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Begin Part 2 of 3

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): -0.1% actual versus 1.0% expected (raised from +0.5%) and 1.1% prior (revised from 1.2%).
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.

SUBSCRIBER QUESTIONS:

Q: On your comments on SGI (The Daily, 4-1-02), you state it pulled back on higher volume to close with a doji. I thought we want to see the pull back on lighter volume? Is it the fact that it closed on a doji that the higher volume is good on this pull back?

A: Yes, you are correct on the general idea that pullbacks on higher volume are usually not a good thing. The reason SGI was more appealing Monday night is that it pulled back on low, below average volume the prior week, but the past two sessions it is trying to find support at the 18 day MVA and where it formed a flat consolidation in early March. The volume ramping up as it sells lower and rallied back up Thursday and today's tight doji (very tight intraday range) indicate buyers are supporting the stock at this level. Even though there is higher volume and the stock is going nowhere, it is holding support; there are as many buyers at this level than sellers- - the buyers have finally caught up with the sellers after the selling and are stepping in and accumulating shares. Think of it as kind of running in place in mud, and starting to get your feet under you with some traction.

TEAM TRADES

ATH: In the health insurance business (rising health costs along with an aging population are putting more money in the health sector ledgers). Health insurance is benefiting as well. WLP did fine last week and is still on the move for us, and today ATH was out of the blocks early. It ran right up to the buy point at 59 in the first half hour, but stopped short. It spent the next half hour consolidating and then blasted over 59 on the way to 59.60. Given the market weakness we figured THC's earnings would help the sector, but we held off on issuing the alert and waited for the test of the breakout. Sure enough over the next 30 minutes it pulled back right toward the breakout, resting at 59.10 on the 15 minute MVA. It held and started to bounce. We issued the alert, the first play of the day, and jumped in at 59.20. The stock was not ready to ramble just yet, however, and spent the next hour moving between 59.20 and 59.30. That was good action, however, and the stock then ran up to 59.80 on the high, faded a bit, and then rallied into the close to the session high. Not a bad session, and we are very comfortable with the move and the sector.

THE PLAYS:

BONUS PLAYS: HDWR broke out! TXT is still set up well, and CEY moved up, but on low volume. JDEC dropped with the software.

SFNT (Safenet--$16.16; +0.24; optionable): Software
http://biz.yahoo.com/p/s/sfnt.html
STATUS: In one of our favorite patterns, the base on base. SNT broke out strong recently from a double bottom with handle, taking out its 50 day MVA (14.08) in the process with a gap. After that move, the stock has held up, forming an ascending wedge over the support of its 10 day MVA (15.40). Today SFNT tapped the pattern high at 16.50, but pulled back for a loose doji on volume of 84,500 (average 105,100). Targeting 19.50 (high is 19.71).
BUY POINT: 16.60 on volume of 140,000. Stop: 15.44 (7%).
POSITION: Stock only.

BSX (Boston Scientific--$24.91; +0.12; optionable): Medical instruments
http://biz.yahoo.com/p/b/bsx.html
STATUS: Has pulled into a handle to a double bottom pattern that started after a correction back from the November and all-time high of 27.89, and which featured lows near the 200 day MVA (currently 24.26). BSX tried a move last Thursday but pulled back just short of the handle high (25.50; pattern center at 25), but it has held up over the 18 day MVA (24.26). Volume has been low after the attempt, and we will look for a continued hold of support and a breakout. Excellent buying. Target: 30.
BUY POINT: 25.60 on volume of 3 million (1.12 million today; average 2 million). Stop: 23.50.
POSITION: Stock and/or August $22.50 calls to buy (BSX HX).

IFF (Internat Flavors--$35.74; +0.51; optionable): Chemicals
http://biz.yahoo.com/p/i/iff.html
STATUS: IFF made a nice breakout from a 'flying w' double bottom (right leg not as low as the left) in February, and is continuing to look good, having formed an ascending wedge pattern the last month. Today IFF made a strong move up, closing just below the pattern high of 35.95, and moving on increased volume of 457,200 (average 388,000). Relative strength has broken out ahead of price, which is bullish. Target: 42.
BUY POINT: 36.10 on volume of 525,000. Stop: 33.57 (7%).
POSITION: Stock and/or August $35 calls to buy (IFF HG).

NCOG (Nco Group--$28.12; +0.16; optionable): Business services
http://biz.yahoo.com/p/n/ncog.html
STATUS: In a very tight, lateral consolidation that forms the handle to its cup, which dates back to June 2001. NCOG just broke from a smaller (January-February) cup within the larger pattern, hitting 29.75 before pulling back and holding the 18 day MVA (27.49) in its current flat consolidation. Today we saw a 'get ready' spike of volume, which shot up to 825,000 (average 302,000). Looking for a strong move. Target: 34 (there is resistance from 2000-2001 highs at 35). Great money flow and buying, and solid relative strength.
BUY POINT: 28.50 on continued strong volume (minimum 450,000). Stop: 26.51 (7%).
POSITION: Stock and/or June $25 calls to buy (GCQ FE).

Quick updates prior bonus plays:
CF - Still holding support, waiting for the move
AOG - Made a move up, but on weak volume
KSS - Touch retailer day brought KSS back to the 50 day
CECO - Still looking good
MDR - Watching for a test back after the bounce, but still looking good
ISLE - Carefully watching for a possible turn over and test of the 50 day
UPS - Falling out of the consolidation, but selling still on below average volume
MKSI - Quick test of the weak breakout; we will see if it holds and make a stronger move
C - Still set up in its consolidation
BLC - Still in a consolidation
OO - Has dropped back to test the 50 day

MARKET FAVORITES: CYMI is still set up pretty well. After its solid run, MANU dropped with the software sector. ZRAN made some great moves, but today was crushed, falling back to the 10 day MVA.

Updates on recent Market Favorites:
MCHP & KLAC - holding their 18 day MVA's.
MSFT - Put. Dropped hard toward the target at 56. With the strength of selling, we could get more than that on this move.
FLEX - Put. Testing the 50 day on weak volume
LRCX - Holding up pretty well, still riding positions.

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: No announcements forecast for this week, but we have quite a few on the agenda in the weeks following.

NEW PRE-ANNOUNCEMENT PLAY:

APOL (Apollo Group A--$52.68; +0.04; optionable): Forecast to announce a split during the week of April 8 in conjunction with a board meeting. The company will not confirm a date, but based upon our research the board should meet this week.
http://biz.yahoo.com/p/a/apol.html
BACKGROUND: Last announced a 3:2 split on 1-10-01 in conjunction with a board meeting. The stock price was $50. The company has sufficient shares for a 2:1 split.
STATUS: APOL has made nice, steady progress along its 50 day MVA since its last split, bringing it back in range. After falling back from an attempted breakout from a cup in March, APOL again held the 50 day. It made a nice move last week, bouncing up from its 50 day MVA (58.05) and then topping at 54.33. It has pulled back, yesterday tapping near its 10 day MVA (51.20) but recovering, and today showing a tight doji on reduced, but still strong volume (1.23 million; average 940,600) over its early-March high. Looking strong and showing good action, but APOL could use a couple more sessions to consolidate a bit over support and set up the next move as we go toward the forecast. Target: 62.
BUY POINT: After holding 52, a bounce over 53.20 on increased volume. Stop: 49.57.
POSITION: Stock and/or August $50 calls to buy (OAQ HJ).

PRE-ANNOUNCEMENT BEST PLAYS: PNRA and STI still in good patterns, and SUI could continue its slow move up.
1) EXPD - Lurking in the reverse head & shoulders
2) IFIN - Waiting for a move
3) CYN - Holding support
4) CTAS - Interesting pattern
5) MGA - Still solid

EXPD (Expeditors--$59.71; -0.89; optionable): Air delivery & freight. Working on a date.
http://biz.yahoo.com/p/e/expd.html
BACKGROUND: Last announced a 2:1 split on 5-6-99 at a stock price of $62.50. The company has sufficient shares for a 2:1 split.
STATUS: Tried to move out of the pattern last Thursday, but after hitting a high of 62.34 pulled back intraday, and has settled back some more on low volume the last two sessions. EXPD is in a reverse head & shoulders, formed since the beginning of 2002. Looking for EXPD to hold the 18 day MVA (59.36; right 'shoulder low at the 50 day, 58.05) and set up a breakout. All-time high is 65.92. Target: 70.
BUY POINT: Over 61.50 on volume of 550,000. Stop: 57.75
POSITION: Stock and/or August $55 calls to buy (URP HK - 10 open interest).

IFIN (Investor's Financial Service--$74.73; -0.19; optionable): Looking at an announcement on 4-16 with earnings or with the 4-23 shareholder meeting.
http://biz.yahoo.com/p/i/ifin.html
BACKGROUND: Last announced a 2:1 split on 5-15-00 with a board meeting. The stock price was $82. The annual shareholder meeting was on 4-17-01 at which time authorized shares were increased.
STATUS: IFIN has been in a nice consolidation, and has steadily and slowly drifted back. The move has now dipped slightly below the former highs in its January-March double bottom, and just under its 18 day MVA (75.06). Today IFIN showed a doji after gapping under the 18 day, with low volume of 88,100 (average 194,000). Still looks poised to move. Target: 87.
BUY POINT: Aggressive: Over 76.25 on volume of 240,000. Stop: 72.30. Breakout: 77.61 on volume of 240,000. Stop: 72.50.
POSITION: Stock and/or July $70 calls to buy (FLQ GN - low open interest).

CYN (City National--$51.98; -0.10; optionable): Regional bank. Forecast to announce a split with earnings 4-16-02 before the open.
http://biz.yahoo.com/p/c/cyn.html
BACKGROUND: Based upon our research it appears that CYN split its stock in 1990 in the $40 range. The company has sufficient shares for a 3:2 split.
STATUS: After a nice bounce from the 50 day MVA (50.61), CYN has tapered back on light volume, holding the 10 day MVA (52), today with a tight doji. Good action, and we are looking for a move up and over the high to start a new trend run up the short-term MVA's. Targeting 60.
BUY POINT: 53.28 on volume of 300,000 (average 227,000; today 175,600). Stop: 50
POSITION: Stock and/or August $50 calls to buy (CYN HJ - under 100 open interest).

CTAS ($49.26; -0.49; optionable): Working on a new date.
http://biz.yahoo.com/p/c/ctas.html
BACKGROUND: Last announced a 3:2 split on 1-18-00 in conjunction with a board meeting. The stock price was $54. The annual shareholder meeting was on 10-25-00 at which time additional shares were authorized.
STATUS: CTAS has been making higher lows and lower highs since the beginning of 2001, forming a very large pennant. The stock is now battling to get over December-February highs that are at the level of the long-term down trendline. Over the last month it has formed something of an ascending wedge, and is currently holding the 18 day MVA (48.89) as it sets up for the next move. After its last attempt to breakout, it has held on well, moving on low volume, today dipping back slightly as volume continues to be under the average (792,100; average 973,500). Watching for the breakout, and targeting 60.
BUY POINT: Over 51 on volume of 1.5 million. Stop: 48.
POSITION: Stock and/or August $45 calls to buy (NQQ HI).

MGA (Magna--$73.41; -0.74; optionable): Auto Parts. Forecast to announce a split 5-2-02 with earnings or on 5-9-02 in conjunction with its annual shareholder meeting.
http://biz.yahoo.com/p/m/mga.html
STATUS: After breaking from a large ascending wedge to start the month MGA formed a flag pattern that squeezed very tight with a string of dojis. We got some 'shakeout' action as MGA sold back below pattern support in the 18 day MVA (72.11) last week, but it climbed back smartly and is working on breaking out. After the goo move over the last few sessions, MGA dipped back a bit today on lighter volume (224,300; average 300,300). The stock tested the 10 day MVA at its low of 72.97, which is also with former pattern highs as in the tip of the pennant. Looking for it to hold here and surge to a breakout. On a breakout, targeting: 83. Relative strength has broken out ahead of price.
BUY POINT: Breakout: 74.60 on volume of 400,000. Stop: 70.
POSITION: Stock and/or August $70 calls to buy (MGA HN).

PRE-SPLITS BEST PLAYS: NDN has a good pattern going into the split, and MKC and PMI continued to show strength.
Remember, we try to grab Pre-Splits as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) ADSK - Back at support

ADSK (Autodesk--$45.37; -1.20; optionable): Software. Splits 2:1 effective 4-19-02.
http://biz.yahoo.com/p/a/adsk.html
STATUS: ADSK has formed something of an ascending wedge as it trends up along its 18 day MVA (45.44). The patterns formed after its strong February move (high 47.37) and subsequent pullback that held the 18 day. It is making its steady way, but today pulled back again to the 18 day, hitting a low of 44.71 but recovering. Going toward the split we are looking for a breakout. ADSK displayed good price/volume action on the February run and the formation of the subsequent pattern. Target: 53.
PLAY: Aggressive: A bounce back over 46.25, with stock and/or July $40 calls to buy (ADQ GI). Stop: 43.25. Breakout: Over 47.37 on volume of 1 million, with stock and/or July $45 calls to buy (ADQ GI). Stop: 44.05.

CONTINUING CANDIDATES BEST PLAYS: THC continued up strong.
1) TGIC - Looks ready to move again. Nice.
2) HB - Holding up with a consolidation
3) DIAN - Setting up for another run
4) TGH - Ascending wedge

TGIC (Triad Guaranty--$42.92; +0.26; optionable): Surety & title insurance.
http://biz.yahoo.com/p/t/tgic.html
BACKGROUND: Last announced a 2:1 split on 9-18-97 at a stock price of $55.76. The annual shareholder meeting was on 5-10-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Made a very strong move up last week after a second test of its breakout (and 50 day MVA, at 40.78) from a cup with handle. TGIC gently pulled back Monday on much lighter volume, and today showed a doji, holding its 10 day MVA (42.43, with recent highs at 42) with volume again dropping (20,100; average 54,360). Solid money flow and buying. Target 50.
BUY POINT: Breakout: Over 43.53 on volume of 80,000. Stop: 40.58.
POSITION: Stock.

HB (Hillenbrand--$61.61; -0.29; optionable):
http://biz.yahoo.com/p/h/hb.html
BACKGROUND: Based upon our research it does not appear that HB has ever split its stock. The company has sufficient shares for a 2:1 split.
STATUS: HB fell out of its February pennant pattern, but caught the 50 day MVA (58.92) and has made a good move up from that support. Last week HB took out the former pennant high (61.75), stalling at that point but holding up well the last several sessions. It is forming a lateral consolidation over the 10 day MVA (60.87), which it tested at its low Monday before recovering for a doji. Volume continued to be low today (102,300; average 152,300) as HB showed another loose doji. Looking for a continued hold and a strong move over the recent high. Target on a strong move is 72.
BUY POINT: 62.33 on volume of 200,000. Stop: 58.50.
POSITION: Stock and/or June $60 calls to buy (HB FL).

DIAN (Dianon Systems--$63.59; -1.44; optionable):
http://biz.yahoo.com/p/d/dian.html
BACKGROUND: Based upon our research it does not appear that DIAN has ever split its stock. The annual shareholder meeting was on 10-25-00 at which no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: DIAN made a solid move back up from 55, taking out its 50 day MVA (60.23) on the way, as well as its December high at 62.50. The move slowed down gradually and today it eased back on light volume (110,700; average 245,100), so we are looking for a hold over the 10 day MVA (62.83) to set up an assault on its high 67.96. The key is to hold the 62.50, as a drop back could set up a bearish head & shoulders. So far, the action has been good on this move so we will look for a strong bounce and a continued trend up. Target: 66.
BUY POINT: Aggressive: Over 65 on volume of 320,000. Stop: 61.
POSITION: Stock and/or August $60 calls to buy (UID HL).

TGH (Trigon Healthcare--$73.22; -0.41; optionable):
http://biz.yahoo.com/p/t/tgh.html
BACKGROUND: Based upon our research it does not appear that TGH has ever split its stock. The annual shareholder meeting was on 4-25-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Gave us a nice move out of a breakout from a cup with handle in January, stopping short of its high of 81.50 at its February high of 79. It corrected back and has been absent from the report for a bit, but is back from the watchlist after having moved back over the 50 day MVA (72.07). It retested the 50 day last week, but bounced back, setting up an ascending wedge after tapping the March high and pulling back slightly the last couple of sessions. Today TGH showed a second consecutive doji, holding over its 10 day MVA (72.88) with increased volume (221,000; average 203,600). Looking for a continued hold and then a breakout move. Targeting 85, watching the high on the way.
BUY POINT: 74.40 on volume of 275,000. Stop: 70.25.
POSITION: Stock and/or July $70 calls to buy (TGH GN - low open interest).

End Part 2 of 3

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