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Hello out there stock trading fans. Looks to me that we are going to have a split market for some time on the
NASDAQ. Many NASDAQ stocks still look very strong, and the NASDAQ has been the place to be for the past
year.
Many of the defensive stocks that made nice advances on the N.Y. during the massive sell off in October and
November are in a nice decline now. Brokerage stocks are heading south and construction stocks took it on
the chin,on Friday. All of these groups tell a story.
The construction stocks are very interest rate sensitive. The utility index has closed on the 50 day moving
average line and looks to break below this line.
The Dow Jones Utility average has just completed a head and shoulders top. In fact, it has just broken the
right shoulder of this formation to the downside. This is not good for those of you in long position.
The brokerage stocks are tuned into the markets movement. If the market goes down, then trading will dry
up and so will their earnings. The largest and the best brokerage stock to track is Merrill Lynch. It has just
had a small base failure, similar to Schwab and DLJ.
The defensive stocks are very conservative and coming in with poor earnings. Gillette (G) last quarter came in
with 1% growth in revenue. Albertson’s Inc. (ABS) had only 6% revenue growth. And there are so many others.
Can you imagine this; Gillette (G) has a P/E of 46. I think this is such a great short… at $115. It is also poised
to break the 50-day moving average line, meaning this stock could drop to 98 or so. It will then come into
contact with the 200 day moving average line and should nd some support there.
I do think that there are many, good stocks out there to own. I just not in favor of being long stocks as
interest rates are backing up. We are so very extended here after a very nice market gain of 25% from the
lows of December. In the beginning of a new Bull move in the market, it's easy to own a basket of stocks as
almost all of them go up. But in this type of market, where you may have half of you positions going down
and the other half going up, your net gain is almost nothing, as your loses will off set your winners. However,
if you cut you losers fast by using your rising trend lines, and you keep your stop loss points set high, then
you will probably still forge ahead. For a little while that is!
For those of you who are not yet technically versed, Let me enlighten you on one of the better yardsticks of
stock extension measurement. This will give you a good idea of where we are in this market on some of the
big movers. Maybe you even own some of these stocks. I'm refering to the 200-day moving average line. As
stocks start their big move, they are generally close to the 200-day moving average line. Maybe they are 30%
above the 200-day. So for example, if a stock is at $27 dollars then the 200-day is at 20 or so. Such was the
case with CMGI back in December. Then the stock had a nice breakaway gap in early December, climbing
steadily to $107 this past week.
Many Technicians consider a stock very extended at 100% above the 200-day. A stock is extremely extended
at 200% above the 200-day. All stocks have very nice breaks in their price when they are above the 200 day
by at lest 200%. It may take a few weeks or even a month, but break hard they will. CMGI and a few others
that I will list here are at 300% above their 200-day moving average line. For those of you that would like to
buy these stocks here and believe that this market move will not end, please come and talk to me as I have a
few nice bridges to sell. And that's not all, how about a nice used Yugo.
So here is my list of very extended stocks that are poised to connect with Earth again.
CMGI (CMGI) - $87

Look to be a $40 to $50 dollar stock by August or sooner.

Chancellor Media (AMFM) - $42

I gave you this one in November at 54 then stock split 2/1 then went to $50. Short here and look to cover at the 200 day at
$34.
Complete Business Solutions (CBSL) - $32

May have to wait a little before the next big break. Short the right shoulder, cover at $22.
Earthlink (ELNK) - $65

200 day is at $30 and I think this stock should get close to it. May take 8 weeks or more.
LHS Group Inc. (LHSG) - $124

P/E of 223 and earnings and revenue just reported are at versus last quarter at .17 cents a share. Look out below… could
become a $50 to $60 stock in 3 to 4 months.
Mindspring (MSPG) - $71

200 day is at 34 and the stock has started the sell off. Stock should see $50 by July.
Steiner Leisure (STNRF) - $47

Has just broke the right shoulder of a head and shoulders formation. 200 day is a 31. May break harder after earnings due out
this May 1.
Syntel Inc. (SYNT) - $31

Stock had a grand run from $15 to $60 in 11 weeks. Now has spilt 3/2 and has started new down trend. Stock is new IPO in
August so there is no 200 yet. Look to cover at 20 or so.
Go 2 Net (GNET) - $28

Finished blow off top and now breaking hard. Tried to rally on good news and then failed. May have to wait a few days. Short
any strength you can nd. Looks to be a $20 stock or less in a few months.
Before I get to the N.Y. stocks to sell short, I would like to say one thing. “You folks know that I have been
doing this for a very long time. One thing that never ceases to amaze me is that in a few years we will look
back at most of these stocks, and won't even be able to nd these stocks, except in the dog pound at around
$3 to $5.”
Remember Spyglass? A new issue that went from $20 to $80 then collapsed to $4, in two years. I believe that
almost all NASDAQ stock are to be traded and not held for more than 2 to 4 months.
Now on to a few N.Y. stocks
Best Buy (BBY) - $68

Had a nice move from $12 in August to $76 in 7 months. Now time to rest. I would like to short up here as the 200-day is at
38. Stock could come down to visit before it starts a new up trend.
Clear Channel Communications (CCU) - $92

Has just broken through the 50 and the group looks weak. Could see the 200-day at $75.
Medtronic Inc. (MDT) - $50

P/E of 41 and earnings growth of 15% and revenue growth of 5%. Cover at around $40.
Southwest Airlines (LUV) - $27

Has just broke the right shoulder of head and shoulder formation, set to move lower to maybe $20 or so.
Southern New England Telecommunications (SNG)

Growing at 3% per year and P/E of 23. Looking to break its 50-day here and could go to 53 in short order.
Well that's about it on the N.Y. board. Many of the N.Y. stocks have already broken down or will move to slow
to make it worth while to care about.
I would like to mention here that in August 1997, Warren Buffet bought 5 Billion in striped zero's on the heels
of the market collapsed in Asia. We know that debacle sent people scurrying to our markets in a ight to
quality. This helped push our interest rates down to 5.90% from 6.85%. Last week I hear that this guy was
selling those bonds. Maybe he too thinks that interest rates are beginning to back up.
I do see many of the Semi-conductor and related stocks making some decent moves here in the last few days.
Some are even at new highs. After this market correction or rest, and if interest rates stay stable, I think that
the market is telling us that this group could provide some good hunting. Many times some of the best
returns are when this group is out of favor. Some of the stocks that I will list here are that type of stock, like
the disk drive group.
Here are some stocks that look good to buy if you so chose to. Some our in the above group and most are not.
Western Digital (WDC) - $22

Braking out of a very long and tight base. This base will provide nice support and it's a very safe time to buy this stock. If
earnings start to come through here in the next 2 to 4 quarter this stock could see $60 in 18 months or so.
Sanmina Corp. (SAMN) - $88

Earnings just out and stock gapped up on the news. Now consolidating here for a cup and handle formation and set to go.
Buy point is $90.87. Earnings up 53% to .81 cents. P/E of 32. Earnings are just starting to expand. Group strength is low now
at 26 out of 99. In 6 months this group strength could be 85 to 90 or better.
Salton Maxim Housewares (SALT) - $11

P/E of 18 Last quarter Earnings of .40 cents. up 29% and revenue up 74% to 102 million. Earnings due out next week and
this stock could be a real sleeper. Buy point is $12 1/8. Only 5 million shares on the oat.
Semtech Corp. (SMTC) - $23

P/E of 23 and set to start a new up trend. Earnings up 60% to .32 cents.
Resmed Inc. (RESM) - $39

Earnings out and up 65% to .43 cents a share. revenue up 37% to 17 million and only 7.3 million shares total outstanding.
nice up slope trend here and set to go to $50? Buy here and set stops at 36.
Sun Microsystems Inc. (SUNW) - $40

Has found the bottom here and the stock is looking to go back to 50 in a month or so. A big cap stock and other big caps like
HWP are moving nicely.
Stanley Furniture. (STLY) - $49

3.4 million shares outstanding. Earnings out last week at .95 cents. Revenue up 16%. stock is on the move here in a big way.
Was a $30 stock in January. Stock has set up here to move again. Buy point here is $50.
Smart Modular (SMOD) - $24

P/E of 20 and earnings still decelerating but still growing way above the P/E rate. Growing at about 45 to 50 % per year. This
is a good value stock in the tech sector. If this group gets hot again this stock could see $40 dollars by October.
Radica Games (RADAF) - $19

P/E of 12 and this stock keeps putting me to sleep. One day this stock will wake up and smoke. 20 to 30 would be nice.
Pilgrim America (PACC) - $38

This stock could be the next T Row Price. As long as America is in love with funds this stock will do ne. P/E of 26 and
growing at about 100% per year.
Novellus Systems (NVLS) - $49

A nice looking base and the stock is set to move here. Buy point is at $50. Group strength is at an all time low of 6. This
could be a real good time to into this stock for longer-term appreciation.
Natural Alternatives (NAII) - $20

Stock has had a very good move going from $10 to $20 this year. Somewhat extended here but also has built the proper
base and could wake up to move from $20 to $30. Another vitamin and supplements stock. These stock have done very well
in the past, see Natures Bounty NBTY $20 to $60 this year. Buy point is $22.65.
Well that's it for now folks. I will have more for you during the week. By the way I think we are the next Tokyo
stock market. Onward to 40,000 then let's collapse. I will explain latter.
As always if you know anyone that would like this letter please have them send me there e-mail and I will be
happy to include them.
Daniel J. Zanger

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