Leading Company in a Leading Group - Eon Labs is the leader and ranked best overall in the Medical-Generic Drugs group which contains 19 companies and is ranked 11th on IBD's list of 197 industry groups.  Year-to-date this leading group is +6.4%, and meanwhile the Nasdaq Composite is +0.4%, and the S&P 500 Index is -5.3%, the Dow Industrials are -5.8%, and the Russell 2000 is -7.5% year-to-date.  This shows us rather clearly that the group is among those most worthy of consideration.  Add to that the fact that Medical stocks were right behind Banks and Savings & Loans as number three on the list of groups with the most stocks reaching new highs on last Friday.   Other strong stocks in the group include Pharmaceutical Resources Inc (PRX), Mylan Labs Inc (MYL), Hi Tech Pharmacal (HITK), and Lannett Company Inc (LCI).

Institutional Sponsorship - The recent technical trading action has been indicative of buying by institutional investors (mutual funds, banks, insurance companies, pension funds, etc.), and there have been a greater number of institutional buyers than sellers.  However, it is true that there was a minor decrease in net total of institutional ownership in the fourth quarter of 2002.  Data in the tables below is accurate as of December 31, 2002, so it may not indicate some of the most recent activity. 

Market Direction - The Nasdaq Composite chart appears to have formed a bullish "double-bottom" chart pattern after dipping below its February 13th low and reversing to close positive on this past Wednesday.  That may have marked a critical turning point for the market, but investors still need to watch for more confirming strength in the coming weeks, during which time Iraq faces a critical deadline. 

Part of the reason for the sudden market improvement has been growing optimism that the Iraq situation may be resolved soon, and maybe without an all out war.  Assuming that there could still be plenty of short covering to be done, and if investors start fearing they're going to miss out on bargains the gains could intensify.  So barring any unusual tragedies over the weekend, there is a chance of more "panic buying" when Monday morning rolls around. 

For additional insight on current market conditions, we advise everyone to read the most recent installment of John Murphy's Market Watch, which CANSLIM.net makes available for FREE if you click here.

* * * * UPDATES * * * * 

05/30/03 - 10:15AM
ELAB opened this morning at $27.30 and has traded as high as $29.35 on above average volume. Important news stories released today by the company may be the reason for stock's positive action -> Here

05/29/03 - 9:47AM - In the previous week ELAB survived a test of its 50-day moving average line, but on 5/28/03 ELAB faced its worst down day on higher than average volume since late March.  It closed the session near its lows and a hair under the 50-day moving average line.  The stock may spend weeks building a new base, or it could decide to retrace the recent rise and dip all the way back to the $25-26 range to find support near highs reached in late-2002.  For those looking to add to existing positions, it would probably be best to wait until seeing proof  that high volume buying demand is again lifting the price back up.  Investors with a profit may want to watch this one closely and move to lock in some profits, especially if any more high volume losses follow yesterday’s session.

04/24/03 - 6:16PM - Eon Labs, Inc (ELAB +6.75%) surged to new highs after a company press release announced earnings per share of $0.33 (up 73.7%) for the quarter ended March 31, 2003 compared to $0.19 for the year earlier period.   Data from other sources showed $0.25 for the year earlier period, so we are looking for a more detailed explanation of this discrepancy while not suggesting anything good or bad about it.  There is certainly nothing wrong with new highs.  The stock is one of the pace setters in the generic drug group, a group that is providing substantial leadership in the current market rally.

04/21/03 - 5:32PM - ELAB should be watched very closely as it approaches its reporting date for its latest quarter, and investors should expect heavier than normal volume and volatility.  On Thursday morning, before the opening bell, the company will be making the announcement.  Earnings plays can be very difficult, as even when you are right you can be wrong.  In other words, sometimes stocks have run up on anticipation of a good earnings announcement, but then sell off after the news is released.  We are not expecting any bad news, but caution is always warranted.  Of course, the action could also be very favorable in the event of a positive earnings surprise.  Do not make your trading decisions based on guesswork.  Be ready to recognize what may be an opportunity to add to an existing position in ELAB.  

04/06/03 - 10:50PM - Volume has been steadily drying up since March 27th, when ELAB managed a new high close on above average volume. The day's strong rise, and the stock's subsequent new highs in early April have signaled a recovery from the damage caused on March 24th, when Eon Labs Inc. said the U.S. Food and Drug Administration had rejected its copycat version of Elan Corp Plc's drug "Skelaxin". ELAB's version is said to have failed a test to prove it was the same as Skelaxin among patients who had eaten before taking the drugs. ELAB lost 9 cents on Friday to close at $27.21, while its trading volume total of 105,300 shares was less than of half its 50-day average daily volume total (274,600), and lower than any trading day since March 5th, when the stock was closed at $22.09. This would seem to indicate that there are not a lot of anxious sellers, and upon heavier buying there could be a more meaningful rise in price.

03/31/03 - 9:25AM - Volume was 696,200 shares versus its 50-day average volume of 263,700 as Eon
Labs Inc (ELAB) rallied to a new intra-day high of $27.75 Thursday, and it closed the session at $26.97, its highest close thus far. On Friday volume cooled to just 346,700 and it slipped to a close $0.22 lower. There is nothing that indicates anything but good things for ELAB's outlook at this juncture. It would take a plunge to a close lower than its 3/24/03 close of $25.03 to give rise to any serious concern. Meanwhile, the Medical-Generic Drugs group stands ranked at #10 of IBD's 197 industry groups, and the recent action among ELAB's peers is a great reassurance and confirmation of the group's leadership.

03/24/03 - 12:45PM - If we had put out another update on ELAB after Friday's new high close, it would have only been that much more disappointing to unwind the positive spin with an update Monday morning on news and trading activity in the stock that is certainly worthy of an update. We knew about the latest story before today's opening bell because we had signed up on ELAB's email notification system (noted in our original report), so we were not completely blindsided by the early action. 

It turns out that the company announced a small disappointment from the FDA on a pending new generic product. The news appears to not be a very big deal, really, but simply a roadblock or delay on the way to just one new product in the company's pipeline. However, Eon Labs' shares reacted very quickly and negatively at the open. Meanwhile, war pressures were also hurting the broader market, which certainly added to the hysteria. But shortly after trading as low as $22.21 (which would have exceeded almost any recent purchaser's 7-8% stop out point) the stock found persistent support again in the logical area near $24 we have talked about. 

The wild volatility and wider then normal intra-day swings are unnerving, and a reflection of the level of uncertainty that still exists in the market. Unfortunately, even though it has been trading near $25 at mid-day it still looks like today will amount to a second losing day on heavy volume in the short order of just the past three trading sessions. There's no way of knowing, but it is fair to say that the stock might spend a longer period of time (maybe several weeks) consolidating the recent gains and stabilizing before regrouping and trying again at new highs. 

03/20/03 - 6:10PM - ELAB showed the kind of resilience that inspires confidence today.  It fought back from the early damage and even rallied its way higher in the final minutes, although it still ended the day -$1.03 to close at $25.16 on almost four times average volume.  The volatile action could prove to be constructive in the long run, as it serves shakes out the weaker hands.  It could be a blessing in disguise or opportunity to buy on the dip.  Time will tell us for sure, but at this point we would consider things normal and that this is typical, healthy consolidation and not a failed breakout.  Our tone will change if the previously mentioned support is violated.  Also, note that the broader market action today was similar in many ways to the action in ELAB, and market conditions certainly had an influence.  

03/20/03 10:45AM -  Unfortunately, after what in our opinion appears to be a senseless downgrade by CIBC World Markets concerning ELAB prior t today's open, the stock gapped down to $24.56 (-$1.63) from Wednesday's close. It traded as low as $23.62 in the early minutes. The important thing to watch today will be how it finishes, and if it closes towards the upper end of the day's trading range, that offers us a much more encouraging outlook than if it closes toward the day's lowest extremes. We are expecting to see firm support at the previously mentioned $24 level. Since apparent high demand from institutional investors was recently driving it to highs, we'll add that IF sentiment among these major players has truly turned, then they won't step up and provide support at that level by buying, they will bail out, causing it to crash through important technical points. It is early in the day to say, but already there seem to be encouraging signs of stabilization and recovery. We'll look at this again later.

03/19/03 -  Eon Labs, Inc. remains perched up at $26.19, unchanged on volume lighter than average.  This is a sign that there is not a flood of willing sellers ready and anxious to bail out of ELAB.  It still would be reasonable and normal to see a bit more consolidation in the $24-$26 area, especially if the market gets hit with heavier selling.  We are not saying that will happen, but you should read our latest market commentary on the home page for more insight as to the shape of the broader market environment.  In many ways, a downward jolt in the market would be helpful, because we would then get to see what holds up well, and what fails.  An example of a recently strong, high-ranked CANSLIM type idea that may be falling into the latter (failure) category might include Biomet (BMET), although it is worth noting that BMET's reversal and close near its intra-day high today helped it to save face.  It might be finding support at prior resistance near $30.  Translating that to ELAB, the important support is at prior resistance near $24.   

03/18/03 - ELAB gapped up to open $0.78 higher than the previous close and spiked as high as $27.58 (+13.5% above Friday's close) in the first few minutes of trading Tuesday. After the first hour of particularly heavy volume things simmered down, and it ended the day with a 2.67% gain on trading volume 3.5 times heavier than its average. Its closing price was toward the low end of the day's trading range though, and nothing goes straight up. Our outlook remains positive for the stock, and the market overall, based upon the latest action. However, it may be a bit past the prime time to be buying, as we seem a bit overdue in the near term for a pullback. That would be perfectly normal, and perfectly fine within the context of O'Neil's many winning examples which rose many fold in price over several months (if we might only be so fortunate). If we see a "failure", that would be different, and we will say so in another update if that ever becomes the case.

03/17/03 - Our subscribers are obviously pleased with the performance of ELAB today, and of course the market had a fantastic day, which helps the case for buying almost anything. We believe that it is usually very significant, and a clear sign of institutional buying when a stock trades to new highs on nearly triple its average volume, just as ELAB did on Monday. The only words of caution we might add is that ELAB has gained ground on 7 of the past 8 trading days. Inevitably there will be pullbacks at some point. If you are worried about chasing it and buying it too far extended above its 50-day moving average, you may watch for a dip as an opportunity to buy or add to any existing interest that you might have. Only would a bad technical failure back into the previous base (under $24) and the January 27th close of $23.72 be considered a potential red flag or warning sign.

03/16/03 - There are no updates at this time.  We will notify subscribers when we have updates, however, the company offers a Press Releases Alert service which says that you can receive an e-mail alert whenever important news is added to their web site.  If interested you can sign up at the link below.

http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=ELAB&script=2100

Please let us know if you have any questions about this stock, as we would be glad to assist you.

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