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Email Version, Section 1, Monday 06/11/01
The SplitTrader.com Newsletter           Monday 06/11/01   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 -

Posted online for members at: http://www.SplitTrader.com

To view this email newsletter in HTML format with imbedded
charts and graphs, click here:

http://www.splittrader.com/htmlemail/3740_1.asp
===============================================================

In This Newsletter:
===================

Market Commentary - Where Did The Buyers Go?
Definition of the Day
Monday's Split Announcements - None
Tuesday's Expirations
Tuesday's Play-of-the-Day - BEBE

================================================================

Market Commentary
=================

Where Did The Buyers Go?

Or the sellers for that matter.  Volume remained subdued, as we
barely squeaked over 800,000 shares on the big board today.  Of
course, here in Denver, folks were too busy celebrating the
victory of the Avalanche over the Devils in the Stanley Cup
finals to worry about placing a stock order.  Even if you aren't
a sports fan, the Ray Bourque story is one that everyone can
appreciate.  There wasn't a dry eye anywhere on Saturday night,
as Bourque finally lifted Lord Stanley's Cup over his head after
22 years of trying to win the coveted chalice.

In a world where the terms perseverance and dedication have come
to mean something akin to going coffee less for a WHOLE week
before breaking down and hitting Starbucks for a morning fix, Ray
Bourque should be a lesson to us all.  Here is a guy that spent
his whole life striving towards one goal and didn't let up for an
instant along the way.  He also did it with a sense of class and
respect for others that is largely absent from sports (and
society) these days.

Why do I bring this up and what does it have to do with the
market?  The answers to these questions are: "I don't know" and
"nothing" respectively.  Maybe it's because I have found that
life's little lessons can and do apply themselves to whatever we
wish, even trading.  That being said I think we all need to
approach the market as Bourque approached hockey for all those 22
years: with respect and discipline.  This won't win any of us a
shiny 35-pound trophy, but it will keep us out of trouble and may
even make us a few bucks along the way.

So hockey and sportsmanship aside, today was indeed Monday and
stocks did indeed trade.  Since volume was light, stocks were
easily swayed to the downside by a few high profile earnings
warnings.

Dupont Photomasks (NASDAQ:DPMI), a company that makes equipment
for the production of semiconductor chips, had the honor of being
the company to warn of the biggest earnings shortfall.  DPMI was
expecting earnings of $0.52 per share for its fourth quarter and
now anticipates earnings will come in between $0.00-$0.19 per
share.  The company also said it will be trimming 6% of its
workforce to keep expenses down.  Needless to say, the stock
headed south on Monday.  More specifically, DPMI lost $6.03 or
11.6% to $45.97.

The DPMI news unfortunately served to shake up the whole
semiconductor sector.  The PHLX Semi Index (SOX.X) lost 22.70 and
finished just above near term support at 650.  This is not what
we like to see when companies warn.  The more contained the
damage, the more bullish for stocks in general.  When investors
get the herd mentality when selling stocks, a lot of damage can
be done to charts and to investor psychology that delays the
healing process by sometimes weeks or months.

Today's Markets

The indices got off on the wrong foot and unfortunately for the
bulls, there weren't enough market participants out there to even
attempt a run at righting the ship.  In addition, further
evidence out of Japan (GDP was -0.2% versus expectations of
+0.2%) added to the U.S. market weakness since the weak GDP
numbers support a global economic downturn.

The NASDAQ (COMPX) closed down 44.32, or 2.00%, to 2170.78.
Volume was weak, with only 1.4 billion shares changing hands.

The Dow (INDU) also headed lower on Monday, losing 54.91 to
10,922.09.  Volume on the NYSE was only 857 million shares and
advancing stocks outnumbered decliners 1244 to 1801.

Stocks and Sectors on the Move

As already mentioned, today's losses were kicked off by profit
warnings.  Of note is the fact that according to First Call,
there have been 459 warnings quarter-to-date, which is down 1%
compared with this point in the quarter during last quarter.
But, lest you think that this means we are definitely rounding
the corner, this figure of 459 warnings is up 512% from the
number of warnings one year ago at this time.  In addition, a
full 36% of these warnings have come out of the tech sector.

Given the above research findings from First Call, it's no wonder
that investors have recently turned to industries that are least
likely to warn for the current quarter.  As it turns out, it's
the REITs (real estate stocks) that have become a favorite hiding
place.

The reason for the migration into these typically slow moving,
economically sensitive investment vehicles appears to be twofold.
First, with money market rates hovering at a low 4%, investors
are attracted to the REITs' high dividend yields that often
approach 7%.  Second, these REIT stocks have been appreciating on
rumors that the bigger ones will be added to the S&P 500, which
when added to the dividend yield, can make for a nice investment.

While scanning stocks for breakouts late last week, it became
apparent that something was up in the world of real estate
stocks.  The REITs have been breaking out of base patterns left
and right.  But before you dive headlong into these stocks,
remember that they are "trendy" and tend to run in waves.
However, a couple REITs that have been real outperformers lately
include Equity Residential (NYSE:EQT) up $1.09 to $55.29 and
Simon Property (NYSE:SPG) up $0.32 to $27.84.

In addition to the REITs, we have seen a renaissance within the
machinery/tool stocks.  These are early cycle plays and the fact
that these stocks are moving higher means that investors are
betting on the fact that we will see an economic turnaround
within a year.  Some strong stocks with these sectors include
Pall Corp. (NYSE:PLL) up $0.28 to $23.90, Stanely Works
(NYSE:SWK) up $0.30 to $40.35 and Graco (NYSE:GGG) down $0.27 to
$31.65.

Lastly, while they were shunned in the previous bull market,
conglomerates are again appealing to investors who want to avoid
the earnings-warning bomb.  Conglomerates are naturally recession
proof due to the fact that they operate within many diverse
business sectors and can make up for a shortfall in one area with
revenues in another.

Two conglomerates that look good technically and fundamentally
include Crane (NYSE:CR) down $0.21 to $30.91 and Tyco (NYSE:TYC)
down $0.37 to $55.48.

Looking Forward, Always Forward

We'll have to wait until Wednesday to get a better read on the
economy.  With no reports scheduled until Wednesday's retail
sales figure, earnings warnings will continue to have their way
with the market.

We will also continue to keep a close eye on some sector
rotations that have been taking place lately.  Namely the
breakdown within the drug sector and the pickup within the
utility stocks again.

As always, when you are unsure about a trade, hold off until you
have conviction.  Trading just for the sake of trading in a
jittery market like this rarely pays off.

Craig Seidler
Editor
www.SplitTrader.com


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Definition of the Day
=====================

Float

The number of shares that are outstanding and available to be
traded by the public. A smaller "float" can mean more volatility
because large block trades will have a greater influence on the
stock.

For the complete definition, please go to:
http://www.splittrader.com/glossary/viewglossary.asp?glossaryid=146


============================
Monday's Split Announcements
============================

None



=====================================
Tuesday's Expirations by Payable Date
=====================================

Trading Split-Adjusted June 13

Applebee's (APPB) splits 3:2
Johnson & Johnson (JNJ) splits 2:1


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=====================
SplitTrader.com Plays
=====================

The PLAY LEGEND:

SplitTrader.com Play Recommendations.

Play-of-the-Day is our number one play recommendation for the
FOLLOWING trading day.

You will see:
Stock Symbol, Company Name, Closing Price, Change for the Week.
Following the play you will find: Picked at Date and Change Since
Picked

Terms:
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.
==================================================================

=============================
Play of the Day (For Tuesday)
Monday, June 11, 2001
=============================

BEBE - BEBE Stores $31.62 +0.82

Sunday's Comment:

BEBE is a purveyor of contemporary women's fashions. They market
their clothing towards the younger crowd and carry everything
from suits to handbags. Their operating margins of 14.3% are
impressive for a clothier and their 21.5% return on equity tells
us that the company is run efficiently and effectively. In
addition, they just reported May sales that were up 35% over last
May's sales. If BEBE is doing this well under the current
economic environment, just think what it can do in good times. It
is a well-known fact that when the economy is coming out of a
recession, people tend to spend money on clothes first. Turning
to BEBE's chart, we can see that it just emerged from an inverse
head and shoulders continuation pattern. The neckline was defined
by the $29-level. The initial breakout occurred on Tuesday and
was accompanied by good volume of 425,000 shares. This tells us
that the rally has buying support. Another good sign was that the
MACD issued a buy signal on Tuesday as well. Traders looking to
get into our retail clothing play could look to do so on a bounce
off of $29 or on a break above Friday's high of $31.47. In either
case volume should be on track to do at least 300,000 shares for
the day.

Monday's Update:

Looking at how BEBE finished Monday's session, one would never
have figured that it was one of the slowest days of the year as
far as volume goes.  Contrary to the overall market, our retail
play powered ahead on volume of 445,000 (almost two times its
normal volume of 245,000 shares) and managed to close just off
its intraday high of $31.80 at $31.62.  With volume so high and
with the stock leaving a bullish hammer formation on its chart
Monday, we are encouraged that BEBE can continue to set new
highs.  Traders looking to jump on board the BEBE train should
wait for a pullback to near term support at $31 followed by a
bounce on volume that puts the stock on track to do at least
300,000 shares for the day.  Resistance has now come in at $31.80
and stronger support can be found at $29.35.  Our stops remain at
$27.00 to limit downside risk.

Picked On June 10th @ $30.80
Change Since Picked +0.82
Stop Loss @ $ $27.00

 


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