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Begin Part 2 of 3
THIS WEEK
A pretty big week of economic reports once again. After the 'disappointments' of the Philly Fed and the LEI, new and existing home sales, durable goods orders, consumer confidence (Conference Board and Michigan), final GDP, Chicago PMI, and personal spending will get a close eye. Investors will want to see the reports give some upside surprises once again.
The S&P and Dow are set up to make a move higher after the late-week test of the bottom of their trading ranges. Yes things got a bit hairier at the end of last week, but again, the price/volume action has remained solid as the two indexes test lower in the handles of their cup with handle patterns. That is more like classic shakeout action than a breakdown.
Of course, we were looking for a breakout last week but it was thwarted with the GE and INTC comments that helped some of the selling Wednesday and Thursday. The fact that it was shaken by that news showed it was not ready to make the move. It was able to recover, getting rid of some more investors that were ready to sell and keeping the pattern as well. It is set up, but as we said two weeks back, until the breakout occurs, it is nothing more than another pretty picture (or in this case, chart).
Support and Resistance
Nasdaq: Closed at 1851.39.
Resistance: 1875, the bottom of the November consolidation, stopped the move higher Thursday and the intraday high Friday. The simple 50 day MVA (1868.77) and then the 200 day MVA (1888.16) is next and what stopped the recent rally attempt. The top of the November consolidation at 1934 to 1941. After that is 1980 (the December gap up point) and some minor resistance at 2000. Then the January top at 2098.88.
Support: 1850 was broken Wednesday, but the index jumped right back over it and it held again Friday. 1840, the early November gap up point, has provided little help. After that, it is pretty sparse down to 1800 to 1775.
S&P 500: Closed at 1148.70.
Resistance: The December high (1173.62) and the January high (1176.97). That point also marks roughly the lows of summer 2001 consolidation that runs up to 1240. Before that point there is some resistance at 1183 from March 2000.
Support: 1150 down to the 200 day MVA (1144.18). After that, 1125 is the hump in the double bottom, and the simple 50 day MVA (1127.95) and exponential 50 day MVA (1136.04) are converging. 1100 has acted as support as well.
Dow: Closed at 10,427.67
Resistance: The top of the June, July, and August 2001 trading range at 10,600 (10,679 intraday high), is still holding it back. 10,800 represents some resistance. That is followed by resistance at 11,000 on its way to the May 2001 high at 11,345.72.
Support: 10,400 held on the close once again, though it was again violated intraday. That is followed by the January high at 10,300. Then the 200 day MVA (9995.19) and 10,000 teaming up together.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
3-25-02
Existing Home Sales, February (10:00): 5.50M versus 6.04M prior.
3-26-02
Durable Orders, February (8:30): 1.0% versus 2.6% prior.
Consumer Confidence, March (10:00): 98.0 versus 94.1 prior.
3-27-02
New Home Sales, February (10:00): 880K versus 823K prior.
3-28-02
Initial Claims, 3/23 (8:30): 375K versus 371K prior.
GDP-Final, Q4 (8:30): 1.4% versus 1.4% prior.
Chain Deflator-Final, Q4 (8:30): -0.2% versus -0.2% prior.
Mich Sentiment-Rev., March (9:45): 95.0 versus 95.0 prior.
Chicago PMI, March (10:00): 54.0 versus 53.1 prior.
Help-Wanted Index, February (10:00): 47 versus 47 prior.
Personal Income, February (8:30): 0.2% versus 0.4% prior.
Personal Spending, February (8:30): 0.4% versus 0.4% prior.
TEAM TRADES
LOOK: As we have been doing for the past few months, we have been trolling for smaller cap stocks in patterns that can give us good moves higher. LOOK is way off of its former high, but it has received a surge of buying over the past two months and formed a beautiful ascending wedge above the 50 day MVA. Its trading range was narrowing as volume fell well below average. The only time it jumped up was on slight up sessions with big volume spikes. Really good signs. Friday LOOK opened flat, but an hour into the session it zoomed up right to the breakout point on a huge volume spike. Then it moved laterally for two hours in a very tight range just below the 2.94 pivot point. Then it made the move and we sent off the alert. We were able to catch the play right over $3. The stock then banged around in a range from $3 to $3.10 for the next two hours before its next leg up carried it over 3.40. Huge volume on the break.
THE PLAYS:
Trailing Stop Advisories: ORI (30.75)
Removed but watching. Several of these have hit our buy points and are holds for the present time, and others still look good but are taking some time to move, or are simply on the list to make room for other good plays:
Breakouts:
MAT ($21.00; +0.36): Advanced another point on the breakout (cup with handle) and Friday showed a doji on stronger volume. Looks ready for a pullback to 20 or higher. A hold for buys at 20.15.
Tests:
AZR ($21.60; +0.12): Still moving laterally along the 18 day MVA trying a higher move Friday but volume continued to fall, pulling it off the intraday high at 22.19. Broke from an ascending wedge late February; looking for another strong move. A hold for buys at 22.05 and for positions taken on the wedge breakout.
IT ($13.33; -0.15): The nice-looking test of the breakout resulted in a move to 13.49, but the stock closed lower Friday after testing down to the 18 day MVA (12.79), bouncing back nicely anyway. Volume was lower; looking for a hold above 13.05, buy point for which this one is a hold.
DPMI ($51.44; -1.07): Tried to break out from its 9-week cup with handle but immediately pulled back and is holding at the 10 day MVA on steadily decreasing volume. A hold for buys at 53.89.
SHW ($27.91; -1.08): Could not move over the breakout high after testing the breakout from the reverse head and shoulders; the stock gapped down to close with a doji below the 18 day MVA. An upgrade and downgrade Friday. Buy point was 29.50; suggested stop loss is 27.44. We will see if we can get a bounce toward 28.50 Monday, and if we do, get out.
Bounces:
SY ($17.23; -0.47): Closed just under its 50 day MVA (17.32) on rising volume. It may get back over quickly; if so, buy point remains at 17.90 for the moving average bounce.
ROH ($39.66; -0.63): Tested its breakout from a flat base then broke out again on Wednesday but pulled back on decreasing volume, closing at the 18 day MVA Friday.
Will look for another bounce; buy point is over 40.77 on strong volume. Don't like the immediate turn bad down.
VSEA ($43.29; -0.10): Tested the 18 day MVA after making the strong run off the 200 day earlier this month. Bounced again Thursday from that support but Friday on higher volume showed a tombstone doji. Can test the buy point at 42.25.
Wedges, pennants, plateaus:
COCO ($48.71; -0.25): Pinching off in a tight range in the ascending wedge where the handle should be in the 7-month cup base. Still a tight, nice pattern, so continue to look for a breakout; buy point is 50, see the 3-21 report for other details.
TMBR ($26.48; -0.42):: Still holding above the up trendline in the 7-month ascending wedge (25.25), falling through the 18 day MVA Friday on lower volume to test the 50 day MVA. Oils were hit Friday. Still a good pattern for a breakout (pivot 27.91).
GCI ($75.60; -0.60): Made the buy point in the flying plateau (77.20) but the move was short-lived and the stock broke below the 18 day MVA Friday. Can hold at the 75 level (volume was low). A sell if it falls below that.
Basing:
JAKK ($21.50; -0.13): Still in the handle to its 4-month cup base. Volume rose Friday, the stock showing a star doji, an even battle between buyers and sellers. Breakout: 22.59 on volume of 272,000 or higher for stock and/or June $17.50 calls to buy (UFF FW).
KLIC ($19.95; -0.46): Watching as it moves in the handle to its 3-month cup base. Some mild selling back on Friday, but still can roll in a chip rally. Buy point is 21.16.
SFD ($25.27; -0.77): Was making a nice move up in the handle to its cup base on Thursday, but volume fell back Friday and so did price. Still above support, but not the move we wanted. Did not make the buy point.
SCTC ($13.08; +0.33): Made the buy point (13.03) for the breakout from the 27-week cup with handle on a strong surge in volume, pulling off the high of 13.50. Look for a hold above the buy point and continued breakout. A hold for current positions and a buy up to 13.68 on the breakout if it resumes its upward flight.
SLVN ($25.50; -0.33): Moved below support (18 day MVA) on rising volume in the handle to its cup base (that looks something like a reverse head and shoulders as well). Can hold at the down trendline/50 day MVA (25) if it tests lower. That potential support coincides with the Nov/Feb lows up trendline. No new positions until it is back over the 18 day MVA, but can be a hold for the test of the lower support.
SLAB ($33.94; -1.05): Still looks decent in the cup with handle, showing rising volume Friday on a test of the 18 day MVA. Buy point is 37.29 for the breakout if the stock can give a good bounce from here.
NYT ($47.77; +0.27): Broke out a week ago with a somewhat weak move from the cup with handle (pivot 47.59) but pulled back quickly to test the 10 day MVA by Friday, closing there on low volume, trying to form another handle. A hold, with new buys at 48.75 on 950,000+ volume.
CMA ($63.15; -0.15): Much like NYT. Broke out Friday but pulled back to the 10 day MVA by the end of the week, volume falling back in a new handle. A hold for buys at 64.25; new positions at 64.53 on above average volume (1 million+).
WABC ($42.63; +0.07): Hit the buy point at 43.65 Tuesday in the cup with handle but sold back to the 18 day MVA, holding there through week's end on low volume. Will likely move up again; a hold for those buys; new positions at 43.75 on 250,000+ volume.
SXT ($23.01; +0.41): Broke out of the cup with handle, but volume just hasn't been there. Moved up the last 2 days on the below average volume; a hold for buys at 22.15 while waiting on some volume strength to come calling.
NATI ($41.82; +0.64): NATI continues in the handle to its 10-week double bottom base, maintaining support at the 10 day MVA on low volume. The pattern continues to look good. Buy point is 42.72, volume 270,000 for stock and/or June $35 calls (SJQ FG).
IBM ($105.60; -1.18): Having trouble getting over the 50 day MVA (107.16); buy point is 109.10 for a breakout from the reverse head and shoulders. Volume has been low, allowing the stock to hold current support at the 18 day MVA. Will continue to watch it.
WWW ($17.34; -0.88): Broke out of the handle to is 7-month cup base but didn't give a good move; Friday it capped off that action by selling back toward the 18 day MVA on heavier volume. NKE's results did not help shoemakers. Will need some consolidation at that level. Dropping.
PL ($30.96; -0.32): Were looking for a breakout on the move up to resistance over a week ago, but instead the stock ended up breaking below the 18 day MVA as it double-topped. Dropping.
GPC ($36.69; -0.20): Broke out of the cup with handle on Tuesday (buy point was 37.71) but the stock immediately sold back, breaking down to the 50 day MVA on the low by Friday. A sell if it cannot move quickly back over resistance (18 day MVA, 36.92).
Puts:
MU (33.90; -0.61): MU closed back over the 50 day MVA Thursday; after hours the company reported Q2 results below estimates but gave a positive outlook for revenues. Friday it was back below that support, showing a doji on lower volume. Still above the 200 day MVA (32.85). Hit a suggested stop advisory on the move over the 50 day but can be a hold for now for existing positions. New buy point is below 32 on strong volume.
EMBT ($14.30; -0.45): EMBT hit the buy point (13.95) Wednesday, but is managing for now to hold above 14 on low volume. However, the stock is being pushed down by its 10 day MVA (15.14) for over a week. A hold for current positions in the head and shoulders pattern, for the breakdown to 10 (target).
DRI ($37.82; -0.34): Buy point for the play was 38.50, hit Thursday. The company reported stronger profits and received a couple of upgrades Friday, but that didn't help the stock price at all; volume was huge and while DRI didn't put in much of a loss, the pattern looks weak. A hold; target is 32 (200 day MVA).
Best Plays:
1) EXPE: Ready for a pullback.
2) PER: Breaking out of a double bottom.
3) HBAN: Nice pullback.
4) XMM: Bouncing on huge volume.
5) AG: Ascending wedge.
6) ATH: Another good wedge.
7) WFC: Ready to start up again.
8) SLGN: Getting ready for a move up.
9) IFIN: Ready to move up.
10) CTX: Poised to fall.
11) LTXX: Still a nice ascending wedge.
NEW PLAYS:
Covered Call: A previously covered stock.
EXPE (Expedia--$68.37; -0.14; optionable): Internet Software
http://biz.yahoo.com/p/e/expe.html
STATUS: An industrial equipment stock that broke out of a flying 'w', tested the 10 day MVA twice and appears ready for a pullback after the second bounce from support. Made a higher volume move off of support at 65 (10 day MVA) on Wednesday, but followed through with a small gain on decreasing volume, finally giving in to a slight loss Friday (doji). Volume continued lower (633,200; avg. 736,000). Look for a test of the 18 day MVA, currently at 62.13. The stock may find support at 65, so that will be a level to watch on the move down, but EXPE looks ready to make a bigger correction.
SELL POINT: 68 on rising volume.
POSITION: April $65 calls to sell (UED DM; delta 0.71, selling for $5.40 at Friday's close of trading. Can drop in value to around $3.25 on the move to 65; $1.85 for a drop to the 18 day MVA range).
http://www.investmenthouse.com/ct/expe.html
Breakout:
PER (Perot Systems--$19.60; +0.25; optionable): Info Tech Software
http://biz.yahoo.com/p/p/per.html
STATUS: Breaking out of a 12-week double bottom with handle. Buy point was 19.58 and the stock just cleared that Friday on a strong shot of volume (457,200; avg. 308,227). Looking for a continued breakout, and PER is well within 5% of the buy point. The stock broke out of a cup with handle last fall that ran its price up to the December high at the start of this double bottom (21.06). Showing strong money flow and decent buying.
Target: 23.75
BUY POINT: 19.80 on volume of 462,000 or higher. Stop Advisory (7%): 18.41. A buy on the breakout up to 20.60.
POSITION: Stock and/or June $17.50 calls to buy (PER FW).
http://www.investmenthouse.com/ct/per.html
Breakout to a new high:
HGMCY (Harmony Gold--$10.84; +0.92; no options): Gold
http://biz.yahoo.com/p/h/hgmcy.html
STATUS: A small one and gold stocks are typically volatile, but HGMCY is making a strong move off of its 10 day MVA (9.75), volume surging to 2 million Friday well above the average of 906,000. In late January it blasted out of a short base and ran to the February closing high at 10.56, resistance that was eliminated on the move. This latest run initiated at the 50 day MVA (just below 9 at the time), moved over and used as support the 18 day MVA before the 10 day MVA pitched in on Thursday. Looking for a continued run on this breakout. Money flow and relative strength are leading. Target: 13.50
BUY POINT: 11 on continued strong volume. Stop Advisory (7%): 10.21. Can pull back to test the February high before heading up, offering a better entry point, but the stock was up slightly after hours.
POSITION: Stock.
http://www.investmenthouse.com/ct/hgmcy.html
End Part 2 of 3
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