Welcome to the Moderate Trader. Within these pages a potential investor can easily find information that will be helpful when making the decision to buy or sell a stock. These factors are explored in detail in the section titled “Investing."


On February 7, 2005 Travelzoo Inc., (NASDAQ symbol: TZOO) closed at $60.21 per share. Read on to see how we rate this stock. We are also featuring Schering-Plough Corporation (NYSE symbol: SGP) that closed at $19.41 per share on February 7, 2005. . Those wondering whether to buy or sell these stocks will want to read the Buy & Sell section.


In our Model Portfolio section, investors will find a brief description about each stock in our portfolio, our target level at which to buy these stocks, approximately when to sell them, and at what price level.


Read our Buy Alert section to find out which stocks will be bought when they reach our target levels.


For your convenience we have listed the stock split dates and change in value for each one of the stocks held in our Model Portfolio in the section titled Model Portfolio Chart


In May 2002, we started a section called New Investors with a list of stocks provided in Model Portfolio II that may be bought by investors who are just starting to build their stock portfolio.


We welcome your questions, or comments. Please E-mail them to: webmaster@moderatetrader.com

JESSICA BEZOLD, Editor

Your New Year’s resolution may have been to lose weight, exercise, and contribute to your 401(k) plan. If you haven’t done the first two, make sure you do the latter. Although at this time the market could be overvalued, each individual who has a chance to contribute to a 401(k) plan should do so.

Employees who received a bonus by the end of 2004 and haven’t spent all of it yet, should consider contributing the balance of their cash to the 401(k) plan now. We believe that the market is overvalued, therefore investors should consider investing their cash in a short-term bond fund or a money market fund. Many employers offer a matching contribution that could be as high as 40 cents per each dollar that you contribute. At such a rate, for each $1,000 that you contribute annually, your employer will give you $400.00 and add it to your 401(k) plan. That’s like receiving 40 percent interest on your money at a time when bank CD’s are yielding as little as 1.75 percent.

Furthermore, your funds in the 401(k) will grow, free of taxes, until you start making withdrawals when you retire. Individuals who are already in a 401(k) plan should continue making their contributions and ones who aren’t should join the 401(k) plan offered by their employer as soon as possible.

As investors continued to commit money into stocks and stock mutual funds in January, the market continued its uptrend. It is surprising, because the market may have already reached its top. Many stocks are trading at sky-high P/E ratios but it seems that investors’ fear of missing the last leg of the rally is much greater than the fear of market correction. Perhaps these investors do not take market correction into consideration and that is why they don’t acknowledge that stocks could fall, causing them to incur a loss of capital. Does anyone remember the year 2000 and the euphoria that was prevalent among investors?

On February 7, 2005, the Dow Jones industrial average closed at 10715.76, down 0.37 points, while the Nasdaq composite index closed at 2082.03, down 4.63 points. The market is overvalued. Speculators who have cash on the sidelines should wait patiently and then start buying stocks when they reach their low levels. Many tech stocks may test their support levels by mid August 2005, or October 2005. Some of these tech stocks may never again reach such low levels. On the contrary, three years from now some of these tech stocks may revisit their previous highs and reward investors with gains as high as 600 percent.

As far back as in January 2002, we stated in Investing, “Warning! Speculators who have marginal accounts should minimize the margin level as soon as possible. Sell some of the stocks in your account during the market rallies in January 2002. Bring your margin level to zero, if possible. Speculators who do not bring their margin level to zero should be prepared to have enough cash on hand to add to their marginal account.”

We believe that the market is still in a secular long-term bear market and the extensive gains achieved during 2003 and 2004 were due to a bear market rally. Speculators who are still on margin should sell some of their blue chip stocks before they generate a loss. Continue to build your cash position. The market is overdue for a correction and when that happens the Dow could fall 15 percent, while the Nasdaq composite index could fall 30 percent. In a worst case scenario, some of the technology stocks could fall as much as 70 percent.

If that were to happen these marginal accounts could generate margin calls and many speculators may not be financially ready to meet them. Investors and speculators should always remember one of the most important trading rules: Do not hold a stock on its way down.

Cash is king! Investors should preserve the cash they have on hand and then start to accumulate equities at a moderate pace when they reach our buy target levels. Initially, do not commit more than 20 percent of your cash to equities because it could take this lengthy bear market several more months to reach its bottom.

As of Monday, February 7, 2005, after the market closed, the asset allocation in our Model Portfolio was 12 percent equities and 88 percent cash

Applied Materials, Inc., (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The company produces systems that use physical vapor deposition technology, chemical vapor deposition, and oxide etching.

On April 3, 2000, this stock closed at a high of $57.44 per share, after a 2 for 1 split was issued on March 16, 2000. Afterwards, as the money flow started to fall, this equity proceeded to descend.

On July 16, 2001, this stock fell to a low of $41.95 per share and then closed at $45.86 on July 31, 2001. In the September issue of 2001, we stated that AMAT could fall to $39.00 per share in September and at such a level would be a strong buy. Due to the horrific events of September 11, 2001, this stock fell tremendously and closed at $27.87 on September 27, 2001.

The company issued a 2 for 1 stock split on April 17, 2002. After the stock split there were 320 shares in our Model Portfolio. Immediately after the company issued the stock split, this stock reversed its uptrend and proceeded to fall. On May 10, 2002, this stock closed at $23.70 per share. During the next four weeks money flow fell $1.4 billion and the stock closed at $19.83 per share on June 14, 2002.

On November 15, 2002, AMAT closed at $15.83 per share. To our surprise, money flow rose $701 million during the next twelve days and this stock closed at a high of $17.49 per share on November 27, 2002. Afterwards, money flow proceeded to fall and this equity closed at $14.31 per share on May 16, 2003. On July 21, 2003, AMAT closed at $17.87 per share.

To our surprise, the money flow rose $4.2 billion during the following four weeks and AMAT proceeded to test its resistance levels. This equity closed at a high of $20.73 per share on August 21, 2003, and we stated: “At such a level this equity is overvalued and short-term may have no other way to go but down.” On September 22, 2003, AMAT closed at $19.67 per share.

Afterwards, as the money flow rose $5 billion, the stock reversed its short-term downtrend and proceeded to ascend. On October 20, 2003, this equity closed at $21.60 per share. During the next three weeks, as the money flow rose $5.4 billion, this stock proceeded to ascend. On November 6, 2003, AMAT closed at a high level of $25.61 per share. At that price level this equity was trading at 206 times earnings, which is almost unimaginable (does anyone remember the stock market bubble?). On November 6, 2003, this stock closed at $25.61 per share and was fully valued.

On January 16, 2004, AMAT closed at $24.41 per share and we stated: “While there is a very slight probability, depending on the positive money flow and other factors, that this equity could ascend and reach approximately $27.31 per share by February 17, 2004, afterwards this stock could fall.”

The money flow fell $3.7 billion during the next four weeks and the stock proceeded to pull back. On February 17, 2004, AMAT closed at $21.94 per share. In February 2004, we stated: “Although there is a very slight probability that this stock could still ascend and reach a high of approximately $27.31 per share during the next three weeks, the downside risk outweighs the upside potential.”

On April 12, 2004, AMAT closed at $22.84 per share and then proceeded to descend. This equity broke through its support level of $20.20 and closed at a low of $18.12 per share on May 3, 2004. Afterwards, as the money flow rose $2.5 billion, this stock proceeded to rebound and closed at $19.97 per share on May 28, 2004. On August 27, 2004, this equity closed at $16.36 per share.

In August 2004 we stated: “If the money flow were to fall $9.6 billion during the next two months, this equity could fall to a low level. This stock could fall at a slower pace than we originally believed and although it may not reach our initial projected low of $6.27 per share, it could close at a low of $10.35 per share by mid October 2004. At such a price level we would rate this stock accumulate.”

To our surprise, money flow rose $2.9 billion during the next four weeks and the stock closed at $16.49 per share on September 30, 2004. On September 30, 2004, we stated: “Depending on the money flow and other technical indicators, short-term this stock could reach $18.07 per share by mid November 2004.”

As the money flow rose $4.5 billion during the following 6 weeks, this equity proceeded to ascend and closed at $17.65 per share on November 18, 2004.

This stock closed at $17.89 per share on December 3, 2004. Afterwards, this equity proceeded to test its support levels and closed at a low of $16.76 per share on December 20, 2004. Then, as the money flow rose $1.8 billion between December 20 and December 30, 2004, this stock proceeded to ascend and closed at a high of $17.89 per share on December 3, 2004.

Afterwards, as the money flow fell $4.6 billion between December 3, 2004 and January 24, 2005, this equity proceeded to fall and closed at a low of $15.17 per share on January 24, 2005. Then, the money flow rose $1.4 billion and this stock proceeded to rebound. On February 7, 2005, AMAT closed at $16.72 per share.

In December 2004, we stated: “If the money flow were to rise $3.1 billion between December 30, 2004, and February 10, 2005, this stock could break through its recent resistance levels. By February 11, 2005, AMAT could close at a high of $21.04 per share and speculators who bought it recently below $16.50 per share may want to sell it to lock in their short-term gains. Speculators should monitor this stock on a daily basis and if it were to close below $15.96 per share sell it immediately.”

Although this equity could once again test its resistance levels and reach a high of $21.04 per share, longer-term the downside risk is much greater than the upside potential. This stock could reach a low of $10.35 in the second half of 2005.

Long-term, this stock could reach $48.25 per share, perhaps by 2008. There are 160 shares of AMAT left in our Model Portfolio and these will be held long-term.

CMGI, Inc., (NASDAQ symbol: CMGI) finds, acquires, develops, and operates Internet companies. It is one of the world’s largest Internet investment companies. CMGI consists of three venture capital funds.

CMGI, Inc., has developed a strategy to acquire start-up Internet companies, and then either sell them outright, or sell a minority interest and reinvest the cash proceeds. The company has a history of acquiring successful Internet companies. To find out more about CMGI, Inc., visit the company’s web site at www.CMGI.com.

In the year of 2003, CMGI, Inc., sold some of its core holdings. Among them were the Alta Vista unit and uBid, Inc. Due to these sales we have revised our long-term sell target level from $59.75 to $17.50 per share.

The shares of CMGI, Inc., closed at a low of $0.29 per share on August 19, 2002. Afterwards, as the money flow rose $534 million during the following 11 months, this equity proceeded to ascend. On November 14, 2003, this stock closed at a high of $2.12 per share. As the money flow fell, this equity edged to a lower level and closed at $1.78 per share on December 31, 2003.

Afterwards, as the money flow rose $346 million during the next three weeks, this stock established a very strong uptrend. On January 22, 2004, this equity closed at a high of $3.10 per share. Since then, as the money flow started to fall, this stock reversed its course and proceeded to descend.

On December 19, 2003, we revised our rating for CMGI from a speculative long-term buy to a speculative long-term accumulate. On February 17, 2004, CMGI closed at $2.65 per share and we stated: “Speculators may establish half of their position at this price level, and if this stock were to fall below $1.02 per share, then buy the remaining half.”

This equity proceeded to descend and closed at a low of $2.01 per share on March 11, 2004. Afterwards this stock proceeded to rebound and closed at $2.58 per share on April 5, 2004. This stock was not able to break through its resistance level of $2.74 and once again proceeded to descend. As the money flow fell, this equity closed at $1.71 per share on May 17, 2004. Although this stock appeared to rebound and closed at $1.95 per share on June 30, 2004, it was still in a downtrend.

In July 2004 we stated: “On July 27, 2004, this stock closed at $1.40 per share and could fall below $1.00 per share by mid October 2004.” On August 12, 2004, this stock closed at a low of $1.15 per share. Afterwards, this equity proceeded to trade in a narrow range until October 19, 2004, when it closed at a low of $1.16 per share.

On November 29, 2004, this stock closed at $1.57 per share and we stated: “Speculators may want to wait patiently until this stock falls below $1.00 per share and then start accumulating it.”

To our surprise the money flow rose $441 million during the next 8 days and this equity closed at a high of $2.68 per share on December 7, 2004. Afterwards, this stock pulled back and tested its support levels. On December 20, 2004, this equity closed at $2.11 per share. As the money flow rose $214 million during the next 10 days, this stock proceeded to test its resistance levels and closed at a high of $2.64 per share on December 30, 2004.

If the money flow were to fall $978 million between December 30, 2004, and June 28, 2005, this equity could fall to a low of $1.21 per share and we would rate it accumulate. On February 7, 2005, CMGI closed at $2.08 per share and could continue to descend, albeit at a slow pace. We would like to remind investors that the risk of owning this stock is high; therefore it should only be bought by speculators and should not account for more than three percent of one’s portfolio.

Cisco Systems, Inc., (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. Cisco Systems continues to expand its market share. As John T. Chambers, the CEO of Cisco Systems, continues to steer the company on a path to high growth, the long-term outlook for the company is good.

This stock closed at a low of $11.24 per share on September 27, 2001. It then proceeded to rebound and closed at $21.79 on December 6, 2001. Afterwards, as the money flow fell, this stock reversed its uptrend and proceeded to descend.

On July 21, 2003, this stock closed at $17.93 per share. We have been projecting that this equity may test its $8.60 support level by mid September 2003. It hasn’t happened because the money flow started rising at a fast pace. It rose $10.3 billion between June 2003 and November 12, 2003. Although we may have been wrong about the time frame when this equity could reach its low level, only time will tell if we were correct about the price that this stock could drop to.

This equity rose at a slow pace and it could also fall at a slow pace. In November 2003, we stated: “On November 20, 2003, this equity closed at $21.94 per share and is fully valued.” To our surprise, the money flow rose $6.9 billion during the following three weeks and CSCO continued its uptrend. On December 8, 2003, this stock closed at a high of $24.29 per share.

On January 16, 2004, this equity closed at $29.13 per share and we stated: “Speculators who own it may want to sell it.” During the next 7 weeks money flow fell $22.4 billion and this stock fell at a fast pace. On March 9, 2004, CSCO closed at a low of $22.12 per share. Afterwards, as the money flow rose, this stock proceeded to rebound and closed at $24.81 per share on April 5, 2004.

This stock was not able to break through its resistance of $25.71 per share and once again proceeded to fall. On April 23, 2004, this equity closed at $23.32 per share and then proceeded to descend. Although the company reported earnings that were in line with expectations, this stock continued to descend and closed at $20.93 per share on May 17, 2004.

Afterwards, this equity proceeded to rebound and on June 30, 2004, closed at $23.70 per share. As the money flow fell, this stock proceeded to descend and closed at $20.71 per share on July 27, 2004.

This stock maintained its downtrend and on August 12, 2004, closed at $17.79 per share, down $0.50 for the day. Afterwards, this equity proceeded to rebound and test its recent resistance levels. On September 10, 2004, CSCO closed at $20.46 per share and then once again proceeded to descend. As the money flow fell, this equity closed at $18.10 per share on September 30, 2004.

Due to the market’s irrational performance, this stock is falling at a pace much slower than we projected. This equity has not reached our revised buy target level of $12.85 yet.

On January 25, 2005, this stock closed at $17.51 per share and could continue in its long-term downtrend. Speculators may want to wait patiently and if CSCO were to fall below $12.85 in the first half of 2005, we would rate it a buy. Investors who already own this stock could add to their position at such a price level.

Previously we stated that this stock should be held at least ten years. Although patient investors may want to hold this stock five years, speculators may achieve a better return by trading this equity. There are still 100 shares of CSCO left in our Model Portfolio and these will be held long-term.

Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks and improves productivity. The stock of Compuware Corporation reached a high of $40.00 per share in December 1999.

This stock closed at a high of $13.75 per share on January 24, 2002, and then proceeded to fall. Due to the weakness in the sector this stock maintained its downtrend and closed at $12.20 per share on March 15, 2002.

On April 4, 2002, this stock broke through its support level of $9.90 and closed at $8.28 per share, down $2.82 for the day. This equity continued its downtrend and closed at a low of $2.56 per share on August 13, 2002. Afterwards, as the money flow rose $1.1 billion during the following 16 months, this equity proceeded to ascend and closed at a high of $8.39 per share on January 26, 2004. As the money flow fell $294 million during the next two months, this stock edged lower and closed at $7.18 per share on March 24, 2004.

Since then money flow edged higher, CPWR proceeded to ascend, and on April 22, 2004, closed at $8.73 per share. Afterwards, as the money flow fell, this stock reversed its uptrend and proceeded to descend. On September 8, 2004, CPWR closed at a low of $4.44 per share.

Then, this equity proceeded to rebound, and as the money flow rose during the next 9 weeks, this stock closed at a high of $6.30 per share on November 17, 2004.

On December 10, 2004 this stock closed at $5.61 per share. Afterwards, this equity proceeded to rebound and closed at $6.46 per share on December 27, 2004. This stock proceeded to test its support levels and closed at a low of $5.67 on January 25, 2005. As the money flow rose $167 million during the next 10 days, CPWR proceeded to test its resistance levels and closed at a high of $7.29 per share on February 4, 2005.

This equity is in a long-term downtrend, but is falling at a pace much slower than we originally projected. If the money flow were to fall $1.2 billion between February 2005 and September 2005, there is a slight probability that this stock could fall below $2.85 per share. Speculators may start to accumulate this equity at such a price level.

Internet Capital Group, Inc., (NASDAQ symbol: ICGE) is a venture capital group that owns a stake in approximately 30 Internet companies.

Due to the carnage in the Internet sector this stock closed at a low of $3.28 per share on December 29, 2000, down from its high of $143.55 reached in March 2000.

Afterwards, this stock proceeded to establish a slow upward momentum and closed at $6.44 per share on January 31, 2001. It is highly unlikely that this stock will ever revisit its previous high of $143.55 per share.

On June 2, 2003, ICGE closed at a high of $0.82 per share and then proceeded to descend. As the money flow fell $37 million during the following 25 days, this equity descended and closed at a low of $0.46 per share on June 27, 2003. On January 12, 2004, this stock closed at $0.61 per share. Afterwards, as the money flow fell $161 million during the next three months, this stock proceeded to fall and closed at $0.31 per share on April 23, 2004.

In April 2004, we stated: “There is a high probability that this stock could fall below $0.15 per share during 2004, therefore on January 16, 2004, we revised our rating from speculative long-term buy to a hold. We would like to remind investors that the risk of owning this stock is very high; therefore it should not account for more than three percent of one’s portfolio.”

A few days later Internet Capital Group, Inc., announced that its Board of Directors had approved a reverse stock split. The stock split was effective as of Monday, May 10, 2004, and was based on a ratio of 1 for 20. This equity traded under the symbol ICGED until May 30, 2004, and then reverted to its old symbol of ICGE. An investor who owned 100 shares of ICGE will now have only 5 shares. There were 700 shares of ICGE in our Model Portfolio and now there are only 35 shares. This stock will be held long-term, perhaps until 2008.

On May 25, 2004, ICGED closed at $4.75 per share. This stock established a short-term uptrend and on June 29, 2004, ICGE closed at $7.80 per share. As the money flow fell, this stock reversed its uptrend and proceeded to descend. On August 13, 2004, ICGE closed at $4.99 per share. Afterwards, as the money flow rose, this stock proceeded to test its resistance levels and closed at a high of $7.05 per share on November 15, 2004.

This equity found strong resistance at that level and proceeded to descend. On November 29, 2004, this stock closed at $6.98 per share. Afterwards, the money flow rose $89 million during the following 14 days and this equity proceeded to ascend at a fast pace. On December 14, 2004, ICGE closed at a high of $9.50 per share and then proceeded to test its support levels. On February 2, 2005, this stock closed at a low of $7.27 per share and could maintain its long-term downtrend.

If the money flow were to fall $351 million between February 2005 and September 2005, there is a slight probability that ICGE could drop to approximately $2.25 per share and speculators may start accumulating it at such a level. We would like to reiterate that the risk of owning this stock is very high; therefore it should not account for more than three percent of a speculator’s portfolio.

JDS Uniphase Corporation (NASDAQ symbol: JDSU) makes components used in fiber-optic networks and is a leader in the sector.

Although our original objective was to buy 100 shares, due to the substantial amount of cash in our Model Portfolio, a decision was made to buy more shares. On February 6, 2002, two hundred shares of JDSU were bought at $6.33 per share.

Due to the negative outlook for this sector this stock continued to descend and closed at a low level of $1.62 per share on October 7, 2002. As the money flow rose $2.3 billion during the following 8 months, this stock proceeded to ascend and closed at a high of $4.28 per share on June 5, 2003.

On August 21, 2003, JDSU closed at $3.50 per share and we stated: “If the money flow were to fall $420 million during the following 7 weeks, this stock could test its support level of $1.62 per share by mid October 2003 and speculators may want to buy it.”

To our surprise, the money flow rose by $1 billion during the next three weeks and the stock proceeded to ascend. On September 9, 2003, JDSU closed at $4.20 per share. The stock was not able to break through its resistance level of $4.28, reversed its course, and proceeded in a downtrend.

On December 19, 2003, this equity closed at $3.35 per share. As the money flow rose, JDSU proceeded to ascend and closed at $5.73 per share on January 20, 2004. Afterwards, as the money flow dropped, this stock fell and closed at $3.97 per share on March 24, 2004.

Then this equity attempted to rebound but was not able to break through its recent resistance level of $4.75. On April 23, 2004, this stock closed at $4.25 per share. As the money flow continued to fall, this equity maintained its downtrend and closed at a low of $2.98 per share on May 17, 2004. Later on, this stock established a short-term uptrend and on June 29, 2004, closed at $3.83 per share.

On August 13, 2004, this equity closed at $2.97 per share and then proceeded to test its resistance levels. On October 21, 2004, JDSU closed at $3.56 per share. Afterwards, as the money flow fell this stock proceeded to descend. On December 30, 2004, JDSU closed at $3.19 per share.

In December 2004, we stated: “This stock could fall at a pace much slower than we projected. If the money flow were to fall $625 million between October 2004 and May 2005, this stock could fall to $1.62 per share, perhaps by May 2005. At such a level we would rate this stock a speculative buy.”

Out of a sudden, the money flow fell $1.6 billion between December 30, 2004 and February 7, 2005, and the stock fell at a fast pace. On February 7, 2005, JDSU closed at a low of $2.02 per share and could continue to descend. If this stock were to fall to approximately $1.62 per share, speculators may want to buy half of the shares.

There is a slight probability that this stock could fall below $1.04 per share, perhaps by mid May 2005. At such a level, speculators may want to buy the remaining half of the shares. We would like to reiterate that the risk of owning this stock is very high; therefore it should not account for more than three percent of a speculator’s portfolio.

Due to the unfavorable short-term outlook for this sector it may take this stock longer to reach our sell target level. These 200 shares of JDSU will be sold as soon as this stock reaches approximately $12.26 per share, perhaps in the second half of 2007.

WorldCom Group (NASDAQ symbol: WCOEQ) has grown from a small telecommunications provider to a behemoth through mergers and acquisitions. On September 14, 1998, WorldCom merged with MCI Communications Corporation. Once this merger was finalized, WorldCom was in possession of one of the world’s largest and most advanced digital networks that connected local markets in the United States to more than 280 countries and locations worldwide.

Due to the accounting debacle that pushed WorldCom to its bankruptcy, this stock became worthless. Although these shares were cancelled on April 20, 2004, when the company emerged from bankruptcy, we will keep this stock symbol in our Model Portfolio as a reminder of what could happen to the stock of any company.

On September 22, 2003, we added several stocks to our list. Although there may not be enough cash in our Model Portfolio to buy all of these stocks, we do not anticipate that all of the equities that are on our buy list will reach our buy target levels. Our list is not in alphabetical order; the stocks are listed with the most desirable to own listed first and the less desirable listed last.

In 2004 the Dow Jones industrials reached its high level on February 11, 2004, and then proceeded to descend. On October 25, 2004, the Dow closed at a low of 9749.99 and then proceeded to ascend at a fast pace. On December 28, 2004, the Dow closed at a high of 10854.54.

Afterwards, the Dow Jones industrials proceeded to test its support levels and closed at a low of 10368.61 on January 24, 2005. As the money flow rose, the Dow proceeded to rebound and on February 7, 2005 closed at 10715.76. If the Dow does not break above its resistance level of 10854.54 that was reached in December 2004, it could once again reverse its course and proceed to descend.

The Dow is falling at a very slow pace. Unlike in previous years when the Dow could fall as much as 1000 points in two months, it took the index 8 months to fall 987.71 points when it closed at a low level of 9749.99 on October 25, 2004.

The market is overdue for a major correction and when that happens, the Dow could fall 25 percent, while the Nasdaq composite index could fall 30 percent. In a worst case scenario, some of the technology stocks could fall as much as 70 percent. While some of the tech stocks could drop sharply in a very short time, other stocks could fall at a slow pace; therefore we will wait patiently until the stocks on our list reach our buy target levels.

On the other hand, instead of a major correction the market could continue to trade in this irrational sideways pattern and the Dow could reach a bottom by September 2005.

LSI Logic Corporation (NYSE symbol: LSI) makes chips for cellular phones, satellite set-top boxes, DVD products, and personal computers. This stock has been in a long-term downtrend since March 2000, when it closed at a high of $88.25 per share. The most recent high was $11.45 per share, and this equity closed at that level on January 20, 2004. Afterwards, the money flow proceeded to fall once again and the stock started to descend.

In August 2004, we still stated: “If the money flow were to fall $1.8 billion between January 2004 and September 2004, this equity could fall to a low of approximately $2.45 per share. If the stock of LSI Logic Corporation were to fall below $2.95 per share, perhaps by mid September 2004, then 1,000 shares would be bought and added to our Model Portfolio.”

This is the first stock from our Buy Alert list that has neared our buy target level. On September 28, 2004, this stock closed at a low of $4.03 per share. Investors should wait patiently because this equity could maintain its long-term downtrend, albeit at a slow pace. This stock could fall to our buy target level of $2.45 per share by June 2005.

Depending on the money flow and the LSI Logic Corporation earnings outlook, this stock could fall below $1.95 per share. If this equity were to fall to a low of $2.45 per share 500 shares will be bought immediately and added to our Model Portfolio. We would continue to monitor this stock and if it were to fall below $1.85 per share, an additional 700 shares of LSI Logic Corporation would be bought and added to our Model Portfolio.

RF Micro-Devices, Inc., (NASDAQ symbol: RFMD) designs, develops, manufactures, and markets semiconductors and components for the wireless handset market, wireless Local Area Networks (LAN), pagers, the broadband cable communications sector, and wireless security. The company offers a wide selection of products such as amplifiers, mixers, single chip transmitters, receivers, and transceivers.

Among the microprocessors made by the company are gallium arsenide-based chips that are the most expensive and generate the highest profit margin. The company’s largest customer is the Nokia Corporation.

This stock continues in its long-term downtrend, albeit at a slow pace. On August 13, 2004, this equity closed at a low of $4.81 per share. This is a second stock on our list that is nearing our buy target level, albeit at a slow pace. If the money flow were to fall $2.1 billion between September 30, 2004 and June 2005, this stock could descend to approximately $1.65 per share, perhaps by mid July 2005. At such a price level 800 shares of RF Micro-Devices, Inc., would be bought and added to our Model Portfolio.

Rite Aid Corporation (NYSE symbol: RAD) is the third largest drug store chain in the United States. The company operates approximately 3,400 drug stores in 29 states.

In July 2003, we stated: “If the money flow were to rise sharply during the next four weeks, this equity could ascend to approximately $6.35 per share by the end of August 2003 and all of the shares held in our Model Portfolio would be sold.” The money flow did not rise sharply and RAD appeared to reverse its uptrend, that’s why 400 shares of RAD that were held in our Model Portfolio were sold at $4.41 per share.

The stock of Ride Aid Corporation maintained its uptrend, albeit at a slow pace. On December 8, 2003, RAD closed at a high of $6.40 per share, up $0.10 for the day, and then proceeded to descend.

On September 17, 2004, RAD closed at a low of $3.35 per share. This stock could continue to descend at a slow pace. If the money flow were to fall $862 million between September 30, 2004, and July 2005, this equity could fall to a low of approximately $2.24 per share. If this stock were to fall to approximately $2.45 per share, then 700 shares of Ride Aid Corporation would be bought and once again added to our Model Portfolio.

Nasdaq-100 Trust (NASDAQ symbol: QQQQ) is a unit investment trust that invests in the largest companies traded on NASDAQ. Previously, this trust was listed on AMEX under the symbol QQQ. On December 1, 2004, NASDAQ-100 Trust was listed on NASDAQ under the symbol “QQQQ.” The trust issues tracking stocks on the Nasdaq-100 Index and is still called QQQ’s or Q’s. At the height of the Internet frenzy, QQQ’s closed at a high level of $117.55 in April 2000, their price doubling in less than a year.

Then, as the money flow proceeded to fall, QQQ’s, or cubes, as the tracking stock is commonly called, closed at a low level of $28.19 on September 21, 2001. Afterwards, as money flow rose $20 billion, cubes proceeded to test their resistance level and closed at $42.85 on December 5, 2001.

As the money flow fell, QQQ’s closed at $33.52 on April 12, 2002. At that time we stated: “There is a probability that cubes may test their support level of $28.19 by the end of May 2002.” Afterwards, money flow fell $18 billion during the next four weeks and QQQ’s closed at $28.70 on May 7, 2002.

Immediately afterwards, money flow rose $14.4 billion during the next ten days and QQQ’s closed at a high of $32.86 on May 16, 2002, then again resumed their downtrend. As the money flow fell, QQQ’s proceeded to descend and closed at a low of $20.35 on September 30, 2002.

To our surprise, money flow continued to rise and QQQ’s maintained their uptrend. Cubes closed at a high level of $38.59 on January 26, 2004. Afterwards this equity reversed its uptrend and proceeded to descend. The long-term slow stochastic indicator generated a sell signal in February 2004. Although the money flow fell at the pace that we expected, this equity did not reach our projected buy target level of $20.75 by mid October 2004.

Speculators may want to wait patiently for cubes to fall to approximately $22.75, perhaps by mid September 2005. At such a level we would rate these a short-term buy and 250 QQQQ’s would be bought and added to our Model Portfolio.

International Business Machines Corporation (NYSE symbol: IBM) is the world’s largest manufacturer of computer hardware. The stock of Big Blue closed at a high of $133.62 per share on September 1, 2000 and then proceeded to fall.

In October 2002, the stock of IBM Corporation found strong support and then proceeded in an uptrend. On February 4, 2004, this equity closed at a high of $100.19 per share and then reversed its course and proceeded to fall. As the money flow fell, this stock proceeded to break through its recent support levels and closed at a low of $82.21 per share on August 12, 2004. Afterwards, as the money flow rose $3.4 billion this equity proceeded to ascend and closed at a high of $95.92 per share on November 15, 2004.

We are maintaining our buy target level of $55.07 but it could take this stock much longer than we expected to reach such a low level. Barring any very negative statements made by IBM Corporation, this stock could descend at a slow pace and reach our buy target level in the second half of 2005.

On August 21, 2003, we decided to add International Business Machines Corporation to our buy list. If this stock were to fall to our projected buy target level of $55.07 per share, then 100 shares would be bought and added to our Model Portfolio.

Intel Corporation (NASDAQ symbol: INTC) is the leading manufacturer of microprocessors. The company continues to switch production to a 0.18 micron manufacturing process that yields more semiconductors from each wafer. On September 28, 2004, this stock closed at a low of $19.68 per share. Afterwards, as the money flow rose $24.7 billion during the next 8 weeks, this equity proceeded to rebound and on November 18, 2004, closed at $24.80 per share.

This equity remains in a long-term downtrend but is descending at a much slower pace than we initially projected. This stock could reach our buy target level of $16.75 per share by mid June 2005. At such a level 400 shares of Intel Corporation would be bought and added to our Model Portfolio.

Advanced Micro Devices, Inc., (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products, and network products. While the demand for microprocessors continued to grow worldwide in the year 2000, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. Advanced Micro Devices, Inc., and Intel continue their fierce competition.

Long-term, AMD could continue to spend a large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As Advanced Micro Devices, Inc., sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins.

We have previously stated: “Short-term, if the money flow were to fall $6.4 billion between April 2004 and October 2004, there is a slight probability that AMD could descend and reach our buy target level of $2.50 per share by October or November 2004. If this equity were to reach such a low level, 1,000 shares would be bought immediately and added to our Model Portfolio.”

Although money flow fell $2.2 billion between June 30, 2004 and September 3, 2004, the stock closed at a low of $10.86 per share on September 8, 2004. Afterwards, as the money flow rose $4.7 billion during the next 12 weeks, the stock rocketed to a high of $24.85 per share on December 6, 2004.

Investors may want to wait until the second half of 2005 and if the money flow were to fall $5.7 billion between December 2004 and August 2005, this stock could descend to our buy target level of approximately $2.50 per share. If this equity were to reach such a low level, 1,200 shares would be bought immediately and added to our Model Portfolio.

Applied Materials, Inc., (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. On November 6, 2003, this stock closed at a high of $25.61 per share, up $0.66 for the day, and then proceeded to descend. This equity could fall at a slower pace than we originally believed and although it may not reach our initial projected low of $6.27 per share, it could close at a low of $10.35 per share, perhaps by mid 2005.

We will wait until AMAT falls to its lowest level. Afterwards, when this equity reverses its trend and proceeds to ascend, 400 shares will be bought (preferably below $11.10 per share) and added to our Model Portfolio.

Cisco Systems, Inc., (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. Cisco Systems continues to expand its market share. On January 16, 2004, this stock closed at a high of $29.13 per share. Afterwards, this equity reversed its course and proceeded to descend.

Due to the market’s irrational performance, this stock is falling at a pace much slower than we projected. Speculators may want to wait patiently and if CSCO were to fall below $12.85 in the first half of 2005, we would rate it a buy. At such a price level 300 shares would be bought and added to our Model Portfolio.

Microsoft Corporation (NASDAQ symbol: MSFT) is the largest maker of software. The operating system made by Microsoft is used in the majority of computers. The company has no debt and has approximately $55 billion in cash and short-term investments. On March 24, 2004, we lowered our buy target level for this stock from $21.25 per share to $18.75 per share.

On July 20, 2004, the company announced that its board of directors approved a one time dividend of $3.00 per share. The company also stated that it will buy approximately $30 billion of its stock during the next four years. On November 15, 2004 the company paid out a dividend of $3.08 per share.

We are still maintaining our buy target level of below $18.75 per share for this stock, although it could take much longer for this equity to reach it. If this stock were to fall below $18.75 per share, perhaps in the second half of 2005, then 200 shares of MSFT would be bought and added to our Model Portfolio.

Oracle Corporation (NASDAQ symbol: ORCL) is the world’s third largest software company. The company makes database management system software. Approximately 90 percent of corporate websites are using Oracle’s database software. This stock reached its high level in August 2000, and since then has been in a long-term downtrend.

The money flow is falling at a much slower pace than we expected. We believe that there is still a slight probability for this stock to descend to approximately $4.75 per share, but it could happen 8 months later than we originally projected. This equity could reach such a low level in the second half of 2005. At such a level 800 shares of Oracle Corporation would be bought and added to our Model Portfolio.

Hewlett-Packard Company (NYSE symbol: HPQ) is the second largest computer manufacturer in the world. The company designs and makes notebook personal computers, servers, consumer PC’s, and networking equipment. This stock is falling at a very slow pace. If the money flow were to fall $10.4 billion between September 30, 2004 and July 2005, this stock could fall below $10.95 per share, perhaps by mid July 2005. If this stock were to fall below $9.95 per share, 100 shares will be bought and added to our Model Portfolio.

Yahoo, Inc., (NASDAQ symbol: YHOO) is a global Internet media company that provides comprehensive information and shopping services to over 200 million users worldwide. The company’s website, www.yahoo.com has the highest name recognition.

On May 12, 2004, the company issued a 2 for 1 stock split. This stock ascended at a very slow pace and it could also descend at a slow pace. If the money flow were to fall $50.3 billion between October 2004 and October 2005, this stock could fall to a low of $9.75 per share, perhaps by mid October 2005. At such a level 200 shares would be bought and added to our Model Portfolio. Our previous buy target level was $14.45 per share but it has been adjusted for the recent stock split and the strength of the stock to the new buy level of $9.75 per share.

The stock of Motorola, Inc., (NYSE symbol: MOT) had run-up and closed at $20.72 per share on April 22, 2004. At such a level this stock was overvalued. We will continue to monitor this equity. On August 12, 2004, this stock closed at a low of $14.12 per share. Afterwards, as the money flow rose, this equity proceeded to rebound and closed at a high of $19.75 per share on December 1, 2004.

If the money flow were to fall $8.9 billion between December 1, 2004 and June 2005, this stock could drop to a low level of approximately $4.95 per share in the second half of 2005. At such a level 300 shares would be bought and once again added to our Model Portfolio.

We will continue to monitor Dell Computer Corporation (NASDAQ symbol: DELL). This stock closed at $29.82 per share on November 15, 2002, and was trading at approximately 49 times earnings.

On February 10, 2003, this equity closed at a low level of $22.86 per share. Afterwards, as the money flow rose $15.6 billion during the next 8 months, this stock proceeded to ascend and on October 21, 2003, closed at $36.98 per share. At that time we stated: “This equity was overvalued at that level.”

Since then this stock has traded in a fairly narrow range, closing at a low of $34.25 per share on October 26, 2004. Afterwards, as the money flow rose $10.2 billion during the next six weeks, this stock proceeded to ascend at a fast pace. On December 13, 2004, this equity closed at a high of $42.38 per share.

This stock could reach its low level much later than we originally projected. If the money flow were to fall $10.4 billion during the next 10 months, this stock could fall to a low of $17.75 per share, perhaps by mid August 2005. If this equity were to reach such a low level, 100 shares will be bought and added to our Model Portfolio. If the stock of Dell Computer Corporation doesn’t reach our buy target level, then the cash will be used to buy more shares of Advanced Micro Devices, Inc., and another stock.

Nokia Corporation (NYSE symbol: NOK) is the world’s largest manufacturer of mobile phones. The company is located in Finland, with subsidiaries in the United Kingdom and China. This equity is still in an overall long-term downtrend. If the money flow were to fall $12.7 billion between September 30, 2004 and July 2005, in a worst case scenario this equity could descend to a low level of $4.95 per ADR, perhaps by mid August 2005. If this equity were to reach such a low level, 600 ADR’s of Nokia Corporation will be bought and once again added to our Model Portfolio.

On October 18, 2002, we added the stock of Juniper Networks, Inc., (NASDAQ symbol: JNPR) to our buy list. The company makes Internet Protocol routers. This equity closed at a high of $30.39 per share on January 20, 2004, and then proceeded to descend. If this stock were to reach a low of approximately $2.15 per share, perhaps in the second half of 2005, then four hundred shares will be bought and added to our Model Portfolio.

We also added the stock of EMC Corporation (NYSE symbol: EMC) on October 18, 2002. If this stock were to reach a low of $2.55 per share, five hundred shares will be bought and added to our Model Portfolio. EMC Corporation is a major supplier of enterprise storage devices, software, and services.

EMC Corporation acquired Data General in October 1999, and that added a selection of mid-priced storage devices. As the Internet continues to grow and hundreds of millions of people go online during the next decade, we predict that the need for storage devices could continue to grow in double-digits.

If this stock were to reach our buy target level of $2.55 per share, perhaps by mid August 2005, speculators may want to buy it and hold it at least two years. Do not commit more than five percent of your cash to this stock.

Corning Incorporated (NYSE symbol: GLW) is a major supplier of fiber-optic cable. Its inventory has been depleted to a low level and as the demand improves the company could sell more products. Afterwards this stock may establish a strong upward trend.

On March 11, 2002, this stock reached a high of $8.90 per share. Then, as money flow fell $631 million during the next four weeks, this equity proceeded to fall and closed at $6.38 per share on May 10, 2002. This stock continued its overall downtrend and closed at a low of $1.10 per share on October 8, 2002.

Afterwards, GLW established a strong uptrend and closed at a high of $13.78 per share on January 20, 2004. At that level this equity was fully valued. This stock is falling at a very slow pace and could reach its low level later than we projected. If the money flow were to fall $3.5 billion between September 30, 2004 and July 2005, this stock could descend and reach our revised buy target level of $2.95 per share, perhaps by mid August 2005.

Vitesse Semiconductor Corporation (NASDAQ symbol: VTSS) makes gallium arsenide semiconductors that are used by manufacturers of networking equipment. On August 20, 2002, this equity was removed from the S&P 500 Index and 31.6 million shares were traded on that day.

At its height in February 2000, this stock closed at $103.83 per share. It then proceeded in a downtrend. Among the company’s major customers are Cisco Systems and Lucent Technologies. When that sector rebounds, the stock of Vitesse Semiconductor Corporation could ascend to a higher level, but at this time this equity is in an overall long-term downtrend. On August 12, 2004, this stock closed at a low of $2.08 per share. This stock could fall to approximately $1.55 per share by June 2005. At such a level 800 shares would be bought and added to our Model Portfolio.

Sun Microsystems, Inc., (NASDAQ symbol: SUNW) is among the major suppliers of hardware to the Internet. The company continues to introduce competitively priced new servers in order to expand its market share.

If the money flow were to fall, then this stock could descend to $2.42 per share. Depending on the money flow and other technical indicators, this equity could maintain its downtrend and fall to a low level of $1.15 per share by August 2005. At such a level, 1,000 shares would be bought and added to our Model Portfolio.

Lucent Technologies, Inc., (NYSE symbol: LU) is the largest manufacturer of telecommunications equipment. Lucent Technologies makes fiber-optic equipment and optical network equipment that allows phone companies to increase capacity and to provide high speed Internet access.

This high flying stock closed at a high of $81.75 per share in December 1999 and has been in a downtrend ever since. At that time no one would have thought that this equity could fall below $10.00 per share. As the money flow fell, this stock continued to plunge and closed at $0.58 per share on October 11, 2002.

On October 18, 2002, Lucent Technologies announced that it will seek shareholder approval to do a reverse stock split to bring its stock price between $15.00 and $25.00 per share. If this reverse stock split were approved it could be as bad as 1 for 36 shares. In such a horrendous scenario an investor who owns 100 shares would receive less than three shares.

We will monitor this equity and if the company were to issue a reverse stock split, the stock could pull back to a lower level after two or three months. When this stock reaches its low level we may buy it again and add it to our Model Portfolio.

Our Model Portfolio is overweighed in technology stocks. We advise investors against acquiring so many technology stocks in their portfolios. Investors may want to buy some of these stocks and add them to their portfolios while speculators who are below thirty years of age may consider allocating up to 50 percent of their portfolios to technology stocks.

Investors who are just starting out should establish a Roth Individual Retirement Account (commonly called a Roth IRA) and should consider buying the equities listed in our Buy Alert section when they reach their lowest level. The annual contribution limit for Roth IRA for taxpayers who are under the age of 50 is $3,000.

The Roth IRA has many advantages. One of the biggest advantages is that no taxes are due on qualified withdrawals, while withdrawals from the traditional IRA are taxable.

By not having to pay taxes to the government, a retiree may be able to save over $200,000 throughout his or her retirement years. Surely, you could think of many ways to spend $200,000 on yourself and your family. Furthermore, an investor could trade stocks, knowing that any capital gains, short-term and long-term, achieved in the Roth IRA are not taxable. This allows each investor to reinvest these gains and to generate a much higher annual return on their portfolio.

Oracle Corporation (NASDAQ symbol: ORCL) is the world’s third largest software company. The company makes database management system software. Approximately 90 percent of corporate Web sites are using Oracle’s database software. On May 10, 2002, one hundred shares of Oracle Corporation were bought at $8.37 per share. This stock will be held long-term.



This portfolio was started in May 2002, with $2,920.00 cash contribution to this Roth IRA.
A $2,000.00 contribution was made in December 2003.
A $2,000.00 contribution was made in August 2004.
As of February 7, 2005, there was $5,510.43 cash Model Portfolio II.
Cash continues to generate interest of only 0.005 percent.




Trades Done in Model Portfolio II


On May 10, 2002, two hundred American Depository Receipts of Ericsson LM Telephone (NASDAQ symbol: ERICY) were bought at $2.29.

On October 23, 2002, the company issued a 1-for-10 reverse stock split and afterwards instead of 200 ADR’s there were only 20 ADR’s. On December 16, 2002, twenty ADR’s of ERICY were sold at $8.53 per ADR. The cash proceeds from this trade will be held in the Model Portfolio II. When the stock of Advanced Micro Devices, Inc., (NYSE symbol: AMD) reaches our buy target level of approximately $2.50 per share, additional cash will be added and 200 shares of AMD will be bought and added to Model Portfolio II.



On May 10, 2002, one hundred shares of Lucent Technologies, Inc. (NYSE symbol: LU) were bought at $4.46 per share.

On January 15, 2003, one hundred shares of LU were sold at $1.77 per share. The cash received from this trade will be held in Model Portfolio II.



On May 10, 2002, one hundred shares of Nortel Networks Corp. (NYSE symbol: NT) were bought at $2.84 per share.

In September 2002, Nortel Networks announced that it plans to do a reverse stock split of 1 for 20, or higher, in the beginning of 2003. Due to this horrendous plan a decision was made to sell this stock. On January 15, 2003, one hundred shares of NT were sold at $2.43 per share.



On May 10, 2002, one hundred shares of Rite Aid Corporation (NYSE symbol: RAD) were bought at $3.07 per share.

On August 20, 2003, all 100 shares of Rite Aid Corporation were sold at $4.41 per share.



On July 10, 2002, one hundred shares of Sun Microsystems, Inc., (NASDAQ symbol: SUNW) were bought at $5.12 per share.

One hundred shares of SUNW were sold on June 12, 2003, at $5.47 per share and the cash was added to existing cash in Model Portfolio II.