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Begin Part 2 of 2
Support and Resistance
Nasdaq: Closed at 1656.93
Resistance: The March down trendline at 1690 (February low at 1696). 1743 to 1750 may act as some resistance (the 18 day MVA is at 1749.17), then 1775. 1850 is next (200 day MVA at 1846.10), followed by 1875, the bottom of the November consolidation.
Support: Right at the lower channel line from the March downtrend (1640). Then not much until 1613 to 1626 (April 2001 low at 1619 intraday).
S&P 500: Closed at 1065.45
Resistance: 1075 is the February lows that did not hold. 1100 represents former price consolidations as well as the March down trendline at 1098. The 10 day MVA (1095.97) and the 18 day MVA (1107.03). After that is 1125 and the 200 day MVA (1129.46) is sitting right above that level. There is some resistance at 1150 as well. After that there is a lot more, but w will take one step at a time.
Support: Completed the 3-month head and shoulders pattern and broke lower. Not 1050 represents the October lows and the last price consolidation level before the September low.
Dow: Closed at 9819.87
Resistance: The 200 day MVA (9930.91), then 10,100 held for many tests before breaking. The March down trendline at 10,115, a key point on any relief bounce. The 18 day MVA is at 10,129.58, another point of resistance in downtrends. 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.
Support: 9500 to 9600 are next as the index 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.
4-29-02
Personal Income, March (8:30): ): 0.4% actual versus 0.4% expected and 0.6% prior
Personal Spending, March (8:30): 0.4% actual versus 0.4% expected and 0.6% prior
4-30-02
Chicago PMI, April (10:00): 55.50 versus 55.7 prior
Consumer Confidence, April (10:00): 108.0 versus 110.2 prior
5-1-02
Auto Sales, April (00:00): 6.0M versus 6.0M prior
Truck Sales, April (00:00): 7.3M versus 7.3M prior
ISM Index, April (10:00): 54.6 versus 55.6
Construction Spending, March (10:00): -0.1% versus 1.1% prior
5-2-02
Initial Claims, 4/27 (8:30): NA versus 421K prior
Factory Orders, March (10:00): 0.7% versus 0.3% prior
5-3-02
Nonfarm Payrolls, April (8:30): 60K versus 58K prior
Unemployment Rate, April (8:30): 5.8% versus 5.7% prior
Hourly Earnings, April (8:30): 0.3% versus 0.3% prior
Average Workweek, April (8:30): 34.3 versus 34.2 prior
ISM Services, April (10:00): 57.5 versus 57.3 prior
TEAM TRADES
With the market continuing its downtrends after breaking support, we were looking over the weekend for stocks doing the same with a lot of vigor. There were quite a few choices, one of them was EMR in the rapidly weakening electronics sector. The buy point was 53.60, and in the first hour it tested to just above that level and bounced without hitting the buy point. It bounced as far as the 15 minute MVA and started down. 45 minutes later it was back at 53.60, bounced one more time and then ducked below the buy point. Volume was not huge, but the test of the 200 day MVA Friday was on moderate volume as well. The stock had breached the 200 day MVA Thursday on high volume, so with the price action we were willing to go ahead and enter the play. The June 60 put options were trading at 7.20 by 7.40 right at the break, and by the time we got the order in after the alert was sent the ask was at 7.60. We put in a limit at that price since we wanted the fill and the spread was very narrow for options. The stock acted just as the market: it sold down the rest of the session, riding below the 15 minute MVA all the way. A strong downtrend intraday complementing a strong breach and weak test of the 200 day MVA.
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 Weekend report:
AMI: Still looks super in the handle, flexing its muscles a bit on higher, above average volume.
ROIL: When the wrong way, gapping slightly higher and then tanking. Still in the pattern and volume was lower, but not the kind of wild action you want as it was pushed down the ay after it tried a move higher.
NUE: Put. Looks ready to tank as it fell on rising though still well below average volume.
NTBK: Put. Tried to recover over the 50 day MVA but failed. Closing just at that level on lower volume. Looks ready to fall, but has to tank below 15.
Continued Plays:
BRCM: Doji on lower volume. Could bounce here toward 35 on a general rally, but still in a massive downtrend.
CAT: Put. Heading back down toward 51.
CNMD: Tight doji on low volume. Like it.
CVGR: Test turns to a thrashing to the downside on very strong volume. We will look for a bounce to clear out, but 4.75 might be all we get.
FDC: Tried to hold the line today as software had a better session. Don't expect it to last.
GMRK: Up again but a doji on above average volume. Going to have some trouble here and may test 42.
GSB: Still in the handle on very tight doji with very low volume.
GYMB: Small bounce off 18 day MVA on no volume. Still trying to clear 18 with some volume.
HARB: Same pattern of tight doji's on no volume at the 18 day MVA.
HNT: Gapped higher but closed fractionally higher on strong volume. Being very careful as this is not good action.
HUM: Gapped higher and tanked on above average volume. We were looking for a pullback, but not on this kind of volume. The higher volume a real concern. Won't let it below 15.50.
IBPI: Up again but a tough day kept it from moving better.
IHI: Interesting pattern still with the lateral consolidation and volume spike on Friday.
OATS: Still in the handle after trying to make the breakout Friday. Lower volume, holding at the 10 day MVA. Still being cautions but could give another move over 11.
OMX: Tanked below the 18 day MVA on rising, above average volume. Out.
OREX: Breaking below the 18 day MVA on very low volume. The breakout on strong volume turned around and is bleeding to death.
PLB: Another doji on lower, average volume. Looks to test 47.50.
PMSI: Health services. Still decent, trying to break over 9.
RKY: nice recovery off of the 50 day MVA on volume.
RPM: Tried to continue the move with a gap higher that failed. Volume was lower, so we will see if it can regroup.
STSA: Still moving up on strong volume but closed 55 cents off the high. May reverse here for a test. Pulling up stops tight.
VWKS: Nice lower volume test (one of the few). Want it to hold at 7.25 or higher.
ZQK: About all it did was hold above 24. We will see if it can recover, but that is our drop point.
Best Plays:
1) WM: Trying to regain that leadership role.
2) TENT: Looks ready for a big bounce.
3) ABCW: Another savings & loan in a bullish pattern.
4) Watchlist: IHI, NYCB looking good.
New plays:
WM (Washington Mutual--$36.73; -0.29; optionable): Savings & Loan
http://biz.yahoo.com/p/w/wm.html
STATUS: Cup w/handle. WM hit a high last August before starting a pretty dramatic fall even before 9-11. From there it has slowly build back up, clearing resistance at 35 that marked the top of the trading range at the bottom of the base. A good volume surge led the move up, and now WM has spent the last 2-weeks in a very nice handle that is making gradually lower intraday lows on below average volume (2.85 million; avg. is 4.39 million). We see a MACD divergence here, showing some unrevealed strength in this move. Price/volume action shows positive accumulation well in excess of any distribution. This was one of our stock split plays on the SSR back in 2001 on its big run, and it looks to be regrouping here for another breakout.
BUY POINT: 38.05 on volume of 6.5 million. Target=45.50. Stop=36.35
POSITION: Stock and/or October 30c to buy (WM JF; 115 OI; 92 delta).
http://www.investmenthouse.com/cd/wm.html
ABCW (Anchor Bancorp--$21.77; +0.42; no options): Savings & Loan
http://biz.yahoo.com/p/a/abcw.html
STATUS: Ascending wedge. Another savings and loan, but they are some of the best patterns out there. After breaking out of a 3.5-month flat base in a big way in March, ABCW has followed that with a 1.5 month ascending wedge, working on really low volume the past two weeks (36K; avg. is 65K). Money flow is solid as is relative strength. Given the market we need to see a clear and high volume break over the top of the pattern at 22. Ascending wedges can big explosive breakouts, and we will look for one here as well.
BUY POINT: 22.10 on volume of 85K or more. Target=25.40. Stop=20.55.
POSITION: Stock (no option chain).
http://www.investmenthouse.com/cd/abcw.html
TENT (Total Entertainment--$11.20; +1.02; no options): Restaurant
http://biz.yahoo.com/p/t/tent.html
STATUS: Testing breakout. Testing a colossal bounce off of the 50 day MVA in early April, TENT pulled back to the 18 day MVA near 10 and bounced today on very heavy volume (131,500; avg. is 55,000). Buying is very heavy and money flow is very strong. Volume has been very heavy on this run and then was lighter on the pullback.
BUY POINT: 11.30 on volume of 100K+. Target=14. Stop=10.50.
POSITION: Stock
http://www.investmenthouse.com/cd/tent.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
GGX ($90.00; -1.05): Having continued trouble with 90, DGX fell today on rising volume (1.03 million). We are looking at selling some May 90 calls (2.10 to sell; 53 delta) on a further move down, looking for a drop to 86 to 87. That will give us about $1.50 on the calls profit when we buy them back and see if the stock can rally up again. The higher volume concerns us, but it was not a huge increase.
UP & COMERS PORTFOLIOS: BBBY, SRCL
Both BBBY and SRCL holding on and doing little Monday.
MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC
As noted today many of the big name techs held their ground, posting modest gains on mixed volume. They look ready to try a nominal bounce toward the down trendlines here.
NOC (115.99; -0.64): Awarded a big contract bringing in $2.9B over the next 4 years, announced after the close. That should help sweeten things a bit in spite of its continued attempts to buy TRW run into obstacles.
HDI (52.95; -0.71): Undercutting the 50 day MVA once again on rising though still below average volume (1.17 million). It is still well within its recent range of 52 to 56, but is showing mild distribution over the past two weeks. As we saw with the indexes, distribution does not have to be above average volume if it is consistent. Not in dire shape. Some support at 52 and the 50 day MVA is at 50.75.
BUD (52.61; +0.22): Shaping up rather nicely after that big down move on rising volume 4 sessions back. In a 4-week lateral pattern, today it moved up on rising volume. A bit more action or slightly lower movement on low volume could set it up nicely.
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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