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Email Version, Section 1, Tuesday 06/12/2001
The SplitTrader.com Newsletter          Tuesday 06/12/01   1 of 1
Copyright 2001, All rights reserved.
Redistribution in any form is strictly prohibited.

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

Market Commentary - Stocks Rebound
Definition of the Day
Tuesday's Split Announcements - None
Wednesday's Expirations
Plays - New - Updates - Drops
Wednesday's Play-of-the-Day - BJ

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

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

Stocks Rebound

We knew second quarter pre-announcements season would likely get
ugly. Well, today we got an idea of just how bad things may be in
tech-land, courtesy of the world's No. 1 handset maker. This
morning, Finnish-based cellular phone giant NOK (-18.9%) filled
up the kettle and brewed up a steaming hot cup of jack squat for
Wall Street, saying, "you can forget about 35-40% annual growth
rates, you can also forget about 25-35% percent growth rates, AND
now you can even forget about even 20% growth. How does growth in
the single-digits sound?" Judging by the way shares of NOK opened
today, down $5.36 at $23.35, we don't think investors were too
happy. Steaming mad might fit the bill. The company also said you
can forget about 17 cents per share Wall Street is expecting. How
about something in the 13-14 cent-range instead? The clincher
came when the company couldn't provide guidance for future
quarters until it released actual numbers in mid-July. For those
of us betting on a second half 2001 rebound in technology,
today's news certainly didn't give us a warm fuzzy feeling.

Fallout from the NOK warning could only be equated to the damage
of a Mount Vesuvius eruption: widespread. Shares of competitors
like MOT (-5.8%) and ERICY (-3.6%) pulled back. Also, companies
that supply, sell, or were in any way related to NOK also
dropped. RFMD (-2.3%), QCOM (-3.0%), OPWV (-10.6%), PHG (-2.2%),
and VOD (-3.3%) were some of the notable losers. The CNET Telecom
Index sank 5.3%, or 123 points to 2796. The news even spread to
telecom and networking players like LU (-1.2%), WCOM (-2.6%),
LVLT (-8.5%), T (-2.7%), and ALA (-1.9%).

Nokia, however, was not the only tech-related bearer of bad news
on Tuesday. Shares of gene-tech high-flyer Affymetrix (AFFX: -
14.94) plunged some 36% after saying it expected revenues for the
second-quarter to be in the range of $44 million to $50 million,
falling short of analysts' estimates by $4-$7 million, widening
its EPS loss to between 6-12 cents per share, considerably higher
than expectations of a 1-2 cent loss. AFFX said that even though
it was attempting to manage expenses, it would not reduce
investments in R&D or infrastructure in a manner that would be
harmful to its long-term prospects, sending sort of a "stubborn"
message to the Street. Perhaps we can call the 36% thrashing in
AFFX shares today a "stubborn" response by investors.

Just to throw in a couple more negative tidbits, just to keep
with the day's negative tone, EMC (-0.5%), the leader in the
multi-billion dollar storage sector, said that 2Q orders weren't
tracking in as fast as expected, quickly prompting a downgrade
from Morgan analyst Gillian Munson. Even though EMC has pricing
power over much of its competition, she said that a 1% drop in
its gross margins translates to a penny drop in EPS. That's big,
considering that 18 cents is the consensus estimate for the June
quarter. Munson removed a penny from her 2Q number to 17 cents
and 4 cents from her 2002 numbers to 78 cents.

Other noteworthy debacles included GM's Hughes Electronics (NYSE:
GMH -2.70) unit, which plunged almost 12% on Tuesday after the
satellite TV company said it would add only half as many
customers this quarter as it had previously expected.

The FDA's rejection of Amgen/Praecis Pharmaceuticals' prostate
cancer drug left AMGN shares basically unchanged, but PRCS
dropped like a rock, ending the session down 26.7% to $16.55.
Gaining on the news, however, were shares of tiny Colorado-based
Atrix Labs (NASDAQ:ATRX +0.31), which has a late stage prostate
drug of its own called Leuprogel.

One of the stocks lucky enough to have a green arrow next to it
was Dell Computer (NASDAQ:DELL +3.3%) after Morgan Stanley upped
the PC maker from Neutral to Outperform. MS said the time to buy
is now, as shares will likely shine once the economy starts to
recover. Dell's president said that while it sees no major up-
tick until the 4Q, European sales are satisfactory.

Trying to sprinkle a little bit of sunshine on Tuesday's
otherwise dark session was the up-tick in U.S. chain store sales,
which rose 0.3% for the week (ending June 2) after slipping 0.1
percent a week earlier. Expectations for the month are for a rise
of 2%. Weak customer traffic and heavy promotional activity
continue to hinder sales. The real numbers from the likes of JCP,
S, TGT, KM, WMT, FD, and May will be released on Thursday.

Despite the deluge of warnings and largely pessimistic views from
analysts, the blue-chip-riddled Dow actually finished higher by
26 points at 10,948 after trading below support at 10,800
intraday. Weighing heavy was the 3.9% drop in HON (NYSE:HON -
1.77) shares, after troubles with the EC regarding its pending
merger with fellow Dow component GE (NYSE:GE: +1.37). The EC is
trying to pressure GE (+2.9%) to sell HON's aerospace assets.
Potential buyers of those assets include United Tech (UTX: -
0.1%), yet another Dow cohort. In other Dow news, GM's
announcement of a "substantial minority stake" (huh?) in hydrogen
fuel cell maker IMPCO Technologies (IMCO:+7.5%) sent shares of
IMCO higher by $2.80 to $39.82. Breadth in the Dow was split 15-
15. Volume on the broader NYSE was nothing exciting, coming in at
1.1 billion shares, with losers finishing neck-and-neck with
gainers 16-15. NYSE new highs tripled up on new lows 120-42.

Checking out how some of the other major U.S. indices finished,
the S&P 500 Index (SPX) ended up 1.49 points at 1255 after being
down almost 20 points. The Russell 2000 (RUT) closed unchanged at
507, and the Wilshire Total Market Index (TMW) ended Tuesday
higher by 0.1% at 11,631.

Bonds traded narrowly on Tuesday, waiting for key data on
Wednesday (Retail Sales), Thursday (PPI), and Friday (CPI) to be
released. Prices on the 2, 5 10, and 30-year issues closed higher
on the session. The yield on the 2-yr note fell 3 basis points to
4.06%, the 5-yr dropped 4 bps to 4.80%, the 10-yr fell 3 bps to
5.25%, and the 30-year treasury ended down 3 bps at 5.65%.

NOK, though its shares are traded on the NYSE, certainly impacted
the four-letter stocks over at the NASDAQ, though the late-day
rally doesn't really show it. For the record, the NASDAQ, after
skidding 65 points to 2105 intra-day, closed down just 0.83 at
2170. The end-of-day figures on the COMPX really aren't a true
representation of what happened on Tuesday. One of the bright
spots included Extreme Networks (NASDAQ:EXTR +2.33), which shot
up 7.8% in support of some positive comments made on sector
player FDRY (+12%) at a CIBC conference. Orders for the FDRY's
April/May period are apparently coming in stronger than
anticipated. Other upside movers in the NASDAQ 100 included INKT
(+6.6%), EXDS (+7.3%), VRSN (+7.5%) and RNWK (+4.6%). Overall,
61% of the Nasdaq's 100 largest companies finished surprisingly
to the plus side, given the four-hour afternoon buying spree.
Breadth for the COMPX still ended in favor of declining issues
20-17, as volume of more than 1.7 billion shares traded hands.
New highs beat out new lows 4-3.

Sector winners included Gold (XAU:+2.7%), Software (GSO:+0.6%),
Internet (+1.9%), and Retail (RLX:+0.8%). Areas being kicked to
the curb included the recently-hot Biotech (BTK:-3.2%), Airlines
(XAL:-1.8%), and Cyclicals (CYC:-0.7%).

Hungry? Well, the queen mother of food stocks makes her debut
tomorrow, as Kraft Foods (KFT) comes to market offering some 280
million shares at $30-$31 per share tomorrow. The deal, which
could raise anywhere from $8.4-$8.68 billion, is the second
largest in U.S. history, behind the AT&T Wireless deal. The
question is whether or not KFT is worth 30 times last year's net
income. The industry trades at roughly 18 times net income. So,
should investors dig in? We say no. With razor thin margins and
an overall industry growth rate of 1%, forget about it.

Sure, the Dow came back from -134 points to eke out a 24 point
gain and the NASDAQ fought off a 65 point deficit to end at
break-even, but why the rally? The NOK news was BAD, BAD, and
BAD. No guidance, single-digit growth, and too much supply. Then,
biotech up-and-comer AFFX warns and the FDA says NO to AMGN/PRCS'
prostate drug. To boot, satellite services behemoth racks up half
the subscribers Wall Street was expecting. Uh, BAD!

Could it be that investors are being smart, looking down the road
6-9 months, and doing some bargain hunting? You bet, and why not?
Those interest rate cuts are going to kick in soon enough. Don't,
however, load the boat just yet. We still have the Beige Book on
Wednesday, which will hopefully show continued declines in
inventories and some stabilization in energy costs. More
importantly, we have PPI and CPI on Thursday and Friday, which
should be in-line with Greenspan's view that inflation pressures
are a non-issue. Then again, after seeing the snapback despite
NOK's woes, who knows what's going to happen. Got a helmet?


Matt Paolucci
Contributing Editor
www.splittrader.com


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

Personal Consumption Expenditures (PCE)

The Personal Consumption Expenditure report is actually a part of
the Personal Income Report. This section includes data pertaining
to durables, non-durables, and services.

For the complete definition, please go to:
http://www.splittrader.com/glossary/viewglossary.asp?glossaryid=454


=============================
Tuesday's Split Announcements
=============================

None


=======================================
Wednesday's Expirations by Payable Date
=======================================

None


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

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

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

=========
NEW PLAYS
=========


NEW SPLIT RUN PLAYS 06/12/01
============================

None


NEW SPLIT CANDIDATE PLAYS 06/12/01
==================================

ESI - ITT Education $43.70 -0.32 (+0.26)

This provider of post-secondary degree programs has been edging
higher all year.  This could be due to the emphasis that current
administration has been putting upon educational programs or it
could be that ITT provides much needed technology training that
has been in great demand.  Either way, institutions have
certainly been gobbling up this stock, providing good buying
support along the way to a year-to-date gain of 98%.  The stock
is also the leader of the commercial-school sector based upon
earnings growth and relative strength.  Turning to the chart, we
like the way ESI has just made a breakaway gap.  The stock gapped
higher on 6/4/01 and has not looked back.  It has also formed a
flag formation that has us looking towards $48 as the near term
price objective.  Traders interested in initiating a new position
in our education play could look to do so on a close above
resistance at $44.50.  There is weak resistance at $45 as well,
but if volume continues to come in at around 250,000 shares, we
don't think it will pose a problem.  However, more conservative
traders may want to go in with a half position on a breach of
$44.50, and then go in with the other half on a breach above $45.
Our initial stop is placed at $40.00.

Picked On June 12th @ $43.70
Change Since Picked 0.00
Stop Loss @ $40.00

 



NEW MOMENTUM PLAYS 06/12/01
============================

None


=======
UPDATES
=======


SPLIT RUN PLAY UPDATES 06/12/01
===============================

LOW - Lowes Companies $72.75 +0.85 (-0.82)

Our home improvement retailer sold off in the early going on
Tuesday, but found good support at its 20-dma at $70.75 and
bounced higher.  LOW closed the day with a slight gain of $0.85.
We will be looking for volume to pick up going forward into the
latter part of this week and for the MACD to issue a buy signal.
A few more up days like today and the MACD should go positive.
For now support remains at the 20-dma of $70.75 and resistance
has come in at $74.00.  Therefore, traders should hold off on
getting into LOW until resistance at $74 is conquered on volume
of at least 3 million shares.  Our stops remain at $68 to limit
downside risk.

Picked on June 7th @ $74.00
Change Since Picked -1.25
Stop Loss @ $68.00

 



SPLIT CANDIDATE PLAY UPDATES 06/12/01
=====================================

BJ - BJ's Wholesale Club $52.36 +1.16 (+1.12)

On Tuesday, BJ managed to close above resistance at $52 on good
volume of 600,000 shares.  BJ also successfully tested its 5-dma
at $51.56 and bounced higher.  Add to this the fact that BJ has
only weak resistance at $52.75 to deal with and we think you have
the recipe for another run higher in BJ.  Of course, Tuesday's
upgrade of BJ from a "buy" to a "strong buy" by Lehman Brothers
doesn't hurt either.  In addition to upgrading the stock, Lehman
raised its 12-month price target on the retailer to $62 from $55.
Traders that may be thinking about getting into BJ should wait
until the stock breaches $52.75 on volume that puts the stock on
track to do at least 650,000 shares for the day.  We are raising
our stop to $50.00 to protect our gains thus far.

Picked on May 27th @ $48.31
Change Since Picked +4.05
Stop Loss @ $50.00

 

===

CEFT - Concord EFS $53.25 +0.48 (+0.91)

CEFT continues to display resilience in the face of adversity.
On Tuesday, CEFT marched higher, even as the averages plunged
into the red.  CEFT reached an intraday high of $54.20 before
pulling back a bit and finishing at $53.25.  We like the way that
volume has been building as the stock moves higher.  The MACD is
also still portending a continuation of the current up trend, so
traders might want to initiate positions on a breach of $54 on
volume of at least 3.9 million shares for the day.  We are
raising our stop to $51.50 to protect against a reversal.

Picked on May 27th @ $50.60
Change Since Picked +2.92
Stop Loss @ $51.50

 

===

HRB - H&R Block $63.25 -0.25 (-0.45)

Over the last week, HRB has been acting "toppy."  This financial
services play has lost ground for the past three sessions in a
row.  In addition, HRB's MACD is about to roll over, which is
generally a sign of an impending downtrend.  Lastly, volume has
been picking up as the stock moves lower, which is generally a
blatant warning sign that sellers have taken over.  Given the
writing on the wall, we would advise against initiating new
positions in HRB until the stock can close above resistance at
$64 on volume of at least 600,000 shares.  We are keeping our
stops at $62.00 for now, but intend to boost them as soon as any
sort of breathing room opens up.

Picked on April 18th @ $52.85
Change since picked +9.40
Stop Loss @ $62.00

 

===

MTG - MGIC Investment $72.36 +0.36 (+0.96)

Our financial services play has been holding up well considering
that most banks, brokers and insurance plays have been wilting
lately.  While MTG is not directly related to the banks and
brokers (it's a mortgage insurer), the stock still keys off the
same interest rate and consumer confidence data that the banks
and brokerage stocks have been.  Looking at the chart, MTG has
now formed a symmetrical triangle formation and appears to want
to break to the upside.  The stock has found good support in the
neighborhood of $71 and its MACD is still decidedly positive.
Traders looking to get into MTG should wait until the stock can
close above resistance at $73 on volume of at least 750 million
shares for the day.

Picked on May 31st @ $70.37
Change Since Picked +1.03
Stop Loss @ $66.75

 



MOMENTUM PLAY UPDATES 06/12/01
===============================

BEBE - BEBE Stores, Inc. $32.01 +0.39 (+1.21)

BEBE continues its march higher.  The good news is that shares of
BEBE are ascending on increasing volume.  The bad news is that
the stock is ripe for a pullback according to its stochastic.
While we don't think that any pullback will be sharp or
prolonged, we just want to get the warning out incase you see
this starting to occur.  With the stock only 5% above its prior
base, it is by no means overly extended, however, we will caution
against chasing it any higher than $32.50, as the risk of a more
severe pullback increases after this point.  We would rather see
the stock move sideways and digest its gains before moving
higher.  That said traders could look to get into BEBE on a
pullback to support at $31 with a subsequent bounce.  Our stops
remain at $27.00.

Picked On June 10th @ $30.80
Change Since Picked +1.21
Stop Loss @ $ $27.00

 

===

WMI - Waste Management $28.50 +0.45 (+0.06)

WMI did a tremendous about face on Tuesday, as shares plummeted
in the early going only to turn on a dime and close higher for
the day.  WMI dipped as low as $27.38 before reversing course at
about midday.   We were encouraged by the fact that the big block
trades occurred as the stock was heading higher in the afternoon
instead of when the stock was selling off in the morning.
Tuesday's action in WMI might have been the "cleansing" before
the next leg higher for the stock.  Any weak shareholders
probably pulled the ripcord today, leaving only strong holders
that will probably not turn into sellers until much higher prices
present themselves.  Those who might be thinking about adding WMI
to their portfolios could look to do so on a break through
resistance at $29 on volume of at least 2.5 million shares for
the session.

Picked on June 6th @ $28.51
Change since picked -0.01
Stop Loss @ $26.90

 



=====
DROPS
=====


SPLIT RUN PLAY DROPS 06/12/01
=============================

None


SPLIT CANDIDATE PLAY DROPS 06/12/01
===================================

SRDX - SurModics, Inc. $53.50 -2.89 (-4.25)

SRDX sold off on Tuesday morning and hit our stop at $54.00.  The
drop didn't come on increased volume and furthermore, it wasn't
prompted by any news.  SRDX dropped all the way to its 50-dma at
$50 before it bounced higher.  We exit this chemical play on
Tuesday.

Picked on June 5th @ $58.00
Profit/Loss = -4.00 (-7%) (Stopped out Friday @ $54.00)
Best Profit = +0.96 (+2%)

 



MOMENTUM PLAY DROPS 06/12/01
=============================

None


===============================
Play of the Day (For Wednesday)
Tuesday, June 12, 2001
===============================

BJ - BJ's Wholesale Club $52.36 +1.16 (+1.12)

Tuesday's Comment:

On Tuesday, BJ managed to close above resistance at $52 on good
volume of 600,000 shares.  BJ also successfully tested its 5-dma
at $51.56 and bounced higher.  Add to this the fact that BJ has
only weak resistance at $52.75 to deal with and we think you have
the recipe for another run higher in BJ.  Of course, Tuesday's
upgrade of BJ from a "buy" to a "strong buy" by Lehman Brothers
doesn't hurt either.  In addition to upgrading the stock, Lehman
raised its 12-month price target on the retailer to $62 from $55.
Traders that may be thinking about getting into BJ should wait
until the stock breaches $52.75 on volume that puts the stock on
track to do at least 650,000 shares for the day.  We are upping
our stop to $50.00 to protect our gains thus far.

Picked on May 27th @ $48.31
Change Since Picked +4.05
Stop Loss @ $50.00

 


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