Steve Zito, MS Fin/BS Econ Wharton School, HTML Writers Guild
uses economic and technical analysis to forecast the direction of the stock market. The views in this newsletter are opinions only, and should not be relied upon as advice on investment decisions.
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NASDAQ COMPOSITE
INDEX closed 1930.32

Why Brokerages are Trashing Nasdaq
Fri., Aug. 17, 2001

******************Commentary*******************
August 16. Back to Page Two Intel closed at 30.16 +0.38, above MA support at 30.15. RSI and MACD are neutral. Stochastics are positive and rising at 60%/60%. Intel is just marking time, which is the nature of a trading range. The low for this year was $22, which occurred in a selling panic on April 4, and again on April 9, when the Lehman Brothers analyst Dan Niles predicted that Intel would make fresh new lows this summer, predicting Intel would fall near $12. Needless to say, Dan Niles has been completely wrong. Intel has rallied to $32 five times and each successive low on Intel for the past two months has been noticeably higher, averaging 3.28% higher than the previous low.
Microsoft closed at 64.62 +1.42 below MA resistance 64.70. RSI and MACD are very negative, stochastics are rising at 42%/30%. Financial media is reporting the X-Box is late. Is that why Microsoft went up today? Last November, Microsoft traded sideways in major distribution from $70 to $72, just before plunging to a low of $40 in December, about the time I started to recommend it. Microsoft owner Bill Gates has been selling his shares all year around $72. Why buy it if Gates is selling?
Cisco closed at 17.48 +0.48, below MA resistance at 17.60. RSI and MACD are still negative, and stochastics are very over-sold at 20%/15%. On August 8, Cisco Systems broke through its short-term uptrend, after Cisco's quarterly earnings report revealed that management is focusing on short-term profits instead of long-term growth. Cisco could easily go to $10. In April 2000 at $80, I said Cisco's growth was fueled by its acquisition of small fast-growing networking firms, and eventually fewer quality candidates would be left available to purchase. Cisco will never have 70% annual growth again like the TV media pundits preach.
Oracle closed at 15.31 +0.30, below MA resistance at 15.60. RSI is poor, MACD is the most negative in months, intermediate stochastics are deeply over-sold at 15%/20%. Oracle has great support around $14, for a risky trade to make $3.50 per share on any over-sold bounce back to $17.50. November 15 call options are a good play if Oracle does trade below the $15 option strike price again. Shares of Oracle plunged from $21 to $16 on March 1 and March 2 when CEO Larry Ellison claimed that his customers had deferred large orders on February 28. Now there are rumblings that the same message will be delivered at the end of August. Oracle was $20 just a few weeks ago.
Worldcom closed at 13.89 +0.07 above MA support at 13.80. RSI is neutral, MACD is positive. Stochastics are very over-bought again at 82%/78%. Worldcom has the lowest risk of the largest Nasdaq stocks, profitable, with earnings, cash flow. WCOM could rise to $20 by September 30. Worldcom has a lower Price/Earnings (P/E) than the S&P 500 top down 2001 P/E estimate of 25.8. Worldcom September 15 call options should be a winner if Nasdaq rallies in earnest after the first week of September.
Dell closed at 25.38 -0.12 below MA resistance at 26.40. RSI and MACD are negative and starting to look like the worst readings of the largest Nasdaq leaders. Stochastics are still falling at 13%/20%. Operating earnings were reported Thursday at $0.16 a share (net loss included extraordinary charges). With a P/E of 39.65, Dell is an extremely over-valued risky stock in a mature PC industry, and headed to $21. After listening to the Dell COO on the earnings, I believe the stock could go even lower than $21 by next December.
Sun Microsystems closed at 14.71 -0.06 below MA resistance at 15.80. RSI and MACD are negative, stochastics are really over-sold at 0%/10%. Sun Microsystems had been on a "break-out" to $18 from a low of $13.50 on July 11 after being trashed by endless Goldman Sachs downgrades between May 29 and July 6. If Nasdaq cracks in a selloff to 1760, Sun Microsystems will be a buy at $11, but use a Stop Loss at $10. For more on how to easily use Stop Loss orders to protect from brokerage downgrades, please read my Trading Tips Page and always use them in Bear Markets.
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