Email Version, Section 1, Monday 03/05/01
The SplitTrader.com Newsletter Monday 03/05/2001 1 of 1
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In This Newsletter:
Market Commentary - Escaping the Cold
Definition of the Day
Monday's Split Announcements - None
Tuesday's Play-of-the-Day - PHCC
Escaping the Cold
It may be March but the bears went back into hibernation for the
second consecutive Monday. The threat of an intensifying
snowstorm slamming the eastern seaboard kept many market
participants at home. Apparently, traders with a bearish slant
were more likely to play hooky.
The threat of severe weather resulted in volume failing to break
the 1 billion-share barrier for the first time this year on the
NYSE. The official tally saw volume come in at 923 million shares
The Dow Industrials (INDU) enjoyed a strong recovery. The INDU
closed with a tidy profit of 96.00 points, finishing the day at
10,562.30. Helping to push the INDU higher were shares of AT&T
(NYSE:T), which picked up $1.16 to $23.56 and Intel (Nasdaq:INTC),
which moved up $1.06 to $30.38.
The Nasdaq Composite Index(COMPX) was also a beneficiary of the
lack of bear sightings. The COMPX finished the day with a gain
of 25.30 points and closed at 2,142.93. Nasdaq (COMPX) volume was
also somewhat light, even though this index is electronically
traded from thousands of independent sights -- final volume was
1.49 million shares traded.
Several members of the beleaguered technology sector managed to
close higher. Sun Microsystems (Nasdaq:SUNW) picked up $1.31 to
$20.94. JDS Uniphase (Nasdaq:JDSU) came back $1.91 to $28.31.
Value investors bolstered Dell Computer (Nasdaq:DELL) by $1.38 to
$23.44. There was interest in Amazon.com (Nasdaq:AMZN) due to a
rumored pending deal with Wal-Mart (NYSE:WMT). AMZN rallied $2.63
We are happy to report that there were several new 52-week highs
established by the denizens of our play list. Baxter
International (NYSE:BDX) picked up $1.87 to $95.20, International
Game Technologies (NYSE:IGT) hit the jackpot with an increase of
$1.94 to $55.78, Lockheed Martin (NYSE:LMT) crept up $0.14 to
$38.44 and Priority Healthcare (Nasdaq:PHCC) rallied $1.31 to
The broad market indices were mostly higher. The S&P 500 (SPX)
gained 7.20 to 1241.40. The Russell 2000 (RUT) brought up the
rear with a decline of 1.09 points and closed at 475.79.
The strongest sector was the semiconductors. The PHLX
Semiconductor Index (SOX) closed with a gain of 30.15 and finished
the day at 612.35. Amazingly, the SOX remains 745 points below
its 52-week high.
The Biotechnology Index (BTK) was among the weaker sector indices,
as it posted a decline of 9.92 points and closed at 572.82.
The weather did not keep the bears away from the bond pits in
Chicago. Bond traders, who have already priced in a March 20th
rate cut of 50-basis points, are marking time and taking small
profits. The 10-year Treasury note slipped 9/32 to a current yield
of 4.985% and the 30-year government bond lost 6/32 and now sports
a yield of 5.375%.
It looks like the most important news of the day has come after
the bell. Several technology stocks are warning investors that
earnings and/or revenues will miss expectations.
New Focus (Nasdaq:NUFO), a manufacturer of fiber optic products,
said it is being hurt by order cancellations. It now expects 2001
revenues to come in around $170 to $190 million. These numbers
are substantially below previous guidance for revenues in the $240
million range. NUFO finished the regular session with a gain of
$0.94 to $21.25. After hour trading is showing a decline of $4.94
Xilinx (Nasdaq:XLNX), a leader in the field of programmable logic
devices (PLDs), claimed that February was weaker than expected.
The Company now believes it will see sequential revenue declines
approaching 15 percent for the month of March. XLNX is holding up
pretty well so far in after hours trading. After finishing the
regular session up $0.75 and closing at $43.25, the stock is only
giving back $0.25 of those gains. Keep an eye out for possible
analyst's rating changes tomorrow.
REMEC (Nasdaq:REMC), a leader in wireless communications
equipment, badly missed consensus estimates for its fourth quarter
profits after the close. The Company reported profits of only 3
pennies while estimates were looking for profits of 12 pennies.
REMC finished the regular session at $9.00 and after hour
indications are for a further decline of up to a point.
The big question for technology traders tomorrow is whether all of
these disappointments are already priced into the market. We have
seen several technology stocks hold their prices after warning
about declining profits in recent weeks. It is becoming
increasingly apparent that the bad news is already priced into the
market, especially among the PHLX Semiconductor Index (SOX)
components. A lack of selling creates a path of least resistance
to the upside for these stocks. However, some good news is
desperately needed for a substantial rally to ensue.
The Dow Industrials appears to at least be stabilizing in the
bottom half of a trading range that began in November. Perhaps
the best thing we can say about this Index is that support has
been firmly established at 10,240. If today's bounce is going to
become anything more substantial, the INDU will have to close
above the 50-DMA of 10,702. It would be preferable if a rally was
accompanied by good volume approaching 2 billion shares.
Manhattan is preparing for up to a foot of snow over the next 48
hours, so we are not expecting any substantial volume until at
least the end of the week. The MACD, which has been in decline
for the past several trading sessions, started to turn up today.
If this technical indicator can trigger a buy signal later this
week, we could see a more substantial rally into the March 20th
The Nasdaq (COMPX) is characterized by some selective buying among
downtrodden technology stocks. It is likely that this buying is
being done by investors with a very long term focus. These people
are not going to quibble about finding an absolute bottom for
Cisco Systems (Nasdaq:CSCO), Intel (Nasdaq:INTC) and Dell Computer
The Nasdaq is sitting at an extremely oversold level, according to
the Relative Strength Indicator (RSI). This fact is likely to
encourage some light buying. The MACD is attempting to slow its
decent and may be even trying to turn up and eventually trigger a
buy signal. The Nasdaq has shown some ability to shake off bad
news. Therefore, it would take some really horrible news to drive
the Index below the 2000 support. Just remember, when trying to
trade bounces, it is critically important to stay disciplined
about your stops.
If you are looking for trading opportunities, you may want to take
a look at the list of Splittrader plays that are making new highs.
These stocks are among the very few that momentum traders appear
to be interested in.
Good Luck! And may all of trades be winning ones!
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Definition of the Day
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Monday's Split Announcements
Tuesday's Expirations by Payable Date
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Play of the Day (For Tuesday)
Monday, March 5, 2001
PHCC - Priority Healthcare Corp. $43.81 +1.31
Priority Healthcare Corporation is a national specialty pharmacy
and distribution company that provides specialized pharmaceutical
services for patients with chronic diseases or genetic disorders
that require high-cost, complex therapies. This weekend we
welcomed PHCC to our list of momentum plays on the heels of the
stock achieving a new 52-week high of $43.75 on Friday. Let's
back up a bit to the events leading up to the new high. On
February 22nd PHCC released their most recent earnings report
which came in one cent above expectations. This has been a great
year for investors of PHCC, since December the stock has nearly
doubled in value; from a mid-December low of $22.69 to Friday's
high of $43.75. The only dark cloud hanging over PHCC's new high
was the fact that volume came in slightly lower than the average.
Normally PHCC trades about 541,000 shares based on a three-month
average, but Friday's high was recorded on volume of only
491,000. So going into next week we will look for volume to build
as PHCC attempts new highs. Possible entry points might include a
bounce off support at $42.00 or a new move higher to $44.00.
Additional support exists at the 5-dma at $41.00, should the
consolidation area at $42.00 fail. Look for additional support
from the NASDAQ Composite Index (COMPX) and the CBOE Health Care
Index (HCX.X) when considering starting a new play. We will post
a stop loss at $39.00 on this play.
Since reporting its quarterly and annual financial results two
weeks ago, Priority has moved ahead nearly 13 percent to Monday's
close of $43.94. What's more, over the past three months, the
company's stock has nearly doubled in price from a December 2000
low of $22.69. Despite this recent strong move forward, we think
that Priority could move higher still. The stock's solid
intermediate and long-term uptrends are bolstered by a strong
MACD and positive On-Balance Volume, which suggests that Priority
has the legs to go higher. To that end, with yesterday's $1.31
advance, Priority had a breakaway gap that cleared former
resistance at $42.00. As for the downside, the stock appears to
have support at its 10-day moving average of $40.67, followed by
its most recent consolidation base of $38.00. Traders
considering a position in Priority should look for strong volume,
250,000 shares or more traded by noon EST, on a move through
yesterday's intra-day high of $44.25 before placing their trades.
Picked on March 4th @ $42.50
Change since picked +$1.31
Stop Loss at $39.00
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