stock split, stock recommendation

Begin Part 2 of 2

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

5-20-02
Leading Indicators, April (10:00): -0.4% actual versus -0.1% expected and -0.1% prior
Treasury Budget, April (2:00): $72.5B versus $189.8B prior

5-23-02
Durable Orders, April (8:30): 0.4% versus -0.5% prior
Initial Claims, 5/18 (8:30): NA versus 418K prior

5-24-02
GDP-Prel., Q1 (8:30): 5.8% versus 5.8% prior
Chain Deflator-Prel., Q1 (8:30): 0.8% versus 0.8% prior
New Home Sales, April (10:00): 883K versus 878K

SUBSCRIBER QUESTIONS

Q: Can you tell me how the exact pivot point is determined?

A: The pivot point is a phrase that is equivalent to the 'buy point' on the reports. The buy point was named this by many traders as it is said to act as the crucial point that 'pivots' a stock out of its prior range and over the resistance that is at the top of that range.

The pivot point is determined based on the type of pattern. In the classic signature patterns such as a double bottom or cup with handle, the point is fairly well defined. In a double bottom for instance the pivot point is the high in the middle 'hump' of the pattern. When a stock clears that point, it has broken free of the resistance that pushed the stock lower on its first rebound before the second leg to the downside shook out the last sellers. In a cup with handle the pivot is over the intraday high in the handle; when a stock clears that point it has moved past all of the overhead supply that held it back as the last sellers were shaken out in the handle's slightly declining price after the stock almost hit the old pre-correction high.

In less defined patterns such as a 50 day MVA bounce we look at prior closing and intraday prices as well as prior resistance to see where on the bounce any resistance will be cleared. If there is no prior resistance, we let it clear the predominant intraday high on the way down. It is less exact and takes more of an eye for the stock action, but if we see a strong bounce on strong volume for a strong stock, we are not going to quibble too much.

THE PLAYS:

BONUS PLAYS:

WY (Weyerhaeuser--$65.51; -0.45; optionable): Lumber
http://biz.yahoo.com/p/w/wy.html
STATUS: Breakout test. WY broke from a cup with handle dating back to mid-March, and is now testing the move. The breakout was on solid volume, but the stock was not able to maintain momentum, pulling back the last three sessions. The pullback has been on much lighter volume, as we like (today 435,900; avg. 1m), and WY is holding the prior handle high (65.16) and 10 day MVA (65.25). Looking for a continued hold and blast back up. WY shows excellent money flow and great buying. Target: 78.
BUY POINT: Over 67 on above average volume. Stop: 62.90
POSITION: Stock and/or July or October $65 calls to buy (WY GM or WY JM).

AEP (American Electric--$43.99; +1.04; optionable): Electric utility
http://biz.yahoo.com/p/a/aep.html
STATUS: Put. AEP dumped back out of its year-long cup base, holding the vicinity of the 50 day (45.50) for a couple of week, but last week AEP dropped hard through its 200 day MVA (44.26). Friday it dipped as far as 41.85 before recovering to close near 43, and today AEP made a test of the 200 day on lighter volume (1.3m; avg. 1m). We will see how AEP handles the 200 day, looking for a failed test and drop back with continued strong selling. Target: 40 (initial).
BUY POINT: From here or after a test through the 200 day, a drop through 43.50 on increased volume. Stop: 44.75
POSITION: August $45 puts to buy (AEP TI).

PRE-ANNOUNCEMENTS: BRL made a nice move, and TFX still looks good.

KSWS ($45.43; +0.90): Forecast to announce a split on 5-23-02 in conjunction with its annual shareholder meeting. Started the bounce today from its 50 day MVA (43.40), moving on sharply higher volume (114,900; avg. 98k), and closing just below the short-term MVA's (45.61). Still looking for a move over 46 on increased volume going into the forecast, with stock and/or July $40 calls to buy (SWU GH - 46 OI).

WEN ($37.49; -0.25): We are looking at a wildcard date on 5-23-02, the date of a WEN investor conference. Holding support at the 18 day MVA (37.56) in its tight ascending wedge. Volume continued low at 286,500 (avg. 822k). The breakout is 38.60 on volume of 1.1m, with stock and/or September $35 calls to buy (WEN IG).

ABC ($77.31; -0.31): We are researching a forecast date. Rested after its good move on Friday. ABC is in a nice handle-type consolidation, and a bit of a rest is fine as we look for a continued surge for a breakout. The move over the closing high is 78.71 on increased volume of 1.4m (nicely down today at 570k (avg. 1m). Stock and/or August $75 calls to buy (ABC HO).

KSS ($77.62; -0.13): Forecast to announce a split on 5-21-02 in conjunction with its annual shareholder meeting. After the huge move by KSS Friday, it reached up to 78.83 today before pulling back to a loose 'tombstone' doji. Volume dipped way back, however, to 1.84m (avg. 1.9m). It is set up for a pullback, and we will see if morning profit taking holds 76-77, and an announcement could be a catalyst for the continued move. With an announcement, Stock and/or July $75 calls to buy (KSS GO). If there is no announcement, we are still looking for a hold of 76, with a move back up over 77 with strong volume for new or additional positions.

XL ($87.87; -2.15): XL spent some time holding 90 and testing its 50 day MVA (92.48), but today could not hold and fell below the recent consolidation lows, and took out its 200 day MVA (88.81). Volume was down but above average at 862k (avg. 791k). We will see if XL tests the 200 day, and look for a drop back through 87.87 on increased volume. Target: 80 (some possible support from prior tops at 83). Stop: 91. July $95 puts to buy (XL SS - 92 OI).

PRE-SPLITS: GG (gold stock) made a great move

ATK ($108.75; +2.11): Splits 3:2 on or about June 11. ATK looked to have found support with its doji over the 50 day MVA (103.68) following its decreasing point losse on strong volume. Today it followed through by bouncing back over the short-term MVA's (108.22) and hitting the 109.10 buy point. Volume was much stronger at 468k (avg. 339k), and we are looking for a continued move. Targeting 125, but this leg on the bounce will run into resistance at the high of 115. New or additional positions on a move over 110.15, with stock and/or August $100 calls (ATK HT). Stop: 103

CONTINUING CANDIDATES: ACDO still a put.

GNSS ($27.23; -0.67): After the gap up and pullback Friday, GNSS gapped down slightly but closed right at the 50 day MVA, showing a tight doji on lower volume (1.32m; avg. 4.2m). Holding existing positions, and for new ones, adjusting aggressive buy point to a move over 28 on above average volume. Stock and/or September $25 calls to buy (QFE IE).

AHC ($82.62; -0.68): Settled back a bit Monday after the big volume surge upward from the 50 day MVA (then 75, now 77.06). We were looking for a rest, and we are ready for a move although it could need a couple of more sessions. 83.77 on volume of 990,000 (today way down to 427k; avg. 660k). Stock and/or August $80 calls to buy (AHC HP).

POST SPLITS: STZ dropped a bit and recovered, still closing below the 50 day; still looking for the drop. The erratic ICUI has formed an ascending wedge, but has been unable to hold moves of late.

WLP ($67.14; -4.16): Downgraded today and WLP took it on the chin, gapping down to its 50 day MVA (68.97) and then continuing down on big volume (4.29m; avg. 1.12m). WlP hit 66.16 at its low, recovering a bit, and we could see a test up toward the 50 day, but we will be looking for a strong drop back through 67 to trigger a put play down to 61 (200 day MVA at 59.73). July $72.50 puts to buy (WLP SV - 38 OI).

CHBS ($40.74; -0.30): Still holding in a nice little consolidation over the 10 day MVA (40.08) and the highs in its April consolidation. Volume has been quite low as the stock pulled laterally and back, and we can look for a strong move for an options play toward the target of 46. The aggressive play is September $35 calls (URH IG) on a move over 42 with above average (453k; today 149,900) volume.

Good Investing!
Jon L. Johnson and the Stock Split Report 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.

stock split
stock recommendation