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PRIME STOCK NEWSLETTER FOR OCTOBER 12th, 2005
Position Statement: In our Prime Recommendation Letter we attempt to identify the recommendation with the highest probability of moving higher.  We recommend that stop orders be placed at the time of purchase,  and once the position has moved profitable we recommend a stop be placed a minimum of $0.25 above the purchase price and moved higher as the position moves higher.

Today’s Comments: The overall market finished Tuesday mixed with the Dow Jones Industrial Average finishing higher while the NASDAQ and S&P 500 finished the day lower. The move lower by the market was rather broad with the weakest sectors on the day being the Semiconductors, Airlines, Broker/Dealers, Telecom, Biotech, Internet, Healthcare Providers, Pharmaceuticals, High Tech, Banking, Insurance Technology, Gold/Silver, Consumer, Retailer, and Cyclicals indices. There was strength in the Oil & Gas, Natural Gas, Interactive, Commodities, and Chemical indices. The bond market had minor weakness as interest rates moved slightly higher. I feel like I am repeating myself as if I am stuck in some sort of groundhog day; again the majority of the sector indices look weak and as they will continue to move lower, and the vast majority of the heavy volume stocks continue to look weak. The Bottom Line: The overall market should move lower.


Sterling Calendar for October 12th, 2005

Date Est. Time Release For

Briefing.com

Consensus Prior
10/12 10:30am Crude Inventories 10/07     (246k)
Date: Comments:
Oct. 12 Harley-Davidson 'HDI' announces earnings before the open. Est. $0.90
Oct. 12 Lam Research reports earnings. Time not disclosed. Est. $0.30
Oct. 12 Monsanto Co. 'MON' reports earnings before the open. Est. ($0.51)

Recommendation: Sell/Short

XM Satellite Radio 'XMSR'

Company: XM Satellite Radio Hld. Symbol: 'XMSR' Closing Price: $32.42
Web Site: http://www.xmradio.com YH: $40.89 YL: $26.16 Forecasted EPS: ($1.82)
Shares Outstanding: 222 Million EPS: ($2.79) P/E: N/A Market Cap.: $7.2 Billion
Price Targets:  $31.16, $27.77, and then $26.53 Upside Stop:  $33.18/share
Options Rec.: October $32.50 Puts @ $0.95/contract Options Symbol: QSYVZ
Company Description: XM Satellite Radio Holdings, Inc., a holding company, provides music, entertainment, and information programming for reception by vehicle, home, and portable radios, as well as over the Internet primarily in the United States. The company offers XM NavTraffic, which provides satellite traffic data, and XM WX satellite weather service that offers graphical data weather service to the marine and aviation markets. Its radio services include music genres-commercial free-and live radio entertainment, popular musical formats, sports and entertainment programming, and local traffic and weather programming, as well as XM Radio Online. As of December 31, 2004, it operated approximately 150 channels, including 65 commercial-free music channels; 30 news and talk channels; 31 sports channels; 21 instant traffic and weather channels; 1 emergency alert channel; and premium channels serving 3.2 million subscribers. The company markets its services through various distribution channels, including automotive manufacturers and dealers, national and regional electronics retailers, car audio dealers, and mass retailers and rental car companies. XM Satellite is headquartered in Washington, District Of Columbia.
Recent News:
 
Our Analysis: The shares of XM Satellite Radio Holdings 'XMSR' closed below a key support level on heavier than normal trading volume yesterday. The shares of 'XMSR' reached their peak in late July and have been trending lower to sideways since then. They have increased their decline since the 1st of October. The shares of 'XMSR' should continue to move lower and test $31.16/share, a point of downside support established in mid-June of this year. If the shares of 'XMSR' close below that level, as I expect they will, then they should continue to move lower and test $27.77/share, the point from which they gapped higher on the open of trading on May 12th of this year. If the shares of 'XMSR' close below that level then they should continue to move lower and test $26.55/share, a point of downside support established in late April of this year. I see upside resistance on the shares of 'XMSR' at $32.80/share, and have set my stops accordingly at $33.18/share.

INDICES
Dow Jones Industrial Average (INDU): Closed @ 10,253.17 Last Signal: Called lower on October 5th with the previous day's close of 10,441.11 Current Expectations: I am expecting the Dow Jones Industrial Average to move lower and test 10,140.12 on a closing basis.

S&P 500 (SPX): Closed @ 1,184.87 Last Signal: Called lower on October 5th with the previous day's close of 1,214.47 Current Expectation: I am expecting the S&P 500 to move lower and test 1,173.80 on a closing basis.

NASDAQ 100 (NDX): Closed @ 1,539.31 Last Signal: Called lower on October 5th with the previous day's close of 1,595.54 Current Expectations: I am expecting the NDX move lower and test 1,533.27 on a closing basis.

CBOE Ten Yr Treasury Index (TNX): Closed @ 4.384% Last Signal: Called higher after the close of trading on September 12th at 4.169% Current Expectations: This index should continue to move higher and test then 4.419%

Stocks Looking Higher

GIL, MESA, ADST, RJET, UTIW, MSSR, LSCO, NURO, ESCL, WMT, MRK, IBM, COP, VLO, JCP


Stocks Looking Lower
MSFT, CSCO, GLW, PFE, BCRX, MOT, TXN, C, ALTR, BRCM, S, BAC, QCOM, JPM, CVS, GOOG, MXIM, CY, DIS, JNPR, BLS, KLAC, CFC, ADI, NSM, KO, ABS, GPS, RIMM, ADBE, AMZN, EXC, COF, XMSR, MRVL, TER, NVDA, MOT, LLY, NVLS, UNH, LOW

Yesterday's Edition of the Prime Stock Newsletter
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