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Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: You often mention trading channels and I know you use TC2000 for charting. Could you share your settings for these channels? (envelope channels in TC?) And, do you ever use Bollinger Bands?
A: The channels we discuss are not generated by any charting service tools. What we are doing on these and what we teach in the online seminars is to draw a trendline for the stock or index. It could be an up trendline or a down trendline depending upon which way the stock or index is trending. If it is an uptrend, that means connecting the predominant lows in the trend. The more you can connect, the better. In a downtrend we would connect the predominant highs; we can toss out an aberration where the stock or index makes a sharp move that quickly reverses. We then draw the other trendline that forms the channel. On an uptrend that means we draw a trendline connecting the predominant tops. Again, that is a trendline that touches the most tops on the rise. If a stock breaks above that channel by 2 to 3%, we need to be cautious of a larger drop toward the lower trendline. On a downtrend we draw a trendline connecting the predominant lows, with the line drawn to hit the most lows. When you look at a trending stock or index, you can almost eyeball it when you get more experience. These channels are very reliable indicators of stock movement. We look at but do not really use Bollinger bands either, preferring to have the straight trendlines being our guide. In our experience, trendlines keep us in good plays and out of trouble in the vast majority of the trades. As taught in the seminars, simply using the trendline analysis we teach will help make you a better investor immediately by getting you into good positions and getting you out of decaying positions.
THE PLAYS:
Good Movers: KROL, OEX, GWW, GTRC, FDS, CAND
Best Plays: The puts looked good today; most of them hit the buy point.
1) DKWD: Doji at support in test of the breakout.
2) PCLE: Low volume test of support.
3) GTRC: Bouncing on higher volume.
4) JILL: Volume keeps falling in the consolidation at support.
5) AAPL, TROW: Making their downside moves on higher volume.
6) BRO: Heading up on higher volume.
7)
NEW PLAYS:
DKWD (D&K Healthcare--$33.89; -0.11; optionable): Wholesale drugs
http://biz.yahoo.com/p/d/dkwd.html
STATUS: Test of breakout. DKWD broke out of a base of nearly three months, most of which shows the upward wedging of lows characteristic of an ascending wedge. Buy point was 32.10, and the stock made that price on big volume at the end of April, and after hitting the breakout high at 35.59 has pulled back in a test. Monday saw it close at the 10 day MVA (33.71), showing a nice tight doji on continued decreased volume (which has been falling steadily for the last 4 days), down to 152,400 (avg. is 164,000). The base showed excellent accumulation over distribution weeks (5:1), so we are looking for a good move up after a successful test; the low volume suggests a hold here, with the intraday low having tested near the 18 day MVA (32.74).
BUY POINT: Aggressive: 34.65 on volume in the range of 175,000 or higher. Target=37. Stop=32.50
POSITION: Stock and/or August $30c to buy (QLD HF; low OI, delta 0.75).
http://www.investmenthouse.com/ct/dkwd.html
PCLE (Pinnacle Systems--$9.15; -0.30; optionable): Photographic equipment
http://biz.yahoo.com/p/p/pcle.html
STATUS: Cup with handle. After crossing over its 200 day MVA last December, PCLE early this year began forming this recent base and after completing the cup portion of the pattern in late April, tested back to the 50 day MVA before settling down and forming a decent handle. Volume for the last three days has been on the decline in the handle, while prices pull back to support at the 18 day MVA (9.09); volume was down to a low 222,100 (avg. 373,227). We are looking for a hold at this support, for a strong move up to breakout. The base shows good accumulation vs. distribution (4-1), and money flow and relative strength are ahead of price.
BUY POINT: Aggressive: 9.75 on volume in the range of 375K or higher. Breakout: 10.27 on volume of 560K or higher. Target=13. Stop=9.40.
POSITION: Stock and/or October $7.50c to buy (PUC JU).
http://www.investmenthouse.com/ct/pcle.html
New plays from the weekend report:
Upside:
HZO (Marinemax--$14.40; -0.05; no options): Boats
http://biz.yahoo.com/p/h/hzo.html
STATUS: Flags. HZO has been throwing flags, moving laterally for a few weeks and then shooting higher again. After three flags the stock looks like it is pulling back in another, catching support at the 18 day MVA (14.01) on overall decreasing volume (down Monday to 54,100 after Friday's above average numbers). The stock held for Monday's small loss on the lower volume, so we will look for a hold in this range (the 10 day MVA is at 14.19) for the next leg up. After the three flags thrown already, we are looking for one more (HZO tends to move about $3 each time). Looking for a run up to 17.40 range once it gets going, where we will take the gain.
BUY POINT: 14.50 on volume of 125K or higher. Target=17.40. Stop=13.75
POSITION: Stock.
http://www.investmenthouse.com/ct/hzo.html
KROL (Kroll, Inc.--$21.15; +1.41; optionable): Security and protection services
http://biz.yahoo.com/p/k/krol.html
STATUS: All-time high. Broke out again Monday after the recent reverse head and shoulders breakout. Volume was higher again and strong at 1.3 million (avg. 195K). Buy point was 20.20, the stock opened at 19.65, so this one is a ride to our target at 24. Money flow and relative strength breaking out as well.
BUY POINT: A hold for buys at 20.20. Target=24. Stop=18.75. A buy to 21.69.
POSITION: September 15c to buy (KRQ IC; delta 83). We can use stock as well.
http://www.investmenthouse.com/ct/krol.html
LTR (Loews Corp.--$60.76; -1.05; optionable): Property & Casualty Insurance
http://biz.yahoo.com/p/l/ltr.html
STATUS: Flat base. LTR moved up last week to the previous highs in the base (at the 62.30 range), volume surging Friday in an incipient breakout move, but with Monday's lack strong volume throughout the market the stock fell back to test the range of its 10 day MVA (60.47); volume was down to 343,700 (avg. 550K). We will look for a hold in this range (the 18 day MVA is at 60.15) for some further consolidation ahead of a breakout. We like the accumulation in the pattern (4 to 1) that shows good price/volume action.
BUY POINT: 62.38 on volume of 660K or more. Target=71. Stop=60.
POSITION: We can use stock, but we are looking primarily at September 55c to buy (LTR IK; delta 80; low OI).
http://www.investmenthouse.com/ct/ltr.html
Downside:
GCI (Gannett--$72.24; -1.89; optionable): Newspapers
http://biz.yahoo.com/p/g/gci.html
STATUS: Put. Kiss goodbye. Made the move today after Friday's test of the 50 day MVA resistance on Friday failed on rising volume. Volume was down Monday to a much lower 499K (avg is 1.05 million), but the stock bled away anyway. Buy point was 73.62; we will look for stronger volume on the move down to take it to the target at the 200 day MVA range (69ish).
BUY POINT: 73.62 on volume of 1 million or better. Target=69. Stop=75.50.
POSITION: July 80p to buy (GCI SP; delta -71; low OI).
http://www.investmenthouse.com/ct/gci.html
GNTA (Genta--$10.99; -1.11; optionable): Biotechnology
http://biz.yahoo.com/p/g/gnta.html
STATUS: Put after 200 day MVA breach. Bad day again for this sector. GNTA sank though volume was lighter, but it was overall in the market Monday (1.25 million; avg. 1.4 million). We were looking for it to commence a quick fall, and will look for preferably rising volume on a continued drop.
BUY POINT: A hold for put buys at 11.75, looking for rising volume on the move (1.5 million or higher). Target=9 (initial), then 8. Stop=13.25.
POSITION: June 15 puts to buy (GJU RW; delta -73).
http://www.investmenthouse.com/ct/gnta.html
BRCD (Brocade--$21.89; -0.49; optionable): Communication equipment
http://biz.yahoo.com/p/b/brcd.html
STATUS: Descending wedge. Double topped in December and January and broke below the 200 day MVA in February. Since then it has formed a descending wedge with decreasing highs and lows at 21.60. Friday it made a big step toward the breakdown, selling on strong volume, then inched closer to the buy point Monday as volume fell back with the market (1.26 million; avg. 16.4 million). Continue to look for the breakdown.
BUY POINT: 21.50 on volume of 20 million. Target=15. Stop=23
POSITION: July 32puts to buy (UBF SZ; delta -71; low OI)
http://www.investmenthouse.com/cd/brcd.html
UVN (Univision--$39.83; -0.37; optionable): Broadcast TV
http://biz.yahoo.com/p/u/uvn.html
STATUS: Kiss goodbye. Breached the 50 day MVA (41.85) a week ago and is continuing to hold just under the 40 range, showing a doji Monday on further decreased volume (564K; avg. 1.11 million). The stock made the buy point at 39.85 but we will want to see volume ramp up on further selling.
BUY POINT: A hold for positions, if taken, at 39.85. A break below 39.80 on volume of 1 million or more for new entry points. Target=35.50. Stop=42.
POSITION: June 45p to buy (UVN RI; delta -71; low OI)
http://www.investmenthouse.com/ct/uvn.html
POSS (Possis Medical--$13.51; -0.46; optionable): Medical appliances
http://biz.yahoo.com/p/p/poss.html
STATUS: Breakdown below 200 day MVA. In a strong sector, but POSS has tanked below the 200 day MVA and is continuing to fall after the kiss good-bye at that now-resistance level. Fell further Monday with volume slacking back, but that can pick up after we get past the Fed tomorrow (90K; avg. 160K).
BUY POINT: Hold for put buys at 13.85, looking for rising volume on a continued drop (185K or more). Target=10. Stop=16.
POSITION: July 20p to buy (UPQ SD; delta -80; low OI).
http://www.investmenthouse.com/ct/poss.html
CONTINUING PLAYS
Puts
OEX (S&P 100--$519.48; -11.04; optionable): S&P 100
STATUS: Put. Took some money off the table this afternoon when the index hit our initial target at 525, but with the strong drop left some positions intact for the move down to our lower target at 515, level of the down channel line. Volume was lighter at 1.1 million (avg. is 1.3 million). Our add-to buy point was below 520, and a trailing stop was set at 526.
BUY POINT: A ride to 515 or can close out positions on a bounce back up from here. Trailing stop 526 (weekend stop was 533).
POSITION: May 535p (OEB QG) or June 535p (OEB RG) to buy.
http://www.investmenthouse.com/ct/$oex.html
ARW (Arrow Electronics--$24.89; -0.52; optionable): Wholesale electronics
http://biz.yahoo.com/p/a/arw.html
STATUS: Put on kiss good-bye. Tested the 200 day MVA late last week and has moved down since (kiss), continuing lower Monday on a slight decrease in volume. Still strong at 729,600 however (average is 564K), so we are looking for the stock to keep falling on preferably higher volume (most stocks saw much lower volume along with the overall market). ARW moved through 25.25, point targeted for new or additional positions for the put play.
BUY POINT: New or additional positions on a drop through 25.25 on volume of 700K or better. Target=22 (initial), then 20. Stop=27.50.
POSITION: June 30p to buy (ARW RF).
http://www.investmenthouse.com/ct/arw.html
ETM (Entercom Communications--$52.35; -0.57; optionable): Radio broadcasting
http://biz.yahoo.com/p/e/etm.html
STATUS: Put. After the March and April double top, ETM broke the 50 day MVA, tested it, and looks ready to make another fall, moving down the last three days. Lower volume Monday (311K; avg. 332K) slowed the decline, but we are looking for that to reverse for continued selling toward our 46.50 target.
BUY POINT: A ride for buys at 52.50, looking for rising volume on the move (450K or higher). Target=46.50. Stop=54.50.
POSITION: June 60p to buy (ETM RL; delta -75; low OI).
http://www.investmenthouse.com/ct/etm.html
GWW (W.W. Grainger--$52.21; -1.69; optionable): Wholesale Electronics
http://biz.yahoo.com/p/g/gww.html
STATUS: Put: Breach of 50 day MVA. Friday was down to 54 after breaking the 50 day MVA 4 days ago (that resistance now at 55.30). Volume hit above average on Friday's selling, and surged even higher Monday to 626,200 (avg. 439K), sending the stock down through our new buy point at 53.70. We were looking for it to tank, and it has made a good start at it.
BUY POINT: A hold for put buys at 53.70. Target=50 (initial); then 48. Stop=55.75.
POSITION: July 60p to buy (GWW SL; low OI, Delta -74)
http://www.investmenthouse.com/ct/gww.html
Upside Plays:
GTRC (Guitar Centre--$19.70; +0.70; no options): Guitars
http://biz.yahoo.com/p/g/gtrc.html
STATUS: Test breakout. Made a nice bounce Monday from a test down to the 18 day MVA on the low (18.57), volume ramping up above average to 216,400 (avg. 185K). Looking for the quick move up to 24, near the early July high at the start of GTRC's cup base, from which the stock broke out in late April. Nice move! Money flow and relative strength breaking out.
BUY POINT: Aggressive: A hold for aggressive buys at 19.65, looking for continued rising volume. Break resistance: 20.09 on 275K+. Target=24. Stop=18.50
POSITION: Stock
http://www.investmenthouse.com/ct/gtrc.html
LPNT (Lifepoint Hospitals--$41.12; +0.45; optionable): Health care plans
http://biz.yahoo.com/p/l/lpnt.html
STATUS: Cup w/handle. Pulled back to the 18 day MVA (40.29) on decreased, below average volume after holding off on a breakout move last Tuesday from its 8-month cup with handle. Volume remained below average Monday (354K; avg. 450K) on the bounce, and we will want to see that surge above last week's higher levels for a breakout over Wednesday's closing high (42.28). We won't mind if the stock takes a couple of days to settle out some more; this sector has been resting after a strong run. Relative strength for the stock continues to break higher, ahead of price.
BUY POINT: 42.50 on volume of 700K+. Target=51. Stop=39.50.
POSITION: Stock and/or August 35c to buy (PUN HG; delta 79; low OI).
http://www.investmenthouse.com/ct/lpnt.html
JILL (J. Jill Group--$32.26; +0.61; optionable): Catalog retail
http://biz.yahoo.com/p/j/jill.html
STATUS: Flat base post breakout of cup w/handle. Still consolidating on low volume (falling further Monday to 118,200; avg. 256K) after trying to break out of the base last Wednesday. Showed a doji Monday just above its 10 day MVA (31.81; the 18 day MVA is at 31.31), after the stock pulled off the intraday high of 33.33 on the low volume. We continue to look for a move out of this pattern on better volume; JILL tends to just $4-5 on each bounce. Good accumulation in the base.
BUY POINT: Aggressive: A hold for buys, if taken, at 32 on above average volume. Breakout 33.70 on 350K or more. Target=36. Stop=29.95.
POSITION: September 25c to buy (JUI IE; delta 89; 65 OI).
http://www.investmenthouse.com/cd/jill.html
SOTR (Southtrust Corp.--$26.60; -0.39; optionable): Regional southeast bank
http://biz.yahoo.com/p/s/sotr.html
STATUS: Cup w/handle. Still moving in the handle of an 8-month cup with handle/ascending wedge. The stock moved below its 18 day MVA Monday, but the low tapped the short term up trendline (26.50) that is supporting the lows in the wedging action of the handle (we targeted that as possible support this weekend). Volume was sharply lower (887,200; avg. 1.25 million), down from the high numbers Thursday and Friday, so there is a good chance SOTR can hold this support if volume remains low. Money flow continues moving up ahead of price, and relative strength has already broken out. Price/volume action in the base favors accumulation.
BUY POINT: 27.42 on volume of 1.87 million or more. Target=32.96 (initial). Stop=25.50.
POSITION: Stock and/or September 25c to buy (SHQ IE; delta 91).
http://www.investmenthouse.com/cd/sotr.html
WATCHLISTS:
Awaiting Breakout Watchlist: These plays have not reached the buy point yet. We were thinking of calling this the 'waiting on breakdown' watchlist, but that really applies to the second list where the selling got brutal on some plays today.
Puts:
AAPL (Apple Computer--$22.65; -0.86; optionable): Personal computers
STATUS: Put. Let go after trying to hold on near its 50 day MVA. Volume was higher at 4.45 million (avg. 5.5 million), so the price/volume action is right for the move down. Our target initially is the 200 day MVA at 21; below that, 20. Volume remains below average, so want to see that crank higher.
BUY POINT: A hold for put buys at 23.25 on volume of 5 million+. Target=20. Stop=24.50.
POSITION: July 27.50p to buy (AAQ SA).
http://www.investmenthouse.com/ct/aapl.html
TROW (T. Rowe Price--$33.82; -1.58; optionable): Asset Management
STATUS: Put. Made it back over the 200 day MVA last week, but Monday the stock let go as financials had a bad day. Rising volume (513,800; avg. 625K) assisted TROW on the break back below that support level, and the stock pushed to a new low in this potential breakdown below the neckline in the head and shoulders pattern.
BUY POINT: A hold for put buys at 34.40, looking for continued rising volume (700K or more). Target=30. Stop=36.
POSITION: July 40p to buy (RQW SH).
http://www.investmenthouse.com/cd/trow.html
Upside Plays:
PLCE (Children's Place--$35.00; -0.25; optionable): Children's apparel
STATUS: Ascending wedge. Still looks good, showing a doji Monday at the 18 day MVA (34.95). Volume is still below average but was slightly higher at 189,200 (avg. 256K). Looking for a bounce back and breakout.
BUY POINT: 37.45 on volume of 1 million or better. Target=49. Stop=34.83.
POSITION: Stock and/or September 30c to buy (TUY IF; 53 OI).
ODSY (Odyssey Healthcare--$34.22; +1.37; no options): Long-term care
STATUS: Test Breakout. Still testing the breakout on very low volume (down to 44,400; avg. is 135K). Gapped down and recovered, holding over the 18 day MVA (32.84). Money flow and buying are solid, and price/volume action in the recent base showed very good accumulation.
BUY POINT: 34.60 on volume of 150K or more. Target=40 (initial). Stop=32.50
POSITION: Stock (no option chain yet).
SCS (Steelcase--$16.90; -0.25; optionable): Business equipment
STATUS: Flat base. SCS is in a current 2-month flat base that has been riding the 50 day MVA on the low (16.47). This is part of a larger 20-month cup base where this flat base is serving as the handle. Today it gapped up but pulled all the way back to test near the 50 day MVA (low today 16.40), recovering to close. Buying and money flow are excellent, and relative strength is already breaking out on this move. Needs to settle down and continue the move started last week.
BUY POINT: 18.10 on volume of 250K+. Target=22.25 (initial). Stop=17
POSITION: Stock and/or July 15c to buy (SCS GC; delta 83).
IRM (Iron Mountain--$31.43; -0.29; optionable): Management services (storage).
STATUS: Ascending wedge. In a wedge for the past 4 months, IRM has been tightening the range, making higher lows all the way up. Money flow is super as is relative strength (already breaking out on this move). Price/volume action has been great during this base with accumulation weeks outnumbering distribution weeks 4 to 1. Monday IRM pulled back on higher volume, holding the 10 day MVA.
BUY POINT: 32.60 on volume of 500K or more. Target=39.25. Stop=30.75
POSITION: Stock and/or July 30c to buy (IRM GF; delta 70).
BRO (Brown & Brown--$35.71; +1.36; optionable): Surety and title insurance
STATUS: Cup w/handle turned reverse head and shoulders. Strong move today, hitting the buy point on increased volume (432k; avg. 340k).
BUY POINT: Still a buy up to 36.50 but we need volume of 585K+. Target=42.75 (new high territory). Stop=32.95.
POSITION: Stock and/or September 30c to buy (BRO IF; low OI for now, but delta of 80; the 35's have a delta of 61, 131 OI).
CMH (Clayton Homes--$17.25; -0.26; optionable): Manufactured housing (mobile homes)
STATUS: Reverse head and shoulders. An immediate pullback off of the strong move on Friday. Not the best action, but volume was down a bit (594k) and it pulled up to close after tapping the 10 day. We will see if it can hold and try again.
BUY POINT: Target=21.25. Stop=16.40.
http://www.investmenthouse.com/cd/cmh.html
PDQ (Prime Hospitality--$13.24; -0.42): Tried to move again today but volume was not there, and it pulled back from a high of 13.98 to close on the 10 day MVA.
Current plays Watchlist: These are plays that have hit the buy point and we are currently monitoring.
Puts:
INTC (Intel--$25.78; -0.78; optionable): Semiconductors
STATUS: Put. After the hard fall Friday INTC continued down today, although volume fell back below the average (44.3m; avg. 45.4m). Looking for a continued push down toward the target.
BUY POINT: Riding current positions. Target=24. Pulling stops down to 29.
CUM (Cummins--$40.10; -1.71; optionable): Big engines
STATUS: Put. Finally made the drop, taking out recent support at 41. Volume was lighter at 606k, so we could get a bounce. Still targeting 39.
FDS (Factset Research--$30.15; -1.85; optionable): Information services
STATUS: Put. Hit our target Friday and we took profits, but it fell really hard today as well, hitting 30 as we thought it might. With any remaining positions we can continue to follow it down, protecting profits. We could get a relief bounce and an attempt to test the 200 day here.
NAV (Navistar--$38.34; -0.55; optionable): Trucks
STATUS: Continued down on light volume, near recent lows. If it hits 37 we will close.
WL (Wilmington Trust--$63.64; -0.26; optionable): Regional bank
STATUS: Put. Encountering resistance at the 10 day MVA, pulling back from a high of 64.42 and falling back on continued above average volume (96,600). Looking for a stronger drop back the 200 day MVA (62.55), the initial target (60 if that breaks). Will close out if its turns back up.
Upside:
CAND (Candies, Inc.--$4.15; +0.41; no options): Footwear
STATUS: Cup w/handle. Nice move on the test of the breakout! Volume was huge at 12.1m (avg. 155k).
BUY POINT: Target=4.95. Stop=3.50.
GISX (Global Imaging--$20.39; +0.02; no options): Specialty retail
STATUS: Double bottom. Holding up after its recent surge, but volume has been weak so we are skeptical, though volume was moving up close to average levels Monday. It is having a hard time clearing the middle of the pattern at 20.43. Without more volume it won't do it. Price/volume action shows accumulation weeks leading 5 to 1, a very nice ratio.
BUY POINT: New positions over 20.75 on volume of 350K+. Target=24.50. Stop=18.22.
POSITION: Stock.
ESI (ITT Educational--$51.56; -0.93; optionable): Education and Training
STATUS: Doing fine after the successful test of the breakout. ESO dipped back today but on much lighter volume, and is holding the 10 day MVA.
GMP (Green Mountain Power--$19.20; -0.25; no options): Electric utility
STATUS: Cup with handle. Dropped back today on sharply lower volume, tapping through the 10 day MVA (19.04) but recovering a bit to close. Looking for a hold of the 10 day (18 day at 18.84), wanting lighter volume on an additional pullback.
ULAB (Unilab--$30.65; -0.04; optionable): Healthcare software & services
STATUS: Double bottom. Continues to rise on very low volume, and that makes us doubt the move. Showed a doji today. Have pulled stop points even higher to 29.
BUY POINT: Target: 35. Stop: 29
UPS (United Parcel Service--$59.58; -0.52; optionable): Delivery
STATUS: Closed below the 50 day MVA today, but volume continued to be low (768k; avg. 1.5m). Looking for the stock to hold the 50 day and give a bounce, but we are not riding on a continued drop.
BUY POINT: Target: 66.44 represents a former high and is the initial target. Stop Advisory: 59
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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