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Begin Part 2 of 2

THE PLAYS:

All prices reflect prices at the close on Monday.

SOME LEADERS TO WATCH: Several of the leading tech stocks are ready for a pullback after some strong moves over the last week. We are looking to pick them back up after a rest. In addition, we are including some bull put credit spreads for moves up that look like they can be strong.

Continued Plays:

JNPR (Juniper Networks--$134.00; -1.66; optionable (JUY)): Computer hardware
http://biz.yahoo.com/p/j/jnpr.html
STATUS: Halted the strong move up (Tuesday) but showed a doji on a slight pullback, as volume dropped below average to 17.3 million (avg. 15.6 million). The stock looks ready to move up from here in a rally; the doji is tight in this low-volume pullback in the ascending wedge. On a further pullback, look for support at the 10 or 18 day MVAs (former tested on the low of 132.38) at 131 and 129.52, respectively. Good buying.
BUY POINT: Aggressive: On a move up from here on stronger volume. Breakout: 145.13, on volume of 21 million or better.
POSITION: Aggressive: Stock and/or April $135 calls to buy (JUY DG). April $130 options were not listed at the time of this writing (check with your broker in the morning). Breakout: Stock and/or April $145 calls to buy (JUY DI). Credit spread: Breakout: February $145 puts to sell (JUY NI), and February $140 puts to buy (JUY NI), for a net credit of $3.38.

XLNX (Xilinx--$55.75; +0.37; optionable (XLW)): Semiconductor.
http://biz.yahoo.com/p/x/xlnx.html
STATUS: Popped up Tuesday from the doji (just above the 50 day MVA 52.81), tacking a bit more to the move Wednesday on stronger volume (8.3 million; avg. 9.8 million). The stock hit a high of 58.63 before pulling back down, but looks ready to move higher on stronger volume. Look for the 50 day MVA to hold as support should we see a pullback. Positive buying.
BUY POINT: On a move up from here on stronger volume.
POSITION: Stock and/or February $55 calls to buy (XLW BK).

EMLX (Emulex Corp--$103.06; -6.53; optionable (UEL)):
http://biz.yahoo.com/p/e/emlx.html
STATUS: Pulling back from Tuesday's new all-time closing high of 109.59. Volume was lower at 5.57 million (avg. 4.3 million), but the stock can pull back further as it needs some consolidation after the strong run up from January's low (60.56). Can find support at the 100 level, if it doesn't pull back to the 10 day MVA (95).
Good money flow and buying.
BUY POINT: On a move back up from 95 (or better), on rising volume.
POSITION: Stock and/or April $95 calls to buy (UEL DS). April $100 calls were not listed at the time of this writing. Please check with your broker in the morning (UEL DT).

Best Plays:
1) SUB: Ready to keep moving up but needs stronger volume.
2) SWBT: Holding support and ready to move on stronger volume.
3) NUAN: Looking for a continued move up.
4) TGP: Ready to move up.
5) MFLO: Pulling back to test on low volume.
6) PLT: Continues to bounce higher.
7) XOXO: Showing a doji in the handle.
8) C: Moving out of the handle on strong volume.
9) LEH: Looking stronger as it hits a new high.
10) KEI: Lateral handle on very low volume.

TESTS OF THE BREAKOUT: Some of these stocks are moving back on low volume to test the breakout. We often take profits on option plays when they start to pullback on the breakout move and then get back in when the stock bounces up off of the breakout point. This second move is where some of the biggest gains are made.

New Play (from the weekend):

ASD (American Standard--$51.50; -0.50; optionable (ASD)): Material and construction
http://biz.yahoo.com/p/a/asd.html
STATUS: Forming a more appropriate handle after its recent breakout, pulling back off of Tuesday's pop up from support (10 day MVA, currently at 51). Volume rose, still just under average at 356,100. Can pull back further to the moving average before bouncing back up. The stock hit a breakout high of 53.69. Good buying.
BUY POINT: Aggressive: On a bounce from 51 on rising volume. Safer: Over 52.
POSITION: Aggressive: Stock and/or April $50 calls to buy (ASD DJ).

Continued Plays:

SUB (Summit Bancorp--$43.94; +0.63; optionable (SUB)): Regional banks
http://biz.yahoo.com/p/s/sub.html
STATUS: Moved above resistance after consolidating in a test of the breakout, the move up on lower, average volume of 747,100. The stock showed strong volume the previous session, so the lower volume today is not a big concern at this point. Want to see higher volume tomorrow, however, to sustain the move up. Support at 43, or the 10 day MVA at 42. Excellent money flow and buying, and high relative strength.
BUY POINT: On further upward movement on volume of 1.5 million or better.
POSITION: Stock and/or April $40 calls to buy (SUB DH).

WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.

Wedges:

New Plays (from the weekend):

HBC (Hsbc Holdings Plc--$79.39; +1.69; optionable (HBC)): Money Center Bank
http://biz.yahoo.com/p/h/hbc.html
STATUS: Broke out of the ascending wedge Tuesday and continued the move Wednesday on stronger volume, the stock hitting a breakout high of 79.90 before pulling back down slightly. Looks like a test is coming (buy point is 77.33), though the stock remains a buy up to 81.20 on this breakout. Strong money flow and high relative strength, and good buying.
BUY POINT: Aggressive: Up to 81.20 on stronger volume. Safer: On a move back up after a test of 77.33, on strong volume.
POSITION: Aggressive: Stock. March $80 options had insufficient open interests at 94 (HBC CP). Safer: Stock and/or March $75 calls to buy (HBC CO), after a pullback.

AMAT (Applied Materials Inc--$49.63; +1.38; optionable (ANQ)): Semiconductor
http://biz.yahoo.com/p/a/amat.html
STATUS: Still looks good in the ascending wedge, moving up Wednesday on higher, above average volume (22 million; avg. 19 million). Up from support (10 day MVA, tested on the low of 48.13). Look for a breakout over the pattern high of 51.50. Should the stock pull back, the 10 day MVA (47.69) can support the stock (if not the 50 day MVA at 45.92). A drop to the 50 day MVA would not destroy the pattern, but we'd like a hold at the 10 day MVA, at the level of the up trendline supporting pattern dips. Good buying.
BUY POINT: Breakout: 51.63, on volume of 25.5 million or better. Remains a buy on the breakout up to 54.21.
POSITION: Breakout: Stock and/or April $50 calls to buy (ANQ DJ).

Continued Wedge Plays:

SWBT (Southwest Bancorp of Texas--$43.06; +0.31; optionable (ZRQ)): Regional: Southwest
http://biz.yahoo.com/p/s/swbt.html
STATUS: Caught support and moved back up the last two days, as volume remains below average (154,700; avg. 248,000) in the ascending wedge. The stock is holding support above the 18 day MVA (42.38), tested on the intraday low, and looks ready to move up on stronger volume. High money flow.
BUY POINT: Aggressive: On a move up on rising volume. Breakout: 45.76, on volume of 335,000 or better.
POSITION: Aggressive: Stock and/or May $40 calls to buy (ZRQ EH). Breakout: Stock and/or May $45 calls to buy (ZRQ EH).

ORCL (Oracle Corporation--$30.06; -1.41; optionable (ORY)): Software
http://biz.yahoo.com/p/o/orcl.html
STATUS: Gave it up and sold below the 50 day MVA (31) on strong volume (65.5 million; avg. 46 million). The stock started down Monday on rumors. May find support here, but can continue down to the 50 day MVA (simple) at 29.25. No new positions until the stock moves back over the 10 day MVA at 32.

TXN (Texas Instruments Inc--$43.50; -1.50; optionable (TNZ)):
http://biz.yahoo.com/p/t/txn.html
STATUS: Dropped below support (50 day MVA simple, 46) Tuesday and tapped that level Wednesday before heading down farther. Volume dropped from Tuesday's strong numbers (on the less than stellar earnings news), but remained well above average at 16.3 million. Lost the pattern, so we will put it on the shelf for now. No new positions.

Pennant:

New Play (from the weekend):

CSBI (Century South Banks Inc--$32.75; -1.31; no options):
http://biz.yahoo.com/p/c/csbi.html
STATUS: Moved up on good volume Tuesday, but dropped back below support (18 day MVA (33.13) on much lower, below average volume (23,200; avg. 80,181). That is a move below the up trendline that is supporting the pennant pattern, but the low tested support at 32.38, a price hit three times recently. Look for a move up on stronger volume. Strong money flow and good buying.
BUY POINT: Breakout: 34.85, on volume of 108,000 or better. Remains a buy up to 36.59.
POSITION: Stock.

BASING/TRADING RANGES:

New Play:

NUAN (Nuance--$57.72; +10.34): Business software.
http://biz.yahoo.com/p/n/nuan.html
STATUS: Broke out of an ascending wedge pattern, also moving over its 50 day MVA (53.85) with a big volume surge (2.79 million; average 1.53 million). Another one that held up well after hours, and it looks good for a continued surge. Money flow shot up and price/volume action is great.
BUY POINT: On a move from here on continued strong volume.
POSITION: Stock and/or May $55 calls to buy (NUD EK).

New Play (from Monday):

MI (Marshall & Isley Corp--$54.60; +1.21; optionable (MI)): Regional banks
http://biz.yahoo.com/p/m/mi.html
STATUS: Beat the buy point of 53.88 but volume just isn't where it needs to be to sustain this breakout move from the handle in the stock's 9.5-month base. Volume dropped to 132,400 (avg. 80,000), and will have to surge in to support the stock. MI shows high money flow and decent buying.
BUY POINT: Aggressive: On further upward movement on volume in the range of 120,000 or better. Safer: On a move up after a pullback to the buy point of 53.88.
POSITION: Stock and/or March $50 calls to buy (MI CJ).

New Plays (from the weekend):

MFLO (Moldflow Corporation--$26.00; -0.63; no options): Software
http://biz.yahoo.com/p/m/mflo.html
STATUS: Pulling back in another handle after Monday's breakout move failed despite good volume that day. The company reported record earnings after the bell and was holding steady in after hours trading. Volume is pulling back with price in an orderly manner, however, and the low tested support of the 10 day MVA at 25. The stock can hold support there, having hit that price 8 times in the base, though was down just slightly in after hours trading. Volume is still solid, though, so it is possible for the stock to pull back to 25 again before heading back up.
BUY POINT: On a move up from 25 or better on stronger volume.
POSITION: Stock.

BSC (Bear Stearns Companies--$61.13; +0.13; optionable (BSC)):
http://biz.yahoo.com/p/b/bsc.html
STATUS: Broke out Tuesday from its handle, but volume, although above average, was below the 2 million range we were looking for. Today the stock could not continue the move, again hitting 61.88 at its high before finishing with a doji on slightly lower volume (1.23 million; average 1.18 million). Held over the breakout at its low of 59.94, and we could still see a continuation of the breakout move, which is a buy up to 62.81. Strong money flow and good buying.
BUY POINT: A move over 61.88 on volume of 1.8 million.
POSITION: Stock and/or April $55 or $60 calls to buy (BCS DK or DL).

FBF (FleetBoston Financial Cp--$43.38; +0.57; optionable (FBF)):
http://biz.yahoo.com/p/f/fbf.html
STATUS: Made the breakout move, but although it hit the breakout point it did not have the volume (we were looking for 1.5 times the average of 3.7 million, or 5.5 million), which came in at 3.68 million. The stock has been moving in the handle of an 18-week cup base. The high in the left side of the cup is 43.75. High money flow and strong buying. Look for financials to benefit from further interest rate cuts.
BUY POINT: Aggressive: A continued move from here with, volume of 5.5 million. Pullback: A move back up after a lower-volume pullback to the 10 day MVA (41.86).
POSITION: Aggressive: Stock and/or April $40 calls to buy (FBF DH). Pullback: Stock and/or April $35 or $40 calls to buy (FBF DG or FBF DH).

PLT (Plantronics Inc--$53.56; +0.62; optionable (PLT)): Telecom
http://biz.yahoo.com/p/p/plt.html
STATUS: In a 19-week base, and the stock is trying to make a move back up after pulling back from its recent high from last week, at 54.81 (high in the left side of the cup is 56.25). Volume was up today at 416,500 (average 379,300), as the stock moves back up after finding support at the 10 day MVA (51.15, near its December and early-January highs). We will see if it can maintain the move.
BUY POINT: Aggressive A move from here on increased volume. Breakout 54.94, on volume of 563,000 or better.
POSITION: Aggressive Stock and/or May $50 call to buy (PLT EJ low open interest). Breakout Stock and/or May $50 call to buy (PLT EJ low open interest).

VRTY (Verity Inc--$30.75; +0.69; optionable (YQV)): Internet software
http://biz.yahoo.com/p/v/vrty.html
STATUS: Ranging laterally after having broken from a recent trading range. The stock banged into its 200 day MVA (32.63) at its high of 32.75, but could not hold the move, dropping back to show a doji. Volume was up, so we will see if the stock can put together a strong move over the 200 day. Looked solid after hours, but on a pullback look for support at the 10 day MVA (28.69), with the 18 day at 27 (above the highs in its December consolidation, at 26.50). Huge money flow and decent buying.
BUY POINT: From here: A move over 32.75 on continued strong volume (911,700; average 620,000). Pullback: A move up after a lower-volume pullback to support.
POSITION: From here: Stock and/or June $30 calls to buy (YQV FF). Pullback: Stock and/or June $25 calls to buy (YQV FE).

SRNA (Serena Software Inc--$42.56; +1.75; optionable (NHU)): Software
http://biz.yahoo.com/p/s/srna.html
STATUS: Made a great move up in the right side of its base last week, and after hitting up to 44.63 (range of the December high) the stock pulled back, testing as low as its 50 day MVA (37) at its low Tuesday. Today the stock reached back up to 46.22 before retreating back. Closing well off the high is not a bullish signal, and we could get another pullback to the 50 day. On a hold of that support and a move up, we will look at positions, looking at additional positions on a break through the high on this run.
BUY POINT: A move up after a lower-volume (down to 766,500 today; average 457,300) pullback that holds support.
POSITION: Stock and/or May $35 calls to buy (NHU EG).

Continued Basing Plays:

TGP (Georgia-Pacific--$31.00; +0.12; no options): Materials and construction
http://biz.yahoo.com/p/t/tgp.html
STATUS: Has dropped back into another handle after pulling back from its most recent breakout (high of 31.88; high in the left side of the cup is 32). The handle is to a 6 month cup base, and the stock has now shown four consecutive dojis over its 18 day MVA (30.69). We will see if it can mount a move back up and break out. Excellent money flow. Earnings January 26. Basic materials usually perform well when the Fed cuts rates.
BUY POINT: Aggressive: Over 31.25 on stronger volume (158,900; average 168,800). Breakout: Over 32, on volume of 250,000 or better.
POSITION: Stock.

AZO (Autozone Inc--$26.13; -0.68; optionable (AZO)): Auto Parts
http://biz.yahoo.com/p/a/azo.html
STATUS: Crash. Forecast some disappointing numbers and has suffered a downgrade, and since dropping Monday has languished under its 50 day MVA (27). We will see what it does. To the downside the 200 day MVA is at 25.11 (with its December lows). No new positions.

XOXO (Xo Communications--$26.81; -0.38; optionable (QNF)): Domestic Telecom
http://biz.yahoo.com/p/x/xoxo.html
STATUS: After breaking from an ascending wedge formed in the bottom of its base, the stock has now pulled back in a handle. The breakout high was 29.94, with the pullback on lower volume as the stock showed three consecutive dojis (tighter today, on volume of 4.32 million; average 6.5 million). The stock has been using the 10 day MVA (25.68) for support, so we will look for a continued hold over that level in the handle and a strong move up. The 200 day MVA is at 31.93. Excellent buying and money flow.
BUY POINT: A move over 28.25, with increased volume.
POSITION: Stock and/or April $25 calls to buy (QNF DE).

C (Citigroup--$55.81; +0.93; optionable (C)): Bank
http://biz.yahoo.com/p/c/c.html
STATUS: Made a move up today toward the breakout, moving over the prior closing high in the handle with above average volume (15.7 million; average 13.1 million). The handle has been in the form of a pennant, and formed out of the stock's 20-week base. Pattern high is 57.38. Good buying, with money flow and relative strength pulling up.
BUY POINT: Aggressive: A continued move on increased volume. Breakout: 57.51, on volume of 19.5 million or better. Remains a buy on the breakout up to 60.39.
POSITION: Aggressive: Stock and/or March $50 (C CJ). Breakout: Stock and/or March $55 calls to buy (C CK).

LEH (Lehman Bros--$83.19; +1.50; optionable (LES)): Brokerage
http://biz.yahoo.com/p/l/leh.html
STATUS: Continues up, making new highs as it goes. The stock is wedging up along its 10 day MVA (78.64) and broke over the left side of its cup pattern Tuesday. Volume was rather weak on that move, but today the stock came back with a strong showing, with volume at 3.46 million (average 2.39 million). Could get a continued move from here, but it has not been one to make a move that takes it too far from the 10 day without pulling back for a visit. Continues with strong money flow and high relative strength.
BUY POINT: On a continued move on strong volume.
POSITION: Stock and/or April $80 calls to buy (LES DP).

MER (Merrill Lynch & Co--$76.44; -3.56; optionable (MER)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: Broke out of its handle with a strong move Tuesday on the heels of strong earnings, but pulled back quickly, dropping back today to test the breakout on even bigger volume (10.5 million; average 4.48 million). A quick pullback is not our favorite reaction to a breakout, especially on the volume we saw today, but it held over its breakout point (75.88) to close. We will see if it can hold here, and if it can, we will look at playing it back up.
BUY POINT: Holding support, and moving back up continued strong volume.
POSITION: Stock and/or April $70 calls to buy (MER DN).

JPM (J.P. Morgan & Co--$53.25; +1.56; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Moved up from its 18 day MVA (51) Tuesday and gapped up today, but could not be continue up in its handle, closing with a loose doji. Volume crept up, but we will need to see more strength to a move that can push the stock up and out of the handle, which has a high of 54.69. The pattern signals a possible move back down, and on that move we will again look for the 18 day to hold.
BUY POINT: Breakout: 54.82, on volume of 15 million or better (9.3 million today; average 10 million). Pullback: A move up after holding the 18 day on a lower-volume pullback.
POSITION: Breakout: Stock and/or June $50 calls to buy (JPM FJ). Pullback: Stock and/or June $45 calls to buy (JPM FI).

KEI (Keithley Instruments Inc--$61.69; +0.63; optionable (KEI)): Electronics (scientific and technical instruments)
http://biz.yahoo.com/p/k/kei.html
STATUS: Has made a nice move, recently breaking from an ascending wedge in the bottom of its cup base. The stock has slowed a bit the last couple of sessions, holding over 60 as it is perhaps starting to form a handle. Volume has dropped back, coming in down at 223,700 today (average is 510,000). We will see if it continues to hold 60, but on a further drop look to the down trendline (July, October and January highs) at 57. Excellent money flow and buying.
BUY POINT: From here: A move over 63.50 on average volume. Pullback: A move up after a pullback to the 57 range.
POSITION: From here: Stock and/or April $60 calls to buy (KEI DL). Pullback: Stock and/or April $55 calls to buy (KEI DK).

PUT PLAYS: Still looking for defensive stocks for possible moves down as the techs rally.

Continued Play:

BMY (Bristol-Meyers Squibb Co--$64.88; -1.37; optionable (BMY)): Drug manufacturer
http://biz.yahoo.com/p/b/bmy.html
STATUS: Got an upgrade but announced earnings that were a mixed bag of news, and the stock dropped to close with a doji after tapping down as low as 63.38 intraday as the stock traded on strong volume (9.16 million; average 4.84 million). The pattern could signal a move up, so we will see how the stock handles its 50 day and 18 day MVA's (66.30 and 66.84, respectively), which have been strong resistance of late. If we get more weakness at that level a possible put back down.
BUY POINT: A move down after a failed test of the 66-67 range, with the selling on continued strong volume.
POSITION: February $70 puts to buy (BMY NN).

Good Investing!
Your Technical Traders Report Team

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 in 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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