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Begin Part 2 of 2

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

4-1-02
ISM Index, March (10:00): 55.6 actual versus 54. expected and 54.7 prior.
Construction Spending, February (10:00): 1.1% actual versus 0.5% expected and 0.8% prior (revised down from +1.5%).

4-2-02
Factory Orders, February (10:00): 0.5% versus 1.2% prior.
Auto Sales, March (8:30): 5.6M versus 5.6M prior.
Truck Sales, March (8:30): 7.5M versus 7.6M 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

QLGC: A reverse head and shoulders formed subsequent to the double top in December and January. Today it made the move over the neckline at 51.50 at about 1:40CT. Now volume was not huge, so we took just a partial position. We have and initial target at the double tops at 56 to 57 (59.88 longer target), so we were looking at options. The stock was trading just over the pivot at 51.50, so we looked at the July 45 calls, but they were very few trades taking place. We went closer to the money, the July 50 calls. A bit more action. The spread was just 10 cents; again that low volatility narrowing that spread making the need to shave pennies less important. The spread was 8.30 by 8.40, and we were able to get into a few contracts at that point. Some might be squeamish about getting into a stock already up $2 on the session (I used to be that way), but when the stock makes the move, I get in if that is the plan. The volume was light, so I adjusted to less than a full position.

PHM: Homebuilders are reporting good earnings, but after a long run they are breaking key support. PHM tested last Thursday's breach of the 50 day MVA and started to fall again after trying to bounce up from the morning fall. Primed to see again.. We were ready to move in when it did. About 1.5 hours into the session volume was 46% of average, so there was some selling ongoing again. It also hit our entry point for the put play. The stock was at 45.90 and we were looking at July 55 puts trading 9.80 by 10.00. Thought about trying to shave off 5 cents from the spread but decided not to; 20 cents is not bad. We entered at $10. The stock made a modest bounce to the 15 minute MVA and started to roll down. Perfect. An hour later, however, it broke over the 15 minute MVA and started to ride it higher the rest of the afternoon. Closed still well off the 50 day MVA, and we are comfortable with the play for now. That is why we bought some July puts to give it time to work for us.

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.

Stop Advisories: WMT (recent buys), VVUS (broke the 18 day MVA).

Stocks from Thursday's report:
HLYW: Hit the aggressive buy point after a test lower and bounce on higher, above average volume (919,600).
SPIL: Tested lower and rallied back flat on below average volume (332,500). Did not hit buy point.
UMC: Edged higher on lower though still above average volume (3.3 million). Did not quite hit the 10.80 buy point.
MEOH: Bounced up from the 10 day MVA (7.45) on rising, above average volume (430,60; volume was there). Still looking at the breakout at 7.90 as the buy point.
PEGS: Fell back on very low volume (63,400) as it continues in the wedge. Breakout at 19.05.

Continued Plays:
SGI: In a very tight pullback from 4.50 to the 18 day MVA (4.15), today showing a doji at that point on volume that climbed above average to 1.62 million. Looks ready to move higher.
FAX: Still in the lateral handle between 4.20 and 4.25 as volume continues below average (622,900). Still looking for the move over 4.30 on a volume surge.
SNIC: That nice cup with handle is holding as volume drops off the table again (72,100; avg. 225K). This is the time software companies start confessing or saying they are on track, so SNIC might get helped or hurt by some others. Still like the pattern quite a bit.

Best Plays:
1) PSSI: Tightening in the wedge.
2) LQI: Making a solid breakout.
3) SGI: Nice pullback, tight doji, volume rising.

New plays:

PMSI (Prime Medical--$7.70; +0.12; no options): Specialized health services
http://biz.yahoo.com/p/ppmsil
STATUS: Still well off of its highs of 2 and three years back ($10 to $12), but PMSI is building up the right side of its long base, picking up $1.50 to $2.00 per big move. It is now consolidating $2.50 move from March, pulling back the past 5 sessions in a tight range and low volume (69,400; avg. 140K). Tapped the 10 day MVA (7.41) on the low and moved higher for the session. Excellent money flow and buying along with good price/volume action.
BUY POINT: Aggressive: 7.90 on volume of 150,000+. Stop Advisory (7%): 7.34. Target: 9.44.
POSITION: Stock.

http://www.investmenthouse.com/cd/pmsi.html

MLS (The Mills--$27.84; -0.12; no options): Retail REIT
http://biz.yahoo.com/p/m/mls.html
STATUS: In a 10-week saucer with handle pattern, just now forming the handle as volume declines the past two sessions to well below average levels (63,300; avg. 150K). Practically all of the base occurred above the 50 day MVA (27.05) other than three sessions in late February and early March. Price/volume action is good in the consolidation (3 up weeks to 2 down).
BUY POINT: 28.35 on volume of 220K or better. Target: 32 initial; then 34 if it clears 32 on a strong move. Stop: 26.75.
POSITION: Stock (no option chain).

http://www.investmenthouse.com/cd/mls.html

Revisiting:

LQI (La Quinta--$7.46; +0.31; no options): REIT: Industrial
http://biz.yahoo.com/p/l/lqi.html
STATUS: Yes another REIT, but they are looking good. Today LQI was solid, hitting a new 52-week high on rising, above average volume (830K; avg. 390K). It broke out of its 8-week cup base on that solid volume. Price/volume action is stellar, relative strength broke out as well. The super volume and money flow look to send it higher. Target is 9.45.
BUY POINT: We will add to positions or take new positions up to 7.75 on continued above average volume. Stop: 6.70. Target: 9.50.
POSITION: Stock (no option chain).

http://www.investmenthouse.com/cd/lqi.html

PSSI (PSS World Medical; $9.74; -0.06; optionable): Wholesale medical equipment.
http://biz.yahoo.com/p/p/pssi.html
STATUS: Tried to break out of a big 15-month cup with handle pattern last October and December, did so briefly, but then failed. Since the first of the year PSSI has been moving in an ascending wedge with a high just over 10. We like these ascending wedges on top of cup breakouts; it is another consolidation that holds up well and then shakes out the remaining sellers for the next move higher. Money flow and relative strength have remained very solid as it works through he 9-week wedge. Volume has backed off well below average (211K; avg. 520K) and the price/volume action is tilted toward accumulation.
BUY POINT: Aggressive: 10.15 on volume of 525K or better. Stop=9.35. BREAKOUT: 10.48 on volume of 775K+. Stop=9.75. Target=13.

http://www.investmenthouse.com/cd/pssi.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

LLL ($117.76; +5.76). Glad we closed out the covered call play Thursday as LLL jumped to a new high on above average volume (1 million) riding, the tensions in the Middle East. We are going to let this one run again, and then look for another covered call play.

UP & COMERS PORTFOLIOS: BBBY, SRCL

SRCL ($62.26; -0.30): Another doji at the 50 day MVA after reaching way down to 60.55 on the low. It rallied back up to close above the 50 day MVA on slightly higher volume, though still very much below average (137K; avg. 325K). We like to see volume jump on tests of the 50 day, but all things considered, this was another day of consolidation that we were looking for.

BBBY ($32.83; -0.92): Suffering from the retail downgrades, BBBY broke below the 50 day MVA (32.75) intraday, but rebounded to close just over that level. That showed some support for the stock. Volume continued above average (3.8 million; avg. 3.1 million), but did not spike on the news.

MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC

WMT (59.56; -1.74): Received two downgrades and those sent it below the 50 day MVA (60.45) on massive volume (13.2 million; avg. 7.75 million). We were concerned about WMT giving a blow-off top earlier in March, but WMT fell back without caving in. The action on the downgrade shows some of the weakness we were seeing. Now we will see how strong it is if it can recapture the 50 day MVA tomorrow on once again strong volume. If not, this is a problem for WMT, and we will lock in our gains.

EMLX ($34.68; +1.75): Steadily moving off the bottom at 26, a $9 move over the past two weeks. Volume the past three sessions has declined on the move higher (8 million today). The 50 day MVA stopped the move today right at the close. Still deep in the pattern and moving with the market.

BRCD ($17.52; +0.59): Has traded below the 200 day MVA (17.65) for 7 weeks. It consolidated above 16 on low volume and has started up to test the 200 day the past two sessions. Volume has been less than stellar (55.8 million today; 73 million average) on the move. A high volume break over the 200 day MVA would be a good start, and after testing that move, could give a good trade higher if the rest of the techs can continue to form up and lead higher in the near term. Not saying it would be long term, but could give a good trade.

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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