Thursday, August 21, 2003

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Corey Dickerson
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1 Dan FITZPATRICK Last Close: $60.41 The Short Advisor Portfolio Fannie Mae 52-Week Range: Yesterday s Close: $33.93 $0.22 $ $77.49 (FNM:NYSE) The Short Advisor Portfolio is printed in full on page 6 of today s issue. Fannie Faces a Flop The government-sponsored entity has been showing weakness since June Its latest bounce was weaker than most, and indicates shares could break again. The volatility in the issue provides two potential entry points. Chris SCHUMACHER Last Close: $44.16 Citigroup (C:NYSE) 52-Week Range: $ $48.15 Citigroup Double Tops Out Shares have formed a double top recently, which is a highly bearish setup. There are several levels of support that could provide a profitable trade. Plus, updates on Transocean, TAR and Diamond Offshore Drilling.

Dan FITZPATRICK Fannie Mae (FNM:NYSE) Last Close: $60.41 52-Week Range: $58.40 -- $77.

2 Dan FITZPATRICK Fannie Mae (FNM:NYSE) Last Close: $ Week Range: $ $77.49 Fannie Faces A Flop Fannie Mae (FNM:NYSE) operates under a federal charter and is a source of funds for mortgage lenders and investors, providing resources for customers to make additional mortgage loans or investments in mortgage-related securities. Many people do not realize that Fannie doesn t lend money directly to consumers. Instead, the company provides liquidity to the mortgage market for the benefit of borrowers. Fannie Mae operates exclusively in the secondary mortgage market by purchasing mortgages and (Continued on the next page) Fannie Mae -- Weekly

mortgage-related securities from primary market institutions, such as commercial banks, savings and loan associations, mortgage companies, securities dealers and other investors.

3 mortgage-related securities from primary market institutions, such as commercial banks, savings and loan associations, mortgage companies, securities dealers and other investors. Fannie Mae s stock has been under pressure for quite some time. It peaked in the summer of 2001 and has been struggling ever since. The fundamental problems have been well-documented, and I won t even begin to try to explain the issues concerning the yield spreads between the FNM 10- year note vs. the Treasures, or the widening duration gap between its assets and liabilities. I don t pretend to be an expert in that area, but I do know that the charts show a lot of weakness. (Continued on the next page) Fannie Mae -- Daily

4 The chart shows that shares started to trickle down in June The stock ultimately dropped down to around $60, where it began the first of a series of bounces. But the stock looks tired now, and I m thinking it just might not bounce this time. See how bearish money flow is? That indicates some strong selling pressure with no sign of letting up. And the accumulation-distribution line is really pointing southward. But given the volatility of the stock, we could have another bounce, so there are really two potential short entries on the stock. Let s check out the daily chart for a closer look. Fannie has been volatile the past couple of months, but the obvious trend has been lower. What bears mentioning is that this most recent peak came after barely any rally. The previous peaks were the result of very strong rallies, but this last one just fizzled, which is a sign of some tired bulls. My guess is that Fannie Mae will fall below $60 very soon, and that would be one signal to short the stock. While it s already declined significantly, a break beneath $60 should bring about a new wave of selling, but keep in mind that there is a contingent of dip buyers in every crowd, and Fannie Mae is no different hence, the two potential entries. First, if the stock bounces, I doubt it ll move higher than the 200-day moving average, which is around $67 or so. I ve drawn a red box on the right side of the weekly chart at the approximate area to short. Once the short entry is taken, a stop should immediately be placed in order to cap your losses. Alternatively, if the stock doesn t bounce, but instead moves beneath $60, a short entry can be taken there. However, notice how volatile this stock has been on the weekly chart. This is a long-term short, not a quick score, so this is not the type of trade that tolerates a tight stop. I ve drawn a stop at around $63.50, and that may be even a bit tight. Due to the volatility, a conservative trader may want to consider taking a partial position initially, and then increasing the size as the trade moves favorably. If you look at Fannie on a monthly chart (not shown), you ll see that this stock is doing a slow roll that will take quite a while to complete. So give it some room to work, and be patient.

Chris SCHUMACHER Last Close: $44.16 Citigroup (C:NYSE) 52-Week Range: $26.15 -- $48.15 Citigroup Double Tops Out Citigroup (C:NYSE) is the current stock on the short screen.

5 Chris SCHUMACHER Last Close: $44.16 Citigroup (C:NYSE) 52-Week Range: $ $48.15 Citigroup Double Tops Out Citigroup (C:NYSE) is the current stock on the short screen. It has formed a little double top near the $48 level off a euphoric high from July 15, Double tops are usually very bearish patterns, with the support of the last range offering a confirmation of the downtrend if that support is broken. On Citigroup's double-top formation, the resistance under that euphoric high is at the $46.20 level. This stock should set up with a short entry if it can trade back near $45.10 and then break $43.85 support for confirmation. This would be the bearish signal that confirms the downtrend. (Continued on the next page) Citigroup -- Daily

6 If price moves into the $43.85 range, partial profits should be taken. It's always best to alleviate some risk and bank some reward at former supports if the reward/risk ratio is satisfied. Because we will have about a dollar in risk, a move into $43.85-$44 will satisfy the risk/reward scenario for this setup. If Citigroup should break $43.85, $42.30 support is the next target for profit. Once again, traders would want to scale out into this support, locking in more gains and alleviating more risk as the stock falls into this target. Should the stock break $42.30, that would be another downtrend confirmation that will allow for remaining shares to be banked at lower levels. As the stock falls, update the trailing stop according to price action, as the stock price will continue to create different pivotal levels. Update: Telefonica de Argentina (TAR:NYSE ADR) never increased in average daily volume as it based above $7 this past week. This trade's liquidity risk is too high, and it s time to take this one off the radar. This trade never set up and is closed. Update: Transocean (RIG:NYSE) has broken resistance above $20.30 after making a long base from its $18.40 support level. The remaining shares on this trade should be taken for a stop loss if we break $ I m still keeping an eye on this trade for a break of $18 and will most likely revisit it again should this one hit the stop loss. This trade is still open. Update: Diamond Offshore Drilling (DO:NYSE) is still stuck in the $18.90-$20.40 range, but is not anywhere near the stop-loss level at $20.20 yet. As we said in our last update, traders should have scaled out and locked in some profit when the stock hit the first profit zone of $18.30-$ The stock needs to hold under $20.10 for me to remain confident in the trade, but I would continue to hold the remaining shares with the original stop in place. This trade is still open.

7 Company Date Published Cost Basis Most Recent Close % Gain/Loss American Medical AMMD 03/24/2003 $ $ % Aon Corp. AOC 08/18/2003 $ $ % Burlington Northern BNI 07/28/2003 $ $ % Diamond Offshore Drilling DO 08/07/2003 $ $ % Johnson & Johnson JNJ 07/31/2003 $ $ % Mercury Computer MRCY 06/12/2003 $ $ % NIKE NKE 06/18/2003 $ $ % Oracle ORCL 08/07/2003 $ $ % Transocean RIG 07/31/2003 $ $ % Starbucks SBUX 03/24/2003 $ $ % Telefonica De Argentina TAR 08/18/2003 $ 7.00 $ % TECO Energy TE 04/24/2003 $ $ % Walgreen WAG 06/03/2003 $ $ % MEMC Electronic Materials WFR 06/23/2003 $ 9.90 $ % Average Return Open Positions Average Return Closed Positions The Short Advisor Watch List Currently there are no stocks in the watch list. The Short Advisor Performance -7.58% -3.71% Total Average Return -5.10% The Short Advisor Portfolio Performance results listed here reflect values of stocks as of the close of the most recently completed trading day but do NOT take into account dividends paid, interest earned or commissions. Results are updated overnight and posted prior to the market open the following business day. The Total Average Return figures reflect changes since inception on March 12, 2003.

8 Contributors Melissa Davis Prior to joining TheStreet.com, Davis worked two years for the Daily Oklahoman, winning the state's top honors for both investigative and business reporting. Before that, she spent two years as managing editor of Durocher's Oklahoma City Business, a local business journal. She has a master's degree in mass communications from the University of Oklahoma and more than 15 years of writing and editing experience. Send your s to tscmdavis@cox.net. Adam Feuerstein A business journalist for 13 years, Adam Feuerstein specializes in biotech and pharmaceuticals. In 2002, he was named a finalist for an Online Journalism Award for his investigative work into ImClone Systems. Before joining TheStreet.com in March 2001, Feuerstein covered business software for Upside.com. Prior to that he covered a variety of business beats, including technology and commercial real estate, at the San Francisco Business Times and the Atlanta Business Chronicle. Send your s to adam.feuerstein@thestreet.com. Dan Fitzpatrick Dan Fitzpatrick is an independent trader in stocks and options, with experience as comanager of a hedge fund. Fitzpatrick has taught seminars on technical analysis, options trading and asset protection strategies for traders and business owners, and is a member of the Market Technicians Association. Fitzpatrick graduated from the McGeorge School of Law. He invites your feedback, comments and suggestions, and can be reached at Dan.Fitzpatrick@thestreet.com. Jeff Linderman Linderman is an independent trader with more than a decade of experience in equities and derivatives. He has been an arbitrage and long/short equities trader on both the buy- and sell-sides, and was a member of the NYSE Options division. He holds an MBA from the Stern School of Business at New York University and a B.S. in Economics from the Wharton School of the University of Pennsylvania. You can reach him at jeff.linderman@thestreet.com. Chris Schumacher Schumacher is the CEO of GST Capital Group LLC and co-owner of RealityTrader.com, an educational trading service for day and position traders. He started his career trading back in 1997 after doing global research for a Columbus-based investment firm during his junior and senior years of college. He is the coauthor of the upcoming book Techniques of Tape Reading with his partner Vadym Graifer, and contributed his knowledge of tape-reading principles as co-author of Ken Wolff's book, Trading on Momentum. Send your s to christopher_schumacher@realitytrader.com. Steven Smith Before joining TheStreet.com as a full-time writer, Smith spent two years as the senior finance writer at Ziff-Davis Media's The Net Economy publication. Before Ziff, Steve spent three years writing for Individual Investor.com. He wrote extensively on options, technical analysis and a variety of trading strategies. Smith was a seatholding member of the Chicago Board of Trade (CBOT) and The Chicago Board Options Exchange (CBOE) from May 1989 to August During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. Send your s to steve.smith@thestreet.com. Bo Yoder Yoder is the head analyst and president of RealityTrader and creator of Dose Of Reality, the Net's first interactive video newsletter. A professional trader and an educator, Yoder started working with the markets from a valuedriven, fundamentally based point of view. As his chart-reading improved, he made the transition from investor to active, technically driven trader. He is a frequent contributor to Technical Analysis of Stocks and Commodities and Active Trader Magazine. He can be reached at bo@realitytrader.com.

9 Contact Info Customer Service: Please or call Mon. - Fri. 8 a.m. to 6 p.m. ET Legal Information Please note that short-selling is a risky strategy and is not suitable for all investors. Selling short involves selling stock you have borrowed from your broker (typically on margin) with the intent of purchasing it at a lower price and taking the profit. However, you may be forced to buy the stock if its price goes up, resulting in losses greater than the amount you invested. You should make sure you are able to fully assess and afford the inherent risks. Adam Feuerstein, a contributor to The Short Advisor, is a Columnist for RealMoney. Jeff Linderman, a contributor to The Short Advisor, is an Outside Contributor to RealMoney. Dan Fitzpatrick, a contributor to The Short Advisor, is an Outside Contributor to RealMoney. Bo Yoder, a contributor to The Short Advisor, is an Outside Contributor to RealMoney. Melissa Davis, a contributor to The Short Advisor, is a reporter for TheStreet.com. TheStreet.com is a publisher and has registered as an investment adviser with the U.S. Securities and Exchange Commission. We are not a registered broker-dealer. The Short Advisor contains the authors' own opinions and are provided for informational purposes only. You should not rely solely upon The Short Report for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained herein constitutes, or is intended to constitute a recommendation by Mr. Feuerstein, Mr. Linderman, Mr. Fitzpatrick, Mr. Schumacher, Mr. Yoder, Ms. Davis, or TheStreet.com, Inc. of any particular security or trading strategy or a determination by Mr. Feuerstein, Mr. Linderman, Mr. Fitzpatrick, Mr. Schumacher, Mr. Yoder, Ms. Davis, or TheStreet.com, Inc. that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Past results are not necessarily indicative of future performance. Mr. Feuerstein, Mr. Linderman, Mr. Fitzpatrick, Mr. Schumacher, Mr. Yoder, and Ms. Davis are restricted from trading in securities discussed in The Short Advisor.

Thursday, August 14, 2003

Thursday, August 14, 2003 Dan FITZPATRICK Last Close: $17.09 Andrx 52-Week Range: Yesterday s (ADRX:Nasdaq) Close: $33.93 $0.22 $7.68 -- $26.45 The Short Advisor Portfolio The Short Advisor Portfolio is printed in full on page