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Begin Part 2 of 2
TOMORROW
Initial claims and factory orders (out at 10:00ET) could shape the action as economic news in lieu of earnings is now again taking center stage. The key in the last two sessions of the week will be how the major indexes handle the down trendlines. After a hesitation in many of the leading stocks where they moved laterally or tested their breakouts we now see them moving back up. That is as expected. The big question is whether the past two sessions can translate into continued gains for the other sectors of the market.
We have been anticipating that this rally would fail at the down trendlines or other near term resistance, and then try to regroup next week for another move higher. There is not a lot of news to send them blasting higher over the trendlines; the employment report Friday is closely watched, but the weekly jobs reports don't show workers back at work. The report will be interesting historical data and always has some impact, but it won't be massive in our book.
Thus we are letting most puts run for now and will look at closing them on selling following a failure to take out the down trendlines or other near resistance. When depends on how strong the selling develops. We will also look at index puts as well if the indexes bounce down at the appropriate points, particularly if they show direction and momentum change signals such as doji's right below resistance.
Support and Resistance
Nasdaq: Closed at 1677.53
Resistance: Closed again just below the steeper down trendline from March (now at 1675). The February lows at 1696 to 1700 are also in the way, followed by the 10 day MVA (1709.62) and the 18 day MVA (1735.89). These are all resistance points in a continuing downtrend. That is followed closely by resistance at 1743 to 1750.
Support: 1613 to 1626 (April 2001 low at 1619 intraday).
S&P 500: Closed at 1086.46
Resistance: The 10 day MVA (1091.41), the March down trendline (1093), and the 18 day MVA (1102.03) are all resistance in a continuing downtrend. 1100 also represents resistance from previous price consolidations. Then 1125 (price consolidations) and the 200 day MVA (1128.38).
Support: 1050 represents the October lows and the last price consolidation level before the September low.
Dow: Closed at 10,059.63
Resistance: Down trendline (10,070). 18 day MVA (10,104.95). 10,100 is also resistance from prior price consolidations. 10,300 blocked the move the last time it made to that level. 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: The 200 day MVA (9928.57). The bottom of the channel is at 9780. 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): 54.7 actual versus 55.50 expected and 55.7 prior
Consumer Confidence, April (10:00): 108.8 actual versus 108.0 expected and 110.2 prior
5-1-02
ISM Index, April (10:00): 53.9 actual versus 54.6 expected and 55.6 prior.
Construction Spending, March (10:00): -0.9% actual versus -0.1% expected and +0.7% prior (revised from 1.1%).
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
CCRN: Staffing and outsourcing should be hot in a recovering economy where there is uncertainty as to the recovery's strength. Why take on full time employees and benefits when you can fill the need with temps? CCRN was ready to breakout, and today it delivered the move. It ran up early then tested quickly as the whole market sold off. Given the shaky rebound, we wanted to see the stock rebound solidly off that opening price. It did after a stutter step sideways and we issued the alert at a bit higher buy point due to the early move (31). The stock jumped up to 31.25 by the time we got back to the screen with the spread at 31.20 by 31.25. Not bad at all as far as a spread; seen a lot more, seen less. A limit order at the ask was quickly filled. The options showed a 30 cent spread at 4.40 by 4.70. With the stock position we did not want to load up on this one stock too much; a few contracts at 4.70 were added. With this lower volatility the trades seem to come pretty quickly. Maybe because we are not fighting as much as there are not many $3.50 option spreads right now. The stock ran back up to its open high at 32, faltered and fell back to 31.30 only to rebound in the last hour to close just off the high. Volume was heavy for the second session, exactly what we want to see, i.e., consecutive solid moves on solid volume. With that kind of breakout we will let it work for us, testing and then riding up. That is the plan, and we will see how the market deals with it.
THE PLAYS: Great moves by ATK, BMS (put), LLL, RYL and RUS!
BONUS PLAYS: Got the big breakout from UAG! XTO made a solid move up toward the breakout.
AMSG (Amsurg--$30.00; +1.00; optionable): Hospitals
http://biz.yahoo.com/p/i/amsg.html
STATUS: Broke out today! AMSG moved out of the handle to its jagged 10-month cup pattern, running today on big volume of 501,800 (avg. 114k). Although jagged, AMSG has shown solid price/volume action throughout the pattern, with weeks where the stock has increased in price with higher volume outnumbering the decreasing price weeks 13-3. It has been steadily trending up in the right side of the base, and with the strong breakout we are looking for more. Good buying. Target: 36
BUY POINT: A buy up to 31 with continued strong volume. Stop: 28-28.83
POSITION: Stock and/or September $25 calls to buy (KKO IE).
LIN (Linens 'n Things--$34.99; +0.29; optionable): Furnishing stores
http://biz.yahoo.com/p/l/lin.html
STATUS: In a 14-month cup. LIN has trended up steadily in the right side, testing its 50 day MVA (currently 32) in December, February and early April but bouncing smartly. After a strong move up in April LIN has made a nice, gradual pullback into a handle on low volume. LIN is holding its 18 day MVA (28.46), showing a doji today on continued light volume (347,300; avg. 526k). Looking for a hold here and a move to breakout. Target: 41.
BUY POINT: Breakout: 36.60 on volume of 790k. Stop: 34.04 (7%). Aggressive: Over 36 on volume of 700k. Stop: 33.75
POSITION: Stock and/or July $30 calls to buy (LIN GF).
CTX (Centex--$57.78; +1.48; optionable): Residential Construction
http://biz.yahoo.com/p/c/ctx.html
STATUS: A great run with the sector, and after topping in early March at 63.09, CTX corrected into a cup with handle pattern. With earnings CTX made a big move toward the end of April, taking out the 50 day MVA (54.84). Since that run the stock has dipped back into a handle, showing appropriately lower volume in the process. Today CTX tested near the 50 day but then moved back up with the market, as volume increased to 1.1 million (avg. 1.17m). Still strong, and looking for a breakout. Target: 71.
BUY POINT: 59 on volume of 1.75 million. Stop: 54.87 (7%)
POSITION: Stock and/or July $55 calls to buy (CTX GK).
PRE-ANNOUNCEMENTS: No announcement from SRCL, but a continuation of its move. ATK continued its blast upward and BMS fell on the put play.
KSS ($73.38; -0.32): Forecast to announce a split on 5-16-02 after the market closes in conjunction with earnings or on 5-21-02 in conjunction with its annual shareholder meeting. Testing its breakout to a new high. After the high-volume intraday recovery Tuesday, KSS held with a doji today on lighter volume. Looking for a move over 75 on increased volume, with stock and/or July $70 calls to buy (KSS GN).
MHK ($65.20; +0.87): Forecast to announce a split at its May 16 shareholder meeting. MHK continues in its handle, consolidating over its short-term MVA's (18 day at 63.75). Today it moved back up from that level on continued low volume (394,600; avg. 644k). The breakout is 67.05 on volume of 965k, with stock and/or August $60 calls to buy (MHK HL - 89 open interest).
MTG ($71.67; +0.31): Forecast to announce a split on 5-2-02 in conjunction with its annual shareholder meeting. Took a nice bounce Tuesday, but slowed today after hitting 72.70 (over the buy point), closing with a loose doji on steady volume (574k; avg. 503k). The shareholder meeting is at 9:00 a.m. ET so we will look a strong move with an announcement. Still looking for a continuation of the bounce play up to 80, with June $70 calls to buy (MTG FN).
MGA ($74.90; +1.01): Forecast to announce a split 5-9-02 with earnings. Earnings will be announced a week later, but MGA is looking like it could be up to something. The stock lost its recent breakout attempt, dropping back into its recent range and testing near its 50 day MVA (72.12). Today MGA made a strong move back over its short-term MVA's (74.26), touching near the buy point (over 75) with volume up to 545k (avg. 266k). The aggressive can look at a continued strong move over 75.30, with stock and/or August $70 calls to buy (MGA HN).
PRE-SPLITS: Great continuation moves by LLL and RYL! PMI is making a good move, and FULT is trying to make it to the buy point.
PNRA ($69.05; +1.98): Splits 2:1 effective May 13. Has been holding up in a range since the strong breakout on its split announcement. The last two sessions PNRA has cranked back up, today reaching up toward its high (69.70) on a second day of strong volume (up to 593,600; avg. 415k). Looks good, and we can add to positions with a move over the high, with August $65 calls to buy (UPA HM - 79 OI, June calls have 1 OI).
GG ($18.22; +0.41): Splits 2:1 on a date TBA. Forming a handle, but made a strong move up today, pulling back off of its intraday high of 18.64. Looking for 18.94, with stock and/or June $17.50 calls to buy (GG FW). Target 22.75, stop 17.61.
FAST ($82.46; -1.18): Splits 2:1 effective 5-13-02. Has come back to test the breakout, and is still holding the prior pivot point after a bit of a retreat today. We were looking for the bounce off of the 'hammer' doji on Tuesday, but we could still get a move as long as the stock continues to hold fast at support. Over 85, with August $80 calls to buy (FQA HP).
PFCB ($72.88; +0.43): Splits 2:1 Thursday, and we are holding positions through the split to see if PFCB will make another move. It has been a consistent bouncer off of the 18 day MVA (71.23), and still could take one or two more on this run before testing back to its 50 day (66.53; last test in late February). Volume has been very high the last two sessions as the stock has inched off of the 18 day, so we are interested in seeing if we get a strong move. As always, we are wary of potential post-split weakness, so are keeping stops in place in case of a breach of support.
CONTINUING CANDIDATES: RUS continues its great breakout! PII and DIAN are looking interesting.
JCI ($86.70; +0.45): Dipped down early but was carried back up by the market. JCI again tested resistance at the 50 day MVA (87.23), closing just below that point as volume remained below the average (411k; avg. 444k). Looking for the strong selling volume we want (500K) on a move below 84.25, with July $90 or June $95 puts to buy (JCI SR - 21 OI, or JCI SS - no OI).
APPB ($38.96; -0.08): Made a nice breakout move, and is now pulling laterally but holding well over the prior highs (38). Today APPB showed a bullish 'shooting star' doji (intraday high of 40) as volume continued to decrease after the strong breakout run (327k; avg. 477k). On a move over 40 with above average volume, targeting 46 with stock and/or August $35 calls to buy (AQB HG).
POST SPLITS:
SONC ($29.15; -0.16): Looking solid on the breakout test, holding up after having been hit with a downgrade after the initial move. On a move over 30 on increased volume, with stock and/or September $25 calls to buy (ZSQ IE).
Good Investing!
Jon L. Johnson and the Stock Split Report 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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