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Support and Resistance

Nasdaq: Closed at 1804.40.
Resistance: Start over again. 1850 and the simple 50 day MVA (1848.45) are the first step. Then 1875, the bottom of the November consolidation and the 200 day MVA (1876.86). 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 has held thus far during this consolidation, but the higher volume selling puts it in question. 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 1136.76.
Resistance: The 200 day MVA (1140.29), but it has been crossed more times than a baby at a christening. After that the December high (1173.62) and the January high (1176.97) are 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 simple 50 day MVA (1127.80) and then 1125 (former price consolidations and the 'hump' in the brief November double bottom) team up for some significant support after that. 1100 has acted as support as well.

Dow: Closed at 10,313.71.
Resistance: 10,400 remains the near term obstacle, the barrier to the upper half of the March trading range. The top of the June, July, and August 2001 trading range at 10,600 (10,679 intraday high) marks the top half of the March trading range. 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: The January intraday high at 10,300 and the closing high at 10,259.74 continue to hold. Then 10,000 followed up by the 200 day MVA (9974.07).

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:

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.

Stocks from Thursday's report:
PMSI: Still pinching back on the 10 day MVA on even lower volume (35,700). Health services are a haven right now, and the great money flow and buying look promising.
MLS: A doji in the handle right on the 10 day MVA as volume moved back to average levels. It looks ready to move. 28.35 is the buy point.
LQI: Racing ahead on strong volume!
PSSI: Another day of consolidation, testing way down to the 50 day MVA on the low and rebounding. Volume remained below average during the consolidation, falling even further today.

Continued Plays:
PEGS: Tried to make the breakout, but fell back to close with a hammer doji on rising, above average volume. Might be ready to make the move over the next couple of sessions.
SGI: After talking it up last night, SGI took a massive plunge out of the consolidation on very high volume. Wiped out the pattern.
HELE: Appliance maker that is trying to make the breakout but cannot muster the volume.
OMX: Had pulled down to the 18 day MVA in a test of the huge move in early March, and after showing a hammer doji Monday jumped up today. Problem is, volume did not follow.

Best Plays:
1) SIB: Ready to make another run at a high.
2) TEX: Nice cup with handle.
3) UPL: Breaking out to a new high.

New plays:

TEX (Terex--$22.69; +0.16; optionable): Construction machinery
http://biz.yahoo.com/p/t/tex.html
STATUS: In a 10-month cup with handle base with the handle forming over the past months after a huge run off the bottom of the base to complete the right side of the cup. Volume has peeled back in the last two weeks of the handle (232,900; avg. is 240K). This is recovering with the economy; now investors have to decide if the economy is going to continue to recover with higher oil prices. Money flow is out ahead of the price and relative strength is ready to breakout as well.
BUY POINT: 23.45 on volume of 360,000 or better. Target=26.95. Stop=21.75
POSITION: Stock and/or July 20c to buy (TEX GD).

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

UPL (Ultra Petroleum--$8.35; +0.32; no options): Oil and Gas exploration
http://biz.yahoo.com/p/u/upl.html
STATUS: Broke out to a new all-time high today, bouncing up off of its 10 day MVA (8.01) after a 3-week lateral consolidation. Volume jumped to above average levels on the move (593K; avg. is 480K). Relative strength broke out on the move as money flow is helping push it higher (not to mention Middle East fighting and rising oil prices). Price/volume action is solid.
BUY POINT: A buy up to 8.65 on continued above average volume. Target=10.25. Stop=7.60
POSITION: Stock (no option chain)

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

CPTS (Conceptus--$21.24; -0.25; optionable): Medical instruments
http://biz.yahoo.com/p/c/cpts.html
STATUS: Raced to an all-time high in December (25.96) after breaking out of a 4-month cup with handle. It is now forming another cup with handle base after correcting back from that high. This base is just over 3 months long and has been forming the handle the past two weeks. Today it tested down toward the 18 day MVA on the low (21.07) and rallied back some. Volume faded to 46,800; avg. is 101K). Money flow and buying are excellent. Relative strength could be a bit better, but it is holding up well.
BUY POINT: Breakout: 23.22 on volume of 150K. Aggressive bounce: 21.75 on 100K or better. Target=27.88. Stop=21.50.
POSITION: Stock and/or August 20c to buy (UCP HD; only 10 OI at this point).

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

Revisiting:

SIB (Staten Island Bancorp--$19.98; +0.30; no options): Regional bank
http://biz.yahoo.com/p/s/sib.html
STATUS: After a quick attempt at breaking out of its 9-week cup with handle pattern (for a new all-time high) just four sessions back, SIB was tossed back down. After a quick test of the 18 day MVA (19.40) it rebounded intraday Monday and rallied toward a breakout today on rising volume (126,800; avg. is 150K). It ran to 20.19 on the intraday high, just below the 20.20 high in the handle. Money flow remains solid and relative strength is ready to make the breakout as well.
BUY POINT: 20.30 on volume of 225K+. Target=24.35 initial. Stop=18.50
POSITION: Stock (no option chain)

http://www.investmenthouse.com/cd/sib.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 (36.00; -1.00). MIK undercut the 18 day MVA (36.90) today on the general retail selling. Volume was lower and still below average (265K). This looks like a test of the breakout from the double bottom pattern but for the generally deteriorating condition of retail overall; they are still looking more or less solid, but eroding. MIK is above the January high at 35 and 50 day MVA, but we want it to hold at 35.

FRX ($83.14; +1.74): The pattern is somewhat volatile with a trading range from 78 to 84 over the past three months, but FRX keeps us happy by continuing to perform. Today it was up off the 50 day at 80.50 on strong, slightly above average volume (1.39 million). It made a higher low this time around and we are looking for a break over 84 on strong volume to add to positions.

DGX (79.44; -3.35): Proposing to buy Unilab, and that tanked the shares down to the 18 day MVA on massive, massive volume (3.1 million). DGX is strong and it is using its strong stock price to make positive acquisitions. We may see a lag in the price for a time as the news is digested.

UP & COMERS PORTFOLIOS: BBBY, SRCL

SRCL ($60.25; -2.01): The lack of volume on the 50 day MVA test concerned us, and there was reason. SRCL broke that level today on above average volume (369K). It has price support at 60, so we will look for a move up from here to recapture it. If it tests but cannot recover and starts to sell, we will look at closing remaining long positions and try a quick downside put play.

BBBY ($31.45; -1.38): Still in pain with the retailers, breaking below the 50 day MVA on continued though steady above average volume (3.8 million). It has done this all March, finding bottom at roughly 31 and bouncing back up. This might be more serious, however, with retailers overall taking a hit. 30.50 is the 200 day MVA. We will watch it closely around that level. Normally we would be out long before that time, but it has been moving in a flat base for four months and the MVA's have been converging.

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

WMT (58.93; -0.63): Fell further today as volume backed off to average (7.78 million). It did not recover back over the 50 day MVA as retailers were hit once again. However, we may get a test back up to the 50 day near 60.45. When it does we will look at exiting positions if it cannot retake that level. if it falls below 58 where there is some support we will exit as well.

NOC (114.00; -2.12): Unable to make a new high and reversed today on higher, above average volume (1.74 million). We could lock in some gain on a test of 111 to 110 on a further pullback, selling April $110 calls (selling for $5.60 with a 72 delta). A fall to $111 would put the calls at 3.64 to buy, a $2+ gain on the call sale.

EMLX, CSCO, BRCD: All reversed at resistance on higher volume.

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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