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stock watch, stock recommendation
Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: Why not use the exponential 20 day MVA versus the exponential 18 day MVA? I hear a lot of services speak about the power of the 20 day MVA, but the first time I have encountered the 18 day MVA is on your site. I have no disagreement on the power of the 50 day simple moving average and the 200 day simple moving average. But, I am curious as to how you decided on the 18 exponential moving average versus others such as the more widely touted 20 day exponential MVA. Thank you.
A: One of the things we always do is watch our indicators of stock market action. Not just what they are saying about the market, but also whether what they are saying is worth anything. What I mean is we look to see if the indicator is helping forecast movements up or down. If we see it is starting to lose its effectiveness, we look to see if anything else is working in its place. While much of analysis does not change because it is driven by human emotion that has remained unchanged since the beginning, what the big money uses to make its moves can and does change. That can happen with moving averages. Sometimes the simple 50 day MVA works better than the exponential 50 day MVA for a particular stock. It used to be that most all technical analysts used the simple 50 day MVA, but with more volatility we started to see the exponential 50 day MVA act as support. Same with the 18 versus 20 day MVA. We started to notice during the last of the big bull run stocks in uptrends would use the 18 day MVA as their support on their trends higher. If we waited for it to test the 20 day MVA to make a move, we would never get in. We still see the 18 day MVA working today as well. We always look at the 20 day and compare simple to exponential on the shorter term MVA's as well. We look to see what is working, and that is what we use.
THE PLAYS:
Good movers: CTX down another $1.80 on huge volume as homebuilders continued the sell-off. IT was up after the Wednesday low-volume doji as volume blew out above average. SCTC moved up in the handle but volume was lower; that needs to reverse to support this incipient breakout move. DRI down over a point for that put play (the company reported good earnings after the bell; the stock was holding at the closing price of 38.16 at the time of this writing). It may try to test the 50 day MVA (39.32) before moving back down.
Stop Advisory: MU (34.50), SWK (47.50)
Trailing Stop Advisory: PH (49)
Covered Call: Were premature on our earlier note about BMS (ready to head up); the stock started selling off Thursday after holding support for over a week, volume was above average Thursday and price falling through the 18 day MVA, and it can continue down to the 50 day MVA (54-53.60 range).
Continued Plays: These still look good: AZR, WAG, VLY, MAT, VSEA, SXT, IBM, WWW. GPC, after hitting the buy point in the cup with handle, fell below the 18 day MVA. It closed just under that level (it is at 36.95).
QLGC (Qlogic--$48.62; +3.76; optionable): Semiconductor
http://biz.yahoo.com/p/q/qlgc.html
STATUS: The stock is forming the right shoulder to a reverse head and shoulders pattern, neckline at 50-51.36 (the latter the March closing high, just above the February high at 50.35). Thursday the stock moved over the short term and 50 day MVAs on continued rising volume (up since Tuesday and Thursday at 9.65 million; avg. 10 million). We were originally watching QLGC for a move back up form the 50 day MVA after it made a lower-volume pullback to that support, but Wednesday the stock broke the support. Looks much better today with the chips having a good day. Target: 60 (initial)
BUY POINT: Breakout: 51.50 on volume of 14 million or higher. Stop Advisory (7%): 47.90
POSITION: Stock and/or July $40 calls to buy (QLC GH).
http://www.investmenthouse.com/ct/qlgc.html
New: Trolling for more chip stocks in good patterns.
LTXX (Ltx Corp--$27.13; +0.65; optionable): Chip Equipment
http://biz.yahoo.com/p/l/ltxx.html
STATUS: Formed a 2-week ascending wedge pattern as a test of the breakout from a short, 2-month cup base within a larger 10-month base. The right side of that cup was quickly formed on a bounce run off the 18 day MVA, support LTXX tested on Thursday's intraday low at 25.50. Volume has been building for the last 4 days, up today to 1.1 million (avg. 802,200), and this move we are looking for a breakout. Excellent money flow. Target: 31.50 (initial)
BUY POINT: 27.68 on volume of 1.1 million or higher. Stop Advisory (7%): 25.74
POSITION: Stock and/or August $22.50 calls to buy (UXT HX)
http://www.investmenthouse.com/ct/ltxx.html
KLIC (Kulicke & Soffa--$20.41; +0.85; optionable): Semiconductor
http://biz.yahoo.com/p/k/klic.html
STATUS: Chips are forming up nicely. KLIC is moving up in the handle to a near 3-month cup with handle base. Volume was higher at 1.3 million (average levels) as the stock bounced from the 18 day MVA. Looking for a breakout over the handle closing high at 21.06. Great money flow and buying. Target: 25.50 Up slightly after hours.
BUY POINT: Breakout: 21.16 on volume of 1.8 million or higher. Stop Advisory (7%): 19.68.
POSITION: Stock and/or July $17.50 calls to buy (KQS GW).
http://www.investmenthouse.com/ct/klic.html
Other new plays:
JAKK (Jakks Pacific--$21.50; -0.13; optionable): Toys & Games
http://biz.yahoo.com/p/j/jakk.html
STATUS: A good sector of late. In a three-day handle to a 4-month cup with handle, highs at 25. The floor of this "cup" is actually a flat base from which JAKK broke out a week ago in a strong 2-day move; volume was strong but on the handle pullback is decreasing very nicely. Showing a tight hammer doji Thursday, we are looking for a move up and breakout. Volume was down to 108,500 (avg. 181,000). Target: 27
BUY POINT: Breakout: 22.59 on volume of 272,000 or higher. Stop Advisory (7%): 21
POSITION: Stock and/or June $17.50 calls to buy (UFF FW).
http://www.investmenthouse.com/ct/jakk.html
COCO (Corinthian Colleges--$48.96; +0.26; optionable): Education Services
http://biz.yahoo.com/p/c/coco.html
STATUS: COCO is in a 7-month cup base, and near the upper right side has formed a 3-week ascending wedge pattern on average or low volume (up slightly Thursday to 229,700; avg. 220,000). The pattern throughout is holding very nicely at the 10 day MVA; upper resistance is at 49.90, the March high. Looking for a breakout as the pattern tightens. The wedge is where we would normally see a handle, so isn't following the prescription for steadily decreasing prices on falling volume for a handle. It is a nice pattern, however, and we can look at entering with partial positions on a breakout, riding the pullback into a better handle, then look for a new breakout from the cup base. Target: 59.85
BUY POINT: Breakout: 50 on volume of 297,000 or higher. Stop Advisory (7%): 46.50
POSITION: Stock and/or August $45 calls to buy (UCS HI).
http://www.investmenthouse.com/ct/coco.html
Previously Covered:
HDWR ($15.13; -0.03): Broke out of the flat base and is testing, showing a hammer doji on rising volume. Buy point 15.50 on continued rising volume (350,000 or higher), for stock and/or August $12.50 calls to buy.
ADSK ($46.57; +0.75): Moved up in the pennant/test of the breakout pattern on rising volume (739,200; avg. 788,000). Buy point is 46.80 on volume in the range of 1.06 million or higher, for stock and/or July $40 calls to buy.
SFD (Smithfield Foods--$26.04; +1.24; optionable): Meat
http://biz.yahoo.com/p/s/sfd.html
STATUS: Ready to break out of the 4-month cup with handle; the stock leapt from the 18 day MVA, recent support in the handle, on rising volume (358,500; avg. 489,000). Looking for the breakout. Target is 31.
BUY POINT: Breakout: 26.09 on volume of 734,000 or higher. Stop Advisory (7%): 24.26. Aggressive buy point was 25.25.
POSITION: Stock and/or July $22.50 calls to buy (SFD GX).
http://www.investmenthouse.com/ct/sfd.html
FDX (Fedex--$57.00; +0.20; optionable): Delivery
http://biz.yahoo.com/p/f/fdx.html
STATUS: After breaking out of the Jan/Feb ascending wedge for the run up to 61.22, FDX has tested back to the 50 day MVA, tapped on Thursday's low at 55.50. We are looking for a bounce back up; since January the stock hasn't tarried at the support on its 2 tests of the level, so could head up from here soon. Target on the run: 67. Wednesday reported an 11% increase in quarterly profits and reaffirmed forecasts for current quarter.
BUY POINT: 58 (over the 18 day MVA at 57.60) on rising volume. Thursday's volume was 2 million; average is 1.7 million. Stop Advisory (7%): 54
POSITION: Stock and/or July $50 calls to buy (FDX GJ).
http://www.investmenthouse.com/ct/fdx.html
Put:
FBN (Furniture Brands--$36.42; -2.69; optionable): Home Furnishings
http://biz.yahoo.com/p/f/fbn.html
STATUS: Broke support of its 50 day MVA (36.84) on huge volume Thursday (1.86 million; avg. 452,300); no specific news, but the sector is starting to sell off after recent gains (FBN has been in a nice uptrend since September lows at 17.65). It will try to move back over the 50 day MVA (bouncing back from the low of 35.65 today), but on a failure to do so, we are looking at an initial target at the 32.50 level.
BUY POINT: Aggressive: 36.30 on continued strong volume, after a test of 36.84 (the 'kiss good-bye').
POSITION: July $45 puts to buy (FBN SI).
http://www.investmenthouse.com/ct/fbn.html
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
Good Investing!
Jon L. Johnson and the Technical Traders Team
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
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stock watch
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