i2 Technologies (ITWO) - Monday traders went long on ITWO, a maker of
Internet solutions for business, as it moved over 25.12 on strong
volume. Tuesday it closed at 28.10, for a quick gain of nearly 12%.
Pull stops up and add to positions on a move over 28.50. If shares pull
back, don't hesitate to sell, but look to re-enter on a bounce near 22-
23. Optionable.
Verisign (VRSN) - Internet security and domain name czar VRSN gapped
higher Monday. Traders used the gap-open tactic to find a new entry of
64.35 and added to previous positions from near 50 and 55.73. The stock
rose on news of a deal with the government that it would be able to
retain rights to the lucrative ".com" domain name. VRSN will allow
".org" to go elsewhere and agreed to competitive bidding for the ".net"
suffix. Tuesday the stock sold off at the open and most traders took
profits near 67, pocketing gains of up to 34%. It ended the day at
66.01 on declining volume. This is a bullish sign because sellers are
not stepping all over each other in a mad rush for the exits and may
hint of higher prices to come. Go long over 67.40, or else on a bounce
near 58-59. Optionable.
UPDATE:
ISS Group Inc. (ISSX) - Traders locked in 10% profits from previous
positions and then re-entered long on a bounce near 50-51 on May 15th.
Shares were added over 61.10 Tuesday before a close of 61.24. Go long
over 63.38, or else take profits and enter an aggressive short on a
bounce down from near 62.90. Optionable.
***********************************
MEDICAL & BIOTECH STOCKS
***********************************
Tuesday the AMEX Biotech Index ($BTK) rose 1.2 or 0.18% to close at
639.57, well above 200 DMA support. AG Edwards upgraded PDII from
"maintain position" to "accumulate" and set a price target of $110 on
the stock. INHL announced Tuesday that it acquired privately held
Shearwater Corp. for $191 million in cash and stock in order to expand
its drug delivery technology. INHL is best known for its inhaled drug
technology. By acquiring Shearwater, INHL expands its drug delivery
platform into injectable drugs. Shearwater's technology improves the
effectiveness of a drug, mainly by making its effects last longer in
the body. Needham and Co liked the news and reiterated their "buy"
rating and 62 price target on INHL.
The AMEX Pharmaceutical Index ($DRG) fell 5.99 or 1.45% to close at
406.56 and looks like it may be pulling back to support of its 200 DMA.
Health insurance company FHCC announced a 2-for-1 split Tuesday leading
SG Cowen to reiterate its "strong buy" on the stock. CIBC World Markets
started coverage on KG with a "buy" and 61 price target.
Protein Design Labs Inc. (PDLI) - Tuesday PDLI announced that it will
collaborate with Exelixis, Inc. (EXEL) to discover and develop
humanized antibodies to diagnose, prevent and treat cancer. EXEL brings
to the table its model organism genetics technology to identify new
cancer drug targets, while PDLI brings its expertise in antibody and
clinical development to create and develop new antibody drug
candidates. PDLI will provide EXEL with $4 million in annual research
funding for two or more years, and has purchased a $30 million note
convertible after the first year of the collaboration into shares of
EXEL common stock. Monday traders entered PDLI long over a gap-adjusted
73.25. Tuesday, on heavy volume, it jumped 3.88 or 5.18% to close at
78.85, leaving traders with a 5.60 or 7.65% paper gain. Plan to add
shares over 80.55 or else enter long on a bounce near 70-71.
Optionable.
Coherent Inc. (COHR)- On April 24th, after the close, COHR reported
earnings of 0.39 vs the year-ago profit of 0.31, which missed
expectations by 0.03. Traders who entered short below 38.12 on April
25th may have taken profits near 33.99 on May 9th. Those who didn't
were stopped out this week when the stock surged higher on strong
volume. Tuesday, on nearly three times its normal volume, COHR rose
2.40 to close at 39.30, near its high of the day and well above 50 DMA
support. Enter long over 41 or else on a bounce near 37.50-38. Next
Friday, June 1st, the company will present an overview of itself at the
Informed Investors Bay Area Technology Stocks Forum. Optionable.
Genzyme (GENZ) - GENZ develops products for the treatment of genetic
diseases through its two business units, Therapeutics and Diagnostics.
Traders entered this stock long over 107.25 on May 9th but soon exited
on weakness. They re-entered long on a bounce near 99.50-100.50 on May
15th. Tuesday the stock rose 0.52 to close at 109.46, leaving a paper
profit of 8.84 or 8.79% in its wake. Traders who missed the bounce on
the 15th got another shot at it on the 16th when the stock fell to
100.03 and rebounded. Tighten trailing stops and add shares over
110.52. More conservative traders can wait to add shares until the
stock breaks past its all-time high of 111.50 and clears 112.25. Using
tight trailing stops, exit immediately if the stock fails to break out
as it can fall back sharply. GENZ splits 2-for-1 on June 4th.
Optionable.
TRADER'S TIP: Double Tops.
A stock makes a double top when it hits the same resistance level on
two different occasions, usually at a near-term high. The second time
it hits resistance it creates a double top. This usually confirms that
the first top was resistance and the stock will typically move lower.
To minimize risk, it is important to be prepared to exit a long
position if it appears that a double top is forming. However, a break
above resistance of the double top can lead to a powerful move to the
upside. So tighten up trailing stops as you approach resistance.
UPDATES:
Affymetrix Inc (AFFX) - Rock and roll! Tuesday, on heavy volume, AFFX
broke above 50 DMA resistance and rose 2.98 to close at 40.55. Enter
long over 42.50 or go long on a bounce near 35-36. Optionable.
COR Therapeutics, Inc. (CORR) - We last entered CORR in mid-April and
took gains of about 15% on April 19th. Tuesday CORR rose 1.66 to close
at 38.81. Plan to enter long over 40 or long on a bounce near 37-37.50.
Optionable.
***********************************
FINANCIAL STOCKS
***********************************
Morgan Stanley Dean Witter (MWD) - As this financial powerhouse rose
past 71 on Monday, traders added to existing positions from 63.21 and
69.25. The stock closed Tuesday at 74.26 on heavy volume, making for a
total possible gain of 17.5% so far. This close puts shares just over
the 200 DMA of 74.15 and well over the 22 and 50 DMAs, near 66 and 65
respectively. Once again, its time to move stops up to protect profits
if you haven't already done so. Add to long positions on a move over 76
or else on a bounce near 70. Note that earnings are tentatively
scheduled for June 20th. Optionable.
AmeriCredit Corp. (ACF) - New Sleeper. ACF is a national consumer
finance company specializing in purchasing, securitizing and servicing
automobile loans. Tuesday, it closed down 0.68 at 54.20; however it is
up 5.7% so far this week. Monday, Robertson Stephens raised their
rating to a "strong buy," commenting that ACF is operating in the best
competitive environment in years, with falling short-term interest
rates and decreased competition. The stock is trading just below its
historic high of 55, set on Monday. ACF is well managed and earnings
have grown by 41% annually over the past 5 years. Analysts expect a 30%
growth rate over the next 5 years. It is noted for its close scrutiny
of loans, turning away 60% of all applicants, and carrying a low
default rate of 7.2%. ACF finances approximately 5% of all used car
sales in the U.S. and last fall entered into a joint agreement with
Chase to increase new car financing. Plan to enter on a bounce near
50.50-52.50 or go long on a blue-sky breakout over 55.50. Trailing
stops should be placed 8-10% below your entry. Optionable.
Lehman Brothers Holdings (LEH) - Traders went short as LEH moved below
58 on April 4th. They took profits later the same day as it bounced
near 54. Since then shares of this financial specialist have been
ticking upward. Tuesday they opened at 80.78 and closed at 82.85. We
suggest going long over 83.65 or else on a bounce near 76-78. Note that
earnings are tentatively due on June 20th. Optionable.
MBNA Corp. (KRB) - Sleeper. KRB is a bank holding company for MBNA
America Bank, which offers credit cards, consumer loans, insurance and
deposit products. Last month, like other credit card companies, KRB saw
their number of defaulted loans rise, due in part to the slowdown in
the economy and rising unemployment. Another part of the reason may be
that individual borrowers are defaulting on credit card loans before
Congress passes a tougher bankruptcy law. Nevertheless, the Fed's
continued rate cuts have been good for this credit card company.
Traders who entered the stock near 35.20 on April 30th added shares
over 37.62 on May 16th. Tuesday it rose 0.84 or 2.25% to close at
38.18. Plan to add more shares over 38.70 and tighten stops on the
move. The stock has resistance at 39.55. Optionable.
MBIA Inc. (MBI) - Insurance and money management firm MBI gave traders
a long entry on a bounce near 50 on April 19th, but it quickly sold
off, pushing them out near flat. The stock split 3-for-2 on April 23rd
and continued to drift lower, bottoming at 46.18 on April 25th as it
warned that 1st-quarter revenues would be below expectations. On May
3rd, earnings came in 5% over year-ago results. Since then the stock
price has recovered a bit; Tuesday it closed at 51.77. We suggest going
long on a bounce near 50, just over the combined 22 and 50 DMAs.
Otherwise nibble long on a move over 52.55. Optionable.
TRADER'S TIP: Converged DMAs.
When looking at a chart, take note if the DMAs are converging near the
same point on the graph. If so, the support or resistance at that point
tends to be a stronger and more reliable place to plot a bounce entry.
For example, MBI suggests a bounce near 50 just over its combined
DMA's. No method is fool proof, but this one increases your chances of
being right.
Dime Bancorp, inc. (DME) - Breakout! Sleeper. What a chart! Nice steady
rise. That's the way, a-huh-a-huh, I like it! DME is a bank holding
company with core business activities in retail, commercial and
mortgage banking. The company has earnings of 1.52 per share and trades
at a P/E of 23.44. Traders who entered DME over 33.99 on May 4th added
shares over 34.72 on May 11th. Tuesday the stock closed at a new
closing high of 36.18 after setting a new all-time high of 36.30 intra-
day. Plan to add shares over 36.55, and tighten trailing stops on the
move. Optionable.
***********************************
OTHER STOCKS
***********************************
Christopher & Banks Corporation (CHBS) - Breakout! Sleeper. This stock
soared after it was announced that it is being added to the S&P 600
SmallCap Index on this Friday. Traders have positions entered near
36.25, over 40.69, over 43.22, over 45.69 and added shares on Tuesday,
using the gap-open tactic, over 47.16. Lately traders have been jumping
aboard stocks being added to popular indices on the knowledge that
index fund managers must purchase shares of these companies. Most plan
exits on or near the date it is to be added. Tuesday, CHBS added
another 2.77 points at close at 46.88. This puts short-term gains from
the first entry at 29.3%! The stock is looking overextended. We suggest
traders either exit or reduce their positions prior to Friday to lock
in those profits. If you remain in CHBS, please keep your trailing
stops snug. No new entry is advised. Optionable.
Fluor Corp. (FLR) - FLR is an engineering and allied services provider.
In late April traders took profits on long positions entered near 42.41
and 49.44 as the stock sold off from near 54.91, booking profits near
20%. On May 1st, earnings disappointed the street, coming in at 0.15 vs
expectations near 0.36. Some traders went long on May 4th on an intra-
day bounce near 49, just over the 22 DMA. Since then the price has
stair-stepped up and Tuesday it closed at 62.65, up nearly 28%. If you
are in this trade, pull up stops to protect profits and add to or
establish a new position as it moves over 63.70. If it pulls back, take
profits and consider going long on a bounce near the 22 DMA, currently
near 54. Optionable.
SkyWest Inc. (SKYW) - SKYW operates Sky West Airlines, a regional
carrier operating in 13 states and Canada. The company also contracts
with Delta Airlines (DAL) to provide "Delta Connection" in the areas in
which its coverage overlaps with Delta. In California SKYW does the
same thing for United Airlines (UAL) under "United Express." The stock
is rapidly approaching a breakout to a new high. Tuesday it opened at
28.67 and closed at 29.24 on solid volume even though CSFB initiated
new coverage with a "hold". We suggest nibbling long over 30.62. If
shares fail to push higher or fail to hold over 30.50, aggressive
traders may consider shorting SKYW on a bounce down from near 30-30.50.
Note that earnings are due May 25th, before the open. The street is
looking for 0.17 vs 0.28 for the same period a year ago. Optionable.
Caterpillar Inc. (CAT) - Sleeper. This tractor company has been on a
steady roll higher since early April. Traders entered long over 52.75
on May 10th. Tuesday it rose 0.50 to close at 56.20 when it announced a
joint venture with The Morey Corporation. According to Scott Morey,
Morey Corporation president, "The new joint venture will benefit from
the vast engineering resources of Caterpillar and the design for
manufacturability and assembly expertise of The Morey Corporation...
The joint venture will be able to develop new products, reduce costs,
speed time to market and continually improve product performance and
reliability by consolidating and integrating the design and
manufacturing processes." Plan to add shares over 57. Set stops 8-10%
below initial entry and trail them higher if it moves up, tightening
over 58.75. CAT earns $2.76 per share and trades at a P/E of 20.20.
Optionable.
Terex Corporation (TEX) - New Sleeper. Tuesday, we set our radar screen
to pinpoint companies in peripheral businesses that would benefit under
the Bush Energy Plan. TEX is a global manufacturer of a broad range of
equipment for the construction, infrastructure and mining industries.
It has two business segments, Terex Lifting and Terex Earthmoving. With
the price of coal soaring, it seems that demand will increase for
mining equipment. Tuesday, the stock closed down 0.21 at 24.04, on very
low volume. Its 52-week high is 24.50. TEX is ranked a "buy" or "strong
buy" by the 7 analysts who cover it. It trades at a P/E of 7, earns
$3.46 per share and is slightly more volatile than the S&P 500, with a
BETA of 1.09. Plan to enter on a bounce near 21-23 or go long 24.75.
Trailing stops should be placed 10% below your entries. Optionable.
***********************************
NEW SPLITS ANNOUNCED
***********************************
Shuffle Master, Inc. (SHFL) – Tuesday SHFL announced a 3-for-2 stock
split. Shuffle Masters Inc. develops, manufactures and markets
automatic card shuffling equipment, table games and video/slot machine
game software for the gaming industry. Optionable.
First Health Group Corp. (FHCC) - Tuesday FHCC announced a 2-for-1
stock split. HCC provides Preferred Provider Organization, clinical
cost management, fee schedule and other cost management services.
Optionable.
Split Exec Rec. Annc. Annc.
Company Name (Symbol) Ratio Date Date Date Price
------------------------- ------- ----- ----- ----- -------
Shuffle Master (SHFL) 3-for-2 06/19 06/08 05/22 $31.84
First Health Group (FHCC) 2-for-1 06/26 06/04 05/22 $51.85
***********************************
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