductor (VTSS) announced after the close and beat 
estimates by a penny coming in at $0.16 a share.  The stock was 
up $18 3/8 to close at $73 1/6.

Novellus (NVLS) announced after the close that it crushed the 
Street's estimates by 6 cents with earnings of $0.45.  The stock 
was up $12 3/4 to close at $53 1/2.   NVLS was up during after 
hours trading.

Eli Lilly (LLY) announced earlier in the day it beat estimates by 
2 pennies coming in at $0.63 per share.  The stock was up $2 

Charles Schwab (SCH) announced earlier in the day that it beat 
estimates by 1 penny coming in at $0.33 per share.  SCH was up 1 
1/2 to close at $42.

The key earnings reports due out tomorrow are; America Online 
(AOL), Delta Air Lines (DAL), EMC Corp (EMC), Sprint (FON) and 
Sprint PCS (PCS), Freddie Mac (FRE), IBM, Intel (INTC), Johnson 
and Johnson (JNJ), Philip Morris (MO), Qualcomm (QCOM), Teradyne 
(TER), Tellabs (TLAB) and Wells Fargo (WFC).  This is by no means 
a complete list.  I strongly urge you to call the Investor 
Relations Department of each and every stock you own to confirm 
earnings release dates.

There are a few key events that should dictate the rest of this 
week's action.  With the market closed on Friday in observance of 
Good Friday, Options Expiration has been pushed to Thursday.  We 
can fully expect a counter-trend rally to continue with some 
expected volatility especially Wednesday and early Thursday.  
Look for some panic buying of today's monster comeback stocks as 
money managers start kicking themselves for not buying the fire 
sale prices of some of their favorite stocks.   The secondary and 
tertiary stocks mostly failed to rally today and should continue 
to be under pressure as more margin calls continue to come due.  
If we can get some solid surprise numbers from the major names 
coming out with earnings tomorrow after the close, this rally 
could extend until at least Wednesday morning.  

Tomorrow morning will see the release of the Housing Starts and 
Building Permits number. If the number is benign we can fully 
expect a solid follow through rally on the open tomorrow with the 
likelihood of a market similar to today's with strength growing 
steadily into the close.   

Last week I pointed out that the Put/Call Ratio was at a very low 
.33.  This contrary indicator correctly predicted further losses 
for the market.  With the Ratio now sitting at a "normal" .72 do 
not look for too much of a rally after tomorrow.  We are likely 
to see the highs for the week sometime Wednesday morning as most 
of the expiration maneuvering and "blue light special" buying 
will mostly be over.  Everybody, including this trader, will be 
more than happy to take a three or perhaps four day weekend to 
evaluate this market and come out firing next week.  Do not be 
surprised if a strong rally this week is followed by more selling 
and major portfolio restructuring early next week.  Although I 
fully expect a strong market tomorrow, a very aggressive trader 
could attempt to buy on weakness at the following key levels; DOW 
10500, NASDAQ 3500 and NDX 3500.  I would not stay long if those 
numbers are violated because we could retest today's lows pretty 
quickly. Major resistance can be found at the following levels: 
DOW 10900, NASDAQ 3900 and NDX 3800. Stick with the best and
strongest names in the market!

Good Luck! And may all of your trades be winning ones!

Jim Booth

Reader's Write

Hi Folks,

I have been subscribing to your site for a few months and I have 
gained quite a bit of knowledge thanks to your expertise. I am 
telling as many people as I can about this site and it is all 
very positive. 

Being a novice, I have heard the term "Amateur Hour" quite often. 
Can you please explain what that means? 



It's been said that amateurs control the open, while 
professionals control the close.  In reality, that's probably an 
oversimplification, but certain patterns develop throughout the 
day, including "amateur hour".

Consider Friday's huge selloff.  When investors came home Friday 
evening to watch the evening news, they learned that both markets 
had undergone the largest selloff in history.  Many figured the 
selling would likely continue, so they called their broker first 
thing Monday and said 'sell at the open'.  The huge volume of 
sell orders started the market lower, then the professionals
stepped in on the gap to buy up stock.

One of the best examples of "amateur hour" is the opening gap 
(higher or lower).  Unless a gap is caused by a truly significant 
news event, professional traders often "fade the open".  We've 
all been burned by the "head fake", and not just once.  Here's an 
example: The Nasdaq opens 20 points higher, our target stock 
opens up 2 (without great news, but maybe on an analyst 
reiteration of 'buy').  Amateurs rush to buy it, thinking that 
they are in on the ground floor of a huge move up.  The stock 
advances another 2 points, now we're up 4, the Nasdaq is up 40, 
all within the first 20 minutes.  Soon, a resistance level is 
hit, buying dries up and the stock begins to retrace, amateurs 
rush to get out, they sell and professionals short the stock.  
Soon the stock is trading in negative territory.

The opposite effect also occurs on an opening gap down.  Traders 
sell out within the first half-hour of the open, then momentum 
slows.  Now amateurs realize they made a mistake and buy in once 
again.  Professionals join them. 
If you are interested in purchasing a stock and find that you 
have missed the initial run-up, you will often find that a stock 
will either reverse direction or pause and consolidate before 
moving higher. You then have an opportunity to enter the trade 
with a better idea of the day's support and resistance levels.

Keep in mind that this is usually relevant only to traders.  Long 
term investors shouldn't worry about daily peaks and valleys.  If 
your timeline is a only a few days to a few months, the opening 
hour of trading is only significant in terms of your entry point.  
The primary consideration is of course, buy low, sell high (or 
sell high/buy low).  In that respect, we advise buying on a move 
over resistance or on a confirming bounce up from support.  If 
you believe that a stock is trading at an excellent level right 
at the open, then you should stick to your strategy and execute 
the trade.

Good luck!

Monday's Split Announcements

No splits announced Monday.


Citigroup Posts Strong 1Q Results
By Matt Paolucci

Citigroup Inc. (C), the world's No. 1 financial services firm,
reported a 51 percent rise in first-quarter profits to a record,
propelled by big gains in its securities business and investment
income, coupled with steady growth in its consumer banking

For the complete article go to:

Monday's Expirations
(By payable date)

Koninklijke Philips Electronics (PHG) splits 4:1
Metromedia Fiber Network (MFNX) splits 2:1


===================== Plays

The PLAY LEGEND: Play Recommendations.

Play-of-the-Day is our number one play recommendation for the 
following trading day. 
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 

BoD = Board of Directors meeting
ADV = Average Daily Volume
dma = daily moving average

>>at the 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. 


SDLI - SDL Incorporated $157.38 (+14.38)

Sunday's Write Up:

Capturing a unique corner of the fiber optics market, SDLI has 
incorporated DWDM technology to improve the speed and efficiency 
of its fiber optic products. DWDM, which stands for Dense 
Wavelength Division Multiplexing, allows separate lightwaves to 
be matched with individual fiber strands for greater amounts of 
data transfer. This area of fiber optics, which is estimated to 
grow by 100% over the next five years, is being spurred by 
Internet growth. As for this week's stock performance, SDLI 
shares showed some strength on Friday, despite the continued 
descent of many technology stocks. Rising off a strong bounce 
from its daily lows, the run-up was confirmed by good intra-day 
volume (1.0m shares), and should present a support level along 
the $120 mark.  Our stop is at $118, since the volatility on this 
thing is huge.  Secondary support will likely be provided along 
the century mark, given a resumption of selling pressure. As for 
resistance, the buck fifty mark, bolstered by the 5-dma ($150.18) 
should offer some initial opposition. Entries can be initiated 
by price reversals off support or advances through resistance, 
when good volume and market strength are confirmed. Continue to 
plan your exits in front of the earnings announcement of 4/19 
(After the market). (Remember to confirm strength in the broader 
market before initiating new plays.  In this environment, any 
short-term long play should be considered high-risk.)

Monday's Comment:

The record gain posted on the Nasdaq Composite may have come just 
in time to accelerate SDLI's earnings run.  This is a short-term 
play, only two days remain until our planned exit.  Earnings are 
due after the market Wednesday, so we will be out before 
Wednesday's close.  Until that time, the stock looks poised to 
rally with the broad market as traders anticipate good earnings 
numbers (and the remote possibility of a split announcement).  
Even during the Friday selloff, SDLI attempted to rally.  With 
Monday's close, the stock had moved above the $150 resistance 
level on high volume, indicating that buying conviction is solid.  
Enter this play only on market strength.  Keep in mind that one 
positive day for the Nasdaq does not make a trend, but the 
trading volume is certainly encouraging.  Support is at $150, 
bolstered at $147.25, which is the 10-dma.  Initial resistance 
is Monday's high of $158.50, then $160.  A consolidation area 
at about the $163 level would next offer some resistance.

Picked on April 13th @ $152.25
Change since picked +5.13

Chart =

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This newsletter is a publication dedicated to the education 
of online stock traders. The newsletter is an information 
service only. The information provided herein is not to be 
construed as an offer to buy or sell securities of any kind. 
The newsletter picks are not to be considered a recommendation 
of any stock but an information resource to aid the investor 
in making an informed decision regarding how to trade stock
splits. It is possible at this or some subsequent date, the 
editors and staff of may own, buy or sell 
securities presented. All investors should consult a qualified 
professional before trading in any security. The information 
provided has been obtained from sources deemed reliable but is 
not guaranteed as to accuracy or completeness. 
staff makes every effort to provide timely information to its 
subscribers but cannot guarantee specific delivery times due 
to factors beyond our control.

Copyright 2001

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