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Support and Resistance

Nasdaq: Closed at 1650.49
Resistance: The February lows at 1696 to 1700. That is followed closely by another down trendline from March at 1733 and resistance at 1743 to 1750. The 50 day MVA is at 1755.65
Support: 1650 held today on the close. That is followed by 1620. Looks like it is going to try and fill the gap to 1600. 1550 to 1560 are the October lows and could try to hold. Then 1500. After that is the September low at 1387.06.

S&P 500: Closed at 1073.01
Resistance: As noted Wednesday, 1080 (February closing lows) had not been completely broken. They are still unbroken in the big picture. The down trendline at 1080 is now back in control, backed up by the 18 day MVA (1086.60). Then the next down trendline at 1095, backed up by 1100 from price consolidations. 1125 is the serious resistance as that represents strong price points and the 200 day MVA (1124.34).
Support: Hanging onto the February lows at 1074, but barely. After that is 1063, followed by 1050, the October lows and the last price consolidation level before the September low. There is possible support at 1000, but it is not much.

Dow: Closed at 10,037.42
Resistance: 10,100 continued to keep the index in check along with the 50 day MVA (10,128.55). After that, 10,300 holds the key to reaching toward the March high. 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 down trendline is now at 9975, and the index could ride down that. Not much support, however, as it can trend lower and still hold above that line. The 200 day MVA (9913.64) is the next real level. Then recent lows at 9811. The bottom of the downtrend channel is at 9675. Then 9500 to 9600 in the shelf of support from 9500 to 10,100.

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): 411K actual versus 407K expected and 422K prior (revised from 418K)
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%

TEAM TRADES

Though retail is showing some signs of stress, there continue to be retailers that are strong, showing very good consolidations and then great buy points on the continued moves higher. LIN had formed a big cup with handle over the past year, riding up the 50 day MVA as it climbed the right side of its base. It had pulled into a three-week handle where volume just dried up, coming in well below average for two weeks as buying indicators continued to rise, i.e., good price accumulation. We had good moves from ANN on Wednesday, and LIN showed a volume spike that day though it lost a bit of ground. Today with the same store sales numbers coming out, we were looking at the leaders. CHS, CHBS, LIN, ANN all made great moves.

LIN was moving well early, but we did not want to rush in. We wanted to make sure it was amassing the volume needed for the breakout of such a long pattern. We watched and waited as it build toward the breakout at 36.60. Volume was solid, and looked as if it was going to meet our target. It made two runs toward 36.60 before lunch, and then backed off in a very tight range. We noted this and set a buy point alert below the buy point but above the session high to keep us right on top of it. That triggered right before noon central. Volume was solid. We were watching volume move into the stock as it hit the buy point. We shot out the alert and then looked at picking up some positions on this one. It could be a split candidate soon so we were looking at some stock positions. The spread was anywhere from 5 cents to 2 cents. We were going to try and shave it a bit as it was showing 36.55 by 36.60, but then the spread narrowed to a penny; obviously someone was trying to do what we were thinking of doing. With the market maker playing that game and with the volume good, we did not want to mess around too much. Instead we went ahead and limited the order at 36.60; if we got better, great. If not, at least we should get the fill at our breakout price. The latter is what happened. The stock made a continued move higher during the session with some profit taking at the close that pushed it back a bit, but still in the black for the day. The key is the good volume as it cleared resistance. This is one we want to try and hold for quite awhile.

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 Wednesday's report:
CAO: Flag. Holding the pattern with another lateral doji.
AXP: Breakaway gap/cup with handle. Pulled back with a doji on low volume.
FRED: 18 day MVA bounce. Closed at the support, but some selling on higher volume took it down. Will look for the hold here in the 38 range.
JDAS: Put. Hit the buy point for a loss of $0.80.

Continued Plays:
COCO: Back at the 18 day MVA in a test of the last run off its 50 day MVA. Volume was low with the doji; the stock is getting ready for another jump.
COL: Bumping up on stronger volume.
GSB: Trying to firm up in an ascending wedge.
HUM: Testing the 18 day MVA on low volume in a test of its recent strong run.
IMAX: Blasting up on strong volume off a 50 day MVA bounce.
KEY: Testing, but needs to settle out the volume another day or so.
NYCB: Bouncing on news of pricing of a public offering.
PSSI: Holding up in the flat base/ascending wedge, above support (18 day MVA).
SCS: A little cup with handle as the handle to its bigger base.
SNS: Looks ready for a move up after testing the 50 day MVA. A hold for buys at 14.65 and 14.80
URBN: Held with a doji above the 18 day MVA. Volume was lower.

Best Plays:
1) LPX: Taking off!
2) CHGO: Moving up on rising volume.
3) DLTR: Nice pattern!

New plays:

LPX (Lousiana-Pacific--$12.41; +0.76; optionable): Lumber
http://biz.yahoo.com/p/l/lpx.html
STATUS: Breakout. LPX blasted up from the 18 day MVA Thursday with volume soaring (1.9 million; avg. 645K) on news of an upgrade and plans to sell some assets. The stock cleared resistance at the April high (12.15) in a year-long base that shows strong accumulation. The most recent pattern within the base is similar to an ascending wedge, where the handle in the long base would normally be. Money flow and relative strength are breaking out with stock price.
BUY POINT: 12.51 on continued strong volume. Remains a buy up to 12.86 on the breakout. Targe=15. Stop=11.25
POSITION: Stock and/or August 10c to buy (LPX HB; delta=81).

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

Put:

SRZ (Sunrise Assisted Living--$26.46; +0.27; optionable): Health care facilities
http://biz.yahoo.com/p/s/srz.html
STATUS: Put; kiss good-bye. Trended up from the 21 range (February lows) for 2 months, topped out in April just under 30 and ended up selling off below its 50 and 200 day MVAs. The stock caught support in the last week at the 26 range with volume tapering off, but Thursday price was moving up as volume decreased (182,700; avg. 305K). Not too significant for one day's trading, but if that trend continues SRZ can fall back from the resistance (10 day MVA=26.79, and the 18, 50 and 200 day MVAs converge at 27). On the turn back down it can drop to 22, or to the level of a down channel line at 20 (connects the September and February lows).
BUY POINT: 26 on volume in the range of 350K or higher. Target=22. Stop=27.50
POSITION: July 35p to buy (SRZ SG; delta= -0.90).

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

Revisited:

CHGO (Chicago Pizza & Brewery--$7.13; +0.40; no options): Restaurants
http://biz.yahoo.com/p/c/chgo.html
STATUS: 50 day MVA bounce. CHGO broke out from a 4-month flat base in late March, running to 7.90 at the April high then correcting back to the 50 day MVA eight days ago. Volume looked good as it fell back to very low levels in the pullback, increasing on a move back over the 18 day MVA in recent days although it has remained low overall as the stock regroups for a move back up. Volume was slightly up Thursday to 176K (avg. 202K), pushing CHGO back over the 18 day after some selling down Monday. It looks ready to make a run on the April high, and we are looking for more than that on the move. Money flow and relative strength are both ahead of price.
BUY POINT: Aggressive: 7.30 on volume of 230K or higher. Target=10. Stop=6.75
POSITION: Stock (no option chain).

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

DLTR (Dollar Tree Stores--$38.22; +0.15; optionable): Retail
http://biz.yahoo.com/p/d/dltr.html
STATUS: Flag. DLTR broke out of a cup with handle base in late April and is now testing the move in a tight lateral pattern (flag). Volume is decreasing in a steady and orderly manner as the pattern holds above support (the 10 day MVA is at 37.3, the 18 day MVA=36.42, support the stock tapped on the Wednesday low). We are anticipating a breakout and move of around 4 points. Volume was down to 752,300 (avg. Money flow and relative strength are high. Options will leverage positions more favorably than stock.
BUY POINT: 38.95 on volume of 950K. Target=33. Stop=36.22
POSITION: Stock and/or August 35c to buy (DQO HG; delta 0.74).

http://www.investmenthouse.com/cd/dltr.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, and JNC.

RMCI (27.37; +0.56): Firming up in an ascending wedge on low volume, support at the 18 day MVA and buy point over 28.50.

MIK (39.14; -0.36): Closed with a doji below the 18 day MVA after threatening to do so on Wednesday's higher volume loss. Tapped the 50 day MVA again then bounced back.

LLL (131.97; +3.22): Strong again, moving up from yesterday's doji on higher, above average volume. Just keeps on stepping higher.

UP & COMERS PORTFOLIOS: BBBY, SRCL

SRCL (72.50; -0.91): Remains above the upper channel line in the uptrend but slightly higher volume Thursday points to that correction we are looking for.

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

CSCO (15.75; -0.52): After blasting over the 50 day MVA, CSCO pulled back on lower volume, testing the 50 day MVA on the low. BRCM, BRCD, EMLX also fell back.

WMT (54.99; -1.40): Back below the 200 day MVA. It's been a damaging correction.

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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