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Begin Part 2 of 2

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

5-14-02
Retail Sales, April (8:30): 1.2% actual versus 0.7% expected (revised from 0.5%)
Retail Sales ex-auto, April (8:30): 1.0% actual versus 0.4% expected

5-15-02
CPI, April (8:30): 0.5% actual versus 0.4% expected and 0.3% prior
Core CPI, April (8:30): 0.3% actual versus 0.2% expected and 0.1% prior
Business Inventories, March (8:30): -0.3% actual versus -0.1% expected and -0.1% prior
Industrial Production, April (9:15): 0.4% actual versus 0.4% expected and 0.4% prior (revised from 0.7%)
Capacity Utilization, April (9:15): 75.5% actual versus 75.7% expected and 75.3% prior (revised from 75.4%).

5-16-02
Housing Starts, April (8:30): 1.63M versus 1.646M prior
Building Permits, April (8:30): NA versus 1.63M prior
Initial Claims, 5/11 (8:30): NA versus 411k prior
Philadelphia Fed, May (12:00): 11.0 versus 12.3 prior

5-17-02
Trade Balance, March (8:30): -$32.3B versus -$31.5B prior
Mich Sentiment-Prel., May (9:45): 93.0 versus 93.0 prior

TEAM TRADES

PCLE: We had our eye on PCLE for quite some time. It was forming a nice cup pattern all year and tried to breakout in late April. It was not ready and collapsed back down with the market. It formed up again right away, however, and worked through a nice, lateral low volume handle in early May. Tuesday it started to move higher, gapping up with the market and showing above average volume. That had us looking for the move today, and today it made the breakout move. Our buy point was at 10.27 to clear the intraday high in the handle; that is the buy point on these patterns. It did not take long into the session before it hit the buy point. It was up almost 65 cents before it hit our buy point; that does not concern us when looking at breakouts. The key is hitting the buy point and on strong volume for the session. At just after 9:30 when it hit the buy point, volume was running over 80% of average. That indicated it was easily going to hit the target volume for the session, so we had no hesitation in taking positions. The spread was all over the map from a penny to 14 cents with the trading on the stock as there were many buyers. We issued the alert and then went about putting in a limit order given the wide ranging bids and asks. We put in the limit at 10.29 and after several sell side trades a fill was at 10.27. The continued its strong move up for the next half hour, but then topped out near 10.60 for the rest of the session, somewhat perplexing, but very good in that it did not give back its gains. A strong move, and we can even add more positions from here.

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 Tuesday's report:
SSCC: Ascending wedge. Made the buy point on the breakout but pulled back even though volume was higher and very strong.
SSFT: Bounce. Another pullback off the intraday high as volume soared. Showed a dojil on a very small gain (tombstone, which points to a possible pullback).
VWKS: Test of breakout. Pulled back again in the consolidation on low volume. Good price/volume action, and a hold at most recent resistance, so not bad.
EMLX: Break of resistance. Did not follow through on the break above the 50 day MVA, instead closing just under that resistance.

Good Movers: LDG

Continued Plays:
AXP: Inched higher but volume decreased; it bounced in a nice move off the 50 day MVA a week ago for a gain of almost 4 points.
FRED: Was testing the breakout but corrected back to the 50 day MVA by Monday; the stock is holding that support but on low volume Wednesday couldn't get back over the 18 day.
GIVN: Cup with handle breakout Tuesday; the stock on lower volume showed a slightly higher doji, not the follow-through we wanted.
GSB: In the ascending wedge formed since mid-April. Higher volume and a slight dip, but the stock continues to hold above support at 33 (18 day MVA).
HKF: Holding at the 10 day MVA in a test of the last bounce move off the 18 day MVA. Volume shot above average Wednesday with a hammer doji; we will see if HKF's price can blast higher as well.
HMC: Cup with handle. Moved up on stronger volume in the handle!
LDG: Cup with handle. Getting close to the buy point! Strong volume and a pop from support.
OATS: Finally started to pull back after a phenomenal run, but we were looking for that action soon.
PG: Still in the ascending wedge and showing much better accumulation. Buy point is over 93.73 on above average volume for a breakout.
SVM: Retraced Tuesday's higher volume surge up (after testing the flat base breakout); tapped the 18 day MVA on the low then bounced back up for a half-point loss. Not a bad recovery, but not the action we wanted to see in the first place.
TSN: Didn't follow through on the 18 day MVA bounce; it sold back and crossed back through that level Wednesday, closing below the April high (13.94).
URBN: Continued Tuesday's bounce from the 18 day MVA; volume was low that day but surged today on the move.
USAP: Volume is trying to pump higher to boost the stock on its three-day bounce from the 18 day MVA, but is still well below average.

Best Plays:
1) USPI: Ready to move up from support.
2) UAG: Flying plateau on low volume.
3) PEET: Holding support in a handle on very low volume.

New plays:

USPI (Utd Surgical--$27.20; +0.05; optionable): Specialized
http://biz.yahoo.com/p/u/uspi.html
STATUS: 18 day MVA bounce. USPI made a nice run on its late April bounce from the 50 day MVA, gaining 10 points on the move up to the May high at 29.82 (it was a quick run of 7 days!). The stock pulled back immediately from that high, volume falling back below average as price found support at the 18 day MVA, where it opened Tuesday (the support is at 26.65). Volume did move higher Tuesday and Wednesday (to 247,900; avg. 313K), remaining below the average as the stock prepares for another bounce. USPI broke out of a 7-month cup but tested back a bit far (to the 50 day MVA), but that correction set up the stock for the nice run.
BUY POINT: Aggressive: Over 28 on volume in the range 400K or higher. Target=37.
Stop=26.08 (7%).
POSITION: Stock and/or August 22.50c to buy (QPJ HX; delta= 0.81)

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

UAG (United Auto Group--$30.40; -0.59; optionable): Auto Dealerships
http://biz.yahoo.com/p/u/uag.html
STATUS: Flying plateau. UAG broke out of a 4-month flat base on big volume early this month and then topped out at the high (32). From there it pulled back into a lateral consolidation as volume continues to fall back appropriately (down Wednesday to a low 132,900; avg. 318K), a flying plateau. Wednesday UAG pulled back slightly, tapping near recent support at the 30 range on the intraday low, continuing to tighten up in the pattern and thus preparing for another breakout. May take another day or two to get there, but the pattern looks good. Relative strength is high, and the stock shows huge buying.
BUY POINT: 31.23 on volume of 429K or higher. Target=38. Stop=29.04 (7%)
POSITION: Stock and/or August 25c to buy (UAG HE; delta=0.78).

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

PEET (Peet's Coffee & Tea--$15.60; 0.00; no options): Processed and packaged goods
http://biz.yahoo.com/p/p/peet.html
STATUS: Cup with handle. A 10-week base in which the stock has pulled back in a handle. The handle is volatile, but volume has fallen off well below average; by Wednesday down to 86,100 (avg. 186K), and the stock is holding for the second consecutive day above support at the 18 day MVA (15.42). Looking for a breakout; the stock shows strong money flow, high relative strength, and accumulation shows good price/volume action in the base (3 up weeks on rising volume versus 1 down on rising volume). We will have to see a strong volume move over 16.40 for a breakout.
BUY POINT: 16.50 on volume of 279K or higher. Target=19.80. Stop=15.35 (7%)
POSITION: Stock.

http://www.investmenthouse.com/cd/peet.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 (26.95; -0.22): Tested the 18 day MVA again (did the same Tuesday) in the recent wedging-type consolidation. RMCI continues to post higher lows, using the 18 day MVA as its main support all this month with volume dropping well below average. RMCI can hold here for a bounce back and a breakout, though the pattern is not well-formed. Resistance is at the 28 range.

JNC (61.51; +0.79): Continued the move it started on Monday, but volume has been pulling back overall, despite Tuesday's little surge with the good retail sales numbers. The stock today tapped 62.03 on the high; we noted last night we'd look at new entry points after a pullback to 60.

LLL (129.15; -2.70): Stronger, above average volume again and LLL sold back to test the 18 day MVA on the low at 128. It bounced back and closed back over its 10 day MVA (129.41). LLL has bounced twice from the 18 day MVA since its late March test of the 50 day MVA, and the second bounce was weaker due to lower volume on the move up. If it holds support here, some consolidation here would let volume pull back sufficiently to shake out holders, which can lead to a stronger bounce.

DGX (91.19; +0.33): Continues to stay below its 18 day MVA, showing a doji there as volume fell below average. The stock moved up from its opening price (90.82), and the doji at the bottom of the pullback (off the May high at 96.14) can indicate a move back up. Look for that move on strong volume, as the stock breaks above the 18 day (91.30).

UP & COMERS PORTFOLIOS: BBBY, SRCL

Both stocks held steady, climbing higher but pulling off highs, and holding above support levels.

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

HB (61.90; -0.52): Closed below its 50 day MVA on low volume, which is above the February closing high (61.40). Recent lows are at the 60.56 range and just higher. We will look for the stock to hold back over the 50 day and use this correction to move it back toward the April high near 66. Trying to form a bearish head and shoulders but may be able to work out of it.

SEBL (24.01; -0.90): A higher volume doij on a pullback; the stock is holding above its 18 day MVA but has resistance at the 50 day and 200 day MVAs just over 26.

BRCD (23.51; -0.57): Earnings were out after hours and were in line with estimates, but the stock was selling down after hours though not by much; still, BRCD closed under the 18 day MVA (23.62). The 50 day MVA is at 26.48, so the stock is in a similar situation as many other techs, holding between resistance and support levels.

CSCO (16.56; +0.11): Tapped its 200 day MVA on the high at 17.21; volume was higher on the move but the stock pulled back. Typical action for many tech stocks today, though CSCO was one that posted a gain, albeit a small one.

WMT (56.77; -0.62): Just as on Tuesday, tested the 50 day MVA again today then posted the loss. Numbers were good on the announcement yesterday, but the high-volume doji suggested a move back down; however, the stock can try for a hold at the 18 day MVA (56.43); lower support is at 56 or the 200 day MVA at 55.78.

BUD (50.25; +1.15): Setting up for a fall after holding support at the 49 range then moving up Tuesday on lighter volume. Resistance is ahead at first the shorter term up trendline (October and January closing lows) and then the 50 day MVA (58.01). If the lower volume trend continues, BUD can move back down. Will see how high it can recover near-term.

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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