Email Version, Section 1, Wednesday 05/23/2001
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In This Newsletter:
Market Commentary - The Winning Streak Comes To An End
Definition of the Day
Wednesday's Split Announcements - LNCR, RAVN, USPH, ESRX
Thursday's Play-of-the-Day - ASD
The Winning Streak Comes To An End
After six consecutive positive days, the NASDAQ took a break from
its impressive rally. Profit takers have been itching for an
excuse to take a little cash off the table and they got what they
were looking for today from the political arena.
Republican Senator James Jeffords from Vermont announced that he
intends to abandon his current party and become an independent.
His move will change the very tenuous balance of power in the
Senate. The Democrats will gain a 50-49 advantage in the Senate
and will therefore take over committee chairmanships and will
control which bills come through committees to the floor of the
Senate. The narrow advantage combined with a Republican majority
in the house will necessitate continued bipartisan cooperation to
pass any significant legislation.
The markets may be a little concerned about the affects these
changes may have on Bush's economic policy. For now, the tax cut
appears to be safe. However, a second and more widespread tax cut
is probably unlikely. Legislation that would be beneficial for
the defense, energy and drug sectors would also become less
Technology stocks and semiconductor stocks in particular were hit
with some solid profit taking following a report that the April
book-to-bill ratio for North American based manufacturers of
semiconductor equipment was at 0.42, the lowest level in a decade.
The PHLX Semiconductor Index (SOX.X) dropped 34.70 to 660.05.
The selling was also strong within the Dow Jones Industrial
Average (INDU), which fell 151.73 points and finished at 11105.51.
The final print was very close to the lowest level for the day.
Volume came in at 1.13 billion on the NYSE and decliners trounced
gainers by a 2 to 1 ratio.
Several DJIA stocks finished down sharply. American Express
(NASDAQ:AXP) fell $1.35 to $44.70. Boeing (NYSE:BA) dropped $2.00
to $66.00. DuPont (NYSE:DD) lost $1.92 to $47.39 after expressing
a less than rosy forecast for the second quarter. Hewlett-Packard
(NYSE:HWP) slipped $1.22 to $29.58 and General Motors (NYSE:GM)
tanked $1.71 to $55.18.
There were four stocks on the DJIA that managed to close in the
plus column. Philip Morris (NYSE:MO) picked up $0.41 to $49.80.
International Paper (NYSE:IP) gained $0.09 to $39.30. Coca-Cola
(NYSE:KO) bubbled up $0.90 to $48.70 and Proctor & Gamble
(NYSE:PG) recovered $0.19 to $64.19.
The NASDAQ Composite Index (COMPX) was hit for a 70.35 loss and
closed at 2243.50, which was just slightly above the low print for
the day. Volume came in at 1.83 billion and decliners outpaced
advancers by a ratio of 25 to 15.
The most active list saw many technology leaders lose ground.
Cisco Systems (NASDAQ:CSCO) fell $1.12 to $22.36. Intel
(NASDAQ:INTC) slipped $0.73 to $28.80. Sun Microsystems
(NASDAQ:SUNW) dropped $1.27 to $21.49. Applied Materials
(NASDAQ:AMAT) was hit for a $3.65 loss to $52.94 and Juniper
Networks (NASDAQ:JNPR) lost $3.63 to $53.31.
One noticeable winner on the most active list was Dell Computer
(NASDAQ:DELL), which picked up $0.87 to $36.81 after company
President James Vanderslice declared a full-scale price war in a
bid to increase market share. Additionally, Mr. Vanderslice said
that Dell might even make an acquisition with its huge cash
Some of the largest declines among individual stocks was seen
among the biotechs. Protein Design Labs (NASDAQ:PDLI) was
squished by $6.77 to $72.08. Human Genome Sciences (NASDAQ:HGSI)
fell $6.05 to $67.00 and Abgenix (NASDAQ:ABGX) dropped $5.72 to
$39.84. The Biotechnology Index (BTK) was pounded 39.21 points to
600.36. Genome Therapeutics (NASDAQ:GENE) was able to soar in the
face of heavy biotech selling. GENE gained after Ladenburg
Thalman raised its rating to "strong buy" and set a 12-month price
target of $84.00. GENE was up $4.00 to $13.50 on huge volume of
11.23 million shares.
Profit taking on the NYSE extended to the recently strong
brokerage stocks. Goldman Sachs (NYSE:GS) fell $3.99 to $99.30.
Lehman Brothers (NYSE:LEH) lost $3.10 to $79.15. The AMEX
Securities Broker/Dealer Index (XBD) dropped 16.60 to 546.29.
There were some other notable stocks on the NYSE's biggest losers
list. Celestica (NYSE:CLS) lost $4.71 to $56.50 following a
downgrade from Morgan Stanley. The research firm changed its
rating on this major electronic component manufacturer to
"outperform" from "strong buy". Universal Health Services
(NYSE:UHS) dropped $3.77 to $75.63. International Rectifier
(NYSE:IRF) fell $4.03 to $63.07 and BJ Services (NYSE:BJS) slipped
$2.89 to $76.35.
The Splittrader.com Play List was not immune from the market's
slump. Appleby's (NASDAQ:APPB) fell $2.30 to $42.75. PerkinElmer
(NYSE:PKI) sank $3.24 to $71.87 and Investment Tech (NYSE:ITG)
lost $1.99 to $52.51. There were a couple of winners on the list.
American Standard (NYSE:ASD) picked up $0.25 to $65.40 and
Allegheny Energy (NYSE:AYE) extended its gains with a rally of
$0.39 to $54.79.
The broad market indices reflected the negative tone for the day.
The S&P 500 (SPX) was hit for a loss of 20.35 to 1289.05. The S&P
100 (OEX) fell 10.86 to 665.20. The Russell 2000 (RUT) was
pounded 9.87 points to 507.36.
Most of the widely watched sector indices also declined. The
Pharmaceutical Index (DRG) dropped 4.78 to 401.78. The Bank Index
(BKX) slipped 4.94 to 921.62. The AMEX Oil Index (XOI) was tagged
8.65 to 586.93 and the AMEX Networking Index (NWX) dropped 20.91
to 475.61. The Dow Jones Utilities Index (UTIL) actually climbed
3.64 and closed at 398.31.
Bonds were unable to stage a major rally even though stocks were
dropping. The 10-year Treasury note was up 1/16 to a yield of
5.395% and the 30-year government bond fell 1/8 to a yield of
5.79%. Bond trading may pick up tomorrow following the release of
the weekly initial claims and the April new home sales numbers.
Also, Greenspan will be speaking in New York late Thursday and may
make comments that affect the markets.
We have seen some negative developments after the close that could
encourage more selling in the early going tomorrow. TriQuint
Semiconductor (NASDAQ:TQNT) guided analysts lower for the
remaining three quarters of its fiscal year. TQNT said it expects
to post profits this quarter of only three cents. Analysts had
previously expected profits of 11 cents. The company blamed
weakness in bookings and customer order delays for the shortfall.
TQNT dropped $3.13 to $24.81 during the regular session. It is
trading at $22.71 in the after hours session.
TQNT's merger partner, Sawtek (NASDAQ:SAWS), also guided analysts
lower. The company cited the continued slowdown in the wireless
communications sector for the disappointing results. Analysts
previously expected SAWS to post third quarter profits of $0.18
but the company believes that a range of six to eight cents is
more realistic. SAWS finished the regular trading session down
$3.46 to $28.25. SAWS is trading at $25.55 in the after hours
The news was not all bad after the close, however. Enterprise
software solutions giant, J.D. Edwards & Company (NASDAQ:JDEC),
reported a profit of three cents a share. Analysts had actually
expected the company to post a loss of four cents a share. JDEC
dropped $0.70 to $11.93 during the day but has bounced back to
$12.70 in after hours trading.
Synopsys (NASDAQ:SNPS), an electronic design automation tools
company, beat analysts earnings estimates after today's close.
SNPS posted profits of $0.24, a full four pennies above the
consensus estimates, according to First Call. SNPS dropped $2.07
to $60.00 during the day and is currently inactive during the
after hours session.
The NASDAQ could easily slip some more tomorrow. Short-term
momentum now looks to be negative. This is evident in the way
that the NASDAQ sold off right into the close and finished the day
just slightly above the low print of the day. The NASDAQ may be
under pressure from weakness in the semiconductors following the
negative news from SAWS and TQNT. Some of that weakness may be
buoyed by strength among smaller software firms following the SDRC
The NASDAQ is no longer severely overbought according to the RSI.
The extent of this pullback may be dependent on what happens to
the MACD tomorrow. If this indicator crosses over and issues a
sell signal, this correction could easily drop the index to the
2000 support. Traders will also be closely watching the initial
support of 2200. A bounce off this support would be an
encouraging sign that the NASDAQ is getting stronger and might be
able to extend its recovery and take out the 2328 resistance.
The Dow Jones Industrials (INDU) slipped below the minor uptrend
line support of 11,160 today. The much needed breather may take
the INDU down to a test of the 10,750 support. The RSI had been
indicating a very overbought condition so it is not surprising
that the INDU is pulling back. There is some concern that the
selling could continue for the next few days because the MACD is
getting ready to issue a sell signal. Traders will be looking for
the INDU to hold support at 11,000. A close below this support
would probably result in the test of the major support of 10,750,
perhaps by the end of next week.
Those of you who were using trailing stops probably got out of a
few of your stocks with some nice profits today. Cash is king,
and now that the market appears ready to correct its recent
advance, many of you will have the ability to pick up stocks at
support in anticipation of the next advance.
Good Luck! And may all of your trades be winning ones!
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Definition of the Day
A gap may be best defined as a release of pent up buying or
selling pressure. A gap results when there is a significant price
movement between two sessions.
For the complete definition, please go to:
Wednesday's Split Announcements
Wednesday, May 23, 2001, Before the Bell
Oxygen provider declares 2-for-1 stock split
The Board of Directors of Lincare Holdings Inc. (Nasdaq:LNCR)
announced before the opening bell that the company will split its
common shares on a 2-for-1 basis for qualifying shareholders. The
payable date is June 22 and the stock is expected to trade split-
adjusted on June 25.
For the complete announcement, please go to:
Tuesday, May 23, 2001 During the Market
After announcing a 3-for-2 split Raven is flying high
During regular trading today, Raven Industries (Nasdaq: RAVN)
Board of Directors gave the go ahead for a 3-for-2 stock split;
the dividend will be payable on July 13, 2001. Raven's BoD also
announced an increase from 0.12 to 0.13 in the company's quarterly
cash dividend which will also be paid July 13 to shareholders of
record June 25.
For the complete announcement, please go to:
Wednesday, May 23, 2001, During the Market
U.S. Physical Therapy doctors up its stock with a 3-for-2 split
During regular trading today, U.S. Physical Therapy, Inc.(Nasdaq:
USPH) announced a 3-for-2 stock split that will be distributed on
June 28, 2001, to all shareholders on record as of June 7, 2001.
For the complete announcement, please go to:
Wednesday, May 23, 2001, After the Market
Express Scripts to split stock; boosts earnings outlook
Following the closing bell, SplitTrader candidate, Express
Scripts, Inc. (Nasdaq:ESRX) announced the board of directors'
approval of a 2-for-1 stock split on its common shares, payable on
or about June 22, 2001. Currently there are 39 million shares
outstanding, 25.4 million in the float, and 150 million shares
authorized. The last split executed by the company was a 2-for-1
in November 1998.
For the complete announcement, please go to:
Thursday's Expirations by Payable Date
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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.
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 23, 2001
ASD - American Standard $65.40 +0.25 (-0.05)
American Standard Companies, Inc. has been consolidating after
hitting an all-time high of $66.50 last week. On Tuesday, shares
of ASD fell to an intra-day low of $64.80 before bouncing back to
a close of $65.15 on volume of 468,000 shares. Despite the recent
weakness, ASD was able to close above its 5-dma, keeping the
long-term upward trend alive. Daily volume is picking up so ASD
could be able to challenge its all-time high on a positive volume
surge. In the meantime, support is the 5-dma at $64.92 with
additional support at $63.84, the 10-dma. Resistance has fallen
to Monday's intra-day high of $65.45 and then Friday's intra-day
high of $66.50. A bounce off of $64.92 or a move above $64.92 on
midday volume greater than 250,000 shares may be possible entry
points. Our stops are holding steady at $63.50.
On Wednesday, ASD's CEO, Fred Poses, was a featured speaker at
the Merrill Lynch Global Industries Conference in London. He was
due to report on the importance of European markets on ASD's
global strategies for its air conditioning and plumbing systems.
Investors were obviously encouraged by ASD's goals to expand into
Eastern Europe and to leverage their existing operations in
Europe to strengthen their current position as market leaders.
This was because on a decidedly down day in the broader market,
ASD managed to eke out a small gain of $0.25. This advance came
on volume of 480,000 shares, just over the three-month average of
400,000 shares. Turning to the chart, we see that ASD has been
trading within a tight range between $64.50 and $65.50. This may
indicate that ASD may be ready to break to the upside. However,
traders are advised to wait until ASD clears near term resistance
at $65.50 before initiating a position. This move above
resistance should ideally come on daily volume of at least
450,000 shares. Since there is also overhead resistance at
$66.50, traders may want to go in with half a position just above
$65.50, then commit to the other half if ASD can later breach
$66.50 on similar volume. Our stops remain at $63.50 to limit
Picked on May 6th @ $62.50
Change since picked +2.90
Stop Loss @ $63.50
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