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Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: Please explain more about the ECRI as a forecaster. Do we have access to these figures and their interpretation?
A: The Economic Cycle Research Institute puts out a weekly gauge of leading economic indicators and also calculates a 6-month leading indicator as well as an inflation indicator. There is a website at http://businesscycle.com/. Not all of the information provided is free. You can get historical data free, but not the current data.
The ECRI has turned out to be a very accurate gauge of future economic activity. It takes into account many more elements than the governments LEI, and it is claimed to give a 'faster' view of what is going on because it is more sensitive given the elements it considers. It covers not only the U.S, but economies all over the world. It correctly forecast the slowdown in 2000 and 2001, and it showed there was no inflation on the horizon even as the Fed was making all of the noise about inflation around the corner. Not many look at it, but we sure do. Thus far it is saying that there is a recovery ongoing and will continue, that it won't be a double dip, and there is no threat of inflation at all.
THE PLAYS:
Best Plays: Many of our stocks have made good moves!
1) ULAB: Nice cup with handle.
2) CKP: Setting up for the successful test.
3) MTEC: Nice volume spike in the test.
4) XL: Another tight doji.
5) ASCA: Doji on rising volume in the handle.
6) Puts: SYMC (head and shoulders); NKE (looks ready to fall for real); ZLC (still weak).
New Plays:
SYMC (Symatic--$37.30; -0.06; optionable): Internet software
http://biz.yahoo.com/p/s/symcl
STATUS: Put. SYMC is forming a head and shoulders pattern, with the right shoulder forming beneath the 50 day MVA (37.66). It rallied to a high near 42.50 in March, broke below the 50 day MVA on heavy volume in early April, and has made a low volume test of that level (2.49 million; avg. is 4.3 million). This looks very much like a kiss goodbye at the 50 day MVA. Coupled with the head and shoulders developing it is even better. Today the stock showed a doji as it ran into resistance as well. Getting even better. We can enter at two points: a fall from here and a break below 35 on rising volume.
BUY POINT: Aggressive: 36.65 on rising volume. Breakdown: Below 35 on above average volume. Target: 30. Stop=38.50.
POSITION: July 45p to buy (SYQ SI)
http://www.investmenthouse.com/ct/symc.html
ULAB (Unilab--$27.75; +0.25; optionable): Healthcare software & services
http://biz.yahoo.com/p/u/ulab.html
STATUS: ULAB is in a big double bottom dating back to September 2001, and early this month it broke over the pattern center on huge volume. It climbed up to the brink of the all-time high (19.81 from September). After hitting up to 29.89, it has pulled back into a handle, holding over the 10 day MVA (27.34) with comparatively low volume. It showed a doji today with increased volume (582,400; average 441,800), and we will look for ULAB to make a strong bounce and breakout. Good money flow and buying. Target: 35.
BUY POINT: Aggressive: 28.16 on increased volume. Stop: 26.19 (7%). Breakout: 29 on volume of 660,000. Stop: 26.97 (7%)
POSITION: Stock and/or August $25 calls to buy (HQZ HE)
http://www.investmenthouse.com/ct/ulab.html
From the watchlist:
CKP (Checkpoint--$18.02; -0.12; optionable): Security
http://biz.yahoo.com/p/c/ckp.html
STATUS: Nice breakout from its 9-month cup with handle, and is now testing the move. Volume had been pulling back on the test, and then today it moved higher as the stock touched down to the 10 day MVA (17.43) on the low and rebounded (268K; avg. is 155K). Money flow is great and relative strength has broken out.
BUY POINT: 18.30 on volume of 250K+. Target=21.96. Stop=16.95.
POSITION: Stock and/or August 15c to buy (CKP HC).
http://www.investmenthouse.com/ct/ckp.html
MTEC (Meridian Medical--$37.86; +0.96; no options): Medical instruments
http://biz.yahoo.com/p/m/mtec.html
STATUS: Testing its recent breakout, bouncing along the 18 day MVA (35.75). Today it showed a big volume spike on the move higher (200,200; avg. is 125K). It looks as if it is ready to make the move back up.
BUY POINT: 38.35 on volume of 175K+. Target=45.88. Stop=35.25
POSITION: Stock
Plays from Tuesday:
SIGM (Sigma Designs--$5.80; +0.00; optionable): PC peripherals
http://biz.yahoo.com/p/s/sigm.html
STATUS: SIGM was bouncing higher, but today it hit a pause, throwing a tight doji on lower volume (248,200; avg. is 155K) as the rest of the techs took a day off as well. It tested toward the 18 day MVA on the low (5.51) and rebounded. The doji indicates it could rest some more, but it has a ton of buying and money flow. Great volume to boot. We are going to let it test back some more if it will, and then pick up some more on the bounce.
BUY POINT: 5.85 on continued above average volume (250K+). Target=7.94. Stop=5.25.
POSITION: Given the price we are looking at stock.
http://www.investmenthouse.com/ct/sigm.html
PLAB (Photronic--$35.20; +0.58; optionable): Chip equipment
http://biz.yahoo.com/p/p/plab.html
STATUS: 14-month cup with handle. Continued Tuesday's move on much improved volume (1.11 million; avg. 610K), but could not really get moving as the tech sector and market in general were spinning their wheels. It just made the breakout, and volume was what we wanted. It may test toward 34 some more early tomorrow and then start back up. We will be gunning for some more positions when it does.
BUY POINT: 35.35 on volume of 900K+. Target=42.94. Stop=32.88.
POSITION: Stock and/or September 30c to buy (PQF IF; low OI currently).
http://www.investmenthouse.com/ct/plab.html
New on Monday:
ROOM (Hotel Reservations Network--$62.90; -1.21; optionable): Lodging
http://biz.yahoo.com/p/r/room.html
STATUS: Jumped to 65 on Tuesday on rising, above average volume, but ran into some trouble with the rest of the market today. It pulled back on lower volume (717K; avg. is 650K). No problem. As it gapped up Tuesday, that mad it harder to play. We are going to let it test back to the 18 day MVA at 60 or a bit higher, and then let it load up for another push toward 68. Again, 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: On another test of 61.80 down to 60, and then a rebound. We are looking to pick it up on the bounce at 62 if we can. 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--$48.59; -0.43; optionable): Semiconductor equipment
http://biz.yahoo.com/p/p/phtn.html
STATUS: Test of BO. Some wild action going on here. Tuesday the stock shot up on the NVLS and TXN news, hitting 52.73 on the high with massive volume, but it gave most of the gain back. Today it tapped the 50 day MVA on the low (46.70) and rebounded sharply to close over the 18 day MVA (48.35) with a hammer doji on falling though still above average volume (721K; avg. is 605K). Mighty volatile action, but it shows it has some life in it at this important moving average. 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
OAKT (Oak Technology--$16.55; -0.10; optionable): Semiconductor
http://biz.yahoo.com/p/o/oakt.html
STATUS: Double bottom. Broke out on the news from TXN and NVLS, but could not hold a continuation of the move that took it up to an intraday high of 17.55 today. Volume was huge at 1.88 million (avg. 763K), and off of the 'tombstone' we are ready for OAKT to pull back. Looking for the stock to hold the former closing highs in the pattern at 16 on a lower volume pullback, setting up a continuation of the move. Price/volume action is positive in the pattern.
BUY POINT: Holding positions on a lower-volume test of the breakout, looking for support at 16 to set up a move back up. 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--$10.06; -0.23; no options): Networking hardware
http://biz.yahoo.com/p/n/nwre.html
STATUS: Throwing flag poles. NWRE has pulled back again to the support of the 10 day MVA (10.01), holding with low volume in the flag pattern. Again looking for an all-time high for a nice quick gain. 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--$36.93; +0.18; optionable): Northeastern bank
http://biz.yahoo.com/p/n/nfb.html
STATUS: New high. We were looking for the blast to a new high, but Monday's action was a concern with the gap up and high volume drop intraday. It has held up, but not going anywhere with a doji and loose doji the last two sessions with continued high volume (1.15 million today; avg. 560K). The high volume denotes some churning could lead to a drop, so we are continuing to protect positions, not letting them go below 35.25. BUY POINT: Holding for now, watching a retreat carefully to see if it can hold the 36 range and set up again. Target=43.50. Stop=35.25 for existing positions (Originally at 34.25).
http://www.investmenthouse.com/ct/nfb.html
XL (XL Capital--$95.85; -0.01; optionable): P&C insurance
http://biz.yahoo.com/p/x/xl.html
STATUS: Run to $100. Has pulled back the last week after challenging the all-time (February) high of 98.48. The drop has been on rising volume, but not looking bad as XL has not lost much ground and has snuggled up to the 10 day MVA (95.76, tapping the 18 day at intraday lows, 95.14). Volume was up again today as XL showed its second consecutive doji over that support (884K; avg. 815K). If it can continue to hold, looking for a strong bounce.
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--$28.00; -0.20; no options): Resorts & casinos
http://biz.yahoo.com/p/a/asca.html
STATUS: Saucer w/handle. Has pulled back the last week, forming the handle. Perhaps it has found bottom, today holding the 18 day MVA (27.96) with a loose "shooting star" doji. ASCA hit up to 29.39 today before pulling back, with volume jumping to 201,300 (average 166,800). Strong buying and relative strength.
BUY POINT: Bounce: Over 29.39 on increased volume. Stop: 27.80. The breakout is way out at 30.90, needing volume of 250,000. Stop: 28.74. Target: 37.
POSITION: Stock and/or June $25 calls to buy (UWT FE - 9 open interest)
http://www.investmenthouse.com/ct/asca.html
PDQ (Prime Hospitality--$13.20; -0.39; optionable): Lodging
http://biz.yahoo.com/p/p/pdq.html
STATUS: 15-month cup with handle. Back and forth, wedging along in the handle over the short-term MVA's (18 day at 13.11). After solid volume on the recent move back up from 12.50 in the handle, volume has dipped back the last two sessions (105K; avg. 149K). Still holding, so we are still looking for a breakout move. Money flow and buying are still strong.
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--$57.40; -1.34; optionable): Athletic apparel
http://biz.yahoo.com/p/n/nke.html
STATUS: Put; head and shoulders. NKE rebounded Tuesday but could not handle the resistance of the 50 day MVA (58.83, with short-term averages), and today it dropped back again. Volume was lighter on the fall back (1.33 million, the average), so we will see if NKE make the break through recent lows, and we need to see more selling power.
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 60p to buy (NKE SL); delta is 53, 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--$35.75; -0.20; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/v/vari.html
STATUS: After its Friday test over the 50 day (35.13) that did not hold, VARI did not retreat, but gapped up Monday and challenged its short-term MVA's (36.05) on continued strong volume. Volume dropped to a very low level today as VARI tried a move over resistance, but dropped back from a high of 36.50 to close. Still could drop, but not looking as good as it was and we will have to see how it handles the support of the 50 day after the rather strong bounce.
BUY POINT: Aggressive: A move below 34.50 on above average volume (271K; today 76,700). 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
BASING/TRADING RANGES:
AH (Armor Holdings--$26.13; -0.40; optionable): Security and Protection
http://biz.yahoo.com/p/a/ah.html
STATUS: Failed breakout from a 3-month cup with handle. After making the breakout and then quick reversal, AH has steadily sold back, today dipping back toward the 50 day MVA (25.61). As indicated, we were not willing to ride positions through 26. It could take some time from here to set up again.
http://www.investmenthouse.com/ct/ah.html
ASTSF (ASE Test Limited--$16.40; +0.16; optionable): Semiconductor Mftr.
http://biz.yahoo.com/p/a/astsf.html
STATUS: Hit the aggressive buy point with a solid move Tuesday on good sector news, taking out its recent highs in the extended handle to its double bottom. Today ASTSF could only manage a 'hanging man' doji, testing 15.87 at its low while moving on lighter volume of 397K (avg. 284K). It is just under the March high and breakout point of 16.68, but the doji suggests a test back before we see that move.
BUY POINT: Looking for a pullback to hold 16. From there, the breakout is 16.75 on volume of 450K or better. Stop=15.58.
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--$14.00; -0.60; no options): Movie Theaters
http://biz.yahoo.com/p/a/aen.html
STATUS: A bit erratic now. AEN made the breakout move Friday on big volume, but has bounced around since, today pulling back on strong volume (336K; avg. 193K) to close at its 10 day MVA. We will see if it can hold and settle down here and hold, setting up a better move. AEN is right at prior highs in its 10 month double bottom (higher low on right leg).
http://www.investmenthouse.com/ct/aen.html
RGBK (Regions Financial--$34.97; +0.12; optionable): Regional bank
http://biz.yahoo.com/p/r/rgbk.html
STATUS: RGBK hit the breakout buy point Tuesday but did not have the volume until today, when it tested back to the 10 day MVA (34.54) and pulled back up to close. The high volume doji could signal that the stock needs to test back toward the 10 day before launching another attempt to break out clean from its lateral consolidation, which it formed after breaking out in late February over 2001 highs (which were the highs in a large double bottom). Solid money flow and relative strength.
BUY POINT: After a dip back to test the 34.50 range, 35.10 on minimum volume of 750,000. Target: 40.50. Stop: 33.
POSITION: Stock and/or July 30c to buy (GVQ GF).
http://www.investmenthouse.com/ct/rgbk.html
UPS (United Parcel Service--$60.90; -0.05; optionable): Delivery
http://biz.yahoo.com/p/u/ups.html
STATUS: Bounced up again Tuesday but could not continue the move and breakout of its flat consolidation (formed following its strong move up in February and early March). UPS showed a doji today near the top of the pattern range, with volume edging back to 1.3 million (avg. 1.46 million). Still a good pattern that has displayed good price/volume action, and we are being patient as we do not jump the gun with this type of pattern. Good money flow.
BUY POINT: Breakout: 61.10 on volume of 2 million or higher. Target: 66.44 represents a former high and is the initial target. Stop Advisory: 58.05
POSITION: Stock and/or July 55c to buy (UPS GK).
http://www.investmenthouse.com/ct/ups.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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