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us stock market, stock watch
Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: How should your readers go about choosing the stocks to invest in from the newsletter?
A: Our method of investing and making money in the market is different from many places. Most brokers or managers want you to buy into a stock and sit in it for a long time. You buy it at a low, 'value' price, and sit on it until the rest of the market decides to buy it as well. Could be a long wait. We love to be able to buy and hold long-term as well; in the 1990's that was a great way to invest with CSCO, DELL, INTC, and others on a rampage for years. Still, we don't just buy because a stock is 'cheap,' and then hope it rises. We buy a stock when it looks ready to make an important move (short term or longer term) so we can get the most out of the move. Sometimes they never make the move. They break down before that. We market those off and look at them again later. The key is making the move over an important resistance point that can free it of sellers and launch a good run. That may be a shorter term move or a longer term move. We have targets in mind, but we let the stock show us if it is going to continue to run for us.
Given the end of that bull run and the subsequent bear market, however, the recovery has been very choppy. Some stocks have done very well for us over the long run (WLP, LLL, ACS, BBBY) and are still solid, while other longer term winners folded up (GNSS, NVDA). Most stocks are still trying to work out of the bear market, and the action remains choppy. We can make 15%, 20%, 30% on many stocks over a fairly short time period (days to weeks), and then see the stock turn over and lose all the gain and then turn into a loss. The market just does not support a lot of long term buy and holds right now.
That is not necessarily the end of investing. What we have always done, no matter what the market conditions, is get a handful of investments that we really like for each session or each week. We rank them in preference. Then we let them make the move. In other words, I pick a group that looks promising. Then I had buy points for them. I would only buy if they hit the buy point. When I worked full-time at another job I would call my brokers in the morning and let them know what I was looking at. Then they would call me (sometimes not) when the move was made. I also started putting in buy orders above the breakout point and letting the stock hit it while I was away. Lots of times I would not even get in on the first day of the move; I would come home and see the stock had started the move and then get my order in for the next session either beforehand or after the open with a call to the broker. Then I would set my stop point and a target I already had in mind.
Again, the key was focusing on stocks that I liked (good sector, leader, good pattern, type of play) and letting them make the move. Sometimes I would run out of money for the plays on my list. Sometimes I would see others make the move but wait on the select few I wanted to focus on. The key was picking a handful that I wanted to invest in and then let them make the move. That way I would not lose focus and would not get stretched too thin with too many positions.
THE PLAYS:
Best Plays: Many of our stocks have made good moves!
1) ROOM: Looking for a momentum play here.
2) OAKT: Looks more than ready with the semiconductor news.
3) ASTSF: Another chip looking ready to breakout.
4) AEN: Still looks good and ready to move.
5) UPS: Looks ready.
6) AHS: Making a nice move (watchlist).
7) SYPR: Looks ready to resume the move (watchlist).
8) ZLC: Starting the fall.
New Plays:
ROOM (Hotel Reservations Network--$61.65; +2.62; optionable): Lodging
http://biz.yahoo.com/p/r/room.html
STATUS: Hit an all-time high at 70 back in March, showed several dojis, and sold off to the 50 day MVA (at 56.60) and started to bounce on better volume last Wednesday. Today it continued the move on strong volume (764,200; avg. is 650K). At just under 62, the stock gives us quite a bit of running room before it hits resistance at the old high. Even if it does not make it, we can make money on the move using some options. This is more of a short term play where we are looking to get in, get the remainder of the bounce toward 70, and move on.
BUY POINT: 61.80 on volume of 700K or more. We won't see the volume early, so we will be taking positions and then watching the volume at the end of the session. Target: 68. Stop=57.50.
POSITION: July $55c to buy (URD GK). The $60 calls have a low delta.
http://www.investmenthouse.com/ct/room.html
PHTN (Photon Dynamics--$47.16; -0.52; optionable): Semiconductor equipment
http://biz.yahoo.com/p/p/phtn.html
STATUS: After the NVLS news we can expect chip equipment makers to improve. PHTN peaked July 2000 at over $80, bottomed just below 20, and has since moved up to clear 50 in March. It has since pulled back to the 50 day MVA (46.48) where it has moved laterally the past 8 sessions. On the 50 day MVA it has shown a couple of big volume spikes on sessions where it tested the level and held. Today it started to make a move on rising volume, but could not hold it ahead of the after hours earnings on NVLS et al (292K; avg. is 605K). The candlestick pattern showed a doji, indicating it could be ready to make a bounce, particularly on the better chip news. This is another play we are looking to get a nice bounce using some options.
BUY POINT: 48.65 on volume of 600K+. Target=53.50. Stop=46.
POSITION: July 40c to buy (PDU GH; delta=77).
http://www.investmenthouse.com/ct/phtn.html
New plays from the weekend report:
OAKT (Oak Technology--$15.72; +0.03; optionable): Semiconductor
http://biz.yahoo.com/p/o/oakt.html
STATUS: Double bottom. The news from TXN and NVLS may be enough to break this one out. Today it traded in a 75 cent range on lower, below average volume (536,200; avg. is 795K). Again, because of the low volume rise over the handle high, we are looking for OAKT to clear the left side of the pattern at 16.40 (closing) on breakout quality volume. Money flow has moved ahead of price, and relative strength is ready to breakout as well. Price/volume action is positive in the pattern.
BUY POINT: 16.50 on volume of 1.3 million ore better. Target=19.94. Stop=15.35
POSITION: Stock and/or July 12.50c to buy (KAU GV).
http://www.investmenthouse.com/ct/oakt.html
NWRE (Neoware--$10.40; +0.22; no options): Networking hardware
http://biz.yahoo.com/p/n/nwre.html
STATUS: Throwing flag poles. Started up today, hit the buy point (10.45) on its way to a high at 10.90, but could not hold the gain. Volume was up on session but still below average by the close (143,000; avg. is 231K). Again looking for an all-time high for a nice quick gain. As the tech sector may rally tomorrow, we could get another buy point for that move to 12.50. Money flow remains strong and out ahead of price.
BUY POINT: 10.45 on volume of 230K or more. Target=12.54 Stop=9.50
POSITION: Stock
http://www.investmenthouse.com/ct/nwre.html
NFB (North Fork Bancorp--$36.40; -0.02; optionable): Northeastern bank
http://biz.yahoo.com/p/n/nfb.html
STATUS: New high. Moved to that new high today, gapping higher to a high at 37.11 and then rolling back down to close basically flat. That gap high was a concern, and we let it come back down. It held at 36.70 and spiked higher. We took some positions at that point, but then the stock rolled back on us. Volume was strong but lower than Friday's nice upside volume (1.18 million; avg. is 560K). We always hate the gaps higher and selloffs on continued strong volume. With the high volume, we are going to be very protective of positions and wont let it go below 35.25. We will see if it can hold, but when a breakout turns fast, it is fighting a lot of selling.
BUY POINT: Holding for now, but will look at more positions on a move over 37 on another volume surge. Target=43.50. Stop=35.25 for existing positions (Originally at 34.25).
POSITION: Stock and/or August 30c to buy (NFB HF).
http://www.investmenthouse.com/ct/nfb.html
XL (XL Capital--$95.92; -0.64; optionable): P&C insurance
http://biz.yahoo.com/p/x/xl.html
STATUS: Run to $100. Did not make the move we were looking for, insteady pulling back and snugging up a bit more on the 10 day MVA after testing the 18 day MVA on the low (95.30). Volume rose on the session (776,800; avg. is 890K), but was not threatening. The stock did not lose much ground on the selling, not a bad sign on the rising volume, especially giving the close over the short term moving averages. The rotation into technology may leave XL stewing for another session, so we just need to be patient.
BUY POINT: 96.55 (moved from 97.25) on volume of 900K or better. Target: 102. Stop=94
POSITION: We are looking at options on this one as it is high priced and the move is limited. July 90c to buy (XL GR).
http://www.investmenthouse.com/ct/xl.html
ASCA (Ameristar Casinos--$28.70; -1.15; no options): Resorts & casinos
http://biz.yahoo.com/p/a/asca.html
STATUS: Saucer w/handle. Definitely not what we were looking for, but still more of a formation of the handle than any king of breakdown. As we said over the weekend, what we wanted was more handle formation. Today it pulled back to the 10 day MVA on the close on rising though still below average volume (122,300; avg. is 169K). Strong buying and relative strength.
BUY POINT: 30.90 on volume of 250,000 (average 169,000). Target: 37. Stop: 28.74
POSITION: Stock and/or June $25 calls to buy (UWT FE - 9 open interest)
http://www.investmenthouse.com/ct/asca.html
PDQ (Prime Hospitality--$13.15; -0.38; optionable): Lodging
http://biz.yahoo.com/p/p/pdq.html
STATUS: 15-month cup with handle. Started to move higher, but sold back, tapping the 18 day MVA on the low (13.05) and rebounding slightly. Volume was strong but lower (237,400; avg. is 175K). Money flow and buying are still strong. We like that it held the 18 day MVA on lower volume.
BUY POINT: 13.99 on volume of 250K+. Target: 17.88. Stop=13.
POSITION: Stock and/or July 10c to buy (PDQ GB; low OI) or July 12.50c (PDQ GV; lower delta).
http://www.investmenthouse.com/ct/pdq.html
Puts:
NKE (Nike--$57.04; -0.82; optionable): Athletic apparel
http://biz.yahoo.com/p/n/nke.html
STATUS: Put; head and shoulders. NKE made the move lower today, hitting the buy point at 57.40 though volume did not ramp up on the selling (1.02 million; avg. is 1.37 million). We like the initial move, but it will need more selling volume to break below 56. That volume may come in tomorrow.
BUY POINT: New or additional positions can be taken on further selling below 56.95 or on a high volume break below 56. Target=53. Stop=59.
POSITION: July 60c to buy (NKE SL); delta is 60, but you don't get much more if you buy deeper in the money and pay a lot more per option.
http://www.investmenthouse.com/ct/nke.html
Flipping a play:
VARI (Varian--$35.07; +0.75; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/v/vari.html
STATUS: Broke below the 50 day MVA (35.05) Friday, and then tried to bounce today, making it all the way back to 36 on the high. It could not hold the move, however, and sold back to close right at the 50 day MVA. Volume was strong, but a bit lighter than the breakdown Friday (554,500; avg. is 275K). The test of the 50 day MVA was a bit higher than we would like, but we will still watch for it to reverse and fall for the put play, however. That would be the 'kiss goodbye,' and that is the safest entry point.
BUY POINT: The test is done. Now a move below 34.50 on continued strong volume. Target=32. Stop=35.75.
POSITION: August $40p to buy (IUA TH). Delta is -58 and low open interest.
http://www.investmenthouse.com/ct/vari.html
CONTINUING PLAYS
Continued puts:
OEX (S&P 100--$547.72; -6.02; optionable): OEX options
STATUS: As we expected the OEX sold back toward the 550 level, and we exited the puts at 58. That was not the session low (546.23), but we still made a nice gain on the play before it bounced once again.
BASING/TRADING RANGES:
AH (Armor Holdings--$27.23; -0.85; optionable): Security and Protection
http://biz.yahoo.com/p/a/ah.html
STATUS: 3-month cup with handle. After making the breakout and then quick reversal, AH is selling back, tapping the 18 day MVA on Monday's low (28.45). Volume has dropped below average on the last two sessions (146,600; avg. is 215K). Relative strength broke out on the move and money flow is still strong. We want to see it hold here because this is where the very tight handle was formed. It may have just been the day in the market, but we never like those high-volume reversals after a breakout. It dropped below 27.75, but is holding above the handle. Again, we won't let it fall below 26 on current positions. Again, if it gets some volume from here, target still 33.45.
BUY POINT: Holding positions for now. If it bounces from here we will hold onto positions but won't add for now. Stop=26.
POSITION: Nothing new right now
http://www.investmenthouse.com/ct/ah.html
ASTSF (ASE Test Limited--$15.23; +0.23; optionable): Semiconductor Mftr.
http://biz.yahoo.com/p/a/astsf.html
STATUS: Double bottom w/handle. Working through a long, flat handle, the last four sessions on below average volume. Today's volume was slightly up as the stock started to rise in the handle (208K; avg. is 306K). The TXN news could be a boon, finally breaking it out of the pattern. Cool.
BUY POINT: Breakout: 16.75 on volume of 450K or better. Aggressive: 15.95. Target=20.90. Stop=15.45.
POSITION: Stock and/or August 12.50c to buy (QDQ HV).
http://www.investmenthouse.com/ct/astsf.html
WEDGES, PENNANTS, FLYING PLATEAUS
AEN (AMC Entertainment--$14.30; -0.13; no options): Movie Theaters
http://biz.yahoo.com/p/a/aen.html
STATUS: Made the breakout move Friday on big volume, but pulled well off the high to close and tested all the way back below the 10 day MVA (13.84) at its low today, but managed to pull back up to close. Not the continuation move we were looking for, but volume was lighter (367K; avg. 188K) and the move back up to close is encouraging. Still could move, and has that strong money flow and high relative strength which broke out. We can still look at new or additional positions on a move over 14.50, but are not chasing over 15.
BUY POINT: Over 14.50 continued strong volume (300K or better). Target: 17.75. Stop=13.25
POSITION: Stock.
http://www.investmenthouse.com/ct/aen.html
RGBK (Regions Financial--$34.32; -0.41; optionable): Regional bank
http://biz.yahoo.com/p/r/rgbk.html
STATUS: RGBK has made a nice push over the last six months, breaking out in late February over 2001 highs, which were the highs in a large double bottom. It has pulled into a lateral consolidation over the last five weeks, moving roughly between 33.50 and 35. It is bumping against the breakout point the past three sessions, again Monday before pulling back intraday to close just over its 18 day MVA (34.23), with volume up but below average at 488,000 (average 562,600). Looking for a hold here and another push up that can make the breakout. Money flow and relative strength are super.
BUY POINT: Breakout: 34.96 on continued strong volume (minimum 745,000). Target: 40.50. Stop: 33.
POSITION: Stock and/or July $30 calls to buy (GVQ GF).
http://www.investmenthouse.com/ct/rgbk.html
UPS (United Parcel Service--$60.35; -0.36; optionable): Delivery
http://biz.yahoo.com/p/u/ups.html
STATUS: Dropped to the 18 day MVA to close with a doji today, as UPS continues in a flat consolidation following its strong move up in February and early March. The range is very tight with some good price/volume action as it moves sideways. It remains solid, and it is a game of patience. We cannot move in too early; let the breakout occur and then we move in. Holding up very well and money flow remains strong.
BUY POINT: Breakout: 61.10 on volume of 2 million or higher (today down to 788,300; average 1.49 million). Target: 66.44 represents a former high and is the initial target. Stop Advisory: 58.05
POSITION: Stock and/or July $55 calls to buy (UPS GK).
http://www.investmenthouse.com/ct/ups.html
WATCHLIST: We have cycled some stocks to watchlists after making a solid move or continuing the pattern. We are continuing to watch them and follow our positions, but do not need full write-ups to do so.
AHS (AMN Healthcare--$29.11; +0.86):
http://biz.yahoo.com/p/a/ahs.html
After a doji on the 10 day MVA, AHS jumped today on superb, above average volume (215,300). This is one of those 6-month old issues, and today was ready to breakout. We are looking at new positions over 29.35. Stock only.
CKP (Checkpoint Systems--$17.70; 0.00; optionable): Security & Protection Services
http://biz.yahoo.com/p/c/ckp.html
STATUS: Nice, tight doji on the pullback on below average volume (124,200). Looks ready to resume the bounce higher, having held above the 10 day MVA at 17.
CMOS (Credence Systems--$22.76; +0.91)
http://biz.yahoo.com/p/c/cmos.html
STATUS: Made a nice move on rising, though still below average volume (695,500). It is ready to blast over the recent intraday highs that stopped the move (23.20). On a move over that level (will most likely get it tomorrow), we will add to positions.
DRXR (Drexler Technology--$26.49; +1.54; optionable): PC hardware: storage
http://biz.yahoo.com/p/d/drxr.html
STATUS: Just won't quit now. A strong move on super volume (210,800). This puts the stock at an all-time high with style. Target: 29.10
POT (Potash CP--$67.00; +0.28; optionable): Mining, non-metals
http://biz.yahoo.com/p/p/pot.html
STATUS: Held at the 10 day MVA and started up on higher volume just as we wanted! Target=77. Stop=63.50.
PRGX (PRG-Schultz--$14.54; +0.54; optionable): Management services
http://biz.yahoo.com/p/p/prgx.html
STATUS: Making the breakout move on strong volume (983K). Looking super. Again, price/volume action is great with up weeks on higher volume outnumbering down weeks on higher volume. Money flow and buying are solid.
BUY POINT: 14.28 on volume of 750K minimum. Target=17.75 (initial). Stop=13.15.
POSITION: Stock and/or July $10c (FPQ GB) or October $10c (FPQ JB) to buy.
http://www.investmenthouse.com/ct/prgx.html
SYPR (Sypris Solutions--$18.00; -0.40; no options): Printed circuit boards
http://biz.yahoo.com/p/s/sypr.html
STATUS: Still testing the breakout, today showing a doji w/tail down to the 10 day MVA on the low (17.30). Volume was still strong (134,500). Looks ready to continue. Target=20.22 initial; then 24. Stop=15.50
ZLC (Zale Corp--$39.80; -0.43; optionable): Jewelry Stores
http://biz.yahoo.com/p/z/zlc.html
STATUS: Put. Starting the breakdown today but volume did not kick in (326,600; avg. is 373K). From here: Through 39.50 on above average volume. Target: 36. Stop=42.25.
POSITION: May $45 puts to buy (ZLC QI - no open interest as yet)
http://www.investmenthouse.com/ct/zlc.html
Good Investing!
Jon L. Johnson and 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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