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us stock market, trend trading stock
Begin Part 2 of 3
S&P 500:
Turned right back down from 1100 once more, again giving back more than it gained Thursday. It has some support at 1080 and 1074 from its February closing and intraday lows, and with the overall decent price/volume action on the move off of the May lows it has a shot at holding those for another attempt at 1100 and then 1125. In short, it is at a point it could continue the small rally up from 1050 even with the selling Friday as it has had follow through and positive price/volume action. Even the selling Friday was on lower volume. Could. It still has 1100, the 50 day MVA (1100.95), the 200 day MVA (1117.95), and the September 2000/March 2002 down trendline at 1126 (price consolidations at 1125 as well). The big caps cannot put together a lot of rally force.
Stats: -13.26 points (-1.21%) to close at 1083.82
NYSE Volume: 881.011M (-24.64%)
The Chart: http://www.investmenthouse.com/cd/$spx.html
THIS WEEK
Huge economic week ahead with personal income and spending, existing home sales (80% of sales), and consumer confidence all out on Tuesday. Thursday is Chicago PMI, and Friday is productivity, Michigan sentiment, and factory orders. All of these will get a critical review from investors. If we escape the holiday without incident, some strong numbers Tuesday could pump more life into the nascent rally off of the May lows, a rally that has given a follow through signal. At this point while we like the fact that the market has given follow through (it has preceded every strong rally and is thus considered a prerequisite), it does not change how we are going about this market.
We are looking at stocks to both the upside and the downside, basing the play on the pattern as a breakout, trading play, or upside play. While the market direction is always critical, there are still at least two markets now: small caps and their kin and large caps; tech stocks and old economy stocks; growth stocks and value stocks. Small and mid-caps are under some pressure, but they are consistently turning up the best patterns and breakouts. The fact that there was some follow through in the large cap indexes gives us more confidence in upside plays from these stronger patterns.
As for the downside, there are many continuing downtrends and there are continued breakdowns. A lot of the market is still not feeling well, and stocks are breaking lower every session regardless of follow through on the indexes. Moreover, the trend is still down on the big indexes despite this recent move off the low and follow through. To help fight off the inevitable rally attempts we are looking at those stocks with sharp breakdowns and continuing downtrends. They are doing their own thing more or less oblivious to the market overall.
As noted, 14 of the last 18 Memorial Day weeks have been positive. In a bear market, however, we have seen many post-holiday sell offs. Who will win? The market is in position to move higher this week. That is about all you can say: it is in position. Upside catalysts could be solid economic data or as simple as not having any terrorist incident over the holiday. Given this kind of environment, this is why we look at specific stocks at this juncture.
Support and Resistance
Nasdaq: Closed at 1697.64
Resistance: The short March to April trendline at 1704 that turned the index back last week, and 1700 (February low). 1750 and the 50 day MVA (1734.62) are next. The January/March 2002 down trendline is at 1772 and the 200 day MVA at 1814.20.
Support: 1652, the gap up point, has been filled and held twice. Some support from 1600 to 1620 from the October consolidation. 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 1097.08
Resistance: 1100 and the 50 day MVA at 1101.65. The 200 day MVA at 1118.63The March down trendline is at 1082 and has not been totally cleared. Then 1100 is a point to beat. The 200 day MVA is next at 1119.23. Then price consolidations at 1125. September 2000/March 2002 down trendline at roughly 1126.
Support: February lows at 1074 continue to hold. The October lows at 1050 are the last price consolidation level before the September low. There is possible support at 1000, but it is not much. The September low is 944.75.
Dow: Closed at 10,216.08
Resistance: 10,250 to 10,300. Then there is 10,400, the level that has acted as 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: 10,100 has held twice this week on the close. Then the 200 day MVA (9900.53). After that two lows at 9811. Then 9500 to 9600 in the shelf of support from 9500 to 10,100.
THE PLAYS: PDCO blasted up! More splits this week with THC and KSWS!
BONUS PLAYS: THQI started back down on heavier volume, and AM and KMI and still set up for their plays.
Upside:
CMH (Clayton Homes--$18.37; -0.10; optionable): Manufactured housing
http://biz.yahoo.com/p/c/cmh.html
STATUS: CMH made a big breakout from its recent range, bouncing up from the 50 day MVA (then 16.50, now 17.13) two weeks ago. It hit a high of 19.60, pulling back this week on lighter volume. Looks like a nice test, holding its 10 day MVA (18.30) and over prior pattern highs at 17.70. CMH tapped at 18 with intraday lows twice this week, but Friday held with a tight doji as volume dipped to 431k (avg. 492k). Excellent money flow and buying. Looking for a bounce back up, and targeting 22.
BUY POINT: Over 18.80 on increased volume. Stop: 17.80
POSITION: Stock and/or August $17.50c to buy (CMH HW).
AVNT (Avant Corp--$19.48; +0.13; optionable): Software
http://biz.yahoo.com/p/a/avnt.html
STATUS: AVNT is in a five-month, rather elongated double bottom with handle pattern. The right side low, made earlier this month, just undercut the left side low from February (at 16), and after climbing back over its 50 day MVA (18.20), AVNT has pulled into a handle over the last week and a half. Friday the stock made a move toward the handle high (19.85), stopping short at 19.79 and pulling back. Volume was sharply up on the session at 514,400 (avg. 389k), and AVNT looks ready to make a breakout move. The pattern center is at 20.53, with the left-side high at 21.23. Excellent money flow, buying and relative strength. Target: 24.
BUY POINT: 19.95 on volume of 580k. Stop: 18.55 (7%)
POSITION: Stock and/or October $15c or $17.50c to buy (NVQ JC - .88 delta, 443 OI, or NVQ JW - .73 delta, 17 OI).
CKFR (Checkfree Corporation--$23.76; -0.01; optionable): Internet software
http://biz.yahoo.com/p/c/ckfr.html
STATUS: Trading play. Deep in its base, CKFR recently broke from a cup with handle, reaching a high of 25.40 before gently pulling back the last week and a half. A nice post-breakout consolidation, moving on light volume and holding the 10 day MVA (23.50) to close. Friday CKFR started a move, hitting 24.46 before pulling back to close with a doji, as volume was up but remained light at 920k (avg. 1.07m). Looking good and, although this stock is deep in its base and therefore prone to having rallies pushed back by the overhead supply, we can latch onto these types of plays for trading opportunities that can generate nice returns. CKFR is showing excellent money flow and buying. Target: 29
BUY POINT: Over 24.50 on volume of 1.2m. Stop: 22.88 (7%)
POSITION: August $22.50c to buy (FCQ HX).
DCN (Dana Corp--$22.30; +0.04; optionable): Auto parts
http://biz.yahoo.com/p/d/dcn.html
STATUS: DCN has been in a cup with handle dating back to July, but the long handle (started in mid-March) formed into something of a double bottom. Last week DCN surged up from its 50 day MVA (then 19.90, now 20.43), breaking from the pattern with a huge volume surge, but pulling back off of the high of 23.22. DCN has come back to test the move, forming a handle consolidation to the double bottom, holding prior pattern highs at 22 as volume has tapered off nicely (down to 487k on Friday's doji; avg. 1.23m). After this rest, looking for another bounce and run. Shows strong buying and relative strength. Target: 29.
BUY POINT: Over 22.84 on above average volume. Stop: 21.33 (7%)
POSITION: Stock and/or October $20c to buy (DCN JD).
Downside:
TKR (Timken--$23.95; -1.58; optionable): Machine tools
http://biz.yahoo.com/p/t/tkr.html
STATUS: Put. Made a fine move from 16 to 27 in March-April, but has turned over and looks ready for a more severe drop. TKR tapped the 50 day MVA (24.28) Wednesday with strong selling, but a weak bounce found resistance at the short-term MVA's (25.50). Friday TKR turned back on very strong volume (833,300; avg. 288k), closing below the 50 day. TKR could test the 50 day, but with the strong selling we look for a drop and a put play with a target of 19.
BUY POINT: From here or after a failed move over the 50 day, a drop through 23.50 on continued strong volume. Stop: 25.60
POSITION: July $25p to buy (TKR SE).
PSUN (Pacific Sunwear--$19.02; -0.07; optionable): Apparel stores
http://biz.yahoo.com/p/p/psun.html
STATUS: After trending up along its 50 day MVA for six months, PSUN gave up that support earlier this month, and then experienced a huge gap down to its 200 day MVA (currently 19.80). After the initial drop PSUN made a move back up to 21, but this week dumped back through the 200 day, tapping 18.13 before again testing the 200 day. Friday PSUN reached up to that resistance, but retreated to close with a loose 'tombstone' doji. The pattern points to a continued drop. Target on the put: 15 (initial).
BUY POINT: A drop through 18.60 on above average volume (824k; Friday 525k). Stop: 20.25
POSITION: September 22.50p to buy (PVQ UX - 30 OI).
BJ (Bj's Wholesale--$43.30; -0.82; optionable): Discount variety stores
http://biz.yahoo.com/p/b/bj.html
STATUS: BJ has been pinned under its 200 day MVA (currently 46) since November, and over the past three months has formed a head & shoulders pattern. The neckline is support at 43, and when BJ fell hard earlier this week with earnings, it caught support (low of 42.60) and rebounded, but this time could not take out its 50 day MVA (43.44), dropping back Friday. Looking for 43 to give way this time on stronger volume selling (down Friday to 455k; avg. 723k), initially targeting September-February lows at 40.
BUY POINT: 42.70 on volume of 950k. Stop: 45.50
POSITION: July $45p to buy (BJ SI - 30 OI).
Quick updates prior bonus plays:
FNF - Continued up but on continued light volume, and pulled off its high; that could signal a quick test back.
EME - Still looking for the drop as it tests the 50 day on light volume
WY - Quick pullback is not promising; looking for it to hold 66
ATVI - Gapped back after the big move and is trying to hold the prior high
IGEN - A doji Friday could signal a renewed drop on the put play
LNY - Still flirting with the 50 day; 24 is recent support
CCRN - Dropped right back after the breakout, but is holding for now
AGN - Pulled back again on light volume Friday; still riding puts
WFMI - Has not been able to continue the bounce, holding for now
GRMN - Holding up after the move, but wary of a drop off this upward drift
DISH - Dropped back again Friday, but wary of a strong move up; recent support is at 24
CCRD - Has not been able to take out the 10 day, and looking for a drop back on the put play
WM - Could be setting up an ascending wedge
AVY - Gapped up and reversed Friday off of the strong move up - that points to a possible test back down to support at 68. Still looks good though.
TDY - Continued the strong move! Pulled well off the high to close, but we can weather a bit of a drop, looking for volume to settle down on selling
ENTG - Ready to exit - near the stop at 14
PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: MEG did not join KSWS and THC as splitters this week. EASI is forecast for Wednesday, but it is set up for a downside play going in.
NEW PRE-ANNOUNCEMENT PLAYS:
JEF (Jefferies Group--$49.00; +0.05; optionable): Investment brokerage. Researching a new announcement date.
http://biz.yahoo.com/p/j/jef.html
BACKGROUND: A new issue since 1999, JEF has not split its stock. The company has sufficient share for a 3:2 split.
STATUS: Double bottom with handle. JEF made a nice move in March, making a new high at 52.10. It has corrected back into a double bottom, last Friday gapping over the pattern center (50.31), but pulling back off of the gap to form the handle. JEF has tapped near its 50 day MVA (44.97) at intraday lows this week, but has held the 10 day (46.62) to close. Volume has been light in the handle, and was 101,300 Friday as JEF showed a doji (avg. 119,500). Looking for a bounce from here and a breakout. Excellent relative strength and good buying. Target: 62
BUY POINT: Bounce: Over 50 on volume of 150k. Stop: 47. Breakout: 52.20 on volume of 180k. Stop: 48.55 (7%).
POSITION: Bounce: Stock and/or July or October $45c to buy (JEF GI or JEF JI - no OI at this time for the October. Breakout: Stock and/or October $50c to buy (JEF JJ).
NYT (New York Times--$49.95; -0.24; optionable): Newspapers. Working on a forecast date.
http://biz.yahoo.com/p/n/nyt.html
BACKGROUND: Last announced a 2:1 split on 5-20-98 at a price of $73. Before that it announced in 1986 at a similar price. The company has sufficient shares for a 3:2 split.
STATUS: Breakout test. Broke out from a double bottom with handle in March, and then pulled into a flat base. NYT broke from that pattern earlier in May, reaching up to 51.05 before pulling back on a breakout test. A nice, low-volume dip, and NYT caught support above the prior highs and has held the 10 day MVA (49.58). After a bit of a move up Thursday on continued light volume, the stock shored a doji Friday as volume slipped to 258,800 (avg. 486k). Looking good, with excellent relative strength and good buying. Target: 61
BUY POINT: Over 51 on volume of 500k or better. Stop: 47.80
POSITION: Stock and/or October $45c to buy (NYT JI - 89 OI).
PRE-ANNOUNCEMENT BEST PLAYS:
1) EASI - Set up for a put
2) ABC - Looking to break from the consolidation
EASI (Engineered Support--$47.45; +1.41; optionable): Aerospace/Defense. Forecast to announce a split on 5-29-02 before the open with earnings.
http://biz.yahoo.com/p/e/easi.html
BACKGROUND: EASI last announced a 5:4 split on 2-1-2001 with a board meeting at a price of $28.50. Before that it announced on 6-12-98 at a price of $26.50. The company has sufficient shares for a 3:2 split.
STATUS: After a steady run up to complete the right side of its seven month cup base, EASI dropped back through its 50 day MVA (47.27) this week. It has struggled with that level since the initial breach, bouncing back up Wednesday on weak volume, and and doing the same Friday on light volume (down to 126,400; avg. 197k). A nice run toward the forecast, but it is not set up now for upside action. In fact, it is set up for a put, and we can look at a drop back going into earnings. It could be a quick play. Target 42 (200 day MVA at 42.17).
BUY POINT: A drop through 46 on above average volume. Stop: 48.50
POSITION: August $50p to buy (UFE TJ - 52 OI).
ABC (Amerisourcesbergen--$78.08; -0.42; optionable): Drugs wholesale. We are researching a forecast date.
http://biz.yahoo.com/p/a/abc.html
BACKGROUND: Last split in March 1999 in the $70 range. The annual shareholder meeting was on 2-27-02 at which time no additional shares were increased. The company has sufficient shares for a 2:1 split.
STATUS: Still resting after its solid April cup with handle breakout. The consolidation that started as a handle-type move back toward its 18 day MVA (currently 76.36) has now formed into a small saucer. After a promising move up to end last week, this week saw ABC drift a bit on light, below average volume (down with the overall market Friday at 457,400; avg. 1.03m), Friday showing a doji after tapping the 10 day MVA at its low of 77.45. Still set up pretty well, and looking for a surge.
BUY POINT: 79.80 on minimum volume of 1.4m. Stop: 75.10
POSITION: Stock and/or August $75 calls to buy (ABC HO).
PRE-SPLITS BEST PLAYS: Remember, we try to grab Pre-Splits as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) FOSL - Started a move
2) KSWS - Tried to run on the announcement
3) BER - Still poised to move
4) SRCL - Bullish set-up
5) RYL - Could be one last run into the split
FOSL (Fossil--$31.95; +0.92; optionable): Recreational goods. Splits 3:2 effective 6-10-02.
http://biz.yahoo.com/p/f/fosl.html
STATUS: Started back up Friday. FOSL made a huge move on the announcement, blasting up from its 50 day MVA (then 27, now 28.71). After hitting a new high at 33.61, FOSL dropped back, holding the 18 day MVA (30.60). Friday FOSL moved over our buy point (32.10), pulling back just a bit to close. Still targeting 36 on a pre-split run, and still a buy up to 32.50.
PLAY: A buy up to 32.50, with September $30c to buy (QFS IF - 60 OI). Stop: 30
KSWS (K Swiss--$46.15; +0.66; optionable): Footwear. Announced the split Thursday after hours, as forecast! Splits 2:1 effective June 22.
http://biz.yahoo.com/p/k/ksws.html
STATUS: KSWS took off on the announcement, running on sharply higher volume (144k; avg. 93k) Friday. It could not hold the intraday move in the slow market, hitting 47.39 but pulling back, still holding over the short-term MVA's (45.50). The announcement and move follows a dip by KSWS back to test its 50 day MVA (43.68), and we will look for the stock to hold the short-term MVA's and continue its upward trend going toward the split. The high (from earlier this month) is 48.12. Targeting 58.
PLAY: Aggressive: Over 47 on continued strong volume, with stock and/or July $40c to buy (SWU GH - 46 OI). Stop: 43.80
BER (W.R. Berkley--$59.75; -0.10; optionable): P&C insurance. Splits 3:2 on or about July 3.
http://biz.yahoo.com/p/b/ber.html
STATUS: BER formed an ascending wedge with its bounces from the 50 day MVA (58.29) in late April and last week, making highs near 61. After reversing after a gap up Monday, BER has very gradually nestled back to the 10 day MVA (59.63), showing four consecutive dojis. Volume was back to a low level Friday after having spiked up significantly Thursday (211k Thursday, 91k today; avg. 121k). Poised to jump. Target 72.
PLAY: Over 61.20 on volume of 160k, with October $55c to buy (BER JK - 62 OI). Stop: 57.50. Aggressive: 60.60 on volume of 160k, with the same positions and stop.
End Part 2 of 3
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us stock market
trend trading stock
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