Email Version, Section 1, Tuesday 04/10/2001
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In This Newsletter:
Market Commentary - Dow 10,000 In Rearview Mirror
Definition of the Day
Tuesday's Split Announcements - None
Plays - New - Updates - Drops
Wednesday's Play-of-the-Day - SLXP
Dow 10,000 In Rearview Mirror
March 15th was the last trading day that we closed above the
psychologically important 10,000 mark. With today's frisky
advance through this benchmark, the question remains whether we
can leave 10,000 in the rearview mirror for a while, or whether
upcoming headline earnings will transform the 10,000 level back
into the proverbial carrot for investors.
The NASDAQ also managed to add to yesterday's gains, with many of
the indices' most humbled issues puffing their respective chests
and doing their best impression of their former 1999-2000 selves.
In fact, the best performing sectors on the day hold the
unfortunate title of the worst performers for the past year.
These sectors include the internet, fiber optic, networking and
With the market now expecting horrible earnings for this quarter
and with negative pre-announcements at their highest levels since
1998, it will be interesting to see what the market will do in
response to the parade of earnings that kicks off this week. Has
the market been prepped enough to stomach the bad news and has
the bad news already been priced into most issues?
If the bad news is baked in, we may see at least some stability
come into the market, which would be welcomed indeed. In
addition, stability would help most stocks build much-needed
bases from which they can start the long trek higher through
overhead resistance that has been building since last year in
Speaking of bad earnings news, Motorola (NYSE:MOT) reported a
loss of $0.09/share for its first-quarter this evening, missing
already downwardly revised estimates of negative $0.07/share.
Many analysts were disappointed in the larger than expected loss
because of the fact that Motorola had guided lower twice before
the release. In addition, Motorola's key products of wireless
handsets and chips saw decreasing order growth and accelerating
negative operating margins. The stock was off about $1.00 in
after hours trading after closing higher by $1.50 to $13.00 on
the regular session.
We shall get a better read on the overall economy when General
Electric (NYSE:GE) reports earnings on Thursday. Since GE is a
very diversified company, any shortfall or conversely any
windfall by GE will be a fairly good gauge as where we stand in
regard to economic health. GE is widely expected to report
earnings of $0.30/share before the bell.
In what can be attributed to more short covering, rotation out of
bonds and probably some bargain hunting, the NASDAQ and DOW both
powered higher. In addition, investors were soothed by news that
the state of California would purchase the power lines of Edison
International (NYSE:EIX) for $2.76 billion in order to keep the
power concern out of bankruptcy. Although the deal is far from
receiving clearance, it served to put a floor under energy
stocks. EIX rallied $2.46, or 27.58%, to $11.38.
In an impressive move, the NASDAQ (COMPX) added 106.29, or 6.09%,
to 1852.00. Volume was healthy, with 2.2 billion shares changing
hands. Advancers beat decliners 2737 to 1161. Gains were
widespread, however the tech big caps (or what used to be big
caps) saw most of the buying interest.
And as mentioned, the DOW (INDU) shot past the 10,000 barrier in
a bullish move that landed the average above its double bottom
pivot point at 9992.50. More specifically, the DOW moved higher
by 257.59, or 2.62%, to 10102.74. Helping to confirm the move
higher was increased volume on the NYSE. A total of 1.3 billion
shares were exchanged today, as opposed to only 987 million
shares on Monday.
Chart of the Dow Jones Industrial Average:
With investors again nibbling on stocks and with the lack of
economic news to drive government debt prices, bonds retreated.
The benchmark 10-year bond lost 1 4/32 to yield 5.08% and the 5-
year note was down 17/32 to yield 4.64%.
Stocks and Sectors on the Move
Most all tech sectors were higher today but buying was most
prevalent within the semiconductors, storage stocks and internet
issues. Looking at a cross section of 5-minute charts within
these sectors, it was easy to see that buying was fairly steady
throughout the session. This may indicate that real buyers are
coming into the market, as short covering is often punctuated by
quick, violent moves higher.
Some movers on the day include EMC Corp. (NYSE:EMC) up $3.61 to
$34.40, Texas Instruments (NYSE:TXN) up $2.09 to $29.60, Amazon
(NASDAQ:AMZN) up $0.83 to $12.01, Network Appliance (NASDAQ:NTAP)
up $2.33 to $15.68, Advanced Micro Devices (NYSE:AMD) up $1.62 to
$21.32 and Purchase Pro (NASDAQ:PPRO) up $0.99 to $3.68.
Taking a backseat to the tremendous moves in the tech stocks
lately have been some encouraging and not so encouraging moves in
the cyclical stocks and the energy stocks respectively. The
moves higher in cyclical stocks are essentially a vote by the
market against a prolonged downturn since the success of these
types of companies is directly correlated to upturns in the
business cycle, even more so than other consumer driven
Some winners in the cyclical group (CYC.X) include Alcoa
(NYSE:AA) up $1.75 to a new 52-week high of $39.25, Minnesota
Mining (NYSE:MMM) up $3.99 to $108.57, Ingersoll Rand (NYSE:IR)
up $1.10 to $43.18 and Weyerhaeuser (NYSE:WY) up $3.03 to $52.46.
Conversely, the moves higher in oil and gas prices are serving to
lift the already strong energy group, but more importantly are
threatening to quell an already vulnerable consumer. Gas prices
at the pumps are skyrocketing across the country. This is in
anticipation of increased demand from the summer driving season
in addition to worries over lower supply.
Higher energy prices infuse inflationary pressures on the
consumer since most of these costs are unavoidable. Why does
this matter? It matters because consistently higher energy
prices may hinder the Fed from going "all the way" with a 50-
basis point rate cut. As energy prices rise, manufacturers get
to a point where they have to pass the added expense on to the
consumer in the form of higher prices. This also commonly occurs
in the airline business.
Higher prices and rate cuts are the witch's brew for inflation.
Although economists have said that we have moved away from an
inflationary environment for good, this is not a hypothesis that
Greenspan wants to test.
Looking Forward, Always Forward
We spin the tech earnings wheel again tomorrow after the bell
when Yahoo (NASDAQ:YHOO) releases its first-quarter results. The
Street is expecting zero earnings out of the internet giant, or
earnings of $0.00/share. After the Motorola report, we may need
to buy a vowel, depending upon how the market reacts to MOT's
report during tomorrow's session.
With the lack of economic news until Thursday's PPI and retail
sales number, investors don't have a choice but to stew on the
weak performances out of tech companies. Also, given the fact
that we are going into a long weekend, traders may be hesitant to
hold long positions through to Monday. Given these factors, I
believe that the rest of this week will be biased to the
downside, so plan your entries appropriately. In other words be
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Definition of the Day
New York Stock Exchange (NYSE)
The New York Stock Exchange is the oldest and largest stock
exchange in the United States and was founded in 1792.
For the complete definition, please go to:
Tuesday's Split Announcements
Wednesday's Expirations by Payable Date
What will your strategy be for 2001?
The VRTrader.com Annual Forecast Model
Your road map to the 2001 market!
Forecast is prepared by Mark Leibovit, the #1 market timer in
the nation. Mark is Chief Market Strategist for VRTrader.com,
a Premier Investor Network website, a technical consultant
and former 'Elf' on Louis Rukeyser's Wall Street Week for 7
His Annual Forecast Model has been subscribed to by Wall
Street's most elite. Mark is presently ranked #1 timer in
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The PLAY LEGEND:
SplitTrader.com Play Recommendations.
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
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 04/10/01
NEW SPLIT CANDIDATE PLAYS 04/10/01
TARO - Taro Pharmaceutical Industries $49.45 +2.00 (+2.70)
Taro Pharmaceutical markets and distributes prescription and OTC
pharmaceutical products. The company's main focus has been the
off-patent dermatological market, but recent FDA approval on its
generic drug for cardiac arrhythmias has got investors on a buying
spree. Also adding interest to the rally has been the potential
for the company to split its stock. Currently, TARO has
10.71 million shares outstanding and 50 million authorized, well
enough for a 2:1 stock split. Although the company has never split
its stock before, the recent run to all time highs looks
promising. Moving to the chart, the stock is clearly on a breakout
now that higher levels are being confirmed by an expansion in
volume. On Tuesday, TARO soared to a new 52-week high of $50.50 on
good volume of 203,400 shares traded. A move above this level in
the upcoming week could be a good signal for traders to place
their orders. Support will likely reside at the 5-dma of 47.64.
TARO's strong uptrend is bolstered by good technical readings in
the MACD and OBV indicators, which suggests that a sustainable
move is possible. We'll look for potential entry points to arise
when TARO pushes though $50.50 on daily volume above the three-
month average of 144,400 shares. We'll set our stops at $44 for
Picked on April 10th@ $49.45
Change since picked 0.00
Stop Loss @ $44.00
NEW MOMENTUM PLAYS 04/10/01
SPLIT RUN PLAY UPDATES 04/10/01
BJS - BJ Services Company $74.00 +1.45 (+2.25)
Higher prices for oil and natural gas are generating strong demand
for BJS's drilling services, which should help the company to
generate an increase in annual earnings of 79%. Turning to the
chart, BJS shares delivered another nice rally on Tuesday,
recovering 2% to close at $74.00. The advance came on good volume
of 1,755,600 shares, which topped the three-month average. This is
further indication that the stock is attracting more investors
with each leg higher. What's more, the stock was able to gap above
Monday's resistance at the previous high of $73.95 and hold ground
above the 20-dma of $72.54. The short-term technical picture also
looks encouraging, with bullish crossovers in the MACD and
stochastic pointing to more upside strength. With all these
indications, a near-term rally to $75 or $80 can be expected. For
entry points, we'll now look for an upside move to encounter
resistance at $75 and then at the 50-dma of $76.98. Support will
come in at the 20-dma. Traders can consider entries when the stock
breaks through resistance or bounces from support on good volume
of 750,000 shares traded by midday. We suggest moving stops to $70
to help limit downside risk and lock in gains.
Picked on April 8th@ $71.75
Change since picked +2.25
Stop Loss @ $70.00
SPLIT CANDIDATE PLAY UPDATES 04/10/01
EQT - Equitable Resources, Inc. $75.63 2.53 (+3.18)
Equitable Resources has been on fire over the past two weeks,
posting gains in eight of the last 10 sessions. On Tuesday, shares
of EQT traded in positive territory for the entire session. The
stock closed at an all-time high of $75.63 on volume of 170,000
shares. EQT continues to move higher on rising crude oil prices
and strong momentum in the energy sector. The stock could hold its
upward trend as we move closer to the earnings release on April
20th before the bell. Until then, support is the April 5th intra-
day high of $74.00 with stronger support at $73.30, the 5-dma.
Resistance was taken out on Tuesday so new resistance may show up
at $77.50 or $90. Look for a bounce off of $74.00 or a breakout
above $77.50 on midday volume greater than 150,000 shares before
starting new plays. We have moved our stops up to $72.45 to lock
Picked on March 27th @ $67.20
Change since picked +8.43
Stop Loss @ $72.25
MKC - McCormick & Company $42.40 +0.39 (+0.25)
McCormick & Company is trending higher at a slow and steady pace.
On Monday, the stock hit an all-time high of $42.94 before pulling
back to close at $42.01 on volume of 195,000 shares. Daily volume
has been cooling down over the past week and MKC appears to be
falling back on its long-term upward trend which is much more
sustainable. From a technical standpoint, the stock has support at
the 5-dma, currently at $42.23, with additional support at
Tuesday's intra-day low of $42. Resistance remains at Friday's
intra-day high of $42.60 and then the all-time high of $42.94.
Traders may consider entry points on a bounce off of $42.23 or a
move above $42.60 on volume of at least 75,000 shares by noon. We
are keeping our stops at $38.75 to limit potential losses.
Picked on March 29th @ $41.43
Change since picked +0.97
Stop Loss @ $38.75
PFGC - Performance Food Group $54.30 +1.12 (+0.80)
PFGC managed to maintain investor interest so far this week
despite a decided focus on buying battered technology stocks.
PFGC, which is a huge supplier of thousands of food products,
continues to attract investment because of its stable earnings and
a reasonable P/E of 29.84. Still, the stock is finding the $54.50
resistance level tough to surpass. During the past week, the 5-DMA
has provided excellent support and today it closed at $53.41.
Please note that we have raised our suggested stop to $52.50. The
very strong MACD and OBV are encouraging signs that PFGC may be
able to continue its advance. The RSI is confirming the
possibility for more gains because this indicator is telling us
that PFGC has some upside room before becoming overbought. That
said, a move above this resistance accompanied by first hour
trading volume approaching 50,000 shares could prove to be an
excellent trading opportunity. Should that happened, momentum may
enable the stock to establish a new 52-week high above $56.75.
Picked on March 25th @ $49.50
Change since picked +4.80
Stop Loss @ $52.50
SRCL - Stericycle, Inc. $47.45 +0.20 (+2.45)
Stericycle closed above resistance on Monday following eight
sessions of sideways trading. Shares of SRCL traded to an intra-
day high of $47.40 just before the closing bell. On Tuesday, the
stock hit an all-time high of $49.10 before pulling back to close
at $47.45 on volume of 329,000 shares. SRCL has regained some of
its momentum, but the volume is still relatively light compared to
the volume at the end of March. The company is expected to
announce earnings on May 1st after the bell, so the volume may
pick up very soon. In the meantime, SRCL has light support at
Tuesday's intra-day low of $47.10 with stronger support at $45.94,
the 5-dma. Resistance is now at Tuesday's intra-day high of $49.10
and then the $50 mark. Consider opening new positions on a bounce
off of $47.10 or a breakout above $49.10 on volume greater than
100,000 shares by noon. We are bumping our stops up to $44.70 to
protect additional capital.
Picked on April 5th @ $46.00
Change since picked +1.45
Stop Loss @ $44.70
UHS - Universal Health Services $92.30 +0.40 (+1.78)
Shares of this major hospital owner and operator are creeping ever
closer to the psychologically important $100.00 level. Although
the focus of today's market rally was concentrated upon the
technology stocks, UHS has nevertheless been able to keep its
momentum going. UHS is scheduled to release its earnings late
during the trading day of April 17th. A split announcement, in
conjunction with the earnings release, is becoming increasingly
likely due to the share price advance. UHS appears poised to test
the resistance of $96.03. Although we will be exiting this
position before the earnings release, some aggressive traders may
want to add to positions if UHS can hold the support offered by
the 5-DMA of $91.19. Momentum traders may enjoy a nice quick
profit if UHS can move above today's high of $93.00, accompanied
by first hour trading volume of over 100,000 shares. The MACD is
trending nicely higher and the RSI is indicating that there is
plenty of room before the stock would be considered overbought.
Both of these indicators point towards continued gains.
Picked on March 15th @ $83.50
Change since picked +8.80
Stop Loss @ $89.00
MOMENTUM PLAY UPDATES 04/10/01
ACI - Arch Coal Incorporated $32.91 +1.19 (+2.55)
Although the price of coal has risen sharply over the past couple
of months, the cost of producing electricity from coal is still
less expensive than natural gas. This additional demand should
continue to bring plenty more buyers to the coal industry. On the
day, a broad market recovery helped fuel the coal sector higher,
as ACI gained 3.75%. With this rally, the stock was able to punch
through its previous top and set an all-time new high of $33.47.
Volume came in 24% above the three-month ADV with 715,000 shares
traded. This gives us additional confidence that today's advance
will be followed by more short-term strength on the upside. We do
need to point out, however, that the stochastic is a bit rich, but
could be offset by a positive MACD and a strong uptrend in the
OBV. So, should an extended rally unfold, we'll anticipate initial
resistance to emerge at today's intra-day high of $33.47. Support
looks good at the 5-dma of $31.27, and just lower at the 10-dma of
$30.30. Look for entries if midday volume can reach 280,000
shares, as ACI bounces off support or breaks above resistance at
$33.47. Our stop is now just under the 10-dma at $30.00.
Picked on April 5th@ $31.50
Change since picked +1.41
Stop Loss @ $30.00
KMB - Kimberly-Clark $66.40 -1.08 (-0.10)
KMB has been able to outperform the market for more than a year
now. It is not surprising then that the stock has taken a back
seat as sideline cash piles into technology stocks, which are
perceived to be a bargain. We have seen rotations out of cyclical
value stocks like KMB into the technology sector before. The ebb
and flow has a habit of reversing course. We fully expect KMB to
renew its rally once the technology rally subsides. KMB's down
days continue to be accompanied by relatively light volume. This
fact is an indication that there are plenty of long-term investors
in KMB, which helps the stock to maintain its value. The MACD is
right on the verge of issuing a buy signal and probably will offer
this signal with any decent KMB price advance of a point or more
tomorrow. KMB may offer a good buying opportunity if it can climb
above its 50-DMA of $68.28, especially if it accomplishes this
move with midday volume exceeding 1.1 million shares.
Picked on April 1st @ $67.83
Change since picked -1.43
Stop Loss $62.50
SLXP - Salix Pharmaceuticals, Ltd. $16.01 +0.27 (+0.95)
Salix has been moving higher over the past five sessions in
anticipation of its presentation at the Robinson-Humphrey
Institutional Conference. The company appeared at 1:30 p.m. EDT on
Tuesday and the stock responded positively shortly afterwards.
Shares of SLXP traded to an intra-day high of $16.10 (3:00 p.m.)
before settling at $16.01 on heavy volume of 193,000 shares. The
volume was particularly impressive due to the increased frequency
of 10,000+ share trades over the past two days. Going forward,
support is Tuesday's intra-day low of $15.42 with additional
support at $15.09, the 5-dma. Resistance is the all-time high of
$16.31 and then possibly $17 or $17.50. Traders should be looking
for entry points on a bounce off of $15.42 or a breakout above
$16.31 on midday volume greater than 70,000 shares. We have moved
our stops up to $14.75 to limit potential losses.
Picked on April 8th @ $15.06
Change since picked +0.95
Stop Loss @ $14.75
UNP - Union Pacific Corporation $57.00 +1.99 (+1.05)
Union Pacific rallied on Tuesday after its Chairman and CEO, Dick
Davidson, said that he is comfortable with analysts' expectations
due to a 12% volume increase in its coal business during the first
quarter. Shares of UNP traded to an intra-day of $57.37 before
pulling back to close at $57.00 on volume of 2.63 million shares.
UNP broke a four-day losing streak on heavy volume, so the stock
may challenge its recent highs as we approach the earnings
announcement scheduled for April 20th. For now, UNP has support at
the April 5th intra-day high of $56.50 with additional support at
$56.14, the 5-dma. Resistance is the April 3rd intra-day high of
$57.40 and then possibly $58 or $60. A bounce off of $56.50 or a
move above $57.40 on midday volume of at least 600,000 shares may
be possible entry points. Our stops remain at $54.50 as downside
Picked on April 3rd @ $57.35
Change since picked -0.35
Stop Loss @ $54.50
SPLIT RUN PLAY DROPS 04/10/01
SPLIT CANDIDATE PLAY DROPS 04/10/01
MOMENTUM PLAY DROPS 04/10/01
Tuesday, April 10, 2001
SLXP - Salix Pharmaceuticals Ltd. $16.01 +0.27 (+0.95)
Salix has been moving higher over the past five sessions in
anticipation of its investor presentation at the prestigious
Robinson-Humphrey Institutional Conference held today. Investors
must have liked what they heard because SLXP's shares moved
higher, trading to an intra-day high of $16.10 (3:00 p.m.) before
settling at $16.01 on heavy volume of 193,000 shares. The volume
was particularly impressive due to the increased frequency of
10,000+ share trades over the past two days. We believe that
there could be more gains to come because SLXP's stock recently
moved from the Nasdaq SmallCap Market to the Nasdaq National
Market. This should give SLXP much more institutional exposure.
As for the SLXP's technicals, support is Tuesday's intra-day low
of $15.42 with additional support at $15.09, the 5-dma. Resistance
is the all-time high of $16.31 and then possibly $17 after that.
Traders should be looking for entry points on a bounce off of
$15.42 or a breakout above $16.31 on midday volume greater than
70,000 shares. We have moved our stops up to $14.75 to limit
Picked on April 8th @ $15.06
Change since picked +0.95
Stop Loss @ $14.75
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