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The StockBottom.com Newsletter Thursday 06-07-2001 1 of 1
"The Successful Stock Trader's Edge" Copyright , 2001, All rights reserved. Redistribution in any form is strictly prohibited. Posted online for members at: http://www.StockBottom.com The entire newsletter is best viewed in COURIER 10 for alignment =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D To stop receiving this StockBottom Update, send email to remove@stockbottom.com To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.stockbottom.com/htmlemail/3541_1.asp =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D In this newsletter: Market Wrap: Chip Fest 2001 Definition of The Day: Buying Power Sector Watch: One support alert was hit Thursday... Play of the Day: FOE ----------------------------------------------------------------- MARKET WRAP =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Chip Fest 2001 Intel (NASDAQ:INTC +1.32) gave its first-ever mid-quarter update just after the bell, reaffirming second quarter guidance and suggesting stronger earnings in the second half. The company said that second quarter sales would be at the lower end of the expectations, but within expectations at least, as the world's largest semiconductor maker struggles with a slowdown in PC sales. Shares of semis were moving up in response during after-hours trading. The company has been pummeled by weak demand for microprocessors in the current economic downturn. When it reported first-quarter earnings, however, Intel had said it saw "encouraging" signs for a stronger second half. This was despite first-quarter net income plunging 82 percent on a 16 percent decline in sales. Shares of Intel have fallen 59 percent since its record high of 74.88 in August, compared to the Nasdaq Composite index (COMPX) fall of 47 percent during that time period. Intel gained 4.43 percent to 31.16 today during regular trading. During the day, positive expectations about the Intel report helped spark a rush to buy semiconductor shares. In addition, despite a weak earnings forecast from National Semiconductor (NYSE:NSM +3.10) for the next quarter, the company commented in its conference call that the improvement in the quarter has come from quick-turnover orders from cell phone companies. As a result, the rally spread to stocks such as Qualcomm (NASDAQ:QCOM +2.42), Nokia (NYSE:NOK +1.24), and Motorola (NYSE:MOT +0.74). Applied Micro (NASDAQ:AMCC +1.93) led the communication IC stocks higher. C.E. Unterberg Towbin analysts left a meeting with the company with the notion that near-term order cancellations, push- outs, and de-bookings had nearly evaporated. That news also lit a fire under PMC Sierra (NASDAQ:PMCS +4.65). Also, last night the Semiconductor Industry Association projected 20.5 percent growth in 2002, which was revised upward from 10 percent, and 25 percent for 2003. The revision may indicate that a bottom is near in the sector. Corroborating that view was Banc of America Securities, which said that "motherboard checks" (sounds like fun) at Computex in Taiwan showed positive indications for the third quarter. They also noted that conversations with four large Taiwanese manufacturers showed an increase in OEM activity. The Semiconductor Index (SOXX) has jumped 19 percent since last Wednesday=01,s low of 578.40. It=01,s now at 697.04 =01) a 7.7 percent gain today =01) just beyond its pivotal 200-day moving average, which last month acted as strong resistance that turned back the index nearly 20 percent. Can it move through it this time? All of the action today was on moderate volume, which showed some caution ahead of the Intel comments. But when the dust settled, the tech-bound Nasdaq Composite index (COMPX) picked up 46.27 points, or 2.09 percent, to reach 2,264. The S&P 500 (SPX) bigcaps were up 6.93, or 0.55 percent, to 1,276.96. And the Dow Jones Industrials (DJI), after being underwater this morning, closed up 20.50 points, or 0.19 percent, to 11,090.74. In other tech news, chipmaker Broadcom (NASDAQ:BRCM +4.67) warned of a steeper-than-expected sales decrease in its second quarter and announced cost cutting plans. The company slashed second- quarter revenue expectations late yesterday, citing continued weakness in the technology sector. Nonetheless, Broadcom said in its conference call that it saw signs of increasing new orders that may well lead to renewed growth by year=01,s end. Discouraging news from the retail sector came in today. Unseasonable weather in the Midwest and Northeast lowered clothing purchases in May, and high fuel prices and consumer concerns about the economy reduced mall traffic, resulting in slow monthly retail sales. Large retailers including Gap (NYSE:GPS +0.61) and Federated Department Stores (NYSE:FD =01)1.90) warned of additional weakness in sales and/or earnings. Also, Pacific Sunwear (NASDAQ:PSUN =01)0.78) was downgraded. All in all, it seems the overall same-store retail sales pickup in April may not have been the precursor to recovery that was thought. Nonetheless, electronic retailers were up today, partially due to good news out of Best Buy (NYSE:BBY +2.38), which posted a 25 percent increase in Q1 sales and said that quarterly earnings would be in line with estimates. This news also sparked Circuit City (NYSE:CC +0.44), up 2.81 percent, and Radio Shack (NYSE:RSH +0.81), up 2.89 percent. Shares of Philip Morris (NYSE:MO =01)1.48) and other tobacco stocks started to plunge in after hours trading yesterday after an L.A. jury ordered a record $3 billion payout to a smoker with incurable lung and brain cancer. Nonetheless, analysts -- and even antismoking activists -- said the verdict likely would be reduced by the judge or overturned on appeal. Philip Morris closed off its lows for the day to lose 2.96 percent at 48.52. R.J. Reynolds (NYSE:RJR =01)3.19) was down further, though, at 5.42 percent, to 55.69. In other news, banking regulators said U.S. commercial banks earned a record $19.9 billion during the first quarter. This number was "padded" by $1.2 billion worth of securities sales, however, which masked more fundamental concerns about the sector. The Federal Deposit Insurance Corp. added that troubled commercial and industrial loans continued to increase, especially at larger banks, and interest rate margins continued to decline. Banks charged off $7 billion in bad loans in the first quarter, a 38 percent rise from the same period last year. New state jobless claims rose to the highest level since November 1992, last week, revealing a still weakening job market, which may not have bottomed yet. New claims soared above the key 400,000- level for the third straight week =01) the longest string since September of 1992. Economists had expected a modest drop in claims from the prior week. Here comes the Fed? Treasury prices gained early as a result of the aforementioned jobless claims report that raised expectations of further interest rate cuts by the Federal Reserve. Then they weakened, as the 30- year bond =01) the most vulnerable to a potential inflation-igniting recovery =01) shed 31/32 at 95 5/32, with a yield of 5.72 percent, for a gain of 7 basis points. The 10-year Treasury lost 11/32 at 97 24/32, to yield 5.30 percent, a pickup of 5 basis points. The 5-year note dropped 4/32 at 99 1/32 to yield 4.85 percent for a gain of 3 basis points. Finally, the Fed-sensitive 2-year note was flat at 100 9/32, for a yield of 4.10 percent. For Tomorrow: There is a gap between what Intel is saying about the future and what it=01,s box-maker customers are saying. Who=01,s right? We=01,ll be watching to see how this plays out tomorrow. See Intel run. See the market react. Bruce Feldman Staff Analyst www.stockbottom.com ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=3D2234 ************************************************************** =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Definition of The Day: =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Buying Power Buying power has many forms but the most basic definition refers to institutional sized accumulation or distribution over a long period. BOP tells you whether the underlying activity in a stock is characterized by systematic buying or selling. Go to http://stockbottom.com/glossary/viewglossary.asp?glossaryid=3D51 for complete definition. ----------------------------------------------------------------- Sector Watch: =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D As of Market Close =01) Thursday 06/07/2001 One support alert was hit Thursday. The Airline Index (XAL) was unable to pull out of its nose dive in time to prevent a support alert from being hit. I doubt we'll see any support alerts being hit in technology sectors in the near future after Intel's postive guidance. Lowering support (XAL). Key Benchmarks Broad Market Last Support/Resistance Alert *********************************************************** DOW Industrials 11,090 10,650 11,400 SPX S&P 500 1,276 1,240 1,385 COMPX NASD Composite 2,264 2,050 2,400 OEX S&P 100 658 640 690 RUT Russell 2000 514 480 520 NDX NASD 100 1,963 1,760 2,250 MSH High Tech 615 525 690 BTK Biotech 649 520 710 XCI Hardware 880 740 1,000 GSO.X Software 240 210 260 SOX Semiconductor 697 540 765 NWX Networking 440 338 570 INX Internet 217 180 260 BIX Banking 664 620 680 XBD Brokerage 523 475 620 IUX Insurance 766 750 850 RLX Retail 906 875 975 DRG Drug 411 390 456 HCX Healthcare 847 800 890 XAL Airline 145 132 168 OIX Oil & Gas 338 325 375 ** ----------------------------------------------------------------- For a description of how to interpret "Sector Watch" or if you have problems with your E-mail service stripping out formatting spaces use this link for the Web site graphic version: http://www.stockbottom.com/sectorwatch/060701_1.asp Copyright , 2001 StockBottom.com. Do not duplicate or redistribute in any form. ----------------------------------------------------------------- *************************ADVERTISEMENT********************* Do you know the five stages of a stock split? Do you know that only 20% of stocks that are splitting make a profitable play? Do you want to know which stocks are going to split before they announce? Find out all of this and more at SplitTrader.com. A two week free trial will give you access to split candidates, split alerts, plays, education and daily commentary. http://www.sungrp.com/tracking.asp?campaignid=3D2268 ************************************************************ =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Play of The Day (Long) =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D FOE - Ferro Corp. $22.54 +0.23 s/l $21.00 Ferro Corporation is a worldwide producer of performance materials for manufacturers. The Company's portfolio of products includes coatings for ceramics and metal, electronic materials, pigments, fine chemicals and polymer additives, specialty plastic compounds and colors. The Company's materials are used in a wide variety of markets. These include building and renovation, major appliances, household furnishings, transportation and industrial products. Ferro's products are sold principally in the United States and Europe, however, operations extend to the Latin America and Asia- Pacific Tonight, we add a small cap company in the chemical group to the play list as a long. Since the beginning of the year, the Russell 2000 index of small capitalization companies has turned in a 5+% positive return while the Nasdaq Composite is sitting with a 10% loss. Looking at the S&P Chemical Index (CEX.X), buyers have obviously been stepping up to the plate, with the index tacking on an impressive 13+% gain since the beginning of Q2 alone. What makes Ferro even more appealing is the fact that the group has pulled back from gains of 20+%, retracing all the way back to the 20-dma; but bounced firmly off this support point last Friday, and advancing 3.6 points or 0.8% today. Fundamentally speaking, Ferro is experiencing weaker profits like the rest of the world, but did manage to grow revenues 5% sequentially as reported in its last earnings report on 4/24. The company posted revenue of $370.7 million and net income of $14.0 million or $0.37 cents per share as compared with $0.48 in the first quarter of 2000. In a press release, the firm's CEO, Hector R. Ortino, discussed several cost cutting measures to assist in the earnings battle including a program to reduce employment costs on a worldwide basis by more than $12 million annually. When the markets are to fully recover, deep cyclicals like FOE, as well as others in the group will need to lead the way. While the stock was recently downgraded by McDonald / Key Corp., we like what we see on the chart. Shares have broken out of a trading range between $20 and $21.50, and have done so on volume numbers that are far above average. With the exception of some small speed bumps in the road, there really is very little to stop FOE from making an attempt at a new 52-week high ($24.70). Participation was a bit light today, however. MACD sits firmly above the trigger line, as well as in positive territory. As for an entry point, with $24.70 being a nice gain from here, we see no reason not to get on board now. The more conservative, really an oxymoron when talking about a chemical stock, may want to wait for a pullback and bounce off of the $20.00 to $20.15 level, if it happens. Average Daily Volume =3D 125K 52-week: High =3D $24.70 Low =3D $17.62 Next Earnings 07-24 est =3D N/A versus =3D N/A Chart=3D http://www.stockbottom.com/charts/charts.asp?symbol=3DFOE DISCLAIMER =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of StockBottom.com may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. StockBottom.com staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.stockbottom.com/reference/disclaimer.asp ***************************************************************** ADVERTISING INFORMATION For more information on advertising in StockBottom.com Newsletter, or any Premier Investor Network newsletter please contact advertising@stockbottom.com. ***************************************************************** Copyright , 2001 StockBottom.com. Do not duplicate or redistribute in any form.
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