To: SusieQ1065 who wrote (52887 ) 5/20/2002 7:40:22 AM From: SusieQ1065 Respond to OI profiling CVC short on a bounce..Remember what happened to Adelphia Communications over the past several weeks? While that saga may be just about played out, that doesn't mean that there aren't other companies that will be touched by the fallout. Shares of CVC have been in the loser column almost every day for the past month, and the stock got hit hard again last Monday on rumors of the company doing a convertible deal to address the 2003 funding gap. While that rumor never turned out to be anything but rumor, it was enough to hand investors a nearly 10% loss on the day. Worse yet, it produced another breakdown to all-time lows and a fresh double-bottom breakdown on the PnF chart. Speaking of the PnF chart, the current vertical count has CVC slated to visit the $15 level before the pain abates. But now that it is under the magical $20 level, there are likely more sellers waiting to get out on the slightest hint of a recovery in price in the hopes of getting back to even. The first level of resistance is now resting at $20-21, also the site of the 2-month descending trendline at $21. Even if the bulls manage to lift CVC through that level there is heavy resistance at $22.50-23.50 that should stop any frisky bulls in their tracks. So what does any of this have to do with Adelphia? In 2001, CVC received $1.4 billion in cash and stock from the sale of its Ohio system to Adelphia, with the stock portion totaling $422 million. In response to investor concerns about CVC's exposure to Adelphia's decline, the company stated that the stock risk has been hedged through derivative contracts. Additionally, the company stated that is has no plans to undertake a primary issuance or euity securities or convertible equity securities, putting Monday's rumor to rest. This is the source of the 6% bounce in the stock on Friday, but the technical damage has already been done, and reassuring statements from the company are unlikely to turn the tide in just one day. We want to target new positions on rally failures near resistance as detailed above. Initially, we are placing our stop at $23.50.
