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Email Version, Section 1, Wednesday 03/28/2001
The Newsletter        Wednesday 03/28/2001 1 of 1
Copyright 2001, 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 - Everybody Down
Definition of the Day
Wednesday's Split Announcements - None
Thursday's Expirations
Thursday's Play-of-the-Day - NVR


Market Commentary

Everybody Down

After today's abysmal trading session, I figure I'd go with a
diametrically opposed title to Splittrader's Sunday commentary
title of "Everybody Up." It seems the right thing to do
considering losers blistered winners by a 22-to-9 margin on the
NYSE and by a 26-to-11 margin on the Nasdaq.

The catalyst for this latest round of bloodletting was two former
year 2000 high-flyers (which could be nearly anyone these days).
Electronic organizer king Palm (Nasdaq:PALM) got the rivulets
forming when it announced after the close on Tuesday that it
expects fourth-quarter earnings to fall short of estimates.
According to the company, it now expects to post a fourth-quarter
loss of $0.08 a share vs. the First Call estimate of a $0.03 per
share profit.

Palm's confession may have been good for the soul; unfortunately,
it wasn't very good for the stock price.  For the day, Palm shed
$7.44, or 48 percent, to close at $8.06.

Nor was Palm's confession very good for the competition.  Fellow
handheld contraption peddler Handspring (Nasdaq:HAND) got whacked
for $5.31 to $10.88 while Research in Motion (Nasdaq:RIMM) got
nicked $4.43 to $20.25.

Still, the handheld market's woes were small potatoes compared to
the outright despair displayed in the networking sector. This
morning Canadian telecom equipment supplier Nortel (NYSE:NT)
reported that it expects a per-share loss wider than it forecast
in February.  The company also reported that its 2001 projections
are unreliable (hey, who should know better?) and that it will
dismiss 5,000 employees by mid-year.  For the day, Nortel tumbled
$2.76 to $14.00, which, of course, was a new 52-week low.

Nortel's mea culpa quickly reverberated throughout the entire
networking sector. Cisco Systems (Nasdaq:CSCO), which was the
most active stock on the Nasdaq, skidded $2.38 to $15.75.
Meanwhile, Juniper Networks (Nasdaq:JNPR) crumbled $8.85 to
$43.89 and Corning (NYSE:GLW) slumped $3.49 to $21.50.

Another notable telecom loser was Lucent Technologies (NYSE:LU),
which had the misfortune of tapping the equities markets for its
Agere Systems (NYSE:AGRa) today.  Agere is a seller of
microelectronics and optical components used on communications
equipment and networks.  Agere was priced at $6.00 a share, a
considerable discount to the $15 to $20 share price Lucent had
anticipated as recently as last month.

Despite the lousy climate for tech stocks in general, and optical
component makers in particular, Lucent had no choice but to
proceed with the offering.  The company trashed its balance sheet
last year, causing its debt to balloon to unhealthy levels (over
$8 billion), and the spin-off will help clean up some of this
mess.  For the day, Lucent finished off $1.43 to $10.27 while
Agere finished up $0.02 to $6.02.

In Sunday's Splittrader commentary I said that no company has
stubbed its toe more times over the past year than Lucent. (With
the latest stubbing, I think Lucent has worn its poor toe down to
a stump of gangrenous flesh.)

The seemingly never-ending tech sell-off was fully manifest in
most major market indices today, but nowhere more than the Nasdaq
Composite Index (COMPX).  The tech-heavy index was routed for
118.13 points, or 5.99 percent, to close at 1,854.13, putting it
smack-dab on its intermediate downtrend line.

I see a possible silver lining here.  While everyone is carrying
on about COMPX 1,750 or COMPX 1,500, there is an ever-so-slight
argument that it could hold 1,800.

Chart of the NASDAQ Composite:

Of course, for the COMPX to have any chance of standing firm, it
must get some help from the Triplets, meaning Microsoft
(Nasdaq:MSFT), Intel (Nasdaq:INTC) and Cisco Systems
(Nasdaq:CSCO).  All three finished off more than $2.00 today.

Meanwhile, in the Old Economy, traders and investors were once
again thinking bear market.  The Dow Jones Industrial Average
(INDU) lost 162.19 points, or 1.63 percent, to close at 9,785.35.
Of the INDU 30 components, only three finished the session up.
Johnson & Johnson (NYSE:JNJ) was the notable winner, closing up
$3.03 to $86.28 thanks to an upgrade from Morgan Stanley.

As for the INDU losers, the most notable was Disney (NYSE:DIS),
which lost $0.84 to $28.36.  In a surprising announcement, the
company said it will eliminate about 4,000 jobs, or 3 percent of
its worldwide workforce, to reduce annual operating expenses by
$350 million to $400 million.  If anything, the notion of folks
who used to earn a living masquerading as rats, dogs, birds and
dwarves having to seek employment elsewhere proves beyond a doubt
that no one is immune from a slowing economy.

Despite today's attrition, the INDU looks as if it will stay out
of bear-market territory (officially recognized by a close below
9,377) for the remainder of the week.  Technically, the INDU
appears to have support 9,650, if not more immediate support near
a weak uptrend line at 9,750.  In all honesty, though, predicting
support levels in this market has been as easy as picking
Powerball numbers.

Chart of the Dow Jones Industrial Average:

In other stock news on Wednesday, ADC Telecommunications
(Nasdaq:ADCT) lost $2.25 to $8.31 after reporting that it expects
a second-quarter loss.  Like Disney, ADC expects to slash up to
4,000 jobs.

Yahoo! (Nasdaq:YHOO) also made news again today.  The king of the
Internet portals fell $0.63 to $14.94 despite being upgraded by
UBS Warburg.  However, the upgrade could be considered left-
handed at best.  Warburg upgraded Yahoo to a "hold" from a

Not that the rest of the Internet sector fared much better than
Yahoo, because it didn't.  Selling was widespread in the Internet
issues, as the AMEX Internet Index (IIX) tumbled 11 percent

Still, there is one sector of the capital markets thriving in
this contracting economic environment, and that's the treasury
sector.  The 10-year Treasury note was up 7/32 to yield 4.98
percent while the 30-year government bond shed 11/32 to yield
5.465 percent.

As for economic news, we were once again reminded that we are in
the midst of an economic downturn.  The Commerce Department
reported that new orders for durable goods fell 0.2 percent in
February, while new orders for capital goods - which tell us how
much companies are spending on new equipment and software -
dropped 4 percent.

Needless to say, every time the market gets slapped with a
negative economic data set, its eyes instinctively turn to the
Federal Reserve for comfort, which at this point may be a waste
of time and energy.  At this point, I think the Fed has done just
about all it can do.  After all, liquidity isn't the end all to
our economic downturn.  Clearly, the technology sector has
serious inventory overhang and pricing issues, which won't be
washed away by more market liquidity.

With that said, I wouldn't be surprised if the economy turns by
mid-summer, which means that the market will turn before then.
The fact is, the market is a discounting mechanism and I think
that most of the bad economic and earnings news is already
reflected in current stock prices.

Finally, I think that market pessimism has grown to levels that
probably necessities some sort of rally.  According to Bloomberg
and Investors Intelligence, pessimism about U.S. stocks surged to
its highest level in more than 16 months last week.  Keep in
mind, long before the economy and investor sentiment turns
positive, the market will probably be half way to reaching new

S.P. Brown

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Definition of the Day

Put/Call Ratio:

The ratio of put option volume to call option volume. High put
volume indicates bearish sentiment from investors, while high call
volume indicates a bullish stance.

For the complete definition, please go to:

Wednesday's Split Announcements


Thursday's Expirations by Payable Date

New York Community Bancorp (NYCB) splits 3:2

===================== 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.

Thursday's Play-of-the-Day

Wednesday, March 28, 2001

NVR - NVR, Inc. $165.60 -0.60 (+5.65)

Tuesday's Comment:

NVR Incorporated (NVR) constructs and markets single-family
homes, townhouses and condominiums under three trade names: Ryan
Homes, NV Homes, and Fox Ridge Homes. The company currently
serves 16 metropolitan markets in 10 states. In its largest
market, the Maryland Metropolitan area, NVR derived 60% of its
homebuilding revenues. The stock has appreciated very nicely over
the past year, gaining a phenomenal 200%. Much of the stocks
recent price strength can be attributed to NVR's impressive
performance in the third quarter. The homebuilder posted a 58%
quarterly increase in earnings from the same period a year
earlier. Even more interesting, the company only has 8.37 million
shares outstanding with 60 million authorized. Sound like a
possible split play? We certainly think so! The chart on NVR also
looks compelling. NVR shares may have just signaled yet another
momentum breakout. Bullish crossovers in both the MACD and
Stochastic provide us with further confidence of a potential
rally. To that end, we'll look for resistance to come at today's
intraday high of $168.25 and then at the $170 mark. Support comes
in at the $160 mark, bolstered by the 5-dma of $160.83. Traders
looking for an initial position in NVR should look to time their
entries when the stock breaches above resistance or recoils from
support on strong volume of 40,000 shares traded by midday. We
will set our stop at $156.50 to limit our downside risk.

Wednesday's Update:

While the market as a whole circled the drain today, the
homebuilders held up well.  This superior show of relative
strength continues to amaze us, especially in the midst of this
weak market.  But the more these stocks continue to hold up, the
more frustrated the shorts will become, forcing many to cover
buy.  As more of this cover buying occurs, the stronger the
homebuilders become and so on.  Adding to the attractiveness of
this play is the fact that consumer confidence is on the upswing.
This can only be positive as homebuilders gear up for the busy
summer home buying season.  Turning to the chart, we see that
NVR's MACD has issued a buy signal and its OBV is hovering at
two-year highs.  Resistance for NVR comes in at $168.25, its all-
time high and support has recently been confirmed at NVR's 5-dma
of $162.75.  New entries could be considered on a break of
$168.25 or a bounce off of $162.75 on volume that puts the stock
on track to do 85,000 for the day.  Our stops remain at $156.50
to protect against a reversal.

Picked on March 27th @ $166.20
Change since picked -0.60
Stop Loss @ $156.50



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