The Play Of The Day
March 22, 2000
05:33 AM EST.
Good Morning Stock Fans!
Today's Play of The Day is: America Online (NYSE:AOL)
America Online (NYSE:AOL) is looking very good at current levels to make a move to the upside. To back our play up today we have covered all the bases we think! Test us and see!
1.) AOL has had 2.2 million in block buys go in it in last 3 days from 62-66 area. One of the blocks was close to 1 million shares at $66.00. That could have been perhaps Fidelity going back into AOL. In any case fund mangers were busy the last 3 days buying AOL as it bounced off of $60 area.
2.) AOL has news yesterday that its online memberships has increased by 27% since December 6, 1999. AOL said it totals 22 million in members now. This news is very interesting when you look at AOL's share price between Dec 13, 1999 AOL $95.81250 was the high. Yesterday's high was $68.00. To put this in better perspective AOL has seen its share price drop almost 30% when its memberships have grown buy almost 30% since Dec 99. What this say is AOL might just be 60% off where it should be valued on earnings April 25 "$108.75" Not such a stretch is it?
4.) Ahhh... those OPTIONS that we check. Sets up well here to as AOL has over 5,000 contracts traded on the April 85 Option Calls. (Symbol:AOO-DQ) They expire on April 16, 2000 just. Hey how bout that 1 week ahead of AOL numbers. It looks very much like AOL could find 90's by earnings. It all seem to be setting up before our eyes as a great many traders have skipped 70's 75's and 80's options and gone right to the April 85's. We call this OUT OF THE MONEY Options trading. When traders buy up an option more then $5.00 off its current levels in more then normal volume it is called "out of the money" It is 70% or more a dead giveaway that somebody knows something. They seem to be saying AOL $85.00 by April 16, 2000.
5.) The AOL trading graph of late shows AOL is in an area already that if it can break it (That area of $67.00) it can judging by Oct 29, 2000 break out and run like it did from 67- not stopping till it found $95.81250 on that (there's that day again) December 13, 2000. The chart really shows a major AOL break out from October 29, 2000 till December 13, 2000.
6.) I know I have not called AOL. AOL -TImeWarner at all in this piece thus far. Ok ... AOL-TWX, here is my take on the marriage of AOL-TWX. Henry Blodgett said he liked the marriage, and said AOL might test 50's before it comes back and find $88.00 over next 6 months he said in late January 2000. He was darn close to right as AOL lost 50's only for a day or 2 and came back. AOL -TWX if you remember I said over and over it had no "Collar" meaning AOL could drop to $30.00, $20.00 whatever and the AOL TWX takeover would still happen and still TWX shareholders would only get same shares of AOL if it were there or trading at just under 90 where it was ahead of the deal. This was a dead giveaway that AOL would come back and 48 - 67 is a nice move back already. AOL has been tested as a non Internet Stock with the slower growth rate of TWX inside it for all intensive purposes. Sure the merger will not go through for sometime but AOL is worth 68 not on a Net Stock scale but instead on TWX's scale. No, its not the exact same scale as TWX 's but then again AOL is included in the TWX deal. Therefore to not confuse AOL is not ahead of itself its behind. It's current share price shows that people believe again that AOL is top Media Metrix said yesterday AOL was most visited site in February 2000 period! More then even YAHOO!. We will look for AOL to trade 30 million shares today as it has traded 19 mill and 20 mill this week and dropped back. However, it traded almost 30 mill on Friday and ran up nice. It looks like it would have traded over 30 mill yesterday but the Fed decision slowed it down. Today with that out of the way AOL should begin its run!
To sum up today's AOL selection as our Play of The Day. I ask any of you to call up CNBC and I will bet my AOL shares all 500 of them at $64.3750 that not one fund manger says AOL is not a great buy short term and long term. Remember in late November when they said AOL wasn't a short term buy it was just to high? Well, that talk has subsided and with many of you seeming to have your trusty fund manger go into AOL over the last week or days. We might as well follow those boyz and girlz as they seem to think AOL is ... Wow I never thought I would say this a VALUE PLAY! ... ( almost 30% increase in members since Dec 99 and a 30% drop in stock price. That may just say it all!
KEY INDICATORS: AOL
Buy Area: $66.8750-$67.75
Sell Stop: $62.43750
BUY MORE on weakness: $64.00-$63.00
BUY MORE on strength: $72.00-$74.00
Time Frame: April 16, 2000
Type of Trade: Swing Trade
KEY TO TRADE: AOL reports April 25, 2000 after the close. AOL April Options expire 1 week prior to that. Also AOL volume estimated to be 30 mill plus today to take it to $72.00- $73.00
"RUN THE OPTIONS!" AOL
The Stock Options we like off AOL play are the AOL April 16, 2000 85.00
Call Options (Symbol: AOO-DQ Last Ask - $0.93750 yesterday. 3/10/2000 -
3/21/2000 volume 5,600 contracts. over 2,000 yesterday.
Out of the money option buying ahead of earnings sets up well for
anticipated AOL move to $85.00 by April 16, 2000.
BONUS PLAY: #1 - Xerox Corp. (NYSE:XRX)
Are you kidding me? Xerox? Anybody not know what Xerox does? Just in case you've arrived from Planet Claire, Planet X, or just Mars, they are the largest manufacturer and marketer of copying and printing equipment inthe world, almost as well known by their tag line "The Document Company" introduced in 1994. Since 1980, Xerox and Fuji Xerox have won 25 national quality awards in 20 countries, including one of the world's prestigious on two occasions: the Malcolm Baldrige National Quality Award -- for Xerox Business Services in 1997 and for Xerox Business Products and Systems in 1989.
Since March 9th, XRX has been clawing its way out of the basement at $21 on what we hope will be a stairway to heaven. That's roughly when XRX announced they would offer low-end inkjet printers to compete with HP. Investors responded nicely given that XRX had been looking for a way since October to entice investors back into the issue with a good revenue story. Recall that in October, XRX warned it would miss its numbers for that quarter. With a settlement at hand yesterday over its six patentdisputes with Hewlett Packard, XRX made its biggest 1-day gain in at least six months. Volume today was huge at almost 10 mln shares traded - 54% greater than the ADV. Support now is at the 5-dma of $26.54. Intraday, it can be found at $26.50 and $27.50.Target shoot at those levels expecting some backing and filling from today's move. Earnings are confirmed for April 25th.
Xerox's success against HP rests on the recent announcement of a Xerox, Sharp, and Fuji Xerox link up that has the total investment by the consortium exceeding $2 bln to develop, manufacture and market those low cost printers. XRX told analysts it hopes to have 10% of the market within four years from the 1% share it has now.
KEY INDICATORS: XRX
Buy Area: $27.50 - $28.50
Sell Stop: $25.25
Time frame 2-10 days
Type of Trade: Swing Trade
RUN THE OPTIONS : XRX
The Stock Options we like here are the April 16, 2000 $30.00 Calls (Symbol:XRX-DF) last If we are right in our prediction those options would be worth $5.25 at least if stock hits $35.00) Look at the volume on this call yesterday! 6.23k!
BONUS PLAY #2: Light Path (NASDAQ:LPTHA)
LightPath (NASADAQ:LPTHA), manufactures its proprietary collimator assemblies and GRADIUM(R) glass products at its headquarters in Albuquerque. The Company has recently announced the opening of a second office in Warren, NJ for the purpose of development of various optical switch products. The Company has 18 U.S. patents, plus 8 more pending, associated with its optical technologies. In addition, various foreign countries had issued a total of 7 patents with 10 patents pending.
The 30 day high on this stock when the NASDAQ was trading over 5,000 was almost $68.00. it just missed it 30 day low yesterday as it bounced for the second time in as many days at $36.00. it had bounced just 2 days earlier at $36.00. The drop on both days was still off its 30 day low by $1.00. The volume in both drops was on less, and the it also created ranges off both drops of 4 plus points. The stock closed yesterday at $44.00. Incidentally that was its low on March 15, 2000 the day the NASDAQ came back to 4800. What this says is that LPTHA should if the NASDAQ can find 4800 it should find $51.00 its high on March 15, 2000. This sets up as a nice play today. However we like LPTHA to open at $45.00 or pop to that level on no volume or low volume. We like a re test back to $41.8750-$42.8750 ahead of the predicted move. If LPTHA can trade 1.6 million shares today in an up market we really like it to see 49.00-$50.00 in next 2-3 days.
KEY INDICATORS: LPTHA
Time Frame: 2-3 days
Type of Trade: Swing Trade.
REPLAY: If LPTHA loses $41.00 and we stop out today. We will set a Limit
Buy at $36.75 to buy back in as $35.00 is where it seems to have plenty of
buyers and bounce back 3-4 points each time.
STOCKS ON OUR SCREENS TODAY:
XYBR - CNBC piece was positive it has had a nice run we may sell on open
today. And wait for retrace back under $20.00.
DSGX- We like the range back up to $66.00
AMGN- We like 65-66 next 3 days.
NTRX- It looked great as we called it as a oversold bounce on volume off 18.8750 area. it looks great to come back to 24-25 area 5 days maybe less.
APCC- We will sell this one on open today.
DLK - We will sell this one on open up gap we are hoping for today. We played it from 68 - 81 not bad for a 1 day move!
ORCL- if NASDAQ can keep going up we like ORCL to $85.00, we bail today if it loses $80.00
RNWK- Back to $65.00
EXDS- We know about the $285.00 Target. We can't see EXDS breaking 200 in next 30 days. If it does we short it but we stay long to $190.00 area 177 all time high this last 30 days it came.
YHOO- We shorted at 192.50 yesterday it ran to much we like it to find $165.00 again. At 209 we will be proven worng and cover.
SCII- We like the come back it made 37-53. We like a 48 retest then a move to $50.00. sell stop $43.00
ISLD- Due for a bounce. We like mid 80's low 90's
DCLK it has trouble with $100.00 if it can break 100.00 " not on a gap upon open" then it may see $112.00 area. If it can't break $100.00 and drops back to 96.00 we short it to 92.00 for 4 points in the range.
CYBR- may make it back to 25.00 on increase in volume.
GBLX- Looks ready to bounce
DIGX - oversold went green near close.
PWAV- oversold should come back 5-10 today
SMSI - bounced back 24 is top of range. then back to $20.00
EGRP - oversold
NITE - looks good here
SWS- It just needs more volume!
CC- Looks overdsold may follow BBY's move.
ACLA- A Bio-Tech IPO yesterday. It competes head on with a stock that was trading as high as 202 just 2 months ago CALP. CALP currently trades at 81.00. With ALCA under $35.00 and in bed with just as big of names as CALP we fell ALCA opened lower and traded lower in pre Fed NASDAQ down market and Bio Techs getting slammed didn't help. We like ACLA to find 40's perhaps 50's if it gets going in next 3 trading days!
Have a great day!
More to come....
and Team of Pro Traders!