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Begin Part 2 of 3

Support and Resistance

Nasdaq: Closed at 1770.03.
Resistance: 1800 stopped the bounce attempt Friday. That is followed by a jumble of trouble at 1850 with the simple 50 day MVA (1840.63). Then 1875, the bottom of the November consolidation and the 200 day MVA (1871.27). 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: 1775, the October high, and 1170 are trying to hold. Then the early November gap up at 1768 and 1745, where it launched from on that gap. That may not be very solid. After that it is 1700.

S&P 500: Closed at 1122.73.
Resistance: The 200 day MVA (1138.40). There is some resistance at 1150 as well. 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: 1120 has been holding on the low, trying to hold on near 1125 (former price consolidations and the 'hump' in the brief November double bottom). 1100 has acted as support as well. 1075 marks the bottom of the February double bottom pattern.

Dow: Closed at 10,271.64
Resistance: The January high at 10,300 is the first level to clear, and it held on Friday's high. Next is 10,400, 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 simple 50 day MVA (10,162.67) held Wednesday and Thursday. Then 10,000 followed up by the 200 day MVA (9963.89).

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

4-8-02
Wholesale Inventories, February (10:00): 0.0% versus -0.2% prior.

4-11-02
Initial Claims, 4/6 (8:30): na versus 460K.
Export Prices ex-ag., March (8:30): 0.0% versus 0.0% prior.
Import Prices ex-oil, March (8:30): na versus -0.5%

4-12-02
PPI, March (8:30): 0.6% versus 0.2% prior.
Core PPI, March (8:30): 0.1% versus 0.0% prior.
Retail Sales, March (8:30): 0.5% versus 0.3% prior.
Retail Sales ex-auto, March (8:30): 0.4% versus 0.4% prior.
Michigan Sentiment-Prel., April (9:45): 97.3 versus 95.7 prior.

SUBSCRIBER QUESTIONS

Q: I would like to know if you still consider a stock a buy if you miss the buy point on a gap up but the stock pulls back to the point during the day.

A: From your question I assume the point the stock pulls back to is the buy point. There is a reason we picked the buy point; usually it represents a break over resistance. When resistance is broken it is 'soft' support, i.e., it should hold as support on a test lower. It does not become 'hard' support until it is tested and the test holds. When stocks build pressure to breakout, often it gaps over the resistance and the buy point. That is good, strong action. If it comes back to test that level and it holds, that resistance that was broken is becoming hard support. The early sellers are gone, buyers have moved back in, and the stock starts to head back up. Thus, the test of the breakout after the gap over that level, as long as it holds, it a good sign and a good entry point.

TEAM TRADES

Thursday we made some tough decisions on loss cutting, but Friday even with the continued market doldrums we saw strong stocks breaking out. CF, Charter One Financial is a savings & loan in a nice cup with handle and ready for a new high. The stock started strong, surging higher on strong volume spikes. About an hour into the session it surged to the buy point at 32.60. The move was so strong we wanted to see it test back a bit before we got in. It pulled all the way back to 32.35, holding roughly at the first morning top. From there it started a stair-step up the 15 minute MVA. Right at 10:30 it hit the buy point again and then pulled back again. When it came off the 15 minute MVA once again that was the buy point. Volume was near 60% of average, not bad for that time of the morning. We entered with a stock position; once again the stock bounced to the 32.65 level and fell back to the 15 minute MVA; an ascending wedge forming intraday. It broke out right after that and moved to 33 before re-testing the 32.60 breakout and rising a bit to the close. Volume was excellent, and this is one area that continues to do well. A new high on strong volume. Like to see that.

THE PLAYS: APOL announced the split! Some great moves on the report this week, including PDCO, CHBS, GTK, DIAN, GOSHA and THC.

BONUS PLAYS: CF broke out! KO is still set up in its pattern, AVP is resting after its move, NFI hit the buy point but pulled back in its pattern, and LGND dropped on news without hitting the buy point.

JILL (J. Jill Group--$27.90; +0.25; optionable): Catalog & mail order
http://biz.yahoo.com/p/j/jill.html
STATUS: JILL has formed a cup since February 2001, breaking out of a handle in March and making a nice move up from 23. It hit a new high at 30.74, and now has pulled back into another handle, testing its 18 day MVA (27.28) and holding comfortably over prior handle highs near 26. Good price volume action, and it looked like we were getting a move Thursday as JILL reached up to 29 on decent volume but pulled back, Friday settling for a doji over support. Looking for a strong bounce up toward the breakout. Great buying and good relative strength. Target: 35.
BUY POINT: Bounce: Over 29 on volume of 300,000. Stop: 27.06.
POSITION: Stock and/or June $25 calls to buy (JUI FE).

VCI (Valassis Communications--$38.68; +0.08; optionable): Marketing services
http://biz.yahoo.com/p/v/vci.html
STATUS: VCI broke out over prior highs at 37 at the end of February, and has since pulled into a lateral price consolidation. It is at the level of July 2000 highs, and has held up well through a downgrade in mid-March, suffering a slight dip at that point but recovering quickly. Volume has been generally low throughout the pattern, but it has gained considerably the last two sessions, Friday rising to 408,800 (average 240,600) as VCI showed another loose doji. It looks ready to make a move, and the next level of resistance is the all-time high at 46.50. Excellent relative strength and good buying. Target: 46.
BUY POINT: 39.30 on continued strong volume (minimum 325,000). Stop: 37.
POSITION: Stock and/or July $35 calls to buy (VCI GG).

UB (Unionbancal--$43.50; +0.13; optionable): Regional bank
http://biz.yahoo.com/p/u/ub.html
STATUS: UB broke out over its August and December highs, which were the highs ina large ascending wedge, last month and is now in the range of its all-time high (46.44). UB received a couple of upgrades on the breakout, and after its fine move was promptly downgraded, but the stock has held on well, forming a solid, low volume consolidation over the short-term MVA's (18 day at 42.68) while it digests its gains. UB shows excellent relative strength, buying and money flow, and we will look for a break from this consolidation to make a new high and target 51.
BUY POINT: 44.13 on volume of 560,000 (average 412,500; Friday steady at 212,300). Stop: 42 (7%).
POSITION: Stock and/or June $40 calls to buy (UB FH).

ALEX (Alexander & Baldwin--$27.63; +0.52; optionable): Shipping
http://biz.yahoo.com/p/a/alex.html
STATUS: ALEX formed a double bottom over the course of 2001, but after breaking over the pattern center in December the stock fell back down and tested its 200 day MVA (then 24, now 25), but has moved back up to form a cup with handle pattern. The handle tested back to 26.50 (50 day MVA at 26.31), but shot up Thursday to hit the recent high at 28 before pulling back to close. Volume was very strong on that move, and Friday ALEX moved up again on much lower, but still strong volume (228,800; average 171,000) and appears poised to take out 28 and make a run for it. Excellent money flow, and relative strength has broken out. Target: 33.
BUY POINT: 28.11 on volume of 255,000. Stop: 26.25.
POSITION: Stock and/or June $25 calls to buy (XQD FE).

CKP (Checkpoint Systems--$15.85; +0.14; optionable): Security & Protection Services
http://biz.yahoo.com/p/c/ckp.html
STATUS: CKP broke from a two-month cup in March, and that cup was within a larger base going back to July 2001 (high of 17.80). The last breakout hit 16.95, and since then the stock has pulled back gradually on light volume, holding support at the 18 day MVA (15.70), with intraday dips holding over the prior pattern highs. CKP has shown consecutive dojis over the 18 day, and we are looking for the stock to hold that support and make a move at the high. Good relative strength. Target: 20.
BUY POINT: Breakout: 16.75 on volume of 205,000 (average 138,000; Friday 112,800). Stop: 15.58 (7%). Aggressive: 16.28 on volume of 175,000 or better. Stop: 15.58.
POSITION: Stock and/or August $15 calls to buy (CKP HC).

MCO (Moody's--$40.90; +0.38; optionable): Business Services
http://biz.yahoo.com/p/m/mco.html
STATUS: A nice trend up for the past 18 months, but after a big December breakout hit 42 MCO had to test back. It held the former highs and its long-term trendline on that test, and has now formed a ragged saucer pattern in the process. Last week, MCO bounced smartly from its 50 day MVA (39.14), gapping up to a high of 41.40 on Monday but pulling back in a nice, gradual, low volume drop to test the 18 day MVA (39.95). Something of a handle here, and after a low volume push up Friday (244,100; average 454,300), we are looking for MCO to break out. Target: 48.
BUY POINT: Breakout: 41.50 on volume of 680,000. Stop: 38.80.
POSITION: Stock and/or August $40 calls to buy (MCO HH).

Quick updates prior bonus plays:
HLT, ATMI, NCOG, SCHL, TXT - Still looking solid in consolidations
SBUX - Tried to break out of the ascending wedge, but needs some volume
CTSH - Dropped back but can still form a good handle
CSL - Bounced from the 18 day, continuing to look good
BSX - Still a good handle
IFF - Tried a move but no volume, will see if it can set up again
HDWR - Holding up well on the breakout test
CEY - Jumped today but did not have much volume, and could pull back to support again
CECO - Still looking good
MDR - Holding the 18 day on the pullback in its trend
MKSI - Sold back through the 18 day on weak volume; if it cannot make it back through on a test will look at using that opportunity to exit any remaining positions

MARKET FAVORITES: CMOS has moved up strong, but today pulled back off its intraday high. Still looks good. CYMI is still set up in its consolidation. LRCX continues to bleed down. If it cannot hold support here it will be right at the stop point.

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: KRB is forecast for Thursday, and then we get into many more in the following weeks.

NEW PRE-ANNOUNCEMENT PLAY:

ASD (Amer Standard--$72.65; +2.26; optionable): Researching a new date.
http://biz.yahoo.com/p/a/asd.html
BACKGROUND: Based upon our research it does not appear that ASD has ever split its stock. The company has sufficient shares for a 2 for 1 split.
STATUS: Broke out to a new high Friday! Since September ASD formed a large double bottom, although the right side did not touch as low as the left. ASD recently surged up to take out the center of the pattern and challenge the high, dipping back in late March to test its 50 day MVA (currently 66.92). Off of that move it challenged the highs again, and Friday charged off of the 18 day MVA (69.37) on good volume (903,400; average 467,500) to finally break through. Still a buy up to 74.76 on this move, targeting 85.
BUY POINT: Still a buy up to 74.76 on good volume. Stop: 68.50-69.50.
POSITION: Stock and/or July $70 calls to buy (ASD GN).

PRE-ANNOUNCEMENT BEST PLAYS: SUI took a solid bounce from the 50 day.
1) APOL - Announced split!
2) DRYR - Big move brings it back in the picture
3) BER - Good move to new high
4) CYN - Set up an ascending wedge
5) KLAC - One of the techs that will move if given the chance
6) EASI - Strong uptrend
7) CTAS - Tightening
8) CPS - Great comeback

APOL (Apollo Group--$51.16; -0.93; optionable): Announced a 3:2 stock split Friday, effective 4-26-02!
http://biz.yahoo.com/p/a/apol.html
STATUS: Another split for APOL, making three since 1998. Playing these stocks that consistently split and recover builds wealth, not only getting the benefit of the appreciation (over 200% in the last two years), and the additional shares that allow us to make money using strategies such as covered calls. APOL has made nice, steady progress along its 50 day MVA since its last split, and after falling back from an attempted breakout from a cup in March, APOL continued to hold the 50 day, and made a strong bounce toward the end of March that hit a 54.33. It has pulled back, closing just below the 10 day (51.34) today (18 day at 50.54). Looking for it to hold and perhaps consolidate a bit more here before making the next move. Target: 62.
BUY POINT: After holding at this level, a move over 53 on increased volume of 1.2 million (average 946,500). Stop: 49.50.
POSITION: Stock and/or August $50 calls to buy (OAQ HJ).

DRYR (Dreyers Grand Ice Cream--$43.34; +2.26; optionable): Forecast to announce a split with earnings on 4-24-02 before the open.
http://biz.yahoo.com/p/d/dryr.html
BACKGROUND: Last announced a 2:1 split on 10-27-97 at a price of $42. Before that it announced in October 1990 at about the same price range. The annual shareholder meeting was on 5-9-01 at which time no additional shares were authorized. The company has sufficient shares for a 3:2 split.
STATUS: DRYR had been in a small double bottom with handle, but the handle just kept extending and it hugged the 50 day MVA (41.21) for the last couple of weeks. It consolidated this week, but Friday blasted up on big volume (709,000; average 244,300), taking out its most recent high. A strong move, and DRYR has set up something of a large ascending wedge, and after this bounce we will look for a move to a new high (closing high is 44.20; intraday spike hit 44.88). Target: 52.
BUY POINT: 44.30 on continued strong volume (minimum 330,000). Stop: 41.20 (7%).
POSITION: Stock and/or June $40 calls to buy (QDF FH - no open interest).

BER (W.R. Berkley--$58.53; +0.77; optionable): Property & Casualty Insurance. Researching a new announcement date.
http://biz.yahoo.com/p/b/ber.html
BACKGROUND: Based upon our research it does not appear that BER has ever split its stock. The annual shareholder meeting was on 5-15-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: BER has been steadily trending up along the short-term MVA's (10 & 18 day at 57.88 and 57.07), with volume on the recent moves rather light. Friday BER bounced up with a spike in volume (143,000; average 121,600), taking out the left side high in its cup pattern (58.40, from November). The all-time high is 59.35, made this week on an intraday spike. Looking for continued strength here to continue its trend. We have been targeting 64, but on a continued strong move, moving the target to 68.
BUY POINT: 59 on increased volume of 180,000. Stop: 56.
POSITION: Stock and/or July $55 calls to buy (BER GK).

CYN (City National--$51.53; -0.28; 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 testing its 50 day MVA (50.75) last week, CYN made a strong bounce, but could not take out its high from mid-March (53.18). We watched carefully on the pullback with regard to a possible double top, but the low-volume drop turned back up before hitting the 50 day, and today got some volume on a move back over the short-term MVA's (51.95). We will now watch for increased volume to push the stock up in what could shape up as an ascending wedge, looking for a run over the tops. Target: 60.
PLAY: 53.28 on volume of 300,000 (average 224,000; today 262,300) or better, with August $50 calls to buy (CYN HG - 60 open interest). Stop: 50.50

KLAC (Kla-Tencor--$65.63; -0.08; optionable): Semiconductor equipment. Forecast to announce a split with earnings either after the close 4-17-02 or before the open 4-18-02.
http://biz.yahoo.com/p/k/klac.html
BACKGROUND: Last announced a 2:1 split on 12-16-99 at a price of $93.
STATUS: The chip equipment stocks are some of the best performing tech stocks. Indeed, there were raised estimates for KLAC out before the open Friday, but after gapping up and hitting 67.36, it could not overcome the weak market. KLAC broke out of a reverse head & shoulders in early March, and hit a breakout high of 70.58 but a pullback has managed to hold the 18 day MVA (65.20). Volume was up Friday on the interest generated by the news. Good relative strength, and in an improved market we are looking for KLAC to make another move. Target: 77.
BUY POINT: Aggressive: In a market rally, a move over 67.50 with above average volume. Stop: 62.87 (7%).
POSITION: Stock and/or June $65 calls to buy (CKV FM).

EASI (Engineered Support--$47.23; -0.37; optionable): Aerospace/Defense. Forecast to announce a split the week of 5-27-02 with earnings.
http://biz.yahoo.com/p/e/easi.html
BACKGROUND: EASI last announced a 5:4 split on 2-1-2001 with a board meeting at a price of $28.50. Before that it announced on 6-12-98 at a price of $26.50. The company has sufficient shares for a 3:2 split.
STATUS: EASI made a strong move Monday, breaking from the upward-sloping handle to its cup pattern. After that promising move it immediately showed a high volume doji, and off of that topping sign EASI pulled back. However, the pullback was on much lower volume, and EASI has shown consecutive loose dojis at the former handle high, comfortably over its 10 day MVA (46.56). It has been a nice, steady move up the short-term MVA's as the stock builds the right side of its base, and we will look for EASI to take a bounce so we can add to positions on the continued run. On a strong move the target is adjusted to 56.
BUY POINT: Bounce: New or additional positions on a move over 48.50 on volume of 270,000 or better (today down to 137,800; average 219,000). Stop: 45.20 (7%).
POSITION: Stock and/or August $45 calls to buy (UFE FI - 55 open interest).

End Part 2 of 3

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