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Begin Part 2 of 2
Support and Resistance
Nasdaq: Closed at 1845.35.
Resistance: 1850 held the index back Thursday on the close. Intraday, the simple 50 day MVA (1853.71) turned the tide. After that, 1875, the bottom of the November consolidation stopped the attempt before that. The 200 day MVA (1880.92) is right behind that. 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: 1800 held more or less twice late last week. Clearer support is 1775, the October high. Then the early November gap up at 1768 and 1745, where it launched from on that gap.
S&P 500: Closed at 1147.39.
Resistance: 1150 (prior tops and bottoms) held on the close Thursday. After that is the December high (1173.62) and the January high (1176.97) will be the real key. Those points also mark 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: The 200 day MVA (1141.58) held Thursday. The simple 50 day MVA (1127.46) and then 1125 (former price consolidations and the 'hump' in the brief November double bottom). 1100 has acted as support as well.
Dow: Closed at 10,403.94
Resistance: 10,400 still has not been cleared totally. 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 is possible, but not totally cleared. The January intraday high at 10,300 and the closing high at 10,259.74. Then 10,000 followed up by the 200 day MVA (9981.03).
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
4-1-02
Auto Sales, March (8:30): 5.6M versus 5.6M prior.
Truck Sales, March (8:30): 7.5M versus 7.6M prior.
ISM Index, March (10:00): 54.3 versus 54.7 prior.
Construction Spending, February (10:00): 0.8% versus 1.5% prior.
4-2-02
Factory Orders, February (10:00): 0.5% versus 1.2% prior.
4-3-02
ISM Services, March (10:00): 57.0 versus 58.7 prior.
4-4-02
Initial Claims, 3/30 (8:30): 394K versus 394K prior
4-5-02
Nonform payrolls, March (8:30): 23K versus 66K prior.
Unemployment Rate, March (8:30): 5.6% versus 5.5% prior.
Hourly earnings, March (8:30): 0.2% versus 0.1% prior.
Average Workweek, March (8:30): 34.2 versus 34.1 prior.
Consumer Credit, February (3:00): $8.5B versus $12.8B prior.
TEAM TRADES
Many good stocks from many sectors were on the move Friday. We wanted to accumulate some more positions ahead of next week. We were not concentrating on sectors, but on the good patterns. Some we got into worked well (ACDO, CSTR, CHK), but others had good moves up only to come back on us. Even those are still in good shape for next week.
WLP: A 50 day MVA bounce underway, we wanted to catch this stock on the move for a nice quick pop. It gapped over our entry point of 63.60, but we just waited, knowing that stocks often do that and then come back to test the move. Sure enough it pulled back to 63.80, but bounced up to 64. All of this in the first half hour, and as usual, we were inclined just to let the early players set the price. Don't want to be the guinea pig in most cases as the specialists and first traders work to set the market price. Well, over the next 20 minutes it worked its way back to 63.80 again, and we saw it was going to hold. It started to bounce again, so we issued the alert and then moved in with July $60 strike calls. We did not try to split the spread; volatility has been low on options and the spreads have been narrow. We have missed some trades trying to shave 5 cents or so. If we believe in the trade we don't worry too much about a few cents. Anyway, the stock then ran up to 64.20 over the next 45 minutes or so and was looking good. It hit the wall there, however, and fell to 62.90 over the next 2.5 hours. It held at 63, right above the tops of mid March, and rallied to the close, finishing about 63.70. Back to flat with a loose doji.
THE PLAYS:
Reading the Plays: Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA. Please click on the Yahoo and chart links for company and charting information. A "prior high" refers to the high at the start of a base.
For conserving space on listings of stop losses, the symbol (7%) indicates that the stop is 7% below the buy point.
Good movers: CHK gave another strong move Thursday! CSTR on strong volume popped up nearly 2 points from its 18 day MVA, making the move we wanted! VRST broke out of its cup with handle on huge volume (no news on that big number).
Stop Advisories: SRCL (62.40), LLL (113.50, covered call)
Stocks from Wednesday's report:
WFMI: Pulled back a bit farther than we wanted on some higher volume, stopping at the 18 day MVA but below the pivot point (46.49).
SIB: Pulled back on lower volume after Wednesday's bounce from the 18 day MVA. Cup with handle.
CHK: Very nice extension of Wednesday's breakout move, with the stock moving over the previous March high.
NOC: Up another 1.55 points on the bounce from its 50 day MVA. The stock cleared resistance at the earlier March high (112.70) but volume was low again, below average. Look for a hold in this range ahead of a continued bounce.
HDI: Tried to make its move, hitting 56.20 on the high (buy point was 55.91 and the stock closed at 55.13), pulling back into a doji. Volume higher but still below average.
Continued Plays: Still like SBUX, HARB, ODP, FAX.
ACAT: Covered 3-07 in the ascending wedge. It broke out and made a strong move Monday after testing the highs in the pattern, and Thursday was heading up again after testing that move.
ADBE: Gapped higher, gaining $1.44 on a sharp rise in volume Thursday. Was consolidating at the 18 day MVA in a test of its ascending wedge breakout early March.
CBUK: Moved up from the 18 day MVA on rising volume Thursday; testing the breakout from the Feb/Mar consolidation.
EXLN: Testing the breakout, and closed at its high Thursday (1.53), on a good push higher in volume. 1.53 is the resistance the stock is trying to break, and it might!
MPS: Keeps moving up, but volume has tapered off the last 2 days; can pull back to test 8.50; showed a tombstone doji Thursday.
UCI: Still climbing, but on sharply lower volume. Ballistic moves such as this one cannot continue indefinitely. If it does not hit our target first, it could test back toward the 10 day MVA at 17. We might take money off the table if it runs hard Monday and then starts to stall.
Best Plays:
1) HLYW: Looks ready to bounce here!
2) SPIL: Strong move up in the cup with handle!
3) UMC: Breakout!
New plays:
HLYW (Hollywood Entertainment--$16.80; -0.09; optionable): Music & Video
http://biz.yahoo.com/p/h/hlyw.html
STATUS: Testing the breakout from an 18-week cup with handle base. The stock broke out and ran to18.14 then pulled back in the test to the 18 day MVA Thursday, showing a hammer doji (price fell to 16.15 intraday before bouncing). Volume was rising on the move to 851,900 (avg. 823,000), indicating buyers came in and pushed it back up. It closed just over the 10 day MVA, a good place to rally after the intraday recovery Thursday. The base formed at the top of an uptrend that started at the first of last year (near $1.00!). Huge money flow and strong buying! Target: 20.40
BUY POINT: Aggressive: 17.30 on volume around 980,000 or higher. Stop Advisory (7%): 16.09
POSITION: Stock and/or July $15 calls to buy (HWQ GC).
http://www.investmenthouse.com/cd/hlyw.html
Some semiconductor stocks are setting up good patterns, and as we have seen, smaller stocks are performing well in the recent market:
SPIL (Siliconware Precision--$5.20; +0.30; no options): Semiconductor equipment
http://biz.yahoo.com/p/s/spil.html
STATUS: Issued in September 2000 when it immediately started forming the current 19-month saucer base. More recently, however, SPIL developed a 10-week cup with handle after making a solid rise off the base bottom. The handle pulled back to the 18 day MVA, caught higher support at the 10 day MVA and after holding there on decreasing volume the last three days, SPIL started to move Thursday, posting the gain on a sharp rise in volume (1.2 million; avg. 419,363). Looks ready to make a breakout here. Showing huge money flow and buying. Target: 6.75
BUY POINT: 5.35 on continued strong volume. Stop Advisory (7%): 4.96
POSITION: Stock.
http://www.investmenthouse.com/cd/spil.html
UMC (United Microelectronics--$10.65; +0.82; optionable): Integrated Circuits
http://biz.yahoo.com/p/u/umc.html
STATUS: Broke out of a 15-week reverse head and shoulders, and interestingly, the head of which is the right shoulder of a bigger, 9-month reverse head and shoulders base. The stock made a big gapping move higher on the breakout with volume blasting up to 7.18 million (avg. 3 million); it remains a buy on the breakout since it is within 5% of the buy point at 10.35. Money flow is very strong, and relative strength is breaking out. Target: 13.45
BUY POINT: 10.80 on continued strong volume. Stop Advisory (7%): 10.04
POSITION: Stock and/or June $7.50 calls to buy (UMC FU).
http://www.investmenthouse.com/cd/umc.html
MEOH (Methanex--$7.41; -0.03; no options): Chemicals
http://biz.yahoo.com/p/m/meoh.html
STATUS: Had a big run the first half of this month (started the end of February) to the high at 7.80, off of a bounce from the 18 day MVA, forming most of the right side of its year-long cup with handle. The run broke MEOH over the 200 day MVA at the start of the run, and now the stock has tested back to the 18 day MVA (7.25) in the handle. Volume picked up Tuesday on a bounce from the support, but the stock wasn't ready yet to make the move. After closing a cent below the 10 day MVA Thursday MEOH can re-test the 18 day (7.25) as volume decreases again (was down to 408,000; still well above the average of 267,318). After such a long base, a longer handle would not hurt Looking for a move up and breakout. Target: 9.50
BUY POINT: Breakout: 7.90 on volume in the range of 401,000. Stop Advisory (7%): 7.35
POSITION: Stock.
http://www.investmenthouse.com/cd/meoh.html
Revisiting:
PEGS (Pegasus Solutions--$18.50; +0.25; optionable): Business Services
http://biz.yahoo.com/p/p/pegs.html
STATUS: Were following this stock in the test of the breakout from its 18-week cup with handle base. Our earlier buy point was 19, but now the stock has formed an ascending wedge as the test, and we are moving that up now. Thursday PEGS moved up from the 10 day MVA (18.19) while volume spiked to 295,100 (avg. 195,300); the stock pulled off the high (18.84), but we are looking for the strong volume to push it back up again for a breakout. The stock shows huge money flow and good buying; target is 24.40
BUY POINT: Breakout: 19.05 on continued strong volume (minimum required for the breakout is 264,000). Stop Advisory (7%): 17.72
POSITION: Stock and/or July $17.50 calls to buy (PUG GW).
http://www.investmenthouse.com/cd/pegs.html
PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that look ready to pick up a few shares.
THE LEADERS: DGX, FRX, LLL, MIK
MIK ($37.80; 0.00): Continues to hold at the 10 day MVA (37.76) after pulling back from the March high (39.43) on decreasing volume. We noted last night this support as the place to buy back the covered calls, and now MIK looks ready to head higher. On strong volume, aggressive buy points over 38.50.
FRX ($81.70; +0.75): Bounced from the 50 day MVA on rising volume after the stock fell to that support three days ago. Closed at the 18 day MVA and might be able to deliver the bounce play from here (3-23).
DGX ($82.85; -0.70): Pulled back with a tight doji on lower volume, taking a breather after its 4-day bounce from the 10 day MVA. It tends to make 4 to 5 day moves and then pull back to near term support. In this case that may be the 10 day MVA just over 80 or the 18 day MVA at 78.75. A good place to play a quick covered call sale with April or May $80 calls to sell, and buying them back around 80. Can make a dollar on the move.
UP & COMERS PORTFOLIOS: BBBY, SRCL
SRCL ($62.56; -0.23): Showed a doji at the 50 day MVA (62) on low volume, after the stock pulled back from the March high at 67.99. Will look for another 2-3 days of consolidation then a bounce back up.
MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC
SEBL ($32.61; +0.46): Closed back over the 50 day MVA (32.40), rising volume taking it to a high at 33.89, above the short term MVAs and the 50 day MVA simple (the latter at 33.43). Pulled back into a tight doji at the end of the day.
AMGN ($59.68; -1.17): Broke below the 200 day MVA again, on higher volume, but holding at the 50 day MVA (59.38). Volume still below average so may back down and allow the stock to remain above support, but not a positive sign on the selling.
Good Investing!
Jon L. Johnson and The Daily Staff
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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