Email Version, Section 1, Thursday 04/05/01
The SplitTrader.com Newsletter Thursday 04/05/2001 1 of 1
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In This Newsletter:
Market Commentary - Dell Says All Is Swell
Definition of the Day
Thursday's Split Announcements - None
Stock Plays - New - Updates - Drops
Friday's Play-of-the-Day - SRCL
Dell Says All Is Swell
Michael Dell's announcement that his computer company would
likely meet its first-quarter EPS and sales estimates was all
that was needed to jump start the averages today. It was off to
the races as investors literally piled money back into tech
Dell Computer (NASDAQ:DELL) reaffirmed that it was in line to
meet earnings estimates of $0.17/share and sales of $8 billion.
Given the market's reaction to this news, you would have thought
that making these numbers was a phenomenal feat worth putting Mr.
Dell's face on the cover of Fortune magazine again.
Don't get me wrong, the news was indeed good and was exactly what
the market craved, however, a closer look at the situation puts
today's market rally of biblical proportions into perspective.
While the computer company said it is line to meet the EPS
estimates, those estimates have already been lowered. So Dell is
going to jump over a lowered bar. In addition, Michael Dell
himself said that he sees additional risks in the last four weeks
of the quarter and he will not speculate what business will be
like beyond the first-quarter. In other words, no visibility and
after all the hoopla, there is a risk they may not meet the
numbers anyway. By the way, DELL finished the day up $3.06 at
I see Dell's success as a direct result of their heavy investment
in their unique business model. As everyone knows, Dell makes
computers as they are purchased instead of putting pre-made
models into inventory. This is the ideal mode of operation for
today's uncertain environment and has obviously paid off for the
Round Rock, Texas company. However, instead of just Dell
rallying today, it was all of techland that joined the party,
even those companies that still have significant inventory and
So the question remains, "Did today's rally attract real buying
or was it just a wave of massive short-covering sparked by one
success story amid volumes of tales of woe?" Only time will
tell, but if the market is going to firm here and go higher, it
will still be on shaky legs that could certainly let go again at
Today's move higher was nothing short of explosive. We knew this
was going to happen sooner or later but even so, it was shocking
to witness. The averages launched higher right out of the bell
and never looked back. Internals were downright impressive and
just about every sector joined in the fun. The only ingredient
lacking was volume.
The NASDAQ (COMPX) saw its third largest percentage gain ever
today, having rocketed 146.20, or 8.92%, to 1785. Advancers beat
decliners 2832 to 851 and volume came in at 2.2 billion.
The DOW (INDU) posted its second largest point gain after it was
lifted by 402.63, or 4.23%, to 9918.05. Internals were again
impressive, with advancing issues whipping decliners 2303 to 753.
Volume came in at 1.3 billion shares.
As expected, with the spotlight fixated upon equities, Treasurys
lost ground. The 10-year note fell 15/32 to yield 4.97% and the
30-year bond lost 23/32 to yield 5.52%.
On the economic front, we received word of higher jobless claims
this morning. Weekly jobless claims rose by a larger than
expected 18,000 to 383,000. However, analysts are forecasting
jobless claims at the 400,000 mark as soon as next week. This
would be the first time since October of 1992 that the U.S. saw
such a high unemployment figure.
Stocks and Sectors on the Move
It was up, up and away for most all technology shares today. The
biggest beneficiaries on a percentage basis, however, were those
companies that are tied to PC's and that had better chart
patterns going into today's rally. By better chart patterns, I
mean on a relative basis. As you know, there are precious few
tech charts that deserve more than a cursory glance, but on the
other hand, there are some that have not lost support and fallen
off the cliff just yet.
Case in point is Microsoft (NASDAQ:MSFT). The stock is most
certainly in a downtrend, but has held up well at the $60 level.
With the good news out of Dell, MSFT took to the sky. Investors
were encouraged that consumers would be buying more PCs that
would include the Windows software. MSFT was lifted $4.81 to
$56.75 on the day.
Also outperforming its peers was Worldcom, Inc. (NASDAQ:WCOM).
While WCOM has fallen off the cliff already, it has been
bottoming and heading higher for the past three months. The
stock added $1.56, or 9.32%, closing at $19.06.
And of course, an analysis of the tech sector wouldn't be
complete without looking at the semiconductor stocks. Having
been pummeled 25.6% over the last six trading sessions, the SOX.X
rebounded 12.4% today. Again, a tech stock with a stronger
chart, Advanced Micro Devices (NYSE:AMD) performed well on the
day. AMD added $2.28 to $23.02 even after being downgraded by
Merrill Lynch from "accumulate" to "neutral" on the basis that
demand for low end PCs will be weak.
While it was a decidedly positive day there was the daily token
implosion. The grocery store chain operator Kroger (NYSE:KR)
fell on a downgrade by CS First Boston from a "buy" to the
dreaded "hold". In response, the stock fell $1.59 to $22.99
after having been as low as $21.42.
Looking Forward, Always Forward
We get the granddaddy of all economic reports tomorrow in the
non-farm payrolls number. Economists are predicting March
payrolls to have added 70,000 jobs versus the previous reading of
There are mixed feelings as to what kind of market reaction to
expect from either a high or low reading. On the one hand, if
the economy created fewer jobs, than the economy may be weaker
than expected, which would bode well for further rate cuts. A
strong number would mean the economy is may not be circling the
drain, but a strong number may decrease the odds of further rate
I believe we need further rate cuts to get the economy back on
track, so I am of the camp that believes the market will rally on
a weak reading.
Bottom line is that the bulls would like to see a follow through
to today's rally. They are banking on the fact that any further
advances will serve to squeeze the rest of the shorts and will
also work to get some of the sidelined cash back into the game.
But no matter what happens tomorrow, keep in mind that the ice is
still thin. If you are going long, half positions are the order
of the day.
Keep Stops In Place and Have A Good Weekend
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Definition of the Day
The CBOE's Volatility Index is known by ticker symbol VIX.
For the complete definition, please go to:
Friday's Expirations by Payable Date
Right Management Consultants (RMCI) splits 3:2
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The PLAY LEGEND:
SplitTrader.com 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.
Drops are closing 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
On the SplitTrader.com website we have very detailed profiles
for the stocks we play. Please take the time to visit the site
and look up a stock's profile if you are interested in more
NEW SPLIT RUN PLAYS 04/05/01
NEW SPLIT CANDIDATE PLAYS 04/05/01
SRCL - Stericycle, Inc. $46.00 +2.00 (+1.38)
Stericycle provides medical waste collection, transportation, and
treatment services to more than 237,000 customers in the United
States, Canada and Puerto Rico. Shares of SRCL have performed well
over the last three months. Last week, the stock hit an all-time
high of $47, representing an 81% gain from its intra-day low of
$26 on January 10th. SRCL is currently consolidating in the
$41.50-$46.50 range, and we believe that it may be ready for an
earnings run. We are also looking for a split announcement with
the earnings release scheduled for May 1st after the bell. The
company has enough shares for a 3:2 split with 30 million shares
authorized and 15.3 million shares outstanding. Going forward,
SRCL has support at Wednesday's intra-day high of $44.88 with
additional support at $43.61, the 10-dma. Resistance is the all-
time high of $47 and then possibly $49 or $50. Consider entry
points on a bounce off of $44.88 or a breakout above $47.00 on
volume of at least 125,000 shares by noon. We plan to place stops
at $41.50 to limit potential losses.
Picked on April 5th @ $46.00
Change since picked +0.00
Stop Loss @ $41.50
NEW MOMENTUM PLAYS 04/05/01
ACI - Arch Coal Incorporated $31.50 +1.65 (+1.25)
Arch Coal Incorporated (ACI) produces steam and metallurgical coal
from surface and deep mines primarily located in the central
Appalachian and western regions of the U.S. The company offers its
coal for sale to utility, industrial and export markets. Energy
stocks are hot right now, but ACI is simply on fire. Looking at
the daily chart, shares have been moving higher from a mid-
December low of $9.37. Support has been strong at the 5-dma of
$29.70 and has presented a number of quick entry points over this
period. After testing this level once again during today's trading
session, shares now look poised for higher ground. Today's rally
did set an intraday new high of $32, as ACI broke above previous
resistance set back on 3/28. Volume was impressive, as ADI traded
51 percent above its normal average daily volume. On a technical
basis, all of the short-term readings look great. Relative
strength and momentum are pointing higher, with the MACD bouncing
off its lower moving average line. Today's close is also of
interest, as shares finished right at the previous all-time high.
We also think that ACI could be fueled by strength in the broader
market should today's sharp market rally continue. We do believe,
however, that there could be some short-term selling, given the
402-point pop in the Dow. As far as playing ACI, we'll look for a
run above today's intraday high of $32 or a pullback to the 5 or
10-dma of $28.95 to signal possible entries. Our stop is just
under the 10-dma at $28.25.
Picked on April 5th@ $31.50
Change since picked 0.00
Stop Loss @ $28.25
SPLIT RUN PLAY UPDATES 04/05/01
MBI - MBIA Incorporated $82.79 +3.07 (+2.11)
Enjoying the benefits of a broad market rally, MBI surged to a new
all time high close in Thursday trading session, gaining 3.85% on
the day. A swift gap at the open sent a signal to momentum traders
who took the stock as high as $82.98. Buying was strong
throughout the entire financial services sector, with the NYSE
Financial Index (NFX) adding 19.53 points, or 3.50%, to close at
577.38. We want to point out that the NFX could be close to
breaking its down trendline, which could signal further strength
to the sector. Turning back to the MBI chart, the technical
indicators are certainly making the stock a stand out. Currently,
the MACD and stochastic indicators are clearly trending higher,
with the RSI starting to edge higher. On Balance Volume is also
looking very strong at year high levels, suggesting to us that
ample buying is occurring on positive days. Traders looking for
additional entry points should wait for a sharp break through
resistance at today's high of $82.92 or a bounce off the 5-dma of
$80.90. Continue to hold a firm stop at the $76.50 mark.
Picked on April 2nd@ $81.70
Change since picked +1.09
Stop Loss @ $76.50
SBUX - Starbucks $40.94 +0.00 (-1.50)
SBUX continues to struggle a bit this week as it attempts to
consolidate around its 200-DMA of $42.41. In Tuesday's write-up
we expressed concern about adding to positions if SBUX failed to
climb back over this important moving average. Nothing has
changed and we continue to stress caution until SBUX can prove
that it can move higher. With that said, a sustainable advance
becomes more likely as SBUX approaches its split payable date on
April 27th. Traders may want to add to positions if SBUX can
cross over $42.41 tomorrow on midday volume of 1.3 million shares.
The MACD, which had issued a buy signal, is threatening to reverse
course. This indicator would likely issue a sell signal if SBUX
has a negative day tomorrow.
Picked on March 29th @ $41.94
Change since picked -1.00
Stop Loss $38.50
SPLIT CANDIDATE PLAY UPDATES 04/05/01
EQT - Equitable Resources, Inc. $73.60 +1.89 (+4.60)
Equitable Resources has set record highs in each of the last three
sessions. On Thursday, shares of EQT traded to an all-time high of
$74 before pulling back to close at $73.60 on volume of 339,000
shares. The stock has made five consecutive higher highs and three
consecutive higher lows, so EQT may continue to rally as we move
closer to the earnings release, expected April 20th before the
bell. We are looking for a split announcement with the earnings
report. Until then, support is Wednesday's intra-day high of
$72.35 with stronger support at $70.83, the 5-dma. Resistance now
stands at Thursday's intra-day high of $74 and then the $76-$77
area. A bounce off of $72.35 or a breakout above $74 on midday
volume greater than 150,000 shares may be possible entry points.
We have moved our stops up to $70.00 to lock in profits.
Picked on March 27th @ $67.20
Change since picked +6.40
Stop Loss @ $70.00
MKC - McCormick & Company $42.47 +0.36 (+0.48)
McCormick & Company hit an all-time high on Thursday after filling
in the gap created on March 30th. Shares of MKC traded as high as
$42.50 just before Thursday's closing bell. Volume has been
trending lower over the past two weeks and this could put a drag
on the short-term upward trend. However, the volume remains
relatively normal on a 6-month basis so the long-term upward trend
should be able to hold. In the meantime, support is Monday's
intra-day high of $42.25 with additional support at $41.57, the 5-
dma. Resistance was taken out on Thursday so new resistance may
show up at $43 or $44. Look for a bounce off of $42.25 or a
breakout above $43.75 on midday volume of at least 90,000 shares
before starting new plays. We are keeping our stops at $38.75 to
limit potential losses.
Picked on March 29th @ $41.43
Change since picked +1.04
Stop Loss @ $38.75
PFGC - Performance Food Group $53.38 +0.63 (+0.88)
Shares of this major food distributor lightly participated in
today's monster NASDAQ (COMPX) comeback rally. The good news came
yesterday when PFGC announced that it had completed its
acquisition of Empire Seafood Holding Group. PFGC expects the
purchase to immediately add 1 to 2 cents to its fourth quarter
profits. PFGC fell just short of the $54.50 resistance during
trading today. PFGC may be poised to make a substantial rally
once this triple top resistance is conquered. Therefore, traders
may want to add to positions tomorrow if PFGC can trade above
$54.63 with first hour trading volume of 30,000 shares or more.
Also please note that we have raised our stop to $51.25, which is
just below the support offered by the 10-DMA of $51.88. The
longer term picture for PFGC continues to be encouraging due to a
rising MACD and the nice move that the OBV has been making this
Picked on March 25th @ $49.50
Change since picked +3.88
Stop Loss @ $51.25
RDN - Radian Group Incorporated $67.10 +2.01 (-0.65)
Financial service stocks were brought back to life today, as
buyers leaped back into the financial sector and pushed the NYSE
Financial Index (NFX) to a 3.50% gain. The swift recovery helped
RDN to reverse a two-day decline and post a 3.08% gain to close at
$67.10. Today's rally could be the first indication of the next
leg up, but RDN will likely need to post heavier volume if it
attempts to take out recent highs. On the day, Radian traded well
below the 3-month ADV, with 269,300 shares changing hands. As for
the technical indicators, RDN shares continue to look poised for
higher levels. A positive MACD and a bullish crossover of the
stochastic in today's session could be just what we need for a
follow through. That aside, volume will still be the big question
as we head into next week, so we'll look for a breakout to be
accompanied by daily volume above the three-month average of
470,000 shares. Should this unfold, we'll look for resistance to
emerge at the recent high of $68.98 followed by more opposition at
$70. The 10-dma of $65.25 will now hold key support. Entry points
could come when shares bounce off support at the 10-dma or break
through the previous top on volume of at least 225,000 shares
traded at noon. We now recommend that stops be raised to $65.25.
Picked on March 18th @ $61.00
Change since picked +6.10
Stop Loss @ $65.25
UHS - Universal Health Services $90.43 -0.42 (+2.13)
Shares of this major hospital owner surged during Wednesday's
market action. Although UHS took a bit of a break today while
most traders concentrated on picking up battered technology
shares, those that are long UHS have to be pleased with the stock
performance during this trying week. The advance in UHS has
enabled us to raise our stop to $86.50. Now that UHS has crossed
the $90.00 threshold, a split announcement becomes even more
likely. Another benefit of crossing over $90.00 is the strong
possibility that UHS could stage a quick move to the
psychologically important $100.00 level. The next resistance
level before $100.00 is $96.05. We see some support provided by
the 5-DMA of $88.28. Investors may want to add to positions as
long as UHS stays above this support tomorrow. Additionally,
momentum traders might want to jump on UHS if it can surpass
today's high of $91.60 with midday volume over 190,000 shares.
Picked on March 15th @ $83.50
Change since picked +6.93
Stop Loss @ $86.50
MOMENTUM PLAY UPDATES 04/05/01
KMB - Kimberly-Clark $66.99 +0.14 (-0.84)
KMB made an encouraging rally earlier in the day as it crossed
over the critical 50-DMA of $68.09 right on the open.
Unfortunately, it could not maintain this early strength and it
subsequently pulled modestly back throughout the rest of the day.
This pullback can most likely be attributed to a bit of portfolio
shuffling out of cyclical stocks and into some of the big
technology names. Although this trend may continue tomorrow, we
remain encouraged about the long-term profit potential for KMB due
to the stock's long term uptrend and earnings stability. Traders
might want to pick up KMB tomorrow as long as the stock can stay
above $66.88. Additionally, a move above today's high of $68.38,
accompanied by midday volume over 1.1 million shares, could be an
enticing entry point. One encouraging sign that KMB could
eventually make a nice move is the Money Flow, which continues to
Picked on April 1st @ $67.83
Change since picked -0.84
Stop Loss $62.50
UNP - Union Pacific Corporation $56.25 -0.25 (0.00)
Union Pacific Corporation has been selling off after trading to a
52-week high during Monday's session. On Thursday, shares of UNP
hit an intra-day low of $55.85 before bouncing back to a close of
$56.25 on heavy volume of 1.96 million shares. The stock has
traded to lower highs in each of the last three sessions and the
stock closed below the 5-dma for the first time since March 20th,
breaking its upward trend. However, UNP was able to rally after
touching in the 10-dma over the past two days so the stock could
make a speedy recovery. For now, support is the 10-dma at $55.84
with stronger support at $55.36, Wednesday's intra-day low.
Resistance is the 5-dma at $56.72 and then Wednesday's intra-day
high of $57.15. Traders may consider entry points on a bounce off
of $55.84 or a move above $56.72 on volume greater than 500,000
shares by noon. Our stops remain at $54.50.
Picked on April 3rd @ $57.35
Change since picked -1.10
Stop Loss @ $54.50
SPLIT RUN PLAY DROPS 04/05/01
SPLIT CANDIDATE PLAY DROPS 04/05/01
MOMENTUM PLAY DROPS 04/05/01
WM - Washington Mutual Incorporated $52.00 +0.80 (-2.75)
Shares of Washington Mutual continued to pullback from Tuesday's
fall and pierced our stop of $50.75 in Wednesday's session.
Although no news was responsible for the fall, traders felt that
the recent rally was a good enough reason to part with their
shares. It's also likely that the stock was under selling pressure
from continuing broad market weakness.
Picked on April 1st @ $54.75
Profit/Loss = -4.00 (-7%) (Stopped out Wednesday @ $50.75)
Best Profit = +0.88 (+2%)
Thursday, April 5, 2001
SRCL - Stericycle, Inc. $46.00 +2.00 (+1.38)
It's a dirty business, but someone has to do it. Our Play of the
Day for Friday, Stericycle, provides medical waste collection,
transportation and treatment services to more than 237,000
customers in the United States, Canada and Puerto Rico. Shares of
SRCL have performed well over the past three months. Last week,
the stock hit an all-time high of $47, representing an 81% gain
from its intra-day low of $26 on January 10th. SRCL is currently
consolidating in the $41.50-$46.50 range, and we believe that it
may be ready for an earnings run. We are also looking for a split
announcement with the earnings release scheduled for May 1st after
the bell. The company has enough shares for a 3:2 split with 30
million shares authorized and 15.3 million shares outstanding.
Going forward, SRCL has support at Wednesday's intra-day high of
$44.88 with additional support at $43.61, the 10-dma. Resistance
is the all-time high of $47 and then possibly $49 or $50. Consider
entry points on a bounce off of $44.88 or a breakout above $47.00
on volume of at least 125,000 shares by noon. We plan to place
stops at $41.50 to limit potential losses.
Picked on April 5th @ $46.00
Change since picked +0.00
Stop Loss @ $41.50
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