The Play Of The Day
March 27, 2000
07:45 AM EST.
Good Morning Stock Fans!
2 MONTH NASDAQ MARKET OUTLOOK: MARCH 27- APRIL 27, 2000:
Stock Fans! I tell you a good way to lose some stock pals is to call this NASDAQ market, one that I was BULLISH on since I predicted the NASDAQ to rise into end of October 1999. Many of you remember me saying I like us to begin a NASDAQ run into the end of the year upon setting back our clocks for daylight savings the end of October 1999. I told you all as September ended I would go in this market big and long come Oct. 25, 1999. I was right as the NASDAQ really hasn't looked back since then. I was LONG the NASDAQ (for the most part except some range plays here and there shorting stocks selling off their highs on lost momentum) until this past Friday when I saw what I forewarned would tell me the top had come on the NASDAQ. I said what I would look for at the top was rising stock prices on less volume. If you remember I said I loved the NASDAQ to "Keep Keepin On!" until it rose abruptly on LOWER VOLUME this past Wednesday following the FED latest rate hike of 0.25%, a very BEARISH (down sign). The NASDAQ sold off from 5,000 into the FED rate increase last Wednesday as it pulled back and found the 4550 mark for the second time in as many weeks. I really believe from what the NASDAQ is saying to me is if the FED was have raised rates 0.50% then the NASDAQ would have probably tested the 4,000 area since we had already dropped 600 plus points into the increase date. The NASDAQ seems to be saying since we didn't let the FED cool the NASDAQ off that it is going cool itself off as it is heavily shorted and has risen faster with wider ranges since last Wednesday on LESS volume.
To explain why the it is more often then not viewed as Bearish for the NASDAQ to rise sending key stocks in its index to all time highs in the process. Let me use the following example to help illustrate to all of you why this can be so BEARISH.
Let's say that this website BigPlayStocks.com was publicly traded company like the NASDAQ stocks are. Let's for fun assign it the example symbol... Let's use the symbol BPSC to identify BigPlayStocks.com. Now lets for a moment say that BPSC has just 500 share publicly traded. I use such a low amount of shares to illustrate what it most often means when stocks rise more then they did on higher volume in less time. Ok, now Lets say of those 500 shares there are 10 buyers wanting shares. Now this is the easy part are Supply is 500 are demand is 10 since we have 10 buyers right? Ok, now assume that BPSC has someone who wants to SHORT 300 shares of the 500. Meaning they are betting on the price of the shares to drop. Is there now less Supply on BPSC? Yes, of course there is. Also assume we still have only 10 buyers. So does the price of BPSC increase? Sure it does. See when shares are SHORTED they are not available to trade in the public float. Therefore its all about Economics 101 right? Sure it is... If Supply is low demand and is the same or imagine this as in NASDAQ's case even lower (as we have risen from last Wed to see CSCO, ORCL to name just 2 all time highs on 2/3 less the volume it took for the NASDAQ to find its all time high on March 10, 2000) volume of late. I look at ORCL for example and it seems to be saying to me that it has less Demand but since Supply is so low because of market technicians taking shares out of the float Short it actually rises in this case to all time highs on less volume.
Hopefully many of you understand after the preceding example why the NASDAQ rising on much less volume since Wednesday of last week understand better after that example of what I mean when I say a stock going up on LOWER volume is generally BEARISH. You all should have learned one time or another in Econ 101 that in order to raise a products price demand for that product must be higher.
Now let me also clear this up. I am not saying to all of you that you should short as I am only allowed to tell you what I am doing. I remain a BULL. In longer term its just that currently it makes much more sense for the NASDAQ to pull back, and adjust to avoid further FED interest rate increases as well as make room for the NASDAQ to rise on upcoming better then expected earnings and still stay away from increases that will bring further FED rate worries. The NASDAQ must then adjust to account for a move up and stay away from to much of an increase.
Stock Fans, as I have said time and time again as I put my neck on the line and try and not just tell you why I feel the NASDAQ is due for a correction ahead of key NASDAQ index stocks ahead of their earnings report. I also point use as much information to back up why it looks to me that a correction is coming very shortly. I may be wrong in this prediction. If I am then yet again we will all be able to look back at this day and see why I was. There is one thing very much a positive as the NASDAQ is a current levels just off all time highs. A little caution if you are long stocks and decide to stay never hurt anyone? Right?
Special Note: SHORTING is much more risky then going LONG. The reason SHORTING is much more risky is because of the following. If you are short 100 shares of lets use as an example ORCL you are betting on the price to drop. You must Sell Short to have interest in the shares. So when you do this you pay the same as what you would going Long ORCL. If ORCL's price is $88.00 then 100 shares is 8,800 to buy. Ok but unlike going Long on a stock you can't lose more then you invested. However in a short you very easily can. If ORCL goes to $90.00 you are now down 2 points so you now OWE if you cover here 2x100 or 200.00 more then you originally paid. You, can't hold a short and wait for time to bring it back down in this case like you can when you go long. So the big risk that you want to avoid at all costs is commonly refereed to as a SHORT SQUEEZE. This is where the shorts on a stock much do what's called COVER as they may decide they are losing to much or their broker margin may require them to cover. In Short ( no pun intended before you decide it makes sense for you to short a stock please make sure you are aware of all the risks! A short squeeze has wiped out many traders over the past 5 months!
The Stock Jock's NASDAQ - 2 Month Outlook -March 27, 2000-May 27, 2000 Timeline:
March 27- week of April 21, 2000: Range: 5050-4180 (perhaps lose 4,000)
Short NASDAQ index stocks, and NASDAQ index or
Use caution on stocks that are held in long positions, and implement tighter sell stops to protect gains as the NASDAQ should drop to its year low the week of Monday, April 17-April 21, 2000. The reason for this is the current stock options bet on the NASDAQ expire on April 21, 2000 (The third Friday of April.)
Monday, April 24- Friday, April 28, 2000: Range 3950-4340
America Online has already alluded to better then expected earnings coming when they report on Tuesday, April 25 following the close. We like AOL to take the entire market on its back and run into April 21 close form off of the $62.00 level to go as high as perhaps $88.00 by Friday, April 28. Also in this key week other big name techs and nets will report numbers such as: CSCO, QCOM, INTC. All of them should be better then expected.
Monday, May 1- Wednesday, May 16, 2000: Range: 4340-5290
May 17- May 27 Range: 5290-4900
During this period more tech and net stock report their quarterly earnings with DELL reporting its quarterly numbers last on Wednesday, May 16, 2000. I like the NASDAQ to run up all of the first 2 weeks of May off better then expected earnings after bottoming the week of April 17, 2000. However as DELL reports that ends the earnings season and I look for the NASDAQ to slowly sell off as June and summer approaches.
Today's Play of The Day is: (SHORTING) Cisco Systems (NASDAQ:CSCO)
Cisco Systems (NASDAQ:CSCO) this past Friday on yet another split taking place on CSCO It saw its market cap increase to almost the likes of the worlds most valuable company Microsoft (NASDAQ:MSFT). However I am looking for it to be a short lived move as with CSCO latest split taking place a 2 for 1 split added in 100% more shares. In doing this CSCO should have traded big volume to have the share price cut in half. However the latest volume was not even close to double CSCO 30 day average volume and CSCO still went higher. In fact it went up more then 10 points last Thursday and Friday after it split 2 for 1. It looks very much like since Wed, the day the FED increased interest rates .25 that market technicians have been shorting shares of CSCO along with all the other NASDAQ Key Tech stocks in the index.
Therefore I will look to SHORT shares of CSCO today right off the open as it should gap up to perhaps as high as $81.00 -$82.00. To have CSCO run both ahead of a split and after a split on much less volume tells me CSCO is a much better bet to see 60's then it is to see 90's.
KEY INDICATORS: CSCO
Sell Short Area: $81.00-$78.8750
Cover for a Loss: $86.1250
10 DAY TARGET:$68.1250-$68.6250
20 DAY TARGET:$62.25-$63.50 (CSCO 30 day low $62.00)
Type of Trade: Swing Trade
VOLUME WATCH: The next time CSCO trades
RUN THE OPTIONS: CSCO
The best Option Puts to play here are the April 21, 2000 $75.00 Option Puts
Bonus Play #1: Integrated Device Technology (NasdaqNM: IDTI)
Integrated Device Technology, Inc. (IDT) enables a digitally connected world by providing innovative semiconductor solutions to leading-edge system designers in communications. IDT's broad product mix consists of communications memories, networking devices, RISC microprocessors, high-speed SRAMs, and high-performance logic and clock management products. Headquartered in Santa Clara, California, the Company employs approximately 4,800 people worldwide and has manufacturing facilities in California, Oregon, the Philippines, Malaysia and Australia.
IDT Expands Communications IC Presence With New Telecom Products; Company's TSI Switch Family Targets the Convergence of Voice and Data Networks.
Stock Fans, in Real Estate it is Location, Location, Location. With stocks it is all about timing. The timing indicators look good for this growing Company. MACD timing indicator has bottomed and is moving off its base. IDTI's earnings have been growing at a fast clip and with this hot sector. Looking for the breakout to new highs!
KEY INDICATORS: IDTI
Time Frame: 2-6 days
Type of Trade: Swing
Bonus Play #2: Immunex Corporation (NasdaqNM: IMNX)
Immunex is a biopharmaceutical firm that develops, markets, and manufactures innovative therapeutic products for the treatment of cancer, infectious diseases, and immunological disorders. For the fiscal year ended 12/99, revenues totaled $541.7 million, up from $243.5 million. Net income totaled $44.3 million, up from $986 thousand.
Stock Fans, playing the Barron's Baby Boomer age plays! They mentioned several stocks, but I plugged the symbols into the "grid" and this is the one that came out on top. This is a good stock for your IRA or 401k. The indicators and numbers are for the short term players. Timing indicators look great for entry.
KEY INDICATORS: IMNX
Time Frame: 4-7 days
Type of Trade: Swing
STOCKS ON OUR SCREENS TODAY:
AOL- It may test 68.00 as support soon.
NITE- This stock as many of the online broker stocks are way off all time highs in relation to the NASDAQ index. Therefore NITE may see mid 60's soon.
YHOO- This one we called right in ALERT EMAIL off 200 for 12 plus points on Friday now it looks like 194-165 as its range
WGAT- This one may break out in any market on more volume
APCC- It may find $44.00 then fall back under $40.00 again.
DCLK- We like it to test $88.00 soon
MSTR- We will look to short this one over $140.00
HSAC- It may move all it needs is positive volume
VDAT- Low risk here it should hold $9.00
EBAY- If YHOO hints towards no deal this stock get hammered to under $195.00
AMTD- It may run off NITE
EGRP- Another key online broker
ONVI -Quite period ends today
PALM- Quite period ends today
COMS- This one we like to find low 50's soon. it belongs at $45.00
QCOM- Due for a pull back to $120.00 maybe $110.00 area.
ORCL- This one is bet heavily to not see 95.00 I think 90 is a strench. 90-62 maybe its low by April 17-April 21, 2000.
INTC- Its bet heavily to not break $145-$150. It may see $108.00 soon
EXDS- The are chasing $200.00. We like it to fall to $137.00 again soon
SMSI- back to $15.50 then $10.00
MZON - We shorted at 16.59 and hold short for $10's- then $9's
LPTHA- We stay short looking for a drop under $50.00 today
IPIX- Worth Watching.
STOCKS PROFILED ON CNBC POWER LUNCH TODAY:
GMGC- Tom Dorsey, our favorite analyst on CNBC called GMGC as a DOUBLE off $11.00 2 months ago. It came close getting to $18.00. it may add on $3.00 today on big volume ahead of CNBC.
WCII- This one is undervalued at current levels to other companies in the space are. valued higher. It may see $65.00 in the next day or so then drop back with market.
Have a great day!
More to come....
and BigPlayStocks.com Team of Pro Traders!