us stock market, top stock pick

Begin Part 2 of 2

TEAM TRADES

We had said to be on the lookout for those stocks that gave good earnings reports and solid outlooks for the future but were roughed up anyway. Those would be right back into the action after giving us some great entry points. Seems as if we were not the only ones thinking along those lines Friday as a swarm of buyers came in just as soon as the Nasdaq touched support at the 18 day MVA. That was fast and we were not waiting when we saw stocks such as EMLX hitting support and moving right back up as well.

BRCM: Opened at 96 and ran right down for a moment to 95 where it had reached intraday peaks for six sessions in late December. It started right back up from there along with EMLX, JDSU and BRCD doing the same, we were not going to waste a lot of time. It was up to 99 in a flash and then dropped to 97.50 briefly. It started back up and we were already waiting with an order for stock at 98.50. We also had some May calls we started target shooting at on Thursday when it was selling big, and we wanted to add take some more positions. We were late getting that order in and the stock moved up on us. The stock ran to 107 and then sold back to 100. We thought it might go back to 96, but it turned. When it broke over 103 where it tried to hold on the way back down, we took a shot with more May calls that were trading at 13.125 by 13.625. We dropped in a limit order and this time the fill was made. The stock ran higher and closed at 110. Not bad, but we wanted those earlier options as well.

VRSN: We were watching VRSN as well as a possibility as it was one the stocks that had crushed earnings and gave a super outlooks but was sold off. We were looking for support at 69 to 70 and sure enough, after about an hour and 40 minutes into the session it hit 69.50 and bounced sharply. We were somewhat concerned that it did not start right back up with the other stocks earlier on in the session, but the move coincided with the Nasdaq turning up at that point and if the stock was going to move it would do it from there. Also, we had noted that when it made its brief runs in the morning, it did so on much stronger volume than the selling. When it started up from 69.50, it did so in a big way. We decided to go with some positions with stock though the options looked tempting. You had to go out to July to get much time and we just did not want to get the March options. The stock was trading 70.50 by 71 and we put a limit order in at the ask. The stock bounced around for about 30 minutes and we thought it was going to run from us before it came back and took us out. It then bounced up on a great run to 75. It came all the way back to 73 at 1:30, and we were starting to sweat it. There was no real magic at that level as far as we could tell, but it held and it turned back up for a nice move to 76. A good entry at support on a stock that looks as if it has some room to run to the upside now that the earnings sellers are gone.

For a review of frequently asked questions, please use the link below:

http://www.investmenthouse.com/1questions.htm

THE PLAYS: Tons of plays tonight as many, especially financial, are forming good bases. Look them over and focus on the ones you like. We have flagged our favorites in the Best Plays.

All prices reflect prices at the close on Friday.

Several stocks on the current report (and formerly) have been holding up well and even breaking out in the last month, such as EMLX, HBC, ACS, MRCY, MAPS, LEH, MER, and others. In the current report we are looking at many stocks that look ready to do the same. We will watch with interest as the market moves into the Fed rate cut this week, as we expect these stocks to make good moves as well.

SOME LEADERS TO WATCH:

Continued Play:

EMLX (Emulex Corp--$106.69; +10.19; optionable (UEL)):
http://biz.yahoo.com/p/e/emlx.html
STATUS: What a move as the stock dropped back to the 18 day MVA (92.11) just as we expected and shot up from there. What a great entry point. The stock tucked away an easy 10 points on stronger volume (6.4 million; avg. 4.5 million) on the move. After a two-day pullback on lower volume, looks ready to break to a new high on the momentum. If the stock gets caught in a market pullback Monday, look for support at 100 at the lowest before a move back up.
BUY POINT: Aggressive: On further upward movement on continued strong volume.
POSITION: Stock and/or April $105 calls to buy (UEL DA).

BRCD (Brocade Communications--$108.38; +6.69; optionable (GUF)): Computer hardware
http://biz.yahoo.com/p/b/brcd.html
STATUS: Breaking out of a double-bottom with handle pattern, the stock moving up from support (50 day MVA, 97.01) after a gap down to open (96.72) at that level. From there, stronger volume (9.67 million; avg. 7 million) pushed the stock toward the handle high of 112. This one can make it back to the October high of 133.72 pretty quickly if the market continues to show a positive direction. A mover.
BUY POINT: Aggressive: On further upward movement on continued rising volume. Breakout: 112.13, on volume of 10.5 million or better.
POSITION: Aggressive: Stock and/or April $105 calls to buy (GUF DA). Breakout: Stock and/or April $110 calls to buy (GUF DB).

Best Plays: Lots of good patterns and imminent breakouts.
1) ACS: Breaking out and still a buy.
2) NMTC: Flying plateau as a handle on very low volume.
3) CHBS: Breaking out of a handle.
4) CFBX: A tight pennant on low volume.
5) IBM: A breakout.
6) FLEX: Moving up to a breakout.
7) EDS: Great pennant.
8) BSC: Very tight, flat, low-volume consolidation.

BREAKOUTS:

New Play:

ACS (Affiliated Computer Svc--$62.94; +2.88; optionable (ACS)): Software
http://biz.yahoo.com/p/a/acs.html
STATUS: A formerly covered stock that is breaking out of wedge-type pattern to a new all-time closing high on strong volume (746,300; avg. 297,000). Everything looks good for a continued move up, with the strong money flow and high relative strength. Good momentum established on the move.
BUY POINT: A buy on the breakout up to 65.90.
POSITION: Stock and/or April $60 calls to buy (ACS DL).

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:

AREM (Aremissoft Corporation--$26.31; +0.06; optionable (UKM)): Application software
http://biz.yahoo.com/p/a/arem.html
STATUS: Back to this one again. The stock is testing an ascending wedge breakout, and moved up from support (18 day MVA, 24.86 on stronger volume (528,400; avg. 495,000). Looking for a break to a new high over the breakout high of 28.25. Strong buying.
BUY POINT: Over 28.25, on volume of 713,000 or better.
POSITION: Stock and/or April $25 calls to buy (UKM DE).

Continued Plays:

ASD (American Standard--$51.00; -1.31; optionable (ASD)): Material and construction
http://biz.yahoo.com/p/a/asd.html
STATUS: Clogging up a bit as it continues to test the breakout from the recent base, though the stock pulled back just below the 10 day MVA (51.20), a level it has remained above on the pullback. It tested the 18 day MVA on its low of 50.31 and moved back up on stronger volume (267,300; avg. 340,000), so we will see if it can mount a stronger move back up to the breakout high of 53.69. The sector is doing well. Good buying.
BUY POINT: Aggressive: On a move over 52 (resistance) on continued rising volume.
POSITION: Aggressive: Stock and/or April $50 calls to buy (ASD DJ).

SUB (Summit Bancorp--$43.75; +0.50; optionable (SUB)): Regional banks
http://biz.yahoo.com/p/s/sub.html
STATUS: Trying to break out, but continues to consolidate above the 10 day MVA (42.68), the stock opening at that support level and moving up from there. Volume, however, was lower at 387,500 (avg. 800,000), so until the stock gets a surge in volume in a rally, expect further consolidation. Tapped 44.13 the second time in three days; 44.19 as well. Looks good; with a rate cut coming we expect the financials to benefit. High money flow and relative strength.
BUY POINT: Over 44.19 on volume of 523,000 or better.
POSITION: Stock and/or April $40 calls to buy (SUB DH).

HBC (Hsbc Holdings Plc--$79.70; +0.50; optionable (HBC)): Money Center Bank
http://biz.yahoo.com/p/h/hbc.html
STATUS: Thursday the stock pulled back on lower volume from the ascending wedge breakout high (79.90, reached Wednesday), gapping lower Friday but moving up from there on stronger volume (134,800; avg. 92,090). Looks ready to break to a new high on continued strong volume. Looking for financials to rally into the rate cut Wednesday. Good buying, strong money flow and high relative strength. The high tapped 80.
BUY POINT: Aggressive: On further upward movement on continued strong volume.
POSITION: Aggressive: Stock and/or March $75 calls to buy (HBC CO).

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:

Continued Plays:

AMAT (Applied Materials Inc--$47.88; -0.87; optionable (ANQ)): Semiconductor
http://biz.yahoo.com/p/a/amat.html
STATUS: Still holding in the ascending wedge, pulling back to the 50 day MVA (46.10). Volume was stronger and at average levels (20.3 million), and we like that the stock moved up from the opening price of 47.25 despite the overall loss on the day.
BUY POINT: Breakout: 51.63, on volume of 27 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

Pennant:

New Play:

NEU (Neuberger Berman Inc--$78.75; -0.56; optionable (NEU)): Financial services
http://biz.yahoo.com/p/n/neu.html
STATUS: In a pennant above support (50 day MVA, 74.43, and 10 and 18 day MVAs at 78.62 and 78.09, respectively). Showed its second doji on a continued pullback; volume was just higher but has remained below average during the pattern (212,400; avg. 264,772). High money flow and relative strength. Pattern high 85.69.
BUY POINT: Aggressive: Up from support on stronger volume (average or better). Breakout: 85.82, on volume of 357,000 or better.
POSITION: Aggressive: Stock. April options below the $85 strike have no open interests. Breakout: Stock and/or April $85 calls to buy (NEU DO; please note that this option has only 10 open interests).

EDS (Electronic Data Systems--$57.25; +0.69; optionable (EDS)): Software
http://biz.yahoo.com/p/e/eds.html
STATUS: Formerly covered. In a pennant, the stock was just up from support (10 day MVA, 56.62) in the pattern on stronger volume (1.56 million; avg. 2.1 million). Looking for a breakout over the pattern high at 60. High money flow and relative strength.
BUY POINT: 60.13, on volume of 3 million or better.
POSITION: Stock and/or March or June $60 calls to buy (EDS CL or FL).

Continued Plays:

CSBI (Century South Banks Inc--$33.31; +0.43; no options):
http://biz.yahoo.com/p/c/csbi.html
STATUS: Has pulled back below the up trendline supporting dips in the pattern, but is holding up pretty well as the pennant continues to consolidate on lower, below average volume (14,200 (avg. 81,000). The stock moved up from support (32,75, hit 4 times recently) on the lower volume; ready to rally into the rate cut. Good buying and high money flow.
BUY POINT: Breakout: 34.85, on volume of 109,000 or better. Remains a buy up to 36.59.
POSITION: Stock.

BASING/TRADING RANGES: There are many stocks, particularly financial stocks, forming solid patterns to break out of. Because of the number, write-ups are as brief as possible. We may see these stocks start to move up prior to the FOMC meeting, but we want to see them move on strong volume when they do breakout.

New Plays:

Some smaller stocks:

NMTC (Numerical Technologies--$27.00; 000; optionable (QEK)): Business Software
http://biz.yahoo.com/p/n/nmtc.html
STATUS: In a flying plateau that is serving as the handle to a 16-week cup base. Below the 200 day MVA (33.21), but we like the pullback on declining volume (226,700; avg. 319,409), and the stock shows great buying and money flow. Popped up January 19 on stellar earnings. Software sector looks good recently.
BUY POINT: 28.88, on volume of 479,000 or better. Remains a buy on the breakout up to up to 30.32.
POSITION: Stock and/or April $25 calls to buy (QEK DE)

CHBS (Christopher & Banks Corp--$38.69; +2.13; no options): Apparel
http://biz.yahoo.com/p/c/chbs.html
STATUS: Breaking out of a cup with handle on strong volume (481,300; avg. 161,000). Buy point is 38.07, so the stock remains a buy. Prior basing high is 41.88; will see if the stock carries through on a breakout over that price, or forms another handle first. Good buying, strong money flow and relative strength that has broken out ahead of price.
BUY POINT: Up to 39.97 on the breakout.
POSITION: Stock.

CFBX (Community First Bankshrs--$19.19; 0.00; optionable (QSJ)): Regional Banks: Pacific
http://biz.yahoo.com/p/c/cfbx.html
STATUS: In a pennant above the 10 day MVA (19.09) on below average volume. Showed a tight doji, the second consecutive doji, as volume began to pick up (119,200; avg. 146,409); look for a move up into the rate cut. Pattern high is 19.50. Strong money flow.
BUY POINT: 19.63, on volume of 198,000 or better.
POSITION: Stock and/or May $17.50 calls to buy (QSJ EW).

Some new bigger basing stocks.

IBM ($114.91; +3.44; optionable (IBM)): Computer hardware
http://biz.yahoo.com/p/i/ibm.html
STATUS: In a 5-month base and making a breakout move from a handle-type consolidation that formed above the 200 day MVA (108.26). IBM gapped up January 18 on earnings. The stock just beat the buy point of 114.07 on the good volume (9 million; average 7.8 million). Relative strength broke out higher (and is ahead of price) as money flow continues to rise.
BUY POINT: Remains a buy on the breakout up to 119.77 on volume of 11.7 million or better.
POSITION: Stock and/or March $110 (IBM CB) or March or April $115 (IBM CC or DC) calls to buy.

FLEX (Flextronics Internat Ltd--$39.00; +2.81; optionable (QFL)): Electronics
http://biz.yahoo.com/p/f/flex.html
STATUS: Breaking out of a cup with handle on strong, above average volume (14.8 million; avg. 8.8 million). Handle high is 39.06, tapped by the intraday high. Just a bit higher for the breakout. Great money flow and relative strength broke higher. Decent buying.
BUY POINT: 39.19, on continued strong volume. Remains a buy on the breakout up to 41.15.
POSITION: Stock and/or (QFL DG or DH).

CYTC (Cytyc Corporation--$64.56; +5.75; no options): Scientific & technical instruments
http://biz.yahoo.com/p/c/cytc.html
STATUS: Moving up on strong volume (1.76 million; avg. 591,000) after finding support at the 18 day MVA (59.56). The stock has recovered from a dip below the 50 day MVA (57.63) after resolving a dispute with Tripath Imaging. Needs to break over December top at 66.75 (prior basing high is 67.75). Formerly covered in an ascending wedge (Nov/Dec). High money flow and relative strength.
BUY POINT: Aggressive: Up from here on continued strong volume. Breakout: 66.88, on volume of 885,000 or better.
POSITION: Stock.

SVGI (Silicon Valley Group Inc--$35.44; -0.69; optionable (FQQ)): Semiconductor
http://biz.yahoo.com/p/s/svgi.html
STATUS: At support on a pullback from the January (handle) high of 37.88. In a 16-week cup with handle base as volume continues to drop back below average (251,500; avg. 627,545). Looking for a move up from here on stronger volume (the stock tested lower support at 18 day MVA on the low of 34.31). Good buying and excellent money flow.
BUY POINT: 38.01, on volume of 941,000 or better.
POSITION: Stock and/or March or June $35 calls to buy (FQQ CG or FG).

ADSK (Autodesk Inc--$37.31; -0.25; optionable (ADQ)): Software
http://biz.yahoo.com/p/a/adsk.html
STATUS: In an 8-month cup with handle base (prior high of 42) and at support at the apparent base of the handle (at the 10 day MVA, 36.94). Volume is low at 589,100 (avg. 720,227). Looking for a move up from the doji; handle high is 39.88. Good buying.
BUY POINT: 40.01, on volume of 1 million or better.
POSITION: Stock and/or April $35 calls to buy (ADQ DG).

AC (Alliance Cap Mgmt--$55.88; +1.38; optionable (AC)): Financial
http://biz.yahoo.com/p/a/ac.html
STATUS: In a flying plateau that is serving as a handle to the stock's 19-week cup with handle. Finding support at 54.44 (December top), the stock moved up Friday on good volume (265,900; avg. 230,454). Looking for a breakout over the pattern high of 56.25. Good buying and strong money flow, high relative strength.
BUY POINT: 56.38, on volume of 346,000 or better.
POSITION: Stock and/or April $55 calls to buy (AC DK).

Continued Plays:

MFLO (Moldflow Corporation--$26.25; +1.75; no options): Software
http://biz.yahoo.com/p/m/mflo.html
STATUS: Sold down Thursday with just about everything else, but found support Friday at the 20 day MVA (24.11) and shot up from there, on strong (though down) volume of 115,000 (avg. 66,772). Looking for a breakout move over the handle high of 28.88 on again rising volume. Great buying.
BUY POINT: 29.01, on continued rising volume (has hit breakout volume).
POSITION: Stock.

BSC (Bear Stearns Companies--$60.69; -0.37; optionable (BSC)):
http://biz.yahoo.com/p/b/bsc.html
STATUS: Holding in a lateral consolidation as the low tested (for the third consecutive day) the 60 level. Volume has pulled back in an orderly manner below average (506,800; avg. 1.1 million); the stock can pull back to 60, but we are looking for support there for a breakout from this new handle formation. Strong money flow and good buying.
BUY POINT: 62.07, on volume of 1.6 million.
POSITION: Stock and/or April $55 or $60 calls to buy (BCS DK or DL).

FBF (FleetBoston Financial Cp--$43.31; +0.68; optionable (FBF)):
http://biz.yahoo.com/p/f/fbf.html
STATUS: Tried to break out of the cup with handle, beating the buy point of 43.32 but failing to clear the prior basing high of 43.75. The stock has tapped 43.69 the last three days as low volume holds the breakout in check; Friday saw a move up from the 10 day MVA (42.24) on lower, below average volume (2.8 million; avg. 3.7 million). Look for a move out of the base as the financials rally into (or on) the rate cut. On a pullback, support at 42 or better.
BUY POINT: 43.82, on volume in the range of 5.5 million.
POSITION: Aggressive: Stock and/or April $40 calls to buy (FBF DH).

VRTY (Verity Inc--$30.00; +0.06; optionable (YQV)): Internet software
http://biz.yahoo.com/p/v/vrty.html
STATUS: Continues to range in the handle of the cup base. Tapped the 10 day MVA on the low (28.88) and ended the day with a doji on stronger, above average volume (794,300; avg. 626,363). Pattern high is 32.75 (200 day MVA); looking for a move up from the doji on even stronger volume. Buying continues to improve as money flow remains high.
BUY POINT: Breakout: 32.88, on volume of 940,000 or better.
POSITION: Stock and/or June $30 calls to buy (YQV FF).

SRNA (Serena Software Inc--$40.94; -0.62; optionable (NHU)): Software
http://biz.yahoo.com/p/s/srna.html
STATUS: Holding at support (40.81, hit 3 times in the base) and showing a perfect doji as volume pulls back farther below average (310,700; avg. 465,318). In a pennant as a handle in a pretty ragged base, the star doji is a strong indicator move back up after the two-day pullback. Handle high is 46.22. Good buying.
BUY POINT: Aggressive: On a move up from here on stronger volume. Breakout: 46.35, on volume of 698,000 or better.
POSITION: Stock and/or May $35 calls to buy (NHU EG). May $40 calls have 25 open interests.

TGP (Georgia-Pacific--$31.31; +0.37; no options): Materials and construction
http://biz.yahoo.com/p/t/tgp.html
STATUS: Moved up from the doji on slightly higher volume (118,300; avg. 160,000) as earnings were good (out before the bell Friday). Looking for a breakout over the handle high of 31.88 on higher volume, as the stock continues to climb on the news and the sector rallies into or on the rate cut Wednesday. Strong money flow.
BUY POINT: 32.01, on volume of 240,000 or better.
POSITION: Stock.

C (Citigroup--$55.19; -0.12; optionable (C)): Large Banks
http://biz.yahoo.com/p/c/c.html
STATUS: Still looks good as it consolidates above support (10 day MVA, 54.56) on below average volume (1.2 million; avg. 13.2 million). The stock had formed a pennant as a handle to its 20-week base, but could not extend the breakout move on Thursday's selling. Showing a doji on the lower volume; look for a breakout (handle high, 57.38) on the rate cut.
BUY POINT: Breakout: 57.51, on volume of 19.8 million or better. Remains a buy on the breakout up to 60.39.
POSITION: Breakout: Stock and/or March $55 calls to buy (C CK).

LEH (Lehman Bros--$81.50; +0.50; optionable (LES)): Brokerage
http://biz.yahoo.com/p/l/leh.html
STATUS: Tried the breakout last week (and cleared the base) but the market wasn't ready to back a strong move; the stock pulled back to support Friday (80) and managed only a small move up as volume remained below average (2.38 million; avg. 2.4 million). Looking for a breakout over the breakout high of 84.94 on strong volume. Strong money flow and high relative strength.
BUY POINT: Aggressive: Up from here on stronger volume. New high: Over 84.94, on volume in the range of 3.2 million.
POSITION: Stock and/or April $80 calls to buy (LES DP).

MER (Merrill Lynch & Co--$74.44; +0.31; optionable (MER)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: Pulled back from the breakout high of 80 to find support at the 18 day MVA (73.17). Volume is back below average (3.5 million) on the pullback, so we will see if a rally into or on the rate cut can take MER back up.
BUY POINT: Over 76, on volume of 4.5 million or better.
POSITION: Stock and/or April $70 or $75 calls to buy (MER DN or DO).

JPM (J.P. Morgan & Co--$54.19; +1.13; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Really wants to break out; Friday the stock hit a high of 59.19 (buy point is 54.82, and the prior basing high is 58.38) but couldn't hold the move on the low volume (7.9 million; avg. 10.3 million). Continues to hold near the handle high, after testing support at 52.75, hit 6 times since July. Look for a hold at that level on a pullback, until the stock can break out on stronger volume on the Fed interest rate cut.
BUY POINT: Breakout: 54.82, on volume of 15 million or better.
POSITION: Breakout: Stock and/or June $50 calls to buy (JPM FJ).

KEI (Keithley Instruments Inc--$61.06; +3.37; optionable (KEI)): Electronics (scientific and technical instruments)
http://biz.yahoo.com/p/k/kei.html
STATUS: Currently forming the handle to a 15-week cup base and finding support at the 10 day MVA (56.64) for a move up on stronger volume (548,900; avg. 510,000). Handle high is 63.50. The stock recently broke out of an ascending wedge at the bottom of the base, which resulted in a move up to the handle high. We like the hold of support above the long term down trendline (58) and look for a move up from here. Positive buying.
BUY POINT: 63.63, on volume of 765,000 or better. Remains a buy on the breakout to 66.81.
POSITION: Stock and/or April $60 calls to buy (KEI DL).

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.

us stock market
top stock pick