Email Version, Section 1, Wednesday 05/02/2001
The SplitTrader.com Newsletter Wednesday 05/02/2001 1 of 1
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In This Newsletter:
Market Commentary | The Quick and the Nearly Dead
Definition of the Day
Wednesday's Split Announcements | FIC, COLM
Thursday's Play-of-the-Day | WSM
The Quick and the Nearly Dead
The story of the week has been the rally in technology stocks,
particularly in the stocks of networking, semiconductors and
Internet companies. The money appears to be coming from the sale
of oil and gas issues, and, to a lesser extent, from financial
Networking stocks, as represented by the AMEX Networking Index
(NWX), bottomed on April 4th at 340.05 and have subsequently
rallied to 493.10 as of today's close after picking up another
27.70 points today. This rally represents a gain of 45% in less
than a month. Some of the key components of this index include,
Cisco Systems (NASDAQ:CSCO), which rallied $2.20 to $20.00,
Juniper Networks (NASDAQ:JNPR), which gained $1.86 to $65.11, and
Sycamore Networks (NASDAQ:SYCM), which picked up $1.14 to $12.02.
The rally among networking shares today was likely prompted by
reports (or more accurately, opinions) that Cisco has begun to
stabilize and will be able to reverse the course of rising
inventories. Although a few analysts are publicly saying they see
the light at the end of the tunnel for Cisco, most are not raising
their ratings on the company due to continued valuation concerns.
The semiconductor stocks, as represented by the PHLX Semiconductor
Index (SOX), managed a modest gain of 4.20 to 670.65 today;
however, it is up an incredible 216.80 points, or 48%, from its
April 4th low. Some of the key components of this index include
Intel (NASDAQ:INTC), which gained $0.76 to $32.15, and Texas
Instruments (NYSE:TXN), which picked up $0.38 to $39.95.
One index that tracks Internet stocks is the CBOE Internet Index
(GIN). This index rallied an impressive 7.66 points today and
closed at 154.58. This index is up 66.44 points, or 75%, from its
April 3rd low. Some of the key components of this index include
CMGI (NASDAQ:CMGI), which had a huge rally of $1.67 to $5.75,
Yahoo! (NASDAQ:YHOO), which managed a gain of $0.61 to $2.79, and
Amazon (NASDAQ:AMZN), which rallied $0.22 to $16.98.
The rally in Internet shares was prompted by a positive earnings
report from Priceline.com (NASDAQ:PCLN) after yesterday's close.
The name-your-own-price Internet company posted a narrower than
expected loss of 3 pennies when analysts were expecting a loss of
5 pennies. The company further said that it expects to show a
profit of a couple of pennies in the next quarter when analysts
had been expecting a break-even quarter. Incredibly, PCLN is up
$5.90 from its 52-week low of $1.06. As amazing as this rally has
been, it is probably of little consequence for investors who
bought PCLN near its high of $64.50.
For the record, the NASDAQ (COMPX) enjoyed a solid day by gaining
52.34 points and closing at 2,220.58. The volume of 2.6 billion
shares was very impressive. Advancers beat decliners by a 12 to 7
The biggest winner of the day on the NASDAQ was Simplex Solutions
(NASDAQ:SPLX), a software maker for the chip industry. SPLX, an
IPO that had a $12 offering price before it began trading today,
finished its first session up $9.20 to $21.20 on solid volume of
7.25 million shares. The success of this IPO is a very important
indicator that the NASDAQ has likely seen its bottom and investors
are becoming more confident about a technology recovery.
Other big winners on the NASDAQ included many former favorites
from the software, communications infrastructure and data storage
world. Brocade Communications (NASDAQ:BRCD) soared $6.98 to
$49.94, Verisign (NASDAQ:VRSN) gained $6.85 to $59.40, Veritas
Software (NASDAQ:VRTS) picked up $6.15 to $72.16 and Broadcom
(NASDAQ:BRCM) cruised $6.40 to $48.36.
The Dow Jones Industrials (INDU) took a break today after
yesterday's healthy recovery. The INDU dropped a modest 21.66
points to 10,876.68. Volume on the NYSE was decent with 1.3
billion shares traded. Advancers and decliners were pretty much
The NYSE declining stock list was dominated by oil and gas
companies. In fact, the AMEX Oil and Gas Index (XOI) dropped
23.97 to 560.16. Among the notable decliners were Smith
International (NYSE:SII), which dropped $7.06 to $74.99, and
previous Splittrader.com winner, BJ Services (NYSE:BJS), which
fell $5.69 to $75.21.
Speaking of Splittrader.com, it was another relatively slow day
for the denizens of our Current Play List. We did see gains in
Lear Seating (NYSE:LEA) of $0.52 to $36.45 and Williams-Sonoma
(NYSE:WSM) of $0.60 to $31.70.
The bond market saw some gains today. The 10-year Treasury rose
3/32 and is now yielding 5.28% while the 30-year government bond
rallied 17/32, knocking the yield down to 5.70%. Bond traders are
now preparing themselves for Friday's employment numbers which may
help to determine the Fed's next interest rate move later this
Moving on to after hours activity, which may give us some clues
about tomorrow's opening. At the time of this writing, we are
seeing neutral to slightly negative news. Macromedia
(NASDAQ:MACR), a Web design software company, missed consensus
estimates of $0.20 a share by 5 pennies after reporting its
quarterly results. MACR finished the regular trading session up
$2.88 to $26.58 but is losing all those gains and more as it
trades around $21.00 in after hours trading. Chip maker Cirrus
Login (NASDAQ:CRUS) met consensus estimates of 6 pennies a share
but offered less than an encouraging forecast for next quarter
citing inventory issues among it customers. Nevertheless, CRUS is
slightly adding to its closing price of $16.70 during after hours
trading. Also in the chip sector, Vitesse Semiconductor
(NASDAQ:VTSS) announced that it is cutting 12 percent of its
workforce and will have to take a charge against earnings in the
next quarter to pay for the move. VTSS is dropping just less than
a point to $37.00 in after hours trading.
The NASDAQ (COMPX) closed just below its intra-day high of
2232.66. Considering the strong volume that accompanied today's
rally, it would not be surprising to see the NASDAQ open strong
and test the 2250 resistance in the early going. If the NASDAQ
starts to turn negative later in the day, we may see a couple days
of a modest correction. It is important to note that the NASDAQ
is in the process of forming a base. Markets rarely jump to bull
markets from bear market in just four weeks. A pullback to 2000
may be just what the market needs to gather strength to make the
next move to 2500. Having said that, the rally could easily
continue if the NASDAQ closes above 2250 tomorrow. Otherwise,
short term traders should start thinking about locking in their
profits either through hedging or the use of stops.
The Dow Jones Industrials continues to flirt with the 11,000
resistance. This resistance will probably hold for a while
because a move above it could foretell a rally attempt to test the
all-time high of 11,518. Personally, I do not think that traders
are ready to make that kind of commitment. We are probably at
least one and maybe two quarters away from a resumption of the
bull market. Market participants probably want to see more
financial results before coming to the conclusion that the economy
is ready to resume a more robust rate of growth. Nevertheless, a
close above 11,000 would probably be a good signal to buy for a
I would like to reiterate what I said on Monday. Sector rotations
are the key to making profits in this consolidating market. If
your group starts to decline one should probably look around for a
group that is going up or vice versa if you play the short side.
Good Luck! And may all of your trades be winning ones!
Definition of the Day
Once a rally or a decline is underway, there may be a pullback, or
a retracement while investors "reposition" themselves before
continuing on with the previously established trend.
For the complete definition, please go to:
Wednesday's Split Announcements
Wednesday, May 02, 2001, After the Bell
Columbia shareholders sport a 3-for-2 stock split
After the closing bell, Columbia Sportswear Company (Nasdaq:COLM)
announced the Board of Directors' approval of a 3-for-2 stock
split on the Company's common shares. The payable date is slated
for June 4 for shareholders of record as of May 17, at which time
one additional common share will be issued for every two shares
For the complete announcement, please go to:
Wednesday, May 2, 2001, After the Bell
Fair, Isaac rewards shareholders with a 3-for-2 stock split
After the bell, Fair, Isaac, and Company (NYSE:FIC) announced a
three-for-two stock split on its outstanding shares of common
stock, payable on June 4, 2001 to all shareholders on record as of
May 14, 2001.
For the complete announcement, please go to:
Thursday's Expirations by Payable Date
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.
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 SplitTrader.com 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.
Wednesday, May 2, 2001
WSM - Williams Sonoma, Inc. $31.70 +0.60 (+2.40)
Specialty home retailer Williams Sonoma continued to build on
yesterday's breakaway gap from $29.00. What's more, todays move
comes on volume nearly double the three-month average daily
volume of 551,000. WSM has been the beneficiary of a resurging
retail sector. Over the past week, the S&P Retail Index (RLX) has
surged ahead 7.2 percent. At this point, WSM has made room to run
higher. The stock has taken out resistance at $30 along with its
upper Bollinger band at $30.56. With these resistance levels out
of the way, it appears to be smooth sailing until $40. As for
support, traders can look for $30 to provide the first level,
followed by the 10-dma at $28.08. Traders considering a position
in WSM should look for strong volume, 250,000 shares or more
traded by noon EDT, on a move through today's intra-day high of
$31.40 or a bounce off support at $30.00 before placing their
trades. We are placing our stop-loss at $27.75, which is
just below the 200-dma.
WSM continues to distance itself from its recent base formation.
This is a great sign for the longs, since it goes to show that
those who bought within the base are now letting their gains ride
instead of selling for a profit. This keeps the supply of stock
available for sale at a minimum and makes for nice upside moves
when buyers show up (as they have over the past three days).
Looking at the chart, we notice that WSM is now 5.6% above $30
(the top of its base). We generally don't want to chase a stock
much more than 8% above its base formation on a breakout move.
Given WSM's current price level, there still may be wiggle room
if you are considering entering a new position in the stock. You
don't want to chase it beyond $32.40, but any entry up to this
point may prove to be a low risk buy-point since we still have
the base below as a safety net should WSM reverse course. In
addition, use strength in the S&P Retial Index (RLX.X) to confirm
your entry. That being said; be prepared for WSM to cough up a
portion of its recent gains due to the fact that the stock is
starting to get overbought. Should this happen, watch for volume
to come in low, as this will be your sign that the selling
pressure is nothing more than a little profit taking, rather than
a change in momentum.
Picked on May 1st @ $31.10
Change since picked +0.60
Stop Loss @ $27.75
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