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TOMORROW

Lighter on the economic news with jobless claims and existing home sales. As noted above, the indexes are primed for some type of relief move. The Dow's pattern is indicative of that: selling down to the breakout point and above the 200 day MVA and showing a loose rising star doji. After the selling this can indicate a bounce ahead.

A bounce in this market has not meant much. Each one is met with selling. This is a bit different as it is at the point of last resort where it bounces with some vigor or it goes on to break the 200 day MVA and really break down. Thus we anticipate the bounce, but with the overall downtrend and the distribution, we need to be convinced of it being more that just a bounce that sets up further downside plays.

Today we saw some leadership sectors that had taken on the hiccups the past few sessions look better, namely large cyclicals, small financials, hotels, restaurants, retail. Something had to be holding the line with the A/D line close to flat and new lows not rising. These could help the market back up in a relief move.

We may see a continuation of the selling out of the gates and then a recovery move or the market may try to make another up move out of the gates. The softer open (maybe even hard selling) would give rise to a better chance at an upside move sticking. We always have to be skeptical of upside opens in a market that is behaving with bearish patterns: upside early usually means downside later.

Support and Resistance

Nasdaq: Closed at 1713.34
Resistance: 1743 to 1750 may act as some resistance, then 1775. 1850 is next (200 day MVA at 1853), followed by 1875, the bottom of the November consolidation. 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: 1700 (February low at 1696.55). Then 1613 to 1626.

S&P 500: Closed at 1093.14
Resistance: 1125. The 200 day MVA (1131.51) is sitting right above that level. There is some resistance at 1150 as well; any bounce on low volume might find that level trouble. After that the December high (1173.62) and the January high (1176.97) are the real key to any longer term move higher. 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: 1100 was broken today. Next is 1075, the February low that completes the head and shoulders. After that 1050 represents the October lows.

Dow: Closed at 10,030.43
Resistance: 10,100 could present some problems on the way back up as it held for so many tests before breaking. The March down trendline at 10,170. 10,300 blocked the move the last time it made to that level, and the up trendline from September is right there at 10,350. After that 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: 10,000 represents some support, but the 200 day MVA (9938.60) is the key master. After that it could drop to 9500 as it has entered into that shelf of support from 9500 to 10,100.

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

4-24-02
Durable Orders, March (8:30): -0.6% actual versus 0.5% expected and +2.7% prior (revised from 1.8%)
New Home Sales, March (10:00): -3.1% (878K) actual versus 890K expected and 906K prior (revised from 875K)
Fed's Beige Book (14:00): More of the same; economic recovery stable if uninspiring and still subject to risk.

4-25-02
Initial Claims, 4/20 (8:30): 425K versus 445K
Employment Cost Index, Q1 (8:30): 0.9% versus 0.9% prior
Help-Wanted Index, March (10:00): NA versus 51
Existing Home Sales, March (10:00): 5.60M versus 5.88M prior

4-26-02
GDP-Adv., Q1 (8:30): 5.0% verus 1.7%
Chain Deflator-Adv., Q1 (8:30): 1.5% versus -0.1% prior
Mich. Sentiment-Rev., April (9:45): 95.0 versus 94.4 prior

SUBSCRIBER QUESTIONS

Q: When you list a stock in your newsletter, and a buy point, and it doesn't meet it in the first week, do you continue to watch it, and if it hits that buy point say a month later, then do you still buy it?

A: We always continue to watch stocks that have been in the reports even if they do not hit the buy points. Many times a stock will be in a base and looks close to breaking out, but needs more time. As long as the pattern holds, we will continue to look at the same buy point. Now if the pattern is disrupted and changes character, that changes the view on the play. It may or may not still be a buy at the same price, volume, etc., but it may still be a buy at a different point. What sometimes happens is a stock tries a move, fails, and then continues with a new base. We let the stock rebuild, make the new base, and then establish the buy point for that base.

THE PLAYS:

Reading the Plays: Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA. Please click on the Yahoo and chart links for company and charting information. A "prior high" refers to the high at the start of a base.
For conserving space on listings of stop losses, the symbol (7%) indicates that the stop is 7% below the buy point.

Stocks from Tuesday's report:
IHI: Tight doji on continued above average volume. Looks like it is trying to move, but has not got it going yet.
CVGR: Gapped higher on continued strong volume, but close up just fractionally. Was not the day for the stock to move, but we think tomorrow it will.
CHGO: Man. Another tight doji (rising star) on below average volume while holding the 10 day MVA. The test is a good one, now we need to see it take off again.
BRCM: Tanking as anticipated on rising volume.

Continued Plays:

Good movers: PMSI, VWKS, ASBC

OREX: Gave it all back today on lower though still strong volume. It was an off day for healthcare. We don't think that will be the trend.
ZQK: As with OREX, it gave back Tuesday's gain, though volume was much lower and below average (119K).
RPM: Sold back Wednesday on average volume. Still looks solid.
GMRK: Another pause on lower volume.
CAT: Put. Sold down again, but showed a rising star doji. Volume fell well below average
SEBL: Put. Falling farther on rising volume.
ATPX: Moved down to the 32.50 range on very, very low volume. Now looking for the bounce up.
GYMB: Made the price move today, but volume did not follow. Will need more volume back in the 550K range minimum.
OATS: Looking good with a strong bounce on above average volume off of the 10 day MVA.
HNT: Very low volume pullback testing the big move from last week. Like it.
ASBC: Yes. Surging today on strong, strong volume!!
HUM: Okay; doji on falling, below average volume. Looks ready to end the test.
PMSI: Health services. Blast off!! Got the volume for the breakout and that is what it did.
CCRN: Still in the handle, but falling on some rising volume.
OMX: Another doji on the 10 day MVA with even more volume. Looks ready to start back up.
HARB: And yet another doji on even stronger volume.
VWKS: It was ready. Blasted off today.

Best Plays:
1) PLB: Pasta is hot.
2) FDC: Testing the breach of the 50 day MVA.
3) STSA: Making the move.
4) Continuing plays: HUM, OMX, OATS: All ready to move.

New plays:

PLB (American Italian Pasta--$47.25; +1.34; optionable): Pasta baby.
http://biz.yahoo.com/p/p/plb.html
STATUS: Heading for an all-time high, breaking out of a 9-month base today on strong volume (173,300; avg. is 85K). Money flow is great, relative strength broke out, and price/volume shows accumulation weeks clearly ahead of distribution. Food is something we all need, and food is outperforming and pasta is something everyone understands. Heck, everyone can make it as well.
BUY POINT: We are looking at positions on a continued move, taking them before 47.75. Volume in the 150K+ range. Target=57. Stop=44.25
POSITION: Stock and/or September 45c to buy (PL II).

http://www.investmenthouse.com/cd/ihi.html

FDC (First Data--$82.85; +1.39; optionable): Business software
http://biz.yahoo.com/p/f/fdc.html
STATUS: Put. Broke below the 50 day MVA 8 sessions back, and has since crawled back up to test the 50 day MVA. Today it tested over the 50 day MVA on the high and then backed off. Volume was slightly above average (2.05 million; avg. is 2 million). There is selling ongoing and money flow has tanked. Looking for a fall from here for the move down to 78.
BUY POINT: 82.25 on volume of 2.5 million. Target=78. Stop=84.50.
POSITION: August 90p to buy (FDC TR; 40 OI).

http://www.investmenthouse.com/cd/fdc.html

Revisited:

STSA (Sterling Financial--$22.51; +0.56; no options): Savings & loan
http://biz.yahoo.com/p/s/stsa.html
STATUS: Still in the ascending wedge, but today showing a huge volume spike as the stock started higher (89,400; avg. is 44K). Money flow is strong, and relative strength is breaking out now. Bullish.
BUY POINT: 22.80 on volume of 65K+. Target=27. Stop=21.15
POSITION: Stock.

http://www.investmenthouse.com/cd/stsa.html

PEGS (Pegasus Solutions--$19.68; +0.62; optionable): Management services
http://biz.yahoo.com/p/p/pegs.html
STATUS: Bounced off the 50 day MVA Monday on strong volume, and today continued that move on once again above average volume (303K; avg. is 200K). The move over 20 clears a high hit 20 months back. It has the volume to do it, and money flow is strong. Relative strength is breaking out already.
BUY POINT: 20.05 on volume of 300K+. Target=24. Stop=18.50
POSTIION: Stock and/or October 15c to buy (PUG JC)

http://www.investmenthouse.com/cd/pegs.html

PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that look ready to pick up a few shares.

THE LEADERS: DGX, FRX, LLL, MIK. New: ICUI; RMCI

FRX (78.40; +4.35): The power of strong earnings. They reversed the selling below the 200 day MVA in one move with massive volume (5.14 million). Tapped the 50 day MVA on the high (80.03) and then pulled back, holding on to most of the gain. Still in a weak chart pattern, but a great recovery.

MIK (39.84; +1.47): Massive volume on the move out of the lateral pattern (4.19 million). The move broke the stock to a new high. We knew we liked the pattern.

UP & COMERS PORTFOLIOS: BBBY, SRCL

BBBY (36.15; +0.06): Did not get the volume as it started the move and it could not hold the breakout. Looks like a sympathy move with some other retailers. Will need the volume on a move higher to take additional positions.

MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC

BUD (51.70; -1.32): Sold off on above average volume (3.28 million) despite solid profits. It is never a good sign when stocks sell on earnings. We are seeing it happen both ways (e.g., FRX). The stock looks sure to test the 50 day MVA (50.70) on this move. Now this is BUD's first test of the 50 day MVA since December (a brief tap toward it in January). Since then it has bounced 4 times up off of the 18 day MVA. Stocks will normally do this, i.e., bounce 4 to 5 times up the 18 day MVA and then test the 50 day MVA. When it does we want to see a relatively clean bounce back up.

HB (63.36; -0.69): Has pulled back form 66 to test the 18 day MVA on today's close. Volume has been below average for the past three sessions. HB looks ready to move back up from here on another 18 day MVA bounce. This will be the first test after the breakout, so it has plenty of upside if it makes four bounces. We will look at picking up positions on a move over 64.50 on volume of 200K or more.

Good Investing!
Jon L. Johnson and The Daily Staff

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 of 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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