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Begin Part 2 of 2

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 Thursday's report:
TIF: Double bottom. Closed just under its 18 day MVA in the handle, showing a doji.
TMCS: Put. Holding with another doji, just under resistance at the 50 day MVA.
SNS: Ascending wedge. Just a slight dip and showing another doji in the pattern.
COL: 18 day bounce/cup with handle. A little bounce up from support but volume was lower.

Good Movers: PEET, USPI, RMCI, GSB

Continued Plays:
AMI: Has been testing the breakout from its cup with handle, and finally closed at the 18 day MVA on low volume. May be ready to make its move back up.
CHGO: Made it over the April high on even higher volume, but the move is slowing down. We'll take the new high, though!
CLF: Still holding the 18 day MVA in its pullback after the strong 50 day run and volume keeps falling.
HKF: Bouncing from support, but volume has been falling and is well below average.
HMC: Volume spiked Friday and the stock moved closer to the buy point in the cup with handle.
HNT: Tested the 50 day MVA on above average volume Tuesday and is currently holding above the 18 day MVA with a tight doji. Looking for another move up!
KEY: After breaking out of the cup with handle is testing the move on decreased volume and holding above the short term MVAs.
LDG: After Wednesday's doji, headed up Friday but volume remained just under average.
NCC: Continued to move after breaking out of the cup with handle, but the move is slowing down.
OATS: Tested the 10 day MVA after the strong run; it bounced from that support but volume was still falling.
PLB: Looks good in the test of the breakout from its big base (when it reached a new all-time high), moving laterally on decreasing volume.
SVM: Pulled back to 15 on decreasing volume after trying to move up in its test of the breakout. Doesn't have the volume behind it.
TSN: Back to the 18 day MVA on low volume after failing to move over the early May highs on the last bounce. Money flow is still high and ahead of price.
UAG: Flying plateau. Held the 10 day MVA on low volume, giving a little bounce.
VWKS: Test of breakout. Still looks good in the lateral consolidation.

Best Plays:
1) HUM: Getting ready for run from the 50 day MVA.
2) MIK: At support on low volume.
3) QLGC: Very interesting possibilities.

New plays:

INLD (Interland--$2.78; 0.00; no options): Internet software
http://biz.yahoo.com/p/i/inld.html
STATUS: Cup base. Not exactly an ascending wedge (which it resembles), because since the start of the pattern (at the December high, 3.00), drop to the 200 day MVA then bounce, INLD posted a lower, not higher, low in February and again in March. It ran back up again (once more from the 200 day MVA) to the December high resistance, then pulled back in a gradual handle that eventually failed. The stock broke the 50 day MVA but recovered, and last week made a nice bounce from that support. It is taking breather (thus far of 2 days) on low volume, but we are looking for it to make a breakout over 3.00. Showed a doji Friday on rising volume (652K; avg. 390K). Money flow is moving higher and is ahead of price, and the base shows strong accumulation (8 up weeks vs. 2 down weeks, on rising volume).
BUY POINT: 3.10 on continued rising volume. Target=4.75. Stop=2.50 (18 day MVA is at 2.60).
POSITION: Stock.

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

Big Covered Call: One type of covered call play we like is one on a solid performer that we can buy, sell the call, and then not worry too much about it. One way to do that is to sell a call 5 or so months out to collect the gain over that time. We may not get 10% per month, but we can enter the play and make a solid return with a minimum of trouble. Volatility is a bit lower on options, so premiums are lower. Still, we can make a solid return with little fuss. One stock we have featured in each seminar series using this method is QLGC. Despite the market ups and downs, QLGC has come right back and given us a good play each time.

QLGC (Qlogic--$51.82; +0.84; optionable)
http://biz.yahoo.com/p/q/qlgc.html
STATUS: In a six-month trading range from 40 to 55, QLGC is showing signs of wanting to break higher. Now it may provide a great upside play from here as it has been showing better relative strength for a big name tech stock. In any event, if it does make the strong move, we will be in the stock; we then let it move as high as it will, and when it shows topping signs we can sell some longer term calls on it, create the covered position, and basically leave the position alone.
BUY POINT: 53.05 on volume of 12 million+. Target: no specific target, but there is some resistance at 57 and then at 62 to 65. When it hits those points and shows topping signs (doji gap higher and then selling), we will sell the calls.
POSITION: Looking at October 55c (GLC JK) to sell. Selling for $7.90 Friday, and at that rate would return 21% for the 5-month play (4.2% per month) if called out. Now as the stock runs higher, the calls will sell for more. If it hits 57 to 60 we could easily get 5% per month or more on this play. We will look at position maintenance as the play progresses, i.e., if we want to buy back the calls if the stock pulls back and holds support so we can sell them again on another rally higher.

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

Revisited:

HUM (Humana--$15.44; +0.12; optionable): Health care plans
http://biz.yahoo.com/p/h/hum.html
STATUS: After the late March move off the 50 day MVA (just under 13 at the time) and subsequent run to the May closing high at 16.80, HUM is consolidating above its 50 day MVA (14.91) ahead of what we think will be another run up. Friday HUM showed its 4th consecutive doji in a lateral move just under the 18 day MVA (15.67) and volume was on the rise, up to average levels at 1.1 million. We are looking for the break above resistance to launch the run, and will focus on leveraging positions by using options. Money flow has taken a dip on the stock's pullback from the high, but is still ahead of price. HUM shows strong buying.
BUY POINT: Aggressive for the bounce: 15.80 on volume of 1.3 million or higher. Target=19.50. Stop=14.69 (7%)
POSITION: Stock and/or August 12.50 or 15c to buy (HUM HV or HC; deltas unavailable due to options expiration).

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

MIK (Michael's Stores--$40.70; -0.35; optionable): Toy & Hobby
http://biz.yahoo.com/p/m/mik.html
STATUS: Breakout to new high. MIK is traveling up its 50 day MVA (38.40), having bounced in April and earlier this month, after a deeper correction below the support in early March. The stock on the last bounce just managed to move over the previous closing high (41.59) but on decreasing volume. That low volume has allowed MIK to hold at the 10 day MVA on the pullback the last three days (40.71); volume is below average at 403,600 (avg. 528K). We will want to see a high volume move over 42.25 to break the stock above recent closing highs at that level, since the last bounce up was weaker.
BUY POINT: 42.35 on volume of 604K or higher. Target=48. Stop=39.75
POSITION: Stock and/or September 35c to buy (MIK IG; delta=0.75).

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

RMCI (31.23; +3.48): We knew this one was looking good, and Friday it broke out of the wedging pattern on huge volume! Buy point was 28.61, and the stock soared through our 5% limit for buying on breakouts. We will look for a pullback for new entry points, but this was a strong move that can follow through with more gains, which is just why we have these leaders in our portfolio.

JNC (61.04; -.53): Topped out on its most recent run which was off the 18 day MVA. The stock tapped near the 10 day MVA at 60 on its intraday low. Volume was much stronger and above average; look for a possible move back down to the 60 range to complete the test.

LLL (127.30; -2.31): Started what could be a correction to the 50 day MVA, discussed in the Thursday report. The low tapped some potential support at the 125 range before LLL bounced back up to close just below the 18 day MVA. Volume was higher, still below average.

DGX (90.14; +0.13): Friday closed below the up trendline noted in Thursday's report (connects Feb/April closing lows), showing a tight doji. Volume was high and above average on the move; if DGX cannot get back over the 18 day MVA (127.83) here, it can drop to test the 50 day MVA at 121.48. It has been since late February that the stock corrected back as far as the 50 day.

UP & COMERS PORTFOLIOS: BBBY, SRCL

BBBY (35.90; +0.07): Has held the 18 day MVA for three days with consecutive doji, volume sliding lower below average. The stock tested its 50 day MVA early in the week and while it doesn't look ready to make the upside move just yet, with volume continuing to fall and the consolidation at support, is at least working toward that end.

SRCL (72.70; +2.15): Trying to hold at the 18 day MVA, volume falling lower, after some selling on Thursday when the company announced a stock split (effective June 1). SRCL bounced back up so isn't ready just yet to break support. Perhaps it can start the split run from here.

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

BRCD and AMGN were back below the 18 day MVA, BRCM can't get over that level since mid-May (with the exception of AMGN, lower-volume moves). Some other techs in the portfolio are noted below:

CSCO (17.25; +0.24): A milestone was reached as CSCO moved over its 200 day MVA. It showed a doji on the small move, and volume was low though a bit higher, but look we'll look for it to hold here until it can bounce up. Has come a long way in just eight days, moving 4 points.

HB (61.14; -0.97): Hit resistance at its 10 day MVA, then Friday at the 50 day MVA and on stronger volume started selling again. HB can fall to 58 if this head and shoulders-type pattern follows through with a breakdown; below that is the 200 day MVA at 57.

SEBL (23.55; +0.12): Fighting with its 18 day MVA the last 2 days; low volume is keeping it a bit quiet and above the 10 day MVA (23.23). Still has work to do with the 50 and 200 day MVAs, and a down trendline above that, ahead.

HDI (55.01; -0.14): The pattern doesn't look too bad, so perhaps the company really can afford to give away 20 Harleys. Broke back over its 50 day MVA in what is shaping up to be almost 4 months of an ascending wedge-type pattern. Currently pulling back to support at the 54 range on low volume. A breakout will be over 57.

BUD (50.95; +0.05): Closed just above an up trendline that connects Oct/Jan lows, but under the 50 day MVA (51.28). Volume has been falling on the move up to resistance, so BUD can be setting up for a fall back to 49 to 48.50-ish, the latter support is at a February consolidation.

EMLX (31.80; +0.54): Tried to put together a bigger move Friday but the market wasn't behind it on the volume side. Gapped higher on the open then pulled back, though still putting in a gain. Volume inched higher.

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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