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Begin Part 2 of 2

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

5-7-02
Productivity-Prel., Q1 (8:30): +8.6% actual versus 7.0% expected and 5.5% prior (revised from 5.2%).
Wholesale Inventories, March (10:00): 0.0% actual versus -0.4% expected and -0.7% prior
FOMC Meeting (2:15): Rates held steady
Consumer Credit, March (Consumer Credit): $6.0B versus $7.1B prior

5-9-02
Initial Claims, 5/4 (8:30): 407K versus 418K prior
Export Prices es-ag., April (8:30): NA versus 0.2% prior
Import Prices ex-oil, April (8:30): NA versus 0.0%
FOMC Minutes, 3/19 (2:00)

5-10-02
PPI, April (8:30): 0.4% versus 1.0% prior
Core PPI, April (8:30): 0.1% versus 0.1% priorAuto Sales, April (00:00): 6.0M versus

SUBSCRIBER QUESTIONS

Q: One of the best services I have invested in. I am not only following your suggested plays, but trying to learn better techniques. I have a question regarding the average volume figures you use. What is the moving average that you place on the volume bars? Also, why do you use an 18 bar EMA rather than a 20 bar EMA which is much more common amongst the investment TA group? Thank you for your response.

A: Thanks for the nice comments. Always appreciated. First, for average volume we use the 50 day average. The reason is that matches an important price moving average, the 50 day MVA and it historically provides a very good measure of movement. We look at a lot of history to determine what works because the same patterns are repeated over and over in the market no matter if we are in an old economy, new economy or whatever. Emotions remain the same, and that is what drives the market. The 50 day average works well historically.

As for the exponential 18 day MVA, it has the same basis. We plot the 20 day MVA on our charts, but in 98% of the cases, the 18 day MVA is used as support in uptrends and resistance in downtrends as opposed to the 20 day moving average. We always plot several moving averages to keep up with what works. The market is dynamic and changes in cycles. The 18 day MVA gives a better read on what is going on in most cases.

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 Monday's report:
HLT: 18 MVA bounce play. Holding nicely at the moving average as volume dipped back at bit.
LBIX: Broke out of the flat base!
ENC: Reverse head and shoulders. Remains tight in the lateral pullback in the right shoulder.
MATK: Put. Hit the buy point on a move down; volume lower, but not by too much.

Good moves: LBIX, BRCM, PHTN

Continued Plays:
AGY: Put. Headed lower again with volume rising.
AMI: Found support at 4.15 and on strong, rising volume bounced. Needs to break initial resistance at 4.50.
CAT: Tapped again at 52, offering the opportunity to close positions for the put play.
CAO: Moving laterally but strong volume couldn't break it higher. Needs a pullback to around 13.50.
CCRN: Moving higher after a short test of the breakout. Volume needs to crank up, as it was still well below average today.
CLF: Tight at support (18MVA) on very low volume. Getting ready to bounce.
COCO: Still tightening up in the pullback, Tuesday showing another, tighter doji at support. Volume lower and we are looking for a bounce.
DANKY: After testing the 18 day MVA the previous 3 days, gave a bounce Tuesday on higher volume. Pulled off the high, but looks like it is starting another bounce!
FDC: Put. Slowing it down here, tapping 75 on the low then moving up to close with a doji. Good place to close it out unless ready to ride a possible bounce back up.
KEY: Testing support on a pullback after the nice run up from the 18 day MVA. Heading for higher support now, the 10 day MVA.
NYCB: The pattern still looks good even though it tried to break out Friday but failed. Volume fell back Monday and the stock bounced from the 18 day MVA with a doji.
OATS: A small gain of ten cents after Monday's blast-off.
PSSI: Looks good in the ascending wedge pattern, moving up on rising volume Tuesday as it used the 50 day MVA as support. Could be the breakout move!
STSA: Broke the 50 day MVA on rising volume in a downside move.
TENT: Extended Monday's breakout with a gap up and a doji. Volume fell back.
UCI: Continued to fall with volume rising; headed for the 50 day MVA just above 18.

Best Plays:
1) OEX: Looking for a bounce for a quick upside move to potential resistance.
2) URBN: Bouncing from the 18 day MVA.
3) AIRM: Ditto!
4) SVM: Trying to make a move out of its flat base.

New plays:

OEX (S&P 100--$518.22; -1.26; optionable): S&P 100 Index
STATUS: Bounce. After giving a move down to the 519 range on the put play (taking out the initial 525 target), the index slowed the action Tuesday, showing a doji after a steep 2-day drop. Volume rose above average to 1.34 million (average is about 1.3 million) with the doji. We are looking for the index to give a relief bounce up to the range of its 10 day MVA at 532 for the quick play, taking profits there if resistance halts the bounce. On the heels of CSCO's earnings news we may see a gap higher; on that move we will look for a test of the opening price, or today's closing price for entry.
BUY POINT: From here: 520 on continued rising volume. Target=532 initially. Stop=515
POSITION: June 515c to buy (OEB FC; low open interest).

http://www.investmenthouse.com/ct/$oex.html

URBN (Urban Outfitters--$31.01; +1.58; optionable): Apparel
http://biz.yahoo.com/p/u/urbn.html
STATUS: 18 day MVA bounce. URBN is a leading stock that is testing its recent strong breakout run off the 50 day MVA. The stock broke out of another base last fall, then came back to test the moving average before the stellar run that led into the current test. URBN hit the April high on the run (that is at 32.36) before falling back on decreasing volume to test the 18 day MVA Monday. Volume crept up that day and the stock just dipped below the support, but Tuesday saw a nice recovery as volume shot above average (316,300; avg. 201,590) with price heading up in a good bounce. Looking for a continued move here; if it continues early in this strong fashion we will look at taking an aggressive entry point. Money flow and relative strength are leading price higher.
BUY POINT: Aggressive: 31.50 on continued rising, strong volume. Target=38. Stop=29.50
POSITION: Stock and/or September 25c to buy (URQ IE).

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

AIRM (Air Methods--$10.00; +0.05; no options): Air services
http://biz.yahoo.com/p/a/airm.html
STATUS: Breakout test. The stock ran up on a mid-April breakout from a flat base, then pulled back to test the 18 day MVA; now it is testing that level again and preparing for another bounce. In fact, that is what the stock did Tuesday, almost tapping down to the moving average but heading up from 9.15 (the 18 day is at 9.02) as volume blasted higher (261,200; avg. 78,136). We look for a continued bounce on the high volume with AIRM making it through resistance at 10 and at the recent highs (10.30 Monday). High money flow and relative strength.
BUY POINT: 10.35 on continued strong volume. Target=13. Stop=9.50
POSITION: Stock (no option chain).

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

SVM (Servicemaster--$14.34; +0.21; optionable): Business services
http://biz.yahoo.com/p/s/svm.html
STATUS: Flat base. The base of nearly 5 months formed after SVM shot up from its 50 day MVA back in November, right after that moving average crossed over the 200 day MVA (a bullish indicator). The stock raced up to the December high (14.20) where it began forming the base, which shows good accumulation, one reason we like it (5 weeks
up on rising volume versus 2 weeks down on rising volume). At this point SVM is trying to move into a breakout; after traveling laterally at the 50 day MVA throughout April, volume is trying to push higher and for a week price has climbed up toward the March high (14.50, tops in the pattern). We are looking for a move over that price on strong volume, which today was up to 477,400 (avg. 444K) as the stock moved up after Monday's slight pullback to test the 10 day MVA (14.09). Money flow is ahead of price, as is relative strength, both bullish signals.
BUY POINT: 14.60 on volume in the range of 600K or higher. Target=17.45. Stop=13.70
POSITION: Stock and/or October 15c to buy (SVM JV).

http://www.investmenthouse.com/cd/svm.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

RMCI (27.61; +0.62): Tapped the 10 day MVA on the intraday low as volume remained far below average and lower. We are looking for RMCI to hold above 26 in the wedging-type pattern formed since mid-April, and give us a breakout over the upper 28-range resistance.

MIK (39.90; +0.03): Volume dropped back below average and MIK is holding nicely at the 18 day MVA, showing a tight doji. We can look at picking up some more positions on a strong bounce from here, for stock and/or September $35 calls (MIK IG, delta 0.80 and 54 open interests). Look for volume over 500,000 on the move.

ICUI (38.46; -0.55): Continued to pull back to the 18 day MVA after Monday's crash back; consolation is that volume has been below average and decreasing both days. Looking for it to hold here.

LLL (126.95; +0.23): Another nice pullback into a doji, at support. Volume is low and below average as well. Can look at grabbing some positions here when the stock is ready to move back up; may take it another day to digest what has been a rather quick pullback, though it is still a good-looking one, very orderly. Stock and/or July or October $120 calls (LLL GD or JD). Look for volume in the range of 800K for a good bounce.

UP & COMERS PORTFOLIOS: BBBY, SRCL

BBBY (35.60; -0.41): Still holding above the highs in the flat base (35.50) from which BBBY broke out in early April, but has moved below the 18 day MVA on higher volume Tuesday. Possible for it to test the 50 day MVA, currently at 34.67.

SRCL (72.33; -0.42): Still above the upper channel line in the uptrend, but teetering on the edge of a pullback. It can hold in that case just above 70 (at the level of the upper channel).

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

BRCM (24.72; -5.22): Tanked on news that the company lost a contract to a competitor. This is the breakdown move in the descending wedge; target is 15.

HB (62.00; -1.02): Tested the 50 day MVA as expected, and is holding one cent above that support. Volume is rising, though, and that doesn't look good unless the stock can continue to rebound off the intraday low of 61.50, which it did today. If it breaks, it can fall to potential support at 60.

BRCD (19.90; -1.99): Broke down Tuesday from its descending wedge, volume strong and the stock heading below recent support at 22.

EMLX (23.42; -3.89): Another strong breakdown. Can drop to the 20 range from here to try and catch first possible support.

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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